SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-58774)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 52 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
Amendment No. [ ]
Fidelity Court Street Trust
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, MA 02109
(Address Of Principal Executive Offices)
Registrant's Telephone Number: (617) 570-7000
Arthur S. Loring, Secretary
82 Devonshire Street,
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b)
( ) on pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
(x) on January 16, 1995 pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the notice required by
such Rule on or before January 31, 1995.
SPARTAN CONNECTICUT MUNICIPAL HIGH YIELD PORTFOLIO
SPARTAN CONNECTICUT MUNICIPAL MONEY MARKET PORTFOLIO
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Funds at a Glance; Who May Want
to Invest
3 a .............................. Financial Highlights
b .............................. *
c, d .............................. Performance
4 a i............................. Charter
ii........................... The Funds at a Glance; Investment Principles and
Risks
b .............................. Investment Principals and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page: The Funds at a Glance; Doing
Business with Fidelity; Charter
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Cover Page; Charter
f .............................. Expenses
g i............................. Charter
. *
ii............................
..
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... Charter
b ............................. *
c .............................. Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. Expenses; How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
SPARTAN CONNECTICUT MUNICIPAL HIGH YIELD PORTFOLIO
SPARTAN CONNECTICUT MUNICIPAL MONEY MARKET PORTFOLIO
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ Descrption of the Trusts
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR, Portfolio Transactions
ii ............................ Trustees and Officers
iii ............................ Management Contracts
b ............................ Management Contracts
c, d ............................ Interests of FMR Affiliates
e ............................ *
f ............................ Distribution and Service Plans
g ............................ *
h ............................ Description of the Trusts
i ............................ Interests of FMR Affiliates
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trusts
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Interests of FMR Affiliates
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements
</TABLE>
* Not Applicable
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 the funds' most recent financial report and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated January 16, 1995.
The SAI has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, call Fidelity at
1-800-544-8888.
Investments in the money market fund are neither insured nor guaranteed by
the U.S. government, and there can be no assurance that the fund will
maintain a stable $1.00 share price.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
CTR-pro-195
SPARTAN(registered trademark)
CONNECTICUT
MUNICIPAL
FUNDS
Each fund seeks a high level of current income free from federal
income tax and Connecticut personal income tax.
SPARTAN CONNECTICUT MUNICIPAL MONEY
MARKET PORTFOLIO invests in high-quality, short-term municipal money
market securities and is designed to maintain a stable $1.00 share
price.
SPARTAN CONNECTICUT MUNICIPAL HIGH YIELD PORTFOLIO seeks to provide
higher yields by investing in a broader range of municipal securities.
PROSPECTUS
JANAURY 16, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL CHARTER How each fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management
arm of Fidelity Investments, which was established in 1946 and is now
America's largest mutual fund manager. FMR Texas Inc. (FTX), a subsidiary
of FMR, chooses investments for Spartan Connecticut Money Market.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
SPARTAN CONN. MONEY MARKET
GOAL: High current tax-free income for Connecticut residents while
maintaining a stable $1.00 share price.
STRATEGY: Invests mainly in high-quality, short-term municipal money
market securities whose interest is free from federal income tax and
Connecticut personal income tax.
SIZE: As of November 30, 199 4 , the fund had over $__ million in
assets.
SPARTAN CONN. HIGH YIELD
GOAL: High current tax-free income for Connecticut residents.
STRATEGY: Invests mainly in longer-term, investment-grade, municipa l
securities whose interest is free from federal income tax and Connecticut
personal income tax.
SIZE: As of November 30, 199 4 , the fund had over $__ million in
assets.
WHO MAY WANT TO INVEST
These non-diversified funds may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal income tax
and Connecticut personal income tax. Each fund's level of risk and
potential reward, depend on the quality and maturity of its investments.
Spartan Connecticut Municipal Money Market is managed to keep its share
price stable at $1.00. Spartan Connecticut Municipal High Yield, with its
broader range of investments, has the potential for higher yields, but also
carries a higher degree of risk. Y ou should consider your investment
objective and tolerance for risk when making an investment decision.
The value of the funds' investments and the income they generate will vary
from day to day, and generally reflect interest rates, market
conditions, and other federal and state political and economic news. When
you sell your shares of Spartan Connecticut Municipal High Yield, they may
be worth more or less than what you paid for them. By themselves, these
funds do not constitute a balanced investment plan.
The Spartan family of funds is designed for cost-conscious investors
looking for higher yields through lower costs. The Spartan
Approach(registered trademark) requires investors to make high minimum
investments and, in some cases, to pay for individual transactions.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. Spartan
Connecticut Money Market is
in the MONEY MARKET
category, and Spartan
Connecticut High Yield is in
the INCOME category.
(right arrow) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund. See page f or more information.
Maximum sales charge on purchases and
reinvested distributions None
Deferred sales charge on redemptions None
Redemption fee ( as a % of amount redeemed
on shares held less than 180 days):
for Spartan Connecticut Money Market None
for Spartan Connecticut High Yield .50%
Exchange and wire transaction fees $5.00
Checkwriting fee, per check written $2.00
(available for Spartan Connecticut Money Market)
Account closeout fee $5.00
THESE FEES ARE WAIVED (except for the redemption fee) if your account
balance at the time of the transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. Expenses are factored into each fund's
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets.
SPARTAN CONN. MONEY MARKET
Management fee %
12b-1 fee None
Other expenses %
Total fund operating expenses %
SPARTAN CONN. HIGH YIELD
Management fee %
12b-1 fee None
Other expenses %
Total fund operating expenses %
EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses after
the number of years indicated, first assuming that you leave your account
open, and then assuming that you close your account at the end of the
period:
SPARTAN CONN. MONEY MARKET
Account Account
open closed
After 1 year $ $
After 3 years $ $
After 5 years $ $
After 10 years $ $
SPARTAN CONN. HIGH YIELD
Account Account
open closed
After 1 year $ $
After 3 years $ $
After 5 years $ $
After 10 years $ $
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
FINANCIAL HIGHLIGHTS
The tables that follow are i ncluded in the funds' Annual Repor t and
have been audited by Coopers & Lybrand L.L.P., independent accountants.
Their reports on the financial statements and financial highlights
are included in the Annual Report. T he financial statements and
financial highlights are incorporated by reference into (are legally a
part of) the funds' Statement of Additional Information.
[Financial Highlights to be filed by subsequent amendment.]
PERFORMANCE
Mutual fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results and do
not reflect the effect of any transaction fees you may have paid. The
figures would be lower if fees were taken into account.
Each fund's fiscal year runs from December 1 through November 30. The
tables below show each fund's performance over past fiscal years compared
to a measure of inflation. The charts on page 8 help you compare the
yields of these funds to those of their competitors.
SPARTAN CONN. MONEY MARKET
Fiscal years ended Past 1 Life of
November 30, 199 4 Year fundA
Average
annual
total return
Cumulative
total return
Consumer
Price
Index
SPARTAN CONN. HIGH YIELD
Fiscal years ended Past 1 Past 5 Life of
November 30, 199 4 Year Year fundB
Spartan Conn.
High Yield
Average
annual
total return
Cumulative
total return
Consumer
Price
Index
A FROM MARCH 4, 1991
B FROM OCTOBER 29, 1987
UNDERSTANDING
PERFORMANCE
YIELD illustrates the income
earned by a fund over a
recent period. Seven-day
yields are the most common
illustration of money market
performance. 30-day yields
are usually used for bond
funds. Yields change daily,
reflecting changes in interest
rates.
TOTAL RETURN reflects both the
reinvestment of income and
capital gain distributions, and
any change in a fund's share
price.
(checkmark)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund 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.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. When a money
market fund yield assumes that income earned is reinvested, it is called an
EFFECTIVE YIELD. A TAX-EQUIVALENT YIELD shows what an investor would have
to earn before taxes to equal a tax-free yield. Yields for the bond fund
are calculated according to a standard that is required for all stock and
bond funds. Because this differs from other accounting methods, the quoted
yield may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGES for Spartan Connecticut Money Market are
calculated based on the IBC/Donoghue's MONEY FUND
AVERAGES(trademark)/All Tax-Free category, which currently reflects the
performance of over ___ mutual funds with similar objectives. These
averages are published in the MONEY FUND REPORT(registered trademark) by
IBC USA (Publications), Inc. The competitive funds averages for Spartan
Connecticut High Yield are published by Lipper Analytical Services, Inc.
The fund compares its performance to the other single state municipal debt
funds, which currently reflects the performance of over ___ mutual funds
with similar objectives. Both of these averages assume reinvestment of
distributions.
SPARTAN CONNECTICUT MONEY MARKET
7-day yields
Percentage (%)
Row: 1, Col: 1, Value: nil
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Row: 31, Col: 1, Value: nil
Row: 31, Col: 2, Value: nil
Row: 32, Col: 1, Value: nil
Row: 32, Col: 2, Value: nil
Spartan
Conn. Money
Market
Competitive
funds average
19__
19__
19__
SPARTAN CONNECTICUT HIGH YIELD
30-day yields
Percentage (%)
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Row: 26, Col: 2, Value: nil
Row: 27, Col: 1, Value: nil
Row: 27, Col: 2, Value: nil
Row: 28, Col: 1, Value: nil
Row: 28, Col: 2, Value: nil
Row: 29, Col: 1, Value: nil
Row: 29, Col: 2, Value: nil
Row: 30, Col: 1, Value: nil
Row: 30, Col: 2, Value: nil
Row: 31, Col: 1, Value: nil
Row: 31, Col: 2, Value: nil
Row: 32, Col: 1, Value: nil
Row: 32, Col: 2, Value: nil
Spartan
Conn. High
Yield
Competitive
funds average
19__
19__
19__
THE TOP CHART SHOWS THE 7-DAY EFFECTIVE YIELD FOR THE FUND AND ITS
COMPETITIVE FUNDS AVERAGE AS OF THE LAST TUESDAY OF EACH MONTH FROM
JANUARY 1992 THROUGH NOVEMBER 199 4. THE BOTTOM CHART SHOWS THE
30-DAY ANNUALIZED NET YIELDS FOR THE FUND AND ITS COMPETITIVE FUNDS
AVERAGE AS OF THE LAST DAY OF EACH MONTH DURING THE SAME PERIOD. YIELDS
FOR THE FUNDS WOULD HAVE BEEN LOWER IF FIDELITY HAD NOT REIMBURSED
CERTAIN FUND EXPENSES.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS 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. In technical terms, Spartan
Connecticut Money Market is currently a non-diversified fund of Fidelity
Court Street Trust II, and Spartan Connecticut High Yield is currently a
non-diversified fund of Fidelity Court Street Trust. Both trusts are
open-end management investment companies. Fidelity Court Street Trust II
was organized as a Delaware business trust on June 20, 1991. Fidelity Court
Street Trust was organized as a Massachusetts business trust on April 21,
1977. There is a remote possibility that one fund might become liable for a
misstatement in the prospectus about another fund.
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 throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL 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.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. F or Spartan Connecticut
Municipal Money Market , you are entitled to one vote for each share you
own. For Spartan Connecticut Municipal High Yield, the number of votes
you are entitled to is based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over ___
(solid bullet) Assets in Fidelity mutual
funds: over $___ billion
(solid bullet) Number of shareholder
accounts: over __ million
(solid bullet) Number of investment
analysts and portfolio
managers: over ___
(checkmark)
The funds are managed by FMR, which chooses their investments and handles
their business affairs. FTX has primary responsibility for providing
investment management services for Spartan Connecticut Money Market.
Maureen Newman has been portfolio manager of Spartan Connecticut
Municipal High Yield since July 1994. She also manages Michigan Tax-Free
High Yield and Spartan Arizona Municipal Income. Previously, she was a bond
analyst for the fixed-income department. Ms. Newman joined Fidelity
in 1985.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions. Personal investing
is monitored to protect shareholders' interests.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services. Fidelity Service Co. (FSC) performs transfer
agent servicing functions for the funds.
FMR Corp. is the parent company of FMR and FTX . Through ownership of
voting common stock, members of the Edward C. Johnson 3d f amily form a
controlling group with respect to FMR Corp. Changes may occur in the
Johnson family group, through death or disability, which would result in
changes in each individual family member's holding of stock. Such changes
could result in one or more family members becoming holders of over 25% of
the stock. FMR Corp. has received an opinion of counsel that changes in the
composition of the Johnson family group under these circumstances would not
result in the termination of the funds' management or distribution
contracts and, accordingly, would not require a shareholder vote to
continue operation under those contracts.
United Missouri Bank, N.A., is each fund's transfer agent, although it
employs FSC to perform these functions for the funds. It is located at 1010
Grand Avenue, Kansas City, Missouri.
To carry out the funds' transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that a fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
SPARTAN CONNECTICUT MUNICIPAL MONEY MARKET seeks to earn high
current income that is free from federal income tax and the Connecticut
personal income tax while maintaining a stable $1.00 share price by
investing in high-quality, short-term municipal money market
securiti es of all types. FMR normally invests at least 65% of the
fund's total assets in state tax-free securities, and normally invests so
that at least 80% of the fund's income is free from federal income tax.
When you sell your shares, they should be worth the same amount as when you
bought them. Of course, there is no guarantee that the fund will maintain a
stable $1.00 share price. The fund follows industry-standard guidelines on
the quality and maturity of its investments, which are designed to help
maintain a stable $1.00 share price. The fund will purchase only
high-quality securities that FMR believes present minimal credit risks and
will observe maturity restrictions on securities it buys. In general,
securities with longer maturities are more vulnerable to price changes,
although they may provide higher yields. It is possible that a major
change in interest rates or a default on the fund's investments could cause
its share price (and the value of your investment) to change.
SPARTAN CONNECTICUT MUNICIPAL HIGH YIELD seeks high current income that is
free from federal income tax and the Connecticut persona l income tax
by investing primarily in municipal securities judged by FMR to be of
investment-grade quality although it can also invest in lower-quality
securities. The fund has no restrictions on maturity, but it generally
invests in medium- and long-term bonds and maintains a dollar-weighted
average maturity of 15 years or longer. FMR normally invests so that at
least 80% of the fund's income is free from both federal and Connecticut
personal income taxes.
The money market fund stresses income, preservation of capital, and
liquidity. The bond fund seeks to provide a higher level of income by
investing in a broader range of securities. Each fund's yield and the bond
fund's share price change daily and are based on interest rates, market
conditions, other economic and political news, and on the quality and
maturity of its investments. In general, bond prices rise when interest
rates fall, and vice versa. This effect is usually more pronounced for
longer-term securities. Lower-quality securities offer higher yields, but
also carry more risk. FMR may use various investment techniques to hedge
the bond fund's risks, but there is no guarantee that these strategies will
work as intended. When you sell your shares of the bond fund, they may be
worth more or less than what you paid for them.
EACH FUND'S performance is affected by the economic and political
conditions within the state of Connecticut. The state's economy is
sensitive to some industry trends, such as the level of defense spending.
For the last several years, Connecticut has been in a recession and its
budget has experienced deficits.
If you are subject to the federal alternative minimum tax, you should note
that each fund may invest all of its assets in municipal securities issued
to finance private activities. The interest from these investments is a
tax-preference item for purposes of the tax.
FMR normally invests each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations, and Spartan Connecticut High Yield does not expect to invest
in state taxable obligations. Each fund also reserves the right to
invest without limitation in short-term instruments, to hold a substantial
amount of uninvested cash, or to invest more than normally permitted in
taxable obligations for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fun d may invest, and strategies FMR may
employ in pursuit of a fund's investment objective. A summary of
risks and restrictions associated with these instrument types and
investment practices is included as well. A complete listing of each
fund's policies and limitations and more detailed information about the
funds' investments is 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 to
the full extent permitted unless it believes that doing so will help the
funds achieve their goals. Current holdings and recent investment
strategies are described in the funds' financial report which is
sent to shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable 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 purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa.
Debt securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "municipal junk
bonds") may have speculative characteristics, and involve greater risk
of default or price changes due to changes in the issuer's
creditworthiness. 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 table o n the next page provides a summary of ratings assigned to
debt holdings (not including money market instruments) in Spartan
Connecticut Municipal High Yield's portfolio. These figures are
dollar-weighted averages of month-end portfolio holdings during fiscal
199 4 , and are presented as a percentage of total security
investments. These percentages are historical and do not necessarily
indicate the fund's current or future debt holdings.
SPARTAN CONNECTICUT HIGH YIELD
Fiscal 1994 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa % AA %
Upper-medium grade A A
Medium grade Baa % BBB %
LOWER QUALITY
Moderately speculative Ba % BB %
Speculative B % B %
Highly speculative Caa % CCC %
Poor quality Ca % CC %
Lowest quality, no interest C C
In default, in arrears -- D %
% %
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S OR
S&P AMOUNTED TO ___%. THIS MAY INCLUDE SECURITIES RATED BY OTHER
NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES. FMR
HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER-QUALITY ACCOUNT FOR
__% OF THE FUND'S TOTAL SECURITY INVESTMENTS. REFER TO THE FUND'S STATEMENT
OF ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
RESTRICTIONS: Spartan Connecticut Municipal High Yield does not currently
intend to invest more than one-third of its assets in bonds of equivalent
quality to Ba or lower by Moody's and BB or lower by S&P, and does not
currently intend to invest in bonds whose quality is judged by FMR to be
equivalent to bonds rated lower than B. The fund does not currently intend
to invest in bonds rated below Caa by Moody's or CCC by S&P.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. Municipal securities
may be issued in anticipation of future revenues, and may be backed by the
full taxing power of a municipality, the revenues from a specific project,
or the credit of a private organization. A security's credit may be
enhanced by a bank, insurance company, or other financial institution. A
fund may own a municipal security directly or through a participation
interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by the state
of Connecticut or its counties, municipalities, authorities, or other
subdivisions. The ability of issuers to repay their debt can be affected by
many factors that impact the economic vitality of either the state or a
region within the state.
Other state tax-free securities include general obligations of the U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations. The economy
of Puerto Rico is closely linked to the U.S. economy, and will be
affected b y the strength of the U.S. dollar, interest rates, the price
stability of oil imports, and the continued existence of favorable tax
incentives. Recent legislation revised these incentives, but the
government of Puerto Rico anticipates only a slight reduction in the
average real growth rates for the economy.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ASSET-BACKED SECURITIES may include pools of purchase contracts, financing
leases, or sales agreements entered into by municipalities. These
securities usually rely on continued payments by a municipality, and may
also be subject to prepayment risk.
VARIABLE- AND FLOATING-RATE INSTRUMENTS may have interest rates that move
in tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
RESTRICTIONS: The money market fund may not purchase certain types of
variable- or floating-rate instruments which are inconsistent with the
fund's goal of maintaining a stable share price.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, a fund
may pay periodic fees or accept a lower interest rate. Demand features,
standby commitments, and tender options are types of put features.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, and purchasing indexed securities.
RESTRICTIONS: The money market fund may not use investment
techniques which are inconsistent with the fund's goal of maintaining a
stable share price.
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 the
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 the 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.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield or the market value of its assets.
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 other securities, including illiquid securitie s, 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 purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
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 or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
these changes, and also to changes in the market value of a single issuer
or industry.
RESTRICTIONS: The funds are considered non-diversified. Generally,
to meet federal tax requirements at the close of each quarter, a
fund does not invest more than 25% of its total assets in any one issuer
and, with respect to 50% of total assets, does not invest more than 5% of
its total assets in any one issuer. These limitations do not apply to U.S.
government securities. A fund may invest more than 25% of its total assets
in tax-free securities that finance similar types of projects.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a bond fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its 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.
SPARTAN CONNECTICUT MUNICIPAL MONEY MARKET seeks as high a level of current
income, exempt from federal income tax and, to the extent possible, exempt
from Connecticut personal income tax, as is consistent with preservation of
capital and liquidity. The fund will normally invest so that at least 65%
of its total assets are invested in state tax-free obligations and at least
80% of its income will be exempt from federal income tax.
SPARTAN CONNECTICUT MUNICIPAL HIGH YIELD seeks a high level of current
income, exempt from federal income tax and Connecticut personal income tax.
The fund will normally invest so that at least 80% of its income is exempt
from both federal and Connecticut personal income taxes.
EACH FUND may borrow only for temporary or emergency purposes, but not in
an amount exceeding 33% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its 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 an affiliate who provides
assistance with these services for Spartan Connecticut Municipal Money
Market.
FMR may, from time to time, agree to reimburse the funds for management
fees 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 a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. Each fund
pays a management fee at a fixed annual rate of its average net assets:
.50% for Spartan Connecticut Money Market and .55% for Spartan Connecticut
High Yield.
FMR HAS SUB-ADVISORY AGREEMENTS with FTX, which has primary responsibility
for providing investment management for Spartan Connecticut Municipal Money
Market Portfolio, while FMR retains responsibility for providing other
management services. FMR pays FTX 50% of its management fee (before expense
reimbursements) for these services.
FSC performs many transaction and accounting functions for the funds. These
services include processing shareholder transactions and calculating each
fund's share price. FMR, and not the funds, pays for these services.
To offset shareholder service costs, FMR or its affiliates also collect the
funds' $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for wire
purchases and redemptions, and, for Spartan Connecticut Money Market, the
$2.00 checkwriting charge. For fiscal 1994, these fees amounted to $_____,
$_____, $______, and $_____, respectively, for Spartan Connecticut Money
Market and $_____, $_____, and $_____, respectively, for Spartan
Connecticut High Yield.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the fund's shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
For fiscal 19 94, t he portfolio turnover rates for Spartan
Connecticut High Yield was __%. This rate varies from year to year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over __ walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. Spartan Connecticut Money Market is managed to keep its share
price stable at $1.00. Each fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity
fund.
If you buy shares by check or Fidelity Money Line(registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
For Spartan Conn. Money Market $25,000
TO ADD TO AN ACCOUNT $1,000
Through automatic investment plans $500
MINIMUM BALANCE $5,000
For Spartan Conn. Money Market $10,000
UNDERSTANDING THE
SPARTAN APPROACH(registered trademark)
Fidelity's Spartan Approach is
based on the principle that
lower fund expenses can
increase returns. The Spartan
funds keep expenses low in
two ways. First, higher
investment minimums reduce
the effect of a fund's fixed
costs, many of which are paid
on a per-account basis.
Second, unlike most mutual
funds that include transaction
costs as part of overall fund
expenses, Spartan
shareholders pay directly for
the transactions they make.
(checkmark)
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to the complete
check payable to the name of the fund.
complete name of the Indicate your fund
fund of your choice. account number on
Mail to the address your check and mail to
indicated on the the address printed on
application. your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your application (small solid bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (small solid bullet) There may be a $5.00 (small solid bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(small solid bullet) Call 1-800-544-7777 to (small solid bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
</TABLE>
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<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000
worth of shares in the account ($10,000 for Spartan Connecticut Money
Market) to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It 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
(including Fidelity Investor Centers), 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) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the table
at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account in Spartan Connecticut Money
Market, you may write an unlimited number of checks. Do not, however, try
to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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IF YOU SELL SHARES OF SPARTAN CONNECTICUT MUNICIPAL HIGH YIELD PORTFOLIO AFTER HOLDING
THEM LESS THAN 180 DAYS, THE FUND WILL DEDUCT A REDEMPTION FEE EQUAL TO .50% OF THE
VALUE OF THOSE SHARES. IF YOUR ACCOUNT BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR
INDIVIDUAL REDEMPTION TRANSACTIONS: $2.00 FOR EACH CHECK YOU WRITE AND $5.00 FOR
EACH EXCHANGE, BANK WIRE, AND ACCOUNT CLOSEOUT.
</TABLE>
<TABLE>
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Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$ 10; maximum: $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.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Check (check_graphic) All account types (small solid bullet) Minimum check: $1,000.
(small solid bullet) All account owners must sign
a signature card to receive a
checkbook.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, 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 will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. There may be a $5.00 fee for
each exchange out of the funds, unless you place y our transaction on
Fidelity's automated exchange services.
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 page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
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<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
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<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THAT FUND MAY NOT BE AN
APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains, if any, to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains earned by the bond fund are
normally distributed in January and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. Spartan Connecticut
Municipal High Yield offers four options, Spartan Connecticut Municipal
Money Market offers three options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions, if
any, will be automatically reinvested in additional shares 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, if any, will be
automatically reinvested, but you will be sent a check for each dividend
distribution. This option is not available for Spartan Connecticut Money
Market.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions, if any.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions, if any, will be automatically invested in
another identically registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions, if any, will be reinvested at the NAV as
of the date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS. Money
market funds usually don't
make capital gain
distributions.
(checkmark)
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the funds' tax implications.
TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These 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. Fidelity will send you and the IRS a
statement showing the tax status of the distributions paid to you in the
previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Each fund may invest up to 100% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
To the extent a fund's income dividends are derived from state tax-free
obligations, they will be free from the Connecticut income tax on
individuals, trusts, and estates. Subject to adoption of proposed
regulations, long-term capital gain distributions, to the extent derived
from Connecticut obligations, would also be free from this tax.
Additionally, income dividends and long-term capital gain distributions
derived from Connecticut obligations would not be subject to the net
Connecticut minimum tax.
During fiscal 1994, __% of each fund's income dividends was free
from federal income tax, and __% and __% were free from Connecticut taxes
for Spartan Connecticut Money Market and Spartan Connecticut High Yield,
respectively. __% of Spartan Connecticut Money Market's and __% of Spartan
Connecticut High Yield's income dividends were subject to the federal
alternative minimum tax.
TAXES ON TRANSACTIONS. Your bond fund redemptions - including exchanges to
other Fidelity funds - 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 consolidated transaction statement every January. 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 just before a fund deducts a capital
gain distribution from its NAV, 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.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The money market fund values the securities it owns on the basis of
amortized cost. This method minimizes the effect of changes in a security's
market value and helps the fund to maintain a stable $1.00 share price. For
the bond fund, assets are valued primarily on the basis of market
quotations, if available. Since market quotations are often unavailable,
assets are usually valued by a method that the Board of Trustees believes
accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT 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. Fide lity may only be
liable for losses resulti ng from unauthorized transactions if it does
not follow r easonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion,
th ey would disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees a fund or its
transfer agent has incurred.
(small solid bullet) Spartan Connecticut Money Market reserves the right to
limit all accounts maintained or controlled by any one person to a maximum
total balance of $2 million.
(small solid bullet) You begin to earn dividends as of the first business
day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge
you a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when a fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. 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) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line
have been collected, which can take up to seven business days.
(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) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
THE REDEMPTION FEE for Spartan Connecticut High Yield, if applicable, will
be deducted from the amount of your redemption. This fee is paid to the
fund rather than FMR, and it does not apply to shares that were acquired
through reinvestment of distributions. If shares you are redeeming were not
all held for the same length of time, those shares you held longest will be
redeemed first for purposes of determining whether the fee applies.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at
the time of the transaction is $50,000 or more. Otherwise, you should note
the following:
(small solid bullet) The $2.00 checkwriting charge will be deducted from
your account.
(small solid bullet) The $5.00 exchange fee will be deducted from the
amount of your exchange.
(small solid bullet) The $5.00 wire fee will be deducted from the amount of
your wire.
(small solid bullet) The $5.00 account closeout fee does not apply to
exchanges or wires, but it will apply to checkwriting.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000 ($10,000 for Spartan Connecticut
Money Market), you will be given 30 days' notice to reestablish the minimum
balance. If you do not increase your balance, Fidelity reserves the right
to close your account and send the proceeds to you. Your shares will be
redeemed at the NAV on the day your account is closed and the $5.00 account
closeout fee will be charged.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
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) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(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 the 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) 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 coincide
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 the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
From Filler pages
SPARTAN(Registered trademark) CONNECTICUT MUNICIPAL HIGH YIELD PORTFOLIO
A FUND OF FIDELITY COURT STREET TRUST
SPARTAN(Registered trademark) CONNECTICUT MUNICIPAL MONEY MARKET PORTFOLIO
A FUND OF FIDELITY COURT STREET TRUST II
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1 6 , 199 5
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated January 1 6 , 199 5 ).
Please retain this document for future reference. The funds' financial
statements and financial highlights, included in the Annual
Report , for the fiscal year ended November 30, 199 4
are incorporated herein by reference. To obtain an additional copy
of the Prospectus or the Annual Report, please call Fidelity Distributors
Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 2
Special Factors Affecting Connecticut 10
Special Factors Affecting Puerto Rico 11
Portfolio Transactions 12
Valuation of Portfolio Securities 14
Performance 14
Additional Purchase and Redemption Information 20
Distributions and Taxes 20
FMR 22
Trustees and Officers 22
Management Contracts 24
Distribution and Service Plans 26
Interest of FMR Affiliates 27
Description of the Trusts 27
Financial Statements 29
Appendix 29
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER (MONEY MARKET FUND ONLY)
FMR Texas Inc. (FMR Texas)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
United Missouri Bank, N.A. (United Missouri) and Fidelity Service Co. (FSC)
CTR-ptB- 1 9 5
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
Each fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
However, except for the fundamental investment limitations set forth below,
the investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF SPARTAN CONNECTICUT MUNICIPAL MONEY MARKET
PORTFOLIO
(MONEY MARKET FUND)
THE FOLLOWING ARE THE MONEY MARKET FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short;
(3) purchase securities on margin, except that the fund may obtain such
short-term credits as are necessary for the clearance of transactions;
(4) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(5) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(6) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or municipal securities issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(7) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(8) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments; or
(9) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(10) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objectives, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund may borrow money only (a) from a bank or from a registered
investment company or fund for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (4)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
( iii ) The fund does not currently intend to purchase any security
if, as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to legal
or contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(i v) The fund does not currently intend to invest more than 25% of
its total assets in industrial revenue bonds related to a single industry.
(v) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(vi) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to purchases
of debt securities.
( vii) The fund does not currently intend to (a) purchase securities
of other investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (b) purchase
or retain securities issued by other open-end investment companies.
Limitations (a) and (b) do not apply to securities received as dividends,
through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(viii) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's policies on quality and maturity, see the section
entitled "Quality and Maturity" on page 4.
For purposes of limitations (6) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
INVESTMENT LIMITATIONS OF SPARTAN CONNECTICUT MUNICIPAL HIGH YIELD
PORTFOLIO
( BOND FUND )
The following are the bond fund 's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
( 2 ) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets ( including the amount
borrowed ) less liabilities (other than borrowings) . Any
borrowings that come to exceed this amount will be reduced within
three days (not including Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
( 3 ) underwrite securities issued by others (except to the extent
that the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
( 4 ) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by
a U.S. territory or possession or a state or local
government , or a political subdivision of any of the
foregoing ) if, as a result, more than 25% of the fund's total
assets would be invested in securities of companies whose principal
business activities are in the same industry;
( 5 ) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business);
( 6 ) purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this
shall not prevent the fund from purchasing or selling options and
futures contracts or from investing in securities or other
instruments backed by physical commodities );
( 7 ) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements ; or
(8) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the
fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that transactions in
futures contracts and options are not deemed to constitute selling
securities short.
(iii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(i v ) The fund may borrow money only (a) from a bank or from a
registered investment company or fund for which FMR or an affiliate serves
as investment adviser or (b) by engaging in reverse repurchase agreements
with any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation ( 2 )). The fund will
not purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v i ) The fund does not currently intend to invest more than 25% of
its total assets in industrial revenue bonds related to a single industry.
(vi i ) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to purchases
of debt securities.
(vii i ) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(ix) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations ( 4 ) and (i), FMR identifies the issuer
of a security depending on its terms and conditions. In identifying the
issuer, FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the bond fund 's limitations on futures and options
transactions, see the section entitled "Limitations on Futures and Options
Transactions" beginning on page 8.
Each fund's investments must be consistent with its investment
objective and policies. Accordingly, not all of the security types and
investment techniques discussed below are eligible investments for each of
the funds.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the Investment Company Act of 1940.
These transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S.
government securities with affiliated financial institutions that
are primary dealers in these securities ; short-term currency
transactions; and short-term borrowings. In accordance with exemptive
orders issued by the Securities and Exchange Commission, the Board of
Trustees has established and periodically reviews procedures applicable to
transactions involving affiliated financial institutions.
QUALITY AND MATURITY . (MONEY MARKET FUND ONLY) Pursuant to
procedures adopted by the Board of Trustees, the fund may purchase only
high-quality securities that FMR believes present minimal credit risks. To
be considered high-quality, a security must be rated in accordance with
applicable rules in one of the two highest categories for short-term
securities by at least two nationally recognized rating services (or by
one, if only one rating service has rated the security); or, if unrated,
judged to be of equivalent quality by FMR.
The fund currently intends to limit its investments to securities
with remaining maturities of 397 days or less , and to
maintain a dollar-weighted average maturity of 90 days or less.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. The bond fund may receive fees for
entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the fund could miss
a favorable price or yield opportunity, or could suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
REFUNDING CONTRACTS. The bond fund may purchase securities on a
when-issued basis in connection with the refinancing of an issuer's
outstanding indebtedness. Refunding contracts require the issuer to sell
and the fund to buy refunded municipal obligations at a stated price and
yield on a settlement date that may be several months or several years in
the future. The fund generally will not be obligated to pay the full
purchase price if it fails to perform under a refunding contract. Instead,
refunding contracts generally provide for payment of liquidated damages to
the issuer (currently 15-20% of the purchase price). The fund may secure
its obligations under a refunding contract by depositing collateral or a
letter of credit equal to the liquidated damages provisions of the
refunding contract. When required by SEC guidelines, the fund will place
liquid assets in a segregated custodial account equal in amount to its
obligations under refunding contracts.
INVERSE FLOATERS. The bond fund may invest in inverse floaters,
which are instruments whose interest rates bear an inverse relationship to
the interest rate on another security or the value of an index. Changes in
the interest rate on the other security or index inversely affect the
residual interest rate paid on the inverse floater, with the result that
the inverse floater's price will be considerably more volatile than that of
a fixed-rate bond. For example, a municipal issuer may decide to issue two
variable-rate instruments instead of a single long-term, fixed-rate bond.
The interest rate on one instrument reflects short-term interest rates,
while the interest rate on the other instrument (the inverse floater)
reflects the approximate rate the issuer would have paid on a fixed-rate
bond, multiplied by two, minus the interest rate paid on the short-term
instrument. Depending on market availability, the two portions may be
recombined to form a fixed-rate municipal bond. The market for inverse
floaters is relatively new.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating interest
rates and carry rights that permit holders to demand payment of the unpaid
principal balance plus accrued interest from the issuers or certain
financial intermediaries. Floating rate instruments have interest rates
that change whenever there is a change in a designated base rate while
variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value
for the instrument that approximates its par value.
With respect to the money market fund, a demand instrument with a
conditional demand feature must have received both a short-term and a
long-term high-quality rating or, if unrated, have been determined to be of
comparable quality pursuant to procedures adopted by the Board of Trustees.
A demand instrument with an unconditional demand feature may be acquired
solely in reliance upon a short-term high-quality rating or, if unrated,
upon a finding of comparable short-term quality pursuant to procedures
adopted by the Board of Trustees.
The funds may invest in fixed-rate bonds that are subject to third party
puts and in participation interests in such bonds held in trust or
otherwise. These bonds and participation interests have tender options or
demand features that permit a fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. A fund considers variable rate instruments structured in this way
(Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The IRS has not ruled whether the interest on Participating
VRDOs is tax-exempt and, accordingly, a fund intends to purchase these
instruments based on opinions of bond counsel.
The money market fund may invest in variable or floating rate instruments
that ultimately mature in 397 days if the fund acquires a right to sell the
instruments that meets certain requirements set forth in Rule 2a-7.
Variable rate instruments (including instruments subject to a demand
feature) that mature in 397 days or less may be deemed to have maturities
equal to the period remaining until the next readjustment of the interest
rate. Other variable rate instruments with demand features may be deemed to
have a maturity equal to the period remaining until the next adjustment of
the interest rate or the period remaining until the principal amount can be
recovered through demand. A floating rate instrument subject to a demand
feature may be deemed to have a maturity equal to the period remaining
until the principal amount can be recovered through demand.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. Subject to applicable regulatory requirements, the money market fund
may buy tender option bonds if the agreement gives the fund the right to
tender the bond to its sponsor no less frequently than once every 397 days.
In selecting tender option bonds for the funds, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. Each fund may
acquire standby commitments to enhance the liquidity of portfolio
securities, but, in the case of the money market fund, only when the
issuers of the commitments present minimal risk of default.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments. In
the latter case, the fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity. Standby commitments will
not affect the dollar-weighted average maturity of the money market fund,
or the valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the funds; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. Each fund may invest a portion of its assets
in municipal leases and participation interests therein. These obligations,
which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, the funds will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives
a fund a specified, undivided interest in the obligation in proportion to
its purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
FEDERALLY TAXABLE OBLIGATIONS. The funds do not intend to invest in
securities whose interest is federally taxable; however, from time to time,
each fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, each fund may invest in obligations whose interest is
federally taxable pending the investment or reinvestment in municipal
securities of proceeds from the sale of its shares or sales of portfolio
securities.
Should a fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The bond fund 's standards for high-quality, taxable
obligations are essentially the same as those described by Moody's
Investors Service, Inc. (Moody's) in rating corporate obligations within
its two highest ratings of Prime-1 and Prime-2, and those described by
Standard & Poor's Corporation (S&P) in rating corporate obligations within
its two highest ratings of A-1 and A-2. The money market fund will purchase
taxable obligations only if they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the Connecticut
legislature that would affect the state tax treatment of the funds'
distributions. If such proposals were enacted, the availability of
municipal obligations and the value of the funds' holdings would be
affected and the Trustees would reevaluate the funds' investment objectives
and policies.
Each fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities
of portfolio securities, sales of fund shares, or in order to meet
redemption requests, a fund may hold cash that is not earning income. In
addition, there may be occasions when, in order to raise cash to meet
redemptions, a fund may be required to sell securities at a loss.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price . The resale price reflects the purchase
price plus an agreed-upon incremental amount which is unrelated to the
coupon rate or maturity of the purchased security. A repurchase agreement
involves the obligation of the seller to pay the agreed-upon resale
price, which obligation is in effect secured by the value (at least equal
to the amount of the agreed-upon resale price and marked to market daily)
of the underlying security. A fund may engage in repurchase
agreements with respect to any type of security in which it is
authorized to invest (except that the security may have a
maturity in excess of 397 days ) . While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the
underlying securities, as well as delays and costs to a fund in
connection with bankruptcy proceedings), it is each fund's current policy
to limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of a fund's
assets and may be viewed as a form of leverage.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from
FMR, the Board monitors investments in illiquid instruments. In determining
the liquidity of a fund ' s investments, FMR may consider
various factors, including (1) the frequency of trades and quotations, (2)
the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security
(including any demand or tender features), and (5) the nature of the
marketplace for trades (including the ability to assign or offset the
fund's rights and obligations relating to the investment).
For the money market fund, FMR may determine some restricted securities
and municipal lease obligations to be illiquid. Investments currently
considered by the bond fund to be illiquid include over-the-counter
options. Also, FMR may determine some restricted securities and municipal
lease obligations to be illiquid. However, with respect to over-the-counter
options the bond fund writes, all or a portion of the value of the
underlying instrument may be illiquid depending on the assets held to cover
the option and the nature and terms of any agreement the fund may have to
close out the option before expiration.
In the absence of market quotations, illiquid investments for the money
market fund are valued for purposes of monitoring amortized cost valuation
and , for the bond fund, priced at fair value as determined in
good faith by a committee appointed by the Board of Trustees. If through a
change s in values, net assets, or other circumstances, a fund were
in a position where more than 10% of its net assets were invested in
illiquid securities, it would seek to take appropriate steps to protect
liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to
sell a security under an effective registration statement. If, during such
a period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security. However, in general, the money market fund anticipates
holding restricted securities to maturity or selling them in an exempt
transaction.
INDEXED SECURITIES. The bond fund may purchase securities whose
prices are indexed to the prices of other securities, securities indicies,
or other financial indicators. Indexed securities typically, but not
always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic.
Indexed securities may have principal payments as well as coupon payments
that depend on the performance of one or more interest rates. Their coupon
rates or principal payments may change by several percentage points for
every 1% interest rate change. One example of indexed securities is inverse
floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
LOWER- QUALITY MUNICIPAL SECURITIES. The bond fund may invest
a portion of its assets in lower- quality municipal securities as
described in the p rospectus.
While the market for Connecticut municipals is considered to be adequate,
adverse publicity and changing investor perceptions may affect the ability
of outside pricing services used by the fund to value its portfolio
securities, and the fund's ability to dispose of lower- quality
bonds. The outside pricing services are monitored by FMR and reported to
the Board to determine whether the services are furnishing prices that
accurately reflect fair value. The impact of changing investor perceptions
may be especially pronounced in markets where municipal securities are
thinly traded.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to
be in the best interest of the fund's shareholders.
INTERFUND BORROWING PROGRAM. The fund has received permission from the SEC
to lend money to and borrow money from other funds advised by FMR or its
affiliates. Interfund loans and borrowings normally will extend overnight,
but can have a maximum duration of seven days. Loans may be called on one
day's notice. The fund will lend through the program only when the returns
are higher than those available at the same time from other short-term
instruments (such as repurchase agreements), and will borrow through the
program only when the costs are equal to or lower than the cost of bank
loans. The fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed. Any delay in repayment to a
lending fund could result in a lost investment opportunity or additional
borrowing costs.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-serv ice revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They are secured by
the revenues derived from mortgages purchased with the proceeds of the bond
issue. It is extremely difficult to predict the supply of available
mortgages to be purchased with the proceeds of an issue or the future cash
flow from the underlying mortgages. Consequently, there are risks that
proceeds will exceed supply, resulting in early retirement of bonds, or
that homeowner repayments will create an irregular cash flow. Many
factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current laws
and regulations.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS ( bond fund only).
The fund has filed a notice of eligibility for exclusion from the
definition of the term "commodity pool operator" with the Commodity Futures
Trading Commission (CFTC) and the National Futures Association, which
regulate trading in the futures markets. The fund intends to comply with
Rule 4.5 under the Commodity Exchange Act, which limits the extent
to which the fund can commit assets to initial margin deposits and option
premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date.
When the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures can
be held until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply
with guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of
the fund's assets could impede portfolio management or the fund's ability
to meet redemption requests or other current obligations.
SPECIAL FACTORS AFFECTING CONNECTICUT[TO BE UPDATED]
The following only highlights some of the more significant financial trends
and problems, and is based on information drawn from official statements
and prospectuses relating to securities offerings of the State of
Connecticut, its agencies and instrumentalities, as available on the date
of this Statement of Additional Information. FMR has not independently
verified any of the information contained in such official statements and
other publicly available documents, but is not aware of any fact which
would render such information inaccurate.
Manufacturing has historically been Connecticut's single most important
economic activity. The State's manufacturing industry is diversified, but
from 1970 to 1992 manufacturing employment declined 30.8%. During this
period, employment in other non-agricultural establishments (including
government) increased 60.8%, particularly in the service, trade, and
finance categories. In 1992, manufacturing accounted for only 20.1% of
total nonagricultural employment in Connecticut. Defense-related business
plays an important role in the Connecticut economy, and economic activity
has been affected by the volume of defense contracts awarded to Connecticut
firms. On a per capita basis, defense awards in Connecticut have
traditionally been among the highest in the nation, but reductions in
defense spending have had a substantial adverse impact on Connecticut's
economy, and the state's largest defense contractors have announced
substantial labor force reductions to occur over the next four years.
The annual average unemployment rate (seasonally adjusted) in Connecticut
decreased from 6.9% in 1982 to a low of 3.0% in 1988, but it reached 7.4%
as of May 1993. Pockets of more significant unemployment and poverty exist
in some of Connecticut's cities and towns, the economic conditions of which
are causing them severe financial problems, resulting in some cases in the
reporting of operating and accumulated deficits. Connecticut is in a
recession the depth and duration of which are uncertain.
While the State's General Fund ended fiscal 1984-85, 1985-86 and 1986-87
with operating surpluses of approximately $365,500,000, $250,100,000 and
$365,200,000, respectively, the State recorded operating deficits in its
General Fund for fiscal 1987-88, 1988-89, 1989-90, and 1990-91 alone of
$115,600,000, $28,000,000, $259,000,000, and $809,000,000, respectively. In
the fall of 1991, the State issued $965,712,000 of Economic Recovery Notes
to help fund its accumulated General Fund deficit. Largely as a result of
the enactment in 1991 of a general income tax on resident and non-resident
individuals, trusts, and estates the State's General Fund ended fiscal
1991-92 and 1992-93 with an operating surplus of $110,000,000 and
$113,500,000, respectively.
The state's two major revenue raising taxes have been the sales and use
taxes and the corporation business tax, each of which is sensitive to
changes in the level of economic activity in the State, but the Connecticut
income tax on individuals, trusts, and estates is expected to supersede
each of them in importance. Motor fuel taxes and other
transportation-related taxes are paid into a Special Transportation Fund
while all other tax revenues are carried in the General Fund.
The repair and maintenance of the State's highways and bridges will require
major expenditures in the near term. The State has adopted legislation that
provides for, among other things, the issuance of special tax obligation
bonds, the proceeds of which will be used to pay for improvements to the
State's transportation system. The bonds are payable solely from motor
vehicle and other transportation-related taxes and fees deposited in the
Special Transportation Fund. However, the amount of revenues is dependent
on the occurrence of future events, including a possible rise in fuel
prices, and may thus differ materially from projected amounts. The cost of
this infrastructure program, to be met from federal, State and local funds,
is currently estimated at $9.5 billion. The State expects to issue $3.7
billion of special tax obligation bonds over a ten-year period commenced
July 1, 1984 to finance a major portion of the State's share of such cost.
The State's budget problems led to ratings of its general obligation bonds
being lowered early in 1990, from Aa1 to Aa by Moody's Investors Service,
Inc., and from AA+ to AA by Standard & Poor's Corporation. Because of
concern over Connecticut's lack of a plan to deal with accumulated
projected deficits in its General Fund, on September 13, 1991, Standard &
Poor's further lowered its ratings of the State's general obligation bonds
and certain other obligations that depend in part on the creditworthiness
of the State to AA-. State and regional economic difficulties, reductions
in revenues, and increased expenses could lead to further fiscal problems
for the State and its political subdivisions, authorities, and agencies.
This could result in declines in the value of their outstanding
obligations, increases in their future borrowing costs, and impairment of
their ability to pay debt service on their obligations.
SPECIAL FACTORS AFFECTING PUERTO RICO
The following only highlights some of the more significant financial
trends and problems affecting the Commonwealth of Puerto Rico (the
"Commonwealth" or "Puerto Rico"), and is based on information drawn from
official statements and prospectuses relating to the securities offerings
of Puerto Rico and its agencies and instrumentalities, as available on the
date of this Statement of Additional Information. FMR has not independently
verified any of the information contained in such official statements,
prospectuses, and other publicly available documents, but is not aware of
any fact which would render such information materially inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1993 trade with the United States accounted for
approximately 86% of Puerto Rico's exports and approximately 69% of
its imports. In this regard, in fiscal 1993 Puerto Rico experienced a $2.5
billion positive adjusted merchandise trade balance. Since fiscal
1987 , personal income, both aggregate and per capita, has increased
consistently each year. In fiscal 1993 aggregate personal income was $24.1
billion and personal per capita income was $6,760. Gross domestic product
in fiscal 1991, 1992, and 1993 was $22.8 billion, $23.5 billion, and $25
billion, respectively. For fiscal 1994, an increase in gross domestic
product of 2.9% over fiscal 1993 is forecasted. However, actual growth in
the Puerto Rico economy will depend on several factors, including the
condition of the U.S. economy, the exchange rate for the U.S. dollar and
the price stability of oil imports and interest rates. Due to these factors
there is no assurance that the economy of Puerto Rico will continue to
grow.
Puerto Rico's economy continued to expand throughout the five-year
period from fiscal 1989 through fiscal 1993. While trends in the Puerto
Rico economy generally follow those of the United States, Puerto Rico did
not experience a recession primarily because of its strong manufacturing
base, which has a large component of non-cyclical industries. Other factors
behind the continued expansion included Commonwealth-sponsored economic
development programs, stable prices of oil imports, low exchange rates for
the U.S. dollar, and the relatively low cost of borrowing funds during the
period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late
1970s, but it still remains significantly above the U.S. average and
has been increasing in recent years. Despite long-term improvements the
unemployment rate rose from 16.5 % to 17.5% from fiscal 1992 to
fiscal 1993. However, by the end of January 1994, the unemployment rate had
dropped to 16.3%.
The economy of Puerto Rico has undergone a transformation in the later half
of this century from one centered around agriculture to one dominated by
the manufacturing and service industries. Manufacturing is the cornerstone
of Puerto Rico's economy, accounting for $ 14.1 billion or 39.4% of gross
domestic product in fiscal 1993. However, manufacturing has experienced
a basic change over the years as a result of the influx of higher wages,
high technology industries such as the pharmaceutical industry,
electronics, computers, micro-processors, scientific instruments and high
technology machinery. The service sector, which employs the largest
number of people, includes wholesale and retail trade, finance and real
estate, and ranks second in its contribution to gross domestic product.
In fiscal 1993, the service sector generated $14.0 billion in gross
domestic product or 39.1% of the total and employed over 467,000 workers
providing 46.7% of total employment. The government sector of the
Commonwealth plays an important role in Puerto Rico's economy. In fiscal
year 1993, the government accounted for $3.9 billion of Puerto Rico's gross
domestic product and provided 21.7% of the total employment. Tourism also
contributes significantly to the island economy, accounting for $1.6
billion of gross domestic product in fiscal 1993.
The present administration, which took office in January 1993, envisions
major economic reforms and has developed a new economic development program
to be implemented in the next few years. This program is based on the
premise that the private sector will be the primary vehicle for economic
development and growth. The program promotes changing the role of the
government from one of being a provider of most basic services to one of
being a facilitator for private sector initiatives and will encourage
private sector investment by reducing regulatory restraints. The program
contemplates the development of initiatives that will foster private
investment, both eternal and internal, in areas that are served more
efficiently and effectively by the private sector. The program also
contemplates a general revision of the tax system to expand the tax base,
reduce top personal and corporate tax rates, and simplify a highly complex
system. Other important goals for the new program are to reduce the size of
the government's direct contribution to gross domestic product and, to
facilitate private development and growth which would be realized through a
reduction in government consumption and an increase in government
investment in order to improve and expand Puerto Rico's infrastructure.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
("Section 936") and the Commonwealth's Industrial Incentives Program.
Section 936 currently grants U.S. corporations that meet certain criteria
and elect its application, a credit against their U.S. corporate income tax
on the portion of the tax attributable to (i) income derived from the
active conduct of a trade or business in Puerto Rico ("active income"), or
from the sale or exchange of substantially all the assets used in the
active conduct of such trade or business, and (ii) qualified possession
sources investment income ("passive income"). The Industrial Incentives
Program, through the 1987 Industrial Incentives Act, grants corporations
engaged in certain qualified activities a fixed 90% exemption from
Commonwealth income and property taxes and a 60% exemption from municipal
license taxes.
Pursuant to recently enacted amendments to the Internal Revenue Code
(the "Code"), and for taxable years commencing after 1993, two alternative
limitations will apply to the Section 936 credit against active business
income and sale of assets as previously described. The first option will
limit the credit against such income to 40% of the credit allowed under
current law, with a five-year phase-in period starting at 60% of the
current credit. The second option will limit the allowable credit to the
sum of (i) 60% of qualified compensation paid to employees (as defined in
the Code); (ii) a specified percentage of depreciation deductions; and
(iii) a portion of the Puerto Rico income taxes paid by the Section 936
corporation, up to a 9% effective tax rate.
At present, it is difficult to forecast what the short- and long-term
effects of the new limitations to the Section 936 credit will be on the
economy of Puerto Rico. However, preliminary econometric studies by the
government of Puerto Rico and private sector economists (assuming no
enhancements to the existing Industrial Incentives Program) project only a
slight reduction in average real growth rates for the economy of Puerto
Rico. These studies also show that particular industry groups will be
affected differently. For example, manufacturers of pharmaceuticals and
beverages may suffer a larger reduction in tax benefits due to their
relatively higher profit margins. In addition, the above limitations are
not expected to reduce the tax credit currently enjoyed by labor-intensive,
lower profit margin industries, which represent approximately 40% of the
total employment by Section 936 corporations in Puerto Rico.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the funds'
management contracts. If FMR grants investment management authority
to a sub-adviser (see section entitled "Management Contracts"), the
sub-adviser is authorized to place orders for the purchase and sale of
portfolio securities and will do so in accordance with the policies
described below. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. Securities purchased and sold
by the money market fund generally will be traded on a net basis (i.e.,
without commission). In selecting broker-dealers, subject to applicable
limitations of the federal securities laws, FMR consider s various
relevant factors , including, but not limited to, the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). FMR maintains a listing of broker-dealers who
provide such services on a regular basis. However, as many transactions on
behalf of the money market fund are placed with broker-dealers (including
broker-dealers on the list) without regard to the furnishing of such
services, it is not possible to estimate the proportion of such
transactions directed to such broker-dealers solely because such services
were provided. The selection of such broker-dealers generally is made by
FMR (to the extent possible consistent with execution considerations),
based upon the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients and, conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
each fund to pay such higher commissions, FMR must determine in good
faith that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the funds and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds , or shares of other
Fidelity funds to the extent permitted by law. FMR may use research
services provided by and place agency transactions with Fidelity Brokerage
Services, Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are
fair, reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements , the
Board of Trustees has authorized FBSI to e xecute portfolio
transactions on national securities exchanges in accordance with
approved procedures and applicable SEC rules .
Each fund's Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the fund s and review the commissions paid by
each fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the fund.
For the fiscal periods ended November 30, 1994 and 1993 the funds'
portfolio turnover rates were ___% and ___%, respectively for the bond
fund, and ___% and ____% for the money market fund.
For fiscal 1994, 1993, and 1992, the funds paid [no brokerage
commissions/ brokerage commissions of $____, $______, and $______,
respectively.]
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially
the same as those of other funds managed by FMR, investment decisions for
each fund are made independently from those of other funds managed by FMR
or accounts managed by FMR affiliates. It sometimes happens that the same
security is held in the portfolio of more than one of these funds or
accounts. Simultaneous transactions are inevitable when several funds
and accounts are managed by the same investment adviser,
particularly when the same security is suitable for the investment
objective of more than one fund or account .
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable
f o r each fund. In some cases this system could have a
detrimental effect on the price or value of the security as far as each
f und is concerned. In other cases, however, the ability of the
funds to participate in volume transactions will produce better executions
and prices for the funds. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to each fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
MONEY MARKET FUND. The fund values its investments on the basis of
amortized cost. This technique involves valuing an instrument at its cost
as adjusted for amortization of premium or accretion of discount rather
than its value based on current market quotations or appropriate
substitutes which reflect current market conditions. The amortized cost
value of an instrument may be higher or lower than the price the fund would
receive if it sold the instrument.
Valuing the fund's instruments on the basis of amortized cost and use of
the term "money market fund" are permitted by Rule 2a-7 under the
Investment Company Act of 1940. The fund must adhere to certain conditions
under Rule 2a-7.
The Board of Trustees of the trust oversees FMR's adherence to SEC rules
concerning money market funds, and has established procedures designed to
stabilize the fund's NAV at $1.00. At such intervals as they deem
appropriate, the Trustees consider the extent to which NAV calculated by
using market valuations would deviate from $1.00 per share. If the Trustees
believe that a deviation from the fund's amortized cost per share may
result in material dilution or other unfair results to shareholders, the
Trustees have agreed to take such corrective action, if any, as they deem
appropriate to eliminate or reduce, to the extent reasonably practicable,
the dilution or unfair results. Such corrective action could include
selling portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity; withholding dividends;
redeeming shares in kind; establishing NAV by using available market
quotations; and such other measures as the Trustees may deem appropriate.
During periods of declining interest rates, the fund's yield based on
amortized cost may be higher than the yield based on market valuations.
Under these circumstances, a shareholder in the fund would be able to
obtain a somewhat higher yield than would result if the fund utilized
market valuations to determine its NAV. The converse would apply in a
period of rising interest rates.
BOND FUND. Valuations of portfolio securities furnished by the
pricing service employed by the fund are based upon a computerized matrix
system or appraisals by the pricing service, in each case in reliance upon
information concerning market transactions and quotations from recognized
municipal securities dealers. The methods used by the pricing service and
the quality of valuations so established are reviewed by officers of the
fund and FSC under the general supervision of the Board of Trustees. There
are a number of pricing services available, and the Trustees, or officers
acting on behalf of the Trustees, on the basis of on-going evaluation of
these services, may use other pricing services or discontinue the use of
any pricing service in whole or in part. Futures contracts and options are
valued on the basis of market quotations if available.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. The bond fund 's share price,
and each fund ' s yield and total return fluctuate in response
to market conditions and other factors , and the value of the bond
fund's shares when redeemed may be more or less than their original
cost.
YIELD CALCULATIONS. To compute the money market fund's yield for a period,
the net change in value of a hypothetical account containing one share
reflects the value of additional shares purchased with dividends from the
one original share and dividends declared on both the original share and
any additional shares. The net change is then divided by the value of the
account at the beginning of the period to obtain a base period return. This
base period return is annualized to obtain a current annualized yield. The
money market fund also may calculate a compound effective yield by
compounding the base period return over a one-year period. In addition to
the current yield, the money market fund may quote yields in advertising
based on any historical seven-day period. Yields for the money market fund
are calculated on the same basis as other money market funds, as required
by regulation.
For the bond fund, yields are computed by dividing the fund's
interest income for a given 30-day or one-month period, net of expenses, by
the average number of shares entitled to receive dividends during the
period, dividing this figure by the fund's net asset value per share at the
end of the period, and annualizing the result (assuming compounding of
income) in order to arrive at an annual percentage rate. Yields do not
reflect the fund's .50% redemption fee, which applies to shares held less
than 180 days. Income is calculated for purposes of the bond fund 's
yield quotations in accordance with standardized methods applicable to all
stock and bond funds. In general, interest income is reduced with respect
to bonds trading at a premium over their par value by subtracting a portion
of the premium from income on a daily basis, and is increased with respect
to bonds trading at a discount by adding a portion of the discount to daily
income. Capital gains and losses generally are excluded from the
calculation.
Income calculated for the purposes of determining the bond fund's
yield differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, the bond fund's
yield may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.
Yield information may be useful in reviewing the funds' performance and in
providing a basis for comparison with other investment alternatives.
However, e ach fund ' s yield fluctuate s , unlike
investments that pay a fixed interest rate over a stated period of time.
When comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective investment
companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates the
funds' yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the funds' yield will tend
to be somewhat lower. Also, when interest rates are falling, the inflow of
net new money to a fund from the continuous sale of their shares
will likely be invested in instruments producing lower yields than the
balance of the fund ' s holdings, thereby reducing the fund's current
yield. In periods of rising interest rates, the opposite can be expected to
occur.
A fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment after taxes to equal the fund's tax-free
yield. Tax-equivalent yields are calculated by dividing a fund's yield by
the result of one minus a stated federal or combined federal and state tax
rate. If only a portion of a fund's yield is tax-exempt, only that
portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and state income tax laws for 1995. The
second table shows the approximate yield a taxable security must provide at
various income brackets to produce after-tax yields equivalent to those of
hypothetical tax-exempt obligations yielding from _% to _%. Of course, no
assurance can be given that a fund will achieve any specific tax-exempt
yield. While the funds invest principally in obligations whose interest is
exempt from federal and state income tax, other income received by the
funds may be taxable. The tables do not take into account local taxes, if
any, payable on fund distributions.
Use the first table to find your approximate effective tax bracket
taking into account federal and state taxes for 1995.
1995 TAX RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Federal State Single Return Joint Return
Taxable Income* Income Tax Marginal Combined Income Combined Income
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Single Return Joint Return Bracket Rate Tax Bracket** Tax Bracket**
</TABLE>
* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions,
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may increase a taxpayer's marginal tax rate. An increase
in a shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Having determined your effective tax bracket, use the following table to
determine the tax-equivalent yield for a given tax-free yield.
If your effective combined federal and state personal tax rate in 1995
is:
% % % % %
<TABLE>
<CAPTION>
<S> <C>
To match these
tax-free yields: Your taxable investment would have to earn the following yield:
2%
3%
4%
5%
6%
7%
</TABLE>
Each fund may invest a portion of its assets in obligations that are
subject to state or federal income taxes. When a fund invests in these
obligations, its tax-equivalent yield will be lower. In the table above,
tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's net asset
value (NAV) over a stated period. Average annual total returns are
calculated by determining the growth or decline in value of a hypothetical
historical investment in a fund over a stated period, and then calculating
the annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative total return of 100% over ten years would
produce an average annual return of 7.18%, which is the steady annual rate
of return that would equal 100% growth on a compounded basis in ten
years. While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that a fund's performance
is not constant over time, but changes from year to year, and that average
annual returns represent averaged figures as opposed to the actual
year-to-year performance of the fund.
In addition to average annual total returns, a fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and cumulative
total returns may be quoted as a percentage or as a dollar amount, and may
be calculated for a single investment, a series of investments, or a series
of redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on
a before-tax or after-tax basis and, for the bond fund, may or may not
include the effect of the .50% redemption fee on shares held less than 180
days. Excluding the bond fund's redemption fee from a total return
calculation produces a higher total return figure. Total returns,
yields, and other performance information may be quoted numerically or in a
table, graph, or similar illustration, and may omit or include the effects
of each fund's $5.00 account closeout fee .
NET ASSET VALUE. Charts and graphs using the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following table s show the
money market fund's 7-day yields, the bond fund's 30-day yields, each
fund's tax-equivalent yields, and total returns for periods ended
November 30, 199 4 . Total return figures include the effect of
the $5.00 account closeout fee based on average account size, but not
the bond fund's .50% redemption fee, applicable to shares held less
than 180 days.
The tax-equivalent yield is based on a combined effective federal and
state income tax rate of __% and reflects that, as of November 30, 1994, an
estimated __% of the fund's income was subject to state taxes. Note that
each fund may invest in securities whose income is subject to the federal
alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Equivalent One Five Life of Fund* One Five Life of Fund*
Yield Yield Year Years Year Years
MONEY
MARKET
FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BOND FUND
</TABLE>
* From March 4, 1991 (commencement of operations of the money market
fund) or from October 29, 1987 (commencement of operations of the bond
fund).
Note: If FMR had not reimbursed certain fund expenses during these
periods, the fund's total returns would have lower.
The following table show the income and capital elements of each fund's
cumulative total return. The table compare s each fund's
return to the record of the Standard & Poor's Composite Index of
500 Stock s (S&P 500), the Dow Jones Industrial Average (DJIA),
and the cost of living (measured by the Consumer Price Index, or CPI) over
the same period. The CPI information is as of the month end closest to
the initial investment date for each fund. The S&P 500 and DJIA
comparisons are provided to show how each fund's total re turn
compared to the re cord of a broad average of common stocks and a
narrower set of stocks of major industrial companies, respectively, over
the same period. Of course, since the funds invest in short-term and
other fixed-income securities, common stocks represent a different type
of investment from the funds. Common stocks generally offer greater
growth potential than the funds, but generally experience greater
price volatility, which means greater potential for loss. In addition,
common stocks generally provide lower income than a fixed-income
investment such as the funds. Figures for t he S&P 500 and DJIA
are based on the prices of unmanaged groups of stocks and, unlike the
funds' returns, do not include the effect of paying brokerage commissions
or other costs of investing.
MONEY MARKET FUND. During the period from March 4, 1991
(commencement of operations) to November 30, 199 4 , a hypothetical
$10,000 investment in Spartan Connecticut Municipal Money Market
Portfolio would have grown to $ __________ , assuming all
distributions were reinvested. This was a period of fluctuating interest
rates and the figures below should not be considered representative
of the dividend income or capital gain or loss that could be realized from
an investment in the fund today.
<TABLE>
<CAPTION>
<S> <C> <C>
SPARTAN CONNECTICUT MUNICIPAL MONEY MARKET PORTFOLIO INDICES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested Cost
Year Ended $10,000 Dividends Capital Gain Total of
November 30 Investment Distributions Distributions Value S&P 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
199 4 $10,000 $ $0 $ $ $ $
199 3 10,000 0
1992 10,000 0
199 1 * 10,000 0
</TABLE>
* From March 4, 1991 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on March 4,
1991, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends for the period covered (their cash value at the time
they were reinvested), amounted to $ __________ . If distributions had
not been reinvested, the amount of distributions earned from the fund over
time would have been smaller, and cash payments (dividends) for the period
would have amounted to $ _________ . The fund did not distribute any
capital gains during the period. Tax consequences of different
investments have not been factored into the above figures. The figures
in the table do not reflect the effect of the fund's $5 .00
account closeout fee.
BOND FUND . During the period from October 29, 1987
(commencement of operations) to November 30, 199 4 , a hypothetical
$10,000 investment in Spartan Connecticut Municipal High Yield
Portfolio would have grown to $ _________ assuming all
distributions were reinvested. This was a period of widely fluctuating
interest rates and bond prices, and the figures below should not be
considered representative of the dividend income or capital gain or loss
that could be realized from an investment in the fund today.
SPARTAN CONNECTICUT MUNICIPAL HIGH YIELD PORTFOLIO INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested Cost
Year Ended $10,000 Dividends Capital Gain Total of
November 30 Investment Distributions Distributions Value S&P 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $ $ $ $ $ $
1993 $ $ $ $ $ $ $
1992
1991
1990
1989
1988
1987*
</TABLE>
* From October 29, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on October
29, 1987, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gains distributions for the period
covered (their cash value at the time they were reinvested), amounted to
$ __________ . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash p ayments for the period would have amounted to
$ _________ for dividends and $ ____ for capital gain s
distributions. Tax consequences of different investments have not been
factored into the above figures. The figures in the table do not
reflect the effect of the fund's $5 .00 account closeout fee,
or the .50% redemption fee applicable to shares held less than 180 days.
A fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to the
mutual fund rankings, a fund's performance may be compared to stock,
bond, and money market mutual fund performance indices prepared by Lipper
or other organizations. When comparing these indices, it is important to
remember the risk and return characteristics of each type of investment.
For example, while stock mutual funds may offer higher potential returns,
they also carry the highest degree of share price volatility. Likewise,
money market funds may offer greater stability of principal, but generally
do not offer the higher potential returns from stock mutual funds.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. , in its
advertising materials. Morningstar, Inc. , is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted performance.
Rankings that compare the performance of Fidelity funds to one another in
appropriate categories over specific periods of time may also be quoted in
advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For
example, a fund may offer greater liquidity or higher potential returns
than CDs, a fund does not guarantee your principal or your return, and fund
shares are not FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A fund may compare its performance or the performance of securities
in which it may invest to averages published by IBC USA (Publications),
Inc. of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AVERAGES(trademark)/All
Tax-Free, which is reported in the MONEY FUND REPORT(registered trademark),
covers over 325 tax-free money market funds. The Bond Fund Report
AverageS(trademark)/Municipal, which is reported in the BOND FUND
REPORT(registered trademark), covers over 350 tax-free bond funds. When
evaluating comparisons to money market funds, investors should consider the
relevant differences in investment objectives and policies. Specifically,
money market funds invest in short-term, high-quality instruments and seek
to maintain a stable $1.00 share price. The bond fund, however,
invests in longer-term instruments and its share price changes daily in
response to a variety of factors.
The bond fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal
bond. Unlike tax-free mutual funds, individual municipal bonds offer a
stated rate of interest and, if held to maturity, repayment of principal.
Although some individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales charges
of many tax-free mutual funds are lower than the purchase cost of
individual municipal bonds, which are generally issued in $5,000
denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college and other
goals ; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate
to current economic and political conditions, fund management,
portfolio composition, investment philosophy, investment
techniques , the desirability of owning a particular mutual fund, and
Fidelity services and products. Fidelity may also reprint, and use as
advertising and sales literature, articles from Fidelity Focus, a quarterly
magazine provided free of charge to Fidelity fund shareholders.
A fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. The bond fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may compare
these measures to those of other funds. Measures of volatility seek to
compare the fund's historical share price fluctuations or total returns to
those of a benchmark. Measures of benchmark correlation indicate how valid
a comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, the bond
fund may also discuss or illustrate examples of interest rate
sensitivity.
MOMENTUM INDICATORS indicate the bond fund's price movements over
specific periods of time. Each point on the momentum indicator represents
the fund's percentage change in price movements over that period.
The bond fund may advertise examples of the effects of periodic
investment plans, including the principle of dollar cost averaging. In
such a program, an investor invests a fixed dollar amount in a fund at
periodic intervals, thereby purchasing fewer shares when prices are high
and more shares when prices are low. While such a strategy does not assure
a profit or guard against loss in a declining market, the investor's
average cost per share can be lower than if fixed numbers of shares are
purchased at the same intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares during periods
of low price levels.
As of November 30, 199 4 , FMR advised over $____ billion in tax-free
fund assets, $____ billion in money market fund assets, $_____ billion in
equity fund assets, $_____ billion in international fund assets, and
$______ billion in Spartan fund assets. The funds may reference the growth
and variety of money market mutual funds and the adviser's innovation and
participation in the industry. The equity funds under management figure
represents the largest amount of equity fund assets under management by a
mutual fund investment adviser in the United States, making FMR America's
leading equity (stock) fund manager. FMR, its subsidiaries, and affiliates
maintain a worldwide information and communications network for the purpose
of researching and managing investments abroad.
In addition to performance rankings, each fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1995: New
Year's Day (observed), Washington's Birthday (observed), Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. Although FMR expects the same holiday schedule to be
observed in the future, the NYSE may modify its holiday schedule at any
time.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, a fund's NAV may be affected on days when investors do
not have access to the fund to purchase or redeem shares. In addition,
trading in some of a fund's portfolio securities may not occur on days when
the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing a fund's NAV. Shareholders receiving securities or other property
on redemption may realize a gain or loss for tax purposes, and will incur
any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying the
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you
and the U.S. Postal Service cannot deliver your checks, or if your checks
remain uncashed for six months, Fidelity may reinvest your distributions at
the then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that each fund's income is designated
as federally tax-exempt interest, the daily dividends declared by the
fund are also federally tax-exempt. Short-term capital gains are
distributed as dividend income, but do not qualify for the
dividends-received deductions. These gains will be taxed as ordinary
income. Each fund will send each shareholder a notice in January
describing the tax status of dividend and capital gain distributions (if
any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
Each fund purchases municipal obligations based on opinions of bond
counsel regarding the federal income tax status of the obligations. These
opinions generally will be based on covenants by the issuers regarding
continuing compliance with federal tax requirements. If the issuer of an
obligation fails to comply with its covenant at any time, interest on the
obligation could become federally taxable retroactive to the date the
obligation was issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other purposes. Interest from private activity securities will be
considered tax-exempt for purposes of each fun d ' s
policies of investing so that at least 80% of its income is free
from federal income tax. Interest from private activity securities is a
tax-preference item for the purposes of determining whether a taxpayer is
subject to the AMT and the amount of AMT to be paid, if any. Private
activity securities issued after August 7, 1986 to benefit a private or
industrial user or to finance a private facility are affected by this rule.
A portion of the gain on bonds purchased with market discount after
April 30, 1993 and short-term capital gains distributed by each fund are
taxable to shareholders as dividends, not as capital gains. Dividend
distributions resulting from a recharacterization of gain from the sale of
bonds purchased with market discount after April 30, 1993 are not
considered income for purposes of each fund's policy of investing so that
at least 80% of its income is free from federal income tax. Spartan
Connecticut Municipal Money Market Portfolio may distribute any
net-realized short-term capital gains and taxable market discount once a
year or more often, as necessary, to maintain its net asset value at $1.00
per share.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest) exceeds the alternative minimum
taxable income of the corporation. If a shareholder receives an
exempt-interest dividend and sells shares at a loss after holding them for
a period of six months or less, the loss will be disallowed to the extent
of amount of exempt-interest dividend.
CONNECTICUT TAXES. The Connecticut income tax is imposed at the rate of
4.5% on the Connecticut taxable income of resident and non-resident
individuals, trusts, and estates. Connecticut taxable income is federal
adjusted gross income after certain modifications (Connecticut AGI), less a
personal exemption. The amount of the personal exemption varies depending
on the taxpayer's filing status and is phased out as the amount of
Connecticut AGI increases. For a husband and wife filing a joint return,
the personal exemption is $24,000 but decreases to zero as Connecticut AGI
increases between $48,001 and $71,001. For an individual filing a separate
return, the exemption is $12,000 but decreases to zero as Connecticut AGI
increases between $24,001 and $35,001. A credit is also provided depending
on the taxpayer's filing status and Connecticut AGI. The credit ranges from
75% to 10% of the Connecticut income tax, decreasing as Connecticut AGI
increases. No credit is available if Connecticut AGI exceeds $96,000 in the
case of a husband and wife filing a joint return, or $48,000 in the case of
an individual filing separately. Special exemption and credit rules apply
to an individual filing as a head of household or a surviving spouse. The
personal exemption and credit, where applicable, lower the effective rate
of tax below the flat 4.5% statutory rate.
Dividends paid by the funds that qualify as exempt-interest dividends for
federal income tax purposes are not subject to the Connecticut income tax
to the extent they are derived from obligations issued by or on behalf of
the State of Connecticut, any political subdivision thereof, or any public
instrumentality, state or local authority, district, or similar public
entity created under laws of the State of Connecticut, or derived from
obligations of U.S. possessions and territories - the interest on which
federal law prohibits the states from taxing. Exempt-interest dividends
derived from other sources and any distributions by the funds that are
treated as taxable dividends for federal income tax purposes are includable
in Connecticut AGI for purposes of the Connecticut income tax. Amounts, if
any, treated as capital gains or losses for federal income tax purposes,
such as from capital gain distributions on shares of the bond fund
or arising upon the sale, redemption, or other disposition of shares of the
fund by a shareholder, are includable in Connecticut AGI for purposes of
the Connecticut income tax to the same extent as they are taxable for
federal income tax purposes, except that, subject to the adoption of
proposed regulations, capital gain dividends would not have to be included
in Connecticut AGI to the extent derived from obligations issued by or on
behalf of the State of Connecticut or any of its political subdivisions.
The net Connecticut minimum tax is imposed for taxable years commencing
after 1992 on taxpayers subject to both the Connecticut income tax and the
federal AMT. The net Connecticut minimum tax is based on what the
taxpayer's federal AMT tax base would be if computed taking certain
Connecticut modifications into account. Included in these modifications,
subject to the adoption of proposed regulations, would be the elimination
of exempt-interest dividends on private activity bonds issued by the State
of Connecticut or any if its political subdivisions, and capital gain
dividends to the extent derived from such obligations.
In addition, the Connecticut corporation business tax is imposed on any
corporation or association carrying on, or having the right to carry on,
business in Connecticut. Distributions from any source that are treated as
federally tax-exempt dividends are includable in gross income for purposes
of the corporation business tax. However, the corporation business tax
allows a deduction for 70% of amounts includable in taxable income
thereunder that are treated as dividends for federal income tax purposes,
such as distributions of taxable net investment income and net short-term
capital gains, but disallows deductions for expenses related to such
amounts.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by
each fund on the sale of securities and distributed to shareholders
are federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives a
long-term capital gain distribution on shares of a fund , and
such shares are held six months or less and are sold at a loss, the portion
of the loss equal to the amount of the long-term capital gain distribution
will be considered a long-term loss for tax purposes. Short-term capital
gains distributed by each fund are taxable to shareholders as dividends,
not as capital gains.
Each fund hereby designates approximately $_____ as a capital gain
dividend for the purpose of the dividend-paid deduction.
As of November 30, 1994, the money market fund had a capital loss
carryforward aggregating approximately $__________. This loss carryforward,
of which $________, and $_________ will expire on November 30, ____, ____,
and ____, respectively is available to offset future capital gains.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. The bond fund intends to comply with other
tax rules applicable to regulated investment companies, including a
requirement that capital gains from the sale of securities held less than
three months constitute less than 30% of the fund's gross income for each
fiscal year. Gains from some futures contracts and options are included in
this 30% calculation, which may limit the fund's investments in such
instruments.
Each fund is treated as a separate entity from the other funds of
Fidelity Court Street Trust (Spartan Connecticut Municipal High Yield
Portfolio) and Fidelity Court Street Trust II (Spartan Connecticut
Municipal Money Market Portfolio) for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of
some of the tax consequences generally affecting e ach fund
and its shareholders, and no attempt has been made to discuss
individual tax consequences. In addition to federal income taxes,
shareholders may be subject to state and local taxes on fund distributions,
and shares may be subject to state and local personal property taxes.
Investors should consult their tax advisers to determine whether a
fund is suitable to their particular tax situations.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company
organized in 1972. Through ownership of voting common stock and the
execution of a shareholders' voting agreement, Edward C. Johnson, 3d,
Johnson family members, and various trusts for the benefit of the Johnson
family form a controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for institutional customers and funds
sold through intermediaries ; and Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within the
Fidelity organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades require pre-clearance, and participation in initial public
offerings are prohibited. In addition, restrictions on the timing of
personal investing relative to trades by Fidelity funds and on short-term
trading have been adopted. Personal investing is monitored to protect
shareholders' interests.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trusts are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. Trustees and officers elected or
appointed to Fidelity Court Street Trust prior to the money market fund's
conversion from a series of Fidelity Court Street Trust to a series of
Fidelity Court Street Trust II served Fidelity Court Street Trust in
identical capacities. All persons named as Trustees also serve in similar
capacities for other funds advised by FMR. Unless otherwise noted, the
business address of each Trustee and officer is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. Those
Trustees who are "interested persons" (as defined in the Investment Company
Act of 1940) by virtue of their affiliation with either trust or with FMR,
are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc. , and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration
and production, 1990). Until March 1990, Mr. Cox was President and
Chief Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill Corporation (non-hazardous
waste, 1993) and CH2M Hill Companies (engineering). In addition, he
served on the Board of Directors of the Norton Company (manufacturer of
industrial devices, 1983-1990) and continues to serve on the Board of
Directors of the Texas State Chamber of Commerce, and is a member of
advisory boards of Texas A&M University and the University of Texas at
Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton , NY, Trustee
(1992). Prior to her retirement in September 1991, Mrs. Davis was the
Senior Vice President of Corporate Affairs of Avon Products, Inc. She is
currently a Director of BellSouth Corporation (telecommunications), Eaton
Corporation (manufacturing, 1991), and the TJX Companies, Inc. (retail
stores, 1990), and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc. (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as a
Trustee of First Union Real Estate Investments , Chairman of the
Board of Trustees and a member of the Executive Committee of the Cleveland
Clinic Foundation, a Trustee and a member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of the Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company. He
is a Director of Allegheny Power Systems, Inc. (electric utility), General
Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute , and he is a member
of the Advisory Boards of Butler Capital Corporation Funds and Warburg,
Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software ) , Georgia Power Company (electric utility),
Gerber Alley & Associates, Inc. (computer software), National Life
Insurance Company of Vermont, American Software, Inc. (1989), and
AppleSouth, Inc. (restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior
Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President - Legal of FMR Corp., and Vice
President and Clerk of FDC.
THOMAS J. STEFFANCI, Vice President (1994) (bond fund only), is Vice
President of Fidelity's fixed-income funds and Senior Vice President of FMR
(1993). Prior to joining FMR, Mr. Steffanci was Senior Managing Director
of CMB Investment Counselors (1984-1990).
FRED L. HENNING, JR., Vice President (1994) (money market fund only), is
Vice President of Fidelity's money market funds and Senior Vice President
of FMR Texas Inc.
THOMAS D. MAHER, Assistant Vice President (1990) (money market
fund only) , is Assistant Vice President of Fidelity's money market
funds and Vice President and Associate General Counsel of FMR Texas Inc.
(1990). Prior to 1990, Mr. Maher was an employee of FMR and Assistant
Secretary of all the Fidelity funds (1985 - 1989).
SCOTT ORR is manager and Vice President of Spartan Connecticut Municipal
Money Market, which he has managed since October 1993. He also manages
Fidelity Connecticut Municipal Money Market, Michigan Municipal Money
Market, New Jersey Tax-Free Money Market, and Spartan New Jersey Municipal
Money Market. Previously, he served as a municipal bond analyst. Mr. Orr
joined Fidelity in 1989.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. William R. Spaulding, Bertram H. Witham,
and David L. Yunich participate in the program.
As of November 30, 199 4 , the Trustees and officers of the funds
owned, in the aggregate, less than ___ % of each fund's total
outstanding shares. [to be updated]
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under FMR's management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides the funds with all necessary
office facilities and personnel for servicing the funds' investments, and
compensates all officers of the Trust, all Trustees who are "interested
persons" of the Trust or FMR, and all personnel of the Trust or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the funds. These services include providing facilities
for maintaining each fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the funds; preparing all general shareholder
communications and conducting shareholder relations; maintaining the funds'
records and the registration of the funds' shares under federal and state
law; developing management and shareholder services for the funds; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Board of Trustees.
FMR is responsible for the payment of all expenses of the funds with
certain exceptions. Specific expenses payable by FMR include, without
limitation, the fees and expenses of registering and qualifying the funds
and their shares for distribution under federal and state securities laws;
expenses of typesetting for printing the Prospectus and Statement of
Additional Information; custodian charges; audit and legal expenses;
insurance expenses; association membership dues; and the expenses of
mailing reports to shareholders, shareholder meetings, and proxy
solicitations. FMR also provides for transfer agent and dividend disbursing
services and portfolio and general accounting record maintenance through
FSC.
FMR pays all other expenses of the funds with the following exceptions:
fees and expenses of all Trustees who are not "interested persons" of the
Trust or FMR (the non-interested Trustees); interest on borrowings; taxes;
brokerage commissions (if any); and nonrecurring expenses as may arise,
including costs of any litigation to which the funds may be a party, and
any obligation they may have to indemnify the officers and Trustees with
respect to litigation.
FMR is the money market fund's manager pursuant to a management contract
dated February 28, 1992. The contract was approved by Fidelity Court Street
Trust as sole shareholder of the fund on February 28, 1992, in conjunction
with an Agreement and Plan of Conversion to convert the fund from a series
of a Massachusetts business trust to a series of a Delaware trust. The
Agreement and Plan of Conversion was approved by public shareholders of the
fund on December 11, 199 1 . Besides reflecting the fund's
redomiciling, the February 28, 1992 contract is identical to the fund's
prior management contract with FMR, which was approved by FMR as sole
shareholder on March 1, 1991.
FMR is the bond fund 's manager pursuant to a management contract
dated January 1, 1992 which was approved by shareholders on December 11,
1991.
For the services of FMR under these contracts, the funds pay FMR a monthly
management fee at the annual rate of .50% (money market fund) and .55%
( bond fund ), respectively, of average net assets throughout the
month. FMR reduces its fee by an amount equal to the fees and expenses of
the non-interested Trustees.
Prior to January 1, 1992, FMR was the bond fund 's manager pursuant
to a management contract dated March 1, 1989. For the services of FMR under
that contract, the fund paid FMR a monthly management fee composed of two
elements: a group fee rate and an individual fund fee rate. The group fee
rate was based on the average monthly net assets of all the registered
investment companies with which FMR had management contracts and was
calculated on a cumulative basis pursuant to a graduated schedule that
ranged from .37% to .15%. The individual fund fee rate was .25%.
FMR may, from to time, voluntarily reimburse all or a portion of a fund's
operating expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses). The tables below outline expense limitations (as a
percentage of the funds' average net assets) in effect for the money
market fund during last three fiscal years. The tables also show the
amount of management fees incurred under each fund's contract and
the amounts reimbursed by FMR for each fiscal perio d, if applicable .
MONEY MARKET FUND:
From To Expense Limitation
September 1, 1993 September 30, 1993 .40%
August 1, 1993 August 31, 1993 .30%
July 1, 1993 July 31, 1993 .25%
June 1, 1993 June 30, 1993 .20%
May 1, 1993 May 31, 1993 .15%
March 1, 1993 April 30, 1993 .10%
September 1, 1992 February 28, 1993 .05%
March 4, 1991 August 31, 1992 0%
Management Fees Amount of
Fiscal Year Before Reimbursement Reimbursements
1994 $ $
1993 $641,483 $331,281
1992 $243,088 $233,746
BOND FUND :
From To Expense Limitation
January 1, 1991 December 31, 1991 .55%
Management Fees Amount of
Fiscal Year Before Reimbursement Reimbursements
1994 $ $ 0
1993 $2,474,254 $ 0
1992 $2,110,249 $ 11,998
To defray shareholder service costs, FMR or its affiliates also collect the
funds' $5.00 exchange fees, $5.00 account closeout fees, $5.00 fees for
wire purchases and redemptions, and the money market fund's $2.00
checkwriting charge. The bond fund 's .50% redemption fee is retained
by the fund. Shareholder transaction fees and charges collected for the
fiscal years ended November 30, 1994, 1993, and 1992, are
indicated in the table below.
MONEY MARKET FUND:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Fiscal Year Exchange Fees Account Closeout Fees Wire Fees Checkwriting Charge
</TABLE>
1994 $ $ $ $
1993 $2,435 $256 $520 $ 1,684
1992 $2,215 $179 $610 $ 1,544
BOND FUND :
Fiscal Year Exchange Fees Account Closeout Fees Wire Fees
1994 $ $ $
1993 $6,270 $1,475 $ 890
1992 $8,140 $1,340 $ 2,020
SUB-ADVISER. With respect to the money market fund, FMR has entered into a
sub-advisory agreement with FMR Texas pursuant to which FMR Texas has
primary responsibility for providing portfolio investment management
services to the fund. Under the sub-advisory agreement FMR pays FMR Texas a
fee equal to 50% of the management fee payable to FMR under its current
management contract with the fund. The fees paid to FMR Texas are not
reduced by any voluntary or mandatory expense reimbursements that may be in
effect from time to time. During the fiscal periods ended November 30,
199 4 , 199 3 , and 199 2 FMR paid FMR Texas fees of
$__________, $320,741, and $121,544, respectively under the
sub-advisory agreement.
DISTRIBUTION AND SERVICE PLANS
Each fund has adopted a distribution and service plan (the p lans)
under Rule 12b-1 of the Investment Company Act of 1940 (the Rule).
The Rule provides in substance that a mutual fund may not engage directly
or indirectly in financing any activity that is primarily intended to
result in the sale of shares of the fund except pursuant to a plan adopted
by the fund under the Rule. Each fund's B oard of Trustees has
adopted the plan to allow the fund and FMR to incur certain expenses that
might be considered to constitute indirect payment by the fund of
distribution expenses. Under the plan, if the payment of management fees
by a fund to FMR is deemed to be indirect financing by the fund
of the distribution of its shares, such payment is authorized by the plan.
Each plan also specifically recognize s that FMR,
either directly or through FDC, may use its management fee revenue, past
profits , or other resources, without limitation, to pay promotional
and administrative expenses in connection with the offer and sale of
shares of the funds . In addition, each plan provide s
that FMR may use its resources, including its management fee revenues, to
make payments to third parties that provide assistance in selling shares
of the fund, or to third parties, including banks, that render
shareholder support services. The Trustees have not authorized such
payments to date.
Each fund's plan has been approved by the Trustees. As required by the
Rule, the Trustees carefully considered all pertinent factors relating to
implementation of each plan prior to i ts approval, and have
determined that there is a reasonable likelihood that the plan will benefit
the fund and i ts shareholders. In particular, the Trustees noted
that each plan do es not authorize payments by the fund other
than those made to FMR under its management contract with the fund. To the
extent that e ach plan give s FMR and FDC greater flexibility
in connection with the distribution of shares of the fund, additional sales
of the fund ' s shares may result. Additionally, certain shareholder
support services may be provided more effectively under each plan by
local entities with whom shareholders have other relationships.
The money market fund's plan was approved by Fidelity Court Street Trust
on February 28, 1992 as the then sole shareholder of the fund, pursuant to
an Agreement and Plan of Conversion approved by public shareholders of the
fund on December 11, 1991. The bond fund's plan was approved by
shareholders on November 16, 1988.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support
services , or servicing and recordkeeping functions. FDC intends to
engage banks only to perform such functions. However, changes in federal or
state statutes and regulations pertaining to the permissible activities of
banks and their affiliates or subsidiaries, as well as further judicial or
administrative decisions or interpretations, could prevent a bank from
continuing to perform all or a part of the contemplated services. If a bank
were prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
Each fund may execute portfolio transactions with and purchase
securities issued by depository institutions that receive payments under
the plan. No preference for the instruments of such depository institutions
will be shown in the selection of investments. In addition, state
securities laws on this issue may differ from the interpretations of
federal law expressed herein, and banks and financial institutions may be
required to register as dealers pursuant to state law.
INTEREST OF FMR AFFILIATES
United Missouri is each fund's custodian and transfer agent. United
Missouri has entered into sub-contracts with FSC, an affiliate of FMR,
under the terms of which FSC performs the processing activities associated
with providing transfer agent and shareholder servicing functions for each
fund. United Missouri has additional sub-contracts with FSC, pursuant to
which FSC performs the calculations necessary to determine each fund's net
asset value per share and dividends and maintains the funds' accounting
records. United Missouri is entitled to reimbursement for fees paid to FSC
from FMR, which must bear these costs pursuant to its management contract
with each fund.
Prior to January 1, 1992 (in accordance with the terms of the bond
fund 's March 1, 1989 contract with FMR) the bond fund reimbursed
its custodian and transfer agent (Shawmut Bank, N.A. from commencement of
operations to November 7, 1991, and, subsequently, United Missouri) for
fees paid to FSC for transfer agent and pricing and bookkeeping services.
The fees paid by the bond fund 's custodian bank to FSC for the
fiscal year ended November 30, 1992 are indicated in the table below.
Fiscal Year Transfer Agent Fees Pricing and Bookkeeping Fees
1992 $ 15,595 $ 14,703
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at net asset value. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Fidelity Court Street Trust (the Massachusetts Trust)
is an open-end management investment company originally organized as a
Massachusetts business trust on April 21, 1977. On August 1, 1987, the
Massachusetts Trust's name was changed from Fidelity High Yield Municipals
to Fidelity Court Street Trust. Currently, there are four funds of the
Massachusetts Trust: Spartan Connecticut Municipal High Yield Portfolio,
Fidelity High Yield Tax-Free Portfolio, Spartan Florida Municipal Income
Portfolio, and Spartan New Jersey Municipal High Yield Portfolio. The
Massachusetts t rust's Declaration of Trust permits the Trustees to
create additional funds.
Fidelity Court Street Trust II (the Delaware Trust) is an open-end
management investment company organized as a Delaware b usiness trust
on June 20, 1991. Currently, there are four funds of the Delaware Trust:
Fidelity Connecticut Municipal Money Market Portfolio, Spartan Connecticut
Municipal Money Market Portfolio, Spartan Florida Municipal Money Market
Portfolio, and Fidelity New Jersey Tax-Free Money Market Portfolio.
Fidelity Court Street Trust II entered into an agreement to acquire all of
the assets of Spartan Connecticut Municipal Money Market Portfolio, a
series of the t rust on February 28, 1992. The Delaware
t rust's Trust Instrument permits the Trustees to create additional
funds.
In the event that FMR ceases to be investment adviser to a trust or any of
its funds, the right of the trust or the fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn. There is a remote possibility
that one fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
The assets of each trust received for the issue or sale of shares of each
of its funds and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general expenses of their respective trusts. Expenses with respect to
the trusts are to be allocated in proportion to the asset value of their
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of the trusts, subject to the general
supervision of the Board of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds of a certain trust. In the event of the dissolution or
liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY - MASSACHUSETTS TRUST. The Massachusetts
t rust is an entity of the type commonly known as "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust
may, under certain circumstances, be held personally liable for the
obligations of the trust. The Declaration of Trust provides that the
Massachusetts Trust shall not have any claim against shareholders except
for the payment of the purchase price of shares and requires that each
agreement, obligation, or instrument entered into or executed by the
Massachusetts t rust or its Trustees shall include a provision
limiting the obligations created thereby to the Massachusetts t rust
and its assets. The Declaration of Trust provides for indemnification out
of each fund's property of any shareholders held personally liable for the
obligations of the fund. The Declaration of Trust also provides that each
fund shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the fund and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the
fund itself would be unable to meet its obligations. FMR believes that, in
view of the above, the risk of personal liability to shareholders is
remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
SHAREHOLDER AND TRUSTEE LIABILITY - DELAWARE TRUST. The Delaware
t rust is a business trust organized under Delaware law. Delaware law
provides that shareholders shall be entitled to the same limitations of
personal liability extended to stockholders of private corporations for
profit. The courts of some states, however, may decline to apply Delaware
law on this point. The Trust Instrument contains an express disclaimer of
shareholder liability for the debts, liabilities, obligations, and expenses
of the Delaware t rust and requires that a disclaimer be given in
each contract entered into or executed by the Delaware t rust or its
Trustees. The Trust Instrument provides for indemnification out of each
fund's property of any shareholder or former shareholder held personally
liable for the obligations of the fund. The Trust Instrument also provides
that each fund shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the fund and satisfy
any judgment thereon. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in
which Delaware law does not apply, no contractual limitation of liability
was in effect, and the fund is unable to meet its obligations. FMR believes
that, in view of the above, the risk of personal liability to shareholders
is extremely remote.
The Trust Instrument further provides that the Trustees shall not be
personally liable to any person other than the Delaware t rust or its
shareholders; moreover, the Trustees shall not be liable for any conduct
whatsoever, provided that the Trustees are not protected against any
liability to which they would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
VOTING RIGHTS - BOTH TRUSTS. Each fund's capital consists of shares of
beneficial interest. As a shareholder of the Massachussetts trust, you
receive one vote for each dollar value of net asset you own. As a
shareholder of the Delaware trust, you receive one vote for each share you
own. The shares have no preemptive or conversion rights; voting and
dividend rights, the right of redemption, and the privilege of exchange are
described in the p rospectus. Shares are fully paid and
nonassessable, except as set forth under the respective "Shareholder and
Trustee Liability" headings above . Shareholders representing 10% or
more of a trust or one of its funds may, as set forth in the Declaration of
Trust or Trust Instrument, call meetings of the trust or fund for any
purpose related to the trust or fund, as the case may be, including, in the
case of a meeting of an entire trust, the purpose of voting on removal of
one or more Trustees.
A trust or any fund may be terminated upon the sale of its assets to (or,
in the case of the Delaware t rust and its funds, merger with)
another open-end management investment company or series thereof, or upon
liquidation and distribution of its assets. Generally such terminations
must be approved by vote of the holders of a majority of the outstanding
shares of the trust or the fund (for the Delaware trust), or by a vote
of the holders of a majority of the trust or fund, as determined by the
current value of each shareholder's investment in the trust or fund (for
the Massachussetts trust); however, the Trustees of the Delaware
t rust may, without prior shareholder approval, change the form of
the organization of the Delaware t rust by merger, consolidation, or
incorporation. If not so terminated or reorganized, the trusts and their
funds will continue indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the Delaware t rust to merge or consolidate into one or more
trusts, partnerships, or corporations, so long as the surviving entity is
an open-end management investment company that will succeed to or assume
the Delaware t rust registration statement, or cause the Delaware
t rust to be incorporated under Delaware law. Each fund may
also invest all of its assets in another investment company.
CUSTODIAN. United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City,
Missouri, is custodian of the assets of the funds. The custodian is
responsible for the safekeeping of the funds' assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the funds or in deciding which
securities are purchased or sold by the funds. The funds may, however,
invest in obligations of the custodian and may purchase securities from or
sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the trusts'
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and
personal and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts (bond fund) and 1999 Bryan Street, Dallas, Texas (money
market fund) serves as the trusts' independent accountant. The auditor
examines financial statements for the funds and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
The funds' financial statements and financial highlights for the
fiscal year ended November 30, 199 4 are included in the funds'
Annual Report, which is a separate report supplied with this Statement
of Additional Information . The funds' financial statements and financial
highlights are incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will
take advantage of a maturity-shortening device, such as a call, refunding,
or redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds.
The descriptions that follow are examples of eligible ratings for the
funds. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations when
determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND
MUNICIPAL NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important in the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG-3/VMIG-3 - This designation denotes favorable quality, with all
security elements accounted for, but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG-4/VMIG-4 - This designation denotes adequate quality protection
commonly regarded as required of an investment security is present and,
although not distinctly or predominantly speculative, there is specific
risk.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND
MUNICIPAL NOTES:
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
SP-3 - Speculative capacity to pay principal and interest.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments of or maintenance of other
terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
short-comings.
C - Bonds rated C are the lowest-rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned on actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating will also
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
Fidelity Court Street Trust:
Spartan Florida Municipal Income Portfolio
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Funds at a Glance; Who May Want
to Invest
3 a .............................. Financial Highlights
b .............................. *
c .............................. Performance
d .............................. Performance
4 a i............................. Charter
ii........................... The Funds at a Glance; Investment Principles and
Risks
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page: The Funds at a Glance; Charter;
Doing Business with Fidelity
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Cover Page: Charter
f .............................. Expenses
g i............................. Charter
g ii............................ *
.
5 A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... Charter
b ............................. *
c .............................. Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f .............................. Dividends, Capital Gains, and Taxes
g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Cover Page: Charter
b .............................. Expenses; How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10 ............................ Cover Page
11 ............................ Cover Page
12 ............................ Description of the Trusts
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i........................... FMR; Portfolio Transactions
ii.......................... Trustees and Officers
iii......................... Management Contracts
b ............................ Management Contracts
c, d ............................ Interest of FMR Affiliates
e ............................ *
f ............................ Distribution and Service Plans
g ............................ *
h ............................ Description of the Trusts
i ............................ Interest of FMR Affiliates
17 a-c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trusts
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Interest of FMR Affiliates
c ............................ *
22 a ............................ *
b ............................ Performance
23 ............................ Financial Statements
</TABLE>
* Not Applicable
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 the funds' most recent financial report and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated January 16, 1995.
The SAI has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, call Fidelity at
1-800-544-8888.
Investments in the money market fund are neither insured nor guaranteed by
the U.S. government, and there can be no assurance that the fund will
maintain a stable $1.00 share price.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the
Federal Reserve Board, or any other agency, and are subject to investment
risk, including the possible loss of principal.
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
SFC-pro-195
SPARTAN
FLORIDA
MUNICIPAL
FUNDS
Each fund seeks a high level of current income free from federal
income tax and the Florida intangible tax.
SPARTAN FLORIDA MUNICIPAL MONEY MARKET invests in high-quality, short-term
municipal money market securities and is designed to maintain a
stable $1.00 share price.
SPARTAN FLORIDA MUNICIPAL INCOME seeks to provide higher yields by
investing in a broader range of municipal securities.
PROSPECTUS
JANUARY 16, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL CHARTER How each fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management
arm of Fidelity Investments, which was established in 1946 and is now
America's largest mutual fund manager. FMR Texas Inc. (FTX), a subsidiary
of FMR, chooses investments for Spartan Florida Municipal Money Market.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
SPARTAN FLORIDA MONEY
GOAL: High current tax-free income, and exemption from the Florida
intangible tax while maintaining a stable $1.00 share price.
STRATEGY: Invests mainly in high-quality, short-term municipal money
market securities whose interest is free from federal income tax and
the Florida intangible tax.
SIZE: As of November 30, 199 4 , the fund had over $__ million in
assets.
SPARTAN FLORIDA INCOME
GOAL: High current tax-free income, and exemption from the Florida
intangible tax.
STRATEGY: Invests mainly in longer-term, investment-grade municipal
securities whose interest is free from federal income tax and the
Florida intangible tax.
SIZE: As of November 30, 199 4, the fund had over $__ million in
assets.
WHO MAY WANT TO INVEST
These non-diversified funds may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal income
tax and the Florida intangible tax. Each fund's level of risk and
potential reward, depend on the quality and maturity of its investments.
Spartan Florida Municipal Money Market is managed to keep its share price
stable at $1.00. Spartan Florida Municipal Income, with its broader range
of investments, has the potential for higher yields, but also carries a
higher degree of risk. You should consider your investment objective and
tolerance for risk when making an investment decision.
The value of the funds' investments and the income they generate will vary
from day to day, and generally reflect interest rates, market conditions,
and other federal and state political and economic news. When you sell your
shares of Spartan Florida Municipal Income, they may be worth more or less
than what you paid for them. By themselves these funds do not
constitute a balanced investment plan.
The Spartan family of funds is designed for cost-conscious investors
looking for higher yields through lower costs. The Spartan
Approach(registered trademark) requires investors to make high minimum
investments and, in some cases, to pay for individual transactions.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund. See page for more information.
Maximum sales charge on purchases and
reinvested distributions None
Deferred sales charge on redemptions None
Redemption fee ( as a % of amount redeemed
on shares held less than 180 days days)
for Spartan Florida Municipal Money Market None
for Spartan Florida Municipal Income .50%
Exchange and wire transaction fees $5.00
Checkwriting fee, per check written $2.00
available for Spartan Florida Municipal Money Market
Account closeout fee $5.00
THESE FEES ARE WAIVED (except for the redemption fee) if your account
balance at the time of the transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. Expenses are factored into each fund's
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets.
SPARTAN FLORIDA MONEY
Management fee 0 .50
%
12b-1 fee None
Other expenses 0.00
%
Total fund operating expenses 0 .50
%
SPARTAN FLORIDA INCOME
Management fee 0. 55
%
12b-1 fee None
Other expenses 0.00
%
Total fund operating expenses 0. 55
%
EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses after
the number of years indicated, first assuming that you leave your account
open, and then assuming that you close your account at the end of the
period:
SPARTAN FLORIDA MONEY
Account Account
open closed
After 1 year $ $
After 3 years $ $
After 5 years $ $
After 10 years $ $
SPARTAN FLORIDA INCOME
Account Account
open closed
After 1 year $ $
After 3 years $ $
After 5 years $ $
After 10 years $ $
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
FINANCIAL HIGHLIGHTS
The tables that follow are included in the funds' Annual Report and
have been audited by Coopers & Lybrand L.L.P., independent
accountants. Their reports on the financial statements and financial
highlights are included in the Annual Report. The financial statements and
financial highlights are incorporated by reference into (are legally a
part of) the funds' Statement of Additional Information.
[Financial Highlights to be filed by subsequent amendment.]
PERFORMANCE
Mutual fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results and do
not reflect the effect of any transaction fees you may have paid. The
figures would be lower if fees were taken into account.
Each fund's fiscal year runs from December 1 through November 30. The
tables below show each fund's performance over past fiscal years compared
to a measure of inflation. The charts on page 7 help you compare the yields
of these funds to those of their competitors.
SPARTAN FLORIDA MONEY
Fiscal years ended Past 1 Life of
November 30, 199 4 Year fundA
Average
annual
total return
Cumulative
total return
Consumer
Price
Index
SPARTAN FLORIDA INCOME
Fiscal year s ended Past 1 Life of
November 30, 199 4 Year fundB
Average
annual
total return
Cumulative
total return
Consumer
Price
Index
A FROM AUGUST 24, 1992
B FROM MARCH 16, 1992
UNDERSTANDING
PERFORMANCE
YIELD illustrates the income
earned by a fund over a
recent period. Seven-day
yields are the most common
illustration of money market
performance. 30-day yields
are usually used for bond
funds. Yields change daily,
reflecting changes in interest
rates.
TOTAL RETURN reflects both the
reinvestment of income and
capital gain distributions, and
any change in a fund's share
price.
(checkmark)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund 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.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. When a money
market fund yield assumes that income earned is reinvested, it is called an
EFFECTIVE YIELD. A TAX-EQUIVALENT YIELD shows what an investor would have
to earn before taxes to equal a tax-free yield. Yields for the bond fund
are calculated according to a standard that is required for all stock and
bond funds . Because this differs from other accounting methods, the
quoted yield may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGE for Spartan Florida Municipal Money Market is
calculated based on the IBC/Donoghue's MONEY FUND
AVERAGES(trademark)/All Tax-Free category, which currently reflects the
performance of over 370 mutual funds with similar objectives. This
average is published in the MONEY FUND REPORT(registered trademark) by IBC
USA (Publications), Inc. The competitive funds average for Spartan Florida
Municipal Income is published by Lipper Analytical Services, Inc. The fund
compares its performance to the Lipper Florida Municipal Income Funds
Average, which currently reflects the performance of over 55 mutual
funds with similar objectives. Both of these averages assume reinvestment
of distributions.
SPARTAN FLORIDA MUNICIPAL MONEY MARKET
7-day yields
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 1, Col: 2, Value: nil
Row: 2, Col: 1, Value: nil
Row: 2, Col: 2, Value: nil
Row: 3, Col: 1, Value: nil
Row: 3, Col: 2, Value: nil
Row: 4, Col: 1, Value: nil
Row: 4, Col: 2, Value: nil
Row: 5, Col: 1, Value: nil
Row: 5, Col: 2, Value: nil
Row: 6, Col: 1, Value: nil
Row: 6, Col: 2, Value: nil
Row: 7, Col: 1, Value: nil
Row: 7, Col: 2, Value: nil
Row: 8, Col: 1, Value: nil
Row: 8, Col: 2, Value: nil
Row: 9, Col: 1, Value: nil
Row: 9, Col: 2, Value: nil
Row: 10, Col: 1, Value: nil
Row: 10, Col: 2, Value: nil
Row: 11, Col: 1, Value: nil
Row: 11, Col: 2, Value: nil
Row: 12, Col: 1, Value: nil
Row: 12, Col: 2, Value: nil
Row: 13, Col: 1, Value: nil
Row: 13, Col: 2, Value: nil
Row: 14, Col: 1, Value: nil
Row: 14, Col: 2, Value: nil
Row: 15, Col: 1, Value: nil
Row: 15, Col: 2, Value: nil
Row: 16, Col: 1, Value: nil
Row: 16, Col: 2, Value: nil
Row: 17, Col: 1, Value: nil
Row: 17, Col: 2, Value: nil
Row: 18, Col: 1, Value: nil
Row: 18, Col: 2, Value: nil
Row: 19, Col: 1, Value: nil
Row: 19, Col: 2, Value: nil
Row: 20, Col: 1, Value: nil
Row: 20, Col: 2, Value: nil
Row: 21, Col: 1, Value: nil
Row: 21, Col: 2, Value: nil
Row: 22, Col: 1, Value: nil
Row: 22, Col: 2, Value: nil
Row: 23, Col: 1, Value: nil
Row: 23, Col: 2, Value: nil
Row: 24, Col: 1, Value: nil
Row: 24, Col: 2, Value: nil
Row: 25, Col: 1, Value: nil
Row: 25, Col: 2, Value: nil
Row: 26, Col: 1, Value: nil
Row: 26, Col: 2, Value: nil
Row: 27, Col: 1, Value: nil
Row: 27, Col: 2, Value: nil
Row: 28, Col: 1, Value: nil
Row: 28, Col: 2, Value: nil
Row: 29, Col: 1, Value: nil
Row: 29, Col: 2, Value: nil
Row: 30, Col: 1, Value: nil
Row: 30, Col: 2, Value: nil
Row: 31, Col: 1, Value: nil
Row: 31, Col: 2, Value: nil
Row: 32, Col: 1, Value: nil
Row: 32, Col: 2, Value: nil
Spartan
Florida Money
Competitive
funds average
1993
1994
SPARTAN FLORIDA MUNICIPAL INCOME
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 1, Col: 2, Value: nil
Row: 2, Col: 1, Value: nil
Row: 2, Col: 2, Value: nil
Row: 3, Col: 1, Value: nil
Row: 3, Col: 2, Value: nil
Row: 4, Col: 1, Value: nil
Row: 4, Col: 2, Value: nil
Row: 5, Col: 1, Value: nil
Row: 5, Col: 2, Value: nil
Row: 6, Col: 1, Value: nil
Row: 6, Col: 2, Value: nil
Row: 7, Col: 1, Value: nil
Row: 7, Col: 2, Value: nil
Row: 8, Col: 1, Value: nil
Row: 8, Col: 2, Value: nil
Row: 9, Col: 1, Value: nil
Row: 9, Col: 2, Value: nil
Row: 10, Col: 1, Value: nil
Row: 10, Col: 2, Value: nil
Row: 11, Col: 1, Value: nil
Row: 11, Col: 2, Value: nil
Row: 12, Col: 1, Value: nil
Row: 12, Col: 2, Value: nil
Row: 13, Col: 1, Value: nil
Row: 13, Col: 2, Value: nil
Row: 14, Col: 1, Value: nil
Row: 14, Col: 2, Value: nil
Row: 15, Col: 1, Value: nil
Row: 15, Col: 2, Value: nil
Row: 16, Col: 1, Value: nil
Row: 16, Col: 2, Value: nil
Row: 17, Col: 1, Value: nil
Row: 17, Col: 2, Value: nil
Row: 18, Col: 1, Value: nil
Row: 18, Col: 2, Value: nil
Row: 19, Col: 1, Value: nil
Row: 19, Col: 2, Value: nil
Row: 20, Col: 1, Value: nil
Row: 20, Col: 2, Value: nil
Row: 21, Col: 1, Value: nil
Row: 21, Col: 2, Value: nil
Row: 22, Col: 1, Value: nil
Row: 22, Col: 2, Value: nil
Row: 23, Col: 1, Value: nil
Row: 23, Col: 2, Value: nil
Row: 24, Col: 1, Value: nil
Row: 24, Col: 2, Value: nil
Row: 25, Col: 1, Value: nil
Row: 25, Col: 2, Value: nil
Row: 26, Col: 1, Value: nil
Row: 26, Col: 2, Value: nil
Row: 27, Col: 1, Value: nil
Row: 27, Col: 2, Value: nil
Row: 28, Col: 1, Value: nil
Row: 28, Col: 2, Value: nil
Row: 29, Col: 1, Value: nil
Row: 29, Col: 2, Value: nil
Row: 30, Col: 1, Value: nil
Row: 30, Col: 2, Value: nil
Row: 31, Col: 1, Value: nil
Row: 31, Col: 2, Value: nil
Row: 32, Col: 1, Value: nil
Row: 32, Col: 2, Value: nil
Spartan
Florida
Income
Competitive
funds average
1993
1994
THE TOP CHART SHOWS THE 7-DAY EFFECTIVE YIELD FOR THE FUND AND ITS
COMPETITIVE FUNDS AVERAGE AS OF THE LAST TUESDAY OF EACH MONTH FROM
JANUARY 1993 THROUGH NOVEMBER 1994 . THE BOTTOM CHART SHOWS THE
30-DAY ANNUALIZED NET YIELDS FOR THE FUND AND ITS COMPETITIVE FUNDS
AVERAGE AS OF THE LAST DAY OF EACH MONTH DURING THE SAME PERIOD. YIELDS
FOR THE FUNDS WOULD HAVE BEEN LOWER IF FIDELITY HAD NOT REIMBURSED
CERTAIN FUND EXPENSES.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS 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. In technical terms, Spartan Florida
Municipal Money Market is currently a non-diversified fund of Fidelity
Court Street Trust II, and Spartan Florida Municipal Income is currently a
non-diversified fund of Fidelity Court Street Trust. Both trusts are
open-end management investment companies. Fidelity Court Street Trust II
was organized as a Delaware business trust on June 20, 1991. Fidelity Court
Street Trustwas organized as a Massachusetts business trust on April 21,
1977. There is a remote possibility that one fund might become liable for a
misstatement in the prospectus about another fund.
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 throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL 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.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. For the money market
fund, you are entitled to one vote for each share you own. For the bond
fund, the number of votes you are entitled to is based upon the dollar
value of your investment.
FMR AND ITS AFFILIATES
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over ___
(solid bullet) Assets in Fidelity mutual
funds: over $___ billion
(solid bullet) Number of shareholder
accounts: over __ million
(solid bullet) Number of investment
analysts and portfolio
managers: over ___
(checkmark)
The funds are managed by FMR, which chooses their investments and handles
their business affairs. FTX has primary responsibility for providing
investment management services for Spartan Florida Municipal Money Market.
Anne Punzak is manager and Vice President of Spartan Florida Municipal
Income, which she has managed since March 1992. She also manages
Aggressive Tax-Free and High Yield Tax-Free. Previously, she managed
Insured Tax-Free. Ms. Punzak joined Fidelity in 1984.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions. Personal investing
is monitored to protect shareholders' interets.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Service Co. (FSC) performs transfer agent
servicing functions for the funds.
FMR Corp. is the parent company of FMR and FTX . Through ownership of
voting common stock, members of the Edward C. Johnson 3d family form a
controlling group with respect to FMR Corp. Changes may occur in the
Johnson family group, through death or disability, which would result in
changes in each individual family member's holding of stock. Such changes
could result in one or more family members becoming holders of over 25% of
the stock. FMR Corp. has received an opinion of counsel that changes in the
composition of the Johnson family group under these circumstances would not
result in the termination of the funds' management or distribution
contracts and, accordingly, would not require a shareholder vote to
continue operation under those contracts.
United Missouri Bank, N.A., is each fund's transfer agent, although it
employs FSC to perform these functions for the funds. It is located at 1010
Grand Avenue, Kansas City, Missouri.
To carry out the funds' transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that a fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
SPARTAN FLORIDA MUNICIPAL MONEY MARKET seeks to earn high current
income that is free from federal income tax while maintaining a
stable $1.00 share price by investing in high-quality, short-term municipal
money market securities of all types.
When you sell your shares, they should be worth the same amount as when you
bought them. Of course, there is no guarantee that the fund will maintain a
stable $1.00 share price. The fund follows industry-standard guidelines on
the quality and maturity of its investments, which are designed to help
maintain a stable $1.00 share price. The fund will purchase only
high-quality securities that FMR believes present minimal credit risks and
will observe maturity restrictions on securities it buys. It is possible
that a major change in interest rates or a default on the fund's
investments could cause its share price (and the value of your investment)
to change.
SPARTAN FLORIDA MUNICIPAL INCOME seeks high current income that is free
from federal income tax by focusing on municipal bonds judged by FMR to be
of investment-grade quality, although it can also invest in some lower
quality securities. The fund has no restrictions on maturity, but it
generally invests in medium- and long-term bonds and maintains a
dollar-weighted average maturity of 15 years or longer.
FMR normally invests at least 65% of each fund's total assets in securities
that are free from the Florida intangible tax, and normally invests so that
at least 80% of each fund's income distributions are free from federal
income tax.
EACH FUND'S performance is affected by the economic and political
conditions within the state of Florida. Because of the importance of
foreign trade, agriculture, construction, and tourism in Florida, the
state's economy is sensitive to trends in these industries.
The money market fund stresses income, preservation of capital, and
liquidity. The bond fund seeks to provide a higher level of income by
investing in a broader range of securities. Each fund's yield and the bond
fund's share price change daily and are based on interest rates, market
conditions, other economic and political news, and on the quality and
maturity of its investments. In general, bond prices rise when interest
rates fall, and vice versa. This effect is usually more pronounced for
longer-term securities. Lower-quality securities offer higher yields, but
also carry more risk. FMR may use various investment techniques to hedge
the bond fund's risks, but there is no guarantee that these strategies will
work as intended. When you sell your shares of the bond fund, they may be
worth more or less than what you paid for them.
If you are subject to the federal alternative minimum tax, you should note
that each fund may invest all of its assets in municipal securities issued
to finance private activities. The interest from these investments is a
tax-preference item for purposes of the tax.
FMR normally invests each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations, and expect to be exempt from the Florida intangible tax. Each
fund also reserves the right to invest without limitation in short-term
instruments, to hold a substantial amount of uninvested cash, or to invest
more than normally permitted in taxable obligations for temporary,
defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of each fund's
policies and limitations and more detailed information about the funds'
investments is 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 to
the full extent permitted unless it believes that doing so will help the
funds achieve their goals. Current holdings and recent investment
strategies are described in the funds' financial reports which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable 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 purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "municipal junk
bonds") may have speculative characteristics, and involve greater risk
of default or price changes due to changes in the issuer's
creditworthiness. 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 table below provides a summary of ratings assigned to debt holdings
(not including money market instruments) in Spartan Florida Municipal
Income's portfolio. These figures are dollar-weighted averages of month-end
portfolio holdings during fiscal 199 4 , and are presented as a
percentage of total security investments. These percentages are
historical and do not necessarily indicate the fund's current or future
debt holdings.
SPARTAN FLORIDA MUNICIPAL INCOME
Fiscal 1994 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa % AA %
Upper-medium grade A A
Medium grade Baa % BBB %
LOWER QUALITY
Moderately speculative Ba % BB %
Speculative B % B %
Highly speculative Caa % CCC %
Poor quality Ca % CC %
Lowest quality, no interest C C
In default, in arrears -- D %
% %
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S OR
S&P AMOUNTED TO ___%. THIS MAY INCLUDE SECURITIES RATED BY OTHER
NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES. FMR
HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER-QUALITY ACCOUNT FOR
__% OF THE FUND'S TOTAL SECURITY INVESTMENTS. REFER TO THE FUND'S STATEMENT
OF ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
RESTRICTIONS: Spartan Florida Municipal Income does not currently intend to
invest more than one-third of its assets in bonds of equivalent quality to
Ba or lower by Moody's and BB or lower by S&P, and does not currently
intend to invest in bonds whose quality is judged by FMR to be equivalent
to bonds rated lower than B. The fund does not currently intend to invest
in bonds rated below Caa by Moody's or CCC by S&P.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. Municipal securities
may be issued in anticipation of future revenues, and may be backed by the
full taxing power of a municipality, the revenues from a specific project,
or the credit of a private organization. A security's credit may be
enhanced by a bank, insurance company, or other financial institution. A
fund may own a municipal security directly or through a participation
interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by
the state of Florida or its counties, municipalities, authorities, or other
subdivisions. The ability of issuers to repay their debt can be affected by
many factors that impact the economic vitality of either the state or a
region within the state.
Other state tax-free securities include general obligations of the
U.S. territories and possessions such as Guam, the Virgin Islands, and
Puerto Rico, and their political subdivisions and public corporations. The
economy of Puerto Rico is closely linked to the U.S. economy, and will
be affected by the strength of the U.S. dollar, interest rates, the
price stability of oil imports, and the continued existence of favorable
tax incentives. Recent legislation revised these incentives, but the
government of Puerto Rico anticipates only a slight reduction in the
average real growth rates for the economy.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ASSET-BACKED SECURITIES may include pools of purchase contracts, financing
leases, or sales agreements entered into by municipalities. These
securities usually rely on continued payments by a municipality, and may
also be subject to prepayment risk.
VARIABLE- AND FLOATING-RATE INSTRUMENTS may have interest rates that move
in tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
RESTRICTIONS: The money market fund may not purchase certain
types of variable- or floating-rate instruments which are inconsistent with
the fund's goal of maintaining a stable share price.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, a fund
may pay periodic fees or accept a lower interest rate. Demand features,
standby commitments, and tender options are types of put features.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts and purchasing indexed securities.
RESTRICTIONS: The money market fund may not use investment
techniques which are inconsistent with the fund's goal of maintaining a
stable share price.
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 the
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 the 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.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield or the market value of its assets.
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 other securities, including illiquid 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 purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
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 or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
these changes, and also to changes in the market value of a single issuer
or industry.
RESTRICTIONS: The funds are considered non-diversified. Generally, to
meet federal tax requirements at the close of each quarter , a fund does
not invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S. government
securities. A fund may invest more than 25% of its total assets in tax-free
securities that finance similar types of projects.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a bond fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its 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.
SPARTAN FLORIDA MUNICIPAL MONEY MARKET seeks as high a level of current
income exempt from federal income tax, as is consistent with preservation
of capital and liquidity by investing in high-quality, short-term municipal
obligations.
SPARTAN FLORIDA MUNICIPAL INCOME seeks the highest level of current income,
exempt from federal income tax, available from municipal bonds judged by
FMR to be of investment-grade quality. The fund may also invest a portion
of its assets in bonds rated below investment-grade quality.
EACH FUND will normally invest so that at least 80% of its income
distributions are free from federal income tax. Each fund may borrow only
for temporary or emergency purposes, but not in an amount exceeding 33% of
its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its 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 an affiliate who provides
assistance with these services for Spartan Florida Municipal Money Market.
FMR may, from time to time, agree to reimburse the funds for management
fees 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 a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. Each fund
pays a management fee at a fixed annual rate of its average net assets:
.50% for Spartan Florida Municipal Money Market and .55% for Spartan
Florida Municipal Income. The total management fee rate for Spartan Florida
Municipal Money Market and Spartan Florida Municipal Income for fiscal
1994, after reimbursement, was __% and __%, respectively.
FMR HAS A SUB-ADVISORY AGREEMENT with FTX, which has primary responsibility
for providing investment management for Spartan Florida Municipal Money
Market, while FMR retains responsibility for providing other management
services. FMR pays FTX 50% of its management fee (before expense
reimbursements) for these services.
FSC performs many transaction and accounting functions for the funds. These
services include processing shareholder transactions and calculating each
fund's share price. FMR, and not the funds, pays for these services.
To offset shareholder service costs, FMR or its affiliates also collect the
funds' $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for wire
purchases and redemptions, and fo rSpartan Florida Municipal Money the
$2.00 checkwriting charge. For fiscal 199 4 , these fees amounted to
$_____, $______, $_____, and $_____, respectively, for Spartan Florida
Municipal Money Market and $_____, $_____, and $_____, respectively, for
Spartan Florida Municipal Income.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the fund's shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
For fiscal 199 4 , the portfolio turnover rate for Spartan Florida
Municipal Income was __%. This rate varies from year to year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. Spartan Florida Municipal Money Market is managed to keep its
share price stable at $1.00. Each fund's shares are sold without a sales
charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity
fund.
If you buy shares by check or Fidelity Money Line(registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
For Spartan Florida Municipal Money Market $25,000
TO ADD TO AN ACCOUNT $1,000
Through automatic investment plans $500
MINIMUM BALANCE $5,000
For Spartan Florida Municipal Money Market $10,000
UNDERSTANDING THE
SPARTAN APPROACH(registered trademark)
Fidelity's Spartan Approach is
based on the principle that
lower fund expenses can
increase returns. The Spartan
funds keep expenses low in
two ways. First, higher
investment minimums reduce
the effect of a fund's fixed
costs, many of which are paid
on a per-account basis.
Second, unlike most mutual
funds that include transaction
costs as part of overall fund
expenses, Spartan
shareholders pay directly for
the transactions they make.
(checkmark)
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
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Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to the complete
check payable to the name of the fund.
complete name of the Indicate your fund
fund of your choice. account number on
Mail to the address your check and mail to
indicated on the the address printed on
application. your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (small solid bullet) Bring your application (small solid bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
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Wire (wire_graphic) (small solid bullet) There may be a $5.00 (small solid bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(small solid bullet) Call 1-800-544-7777 to (small solid bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
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Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000
worth of shares in the account ($10,000 for Spartan Florida Municipal Money
Market) to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It 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
(including Fidelity Investor Centers), 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) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the table
at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited number
of checks. Do not, however, try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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IF YOUR ACCOUNT BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR INDIVIDUAL REDEMPTION
TRANSACTIONS: $2.00 FOR EACH CHECK YOU WRITE AND $5.00 FOR EACH EXCHANGE, BANK WIRE,
AND ACCOUNT CLOSEOUT.
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Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $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.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
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Check (check_graphic) All account types (small solid bullet) Minimum check: $1,000.
(small solid bullet) All account owners must sign
a signature card to receive a
checkbook.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, 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 will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. There may be a $5.00 fee for
each exchange out of the funds, unless you place your transaction on
Fidelity's automated exchange services.
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 page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
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A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THAT FUND MAY NOT BE AN
APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains, if any, to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains earned by the bond fund are
normally distributed in January and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. Each fund offers four
options (three for Spartan Florida Municipal Money Market):
5. REINVESTMENT OPTION. Your dividend and capital gain distributions, if
any, will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned this
option.
6. INCOME-EARNED OPTION. Your capital gain distributions, if any ,
will be automatically reinvested, but you will be sent a check for each
dividend distribution. This option is not available for Spartan Florida
Municipal Money Market.
7. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions, if any.
8. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions, if any, will be automatically invested in
another identically registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions, if any, will be reinvested at the NAV as
of the date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS. Money
market funds usually don't
make capital gain
distributions.
(checkmark)
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the funds' tax implications.
TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, a gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These 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. Fidelity will send you and the IRS a
statement showing the tax status of the distributions paid to you in the
previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Each fund may invest up to 100% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
Each fund has received a ruling from the Florida Department of Revenue
that, if on the close of business on the last business day of any calendar
year, a fund's assets consist solely of those exempt from Florida
intangible tax, shares of the fund owned by Florida residents will be
exempt from the tax. Items exempt from Florida intangible tax include
Florida municipal obligations, certain obligations of the U.S. government
or its agencies, territories, and possessions, and cash.
In the event a fund owns any asset on that day that is subject to the
Florida Intangible tax, all or a portion of the value of a fund's shares
will be subject to the tax. In order to assure exemption of each fund's
shares from the tax, FMR would seek to sell or dispose of any
non-qualifying assets on or before the last business day of the calendar
year. As a result, a fund could potentially receive a lower price for the
securities sold or incur additional costs or taxable capital gains.
During fiscal 1994, __% of each fund's income dividends w as free
from federal income tax and __% and __% was free from the Florida
intangible tax for Spartan Florida Municipal Money Market and Spartan
Florida Municipal Income, respectively. __% of Spartan Florida Municipal
Money Market's and __% of Spartan Florida Municipal Income's income
dividends were subject to the federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your bond fund redemptions - including exchanges to
other Fidelity funds - 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 consolidated transaction statement every January. 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 just before a fund deducts a capital
gain distribution from its NAV, 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.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The money market fund values the securities it owns on the basis of
amortized cost. This method minimizes the effect of changes in a security's
market value and helps the fund to maintain a stable $1.00 share price. For
the bond fund, assets are valued primarily on the basis of market
quotations, if available. Since market quotations are often unavailable,
assets are usually valued by a method that the Board of Trustees believes
accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT 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 may only be
liable for losses resulting from unauthorized transactions if it
does not follow reasonable procedures designed to verify the
identity of the caller. Fidelity will request personalized security codes
or other information, and may also record calls. You should verify the
accuracy of your confirmation statements immediately after you receive
them. If you do not want the ability to redeem and exchange by telephone,
call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees a fund or its
transfer agent has incurred.
(small solid bullet) Spartan Florida Municipal Money Market reserves the
right to limit all accounts maintained or controlled by any one person to a
maximum total balance of $2 million.
(small solid bullet) You begin to earn dividends as of the first business
day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge
you a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when a fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. 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) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line
have been collected, which can take up to seven business days.
(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) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
THE REDEMPTION FEE for Spartan Florida Municipal Income, if applicable,
will be deducted from the amount of your redemption. This fee is paid to
the fund rather than FMR, and it does not apply to shares that were
acquired through reinvestment of distributions. If shares you are redeeming
were not all held for the same length of time, those shares you held
longest will be redeemed first for purposes of determining whether the fee
applies.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at
the time of the transaction is $50,000 or more. Otherwise, you should note
the following:
(small solid bullet) The $2.00 checkwriting charge will be deducted from
your account.
(small solid bullet) The $5.00 exchange fee will be deducted from the
amount of your exchange.
(small solid bullet) The $5.00 wire fee will be deducted from the amount of
your wire.
(small solid bullet) The $5.00 account closeout fee does not apply to
exchanges or wires, but it will apply to checkwriting.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000 ($10,000 for Spartan Florida
Municipal Money Market), you will be given 30 days' notice to reestablish
the minimum balance. If you do not increase your balance, Fidelity reserves
the right to close your account and send the proceeds to you. Your shares
will be redeemed at the NAV on the day your account is closed and the $5.00
account closeout fee will be charged.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
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) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(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 the 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) 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 coincide
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 the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
From Filler pages
SPARTAN(Registered trademark) FLORIDA MUNICIPAL MONEY MARKET PORTFOLIO
A FUND OF FIDELITY COURT STREET TRUST II
SPARTAN(Registered trademark) FLORIDA MUNICIPAL INCOME PORTFOLIO
A FUND OF FIDELITY COURT STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 16, 1995
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated January 16, 1995 ). Please
retain this document for future reference. The funds' financial
statements and financial highlights, included in the Annual
Report , for the fiscal year ended November 30, 199 4,
are incorporated herein by reference. To obtain an additional copy of the
Prospectus or the Annual Report, please call Fidelity Distributors
Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Factors Affecting Florida
Special Factors Affecting Puerto Rico
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Distribution and Service Plans
Interest of FMR Affiliates
Description of the Trusts
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER (money market fund only)
FMR Texas Inc. (FTX)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENTS
United Missouri Bank, N.A. (United Missouri) and Fidelity Service Co. (FSC)
SFC-ptb-19 5
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
Each fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
However, except for the fundamental investment limitations set forth below,
the investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF SPARTAN FLORIDA MUNICIPAL MONEY MARKET PORTFOLIO
(MONEY MARKET FUND)
THE FOLLOWING ARE THE MONEY MARKET FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments; or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objectives, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(vii) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(viii) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to purchases
of debt securities.
(ix) The fund does not currently intend to (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(x) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies, and
limitations as the fund.
For purposes of limitations (4) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the fund's limitations on quality and maturity, see section entitled
"Quality and Maturity" on page 5.
INVESTMENT LIMITATIONS OF SPARTAN FLORIDA MUNICIPAL INCOME PORTFOLIO
( B OND FUND)
THE FOLLOWING ARE THE INCOME FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(8) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the
fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be disposed of in
the ordinary course of business at approximately the prices at which they
are valued.
(vi) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(v i i) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to purchases
of debt securities.
(v i ii) The fund does not currently intend to (a) purchase securities
of other investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (b) purchase
or retain securities issued by other open-end investment companies.
Limitations (a) and (b) do not apply to securities received as dividends,
through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(ix) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations (4) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
8 .
Each fund's investments must be consistent with its investment objective
and policies. Accordingly, not all of the security types and investment
techniques discussed below are eligable investments for each of the
funds.
INVESTMENT POLICIES
QUALITY AND MATURITY (MONEY MARKET FUND ONLY). Pursuant to
procedures adopted by the Board of Trustees, the fund may purchase only
high-quality securities that FMR believes present minimal credit risks. To
be considered high-quality, a security must be rated in accordance with
applicable rules in one of the two highest categories for short-term
securities by at least two nationally recognized rating services (or by
one, if only one rating service has rated the security); or, if unrated,
judged to be of equivalent quality by FMR.
The fund currently intends to l imit its investments to securities
with remaining maturities of 397 days or less, a nd to maintain a
dollar-weighted average maturity of 90 days or less.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. The bond fund may receive fees for
entering into delayed - delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the fund could miss
a favorable price or yield opportunity, or could suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
REFUNDING CONTRACTS. The bond fund may purchase securities on a
when-issued basis in connection with the refinancing of an issuer's
outstanding indebtedness. Refunding co ntracts require the issuer to
sell and the fund to buy refunded municipal obligations at a stated
price and yield on a settlement date that may be several months or several
years in the future. The fund generally will not be obligated to pay the
full purchase price if it fails to perform under a refunding contract.
Instead, refunding contracts generally provide for payment of liquidated
damages to the issuer (currently 15-20% of the purchase price). The fund
may secure its obligations under a refunding contract by depositing
collateral or a letter of credit equal to the liquidated damages provisions
of the refunding contract. When required by SEC guidelines, the fund will
place liquid assets in a segregated custodial account equal in amount to
its obligations under refunding contracts.
INVERSE FLOATERS. The bond fund may invest in inverse floaters,
which are instruments whose interest rates bear an inverse relationship to
the interest rate on another security or the value of an index. Changes in
the interest rate on the other security or index inversely affect the
residual interest rate paid on the inverse floater, with the result that
the inverse floater's price will be considerably more volatile than that of
a fixed-rate bond. For example, a municipal issuer may decide to issue two
variable - rate instruments instead of a single long-term, fixed-rate
bond. The interest rate on one instrument reflects short-term interest
rates, while the interest rate on the other instrument (the inverse
floater) reflects the approximate rate the issuer would have paid on a
fixed-rate bond, multiplied by two, minus the interest rate paid on the
short-term instrument. Depending on market availability, the two portions
may be recombined to form a fixed-rate municipal bond. The market for
inverse floaters is relatively new.
VARIABLE OR FLOATING RATE OBL IGATIONS bear variable or floating
interest rates and carry rights that permit holders to demand payment of
the unpaid principal balance plus accrued interest from the issuers or
certain financial intermediaries. Floating rate instruments have interest
rates that change whenever there is a change in a designated base rate
while variable rate instruments provide for a specified periodic adjustment
in the interest rate. These formulas are designed to result in a market
value for the instrument that approximates its par value.
With respect to the money market fund, a demand instrument with a
conditional demand feature must have received both a short-term and a
long-term high-quality rating or, if unrated, have been determined to be of
comparable quality pursuant to procedures adopted by the Board of Trustees.
A demand instrument with an unconditional demand feature may be acquired
solely in reliance upon a short-term high-quality rating or, if unrated,
upon a finding of comparable short-term quality pursuant to procedures
adopted by the Board of Trustees.
The funds may invest in fixed-rate bonds that are subject to third party
puts and in participation interests in such bonds held in trust or
otherwise. These bonds and participation interests have tender options or
demand features that permit a fund to tender (or put) the
bonds to an institution at periodic intervals and to receive the
principal amount thereof. A fund considers variable rate instruments
structured in this way (Participating VRDOs) to be essentially equivalent
to other VRDOs it purchases. The IRS has not ruled whether the
interest on Participating VRDOs is tax-exempt and, accordingly , a
fund intends to purchase these instruments based on opinions of bond
counsel.
The money market fund may invest in variable or floating rate
instruments that ultimately mature in more than 397 days, if the fund
acquires a right to sell the instruments that meets certain requirements
set forth in Rule 2a-7. Variable rate instruments (including instruments
subject to a demand feature) that mature in 397 days or less may be deemed
to have maturities equal to the period remaining until the next
readjustment of the interest rate. Other variable rate instruments with
demand features may be deemed to have a maturity equal to the period
remaining until the next adjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand. A
floating rate instrument subject to a demand feature may be deemed to have
a maturity equal to the period remaining until the principal amount can be
recovered through demand. The money market fund may purchase a demand
instrument with a remaining final maturity in excess of 397 days only if
the demand feature can be exercised on no more than 30 days' notice (a) at
any time or (b) at specific intervals not exceeding 397 days.
TENDER OPTION BONDS are created by coupling an intermediate- or
long-term , fixed-rate , tax-exempt bond (generally held
pursuant to a custodial arrangement) with a tender agreement that gives the
holder the option to tender the bond at its face value. As consideration
for providing the tender option, the sponsor (usually a bank,
broker-dealer, or other financial institution) receives periodic fees equal
to the difference between the bond's fixed coupon rate and the rate
(determined by a remarketing or similar agent) that would cause the bond,
coupled with the tender option, to trade at par on the date of such
determination. After payment of the tender option fee, a fund effectively
holds a demand obligation that bears interest at the prevailing short-term
tax-exempt rate. Subject to applicable regulatory requirements, the money
market fund may buy tender option bonds if the agreement gives the fund the
right to tender the bond to its sponsor no less frequently than once every
397 days. In selecting tender option bonds for the funds, FMR will consider
the creditworthiness of the issuer of the underlying bond, the custodian,
and the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS. do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. Each fund may
acquire standby commitments to enhance the liquidity of portfolio
securities, but, in the case of the money market fund, only when the
issuers of the commitments present minimal risk of default.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments. In
the latter case, the fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity. Standby commitments will
not affect the dollar-weighted average maturity of the money market fund,
or the valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the funds; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. Each fund may invest a portion of its assets
in municipal leases and participation interests therein. These obligations,
which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, the funds will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives
a fund a specified, undivided interest in the obligation in proportion to
its purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
FEDERALLY TAXABLE OBLIGATIONS. The funds do not intend to invest in
securities whose interest is federally taxable; however, from time to time,
each fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, each fund may invest in obligations whose interest is
federally taxable pending the investment or reinvestment in municipal
securities of proceeds from the sale of its shares or sales of portfolio
securities.
Should a fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The bond fund's standards for high quality , taxable
obligations are essentially the same as those described by Moody's
Investors Service, Inc. (Moody's) in rating corporate obligations within
its two highest ratings of Prime-1 and Prime-2, and those described by
Standard and Poor's Corporation (S&P) in rating corporate obligations
within its two highest ratings of A-1 and A-2. The money market fund will
purchase taxable obligations only if they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the Florida legislature
that would affect the state tax treatment of the funds' distributions. If
such proposals were enacted, the availability of municipal obligations and
the value of the funds' holdings would be affected and the Trustees would
reevaluate the funds' investment objectives and policies.
Each fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities
of portfolio securities, sales of fund shares, or in order to meet
redemption requests, a fund may hold cash that is not earning income. In
addition, there may be occasions when, in order to raise cash to meet
redemptions, a fund may be required to sell securities at a loss.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed - upon price. The resale price reflects the purchase
price plus an agreed - upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. A repurchase
agreement involves the obligation of the seller to pay the
agreed -u pon resale price, which obligation is in effect
secured by the value (at least equal to the amount of the agreed-upon
resale price and marked to market daily) of the underlying security.
A fund may engage in repurchase agreement s with respect to
any type of security in which it is authorized to invest (except
that the security may have a maturity in excess of 397 days) . While it
does not presently appear possible to eliminate all risks from these
transactions (particularly the possibility of a decline in the market value
of the underlying securities, as well as delays and costs to a fund
in connection with bankruptcy proceedings), it is each fund's current
policy to limit repurchase agreement transactions to those
parties whose creditworthiness has been reviewed and found satisfactory
by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
A fund will enter into reverse repurchase agreements only with
parties whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of a fund's
assets and may be viewed as a form of leverage.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR,
the Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset a fund's rights and
obligations relating to the investment).
FMR may determine some restricted securities and municipal lease
obligations to be illiquid for each fund. Investments currently considered
by the bond fund to be illiquid include over-the-counter options. However,
with respect to over-the-counter options the bond fund writes, all or a
portion of the value of the underlying instrument may be illiquid depending
on the assets held to cover the option and the nature and terms of any
agreement the fund may have to close out the option before expiration.
In the absence of market quotations, illiquid investments are valued for
purposes of monitoring amortized cost valuation (money market fund) or
priced (bond fund) at fair value as determined in good faith by a committee
appointed by the Board of Trustees. If through a change in values, net
assets, or other circumstances, a fund were in a position where more than
10% of its net assets were invested in illiquid securities, it would seek
to take appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to
sell a security under an effective registration statement. If, during such
a period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security. However, in general, the money market fund anticipates
holding restricted securities to maturity or selling them in an exempt
transaction.
INDEXED SECURITIES The bond fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, or other
financial indicators. Indexed securities typically, but not always, are
debt securities or deposits whose value at maturity or coupon rate is
determined by reference to a specific instrument or statistic. Indexed
securities may have principal payments as well as coupon payments that
depend on the performance of one or more interest rates. Their coupon rates
or principal payments may change by several percentage points for every 1%
interest rate change. One example of indexed securities is inverse
floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
LOWER- QUALITY MUNICIPAL SECURITIES. The bond fund may invest a
portion of its assets in lower- quality municipal securities as
described in the Prospectus.
While the market for Florida municipals is considered to be
adequate, adverse publicity and changing investor perceptions may affect
the ability of outside pricing services used by the fund to value its
portfolio securities, and the fund's ability to dispose of
lower- quality bonds. The outside pricing services are monitored by
FMR and reported to the Board to determine whether the services are
furnishing prices that accurately reflect fair value. The impact of
changing investor perceptions may be especially pronounced in markets where
municipal securities are thinly traded.
The fund may choose, at its expense or in conjunction with others,
to pursue litigation or otherwise exercise its rights as a security holder
to seek to protect the interests of security holders if it determines this
to be in the best interest of the fund's shareholders.
INTERFUND BORROWING PROGRAM. Each fund has received permission from the
SEC to lend money to and borrow money from other funds advised by FMR or
its affiliates, but will participate in the interfund borrowing program
only as a borrower. Interfund loans normally will extend overnight, but
can have a maximum duration of seven days. A fund will borrow through the
program only when the costs are equal to or lower than the costs of bank
loans. Loans may be called on one day's notice, and the fund may have to
borrow from a bank at a higher interest rate if an interfund loan is called
or not renewed.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They are secured by
the revenues derived from mortgages purchased with the proceeds from
the bond issue. It is extremely difficult to predict the supply of
available mortgages to be purchased with the proceeds of an issue or the
future cash flow from the underlying mortgages. Consequently, there are
risks that proceeds will exceed supply, resulting in early retirement of
bonds, or that homeowner repayments will create an irregular cash flow.
Many factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current laws
and regulations.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and
technological advances which dramatically alter the need for health
services or the way in which such services are delivered; changes in
medical coverage which alter the traditional fee-for-service revenue
stream ; and efforts by employers, insurers, and governmental agencies
to reduce the costs of health insurance and healthcare services.
INVESTMENT POLICIES FOR THE BOND FUND ONLY
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets before engaging in any purchases or sales of futures
contracts or options on futures contracts . The fund intends to comply
with Rule 4.5 under the Commodity Exchange Act, which limits the
extent to which the fund can commit assets to initial margin deposits and
option premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index.
Futures can be held until their delivery dates, or can be closed out before
then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if
it had purchased the underlying instrument directly. When the fund
sells a futures contract, by contrast, the value of its futures position
will tend to move in a direction contrary to the market. Selling futures
contracts, therefore, will tend to offset both positive and negative market
price changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the
fund may be entitled to return of margin owed to it only in proportion to
the amount received by the FCM's other customers, potentially resulting in
losses to the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply with
guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of
the fund's assets could impede portfolio management or the fund's ability
to meet redemption requests or other current obligations.
SPECIAL FACTORS AFFECTING FLORIDA
THE STATE BUDGET. The State operates under a biennial budget which is
formulated in even numbered years and presented for approval to the
Legislature in odd numbered years. A supplemental budget request process is
utilized in the even numbered years for refining and modifying the primary
budget. Under the State Constitution and applicable statutes, the State
budget as a whole and each separate fund within the State budget, must be
kept in balance from currently available revenues during each State fiscal
year. (The State's fiscal year runs from July 1 through June 30.) The
Governor and the Comptroller of the State are charged with the
responsibility of ensuring that sufficient revenues are collected to meet
appropriations and that no deficit occurs in any State fund.
The financial operations of the State covering all receipts and
expenditures are maintained through the use of three types of funds; the
General Revenue Fund, Trust Funds, and Working Capital Fund. The majority
of the State's tax revenues are deposited in the General Revenue Fund and
moneys in the General Revenue Fund are expended pursuant to appropriations
acts. In fiscal year 1992-1993, expenditures for education, health and
welfare, and public safety represented approximately 49%, 30%, and 11%
respectively, of expenditures from the General Revenue Fund. The Trust
Funds consist of moneys received by the State which, under law or trust
agreement, are segregated for a purpose authorized by law. Revenues in the
General Revenue Fund exceeding the amount needed to meet appropriations may
be transferred to the Working Capital Fund.
REVENUES. Estimated revenues of $13,010 million for 1993-94 (excluding
Hurricane Andrew related revenues and expenses) represent an increase of
7.9% over revenues for 1992-93. Estimated revenues for 1994-95 of $13,947
million (excluding Hurricane Andrew impacts) represent an increase of 7.2%
over 1993-1994.
In fiscal year 1992-1993, the State derived approximately 62% of its total
direct revenues for deposit in the General Revenue Fund, Trust Funds, and
Working Capital Fund from State taxes. Federal grants and other special
revenues account for the remaining revenues. The greatest single source of
tax receipts in the State is the sales and use tax. For the fiscal year
ended June 30, 1993, receipts from the sales and use tax totaled $9,426
million, an increase of approximately 12.5% over fiscal year 1991-92. This
amount includes non-recurring increases attributable to the rebuilding and
reconstruction following the hurricane. The second largest source of State
tax receipts is the tax on motor fuels. Receipts from the taxes on motor
fuels are almost entirely dedicated to Trust Funds for specific purposes
and are not included in the General Revenue Fund. For the fiscal year ended
June 30, 1992, preliminary data indicate that collections of this tax
totaled $1,475.5 million.
The State does not impose a personal income tax or ad valorem taxes on real
property or tangible personal property. The imposition of any such tax by
the State would require approval by referendum of an amendment to the State
Constitution. However, the State does impose a corporate income tax on the
net income of corporations, organizations, associations, and other
artificial entities for the privilege of conducting business, deriving
income or existing within the State. For the fiscal year ended June 30,
1993, receipts from the corporate income tax totaled $846.6 million, an
increase of approximately 5.6% from fiscal year 1992-93. The Documentary
Stamp Tax collections totaled $639 million during fiscal year 1992-93, an
increase of approximately 2.7% over fiscal year 1991-92. The Alcoholic
Beverage Tax, an excise tax on beer, wine, and liquor, totaled $442.2
million in 1992-93, an increase of 1.6% from fiscal year 1991-92. The
Florida lottery produced sales of $2.13 billion of which $810.4 million was
used for education in fiscal year 1991-92.
The primary source of revenue for local governments is ad valorem taxes on
real estate and tangible personal property. Under the State Constitution,
ad valorem taxes may not be levied by counties, municipalities, school
districts, and water management districts in excess of the following
respective millages upon the assessed value of real estate and tangible
personal property: for all county purposes, 10 mills; for all municipal
purposes, 10 mills; for all school purposes, 10 mills; and for water
management purposes, either 0.05 mill or 1.0 mill, depending upon
geographic location. These millage limitations do not apply to taxes levied
for payment of bonds and taxes levied for periods not longer than two years
when authorized by a vote of the electors. (Note: one mill equals one-tenth
of one cent).
The State Constitution and statutes provide for the exemption of homesteads
from certain taxes. The homestead exemption is an exemption from all
taxation, except for assessments for special benefits, up to a specific
amount of the assessed valuation of the homestead. This exemption is
available to every person who has the legal or equitable title to real
estate and maintains thereon his or her permanent home. All permanent
residents of the State are currently entitled to a $25,000 homestead
exemption from levies by all taxing authorities, however, such exemption is
subject to change upon voter approval.
On November 3, 1992, the voters of the State of Florida passed an amendment
to the Florida Constitution establishing a limitation on the annual
increase in assessed valuation of homestead property, of the lesser of 3%
or the increase in the Consumer Price Index during the relevant year,
except in the event of a sale thereof during such year, and except as to
improvements thereto during such year. Assessments as of January 1, 1993
will not be subject to the foregoing limitation. The amendment did not
alter any of the millage rates described above.
Since municipalities, counties, school districts and other special purpose
units of local governments with power to issue general obligation bonds
have authority to increase the millage levy for voter approved general
obligation debt to the amount necessary to satisfy the related debt service
requirements, the amendment is not expected to adversely affect the ability
of these entities to pay the principal of or interest on such general
obligation bonds. However, in periods of high inflation, those local
government units whose operating millage levies are approaching the
constitutional cap and whose tax base consists largely of residential real
estate, may, as a result of the above-described amendment, need to place
greater reliance on non-ad valorem revenue sources to meet their operating
budget needs.
STATE BONDS. The State Constitution does not permit the State to issue debt
obligations to fund governmental operations. Generally, the State
Constitution authorizes State bonds pledging the full faith and credit of
the State only to finance or refinance the cost of State fixed capital
outlay projects, upon approval by a vote of the electors, and provided that
the total outstanding principal amount of such bonds does not exceed 50% of
the total tax revenues of the State for the two preceding fiscal years.
Revenue bonds may be issued by the State or its agencies without a vote of
the electors only to finance or refinance the cost of State fixed capital
outlay projects which are payable solely from funds derived directly from
sources other than State tax revenues.
Exceptions to the general provisions regarding the full faith and credit
pledge of the State are contained in specific provisions of the State
Constitution which authorize the pledge of the full faith and credit of the
State, without electorate approval, but subject to specific coverage
requirements, for: certain road projects, county education projects, State
higher education projects, the State system of public education,
construction of air and water pollution control and abatement facilities,
solid waste disposal facilities, and certain other water facilities.
LOCAL BONDS. The State Constitution provides that counties, school
districts, municipalities, special districts, and local governmental bodies
with taxing powers may issue debt obligations payable from ad valorem
taxation and maturing more than 12 months after issuance, only (i) to
finance or refinance capital projects authorized by law, provided that
electorate approval is obtained; or (ii) to refund outstanding debt
obligations and interest and redemption premium thereon at a lower net
average interest cost rate.
Counties, municipalities, and special districts are authorized to issue
revenue bonds to finance a variety of self-liquidating projects pursuant to
the laws of the State. Such revenue bonds are to be secured by and payable
from the rates, fees, tolls, rentals, and other changes for the services
and facilities furnished by the financed projects. Under State law,
counties and municipalities are permitted to issue bonds payable from
special tax sources for a variety of purposes, and municipalities and
special districts may issue special assessment bonds.
THE STATE ECONOMY. The State has grown dramatically since 1980 and ranks
fourth among the 50 states with an estimated population of 13.4 million, an
increase of approximately 41.5% since 1980. Since 1980, the prime working
age population (18-44) has grown at an average annual rate of 3.3%.
Florida's total working age population (18-59) comprises 54% of the total
state population. Non-farm employment grew by approximately 57.9% since
1980. The service sector is Florida's largest employment sector, presently
accounting for 31.7% of total non-farm employment. Manufacturing jobs in
Florida are concentrated in the area of high-tech and value added sectors,
such as electrical and electronic equipment as well as printing and
publishing. Job gains in Florida's manufacturing sector have exceeded
national averages, increasing by 8.4% between 1980 and 1992. Although the
job creation rate for the State of Florida since 1980 is over two times the
rate for the nation as a whole, since 1989 the unemployment rate for the
State has risen faster than the national average. The average rate of
unemployment for Florida since 1980 is 6.5%, while the national average is
7.1%.
On August 24, 1992 Hurricane Andrew passed through South Florida. Property
damage is estimated to be between $20 and $30 billion. The office of the
Governor has estimated that the costs to State and local governments for
emergency services and damage to public facilities and infrastructure are
approximately $1 billion. The Governor's office has estimated lost State
revenue to be between $21.5 million and $38.5 million including utilities
taxes, lottery revenues, tolls and State Park fees. For the local
governments in Dade County and the Dade County School Board lost revenues
are estimated to be between $155.9 million and $258.6 million as a result
of reduction in property values.
The U.S. Congress has passed a disaster aid package which will provide
$10.6 billion in aid to South Florida. This includes Federal Emergency
Management Agency ("FEMA") payment to State and local governments for
repair to facilities owned by local governments, schools and universities,
additional costs for debris removal and public safety services related to
the hurricane and grants to State and local governments to make up for lost
revenue. Also included is funding for grants and loans to individuals for
small business assistance, economic development, housing allowance and
repairs. The State will be required to match the FEMA funding for those
grants and loans with $32.5 million of State and local money. FEMA also has
an Individual and Family Grants Program which is available to uninsured and
under-insured households through which up to $11,500 per household is
available to help cover losses. The State will be required to match this
program 25% to the FEMA's 75%. At this time, the State estimates its
matching requirement will not exceed $100 million.
The Florida Revenue Estimating Conference has estimated additional
non-recurring General Revenues as a result of the hurricane totaling $645.8
million during fiscal years 1992-93, 1993-94 and 1994-95. In a special
session of the Legislature held December 9 to December 11, 1992, the
Legislature enacted a law that sets aside an estimated $630.4 million of
the $645.8 million to be used by State and local government agencies to
defray a wide array of expenditures related to Hurricane Andrew.
The ability of the State and its local units of government to repay
indebtedness may be affected by numerous factors which impact on the
economic vitality of the State in general and the particular region of the
State in which the issuer of the debt is located. South Florida is
particularly susceptible to international trade and currency imbalances and
to economic dislocations in Central and South America, due to its
geographical location and its involvement with foreign trade, tourism, and
investment capital. The central and northern portions of the State are
impacted by problems in the agricultural sector, particularly with regard
to the citrus and sugar industries. Short-term adverse economic conditions
may be created in these areas, and in the State as a whole, due to crop
failures, severe weather conditions, or other agriculture-related problems.
The State economy also has historically been somewhat dependent on the
tourism and construction industries and is sensitive to trends in those
sectors.
The foregoing information regarding the State and its local units of
government constitutes only a brief summary and does not purport to be a
complete description of the matters covered. This summary is based solely
upon information drawn from official statements relating to offerings of
general obligation bonds of the State and has not been independently
verified.
SPECIAL FACTORS AFFECTING PUERTO RICO
The following only highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the "Commonwealth"
or "Puerto Rico"), and is based on information drawn from official
statements and prospectuses relating to the securities offerings of Puerto
Rico and its agencies and instrumentalities, as available on the date of
this Statement of Additional Information. FMR has not independently
verified any of the information contained in such official statements,
prospectuses, and other publicly available documents, but is not aware of
any fact which would render such information materially inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1993 trade with the United States accounted for
approximately 86% of Puerto Rico's exports and approximately 69% of its
imports. In this regard, in fiscal 1993 Puerto Rico experienced a $2.5
billion positive adjusted merchandise trade balance. Since fiscal 1987,
personal income, both aggregate and per capita, has increased consistently
each year. In fiscal 1993 aggregate personal income was $24.1 billion and
personal per capita income was $6,760. Gross domestic product in fiscal
1991, 1992, and 1993 was $22.8 billion, $23.5 billion, and $25 billion,
respectively. For fiscal 1994, an increase in gross domestic product of
2.9% over fiscal 1993 is forecasted. However, actual growth in the
Puerto Rico economy will depend on several factors, including the condition
of the U.S. economy, the exchange rate for the U.S. dollar , and the
price stability of oil imports and interest rates. Due to these factors,
there is no assurance that the economy of Puerto Rico will continue to
grow.
Puerto Rico's economy continued to expand throughout the five-year
period from fiscal 1989 through fiscal 1993. While trends in the Puerto
Rico economy generally follow those of the United States, Puerto Rico did
not experience a recession primarily because of its strong manufacturing
base, which has a large component of non-cyclical industries. Other
factors behind the continued expansion included Commonwealth-sponsored
economic development programs, stable prices of oil imports, low exchange
rates for the U.S. dollar, and the relatively low cost of borrowing funds
during the period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it
still remains significantly above the U.S. average and has been
increasing in recent years. Despite long-term improvements the
unemployment rate rose from 16.5% to 17.5% from fiscal 1992 to fiscal 1993.
However, by the end of January 1994, the unemployment rate had dropped to
16.3%.
The economy of Puerto Rico has undergone a transformation in the later half
of this century from one centered around agriculture to one dominated by
the manufacturing and service industries. Manufacturing is the cornerstone
of Puerto Rico's economy, accounting for $ 14.1 billion or 39.4% of gross
domestic product in fiscal 1993 . However, manufacturing has
experienced a basic change over the years as a result of the influx of
higher wages, high technology industries such as the pharmaceutical
industry, electronics, computers, micro processors, scientific instruments,
and high technology machinery. The service sector, which employs the
largest number of people, includes wholesale and retail trade, finance, and
real estate, and ranks second in its contribution to gross domestic
product. In fiscal 1993, the service sector generated $ 14.0 billion in
gross domestic product or 39.1% of the total and employed over 467,000
workers providing 46.7% of total employment. The government sector of the
Commonwealth plays an important role in Puerto Rico's economy. In fiscal
year 1993, the government accounted for $3.9 billion of Puerto Rico's gross
domestic product and provided 21.7% of the total employment. Tourism also
contributes significantly to the island economy, accounting for $1.6
billion of gross domestic product in fiscal 1993.
The present administration, which took office in January 1993, envisions
major economic reforms and has developed a new economic development program
to be implemented in the next few years. This program is based on the
premise that the private sector will be the primary vehicle for economic
development and growth. The program promotes changing the role of the
government from one of being a provider of most basic services to one of
being a facilitator for private sector initiatives and will encourage
private sector investment by reducing regulatory restraints. The program
contemplates the development of initiatives that will foster private
investment, both external and internal, in areas that are served more
efficiently and effectively by the private sector. The program also
contemplates a general revision of the tax system to expand the tax base,
reduce top personal and corporate tax rates, and simplify a highly complex
system. Other important goals for the new program are to reduce the size
of the government's direct contribution to gross domestic product and, to
facilitate private sector development and growth which would be realized
through a reduction in government consumption and an increase in government
investment in order to improve and expand Puerto Rico's infrastructure.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
("Section 936") and the Commonwealth's Industrial Incentives Program.
Section 936 currently grants U.S. corporations that meet certain criteria
and elect its application, a credit against their U.S. corporate income tax
on the portion of the tax attributable to (i) income derived from the
active conduct of a trade or business in Puerto Rico ("active income"), or
from the sale or exchange of substantially all the assets used in the
active conduct of such trade or business, and (ii) qualified possession
sources investment income ("passive income"). The Industrial Incentives
Program, through the 1987 Industrial Incentives Act, grants corporations
engaged in certain qualified activities a fixed 90% exemption from
Commonwealth income and property taxes and a 60% exemption from municipal
license taxes.
Pursuant to recently enacted amendments to the Internal Revenue Code
(the "Code"), and for taxable years commencing after 1993, two alternative
limitations will apply to the Section 936 credit against active business
income and sale of assets as previously described. The first option will
limit the credit against such income to 40% of the credit allowed under
current law, with a five-year phase-in period starting at 60% of the
current credit. The second option will limit the allowable credit to
the sum of (i) 60% of qualified compensation paid to employees
(as defined in the Code) ; (ii) a specified percentage of
depreciation deductions; and (iii) a portion of the Puerto Rico income
taxes paid by the Section 936 corporation , up to a 9% effective tax
rate.
At present, it is difficult to forecast what the short- and long-term
effects of the new limitations to the Section 936 credit will be on the
economy of Puerto Rico. However, preliminary econometric studies by the
government of Puerto Rico and private sector economists (assuming no
enhancements to the existing Industrial Incentives Program) project only a
slight reduction in average real growth rates for the economy of Puerto
Rico. These studies also show that particular industry groups will be
affected differently. For example, manufacturers of pharmaceuticals and
beverages may suffer a larger reduction in tax benefits due to their
relatively higher profit margins. In addition, the above limitations are
not expected to reduce the tax credit currently enjoyed by labor-intensive,
lower profit margin industries, which represent approximately 40% of the
total employment by Section 936 corporations in Puerto Rico.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the
management contract. If FMR grants investment management authority to
the sub-adviser (see the section entitled "Management Contracts"), the
sub-adviser is authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the policies
described below. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. Securities purchased and sold
by the money market fund generally will be traded on a net basis (i.e.,
without commission). In selecting broker-dealers, subject to applicable
limitations of the federal securities laws, FMR consider s various
relevant factors, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security to be
purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer firm; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness
of any commissions.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to a funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). FMR maintains a listing of broker-dealers who
provide such services on a regular basis. However, as many transactions on
behalf of the money market fund are placed with broker-dealers
(including broker-dealers on the list) without regard to the furnishing of
such services, it is not possible to estimate the proportion of such
transactions directed to such broker-dealers solely because such services
were provided. The selection of such broker-dealers is generally made by
FMR (to the extent possible consistent with execution considerations) based
upon the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and conversely, such
research provided by broker-dealers who have executed transaction orders on
behalf of other FMR clients may be useful to FMR in carrying out its
obligations to the funds. The receipt of such research has not reduced
FMR's normal independent research activities; however, it enables FMR to
avoid additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
each fund to pay such higher commissions, FMR must determine in good
faith that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the funds and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds , or shares of other
Fidelity funds, to the extent permitted by law. FMR may use research
services provided by and place agency transactions with Fidelity Brokerage
Services, Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are
fair , reasonable , and comparable to commissions charged by
non-affiliated, qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain
requirements are satisfied . Pursuant to such requirements , the
Board of Trustees has authorized FBSI to execute portfolio
transactions on national securities exchanges in accordance with
approved procedures and applicable SEC rules .
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
funds and review the commissions paid by each fund over
representative periods of time to determine if they are reasonable in
relation to the benefits to the fund.
F or the fiscal period s ended November 30, 1994 and 1993,
the bond fund's portfolio turnover rates were __% and __%,
respectively .
For fiscal 1994, 1993, and 1992, the funds paid no brokerage
commissions.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seek s to recapture
soliciting broker-dealer fees on the tender of portfolio securities, but at
present no other recapture arrangements are in effect. The Trustees intend
to continue to review whether recapture opportunities are available and are
legally permissible and, if so, to determine in the exercise of their
business judgment whether it would be advisable for each fund to
seek such recapture.
Although the Trustees and officers of each fund are substantially
the same as those of other funds managed by FMR, investment decisions for
each fund are made independently from those of other funds managed
by FMR or accounts managed by FMR affiliates. It sometimes happens that the
same security is held in the portfolio of more than one of these funds or
accounts. Simultaneous transactions are inevitable when several funds
and accounts are managed by the same investment adviser, particularly
when the same security is suitable for the investment objective of more
than one fund or account .
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable
for each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as each fund is
concerned. In other cases, however, the ability of the funds to participate
in volume transactions will produce better executions and prices for the
funds. It is the current opinion of the Trustees that the desirability of
retaining FMR as investment adviser to each fund outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.
VALUATION OF PORTFOLIO SECURITIES
BOND FUND. Valuations of portfolio securities furnished by the
pricing service employed by the bond fund are based upon a
computerized matrix system or appraisals by the pricing service, in each
case in reliance upon information concerning market transactions and
quotations from recognized municipal securities dealers. The methods used
by the pricing service and the quality of valuations so established are
reviewed by officers of the fund and FSC under the general supervision of
the Board of Trustees. There are a number of pricing services available,
and the Trustees, or officers acting on behalf of the Trustees, on the
basis of on-going evaluation of these services, may use other pricing
services or discontinue the use of any pricing service in whole or in part.
Futures contracts and options are valued on the basis of market quotations,
if available.
MONEY MARKET FUND. The f und values its investments on the basis of
amortized cost. This technique involves valuing an instrument at its cost
as adjusted for amortization of premium or accretion of discount rather
than its value based on current market quotations or appropriate
substitutes which reflect current market conditions. The amortized cost
value of an instrument may be higher or lower than the price the
fund would receive if it sold the instrument.
Valuing the fund's instruments on the basis of amortized cost and use of
the term "money market fund" are permitted by Rule 2a-7 under the
Investment Company Act of 1940 . The fund must adhere to certain
conditions under Rule 2a-7; these conditions are summarized in the
Prospectus.
The Board of Trustees of the trust oversee FMR's adherence to SEC
rules concerning money market funds, and has established procedures
designed to stabilize the fund's net asset value ( NAV ) at
$1.00. At such intervals as they deem appropriate, the Trustees consider
the extent to which NAV calculated by using market valuations would deviate
from $1.00 per share. If the Trustees believe that a deviation from the
money market fund's amortized cost per share may result in material
dilution or other unfair results to shareholders, the Trustees have agreed
to take such corrective action, if any, as they deem appropriate to
eliminate or reduce, to the extent reasonably practicable, the dilution or
unfair results. Such corrective action could include selling portfolio
instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends; redeeming shares
in kind; establishing NAV by using available market quotations; and such
other measures as the Trustees may deem appropriate.
During periods of declining interest rates, the fund's yield based on
amortized cost may be higher than the yield based on market valuations.
Under these circumstances, a shareholder in the fund would be able to
obtain a somewhat higher yield than would result if the fund utilized
market valuations to determine its NAV. The converse would apply in a
period of rising interest rates.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. The bond fund's share price and
both funds' yield and total return fluctuate in response to market
conditions and other factors , and t he value of the
bond fund's shares when redeemed may be more or less than their
original cost.
YIELD CALCULATIONS. To compute the money market fund's yield for a period,
the net change in value of a hypothetical account containing one share
reflects the value of additional shares purchased with dividends from the
one original share and dividends declared on both the original share and
any additional shares. The net change is then divided by the value of the
account at the beginning of the period to obtain a base period return. This
base period return is annualized to obtain a current annualized yield. The
money market fund may also calculate a compound effective yield by
compounding the base period return over a one-year period. In addition to
the current yield, the money market fund may quote yields in advertising
based on any historical seven-day period. Yields for the money market fund
are calculated on the same basis as other money market funds, as required
by regulation.
For t he bond fund , yields are computed by dividing the
fund's interest income for a given 30-day or one-month period, net of
expenses, by the average number of shares entitled to receive dividends
during the period, dividing this figure by the fund's net asset value
per share at the end of the period, and annualizing the result
(assuming compounding of income) in order to arrive at an annual percentage
rate. Yields do not reflect the fund's .50% redemption fee, which applies
to shares held less than 180 days. Income is calculated for purposes of the
bond fund's yield quotations in accordance with standardized methods
applicable to all stock and bond funds. In general, interest income is
reduced with respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and is
increased with respect to bonds trading at a discount by adding a portion
of the discount to daily income. Capital gains and losses generally are
excluded from the calculation.
Income calculated for purposes of determining the income fund's yield
differs from income as determined for other accounting purposes. Because of
the different accounting methods used, and because of the compounding of
income assumed in yield calculations, the bond fund's yield may not
equal its distribution rate, the income paid to your account, or the income
reported in the fund's financial statements.
Yield information may be useful in reviewing a fund' s
performance and in providing a basis for comparison with other investment
alternatives. However, each fund' s yield fluctuate s ,
unlike investments that pay a fixed interest rate over a stated period of
time. When comparing investment alternatives, investors should also note
the quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates
a fund' s yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates the fund' s
yield will tend to be somewhat lower. Also, when interest rates are
falling, the inflow of net new money to a fund from the continuous
sale of its shares will likely be invested in instruments producing
lower yields than the balance of the fund' s holdings, thereby
reducing the fund' s current yield. In periods of rising interest
rates, the opposite can be expected to occur.
A fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment after taxes to equal the fund's
tax-free yield. Tax-equivalent yields are calculated by dividing a fund's
yield by the result of one minus a stated federal tax rate. If only a
portion of the fund's yield is tax-exempt, only that portion is adjusted in
the calculation.
The following table shows the effect of a shareholder's tax status
on effective yield under federal income tax laws for 199 5 . It shows
the approximate yield a taxable security must provide at various
income brackets to produce after-tax yields equivalent to those of
hypothetical tax-exempt obligations yielding from 2.0% to 8.0%. Of
course, no assurance can be given that a fund will achieve any specific
tax-exempt yield. While the fund s invest principally in
obligations whose interest is exempt from federal income tax and the
Florida intangible tax , other income received by the funds may be
taxable.
1994 TAX RATES AND TAX-EQUIVALENT YIELDS
Taxable Federal Tax-Free Yield is:
Income* Tax 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
Single Return Joint Return Bracket ** Then taxable-equivalent
yield is:
$22,751 - $55,100 $38,001 - $91,850 28% 2.78% 4.17% 5.56% 6.94% 8.33%
9.72% 11.11%
$55,101 - $115,000 $91,851 - $140,000 31% 2.90% 4.35% 5.80% 7.25% 8.70%
10.14% 11.59%
$115,001 - $250,000 $140,001 - $250,000 36% 3.13% 4.69% 6.25% 7.81% 9.38%
10.94% 12.50%
$250,001 - + $250,001 - + 39.6% 3.31% 4.97% 6.62% 8.28% 9.93% 11.59%
13.25%
* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions,
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may increase a taxpayer's marginal tax rate. An increase
in a shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Each fund may invest a portion of its assets in obligations that are
subject to the Florida intangible tax or federal income tax. When a
fund invests in these obligations, its tax-equivalent yield will be lower.
In the table above, tax-equivalent yields are calculated assuming
investments are 100% federally tax-free and free from the Florida
intangible tax.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund' s NAV
over a stated period. Average annual total returns are calculated by
determining the growth or decline in value of a hypothetical historical
investment in a fund over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative total return of 100% over ten
years would produce an average annual return of 7.18%, which is the steady
annual rate of return that would equal 100% growth on a compounded
basis in ten years. While average annual total returns are a convenient
means of comparing investment alternatives, investors should realize that a
fund's performance is not constant over time, but changes from year to
year, and that average annual returns represent averaged figures as opposed
to the actual year-to-year performance of the fund.
In addition to average annual total returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on
a before-tax or after-tax basis and may or may not include the effect of
the bond fund's .50% redemption fee on shares held less than 180 days.
Excluding the bond fund's redemption fee from a total return calculation
produces a higher total return figure . Total returns, yields, and other
performance information may be quoted numerically or in a table, graph, or
similar illustration and may omit or include the effect of the $5.00
account closeout fee.
NET ASSET VALUE. Charts and graphs using the bond fund's net asset
values, adjusted net asset values, and benchmark indicies may be
used to exhibit performance. An adjusted NAV includes any distributions
paid by the fund and reflects all elements of its return. Unless otherwise
indicated, the fund's adjusted NAVs are not adjusted for sales charges, if
any.
HISTORICAL RETURNS. The following table s show the money
market fund' s 7-day yield, the bond fund's 30-day yield, each
fund's tax-equivalent yield, and total returns for the
period s ended November 30, 199 4 . Total return f igures
include the effect of the $5 account closeout fee based on an
average size account , but not the bond fund's .50% redemption
fee , applicable to shares held less than 180 days.
The tax-equivalent yield is based on a 36% federal income tax rate. Note
that each fund may invest in securities whose income is subject to the
federal alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Returns Cummulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Tax-Equivalent One One
Yield Yield Year Life of Fund* Year Life of Fund*
Spartan Florida
Municipal Money
Market
Spartan Florida
Municipal Income
</TABLE>
* The money market fund commenced operations on August 24, 1992 .
T he bond fund commenced operations on March 16, 1992.
Note: If FMR had not reimbursed certain fund expenses during these
periods, each fund's total returns would have lower.
The following table show s the income and capital elements of each
fund's cummulative total return. The table compare s each
fund's return to the record of the Standard & Poor's Composite Index of
500 Stocks (S&P 500 (registered trademark)), the Dow Jones Industrial
Average (DJIA), and the cost of living (measured by the Consumer Price
Index, or CPI) over the same period. The CPI information is as of the month
end closest to the initial investment date for each fund. The S&P 500
and DJIA comparisons are provided to show how each fund's total return
compared to the record of a broad average of common stocks and a
narrower set of stocks of major industrial companies, respectively, over
the same period. Of course, since the money market fund
invest s in short-term fixed-income securities and the bond
fund invests in fixed-income securities , common stocks represent a
different type of investment from the funds. Common stocks generally offer
greater growth potential than the funds, but generally experience
greater price volatility , which means a greater potential for loss.
In addition, common stocks generally provide lower income than a
fixed-income investment such as the funds. Figures for t he
S&P 500 and DJIA are based on the prices of unmanaged groups of stocks and,
unlike the funds' returns, do not include the effect of paying brokerage
commissions or other costs of investing.
MONEY MARKET FUND. During the period from August 24, 1992
(commencement of operations) to November 30, 199 4 , a
hypothetical $10,000 investment in the money market fund would have grown
to $_______, assuming all distributions were reinvested. This was a period
of fluctuating interest rates and the figures below should not be
considered representative of the dividend income or capital gain or loss
that could be realized from an investment in the fund today.
SPARTAN FLORIDA MUNICIPAL MONEY MARKET PORTFOLIO INDICES
Value of Value of Value of
Initial Reinvested Reinvested Cost
Year Ended $10,000 Dividend Capital Gain Total of
November 30, Investment Distributions Distributions Value S&P 500 DJIA
Living**
1994 $_______ $____ $____ $_____ $______ $_____ $_____
1993 $_______ $____ $____ $_____ $______ $_____ $_____
1992* $_______ $____ $____ $_____ $______ $_____ $_____
* From August 24, 1992 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on August 24,
1992, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends for the period covered (their cash value at the time
they were reinvested), amounted to $______. If distributions had not been
reinvested, the amount of distributions earned from the fund over time
would have been smaller, and cash payments (dividends) for the period would
have amounted to $_____. The fund did not distribute any capital gains
during the period. Tax consequences of different investments have not
been factored into the above figures. The figures in the table do not
include the effect of the fund's $5 account closeout fee.
INCOME FUND. During the period from March 16, 1992 (commencement of
operations) to November 30, 199 4 , a hypothetical $10,000
investment in the bond fund would have grown to $_____, assuming all
distributions were reinvested. This was a period of fluctuating interest
rates and bond prices and the figures below should not be considered
representative of the dividend income or capital gain or loss that could be
realized from an investment in the fund today.
SPARTAN FLORIDA MUNICIPAL INCOME FUND INDICES
Value of Value of Value of
Initial Reinvested Reinvested Cost
Year Ended $10,000 Dividend Capital Gain Total of
November 30 Investment Distributions Distributions Value S&P 500 DJIA
Living**
1994 $_______ $____ $____ $_____ $______ $_____ $_____
1993 $_______ $____ $____ $_____ $______ $_____ $_____
1992* $_______ $____ $____ $_____ $______ $_____ $_____
*From March 16, 1992 (commencement of operations).
**From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on March 16,
1992, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested), amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments for the period would have amounted to $_____ for dividends
and $____ for capital gain s distributions. Tax consequences of
different investments have not been factored into the above figures.
The figures in the table do not reflect the effect of the fund's $5
account closeout fee, and its .50% redemption fee applicable to shares held
less than 180 days.
A fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to the
mutual fund rankings, a fund's performance may be compared to stock,
bond, and money market mutual fund performance indices prepared by
Lipper or other organizations. When comparing these indices, it is
important to remember the risk and return characteristics of each type of
investment. For example, while stock mutual funds may offer higher
potential returns, they also carry the highest degree of share price
volatility. Likewise, money market funds may offer greater stability of
principal, but generally do not offer the higher potential returns from
stock mutual funds.
From time to time, a fund's performance may also be compared to
other mutual funds tracked by financial or business publications and
periodicals. For example, the fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating service
that rates mutual funds on the basis of risk-adjusted performance. Rankings
that compare the performance of Fidelity funds to one another in
appropriate categories over specific period s of time may also be
quoted in advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For
example, a fund may offer greater liquidity or higher potential returns
than CDs, a fund does not guarantee your principal or your return, and fund
shares are not FDIC insured.
Fidelity may provide information designed to help individual understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products,
and services .
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A fund may compare its performance or the performance of
securities in which it may invest to averages published by IBC USA
(Publications), Inc. of Ashland, Massachusetts. These averages assume
reinvestment of distributions. The IBC/Donoghue's MONEY FUND
AVERAGES(trademark)/All Tax-Free, which is reported in the MONEY FUND
REPORT (registered trademark) , covers over 370 tax-free money
market funds. The BOND FUND REPORT AVERAGES(trademark) / Municipal
which is reported in the BOND FUND REPORT(registered trademark), covers
over 385 municipal bond funds. When evaluating comparisons to money
market funds, investors should consider the relevant differences in
investment objectives and policies. Specifically, money market funds invest
in short-term, high-quality instruments and seek to maintain a stable $1.00
share price. The bond fund, however, invests in longer-term
instruments and its share price changes daily in response to a variety of
factors.
The bond fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal
bond. Unlike tax-free mutual funds, individual municipal bonds offer a
stated rate of interest and, if held to maturity, repayment of principal.
Although some individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales charges
of many tax-free mutual funds are lower than the purchase cost of
individual municipal bonds, which are generally issued in $5,000
denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college or other
goals ; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management,
portfolio composition, investment philosophy, investment techniques ,
the desirability of owning a particular mutual fund, and Fidelity services
and products . Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus, a quarterly magazine
provided free of charge to Fidelity fund shareholders.
A fund may present its fund number, Quotron (trademark)
number, and CUSIP number, and discuss or quote its current portfolio
manager.
VOLATILITY. The bond fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may compare
these measures to those of other funds. Measures of volatility seek to
compare the fund's historical share price fluctuations or total returns to
those of a benchmark. Measures of benchmark correlation indicate how valid
a comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, the fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate the bond fund's price movements over
specific periods of time. Each point on the momentum indicator represents
the fund's percentage change in price movements over that period.
The bond fund may advertise examples of the effects of periodic
investment plans, including the principle of dollar cost averaging. In such
a program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more
shares when prices are low. While such a strategy does not assure a profit
or guard against loss in a declining market, the investor's average cost
per share can be lower than if fixed numbers of shares are purchased at the
same intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
As of November 30, 1994, FMR advised over $__ billion in tax-free fund
assets, $__ billion in money market fund assets, $___ billion in equity
fund assets, $__ billion in international fund assets, and $___ billion in
Spartan fund assets. The funds may reference the growth and variety of
money market mutual funds and the adviser's innovation and participation in
the industry. The equity funds under management figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates
maintain a worldwide information and communications network for the purpose
of researching and managing investments abroad
In addition to performance rankings, each fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on
yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1995: New
Year's Day (observed), Washington's Birthday (observed), Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day . Although FMR expects the same holiday
schedule to be observed in the future, the NYSE may modify its
holiday schedule at any time.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p . m . Eastern t ime). However, NAV
may be calculated earlier if trading on the NYSE is restricted or as
permitted by the Securities and Exchange Commission ( SEC ) . To
the extent that portfolio securities are traded in other markets on days
when the NYSE is closed, a fund's NAV may be affected on days when
investors do not have access to the fund to purchase or redeem shares.
In addition, trading in some of a fund's portfolio securities may not
occur on days when the fund is open for business.
If the Trustees determine that existing conditions make cash
payment s undesirable, redemption payments may be made in whole or in
part in securities or other property, valued for this purpose as they are
valued in computing a fund's NAV. Shareholders receiving securities or
other property on redemption may realize either a gain or loss for tax
purposes , and will incur any costs of sale , as well as the
associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the
fund suspends the redemption of the shares to be exchanged as
permitted under the 1940 Act or the rules and regulations thereunder, or
the fund to be acquired suspends the sale of its shares because it is
unable to invest amounts effectively in accordance with its investment
objective and policies.
In the Prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that each fund's income is designated as
federally tax-exempt interest, the daily dividends declared by the fund are
also federally tax-exempt. Short-term capital gains are distributed as
dividend income, but do not qualify for the dividends-received deduction.
These gains will be taxed as ordinary income. Each fund will send each
shareholder a notice in January describing the tax status of dividend and
capital gain distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as S ocial
S ecurity benefits, may be subject to federal income tax on up to
85% of such benefits to the extent that their income, including
tax-exempt income, exceeds certain base amounts.
Each fund purchase s municipal obligations based on opinions
of bond counsel regarding the federal income tax status of the obligations.
These opinions generally will be based on covenant by the issuers regarding
continuing compliance with federal tax requirements. If the issuer of an
obligation fails to comply with its covenants at any time, interest on the
obligation could become federally taxable retroactive to the date the
obligation was issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other tax purposes. Interest from private activity securities
will be considered tax-exempt for purposes of each funds' policies
of investing so that at least 80% of its income distributions
are free from federal income tax. Interest from private activity
securities is a tax preference item for the purpose s of determining
whether a taxpayer is subject to the AMT and the amount of AMT to be paid,
if any. Private activity securities issued after August 7, 1986 to benefit
a private or industrial user or to finance a private facility are affected
by this rule.
A portion of the gain on bonds purchased with market discount after April
30, 1993 and short-term capital gains distributed by each fund are taxable
to shareholders as dividends, not as capital gains. Dividend distributions
resulting from a recharacterization of gain from the sale of bonds
purchased with market discount after April 30, 1993 are not considered
income for purposes of each fund's policy of investing so that at least 80%
of its income distribution is free from federal income tax. The money
market fund may distribute any net realized short-term capital gains and
taxable market discount once a year or more often, as necessary, to
maintain its net asset value at $1.00 per share.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest) exceeds alternative minimum taxable
income of the corporation. If a shareholder receives an exempt-interest
dividend and sells shares at a loss after holding them for a period of six
months or less, the loss will be disallowed to the extent of the amount of
the exempt-interest dividend.
FLORIDA TAX MATTERS. The State of Florida does not currently impose an
income tax on individuals. Thus, individual shareholders of the funds will
not be subject to any Florida income tax on distributions received from the
fund. However, Florida does currently impose an income tax on limited
liability companies and certain corporations. Consequently, distributions
may be taxable to corporate and limited liability companies and
shareholders.
The State of Florida currently imposes an "intangible tax" at the annual
rate of two mills, or .20% on certain securities and other intangible
personal property owned by Florida residents. With respect to the first
mill, or first .10%, of the intangible tax, every natural person is
entitled each year to an exemption of the first $20,000 of the value of the
property subject to the tax. A husband and wife filing jointly will have an
exemption of $40,000. With respect to the last mill, or last .10%, of the
intangible tax, every natural person is entitled each year to an exemption
of the first $100,000 of the value of the property subject to the tax. A
husband and wife filing jointly will have an exemption of $200,000. Notes,
bonds, and other obligations issued by the State of Florida or its
municipalities, counties, and other taxing districts, or by the U.S.
government, its agencies and certain U.S. territories and possessions (such
as Guam, Puerto Rico and the Virgin Islands) are exempt from this
intangible tax. If on the last business day of any year, the fund consists
solely of such exempt assets, then the fund's shares will be exempt from
the Florida intangible tax payable in the following year.
In order to take advantage of the exemption from the intangible tax in any
year, a fund must sell any non-exempt assets held in its portfolio during
the year and reinvest the proceeds in exempt assets on or before the last
business day of the calendar year. Transaction costs involved in
restructuring a fund in this fashion would likely reduce investment return
and might exceed any increased investment return the fund achieved by
investing in non-exempt assets during the year.
The foregoing is a general and abbreviated summary of certain provisions of
Florida law. You should consult your tax adviser to determine the precise
application of Florida or other state law to your particular situation.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the
bond fund on the sale of securities and distributed to shareholders
are federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives a
long-term capital gain distribution on shares of the fund and such shares
are held six months or less and are sold at a loss, the portion of the loss
equal to the amount of the long-term capital gain distribution will be
considered a long-term loss for tax purposes. Short-term capital gains
distributed by the fund are taxable to shareholders as dividends, not as
capital gains.
The bond fund hereby designates approximately $_____ as a capital gain
dividend for the purpose of the dividend-paid deduction.
As of November 30, 199 4 , the money market fund had a capital loss
carry forward aggregating $ _____. This loss carry forward, of which
$____ and $____ will expire on ___ and ____, respectively, is available
to offset future capital gains .
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. The bond fund intends to comply with other
tax rules applicable to regulated investment companies, including a
requirement that capital gains from the sale of securities held less than
three months constitute less than 30% of the fund's gross income for
each fiscal year. Gains from some futures contracts and options are
included in this 30% calculation, which may limit the bond fund's
investments in such instruments.
The money market fund is treated as a separate entity from the other
funds of Fidelity Court Street Trust II for tax purposes. The bond fund is
treated as a separate entity from the other funds of Fidelity Court Street
Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to Federal income taxes, shareholders may be
subject to state and local taxes on fund distributions, and shares may be
subject to state and local personal property taxes. Investors should
consult their tax advisers to determine whether a fund is
suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company
organized in 1972. Through ownership of voting common stock and the
execution of a shareholders' voting agreement, Edward C. Johnson 3d,
Johnson family members, and various trusts for the benefit of the Johnson
family form a controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for certain institutional customers and
funds sold through intermediaries; and Fidelity Investments Retail
Marketing Company, which provides marketing services to various companies
within the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades require pre-clearance, and participation in initial public
offerings are prohibitted. In addition, restrictions on the timing of
personal investing relative to trades by Fidelity funds and on short-term
trading have been adopted. Personal investing is monitored to protect
shareholders' interests.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trusts are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees and
officers also serve in similar capacities for other funds advised by FMR.
Unless otherwise noted, the business address of each Trustee and officer is
82 Devonshire Street, Boston, Massachusetts 02109, which is also the
address of FMR. Those Trustees who are "interested persons" (as defined in
the 1940 Act) by virtue of their affiliation with either trust or FMR, are
indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc. and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). President of Greenhill
Petroleum Corporation (petroleum exploration and production, 1990).
Until March 1990, Mr. Cox was President and Chief Operating Officer
of Union Pacific Resources Company (exploration and production). He is a
Director of Sanifill Corporation (non-hazardous waste, 1993) and
CH2M Hill Companies (engineering). In addition, he served on the Board of
Directors of the Norton Company (manufacturer of industrial devices,
1983-1990) and continues to serve on the Board of Directors of the Texas
State Chamber of Commerce, and is a member of advisory boards of Texas A&M
University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS (1993) 340 P.O. Box 264 Brideghampton , NY,
Trustee (1992). Prior to her retirement in September 1991, Mrs. Davis was
the Senior Vice President of Corporate Affairs of Avon Products, Inc. She
is currently a Director of BellSouth Corporation (telecommunications),
Eaton Corporation (manufacturing, 1991), and the TJX Companies, Inc.
(retail stores, 1990), and previously served as a Director of Hallmark
Cards, Inc. (1985-1991) and Nabisco Brands, Inc. In addition, she is a
member of the President's Advisory Council of The University of Vermont
School of Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls , OH, Trustee
(1990). Prior to his retirement in 1984, Mr. Jones was Chairman and Chief
Executive Officer of LTV Steel Company. Prior to May 1990, he was Director
of National City Corporation (a bank holding company) and National City
Bank of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc. (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as a
Trustee of First Union Real Estate Investments , Chairman of the
Board of Trustees and a member of the Executive Committee of the Cleveland
Clinic Foundation, a Trustee and a member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1 - North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman
of the Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company. He
is a Director of Allegheny Power Systems, Inc. (electric utility), General
Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of Corporate Property Investors ,
the EPS Foundation at Trinity College, the Naples Philharmonic Center for
the Arts, and Rensselaer Polytechnic Institute, and he is a
member of the Advisory Boards of Butler Capital Corporation Funds and
Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company of
Vermont, American Software, Inc. (1989), and AppleSouth, Inc. (restaurants,
1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior
Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
ANNE PUNZAK is manager and Vice President of Spartan Florida Municipal
Income, which she has managed since March 1992. She also manages
Aggressive Tax-Free and High Yield Tax-Free. Previously, she managed
Insured Tax-Free. Ms. Punzak joined Fidelity in 1984.
Deborah Watson is manager and Vice President of Spartan Florida
Municipal Money Market, which she has managed since August 1992. She also
manages California Tax-Free Money Market, Spartan California Municipal
Money Market, and Spartan Pennsylvania Municipal Money Market. Previously,
she was a trader in the money market division. Ms. Watson joined Fidelity
in 1982.
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President - Legal of FMR Corp., and Vice
President and Clerk of FDC.
THOMAS J. STEFFANCI, Vice President (1994) (bond fund only), is Vice
President of Fidelity's fixed-income funds and Senior Vice President of FMR
(1993). Prior to joining FMR, Mr. Steffanci was Senior Managing Director
of CMB Investment Counselors (1984-1990).
FRED L. HENNING, JR., Vice President (1994) (money market fund only), is
Vice President of Fidelity's money market funds and Senior Vice President
of FMR Texas Inc.
THOMAS D. MAHER, Assistant Vice President (1990) (money market fund
only), is Assistant Vice President of Fidelity's money market funds and
Vice President and Associate General Counsel of FMR Texas Inc. (1990).
Prior to 1990, Mr. Maher was an employee of FMR and Assistant Secretary of
all the Fidelity funds (1985-1989).
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. William R. Spaulding, Bertram H. Witham, and
David L. Yunich participate in the program.
As of November 30, 199 4 , the Trustees and officers of each fund
owned in the aggregate less than __% of the outstanding shares of each
fund.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under FMR's management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment
objective, policies, and limitations. FMR also provides the funds with all
necessary office facilities and personnel for servicing the funds'
investments, and compensates all officers of the trust, all Trustees who
are "interested persons" of the trust or of FMR, and all personnel of the
trust or FMR performing services relating to research, statistical, and
investment activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the funds. These services include providing facilities
for maintaining the fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the funds; preparing all general shareholder
communications and conducting shareholder relations; maintaining the funds'
records and the registration of the funds' shares under federal and state
law; developing management and shareholder services for the funds; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Board of Trustees.
FMR is responsible for the payment of all expenses of the funds with
certain exceptions. Specific expenses payable by FMR include, without
limitation, the fees and expenses of registering and qualifying the funds
and their shares for distribution under federal and state securities laws;
expenses of typesetting for printing the prospectuses and statements
of additional information; custodian charges; audit and legal expenses;
insurance expense; association membership dues; and the expenses of mailing
reports to shareholders, shareholder meetings, and proxy solicitations. FMR
also provides for transfer agent and dividend disbursing services and
portfolio and general accounting record maintenance through FSC.
FMR pays all other expenses of each fund with the following
exceptions: fees and expenses of the Trustees who are not "interested
persons" of the trust or of FMR (the non-interested Trustees); interest on
borrowings; taxes; brokerage commissions (if any); and such nonrecurring
expenses as may arise, including costs of any litigation to which the fund
may be a party, and any obligation it may have to indemnify the officers
and Trustees with respect to litigation.
FMR is the money market fund's manager pursuant to a management contract
dated July 16, 1992 which was approved by FMR, then sole shareholder of the
fund, on August 22, 1992. FMR is the bond fund's manager pursuant to
a contract dated February 20, 1992 which was approved by FMR, then sole
shareholder of the fund on March 13, 1992.
For the services of FMR under the management contracts, the money market
fund and the bond fund pay FMR a monthly management fee at the annual
rate of .50% and .55%, respectively, of average net assets throughout the
month. FMR reduces its fee by an amount equal to the fees and expenses of
the non-interested Trustees.
FMR may, from time to time, voluntarily reimburse all or a portion of each
fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses).
The tables below outline expense limitations (as a percentage of each
fund's average net assets) in effect from each fund's commencement of
operations (August 24, 1992 - money market fund; March 16, 1992 -
bond fund) through the date of this Statement of Additional
Information. The tables also show the amount of management fees incurred
under each fund's contract and the amounts reimbursed by FMR for
the same period.
MONEY MARKET FUND:
From To Expense Limitation
April 1, 1994 May 31, 1994 .45%
November 1, 1993 March 31, 1994 .40%
October 1, 1993 October 31, 1993 .35%
September 1, 1993 September 30, 1993 .30%
August 1, 1993 August 31, 1993 .25%
July 1, 1993 July 31, 1993 .20%
June 1, 1993 June 30, 1993 .15%
May 1, 1993 May 31, 1993 .10%
March 1, 1993 April 30, 1993 .05%
August 24, 1992 February 28, 1993 .00%
Management Fees Amount of
Fiscal Period Before Reimbursement Reimbursements
1994 $ $
1993 $ $
1992** $ $
* From August 24,1992 (commencement of operations) through November 30,
1992.
BOND FUND:
From To Expense Limitation
November 1, 1993 February 28, 1994 .50%
October 1, 1993 October 31, 1993 .45%
September 1, 1993 September 30, 1993 .35%
August 1, 1993 August 31, 1993 .30%
June 1, 1993 July 31, 1993 .25%
April 1, 1993 May 31, 1993 .15%
February 1, 1 993 March 31 , 1993 .10%
September 1, 1992 January 31, 1993 .05%
March 16, 1992 August 31, 1992 .00%
Management Fees Amount of
Fiscal Period Before Reimbursement Reimbursements
1994 $ $
1993 $ $
1992** $ $
** From March 16, 1992 (commencement of operations) through November 30,
1992.
To defray shareholder service costs, FMR or its affiliates also collect
each fund s' $5.00 exchange fee, $5.00 account closeout fee,
and $5.00 fee for wire purchases and redemptions, and the money
market fund's $2.00 checkwriting charge. Shareholder transaction fees and
charges collected for the fiscal periods ended November 30, 1993 ,
and 1992 are indicated in the tables below.
MONEY MARKET FUND:
Exchange Fees Account Closeout Fees Wire Fees Checkwriting Charge
199 4 $ $ $ $
1993 $ $ $ $
1992 $ $ $ $
BOND FUND:
Exchange Fees Account Closeout Fees Wire Fees
199 4 $ $ $
1993 $ $ $
1992 $ $ $
SUB-ADVISER. On behalf of Spartan Florida Municipal Money Market
Portfolio, FMR has entered into a sub-advisory agreement with FTX
pursuant to which FTX has primary responsibility for providing portfolio
investment management services to the fund. Under the sub-advisory
agreement, FMR pays FTX a fee equal to 50% of the management fee payable to
FMR under its current management contract with the fund. The fees paid to
FTX are not reduced by any voluntary or mandatory expense reimbursements
that may be in effect from time to time. During fiscal 1994,
1993, and 1992, FMR paid FTX $______ , $______, and $____
respectively , under the sub-advisory agreement.
DISTRIBUTION AND SERVICE PLANS
Each fund has adopted a d istribution and s ervice p lan
(the p lan) under Rule 12b-1 of the Investment Company Act of
1940 (the Rule). The Rule provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity that is primarily
intended to result in the sale of shares of the fund except pursuant to a
plan adopted by the fund under the Rule. Each fund's Board of
Trustees has adopted the p lan to allow the fund and FMR to incur
certain expenses that might be considered to constitute indirect payment by
the fund of distribution expenses. Under the p lan, if the
payment of management fees by the fund to FMR is deemed to be
indirect financing by the fund of the distribution of its shares, such
payment is authorized by the p lan.
Each p lan also specifically recognize s that
FMR, either directly or through FDC, may use its management fee revenue,
past profits, or other resources, without limitation, to pay promotional
and administrative expenses in connection with the offer and sale of
shares of the funds . In addition, each p lan
provide s that FMR may use its resources, including its
management fee revenues, to make payments to third parties that provide
assistance in selling shares of the fund, or to third parties,
including banks, that render shareholder support services. The Trustees
have not authorized such payments to date.
Each fund's p lan has been approved by the Trustees. As required by
the Rule, the Trustees carefully considered all pertinent factors relating
to the implementation of each p lan prior to its
approval, and have determined that there is a reasonable likelihood that
the p lan will benefit the fund and its shareholders. In
particular, the Trustees noted that each p lan do es not
authorize payments by the fund other than those made to FMR under
its management contract with the fund. To the extent that each
p lan give s FMR and FDC greater flexibility in connection with
the distribution of shares of the fund, additional sales of the
fund's shares may result. Additionally, certain shareholder support
services may be provided more effectively under each p lan by
local entities with whom shareholders have other relationships.
Each plan was approved by FMR, then sole shareholder of the funds, on
August 22, 1992 (money market fund) and March 13, 1992 (bond fund),
respectively.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
Each fund may execute portfolio transactions with and purchase
securities issued by depository institutions that receive payments
under the p lan. No preference for the instruments of such
depository institutions will be shown in the selection of
investments . In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and banks
and financial institutions may be required to register as dealers pursuant
to state law.
INTEREST OF FMR AFFILIATES
United Missouri is each fund's custodian and transfer agent. United
Missouri has entered into sub-contracts with FSC, an affiliate of FMR,
under the terms of which FSC performs the processing activities associated
with providing transfer agent and shareholder servicing functions for each
fund. United Missouri has additional sub-contracts with FSC, pursuant to
which FSC performs the calculations necessary to determine each fund's
net asset value per share and dividends and maintains the funds'
accounting records. United Missouri is entitled to reimbursement for fees
paid to FSC from FMR, which must bear these costs pursuant to its
management contract with each fund.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at net asset value . Promotional and administrative expenses
in connection with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUST ORGANIZATION. Spartan Florida Municipal Income Portfolio is a fund
of Fidelity Court Street Trust (the Massachusetts trust) , an
open-end management investment company organized as a Massachusetts
business trust on April 21, 1977. On August 1, 1987, the Massachusetts
trust's name was changed from Fidelity High Yield Municipals to Fidelity
Court Street Trust. Currently, there are four funds of the Massachusetts
trust: Spartan Connecticut Municipal High Yield Portfolio, Fidelity High
Yield Tax-Free Portfolio, Spartan New Jersey Municipal High Yield
Portfolio, and Spartan Florida Municipal Income Portfolio. The
Massachusetts trust's Declaration of Trust permits the Trustees to create
additional funds.
Spartan Florida Municipal Money Market Portfolio is a fund of
Fidelity Court Street Trust II (the Delaware trust) , an open-end
management investment company organized as a Delaware business trust on
June 20, 1991. Currently, there are four funds of the Delaware trust:
Fidelity Connecticut Municipal Money Market Portfolio, Fidelity New Jersey
Tax-Free Money Market Portfolio, Spartan Florida Municipal Money Market
Portfolio, and Spartan Connecticut Municipal Money Market Portfolio. The
Delaware trust's Trust Instrument permits the Trustees to create additional
funds.
In the event that FMR ceases to be investment adviser to a trust or
any of its funds , the right of the trust or the fund to use
the identifying names "Fidelity" or "Spartan" may be withdrawn. There is a
remote possibility that one fund might become liable for any misstatement
in its prospectus or statement of additional information about another
fund.
The assets of each trust received for the issue or sale of shares of each
of its funds and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general expenses of their respective trusts. Expenses with respect to
the trusts are to be allocated in proportion to the asset value of their
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of the trusts, subject to the general
supervision of the Boards of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds of a certain trust. In the event of the dissolution or
liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY - MASSACHUSETTS TRUST. The Massachusetts
trust is an entity of the type commonly known as "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under
certain circumstances, be held personally liable for the obligations of the
trust. The Declaration of Trust provides that the Massachusetts trust shall
not have any claim against shareholders except for the payment of the
purchase price of shares and requires that each agreement, obligation, or
instrument entered into or executed by the Massachusetts trust or its
Trustees shall include a provision limiting the obligations created thereby
to the Massachusetts trust and its assets. The Declaration of Trust
provides for indemnification out of each fund's property of any
shareholders held personally liable for the obligations of the fund. The
Declaration of Trust also provides that each fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the fund itself would be unable to
meet its obligations. FMR believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects a Trustee
against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
SHAREHOLDER AND TRUSTEE LIABILITY - DELAWARE TRUST. The Delaware trust is a
business trust organized under Delaware law. Delaware law provides that
shareholders shall be entitled to the same limitations of personal
liability extended to stockholders of private corporations for profit. The
courts of some states, however, may decline to apply Delaware law on this
point. The Trust Instrument contains an express disclaimer of shareholder
liability for the debts, liabilities, obligations, and expenses of the
Delaware Trust and requires that a disclaimer be given in each contract
entered into or executed by the Delaware Trust or its Trustees. The Trust
Instrument provides for indemnification out of each fund's property of any
shareholder or former shareholder held personally liable for the
obligations of the fund. The Trust Instrument also provides that each fund
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the fund and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which
Delaware law does not apply, no contractual limitation of liability was in
effect, and the fund is unable to meet its obligations. FMR believes that,
in view of the above, the risk of personal liability to shareholders is
extremely remote.
The Trust Instrument further provides that the Trustees shall not be
personally liable to any person other than the Delaware trust or its
shareholders; moreover, the Trustees shall not be liable for any conduct
whatsoever, provided that Trustee s are not protected against
any liability to which they would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
VOTING RIGHTS - BOTH TRUSTS. Each fund's capital consists of shares of
beneficial interest. As a shareholder of the bond fund, you receive one
vote for each dollar value of net asset value you own. As a shareholder of
the money market fund, you are entitled to one vote for each share you
own. The shares have no preemptive or conversion rights; voting and
dividend rights, the right of redemption, and the privilege of exchange are
described in the Prospectus. Shares are fully paid and nonassessable,
except as set forth under the respective "Shareholder and Trustee
Liability" headings above. Shareholders representing 10% or more of a trust
or one of its funds may, as set forth in the Declaration of Trust or Trust
Instrument, call meetings of the trust or fund for any purpose related to
the trust or fund, as the case may be, including, in the case of a meeting
of an entire trust, the purpose on voting on removal of one or more
Trustees.
A trust or any fund may be terminated upon the sale of its assets to (or,
in the case of the Delaware trust and its funds, merger with) another
open-end management investment company or series thereof, or upon
liquidation and distribution of its assets. Generally, such terminations
must be approved for the bond fund by vote of the holders of a majority of
the trust or fund as determined by the current value of each shareholders
investment in the fund or trust. S uch terminations for the
money market fund generally must be approved by vote of the holders of
a majority of the outstanding shares of the trust or the fund, however, the
Trustees of the Delaware trust may, without prior shareholder approval,
change the form of the organization of the Delaware trust by merger,
consolidation, or incorporation. If not so terminated or reorganized, the
trusts and their funds will continue indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the Delaware trust to merge or consolidate into one or more trusts,
partnerships, or corporations, so long as the surviving entity is an
open-end management investment company that will succeed to or assume the
Delaware trust registration statement, or cause the Delaware trust to be
incorporated under Delaware law. Each fund of both the Massachusetts
trust and the Delaware trust may also invest all of its assets in
another investment company.
CUSTODIAN. United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City,
Missouri, 64106, is custodian of the assets of each fund. The
custodian is responsible for the safekeeping of the fund 's assets
and the appointment of subcustodian banks and clearing agencies. The
custodian takes no part in determining the investment policies of the fund
or in deciding which securities are purchased or sold by the fund. The fund
may, however, invest in obligations of the custodian and may purchase
securities from or sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and each
trust 's Trustees may from time to time have transactions with
various banks, including banks serving as custodians for certain of the
funds advised by FMR. Transactions that have occurred to date include
mortgages and personal and general business loans. In the judgment of FMR,
the terms and conditions of those transactions were not influenced by
existing or potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand L.L.P. , One Post Office Square, Boston,
Massachusetts, ( bond fund) and 1999 Bryan Street, Dallas, Texas
(money market fund) serves as the trust's independent accountant. The
auditor examines financial statements for the funds and provides other
audit, tax, and related services.
FINANCIAL STATEMENTS
The funds' financial statements and financial highlights for the
fiscal year ended November 30, 199 4 are included in
the funds' Annual Report, which is a separate report supplied with this
Statement of Additional Information . The funds' financial statements and
financial highlights are incorporated herein by reference.
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds.
APPENDIX
The descriptions that follow are examples of eligible ratings for the
funds. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations when
determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND
MUNICIPAL NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important over the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG-3/VMIG-3 - This designation denotes favorable quality, with all
security elements accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG-4/VMIG-4 - This designation denotes adequate quality protection
commonly regarded as required of an investment security is present and,
although not distinctly or predominantly speculative, there is specific
risk.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND
MUNICIPAL NOTES:
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
SP-3 - Speculative capacity to pay principal and interest.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
The ratings from AA to B may be modified by the addition of a plus or minus
to show relative standing within the major rating categories.
SPARTAN NEW JERSEY MUNICIPAL HIGH YIELD PORTFOLIO
CROSS-REFERENCE SHEET
FORM N-1A
ITEM NUMBER
PROSPECTUS PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C>
1 Cover Page
2a Expenses
b,c Contents; The Fund at a Glance; Who May Want to Invest
3a Financial Highlights
b *
c,d Performance
4a(i) Charter
(ii) The Fund at a Glance; Investment Principles and Risks
b Investment Principles and Risks
c Who May Want to Invest; Investment Principles and Risks
5a Charter
b(i) Cover Page; The Fund at a Glance; Charter; Doing Business with Fidelity
b(ii) Charter
b(iii) Expenses; Breakdown of Expenses
c Charter
d Charter; Breakdown of Expenses
e Cover Page; Charter
f Expenses
g(i) Charter
g(ii) *
5A Performance
6a(i) Charter
a(ii) How to Buy Shares; How to Sell Shares; Transaction Details; Exchange
Restrictions
a(iii) Charter
b *
c Transaction Details; Exchange Restrictions
d *
e Doing Business with Fidelity; How to Buy Shares; How to Sell Shares;
Investor Services
f,g Dividends, Capital Gains, and Taxes
7a Cover Page; Charter
b Expenses; How to Buy Shares; Transaction Details
c *
d How to Buy Shares
e *
f Breakdown of Expenses
8 How to Sell Shares; Investor Services; Transaction Details; Exchange
Restrictions
9 *
</TABLE>
* Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C>
10, 11 Cover Page
12 Description of the Trust
13a-c Investment Policies and Limitations
d Portfolio Transactions
14a, b Trustees and Officers
c *
15a, b *
c Trustees and Officers
16a(i) FMR; Portfolio Transactions
a(ii) Trustees and Officers
a(iii), b Management Contract
c,d Interest of FMR Affiliates
e *
f Distribution and Service Plan
g *
h Description of the Trust
i Interest of FMR Affiliates
17a,b,c Portfolio Transactions
d,e *
18a Description of the Trust
b *
19a Additional Purchase and Redemption Information
b Valuation of Portfolio Securities; Additional Purchase and Redemption
Information
c *
20 Distributions and Taxes
21a Interest of FMR Affiliates
b Interest of FMR Affiliates
c *
22a *
b Performance
23 Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a copy
of the fund's most recent financial report and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated January 16, 1995.
The SAI has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, call Fidelity at
1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
NJT-pro-195
SPARTAN NEW
JERSEY
MUNICIPAL
HIGH YIELD
PORTFOLIO
Spartan New Jersey Municipal High Yield seeks a high level of current
income free from federal income tax and the New Jersey Gross Income
Tax by investing in municipal securities.
PROSPECTUS
JANUARY 16, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
KEY FACTS THE FUND AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES The fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of the fund's financial data.
PERFORMANCE How the fund has
done over time.
THE FUND IN DETAIL CHARTER How the fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
The fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: High current tax-free income for New Jersey residents. As with any
mutual fund, there is no assurance that the fund will achieve its goal.
STRATEGY: Invests mainly in longer-term, investment-grade municipal
s e curities whose interest is free from federal income tax and
the New Jersey Gross Income Tax.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management
arm of Fidelity Investments, which was established in 1946 and is now
America's largest mutual fund manager.
SIZE: As of November 30, 1994, the fund had over $__ million in
assets.
WHO MAY WANT TO INVEST
This non-diversified fund may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal and
New Jersey income taxes.
The value of the fund's investments and the income they generate will
vary from day to day, and generally reflect interest rates, market
conditions, and other federal and state political and economic news. When
you sell your shares, they may be worth more or less than what you paid
for them. By itself, the fund does not constitute a balanced investment
plan.
The Spartan family of funds is designed for cost-conscious investors
looking for higher yields through lower costs. The Spartan
Approach(registered trademark) requires investors to make high minimum
investments and, in some cases, to pay for individual transactions.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. Spartan
New Jersey Municipal High
Yield is in the INCOME
category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or
sell shares of a fund. See page 21 for more information.
Maximum sales charge on purchases and
reinvested distributions None
Deferred sales charge on redemptions None
Redemption fee (as a % of amount redeemed
on shares held less than 180 days) .50%
Exchange and wire transaction fees $5.00
Account closeout fee $5.00
THESE FEES ARE WAIVED (except for the redemption fee) if your account
balance at the time of the transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee to FMR. Expenses are factored into the fund's share
price or dividends and are not charged directly to shareholder ac counts
(see page 14).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets.
Management fee %
12b-1 fee None
Other expenses %
Total fund operating expenses %
EXAMPLES: Let's say, hypothetically, that the fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses after
the number of years indicated, first assuming that you leave your account
open, and then assuming that you close your account at the end of the
period:
Account Account
open closed
After 1 year $ $
After 3 years $ $
After 5 years $ $
After 10 years $ $
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of
expenses for portfolio
management, shareholder
statements, tax reporting, and
other services. These costs
are paid from the fund's
assets; their effect is already
factored into any quoted
share price or return.
(checkmark)
FINANCIAL HIGHLIGHTS
The table that follows is included in the fund's Annual Report and has
been audited by Coopers & Lybrand L.L.P., inde pendent accountants.
Their report on the financial statements and financial highlights is
included in the Annual Report. The financial statements and financial
highlights are incorporated by reference into (are legally a part of) the
fund's Statement of Additional Information.
[Financial Highlights to be filed by subsequent amendment.]
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results and do
not reflect the effect of any transaction fees you may have paid. The
figures would be lower if fees were taken into account.
The fund's fiscal year runs from December 1 through November 30. The tables
below show the fund's performance over past fiscal years compared to a
measure of inflation. The chart on page 7 helps you compare the
yields of this fund to those of its competitors.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods Pas Past Life
ended t 1 5 of
November 30, yea year fund
1994 r s A
Spartan NJ
High Yield
Consumer
Price
Index
CUMULATIVE TOTAL RETURNS
Fiscal periods Pas Past Life
ended t 1 5 of
November 30, yea year fund
1994 r s A
Spartan NJ
High Yield
Consumer __
Price
Index
A FROM JANUARY 1, 1988
UNDERSTANDING
PERFORMANCE
YIELD illustrates the income
earned by a fund over a
recent period. 30-day yields
are usually used for bond
funds. Yields change daily,
reflecting changes in interest
rates.
TOTAL RETURN reflects both the
reinvestment of income and
capital gain distributions and
any change in a fund's share
price.
(checkmark)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund 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.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. A
TAX-EQUIVALENT YIELD shows what an investor would have to earn before taxes
to equal a tax-free yield. Yields are calculated according to a standard
that is required for all stock and bond funds. Because this differs from
other accounting methods, the quoted yield may not equal the income
actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper New Jersey Municipal Debt Funds
Average, which currently reflects the performance of over ___ mutual
funds with similar objectives. This average, which assumes reinvestment of
distributions, is published by Lipper Analytical Services, Inc.
30-DAY YIELDS
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 1, Col: 2, Value: nil
Row: 2, Col: 1, Value: nil
Row: 2, Col: 2, Value: nil
Row: 3, Col: 1, Value: nil
Row: 3, Col: 2, Value: nil
Row: 4, Col: 1, Value: nil
Row: 4, Col: 2, Value: nil
Row: 5, Col: 1, Value: nil
Row: 5, Col: 2, Value: nil
Row: 6, Col: 1, Value: nil
Row: 6, Col: 2, Value: nil
Row: 7, Col: 1, Value: nil
Row: 7, Col: 2, Value: nil
Row: 8, Col: 1, Value: nil
Row: 8, Col: 2, Value: nil
Row: 9, Col: 1, Value: nil
Row: 9, Col: 2, Value: nil
Row: 10, Col: 1, Value: nil
Row: 10, Col: 2, Value: nil
Row: 11, Col: 1, Value: nil
Row: 11, Col: 2, Value: nil
Row: 12, Col: 1, Value: nil
Row: 12, Col: 2, Value: nil
Row: 13, Col: 1, Value: nil
Row: 13, Col: 2, Value: nil
Row: 14, Col: 1, Value: nil
Row: 14, Col: 2, Value: nil
Row: 15, Col: 1, Value: nil
Row: 15, Col: 2, Value: nil
Row: 16, Col: 1, Value: nil
Row: 16, Col: 2, Value: nil
Row: 17, Col: 1, Value: nil
Row: 17, Col: 2, Value: nil
Row: 18, Col: 1, Value: nil
Row: 18, Col: 2, Value: nil
Row: 19, Col: 1, Value: nil
Row: 19, Col: 2, Value: nil
Row: 20, Col: 1, Value: nil
Row: 20, Col: 2, Value: nil
Row: 21, Col: 1, Value: nil
Row: 21, Col: 2, Value: nil
Row: 22, Col: 1, Value: nil
Row: 22, Col: 2, Value: nil
Row: 23, Col: 1, Value: nil
Row: 23, Col: 2, Value: nil
Row: 24, Col: 1, Value: nil
Row: 24, Col: 2, Value: nil
Row: 25, Col: 1, Value: nil
Row: 25, Col: 2, Value: nil
Row: 26, Col: 1, Value: nil
Row: 26, Col: 2, Value: nil
Row: 27, Col: 1, Value: nil
Row: 27, Col: 2, Value: nil
Row: 28, Col: 1, Value: nil
Row: 28, Col: 2, Value: nil
Row: 29, Col: 1, Value: nil
Row: 29, Col: 2, Value: nil
Row: 30, Col: 1, Value: nil
Row: 30, Col: 2, Value: nil
Row: 31, Col: 1, Value: nil
Row: 31, Col: 2, Value: nil
Row: 32, Col: 1, Value: nil
Row: 32, Col: 2, Value: nil
Spartan NJ
High Yield
Competitive
funds average
19__
19__
19__
THE CHART SHOWS THE 30-DAY ANNUALIZED NET YIELDS FOR THE FUND AND ITS
COMPETITIVE FUNDS AVERAGE AS OF THE LAST DAY OF EACH MONTH FROM
JANUARY 1992 THROUGH NOVEMBER 1994. YIELDS FOR THE FUND WOULD HAVE
BEEN LOWER IF FIDELITY HAD NOT REIMBURSED CERTAIN FUND EXPENSES.
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
SPARTAN NEW JERSEY MUNICIPAL HIGH YIELD IS A MUTUAL FUND: an investment
that pools shareholders' money and invests it toward a specified goal. In
technical terms, the fund is currently a non-diversified fund of Fidelity
Court Street Trust, an open-end management investment company organized as
a Massachusetts business trust on April 21, 1977.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL 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. Fidelity 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.
FMR AND ITS AFFILIATES
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over ___
(solid bullet) Assets in Fidelity mutual
funds: over $ ___ billion
(solid bullet) Number of shareholder
accounts: over __ million
(solid bullet) Number of investment
analysts and portfolio
managers: over ___
(checkmark)
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
David Murphy is manager and Vice President of Spartan New Jersey
Municipal High Yield, which he has managed since April 1991. Mr. Murphy
also manages Limited Term Municipals, Spartan California Intermediate
Municipal, Spartan Intermediate Municipal, Spartan New York Intermediate
Municipal, and Spartan Short-Intermediate Municipal. Mr. Murphy joined
Fidelity in 1989.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions. Personal investing
is monitored to protect shareholders' interests.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services. Fidelity Service Co. (FSC) performs transfer
agent servicing functions for the fund.
FMR Corp. is the ultimate parent company of FMR. Through ownership of
voting common stock, members of the Edward C. Johnson 3d family form a
controlling group with respect to FMR Corp. Changes may occur in the
Johnson family group, through death or disability, which would result in
changes in each individual family member's holding of stock. Such changes
could result in one or more family members becoming holders of over 25% of
the stock. FMR Corp. has received an opinion of counsel that changes in the
composition of the Johnson family group under these circumstances would not
result in the termination of the fund's management or distribution
contracts and, accordingly, would not require a shareholder vote to
continue operation under those contracts.
United Missouri Bank, N.A., is the fund's transfer agent, although it
employs FSC to perform these functions for the fund. It is located at 1010
Grand Avenue, Kansas City, Missouri.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND SEEKS HIGH CURRENT INCOME that is free from federal income tax
and the New Jersey Gross Income Tax by investing primarily in
municipal bonds judged by FMR to be of investment-grade quality, although
it can also invest in lower-quality securities. The fund has no
restrictions on maturity, but it generally invests in medium- and long-term
bonds and maintains a dollar-weighted average maturity of 15 years or
longer. FMR normally invests so that at least 80% of the fund's income is
free from both federal income tax and the New Jersey Gross Income Tax.
The fund's performance is affected by the economic and political
conditions within the state of New Jersey. The state's economy has been
sluggish in the last several years. Also, New Jersey relies heavily upon
federal assistance, receiving more aid than most states.
The fund's yield and share price change daily and are based on changes in
interest rates, market conditions, other political and economic news,
and on the quality and maturity of its investments. In general, bond
prices rise when interest rates fall, and vice versa. This effect is
usually more pronounced for longer-term securities. Lower-quality
securities offer high yields, but also carry more risk. FMR may use
various investment techniques to hedge the fund's risks, but there is no
guarantee that these strategies will work as intended. When you sell your
shares, they may be worth more or less than what you paid for them.
If you are subject to the federal alternative minimum tax, you should note
that the fund may invest all of its assets in municipal securities issued
to finance private activities. The interest from these investments is a
tax-preference item for purposes of the tax.
FMR normally invests the fund's assets according to its investment strategy
and does not expect to invest in federally or state taxable obligations.
The fund also reserves the right to invest without l i mitation
in short-term instruments, to hold a substantial amount of uninvested cash,
or to invest more than normally permitted in taxable obligations for
temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, and strategies FMR may employ in
pursuit of the fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of the fund's policies
and limitations and more detailed information about the fund's investments
is contained in the fund's 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 to
the full extent permitted unless it believes that doing so will help the
fund achieve its goal. Current holdings and recent investment strategies
are described in the fund's financial reports which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable 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 purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa.
Debt securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "municipal junk bonds")
may have speculative characteristics, and involve greater risk of
default or price changes due to changes in the issuer's creditworthiness.
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 table at right provides a summary of ratings assigned to debt
holdings (not including money market instruments) in the fund's portfolio.
These figures are dollar-weighted averages of month-end portfolio holdings
during fiscal 1994, and are presented as a percentage of total
security investments. These percentages are historical and do not
necessarily indicate the fund's current or future debt holdings.
FISCAL 1994 DEBT HOLDINGS, BY RATING
MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa % AA %
Upper-medium grade A A
Medium grade Baa % BBB %
LOWER QUALITY
Moderately speculative Ba % BB %
Speculative B % B %
Highly speculative Caa % CCC %
Poor quality Ca % CC %
Lowest quality, no interest C C
In default, in arrears -- D %
% %
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S OR
S&P AMOUNTED TO ___%. THIS MAY INCLUDE SECURITIES RATED BY OTHER
NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES.
FMR
HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER QUALITY ACCOUNT
FOR
__% OF THE FUND'S SECURITY INVESTMENTS. REFER TO THE FUND'S
STATEMENT OF
ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
RESTRICTIONS: The fund does not currently intend to invest more than
one-third of its assets in bonds of equivalent quality to Ba or lower by
Moody's and BB or lower by S&P, and does not currently intend to invest in
bonds whose quality is judged by FMR to be equivalent to bonds rated lower
than B. The fund does not currently intend to invest in bonds rated below
Caa by Moody's or CCC by S&P.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. Municipal securities
may be issued in anticipation of future revenues, and may be backed by the
full taxing power of a municipality, the revenues from a specific project,
or the credit of a private organization. A security's credit may be
enhanced by a bank, insurance company, or other financial institution. The
fund may own a municipal security directly or through a participation
interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by the state
of New Jersey or its counties, municipalities, authorities, or other
subdivisions. The ability of issuers to repay their debt can be affected by
many factors that impact the economic vitality of either the state or a
region within the state.
Other state tax-free securities include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations. The economy
of Puerto Rico is closely linked to the U.S. economy, and will depend on
the strength of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives. Recent
legislation revised these incentives, but the government of
Puerto Rico anticipates only a slight reduction in the average real growth
rates for the economy.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ASSET-BACKED SECURITIES may include pools of purchase contracts, financing
leases, or sales agreements entered into by municipalities. These
securities usually rely on continued payments by a municipality, and may
also be subject to prepayment risk.
VARIABLE- AND FLOATING-RATE INSTRUMENTS may have interest rates that move
in tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, the fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
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 the 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.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
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 other securities, including illiquid securities , may be
subject to legal restrictions. Difficulty in selling securities may result
in a loss or may be costly to the fund.
RESTRICTIONS: The fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
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 or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
these changes, and also to changes in the market value of a single issuer
or industry.
RESTRICTIONS: The fund is considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter , the fund does
not invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S. government
securities. The fund may invest more than 25% of its total assets in
tax-free securities that finance similar types of projects.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its 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 paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
The fund seeks a high level of current income exempt from federal income
tax and the New Jersey Gross Income Tax. Under normal conditions, the fund
will invest so that at least 80% of its income is exempt from both federal
income tax and New Jersey Gross Income Tax. The fund may borrow only for
temporary or emergency purposes, but not in an amount exceeding 33 1/3% of
its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted
from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs.
FMR may, from time to time, agree to reimburse the fund for management fees
above a specified limit. FMR retains the ability to be repaid by the 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 fund's expenses and boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fund pays
the fee at the annual rate of .55% of its average net assets.
FSC performs many transaction and accounting functions for the fund. These
services include processing shareholder transactions and calculating the
fund's share price. FMR, and not the fund, pays for these services.
To offset shareholder service costs, FMR or its affiliates also collect the
funds' $5.00 exchange fee, $5.00 account closeout fee, and $5.00 fee for
wire purchases and redemptions. For fiscal 1994, these fees amounted to
$_____, $_____, and $_____, respectively.
The fund has adopted a Distribution and Service Plan. This plan recognizes
that FMR may use its resources, including management fees, to pay expenses
associated with the sale of fund shares. This may include payments to third
parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the fund's shares. It is important to
note, however, that the fund does not pay FMR any separate fees for this
service.
The fund's portfolio turnover rate for fiscal 1994 was __%. This
rate varies from year to year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in the fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
THE FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. The fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page 17. If there is no application
accompanying this prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity
fund.
If you buy shares by check or Fidelity Money Line(registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
TO ADD TO AN ACCOUNT $1,000
Through automatic investment plans $500
MINIMUM BALANCE $5,000
UNDERSTANDING THE
SPARTAN APPROACH(registered trademark)
Fidelity's Spartan Approach is
based on the principle that
lower fund expenses can
increase returns. The Spartan
funds keep expenses low in
two ways. First, higher
investment minimums reduce
the effect of a fund's fixed
costs, many of which are paid
on a per-account basis.
Second, unlike most mutual
funds that include transaction
costs as part of overall fund
expenses, Spartan
shareholders pay directly for
the transactions they make.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
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Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to "Spartan
check payable to New Jersey Municipal
"Spartan New Jersey High Yield Portfolio."
Municipal High Yield Indicate your fund
Portfolio." Mail to the account number on
address indicated on your check and mail to
the application. the address printed on
your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (small solid bullet) Bring your application (small solid bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
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Wire (wire_graphic) (small solid bullet) There may be a $5.00 (small solid bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(small solid bullet) Call 1-800-544-7777 to (small solid bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify "Spartan New
Bank Routing Jersey Municipal High
#021001033, Yield Portfolio" and
Account #00163053. include your account
Specify "Spartan New number and your
Jersey Municipal High name.
Yield Portfolio" and
include your new
account number and
your name.
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Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It 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
(including Fidelity Investor Centers), 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) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the table
at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
ACCOUNT TYPE SPECIAL REQUIREMENTS
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IF YOU SELL SHARES OF THE FUND AFTER HOLDING THEM LESS THAN 180 DAYS, THE FUND WILL
DEDUCT A REDEMPTION FEE EQUAL TO .50% OF THE VALUE OF THOSE SHARES. IF YOUR ACCOUNT
BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR INDIVIDUAL REDEMPTION TRANSACTIONS:
$5.00 FOR EACH EXCHANGE, BANK WIRE, AND ACCOUNT CLOSEOUT.
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Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $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.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, 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 will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. There may be a $5.00 fee for
each exchange out of the fund, unless you place your transaction on
Fidelity's automated exchange services.
Note that exchanges out of the 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 page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
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A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in January
and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. The fund offers four
options:
9. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
10. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
11. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
12. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions will be reinvested at the NAV as of the
date the fund deducts the distribution from its
NAV. The mailing of distribution checks will begin within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
The fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the fund's tax implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is distributed
to shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These 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. Fidelity will send you and the IRS a
statement showing the tax status of the distributions paid to you in the
previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. The fund may invest up to 100% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
To the extent the fund's income and capital gain distributions are derived
from state tax-free investments, they will be free from the New Jersey
Gross Income Tax.
During fiscal 1994, __% of the fund's income dividends was free from
federal income tax, and __% was free from the New Jersey Gross
Income Tax. __% of the fund's income dividends was subject to the
federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - 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 the fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. 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 just before the fund deducts a
capital gain distribution from its NAV, 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.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates the fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The fund's assets are valued primarily on the basis of market quotations,
if available. Since market quotations are often unavailable, assets are
usually valued by a method that the Board of Trustees believes accurately
reflects fair value.
THE FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow reasonable procedures designed to verify the identity of the caller.
Fidelity will request personalized security codes or other information,
and may also record calls. You should verify the accuracy of your
confirmation statements immediately after you receive them. If you do not
want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees the fund or its
transfer agent has incurred.
(small solid bullet) You begin to earn dividends as of the first business
day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUND THROUGH A BROKER, who may charge you
a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when the fund is priced on
the following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. 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 the fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid bullet) The fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line
have been collected, which can take up to seven business days.
(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.
THE REDEMPTION FEE, if applicable, will be deducted from the amount of your
redemption. This fee is paid to the fund rather than FMR, and it does not
apply to shares that were acquired through reinvestment of distributions.
If shares you are redeeming were not all held for the same length of time,
those shares you held longest will be redeemed first for purposes of
determining whether the fee applies.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at
the time of the transaction is $50,000 or more. Otherwise, you should note
the following:
(small solid bullet) The $5.00 exchange fee will be deducted from the
amount of your exchange.
(small solid bullet) The $5.00 wire fee will be deducted from the amount of
your wire.
(small solid bullet) The $5.00 account closeout fee does not apply to
exchanges or wires.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed and the $5.00 account closeout fee will be charged.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of the fund
for shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
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) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the 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) The 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) Your exchanges may be restricted or refused if the
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges that
coincide with a "market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
From Filler pages
SPARTAN(Registered trademark) NEW JERSEY MUNICIPAL HIGH YIELD PORTFOLIO
A FUND OF FIDELITY COURT STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1 6 , 199 5
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated January 1 6 , 199 5 ).
Please retain this document for future reference. The fund's financial
statements and financial highlights, included in the Annual Report ,
for the fiscal year ended November 30, 199 4 are
incorporated herein by reference. To obtain an additional copy of the
Prospectus or the Annual Report, please call Fidelity Distributors
Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 2
Special Factors Affecting New Jersey 7
Special Factors Affecting Puerto Rico 9
Portfolio Transactions 10
Valuation of Portfolio Securities 11
Performance 11
Additional Purchase and Redemption Information 14
Distributions and Taxes 15
FMR 16
Trustees and Officers 16
Management Contract 17
Distribution and Service Plan 18
Interest of FMR Affiliates 19
Description of the Trust 19
Financial Statements 20
Appendix 20
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
United Missouri Bank, N.A. (United Missouri) and Fidelity Service Co. (FSC)
NJT-ptb-19 5
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
However, except for the fundamental investment limitations set forth below,
the investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval. THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940 ;
( 2 ) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets ( including the amount
borrowed ) less liabilities (other than borrowings) . Any
borrowings that come to exceed this amount will be reduced within three
days (not including Sundays and holidays) to the extent necessary to comply
with the 33 1/3% limitation ;
( 3 ) underwrite securities issued by others (except to the extent
that the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
( 4 ) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies
or instrumentalities, or tax-exempt obligations issued or
guaranteed by a U.S. territory or possession or a state or local
government , or a political subdivision of any of the
foregoing ) if, as a result, more than 25% of the fund's total
assets would be invested in securities of companies whose principal
business activities are in the same industry;
( 5 ) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business);
( 6 ) purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures contracts
or from investing in securities or other instruments backed by physical
commodities) ; or
( 7 ) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (but this
limit does not apply to purchases of debt securities or to repurchase
agreements).
(8) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the
fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short , unless
it owns or has the right to obtain securities equivalent in kind and amount
to the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short .
(iii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(i v ) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation ( 2 )).
The fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v i ) The fund does not currently intend to invest more than 25% of
its total assets in industrial revenue bonds related to a single industry.
(vi i ) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to purchases
of debt securities.
(vii i ) The fund does not currently intend to (a) purchase securities
of other investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (b) purchase
or retain securities issued by other open-end investment companies.
Limitations (a) and (b) do not apply to securities received as dividends,
through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(ix) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations ( 4 ) and (i), FMR identifies the issuer
of a security depending on its terms and conditions. In identifying the
issuer, FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page 6.
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings . In accordance with exemptive orders issued by the
Securities and Exchange Commission, the Board of Trustees has established
and periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. The fund may receive fees for entering
into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because the fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If the fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When the fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the fund could miss a favorable price or yield opportunity, or could suffer
a loss.
The fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
REFUNDING CONTRACTS. The fund may purchase securities on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and the fund
to buy refunded municipal obligations at a stated price and yield on a
settlement date that may be several months or several years in the future.
The fund generally will not be obligated to pay the full purchase price if
it fails to perform under a refunding contract. Instead, refunding
contracts generally provide for payment of liquidated damages to the issuer
(currently 15-20% of the purchase price). The fund may secure its
obligations under a refunding contract by depositing collateral or a letter
of credit equal to the liquidated damages provisions of the refunding
contract. When required by SEC guidelines, the fund will place liquid
assets in a segregated custodial account equal in amount to its obligations
under refunding contracts.
INVERSE FLOATERS are instruments whose interest rates bear an inverse
relationship to the interest rate on another security or the value of an
index. Changes in the interest rate on the other security or index
inversely affect the residual interest rate paid on the inverse floater,
with the result that the inverse floater's price will be considerably more
volatile than that of a fixed-rate bond. For example, a municipal issuer
may decide to issue two variable-rate instruments instead of a single
long-term, fixed-rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument
(the inverse floater) reflects the approximate rate the issuer would have
paid on a fixed-rate bond, multiplied by two, minus the interest paid on
the short-term instrument. Depending on market availability, the two
portions may be recombined to form a fixed-rate municipal bond. The market
for inverse floaters is relatively new.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit the fund to sell them at
par value plus accrued interest on short notice.
In many instances bonds and participation interests have tender options or
demand features that permit the fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. The fund considers variable rate instruments structured in this
way (Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The IRS has not ruled whether the interest on Participating
VRDOs is tax-exempt and, accordingly, the fund intends to purchase these
instruments based on the opinions of bond counsel. The fund may also invest
in fixed-rate bonds that are subject to third party puts and in
participation interests in such bonds held by a bank in trust or otherwise.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, the fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for the fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead,
they are sold at a deep discount from their face value and are redeemed at
face value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, the fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. The fund may
acquire standby commitments to enhance the liquidity of portfolio
securities.
Ordinarily the fund will not transfer a standby commitment to a third
party, although it could sell the underlying municipal security to a third
party at any time. The fund may purchase standby commitments separate from
or in conjunction with the purchase of securities subject to such
commitments. In the latter case, the fund would pay a higher price for the
securities acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. The fund may invest a portion of its assets in
municipal leases and participation interests therein. These obligations,
which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, the fund will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives
the fund a specified, undivided interest in the obligation in proportion to
its purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
FEDERALLY TAXABLE OBLIGATIONS. The fund does not intend to invest in
securities whose interest is federally taxable; however, from time to time,
the fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, the fund may invest in obligations whose interest is federally
taxable pending the investment or reinvestment in municipal securities of
proceeds from the sale of its shares or sales of portfolio securities.
Should the fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The fund's standards for high-quality taxable obligations are
essentially the same as those described by Moody's Investors Service, Inc.
(Moody's) in rating corporate obligations within its two highest ratings of
Prime-1 and Prime-2, and those described by Standard & Poor's Corporation
(S&P) in rating corporate obligations within its two highest ratings of A-1
and A-2.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the New Jersey legislature
that would affect the state tax treatment of the fund's distributions. If
such proposals were enacted, the availability of municipal obligations and
the value of the fund's holdings would be affected and the Trustees would
reevaluate the fund's investment objective and policies.
The fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities
of portfolio securities, sales of fund shares, or in order to meet
redemption requests, the fund may hold cash that is not earning income. In
addition, there may be occasions when, in order to raise cash to meet
redemptions, the fund may be required to sell securities at a loss.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, or other
financial indicators. Indexed securities typically, but not always, are
debt securities or deposits whose value at maturity or coupon rate is
determined by reference to a specific instrument or statistic. Indexed
securities may have principal payments as well as coupon payments that
depend on the performance of one or more interest rates. Their coupon rates
or principal payments may change by several percentage points for every 1%
interest rate change. One example of indexed securities is inverse
floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed - upon price . The resale price reflects the
purchase price plus an agreed - upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security. A
repurchase agreement involves the obligation of the seller to pay the
agreed-upon resale price, which obligation is in effect secured by
the value (at least equal to the amount of the agreed-upon resale price and
marked to market daily) of the underlying security. The fund may engage in
repurchase agreements with respect to any type of security in which
it is authorized to invest . While it does not presently appear
possible to eliminate all risks from these transactions (particularly the
possibility of a decline in the market value of the underlying securities,
as well as delays and costs to the fund in connection with bankruptcy
proceedings), it is the fund's current policy to limit repurchase agreement
transactions to those parties whose creditworthiness has been reviewed and
found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness is deemed satisfactory by FMR. Such transactions may
increase fluctuations in the market value of the fund's assets and may be
viewed as a form of leverage.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
Investments currently considered by the fund to be illiquid include
over-the-counter options. Also, FMR may determine some restricted
securities and municipal lease obligations to be illiquid. However, with
respect to over-the-counter options the fund writes, all or a portion of
the value of the underlying instrument may be illiquid depending on the
assets held to cover the option and the nature and terms of any agreement
the fund may have to close out the option before expiration.
In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by a committee appointed by the
Board of Trustees. If through a change in values, net assets, or other
circumstances, the fund were in a position where more than 10% of its net
assets was invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time it may be
permitted to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop, the fund
might obtain a less favorable price than prevailed when it decided to seek
registration of the security.
LOWER-QUALITY MUNICIPAL SECURITIES. The fund may invest a portion of
its assets in lower- quality municipal securities as described in the
Prospectus.
While the market for New Jersey municipals is considered to be substantial,
adverse publicity and changing investor perceptions may affect the ability
of outside pricing services used by the fund to value its portfolio
securities, and the fund's ability to dispose of lower- quality
bonds. The outside pricing services are monitored by FMR and reported to
the Board to determine whether the services are furnishing prices that
accurately reflect fair value. The impact of changing investor
perceptions may be especially pronounced in markets where municipal
securities are thinly traded.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to
be in the best interest of the fund's shareholders.
INTERFUND BORROWING PROGRAM. The fund has received permission from the SEC
to lend money and to borrow money from other funds advised by FMR or its
affiliates, but it will participate in the interfund borrowing program only
as a borrower. Interfund loans normally will extend overnight, but can have
a maximum duration of seven days. The fund will borrow through the program
only when the costs are equal to or lower than the cost of bank loans. The
fund will not borrow money through the program if, after doing so, total
outstanding borrowings would exceed 15% of total assets. Loans may be
called on one day's notice, and the fund may have to borrow from a bank at
a higher interest rate if an interfund loan is called or not renewed.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund intends to file a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets, before engaging in any purchases or sales of futures
contracts or options on futures contracts. The fund intends to comply with
Rule 4.5 under the Commodity Exchange Act, which limits the extent
to which the fund can commit initial margin deposits and option
premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; (c) purchase call options if, as a result, the current value
of option premiums for call options purchased by the fund would exceed 5%
of the fund's total assets. These limitations do not apply to options
attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Information may be changed as
regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond
Index . Futures can be held until their delivery dates, or can be
closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply with
guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of
the fund's assets could impede portfolio management or the fund's ability
to meet redemption requests or other current obligations.
SPECIAL FACTORS AFFECTING NEW JERSEY
The following highlights only some of the more significant financial trends
and problems affecting New Jersey, and is based on information drawn from
official statements and prospectuses relating to securities offerings of
the State of New Jersey, its agencies and instrumentalities, as available
on the date of this Statement of Additional Information. FMR has not
independently verified any of the information contained in such official
statements and other publicly available documents, but is not aware of any
fact which would render such information inaccurate.
On November 2, 1993, Christine Todd Whitman was elected to replace James
Florio as Governor of the State. Governor-Elect Whitman will take office on
January 18, 1994. As a matter of public record, Governor-Elect Whitman
during her campaign publicized her intention to reduce taxes in the State.
At this time the effect of Governor-Elect Whitman's election cannot be
evaluated.
The State's 1993 Fiscal Year budget became law on June 30, 1993. Changes in
economic activity in the State and the nation, consumption of durable
goods, corporate financial performance and other factors that are difficult
to predict may result in actual collections for Fiscal Year 1994 being more
or less than forecasted. The State is bound, however, by the constitutional
requirement that no appropriations law may be enacted if the amount of
money appropriated therein, together with all other prior appropriations
made for the same Fiscal Year, exceeds the total amount of anticipated
revenues available for such Fiscal Year as certified by the Governor.
By the beginning of the national recession, construction activity had
already been declining in New Jersey for nearly two years. As the rapid
acceleration of real estate prices forced many would-be homeowners out of
the market and high non-residential vacancy rates reduced new commitments
for offices and commercial facilities, construction employment began to
decline; also growth had tapered off markedly in the service sectors and
the long-term downtrend of factory employment had accelerated partly
because of a leveling off of industrial demand nationally. The onset of
recession caused an acceleration of New Jersey's job losses in construction
and manufacturing, as well as an employment downturn in such previously
growing sectors as wholesale trade, retail trade, finance, utilities,
trucking and warehousing.
Reflecting the economic downturn, the rate of unemployment in the State
rose from 3.6% during the first quarter of 1989 to an estimated 6.6% in
1991. In 1992 the State's unemployment rate moved ahead of the nation's for
the first time in a decade to an annual average of 8.4% versus 7.4% in the
United States.
In 1992, employment and services in government turned around in the State,
growing over the year by 0.7% and 0.3%, respectively. These increases were
outweighed by the declines in other sectors - especially in manufacturing,
wholesale and retail trade and construction - resulting in a decline in
non-farm employment of 1.7% in 1992. Non-farm employment continued to
decline in 1993 but the rate of decline has tapered off. Employment in the
last five months of 1993 was 1.0% lower than in the same period in 1992.
Gains were recorded in services, government, finance/insurance/real estate
and transportation/communication/ and public utilities. Declines continued
in trade, construction and manufacturing.
Recovery is likely to be slow and uneven in New Jersey. Some sectors, like
commercial and industrial construction, will undoubtedly lag because of
continued excess capacity. Also, employers in rebounding sectors can be
expected to remain cautious about hiring until they become convinced that
improved business will be sustained. Other firms will continue to merge or
downsize to increase profitability. As a result, job gains will probably
come grudgingly and unemployment will recede at a correspondingly slow
pace.
There is a Constitutional provision that requires the State to maintain a
balanced budget. The State operates on a fiscal year beginning July 1 and
ending June 30. The General Fund is the fund into which all State revenues
not otherwise restricted by statute are deposited and from which
appropriations are made. The largest part of the total financial operations
of the State is accounted for in the General Fund, which includes revenues
received from taxes and unrestricted by statute, most federal revenues, and
certain miscellaneous revenue items. The appropriation acts enacted by the
Legislature and approved by the Governor provide the basic framework for
the operation of the General Fund. The undesignated General Fund balance at
year end for Fiscal Year 1991 was $1.4 million, Fiscal Year 1992 was $760.8
million and for Fiscal Year 1993 is estimated to have been $687.8 million.
For Fiscal Year 1993 the balance in the undesignated General Fund is
projected to be $42.2 million.
$687.3 million is provided in the fiscal 1994 Appropriations Act as the
State's contributions to public retirement plans. Between March 31 and July
1, 1992, independent actuaries reported that the market value of all assets
of the retirement funds was $34.3 billion compared to a $32.4 billion
accrued liability, representing a funding level of 105.9% calculated under
the traditional approach of book value of assets to projected accrued
liability.
According to recently published statistics, New Jersey is among those
states which receive the highest amount of federal aid. Federal aid
received in the General Fund and Special Transportation fund amounted to
$4.29 billion for the fiscal year ended June 30, 1992, is estimated to have
been $4.85 billion for the fiscal year ended June 30, 1993 and is projected
to be $5.61 billion for the fiscal year ending June 30, 1994. The largest
portion of federal aid is made up of entitlements, whereby the State is
reimbursed for expenditures up to a certain percentage of total cost.
Whether federal aid is received under a formula, an entitlement, or a
categorical grant program, the actual expenditure of funds may be either at
the State level, the local level, or some other level, such as a non-profit
agency.
The State finances capital projects primarily through the sale of its
general obligation bonds. These bonds are backed by the full faith and
credit of the State. Tax revenues and certain other fees are pledged to
meet the principal and interest payments required to pay the debt fully. No
general obligation debt can be issued by the State without prior voter
approval, except that no voter approval is required for any law authorizing
the creation of a debt for the purpose of refinancing all or a portion of
outstanding debt of the State, so long as such law requires that the
refinancing provide a debt service savings.
In addition to payment from bond proceeds, capital construction can also be
funded by appropriation of current revenues on a pay-as-you-go basis. This
amount represents 2.2% of the total budget. In fiscal 1993, the amount is
$331.0 million for transportation projects.
The aggregate outstanding general obligation bonded indebtedness of the
State as of June 30, 1993 was $3.5497 billion. The debt service obligation
for outstanding indebtedness is $119.9 million for fiscal year 1993.
The State has extensive control over school districts, cities, counties and
local financing authorities. State laws impose specific limitations on
local appropriations, with exemptions subject to state approval. The State
shares the proceeds of a number of taxes, with funds going primarily for
local education programs, homestead rebates, medicaid and welfare programs.
Certain bonds are issued by localities, but supported by direct state
payments. In addition, the State participates in local wastewater treatment
programs.
At any given time, there are various numbers of claims and cases pending
against the State. State agencies and employees, seeking recovery of
monetary damages that are primarily paid out of the fund created pursuant
to the Tort Claims Act, N.J.S.A. 59:1-1 ET. SEQ. In addition, at any given
time there are various contract claims against the State and State agencies
seeking recovery of monetary damages. The State is unable to estimate its
exposure for these claims. An independent study estimated an aggregate
potential exposure of $50 million for tort claims pending, as of January 1,
1982. It is estimated that were a similar study made of claims currently
pending the amount of estimated exposure would be higher. Moreover, New
Jersey is involved in a number of other lawsuits in which adverse decisions
could materially affect revenue or expenditures. Such cases include
challenges to its system of educational funding, the methods by which the
State Department of Human Services shares with county governments, the
maintenance recoveries and costs for residents in State psychiatric
hospitals, and residential facilities for the developmentally disabled.
Other lawsuits, that could materially affect revenue or expenditures
include a suit by a number of taxpayers seeking refunds of taxes paid to
the Spill Compensation Fund pursuant to N.J.S.A. 58:10-23.11, a suit
alleging that unreasonably low Medicaid payment rates have been implemented
for long-term care facilities in New Jersey, (a method of funding the
judicial system) and a suit seeking return of moneys paid by various
counties for maintenance of Medicaid or Medicare eligible residents of
institutions and facilities for the developmentally disabled and a suit
challenging the imposition of premium tax surcharges on insurers doing
business in New Jersey, and assessments upon property and casualty
liability insurers pursuant to the Fair Automobile Insurance Reform Act.
Legislation enacted June 30, 1992, effective immediately, called for
revaluation of several public employee pension funds, authorized an
adjustment to the assumed rate of return on investment and refunds $773
million in public employer contributions to the State from various pension
funds, to be reflected as a revenue source for Fiscal Year 1992 and $226
million in Fiscal Year 1993 and each fiscal year thereafter. Several labor
unions filed suit seeking a judgment directing the State Treasurer to
refund all monies transferred from the pension funds and paid into the
General Fund. On February 5, 1993, the Superior Court granted the State's
motion for summary judgement as to all claims. An appeal has been filed
with the Appelate Division of Superior Court. An adverse determination
would have a significant impact on Fiscal Years 1992, 1993, and 1994
revenue estimates.
Bond Ratings - In July 1991, Standard & Poor's Corporation ("Standard &
Poors") downgraded New Jersey General Obligation Bonds from AAA to AA+.
Fitch Investor Service, Inc. rates New Jersey General Obligation Bonds AAA.
Citing a developing pattern of reliance on non-recurring measures to
achieve budgetary balance, four years of financial operations marked by
revenue shortfalls and operating deficits, and the likelihood that
financial pressures will persist, on August 24, 1992 Moody's lowered from
Aaa to Aa1 the rating assigned to New Jersey general obligation bonds. On
July 6, 1992, Standard & Poor's removed New Jersey's General Obligation
Bonds from Credit Watch and affirmed its AA+ ratings on New Jersey's
general obligation and various lease and appropriation backed debt, but its
ratings outlook was revised to negative for the longer term horizon (beyond
four months) for resolution of two items cited in the Credit Watch listing:
(i) the Federal Health Care Facilities Administration ruling concerning
retroactive medicaid hospital reimbursements and (ii) the state's
uncompensated health care funding system, which is pending review by the
United States Supreme Court.
SPECIAL FACTORS AFFECTING PUERTO RICO
The following only highlights some of the more significant financial
trends and problems affecting the Commonwealth of Puerto Rico (the
"Commonwealth" or "Puerto Rico"), and is based on information drawn from
official statements and prospectuses relating to the securities offerings
of Puerto Rico and its agencies and instrumentalities, as available on the
date of this Statement of Additional Information. FMR has not independently
verified any of the information contained in such official statements,
prospectuses, and other publicly available documents, but is not aware of
any fact which would render such information materially inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1993 trade with the United States accounted for
approximately 86% of Puerto Rico's exports and approximately 69% of its
imports. In this regard, in fiscal 1993 Puerto Rico experienced a $2.5
billion positive adjusted merchandise trade balance. Since fiscal 1987,
personal income, both aggregate and per capita, has increased consistently
each year. In fiscal 1993 aggregate personal income was $24.1 billion and
personal per capita income was $6,760. Gross domestic product in fiscal
1991, 1992, and 1993 was $22.8 billion, $23.5 billion, and $25 billion,
respectively. For fiscal 1994, an increase in gross domestic product of
2.9% over fiscal 1993 is forecasted. However, actual growth in the Puerto
Rico economy will depend on several factors, including the condition of the
U.S. economy, the exchange rate for the U.S. dollar and the price stability
of oil imports and interest rates. Due to these factors, there is no
assurance that the economy of Puerto Rico will continue to grow.
Puerto Rico's economy continued to expand throughout the five-year
period from fiscal 1989 through fiscal 1993. While trends in the Puerto
Rico economy generally follow those of the United States, Puerto Rico did
not experience a recession primarily because of its strong manufacturing
base, which has a large component of non-cyclical industries. Other factors
behind the continued expansion included Commonwealth-sponsored economic
development programs, stable prices of oil imports, low exchange rates for
the U.S. dollar, and the relatively low cost of borrowing funds during the
period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it
still remains significantly above the U.S. average and has been increasing
in recent years. Despite long-term improvements the unemployment rate rose
from 16.5% to 17.5% from fiscal 1992 to fiscal 1993. However, by the end of
January 1994, the unemployment rate had dropped to 16.3%.
The economy of Puerto Rico has undergone a transformation in the later
half of this century from one centered around agriculture to one dominated
by the manufacturing and service industries. Manufacturing is the
cornerstone of Puerto Rico's economy, accounting for $14.1 billion or 39.4%
of gross domestic product in fiscal 1993. However, manufacturing has
experienced a basic change over the years as a result of the influx of
higher wages, high technology industries such as the pharmaceutical
industry, electronics, computers, micro processors, scientific instruments,
and high technology machinery. The service sector, which employs the
largest number of people, includes wholesale and retail trade, finance, and
real estate, and ranks second in its contribution to gross domestic
product. In fiscal 1993, the service sector generated $14.0 billion in
gross domestic product or 39.1% of the total and employed over 467,000
workers providing 46.7% of total employment. The government sector of the
Commonwealth plays an important role in Puerto Rico's economy. In fiscal
year 1993, the government accounted for $3.9 billion of Puerto Rico's gross
domestic product and provided 21.7% of the total employment. Tourism also
contributes significantly to the island economy, accounting for $1.6
billion of gross domestic product in fiscal 1993.
The present administration, which took office in January 1993, envisions
major economic reforms and has developed a new economic development program
to be implemented in the next few years. This program is based on the
premise that the private sector will be the primary vehicle for economic
development and growth. The program promotes changing the role of the
government from one of being a provider of most basic services to one of
being a facilitator for private sector initiatives and will encourage
private sector investment by reducing regulatory restraints. The program
contemplates the development of initiatives that will foster private
investment, both external and internal, in areas that are served more
efficiently and effectively by the private sector. The program also
contemplates a general revision of the tax system to expand the tax base,
reduce top personal and corporate tax rates, and simplify a highly complex
system. Other important goals for the new program are to reduce the size of
the government's direct contribution to gross domestic product and, to
facilitate private sector development and growth which would be realized
through a reduction in government consumption and an increase in government
investment in order to improve and expand Puerto Rico's infrastructure.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
("Section 936") and the Commonwealth's Industrial Incentives Program.
Section 936 currently grants U.S. corporations that meet certain criteria
and elect its application, a credit against their U.S. corporate income tax
on the portion of the tax attributable to (i) income derived from the
active conduct of a trade or business in Puerto Rico ("active income"), or
from the sale or exchange of substantially all the assets used in the
active conduct of such trade or business, and (ii) qualified possession
sources investment income ("passive income"). The Industrial Incentives
Program, through the 1987 Industrial Incentives Act, grants corporations
engaged in certain qualified activities a fixed 90% exemption from
Commonwealth income and property taxes and a 60% exemption from municipal
license taxes.
Pursuant to recently enacted amendments to the Internal Revenue Code
(the "Code"), and for taxable years commencing after 1993, two alternative
limitations will apply to the Section 936 credit against active business
income and sale of assets as previously described. The first option will
limit the credit against such income to 40% of the credit allowed under
current law, with a five-year phase-in period starting at 60% of the
current credit. The second option will limit the allowable credit to the
sum of (i) 60% of qualified compensation paid to employees (as defined in
the Code); (ii) a specified percentage of depreciation deductions; and
(iii) a portion of the Puerto Rico income taxes paid by the Section 936
corporation, up to a 9% effective tax rate.
At present, it is difficult to forecast what the short- and long-term
effects of the new limitations to the Section 936 credit will be on the
economy of Puerto Rico. However, preliminary econometric studies by the
government of Puerto Rico and private sector economists (assuming no
enhancements to the existing Industrial Incentives Program) project only a
slight reduction in average real growth rates for the economy of Puerto
Rico. These studies also show that particular industry groups will be
affected differently. For example, manufacturers of pharmaceuticals and
beverages may suffer a larger reduction in tax benefits due to their
relatively higher profit margins. In addition, the above limitations are
not expected to reduce the tax credit currently enjoyed by labor-intensive,
lower profit margin industries, which represent approximately 40% of the
total employment by Section 936 corporations in Puerto Rico.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in the fund's
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR
consider s various relevant factors, including, but not limited
to , the size and type of the transaction; the nature and character
of the markets for the security to be purchased or sold; the execution
efficiency, settlement capability, and financial condition of the
broker-dealer firm; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any commissions.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations) based upon the quality of research and execution services
provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and, conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other Fidelity funds
to the extent permitted by law. FMR may use research services provided by
and place agency transactions with Fidelity Brokerage Services, Inc.
(FBSI), a subsidiary of FMR Corp., if the commissions are fair, reasonable,
and comparable to commissions charged by non-affiliated, qualified
brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements , the
Board of Trustees has authorized FBSI to e xecute portfolio
transactions on national securities exchanges in accordance with
approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund.
For the fiscal periods ended November 30, 1994 and
199 3 , the fund's portfolio turnover rates were __% and
25%, respectively.
For fiscal 1994, 1993, and 1992, the fund paid no brokerage
commissions.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine in the exercise of their business judgment whether
it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund or
account .
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund.
In some cases, this system could have a detrimental effect on the price
or value of the security as far as the fund is concerned. In other cases,
however, the ability of the fund to participate in volume transactions will
produce better executions and prices for the fund. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to the fund outweighs any disadvantages that may be said
to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Valuations of portfolio securities furnished by the pricing service
employed by the fund are based upon a computerized matrix system or
appraisals by the pricing service, in each case in reliance upon
information concerning market transactions and quotations from recognized
municipal securities dealers. The methods used by the pricing service and
the quality of valuations so established are reviewed by officers of the
fund and FSC under the general supervision of the Board of Trustees. There
are a number of pricing services available, and the Trustees, or officers
acting on behalf of the Trustees, on the basis of on-going evaluation of
these services, may use other pricing services or discontinue the use of
any pricing service in whole or in part. Futures contracts and options are
valued on the basis of market quotations if available.
PERFORMANCE
The fund may quote performance in various ways. All performance information
supplied by the fund in advertising is historical and is not intended to
indicate future returns. The fund's share price, yield, and total return
fluctuate in response to market conditions and other factors , and
th e value of fund shares when redeemed may be more or less than their
original cost.
YIELD CALCULATIONS. Yields for the fund are computed by dividing the fund's
interest income for a given 30-day or one-month period, net of expenses, by
the average number of shares entitled to receive distributions
during the period, dividing this figure by the fund's net asset value
(NAV) at the end of the period, and annualizing the result (assuming
compounding of income) in order to arrive at an annual percentage rate.
Yields do not reflect the fund's .50% redemption fee, which applies to
shares held less than 180 days. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock
and bond funds. In general, interest income is reduced with respect to
bonds trading at a premium over their par value by subtracting a portion of
the premium from income on a daily basis, and is increased with respect to
bonds trading at a discount by adding a portion of the discount to daily
income. Capital gains and losses generally are excluded from the
calculation.
Income calculated for the purposes of calculating the fund's yield
differs from income as determined for other accounting purposes. Because of
the different accounting methods used, and because of the compounding of
income assumed in yield calculations, the fund's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
Yield information may be useful in reviewing the fund's performance and
in providing a basis for comparison with other investment alternatives.
However, the fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates
the fund's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates the fund's yield will tend
to be somewhat lower. Also, when interest rates are falling, the inflow of
net new money to the fund from the continuous sales of its shares will
likely be invested in instruments producing lower yields than the balance
of the fund's holdings, thereby reducing the fund's current yield. In
periods of rising interest rates, the opposite can be expected to
occur.
The fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment after taxes to equal the fund's
tax-free yield. Tax-equivalent yields are calculated by dividing the fund's
yield by the result of one minus a stated federal or combined federal and
state tax rate. If only a portion of the fund's yield is tax-exempt, only
that portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and state income tax laws for 1994. The
second table shows the approximate yield a taxable security must
provide at various income brackets to produce after-tax yields equivalent
to those of hypothetical tax-exempt obligations yielding from 2 % to
7 %. Of course, no assurance can be given that the fund will achieve
any specific tax-exempt yield. While the fund invests principally in
obligations whose interest is exempt from federal and state income tax,
other income received by the fund may be taxable. The tables do not take
into account local taxes, if any, payable on fund distributions.
Use the first table to find your approximate effective tax bracket
taking into account federal and state taxes for 1994.
1994 TAX RATES AND TAX-EQUIVALENT YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Taxable Income* Marginal Federal Combined New Jersey and
Income Tax New Jersey Federal Effective
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Single Return Joint Return Bracket Marginal Rate Tax Bracket **
</TABLE>
-- $38,001-$50,000 28% 2.375% 29.71%
-- $50,001-$70,000 28% 3.325% 30.39%
$22,751-$35,000 -- 28% 3.750% 30.70%
$35,001-$40,000 $70,001-$80,000 28% 4.750% 31.42%
$40,001-$55,100 $80,001-$91,850 28% 6.175% 32.45%
$55,101-$75,000 $91,851-$140,000 31% 6.175% 35.26%
$75,001-$115,000 -- 31% 6.650% 35.59%
-- $140,001-$150,000 36% 6.175% 39.95%
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
$115,001-$250,000 $150,001-$250,000 36% 6.650% 40.26%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
$250,001 & above $250,001 & above 39.6% 6.650% 43.62%
</TABLE>
* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only; does not include the effect of
preferential rate on long-term capital gains.
** Excludes the impact of the phaseout of personal exemptions,
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may increase a taxpayer's marginal tax rate. An increase
in a shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Having determined your effective tax bracket, use the following
table to determine the tax-equivalent yield for a given tax-free yield.
If your combined effective federal and state personal income tax rate in
1994 is:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
29.71% 30.39% 30.70% 31.42% 32.45% 35.26% 35.59% 39.95% 40.26% 43.62%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
To match these
tax-free rates: Your taxable investment would have to earn the following yield:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2.0% 2.85% 2.87% 2.89% 2.92% 2.96% 3.09% 3.11% 3.33% 3.35% 3.55%
3.0% 4.27% 4.31% 4.33% 4.37% 4.44% 4.63% 4.66% 5.00% 5.02% 5.32%
4.0% 5.69% 5.75% 5.77% 5.83% 5.92% 6.18% 6.21% 6.66% 6.70% 7.09%
5.0% 7.11 % 7.18% 7.22% 7.29% 7.40% 7.72% 7.76% 8.33% 8.37% 8.87%
6.0% 8.54 % 8.62% 8.66% 8.75% 8.88% 9.27% 9.32% 9.99% 10.04% 10.64%
7.0% 9.96 % 10.06% 10.10% 10.21% 10.36% 10.81% 10.87% 11.66% 11.72% 12.42%
</TABLE>
The fund may invest a portion of its assets in obligations that are subject
to state or federal income taxes. When the fund invests in these
obligations, its tax-equivalent yield will be lower. In the table above,
the tax-equivalent yields are calculated assuming investments are
100% federally and state tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's returns, including the effect of reinvesting
dividends and capital gain distributions, and any change in the fund's
NAV over the stated period. Average annual total returns are
calculated by determining the growth or decline in value of a hypothetical
historical investment in the fund over a stated period, and then
calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative total return of 100%
over ten years would produce an average annual total return of 7.18%, which
is the steady annual rate that would equal 100% growth on a compounded
basis in ten years. While average annual returns are a convenient means of
comparing investment alternatives, investors should realize that the fund's
performance is not constant over time, but changes from year to year, and
that average annual returns represent averaged figures as opposed to the
actual year-to-year performance of the fund.
In addition to average annual total returns, the fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on
a before-tax or after-tax basis and may or may not include the effect of
the fund's .50% redemption fee on shares held less than 180 days. Excluding
the fund's redemption fee from a total return calculation produces a higher
total return figure. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration, and may omit or include the effect of the $5.00 account
closeout fee .
NET ASSET VALUE. Charts and graphs using the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following table s show the fund's
yield s , tax-equivalent yield s , and total returns for periods
ended November 30, 199 4. Total return figures include the effect of the
$5.00 account closeout fee based on an average size account, but not the
fund's .50% redemption fee, applicable to shares held less than 180
days.
The tax-equivalent yield is based on a combined effective federal and
state income tax rate of ___% and reflects that, as of November 30, 1994,
an estimated __% of the fund's income was subject to state taxes. Note that
the fund may invest in securities whose income is subject to the federal
alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
30-Day Tax-Equivalent Average Annual Total Returns Cumulative Total Returns
</TABLE>
Yield Yield One Year Life of Fund* One Year Life of Fund*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
___ % ___ % ___ % ___ % ___ % ___ %
</TABLE>
* From January 1, 1988 (commencement of operations).
Note: If FMR had not reimbursed certain fund expenses during these
periods, the fund's total returns would have been lower.
The following table shows the income and capital elements of the fund's
cumulative total return . The table compares the fund's return
to the record of the Standard & Poor's Composite Index of 500 Stocks
(S&P 500), the Dow Jones Industrial Average (DJIA), and the cost of
living (measured by the Consumer Price Index, or CPI) over the same period.
The CPI information is as of the month-end closest to the initial
investment date for the fund. The S&P 500 and DJIA comparisons
are provided to show how the fund's total return compared to the
re cord of a broad average of common stocks and a narrower set of
stocks of major industrial companies, respectively, over the same period.
Of course, since the fund invests in fixed-income securities, common
stocks represent a different type of investment from the fund. Common
stocks generally offer greater growth potential than the fund, but
generally experience greater price volatility , which means greater
potential for loss. In addition, common stocks generally provide lower
income than a fixed-income investment such as the fund. Figures
for t he S&P 500 and DJIA are based on the prices of unmanaged
groups of stocks and, unlike the fund's returns, do not include the effect
of paying brokerage commissions or other costs of investing.
During the period from January 1, 1988 (commencement of operations) to
November 30, 199 4 , a hypothetical $10,000 investment in
Spartan New Jersey Municipal High Yield Portfolio would have grown to
$ ______ , assuming all distributions were reinvested. This was a
period of fluctuating interest rates and bond prices and the figures
below should not be considered representative of the dividend income or
capital gain or loss that could be realized from an investment in the fund
today.
SPARTAN NEW JERSEY MUNICIPAL HIGH YIELD INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Year Value of Reinvested Reinvested Cost
Ended Initial $10,000 Dividend Capital Gain Total of
November 30 Investment Di stribution s Distributions Value S&P 500 DJIA Living
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $_____ $____ $___ $_____ $_____ $_____ $_____
1993 $11,760 $5,490 $451 $17,702 $22,727 $23,225 $12,634
1992 $11,240 $4,344 $204 $15,788 $20,642 $20,242 $12,305
1991 $11,020 $3,326 $95 $14,441 $17,419 $17,213 $11,941
1990 $10,620 $2,341 $92 $13,053 $14,473 $14,717 $11,594
1989 $10,650 $1,532 $0 $12,182 $14,996 $14,967 $10,910
1988* $10,190 $704 $0 $10,894 $11,460 $11,269 $10,425
</TABLE>
* From January 1, 1988 (commencement of operations) .
Explanatory Notes: With an initial investment of $10,000 made on January 1,
1988, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ _____ . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments for the period would have amounted to $ ____ for
dividends and $ ___ for capital gain s distributions. Tax
consequences of different investments have not been factored into the above
figures. The figures in the table do not reflect the effect of the fund's
$5.00 account closeout fee. The figures shown above do not reflect the
fund's .50% redemption fee applicable to shares held less than 180 days.
The fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to the
mutual fund rankings, the fund's performance may be compared to stock,
bond, and money market mutual fund performance indices prepared by
Lipper or other organizations . When comparing these indices, it
is important to remember the risk and return characteristics of each type
of investment. For example, while stock mutual funds may offer higher
potential returns, they also carry the highest degree of share price
volatility. Likewise, money market funds may offer greater stability of
principal, but generally do not offer the higher potential returns from
stock mutual funds.
From time to time, the fund's performance also may be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
The fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For example,
the fund may offer greater liquidity or higher potential returns than CDs,
the fund does not guarantee your principal or your return, and fund shares
are not FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
The fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AVERAGES(trademark)/ All
Tax-Free, which is reported in the MONEY FUND REPORT(registered trademark),
covers over ___ tax-free money market funds. The BOND FUND REPORT
AVERAGESTM/Tax-Free Funds, which is reported in the BOND FUND
REPORT(registered trademark), covers over ___ tax-free bond funds.
When evaluating comparisons to money market funds, investors should
consider the relevant differences in investment objectives and policies.
Specifically, money market funds invest in short-term, high-quality
instruments and seek to maintain a stable $1.00 share price. The fund,
however, invests in longer-term instruments and its share price changes
daily in response to a variety of factors.
The fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike
tax-free mutual funds, individual municipal bonds offer a stated rate of
interest and, if held to maturity, repayment of principal. Although some
individual municipal bonds m ight offer a higher rate of return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales charges
of many tax-free mutual funds are lower than the purchase cost of
individual municipal bonds, which are generally issued in $5,000
denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar-cost averaging; saving for college or other
goals ; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management,
portfolio composition, investment philosophy, investment
techniques , the desirability of owning a particular mutual fund, and
Fidelity services and products . Fidelity may also reprint, and use as
advertising and sales literature, articles from Fidelity Focus, a quarterly
magazine provided free of charge to Fidelity fund shareholders.
The fund may present its fund number, QuotronTM number, and CUSIP number,
and discuss or quote its current portfolio manager.
VOLATILITY. The fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may compare
these measures to those of other funds. Measures of volatility seek to
compare the fund's historical share price fluctuations or total returns to
those of a benchmark. Measures of benchmark correlation indicate how valid
a comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, the fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate the fund's price movements over specific
periods of time. Each point on the momentum indicator represents the fund's
percentage change in price movements over that period.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program,
an investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against a loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares through periods of low price levels.
As of November 30, 1994, FMR advised over $__ billion in tax-free fund
assets, $__ billion in money market fund assets, $__ billion in equity fund
assets, $__ billion in international fund assets, and $__ billion in
Spartan fund assets. The fund may reference the growth and variety of money
market mutual funds and the adviser's innovation and participation in the
industry. The equity funds under management figure represents the largest
amount of equity fund assets under management by a mutual fund investment
adviser in the United States, making FMR America's leading equity (stock)
fund manager. FMR, its subsidiaries, and affiliates maintain a worldwide
information and communications network for the purpose of researching and
managing investments abroad.
In addition to performance rankings, each fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on
yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for
199 5 : New Year's Day (observed),Washington's Birthday (observed),
Good Friday, Memorial Day (observed), Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day (observed). Although FMR expects the
same holiday schedule to be observed in the future, the NYSE may modify its
holiday schedule at any time.
FSC normally determines the fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the Securities and
Exchange Commission. To the extent that portfolio securities are traded in
other markets on days when the NYSE is closed, the fund's NAV may be
affected on days when investors do not have access to the fund to purchase
or redeem shares. In addition, trading in some of the fund's portfolio
securities may not occur on days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, the fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the p rospectus, the fund has notified shareholders that it
reserves the right at any time, without prior notice, to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest effectively in accordance with its investment objective
and policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that the fund's income is designated as
federally tax-exempt interest, the daily dividends declared by the fund
are also federally tax-exempt. Short-term capital gains are distributed
as dividend income, but do not qualify for the dividends-received
deduction. These gains will be taxed as ordinary income. The fund will
send each shareholder a notice in January describing the tax status of
dividend and capital gain distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
The fund purchases municipal obligations based on opinions of bond counsel
regarding the federal income tax status of the obligations. These opinions
will generally be based on covenants by the issuers regarding continuing
compliance with federal tax requirements. If the issuer of an obligation
fails to comply with its covenant at any time, interest on the obligation
could become federally taxable retroactive to the date the obligation was
issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum
tax (AMT), although the interest continues to be excludable from gross
income for other tax purposes. Interest from private activity securities
will be considered tax-exempt for purposes of the fund's policies of
investing so that at least 80% of its income is free from federal income
tax. Interest from private activity securities is a tax-preference item for
the purposes of determining whether a taxpayer is subject to the AMT and
the amount of AMT to be paid, if any. Private activity securities issued
after August 7, 1986 to benefit a private or industrial user or to finance
a private facility are affected by this rule.
A portion of the gain on bonds purchased with market discount after April
30, 1993 and short-term capital gains distributed by the fund are taxable
to shareholders as dividends, not as capital gains. Dividend distributions
resulting from a recharacterization of gain from the sale of bonds
purchased with market discount after April 30, 1993 are not considered
income for purposes of the fund's policy of investing so that at least 80%
of its income is free from federal income tax.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest) exceeds the alternative minimum
taxable income of the corporation. If a shareholder receives an
exempt-interest dividend and sells shares at a loss after holding them for
a period of six months or less, the loss will be disallowed to the extent
of the amount of exempt-interest dividend.
NEW JERSEY TAX CONSEQUENCES. A New Jersey statute requires that at least
80% of the aggregate principal amount of the fund's total investments be
invested in state-tax-free securities.
The fund's exempt-interest dividends, to the extent attributable to
interest from securities the interest on which is exempt from New Jersey
Gross Income Tax, also will be exempt from the New Jersey Gross Income Tax.
Distributions attributable to gains from securities the interest on which
is exempt from New Jersey Gross Income Tax also will be exempt from the New
Jersey Gross Income Tax. An investment in or distributions from investment
interest and capital gains of the fund, including exempt-interest
dividends, will be subject to the New Jersey Corporation Business
(Franchise) Tax and the New Jersey Corporation Income Tax.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund, and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed by
the fund are taxable to shareholders as dividends, not as capital gains.
The fund hereby designates approximately $______ as a capital gain
dividend for the purpose of the dividend-paid deduction.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
the fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar year
as well as on a fiscal year basis. The fund intends to comply with other
tax rules applicable to regulated investment companies, including a
requirement that capital gains from the sale of securities held less than
three months constitute less than 30% of the fund's gross income for each
fiscal year. Gains from some futures contracts and options are included
in this 30% calculation, which may limit the fund's investments in such
instruments.
The fund is treated as a separate entity from the other funds of
Fidelity Court Street Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax cons equence s generally affecting the fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal income taxes, shareholders may be
subject to state and local taxes on fund distributions, and shares may be
subject to state and local personal property taxes. Investors should
consult their tax advisers to determine whether the fund is suitable to
their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades require pre-clearance, and participation in initial public
offerings are prohibited. In addition, restrictions on the timing of
personal investing relative to trades by Fidelity funds and on short-term
trading have been adopted. Personal investing is monitored to protect
shareholders' interests.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, Massachusetts 02109, which is also the address
of FMR. Those Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc. and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill Corporation (non-hazardous
waste, 1993) and CH2M Hill Companies (engineering). In addition, he served
on the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as a
Trustee of First Union Real Estate Investments , Chairman of the
Board of Trustees and a member of the Executive Committee of the Cleveland
Clinic Foundation, a Trustee and a member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1 - North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization f und and Vice Chairman
of the Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991 - 1992). He is a
Director of W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen
Corporation (engineering and construction). In addition, he serves as a
Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic
Deerfield (1989) and Society for the Preservation of New England
Antiquities, and as an Overseer of the Museum of Fine Arts of Boston
(1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989),Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company. He
is a Director of Allegheny Power Systems, Inc. (electric utility), General
Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of Corporate Property
Investors , the EPS Foundation at Trinity College, the Naples
Philharmonic Center for the Arts, and Rensselaer Polytechnic Institute,
and he is a member of the Advisory Boards of Butler Capital
Corporation Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company of
Vermont, American Software, Inc. (1989), and AppleSouth, Inc. (restaurants,
1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior
Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President - Legal of FMR Corp., and Vice
President and Clerk of FDC.
THOMAS J. STEFFANCI, Vice President (1994), is Vice President of
Fidelity's fixed-income funds and Senior Vice President of FMR (1993).
Prior to joining FMR, Mr. Steffanci was Senior Managing Director of CMB
Investment Counselors (1984-1990).
DAVID MURPHY is manager and Vice President of Spartan New Jersey
Municipal High Yield, which he has managed since April 1991. Mr. Murphy
also manages Limited Term Municipals, Spartan California Intermediate
Municipal, Spartan Intermediate Municipal, Spartan New York Intermediate
Municipal, and Spartan Short-Intermediate Municipal. Mr. Murphy joined
Fidelity in 1989.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. William R. Spaulding, Bertram H. Witham, and
David L. Yunich participate in the program.
As of November 30, 199 4 , the Trustees and officers of the fund
owned, in the aggregate, less than __% of the outstanding shares of the
fund .
MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under FMR's management contract with the fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments, and
compensates all officers of the trust, all Trustees who are "interested
persons" of the trust or FMR, and all personnel of the trust or FMR
performing services relating to research, statistical, and investment
activities. In addition, FMR or its affiliates, subject to the supervision
of the Board of Trustees, provide the management and administrative
services necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization; supervising
relations with custodians, transfer and pricing agents, accountants,
underwriters, and other persons dealing with the fund; preparing all
general shareholder communications and conducting shareholder relations;
maintaining the fund's records and the registration of the fund's shares
under federal and state law; developing management and shareholder services
for the fund; and furnishing reports, evaluations, and analyses on a
variety of subjects to the Board of Trustees.
FMR is responsible for the payment of all expenses of the fund with certain
exceptions. Specific expenses payable by FMR include, without limitation,
the fees and expenses of registering and qualifying the trust, the fund,
and its shares for distribution under federal and state securities laws;
expenses of typesetting for printing the Prospectus and Statement of
Additional Information; custodian charges; audit and legal expenses;
insurance expense; association membership dues; and the expenses of mailing
reports to shareholders, shareholder meetings, and proxy solicitations. FMR
also provides for transfer agent and dividend disbursing services and
portfolio and general accounting record maintenance through FSC.
FMR pays all other expenses of the fund with the following exceptions: fees
and expenses of the Trustees who are not "interested persons" of the trust
or of FMR (the non-interested Trustees); interest on borrowings; taxes;
brokerage commissions (if any); and such nonrecurring expenses as may
arise, including costs of any litigation to which the fund may be a party,
and any obligation it may have to indemnify the officers and Trustees with
respect to litigation.
For the services of FMR under the contract, the fund pays FMR a monthly
management fee at the annual rate of .55% of the fund's average net assets
throughout the month. FMR reduces its fee by an amount equal to the fees
and expenses of the non-interested Trustees.
FMR is the fund's manager pursuant to a management contract dated January
1, 1992, which was approved by the fund's shareholders on December 11,
1991. Under the fund's former management contract (dated March 1, 1989),
FMR was compensated for managing the fund's investments and business
affairs. The fund was responsible for paying expenses for maintaining
shareholder records, furnishing shareholder statements and reports, and
other services now paid for by FMR under its current contract with the
fund.
FMR may, from time to time, voluntarily reimburse all or a portion of the
fund's operating expenses (excluding interest, taxes, brokerage
commissions, and extraordinary expenses). The table below outlines expense
limitations (as a percentage of the fund's average net assets) in effect
since December 1, 1989. Also indicated below are the gross management fees
incurred by the fund and the amounts reimbursed by FMR for fiscal 1994,
1993, and 1992.
FROM TO EXPENSE LIMITATION
November 1, 1991 September 30, 1992 .50%
August 1, 1991 October 31, 1991 .45%
January 1, 1991 July 31, 1991 .55%
December 1, 1989 December 31, 1990 .65%
Management Fee Amount of
Year Before Reimbursement Reimbursements
1994 $________ $_______
1993 $2,193,155 $ 0
1992 $1,757,819 $158,991
To defray shareholder service costs, FMR or its affiliates also collect the
fund's $5.00 exchange fee, $5.00 account closeout fee, and $5.00 fee for
wire purchases and redemptions. The fund's .50% redemption fee is retained
by the fund; it is not collected by FMR. Shareholder transaction fees and
charges collected for fiscal 1994, 1993, and 1992 are
indicated in the table on page 20.
Period Ended Exchange Closeout Wire
1994 $____ $____ $____
1993 $7,250 $1,685 $ 810
1992 $8,840 $1,515 $1,150
DISTRIBUTION AND SERVICE PLAN
The fund has adopted a distribution and service plan (the plan) under Rule
12b-1 of the Investment Company Act of 1940 (the Rule). The Rule provides
in substance that a mutual fund may not engage directly or indirectly in
financing any activity that is primarily intended to result in the sale of
shares of the fund except pursuant to a plan adopted by the fund under the
Rule. The fund's Board of Trustees has adopted the plan to allow the
fund and FMR to incur certain expenses that might be considered to
constitute indirect payment by the fund of distribution expenses. Under
the plan , if the payment of management fees by the fund to FMR is
deemed to be indirect financing by the fund of the distribution of
its shares, such payment is authorized by the plan.
The plan also specifically recognizes that FMR, either directly or
through FDC, may use its management fee revenue, past profits, or other
resources, without limitation, to pay promotional and administrative
expenses in connection with the offer and sale of shares of the fund. In
addition, the plan provides that FMR may use its resources, including its
management fee revenues, to make payments to third parties that provide
assistance in selling the shares of the fund, or to third parties,
including banks, that render shareholder support services. No third
party payments were made in fiscal 1994.
The fund's plan has been approved by the Trustees. As required by the Rule,
the Trustees carefully considered all pertinent factors relating to the
implementation of the plan prior to its approval, and have determined that
there is a reasonable likelihood that the plan will benefit the fund and
its shareholders. In particular, the Trustees noted that the plan does not
authorize payments by the fund other than those made to FMR under its
management contract with the fund. To the extent that the plan gives FMR
and FDC greater flexibility in connection with the distribution of shares
of the fund, additional sales of the fund's shares may result.
Additionally, certain shareholder support services may be provided more
effectively under the plan by local entities with whom shareholders have
other relationships.
The plan was approved by the fund's shareholders on November 16, 1988.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
The fund may execute portfolio transactions with and purchase securities
issued by depository institutions that receive pay ments under the
plan . No preference for the instruments of such depository institutions
will be shown in the selection of investments. In addition, state
securities laws on this issue may differ from the interpretations of
federal law expressed herein, and banks and financial institutions may be
required to register as dealers pursuant to state law.
INTEREST OF FMR AFFILIATES
United Missouri is the fund's custodian and transfer agent. United Missouri
has entered into a sub-contract with FSC, an affiliate of FMR, under the
terms of which FSC performs the processing activities associated with
providing transfer agent and shareholder servicing functions for the fund.
United Missouri has an additional sub-contract with FSC, pursuant to which
FSC performs the calculations necessary to determine the fund's net asset
value per share and dividends and maintains the fund's accounting records.
United Missouri is entitled to reimbursement for fees paid to FSC from FMR,
which must bear these costs pursuant to its management contract with the
fund.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to use
all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at net
asset value. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Spartan New Jersey Municipal High Yield Portfolio is a
fund of Fidelity Court Street Trust (the trust), an open-end
management investment company originally organized as a Massachusetts
business trust on April 21, 1977. On August 1, 1987 the trust's name was
changed from Fidelity High Yield Municipals to Fidelity Court Street Trust.
Currently, there are four funds of the trust: Fidelity High Yield Tax-Free
Portfolio; Spartan Connecticut Municipal High Yield Portfolio; Spartan New
Jersey Municipal High Yield Portfolio; and Spartan Florida Municipal Income
Portfolio. The Declaration of Trust permits the Trustees to create
additional funds.
In the event that FMR ceases to be the investment adviser to the trust or a
fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn.
The assets of the trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to be
allocated in proportion to the asset value of the respective funds, except
where allocations of direct expense can otherwise be fairly made. The
officers of the trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or the Trustees include a provision limiting the obligations created
thereby to the trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The Declaration of Trust
also provides that each fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the fund
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which a fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value of
net asset value you own. The shares have no preemptive or conversion
rights; the voting and dividend rights, the right of redemption, and the
privilege of exchange are described in the Prospectus. Shares are fully
paid and nonassessable, except as set forth under the heading "Shareholder
and Trustee Liability" above. Shareholders representing 10% or more of the
trust or a fund may, as set forth in the Declaration of Trust, call
meetings of the trust or a fund for any purpose related to the trust or
fund, as the case may be, including, in the case of a meeting of the entire
trust, the purpose of voting on removal of one or more Trustees. The trust
or any fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the trust or the fund, as determined by the current value
of each shareholder's investment in the fund or trust. If not so
terminated, the trust and its funds will continue indefinitely. Each
fund may invest all of its assets in another investment company.
CUSTODIAN. United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City,
Missouri 64106, is custodian of the assets of the fund. The custodian is
responsible for the safekeeping of the fund's assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the fund or in deciding which
securities are purchased or sold by the fund. The fund may, however, invest
in obligations of the custodian and may purchase securities from or sell
securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the trust's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand L.L.P ., One Post Office Square, Boston,
Massachusetts serves as the trust's independent accountant. The auditor
examines financial statements for the fund and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
The fund's financial statements and financial highlights for the fiscal
year ended November 30, 1994, are included in the fund's Annual Report,
which is a separate report supplied with this Statement of Additional
Information. The fund's financial statements and financial highlights are
incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds.
The descriptions that follow are examples of eligible ratings for the fund.
The fund may, however, consider the ratings for other types of investments
and the ratings assigned by other rating organizations when determining the
eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND
MUNICIPAL NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important in the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG-3/VMIG-3 - This designation denotes favorable quality, with all
security elements accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG-4/VMIG-4 - This designation denotes adequate quality protection
commonly regarded as required of an investment security is present and,
although not distinctly or predominantly speculative, there is specific
risk.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND
MUNICIPAL NOTES:
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
SP-3 - Speculative capacity to pay principal and interest.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium grade obligations, i.e,.
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments of or maintenance of other
terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
PART C - OTHER INFORMATION
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Not applicable.
(b) Exhibits
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1. (a) Amended and Restated Declaration of Trust, dated February 1, 1987, is incorporated herein
by reference to Exhibit 1(b) to Post-Effective Amendment No. 18.
(b) Supplement to the Declaration of Trust, effective August 1, 1987, is incorporated herein by
reference to Exhibit 1(c) to Post-Effective Amendment No. 20.
(c) Supplement to the Declaration of Trust, effective December 9, 1988, is incorporated herein
by reference to Exhibit 1(d) to Post-Effective Amendment No. 26.
2. Not applicable.
3. Not applicable.
4. Not applicable.
5. (a) Management Contract between Fidelity High Yield Tax-Free Portfolio and Fidelity
Management & Research Company, dated March 1, 1993, is incorporated herein by
reference to Exhibit 5(a) to Post-Effective Amendment No. 50.
(b) Management Contract between Spartan Florida Municipal Income Portfolio and Fidelity
Management & Research Company, dated February 20, 1992, is incorporated herein by
reference to Exhibit 5(b) to Post-Effective Amendment No. 39.
(c) Management Contract between Spartan New Jersey Municipal High Yield Portfolio and
Fidelity Management & Research Company, dated January 1, 1992, is incorporated herein
by reference to Exhibit 5(c) to Post-Effective Amendment No. 39.
(d) Management Contract between Spartan Connecticut Municipal High Yield Portfolio and
Fidelity Management & Research Company, dated January 1,1992, is incorporated herein
by reference to Exhibit 5(d) to Post-Effective Amendment No. 39.
6. (a) General Distribution Agreement between Fidelity High Yield Municipals and Fidelity
Distributors Corporation, dated April 1, 1987, is incorporated herein by reference to Exhibit
6(a) to Post-Effective Amendment No. 21.
(b) General Distribution Agreement between Fidelity New Jersey Tax-Free High Yield
Portfolio (now known as Spartan New Jersey Municipal High Yield Portfolio) and Fidelity
Distributors Corporation, dated August 10, 1987, is incorporated herein by reference to
Exhibit 6(b) to Post-Effective Amendment No. 22.
(c) General Distribution Agreement between Fidelity Connecticut Tax-Free High Yield
Portfolio and Fidelity Distributors Corporation, dated October 15, 1987, is incorporated
herein by reference to Exhibit 6(d) to Post-Effective Amendment No. 21.
(d) Amendment to the General Distribution Agreement between Fidelity High Yield
Municipals and Fidelity Distributors Corporation, dated January 1, 1988, is incorporated
herein by reference to Exhibit 6(f) to Post-Effective Amendment No. 26.
(e) Amendment to the General Distribution Agreement between Fidelity New Jersey Tax-Free
High Yield Portfolio and Fidelity Distributors Corporation, dated January 1, 1988, is
incorporated herein by reference to Exhibit 6(g) to Post-Effective Amendment No. 26.
(f) Amendment to the General Distribution Agreement between Fidelity Connecticut Tax-Free
High Yield Portfolio (now known as Spartan Connecticut Municipal High Yield Portfolio)
and Fidelity Distributors Corporation, dated January 1, 1988, is incorporated herein by
reference to Exhibit 6(h) to Post-Effective Amendment No. 26.
(g) Form of General Distribution Agreement between Spartan Florida Municipal Income
Portfolio and Fidelity Distributors Corporation was filed as Exhibit 6(h) Post-Effective
Amendment No. 37.
7. Retirement Plan for Non-Interested Person Trustees, Directors or General Partners is
incorporated herein by reference to Exhibit 7 to Fidelity Union Street Trust's Post-Effective
Amendment No. 87.
8. (a) Custodian Contract, dated July 18, 1991, between Fidelity Court Street Trust and United
Missouri Bank, N.A. is incorporated herein by reference to Exhibit 8(b) to Post-Effective
Amendment No. 36.
(b) Appendix A to Custodian Contract between Fidelity Court Street Trust and United Missouri
Bank, N.A. is incorporated herein by reference to Exhibit 8(b) to Post-Effective
Amendment No. 39.
9. Not applicable.
10. Not applicable.
11. Not applicable.
12. Not applicable.
13. Not applicable.
14. (a) Fidelity Individual Retirement Account Custodial Agreement and Disclosure Statement, as
currently in effect, is incorporated herein by reference to Exhibit 14(a) to Fidelity Union
Street Trust's Post-Effective Amendment No. 87.
(b) Fidelity 403(b)(7) Custodial Account Agreement, as currently in effect, is incorporated
herein by reference to Exhibit 14(e) to Fidelity Union Street Trust's Post-Effective
Amendment No. 87.
(c) Fidelity Institutional Individual Retirement Account Custodial Agreement and Disclosure
Statement, as currently in effect, is incorporated herein by reference to Exhibit 14(d) to
Fidelity Union Street Trust's Post-Effective Amendment No. 87.
(d) National Financial Services Corporation Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is incorporated herein by
reference to Exhibit 14(h) to Fidelity Union Street Trust's Post-Effective Amendment No.
87.
(e) Fidelity Portfolio Advisory Services Individual Retirement Account Custodial Agreement
and Disclosure Statement, as currently in effect, is incorporated herein by reference to
Exhibit 14(i) to Fidelity Union Street Trust's Post-Effective Amendment No. 87.
(f) Fidelity Investments Section 403(b)(7) Individual Custodial Account Agreement and
Disclosure Statement, as currently in effect, is incorporated herein by reference to Exhibit
14(j) to Fidelity Union Street Trust's Post-Effective Amendment No. 87.
(g) National Financial Services Corporation Defined Contribution Retirement Plan and Trust
Agreement, as currently in effect, is incorporated herein by reference to Exhibit 14(k) to
Fidelity Union Street Trust's Post-Effective Amendment No. 87.
(h) The CORPORATEplan for Retirement Profit Sharing/401K Plan, as currently in effect, is
incorporated herein by reference to Exhibit 14(l) to Fidelity Union Street Trust's
Post-Effective Amendment No. 87.
(i) The CORPORATEplan for Retirement Money Purchase Pension Plan, as currently in effect,
is incorporated herein by reference to Exhibit 14(m) to Fidelity Union Street Trust's
Post-Effective Amendment No. 87.
15. (a) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity High Yield Municipals is
incorporated herein by reference to Exhibit 15(a) to Post-Effective Amendment No. 18.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity New Jersey Tax-Free
High Yield Portfolio is incorporated herein by reference to Exhibit 15(b) to Post-Effective
Amendment No. 22.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity Connecticut Tax-Free
High Yield Portfolio is incorporated herein by reference to Exhibit 15(c) to Post-Effective
Amendment No. 21.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan Florida Municipal Income
Portfolio was filed as Exhibit 15(d) Post-Effective Amendment No. 37.
16. (a) A schedule for the computation of performance quotations is incorporated herein by
reference to Exhibit 16(a) to Post-Effective Amendment No. 27.
(b) A schedule for the computation of adjusted net asset value is incorporated herein by
reference to Exhibit 16(b) to Post-Effective Amendment No. 43.
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of the Registrant is substantially the same as the
boards of other funds advised by FMR, each of which has Fidelity Management
& Research Company as its investment adviser. In addition, the officers of
these funds are substantially identical. Nonetheless, Registrant takes the
position that it is not under common control with these other funds since
the power residing in the respective boards and officers arises as the
result of an official position with the respective funds.
Item 26. Number of Holders of Securities
As of August 31, 1994
Name of Class: Shares of Beneficial Interest
Title of Series: Number of Record Holders
Fidelity High Yield Tax-Free Portfolio 60,076
Spartan Connecticut Municipal High Yield Portfolio 8,450
Spartan New Jersey Municipal High Yield Portfolio 10,733
Spartan Florida Municipal Income Portfolio 9,070
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action, suit or
proceeding in which he is involved by virtue of his service as a trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
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Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President and Chief
Executive Officer of FMR Corp.; Chairman of the Board and a
Director of FMR, FMR Corp., FMR Texas Inc., Fidelity Management
& Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.; President and Trustee of funds advised by FMR.
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.; President and a
Director of FMR Texas Inc., Fidelity Management & Research (U.K.)
Inc., and Fidelity Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman of FMR (1992).
Robert Beckwitt Vice President of FMR and of funds advised by FMR.
David Breazzano Vice President of FMR (1993) and of a fund advised by FMR.
Stephan Campbell Vice President of FMR (1993).
Dwight Churchill Vice President of FMR (1993).
Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by FMR; Corporate
Preferred Group Leader.
Will Danoff Vice President of FMR (1993) and of a fund advised by FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by FMR.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Gary L. French Vice President of FMR and Treasurer of the funds advised by FMR.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR (1993).
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Equity Division Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Richard Haberman Senior Vice President of FMR (1993).
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by FMR.
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Robert F. Hill Vice President of FMR; and Director of Technical Research.
Stephen Jonas Treasurer and Vice President of FMR (1993); Treasurer of FMR Texas
Inc. (1993), Fidelity Management & Research (U.K.) Inc. (1993), and
Fidelity Management & Research (Far East) Inc. (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income Division
Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Malcolm W. McNaught III Vice President of FMR (1993).
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Andrew Offit Vice President of FMR (1993).
Judy Pagliuca Vice President of FMR (1993).
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Lee Sandwen Vice President of FMR (1993).
Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund .
Thomas T. Soviero Vice President of FMR (1993).
Richard A. Spillane Vice President of FMR and of funds advised by FMR; and Director of
Equity Research.
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised by FMR.
Thomas Steffanci Senior Vice President of FMR (1993); and Fixed-Income Division
Leader.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and Tax-Free
Fixed-Income Group Leader.
Thomas Sweeney Vice President of FMR (1993).
Donald Taylor Vice President of FMR (1993) and of funds advised by FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds advised by
FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of FMR;
Vice President, Legal of FMR Corp.; and Secretary of funds advised
by FMR.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
CrestFunds, Inc.
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109, or the funds' custodian United
Missouri Bank, N.A., 1010 Grand Avenue, Kansas City, MO.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant, on behalf of Fidelity High Yield Tax-Free Portfolio,
Spartan Connecticut Municipal High Yield Portfolio, Spartan New Jersey
Municipal High Yield Portfolio, and Spartan Florida Municipal Income
Portfolio, provided the information required by Item 5A is contained in the
annual report, undertakes to furnish each person to whom a prospectus has
been delivered, upon their request and without charge, a copy of the
Registrant's latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 52 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and Commonwealth of Massachusetts, on the 28th day of October,
1994.
FIDELITY COURT STREET TRUST
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
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/s/Edward C. Johnson 3d(dagger) President and Trustee October 28, 1994
Edward C. Johnson 3d (Principal Executive Officer)
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/s/Gary L. French Treasurer October 28, 1994
Gary L. French
/s/J. Gary Burkhead Trustee October 28, 1994
J. Gary Burkhead
/s/Richard J. Flynn * Trustee October 28, 1994
Richard J. Flynn
/s/E. Bradley Jones * Trustee October 28, 1994
E. Bradley Jones
/s/Donald J. Kirk * Trustee October 28, 1994
Donald J. Kirk
/s/Peter S. Lynch * Trustee October 28, 1994
Peter S. Lynch
/s/Edward H. Malone * Trustee October 28, 1994
Edward H. Malone
/s/Gerald C. McDonough* Trustee October 28, 1994
Gerald C. McDonough
/s/Thomas R. Williams * Trustee October 28, 1994
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated October 20, 1993 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
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Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this twentieth day of October, 1993.
/s/Edward C. Johnson 3d /s/Peter S. Lynch
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead /s/Edward H. Malone
J. Gary Burkhead Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as President and Board Member (collectively, the "Funds"), hereby
severally constitute and appoint J. Gary Burkhead, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to
sign for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorney-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission. I hereby ratify
and confirm all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d October 20, 1993
Edward C. Johnson 3d
