SPARTAN(registered trademark) CALIFORNIA MUNICIPAL INCOME FUND
SPARTAN(registered trademark) CALIFORNIA INTERMEDIATE MUNICIPAL INCOME FUND
FIDELITY CALIFORNIA INSURED MUNICIPAL INCOME FUND
FUNDS OF
FIDELITY CALIFORNIA MUNICIPAL TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Spartan California Municipal Income Fund, Spartan
California Intermediate Municipal Income Fund, and Fidelity California
Insured Municipal Income Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Spartan California Municipal Income Fund, Spartan California
Intermediate Municipal Income Fund, and Fidelity California Insured
Municipal Income Fund (the funds), will be held at the office of Fidelity
California Municipal Trust (the trust), 82 Devonshire Street, Boston,
Massachusetts 02109 on August 4, 1997, at 9:00 a.m. The purpose of the
Meeting is to consider and act upon the following proposals, and to
transact such other business as may properly come before the Meeting or any
adjournments thereof. Approval of each Reorganization will be determined
solely by approval of the shareholders of the individual fund affected. It
will not be necessary for all three Reorganizations to be approved for any
one of them to take place.
(1) To approve an Agreement and Plan of Reorganization (the Agreement)
between Spartan California Municipal Income Fund and Fidelity California
Municipal Income Fund, another fund of the trust, providing for the
transfer of all of the assets of Spartan California Municipal Income Fund
to Fidelity California Municipal Income Fund in exchange solely for shares
of beneficial interest of Fidelity California Municipal Income Fund and the
assumption by Fidelity California Municipal Income Fund of Spartan
California Municipal Income Fund's liabilities, followed by the
distribution of Fidelity California Municipal Income Fund shares to
shareholders of Spartan California Municipal Income Fund in liquidation of
Spartan California Municipal Income Fund.
(2) To approve an Agreement and Plan of Reorganization (the Agreement)
between Spartan California Intermediate Municipal Income Fund and Fidelity
California Municipal Income Fund, another fund of the trust, providing for
the transfer of all of the assets of Spartan California Intermediate
Municipal Income Fund to Fidelity California Municipal Income Fund in
exchange solely for shares of beneficial interest of Fidelity California
Municipal Income Fund and the assumption by Fidelity California Municipal
Income Fund of Spartan California Intermediate Municipal Income Fund's
liabilities, followed by the distribution of Fidelity California Municipal
Income Fund shares to shareholders of Spartan California Intermediate
Municipal Income Fund in liquidation of Spartan California Intermediate
Municipal Income Fund.
(3) To approve an Agreement and Plan of Reorganization (the Agreement)
between Fidelity California Insured Municipal Income Fund and Fidelity
California Municipal Income Fund, another fund of the trust, providing for
the transfer of all of the assets of Fidelity California Insured Municipal
Income Fund to Fidelity California Municipal Income Fund in exchange solely
for shares of beneficial interest of Fidelity California Municipal Income
Fund and the assumption by Fidelity California Municipal Income Fund of
Fidelity California Insured Municipal Income Fund's liabilities, followed
by the distribution of Fidelity California Municipal Income Fund shares to
shareholders of Fidelity California Insured Municipal Income Fund in
liquidation of Fidelity California Insured Municipal Income Fund.
The Board of Trustees has fixed the close of business on June 9, 1997 as
the record date for the determination of the shareholders of the funds
entitled to notice of, and to vote at, such Meeting and any adjournments
thereof.
By order of the Board of Trustees,
ARTHUR S. LORING, Secretary
June 9, 1997
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY SHAREHOLDER
WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO INDICATE VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN
THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED
STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE ASK YOUR COOPERATION IN
MAILING YOUR PROXY CARD PROMPTLY, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of assistance
to you and help avoid the time and expense involved in validating your vote
if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it appears
in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual signing.
This can be shown either in the form of the account registration itself or
by the individual executing the proxy card. For example:
REGISTRATION VALID
SIGNATURE
A. 1) ABC Corp. John Smith,
Treasurer
2) ABC Corp. John Smith,
Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins,
Trustee
2) ABC Trust Ann B. Collins,
Trustee
3) Ann B. Collins, Trustee Ann B. Collins,
Trustee
u/t/d 12/28/78
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
SPARTAN CALIFORNIA MUNICIPAL INCOME FUND
SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL INCOME FUND
FIDELITY CALIFORNIA INSURED MUNICIPAL INCOME FUND
FUNDS OF
FIDELITY CALIFORNIA MUNICIPAL TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
PROXY STATEMENT AND PROSPECTUS
JUNE 9, 1997
This Proxy Statement and Prospectus (Proxy Statement) is being furnished
to shareholders of Spartan California Municipal Income Fund (Spartan CA
Income), Spartan California Intermediate Municipal Income Fund (Spartan CA
Intermediate), and Fidelity California Insured Municipal Income Fund
(Fidelity CA Insured) (the funds), funds of Fidelity California Municipal
Trust (the trust), in connection with the solicitation of proxies by the
trust's Board of Trustees for use at the Special Meeting of Shareholders of
Spartan CA Income, Spartan CA Intermediate, and Fidelity CA Insured and at
any adjournments thereof (the Meeting). The Meeting will be held on Monday,
August 4, 1997 at 9:00 a.m. Eastern time at 82 Devonshire Street, Boston,
Massachusetts 02109, the principal executive office of the trust.
As more fully described in the Proxy Statement, the purpose of the Meeting
is to vote on proposed reorganizations (Reorganizations). Pursuant to each
Agreement and Plan of Reorganization (the Agreements), Spartan CA Income,
Spartan CA Intermediate, and Fidelity CA Insured each would transfer all of
its assets to Fidelity California Municipal Income Fund (Fidelity CA
Income), another fund of the trust, in exchange solely for shares of
beneficial interest of Fidelity CA Income and the assumption by Fidelity CA
Income of Spartan CA Income's, Spartan CA Intermediate's, and Fidelity CA
Insured's liabilities, respectively. The number of shares to be issued in
the proposed Reorganizations will be based upon the relative net asset
values of each of the funds at the time of the exchange. As provided in
each Agreement, Spartan CA Income, Spartan CA Intermediate, and Fidelity CA
Insured will each distribute shares of Fidelity CA Income to its
shareholders so that each shareholder receives the number of full and
fractional shares of Fidelity CA Income equal in value to the aggregate net
asset values of the shares of each of Spartan CA Income, Spartan CA
Intermediate, and Fidelity CA Insured held by shareholders of each fund on
August 14, 1997, August 21, 1997, and August 28, 1997, respectively, or
such other dates as the parties may agree (the Closing Date). Approval of
each Reorganization will be determined solely by approval of the
shareholders of the individual fund affected. It will not be necessary for
all three Reorganizations to be approved for any one of them to take place.
Fidelity CA Income, a municipal bond fund, is a non-diversified fund of
Fidelity California Municipal Trust, an open-end management investment
company organized as a Massachusetts business trust on April 28, 1983.
Fidelity CA Income's investment objective is to seek high current income
free from federal income tax and California personal income tax. Fidelity
CA Income seeks to achieve its investment objective by investing in
investment-grade municipal securities under normal conditions.
This Proxy Statement, which should be retained for future reference, sets
forth concisely the information about the Reorganizations and Fidelity CA
Income that a shareholder should know before voting on the proposed
Reorganizations. This Proxy Statement is accompanied by the Prospectus
(dated April 19, 1997), which offers shares of Fidelity CA Income. The
Statement of Additional Information for Fidelity CA Income (dated April 19,
1997) is available upon request. Attachment 1 contains excerpts from the
Annual Report of Fidelity CA Income dated February 28, 1997. The Prospectus
and Statement of Additional Information have been filed with the Securities
and Exchange Commission and are incorporated herein by reference. This is
the same Prospectus and Statement of Additional Information which offers
shares of Fidelity CA Insured. A Prospectus and Statement of Additional
Information for Spartan CA Income and Spartan CA Intermediate, both dated
April 19, 1997, have been filed with the Securities and Exchange Commission
and are incorporated herein by reference. Copies of these documents may be
obtained without charge by contacting Fidelity California Municipal Trust
at 82 Devonshire Street, Boston, Massachusetts 02109 or by calling
1-800-544-8888.
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 PROXY STATEMENT AND
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Voting Information
Synopsis
Comparison Of Other Policies Of The Funds
Comparison Of Principal Risk Factors
The Proposed Transactions
Combined Capitalization
Additional Information About Fidelity California Municipal Income Fund
Miscellaneous
Attachment 1. Excerpts From Annual Report Of Fidelity California Municipal
Income Fund Dated February 28, 1997
Attachment 2. Annual Fund Operating Expenses And Examples Of Fund
Expenses For Certain Reorganizations
Exhibit 1. Form Of Agreement And Plan Of Reorganization Of Spartan
California Municipal Income Fund
Exhibit 2. Form Of Agreement And Plan Of Reorganization Of Spartan
California Intermediate Municipal Income Fund
Exhibit 3. Form Of Agreement And Plan Of Reorganization Of Fidelity
California Insured Municipal Income Fund
PROXY STATEMENT AND PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS OF
FIDELITY CALIFORNIA MUNICIPAL TRUST:
SPARTAN CALIFORNIA MUNICIPAL INCOME FUND
SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL INCOME FUND
FIDELITY CALIFORNIA INSURED MUNICIPAL INCOME FUND
TO BE HELD ON AUGUST 4, 1997
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
VOTING INFORMATION
This Proxy Statement and Prospectus (Proxy Statement) is furnished in
connection with a solicitation of proxies made by, and on behalf of, the
Board of Trustees of Fidelity California Municipal Trust (the trust) to be
used at the Special Meeting of Shareholders of Spartan California Municipal
Income Fund (Spartan CA Income), Spartan California Intermediate Municipal
Income Fund (Spartan CA Intermediate), and Fidelity California Insured
Municipal Income Fund (Fidelity CA Insured) (the funds) and at any
adjournments thereof (the Meeting), to be held on Monday, August 4, 1997 at
9:00 a.m. Eastern time at 82 Devonshire Street, Boston, Massachusetts
02109, the principal executive office of the trust and Fidelity Management
& Research Company (FMR), the funds' investment adviser.
The purpose of the Meeting is set forth in the accompanying Notice. The
solicitation is made primarily by the mailing of this Proxy Statement and
the accompanying proxy cards on or about June 9, 1997. Supplementary
solicitations may be made by mail, telephone, telegraph, facsimile, or by
personal interview by representatives of the trust. In addition, D.F. King
& Co. and/or Management Informatio n S ervices Corp. may be
paid on a per-call basis to solicit shareholders on behalf of Spartan CA
Income, Spartan CA Intermediate, and Fidelity CA Insured at an anticipated
cost of approximately $14,198, $5,048, and $ 13,3 63, respectively.
For Fidelity CA Insured, the expenses in connection with preparing this
Proxy Statement and its enclosures and of all solicitations will be paid by
the fund, provided that they do not exceed the fund's 0.55% expense cap in
effect since April 1, 1997. Expenses exceeding the 0.55% expense cap will
be paid by FMR. Fidelity CA Insured will reimburse brokerage firms and
others for their reasonable expenses in forwarding solicitation material to
the beneficial owners of shares. For Spartan CA Income and Spartan CA
Intermediate, the expenses in connection with preparing this Proxy
Statement and its enclosures and of all solicitations will be borne by FMR.
FMR will reimburse brokerage firms and others for their reasonable expenses
in forwarding solicitation material to the beneficial owners of shares.
If the enclosed proxy card is executed and returned, it may nevertheless
be revoked at any time prior to its use by written notification received by
the trust, by the execution of a later-dated proxy card, or by attending
the Meeting and voting in person.
All proxy cards solicited by the Board of Trustees that are properly
executed and received by the Secretary prior to the Meeting, and which are
not revoked, will be voted at the Meeting. Shares represented by such
proxies will be voted in accordance with the instructions thereon. If no
specification is made on a proxy card, it will be voted FOR the matters
specified on the proxy card. Only proxies that are voted will be counted
towards establishing a quorum. Broker non-votes are not considered voted
for this purpose. Shareholders should note that while votes to ABSTAIN will
count toward establishing a quorum, passage of any proposal being
considered at the Meeting will occur only if a sufficient number of votes
are cast FOR the proposal. Accordingly, votes to ABSTAIN and votes AGAINST
will have the same effect in determining whether the proposal is approved.
The funds may also arrange to have votes recorded by telephone. D.F. King
& Co. may be paid on a per-call basis for vote-by-phone solicitations on
behalf of Spartan CA Income, Spartan CA Intermediate, and Fidelity CA
Insured at an anticipated cost of approximately $11,923, $4,177, and
$11,018, respectively. For Fidelity CA Insured, the expenses in connection
with telephone voting will be paid by the fund. For Spartan CA Income and
Spartan CA Intermediate, the expenses in connection with telephone voting
will be borne by FMR. If the funds record votes by telephone, they will use
procedures designed to authenticate shareholders' identities, to allow
shareholders to authorize the voting of their shares in accordance with
their instructions, and to confirm that their instructions have been
properly recorded. Proxies given by telephone may be revoked at any time
before they are voted in the same manner that proxies voted by mail may be
revoked.
If a quorum for each fund is not present at the Meeting, or if a quorum
for each fund is present at the Meeting but sufficient votes to approve one
or more of the proposed items are not received, or if other matters arise
requiring shareholder attention, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a
majority of those shares present at the Meeting or represented by proxy for
each fund. When voting on a proposed adjournment, the persons named as
proxies will vote FOR the proposed adjournment all shares that they are
entitled to vote with respect to each item, unless directed to vote AGAINST
the item, in which case such shares will be voted against the proposed
adjournment with respect to that item. A shareholder vote may be taken on
one or more of the items in this Proxy Statement or on any other business
properly presented at the meeting prior to such adjournment if sufficient
votes have been received and it is otherwise appropriate.
On February 28, 1997, there were 37,882,646, 7,509,522, and 19,890,562
shares issued and outstanding of Spartan CA Income, Spartan CA
Intermediate, and Fidelity CA Insured, respectively. Shareholders of record
at the close of business on June 9, 1997 will be entitled to vote at the
Meeting. Each such shareholder will be entitled to one vote for each dollar
of net asset value held on that date.
As of February 28, 1997, the Trustees and officers of each fund owned, in
the aggregate, less than 1% of each fund's total outstanding shares.
As of February 28, 1997, the following owned of record or beneficially 5%
or more of the outstanding shares of the funds: National Financial Services
Corporation, Boston, MA (Spartan CA Income) (11.72%); National Financial
Services Corporation, Boston, MA (Spartan CA Intermediate) (25.40%);
Chaiken Family Trust, Walnut Creek, CA (Spartan CA Intermediate) (5.68%);
Fred C. Applegate, La Jolla, CA (Spartan CA Intermediate) (5.82%); National
Financial Services Corporation, Boston, MA (Fidelity CA Insured) (10.38%);
National Financial Services Corporation, Boston, MA (Fidelity CA Income)
(8.19%).
VOTE REQUIRED: APPROVAL OF EACH REORGANIZATION REQUIRES THE AFFIRMATIVE
VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES" OF THE SPECIFIC
FUND INVOLVED IN THAT REORGANIZATION. UNDER THE INVESTMENT COMPANY ACT OF
1940 (THE 1940 ACT), THE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING
SECURITIES" MEANS THE AFFIRMATIVE VOTE OF THE LESSER OF (A) 67% OR MORE OF
THE VOTING SECURITIES PRESENT AT THE MEETING OR REPRESENTED BY PROXY IF THE
HOLDERS OF MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES ARE PRESENT
OR REPRESENTED BY PROXY OR (B) MORE THAN 50% OF THE OUTSTANDING VOTING
SECURITIES. BROKER NON-VOTES ARE NOT CONSIDERED "PRESENT" FOR THIS PURPOSE.
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement, in the Agreements, and in the Prospectuses of Spartan
CA Income, Spartan CA Intermediate, Fidelity CA Insured, and Fidelity CA
Income, which are incorporated herein by this reference. Shareholders
should read the entire Proxy Statement and the Prospectus of Fidelity CA
Income carefully for more complete information.
The proposed reorganizations (the Reorganizations) would merge Spartan CA
Income, Spartan CA Intermediate, and Fidelity CA Insured into Fidelity CA
Income, a municipal bond fund also managed by FMR. If the Reorganizations
are approved, Spartan CA Income, Spartan CA Intermediate, and Fidelity CA
Insured will cease to exist and current shareholders of each fund will
become shareholders of Fidelity CA Income instead. However, FMR anticipates
that, upon approval of the Spartan CA Income Reorganization, the combined
fund's name will be changed to Spartan California Municipal Income Fund.
Approval of each Reorganization will be determined solely by approval of
the shareholders of the individual fund affected. It will not be necessary
for all three Reorganizations to be approved for any one of them to take
place.
All four funds seek high current income free from federal income tax and
California personal income tax by investing in California municipal bonds.
They each currently have the same portfolio manager. The funds differ
primarily in their investment policies regarding interest rate sensitivity
and level of holdings in insured bonds and expense structures.
INVESTMENT POLICIES
The following summarizes the investment policy differences, if any,
between each fund and Fidelity CA Income.
Spartan CA Income and Fidelity CA Income have identical investment
policies.
Spartan CA Intermediate is managed to have less interest rate sensitivity
than Fidelity CA Income. Spartan CA Intermediate is managed to have the
same interest rate sensitivity as municipal bonds with maturities between 7
and 10 years and maintains an average maturity between 3 and 10 years.
Fidelity CA Income is managed to have approximately the same sensitivity to
interest rates as municipal bonds with maturities between 8 and 18 years.
As of March 31, 1997, the dollar-weighted average maturity for Spartan CA
Intermediate and Fidelity CA Income was 8.8 years and 14.5 years,
respectively.
Fidelity CA Insured differs from Fidelity CA Income with respect to its
required level of insured bonds. Fidelity CA Insured is required to invest
at least 65% of its assets in insured municipal bonds. Fidelity CA Income
has no required level of investment in insured bonds. As of March 31, 1997,
the level of insured bonds for Fidelity CA Insured and Fidelity CA Income
was 69.0% and 37.4%, respectively.
EXPENSE STRUCTURE
The funds also differ with respect to the contractual structure of the
funds' expenses. Spartan CA Income and Spartan CA Intermediate each pay an
"all-inclusive" management fee to FMR (at a rate of 0.55% of average net
assets per year) which covers substantially all fund expenses. Fidelity CA
Insured and Fidelity CA Income by contrast, each pay its management fee and
other expenses separately. FMR has voluntarily agreed to reimburse Fidelity
CA Insured and Fidelity CA Income to the extent that total operating
expenses exceed 0.55%. If any or all of the Reorganizations are approved,
FMR has agreed to limit the combined fund's expenses to 0.53% of average
net assets through December 31, 1999 (excluding interest, taxes, brokerage
commissions and extraordinary expenses). After that date, the combined
fund's expenses could increase.
In sum, the Spartan CA Income Reorganization would provide that fund's
shareholders with the opportunity to participate in a larger fund with a
comparable investment portfolio and historical performance, and expenses
guaranteed to be lower than Spartan CA Income's for a period of more than
two years.
The Spartan CA Intermediate Reorganization would provide that fund's
shareholders with the opportunity to participate in a larger fund with
greater interest rate sensitivity and expenses guaranteed to be lower than
Spartan CA Intermediate's for a period of more than two years. Greater
interest rate sensitivity would likely result in better performance during
periods of falling interest rates and worse performance during periods of
rising interest rates. In general, Fidelity CA Income has had better
performance and greater interest rate sensitivity than Spartan CA
Intermediate.
The Fidelity CA Insured Reorganization would provide that fund's
shareholders with the opportunity to participate in a larger fund with
generally better overall performance and expenses guaranteed for a period
of more than two years from the effective date of the Reorganization.
The Board of Trustees believes that the Reorganizations would benefit
Spartan CA Income, Spartan CA Intermediate, and Fidelity CA Insured
shareholders and recommends that shareholders vote in favor of the
Reorganizations.
THE PROPOSED REORGANIZATIONS
Shareholders of Spartan CA Income, Spartan CA Intermediate, and Fidelity
CA Insured will be asked at the Meeting to vote upon and approve the
Reorganizations and the Agreements applicable to each fund, which provide
for the acquisition by Fidelity CA Income of all of the assets of Spartan
CA Income, Spartan CA Intermediate, and Fidelity CA Insured in exchange
solely for shares of Fidelity CA Income and the assumption by Fidelity CA
Income of the liabilities of Spartan CA Income, Spartan CA Intermediate,
and Fidelity CA Insured, respectively. Spartan CA Income, Spartan CA
Intermediate, and Fidelity CA Insured will each then distribute the shares
of Fidelity CA Income to its respective shareholders, so that each
shareholder will receive the number of full and fractional shares of
Fidelity CA Income equal in value to the aggregate net asset value of the
shareholder's shares of Spartan CA Income, Spartan CA Intermediate, or
Fidelity CA Insured on the Closing Date (defined below). The exchange of
Spartan CA Income's, Spartan CA Intermediate's, and Fidelity CA Insured's
assets for Fidelity CA Income's shares will occur as of 4:00 p.m. Eastern
time on August 14, 1997, August 21, 1997, and August 28, 1997,
respectively, or such other time and date as the parties may agree (the
Closing Date). Spartan CA Income, Spartan CA Intermediate, and Fidelity CA
Insured will then be liquidated as soon as practicable thereafter. Approval
of each Reorganization will be determined solely by approval of the
shar eholders of the individu al fund affected. It will not be
necessary for all three Reorganizations to be approved for any one of them
to take place.
The funds hav e receive d an opinion of counsel that, except with
respect to Section 1256 contracts, the Reorganizations will not result in
any gain or loss for Federal income tax purposes either to Spartan CA
Income, Spartan CA Intermediate, Fidelity CA Insured or Fidelity CA Income
or to the shareholders of any fund. The rights and privileges of the former
shareholders of Spartan CA Income, Spartan CA Intermediate, and Fidelity CA
Insured will be effectively unchanged by the Reorganizations.
COMPARATIVE FEE TABLES
Each fund pays a management fee to FMR for managing its investments and
business affairs which is calculated and paid to FMR every month.
Spartan CA Income and Spartan CA Intermediate each pay FMR a management
fee at an annual rate of 0.55% of its average net assets. FMR not only
provides each fund with investment advisory and research services, but also
pays all of each f und 's expenses, with the exception of fees and
expenses of all Trustees of the trust who are not "interested persons" of
the trust or FMR; interest on borrowings; taxes; brokerage commissions (if
any); and such nonrecurring expenses as may arise, including costs of any
litigation to which a fund may be a party, and any obligation it may have
to indemnify the officers and Trustees with respect to litigation. The
management fee that the funds pay FMR is reduced by an amount equal to the
fees and expenses paid by each fund to the non-interested Trustees.
In contrast, Fidelity CA Insured and Fidelity CA Income each pay
management fees and other expenses separately. Fidelity CA Insured's and
Fidelity CA Income's management fee is calculated by adding a group fee
rate to an individual fund fee rate, and multiplying the result by each
fund's average net assets. The group fee rate is based on the average net
assets of all mutual funds advised by FMR. In addition to the management
fee payable by each fund, Fidelity CA Insured and Fidelity CA Income also
incur other expenses for services such as maintaining shareholder records
and furnishing shareholder statements and financial reports. Each fund's
total management fee rate for the yea r ended February 28, 1997 was
0.39%. For the year ended February 28, 1997, the total operating expenses
for Fidelity CA Insured and Fidelity CA Income were 0.60% and 0.57%,
respectively. Effective April 1, 1997, FMR voluntarily agreed to reimburse
the total operating expenses of Fidelity CA Insured and Fidelity CA Income
to the extent they exceed 0.55% of average net assets (excluding interest,
taxes, brokerage commissions and extraordinary expenses).
Fidelity also reserves the right to deduct an annual maintenance fee of
$12.00 from accounts in each fund with a value of less than $2,500. Spartan
CA Income also imposes a redemption fee equal to 0.50% of the amount
redeemed on shares held less than 180 days. The redemption fee is payable
to Spartan CA Income to help offset the costs associated with short-term
trading. Fidelity CA Income does not currently impose a redemption fee;
however, the combined fund reserves the right to adopt a redemption fee in
the future if it believes it is appropriate.
If any or all Reorganizations are approved, the combined fund will retain
Fidelity CA Income's expense structure, requiring payment of a management
fee and other operating expenses. FMR has agreed to limit the combined
fund's expense ratio to 0.53% of its average net assets through December
31, 1999 (excluding interest, taxes, brokerage commissions and
extraordinary expenses). This expense limitation would result in a 0.02%
lower total operating expense ratio for Spartan CA Income, Spartan CA
Intermediate, and Fidelity CA Insured shareholders beginning on the first
business day after the effective date of each Reorganization. After
December 31, 1999, the combined fund's expenses could increase. If any of
the proposed Reorganizations are not approved, the fund not approving the
Reorganization will maintain its current fee structure. For more
information about the funds' current fees, refer to their Prospectuses.
Under Spartan CA Income's and Spartan CA Intermediate's all-inclusive
management fee arrangements, Spartan CA Income and Spartan CA Intermediate
shareholders currently have the right to vote on any expense increases over
0.55%. Shareholders of the combined fund would also have the right to vote
on any increases in FMR's management fee; however, because the management
fee would not be all-inclusive, shareholders would not have the right to
vote on all types of expense increases.
The following tables show the current fees and expenses of Spartan CA
Income, Spart an CA Intermediate, Fidelity CA Insured, and Fidelity CA
Income for the year ended February 28, 1997, adjusted to reflect
current fees, and pro forma fees for the combined fund based on the same
period after giving effect to the Reorganizations, including the effect of
FMR's guaranteed expense limitation to 0.53% through December 31, 1999.
ANNUAL FUND OPERATING EXPENSES
Annual fund operating expenses are paid out of each fund's assets.
Expenses are factored into each fund's share price or dividends and are not
charged directly to shareholder accounts. The following are based on
historical expenses, adjusted to reflect current fees, and are calculated
as a percentage of average net assets. Attachment 2 provides expense
information for the combined fund if shareholders of each fund affected do
not approve each of the proposed Reorganizations.
IF ALL THREE REORGANIZATIONS ARE APPROVED:
Spartan Spartan Fidelity Fidelity Pro
CA CA CA CA Forma
Income Interme Insured Income Expenses
C diateC A A Combine
d FundB
Management Fees 0.55% 0.55% 0.34% 0.37% 0.36%
(after
reimbursement)
Other Expenses 0.00% 0.00% 0.21% 0.18% 0.17%
Total Fund 0.55% 0.55% 0.55% 0.55% 0.53%
Operating
Expenses
(after
reimbursement)
A Effective April 1, 1997, FMR voluntarily agreed to reimburse the fund to
the extent that total operating expenses exceed 0.55% (excluding interest,
taxes, brokerage commissions and extraordinary expenses). If this agreement
were not in effect, the management fee, other expenses, and total fund
operating expenses, as a percentage of average net assets, would have been
0.39%, 0.21%, and 0.60%, respectively, for Fidelity CA Insured and 0.39%,
0.18%, and 0.57%, respectively, for Fidelity CA Income.
B FMR has agreed to limit the combined fund's total operating expenses to
0.53% of its average net assets (excluding interest, taxes, brokerage
commissions and extraordinary expenses) through December 31, 1999. If this
agreement were not in effect, the management fee, other expenses, and total
operating expenses, as a percentage of average net assets, would be 0.39%,
0.17%, and 0.56%, respectively.
C FMR has entered into arrangements on behalf of each fund with the fund's
custodian and transfer agent whereby interest earned on uninvested cash
balances is used to reduce fund expenses. Including these reductions the
total operating expenses presented in the table would have been 0.54% for
each of Spartan CA Income and Spartan CA Intermediate.
EXAMPLES OF EFFECT OF FUND EXPENSES
The following table illustrates the expenses on a hypothetical $1,000
investment in each fund under the current and pro forma (combined fund)
expenses calculated at the rates stated above, assuming a 5% annual return.
A ttachment 2 provides examples of the effect on fund expenses for
the combined fund if shareholders of each fund affected do not approve the
proposed Reorganizations.
IF ALL THREE REORGANIZATIONS ARE APPROVED:
After 1 After 3 After 5 After 10
Year Years Years Years
Spartan CA Income $6 $18 $31 $69
Spartan CA Intermediate $6 $18 $31 $69
Fidelity CA Insured $6 $18 $31 $69
Fidelity CA Income $6 $18 $31 $69
Combined Fund $5 $17 $30 $66
These examples assume that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund
Operating Expenses remain the same in the years shown. These examples
illustrate the effect of expenses, but are not meant to suggest actual or
expected costs, which may vary. The assumed return of 5% is not a
prediction of, and does not represent, actual or expected performance of
any fund.
FORMS OF ORGANIZATION
Spartan CA Income, Spartan CA Intermediate, Fidelity CA Insured, and
Fidelity CA Income are non-diversified funds of Fidelity California
Municipal Trust, an open-end management investment company organized as a
Massachusetts business trust on April 28, 1983. The trust is authorized to
issue an unlimited number of shares of beneficial interest. Because the
funds are series of the same Massachusetts business trust, the rights of
the security holders of Spartan CA Income, Spartan CA Intermediate, and
Fidelity CA Insured under state law and the governing documents are
expected to remain unchanged after the Reorganizations. For more
information regarding shareholder rights, refer to the section of the
Funds' Statements of Additional Information called "Description of the
Trusts."
INVESTMENT OBJECTIVES AND POLICIES
The funds have identical investment objectives in that all seek high
current income free from federal income tax and California personal income
tax by investing in California municipal securities. Spartan CA Income,
Fidelity CA Insured, and Fidelity CA Income, as a matter of fundamental
policy, will each normally invest so that at least 80% of its income
distributions are exempt from federal and California state personal income
taxes. Spartan CA Intermediate will normally invest at least 80% of its
assets in municipal securities whose interest is free from federal income
tax.
INVESTMENT POLICIES AND CHARACTERISTICS
The following summarizes the funds' investment policies and
characteristics.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Average Average Require Insured Debt AMT
Rate Maturity Maturity d Holdings Quality Ability
Sensitivit Policy as of Holdings as of
y 3/31/97 in 3/31/97
Insured
Bonds
Spartan 8-18 none 15.5 years none 40.2% 5% 100
CA years below %
Income inv.
grade
Spartan 7-10 3-10 8.8 years none 42.7% 5% 100
CA years years below %
Intermediat inv.
e grade
Fidelity CA 8-18 none 15.4 years 65% of 69.0% only 100
Insured years assets inv. %
grade
Fidelity CA 8-18 none 14.5 years none 37.4% 5% 100
Income years below %
inv.
grade
</TABLE>
SPARTAN CA INCOME
Although Spartan CA Income and Fidelity CA Income can invest in securities
of any maturity, FMR seeks to manage the funds so that they generally react
to changes in interest rates similar to municipal bonds with maturities
between 8 and 18 years. As of March 31, 1997, the dollar-weighted average
maturity of Spartan CA Income and Fidelity CA Income was 15.5 years and
14.5 years, respectively. Spartan CA Income and Fidelity CA Income do not
have required levels for investments in insured bonds. However, as of March
31, 1997, the level of insured bonds for Spartan CA Income and Fidelity CA
Income was 40.2% and 37.4%, respectively.
Spartan CA Income and Fidelity CA Income normally invest in
investment-grade securities, but reserve the right to invest up to 5% of
their assets in below investment-grade securities. As of March 31, 1997,
each fund held only investment-grade securities. Each Fund currently can
invest all of its assets in securities subject to the federal
alternative minimum tax (AMT). The interest from thes e investments is a
tax-preference item for purposes of the federal alternative minimum tax. As
of March 31, 1997, 8.01% of Spartan CA Income's and 0.20% of Fidelity CA
Income's income dividends were subject to the federal alternative minimum
tax.
SPARTAN CA INTERMEDIATE
Spartan CA Intermediate is managed to have the same interest rate
sensitivity as municipal bonds with maturities between 7 and 10 years and
maintains an average maturity between 3 and 10 years. Although Fidelity CA
Income can invest in securities of any maturity, FMR seeks to manage the
fund so that it generally reacts to changes in interest rates similar to
municipal bonds with maturities between 8 and 18 years. As of March 31,
1997, the dollar-weighted average maturity of Spartan CA Intermediate and
Fidelity CA Income was 8.8 years and 14.5 years, respectively. Spartan CA
Intermediate and Fidelity CA Income do not have required levels for
investments in insured bonds. However, as of March 31, 1997, the level of
insured bonds for Spartan CA Intermediate and Fidelity CA Income was 42.7%
and 37.4%, respectively.
Spartan CA Intermediate and Fidelity CA Income normally invest in
investment-grade securities, but reserve the right to invest up to 5% of
their assets in below investment-grade securities. As of March 31, 1997,
each fund held only investment-grade securities. Each Fund currently can
invest all of its assets in securities subject t o the federal
alternative minimum tax (AMT). The interest from these investments is a
tax-preference item for purposes of the federal alternative minimum tax. As
of March 31, 1997, 8.04% of Spartan CA Intermediate's and 0.20% of Fidelity
CA Income's income dividends were subject to the federal alternative
minimum tax.
If shareholder approval of the Reorganization is received, FMR may sell
shorter-term securities held by Spartan CA Intermediate in the period
between shareholder approval and the Closing Date of the Reorganization.
Such selling could cause the average portfolio maturity of Spartan CA
Intermediate to rise above 10 years during this period. In the event of the
sale of any of the fund's assets prior to the Reorganization, any
transaction costs associated with such adjustments will be borne by Spartan
CA Intermediate.
FIDELITY CA INSURED
Although Fidelity CA Insured and Fidelity CA Income can invest in
securities of any maturity, FMR seeks to manage the funds so that they
generally react to changes in interest rates similar to municipal bonds
with maturities between 8 and 18 years. As of March 31, 1997, the
dollar-weighted average maturity of Fidelity CA Insured and Fidelity CA
Income was 15.4 years and 14.5 years, respectively. Fidelity CA Insured, as
a fundamental policy, invests at least 65% of its assets in insured
municipal bonds. Fidelity CA Income does not have a required level for
investments in insured bonds. As of March 31, 1997, the level of insured
bonds for Fidelity CA Insured and Fidelity CA Income was 69.0% and 37.4%,
respectively. However, despite the high credit quality of insured bonds,
Fidelity CA Insured provided less downside protection than the other funds
during 1994's bear market.
Fidelity CA Insured invests only in investment-grade securities. Fidelity
CA Income normally invests in investment-grade securities, but reserves the
right to invest up to 5% of its assets in below investment-grade
securities. As of March 31, 1997, each fund held only investment-grade
securities. Each Fund currently can invest all of its assets in
securiti es subject to the federal alternative minimum tax (AMT). The
interest from these investments is a tax-preference item for purposes of
the federal alternative minimum tax. As of March 31, 1997, 0.47% of
Fidelity CA Insured's and 0.20% of Fidelity CA Income's income dividends
were subject to the federal alternative minimum tax.
If shareholder approval of the Reorganization is received, FMR may sell
insured securities held by Fidelity CA Insured in the period between
shareholder approval and the Closing Date of the Reorganization. Such
selling could cause the level of insured bonds held by Fidelity CA Insured
to fall below 65% during this period. In the event of the sale of any of
the fund's assets prior to the Reorganization, any transaction costs
associated with such adjustments will be borne by Fidelity CA Insured.
The investment objective of each fund is fundamental and may not be
changed without the approval of a vote of at least a majority of the
outstanding voting securities of the fund. There can be no assurance that
any fund will achieve its objective. With the exception of fundamental
policies, investment policies of the funds can be changed without
shareholder approval. The differences between the funds discussed above,
except as noted, could be changed without a vote of shareholders.
PERFORMANCE COMPARISONS OF THE FUNDS
The following table compares the funds' annual total returns for the
periods indicated, as well as each fund's cumulative total return for the
period from December 30, 1993 (commencement of operations of Spartan CA
Intermediate) to March 31, 1997. Please note that total returns are based
on past results and are not an indication of future performance.
Annual Total Return Cumulativ
(periods ended March 31) e Total
Return
1992 1993 1994 1995 1996 1997 Decembe
r 30, 1993
to March
31, 1997
Spartan CA 10.25 13.72 1.27% 5.40% 8.47% 6.13% 13.12%
Income % %
Spartan CA n/a* n/a* -4.77%* 5.73% 8.42% 5.07% 14.70%
Intermediate
Fidelity CA 10.52 14.07 -0.11% 5.56% 8.07% 5.39% 10.86%
Insured % %
Fidelity CA 9.36% 12.94 1.22% 5.50% 8.44% 6.26% 13.47%
Income %
* Spartan CA Intermediate commenced operations on December 30, 1993; not
annualized.
As the table above shows, each fund has provided its shareholders with
better performance than the others at various times during the periods
shown. This differential in performance can be attributed primarily to the
funds' differences in investment policies and historical differences in
portfolio holdings resulting from the relative asset size of the funds and
their available cash flows. However, despite its high credit quality,
Fidelity CA Insured provided less downside protection than the other funds
during 1994's bear market.
The following graphs show the value of a hypothetical $10,000 investment
in each fund made on December 30, 1993, assuming all distributions are
reinvested. The graph compares the cumulative returns of the funds on a
monthly basis from December 1993 through March 1997, and illustrates the
relative volatility of their performance over shorter periods of time.
California Muni Income Sp California Muni Income
00091 00456
1993/12/30 10000.00 10000.00
1993/12/31 10003.18 10003.00
1994/01/31 10116.40 10111.56
1994/02/28 9836.90 9823.16
1994/03/31 9333.86 9322.73
1994/04/30 9373.07 9360.76
1994/05/31 9437.60 9417.18
1994/06/30 9341.16 9332.47
1994/07/31 9531.54 9519.68
1994/08/31 9564.35 9548.49
1994/09/30 9417.60 9406.27
1994/10/31 9186.55 9189.26
1994/11/30 8960.93 8951.14
1994/12/31 9114.73 9105.87
1995/01/31 9441.34 9433.78
1995/02/28 9747.28 9739.22
1995/03/31 9847.39 9825.85
1995/04/30 9849.26 9822.84
1995/05/31 10179.87 10146.23
1995/06/30 10047.78 10014.95
1995/07/31 10139.66 10092.55
1995/08/31 10258.25 10209.43
1995/09/30 10349.57 10306.10
1995/10/31 10523.80 10485.15
1995/11/30 10733.10 10703.62
1995/12/31 10862.33 10833.54
1996/01/31 10928.45 10912.92
1996/02/29 10844.10 10804.97
1996/03/31 10678.51 10658.06
1996/04/30 10643.57 10614.28
1996/05/31 10635.95 10611.25
1996/06/30 10776.72 10741.93
1996/07/31 10881.80 10853.73
1996/08/31 10901.41 10871.06
1996/09/30 11052.31 11034.60
1996/10/31 11196.58 11179.01
1996/11/30 11435.52 11418.46
1996/12/31 11378.85 11350.53
1997/01/31 11399.23 11368.19
1997/02/28 11511.66 11478.10
1997/03/31 11346.82 11311.68
California Muni Income Sp California Int Muni
00091 00432
1993/12/30 10000.00 10000.00
1993/12/31 10003.18 10001.08
1994/01/31 10116.40 10115.55
1994/02/28 9836.90 9829.25
1994/03/31 9333.86 9523.29
1994/04/30 9373.07 9580.74
1994/05/31 9437.60 9660.52
1994/06/30 9341.16 9608.34
1994/07/31 9531.54 9784.83
1994/08/31 9564.35 9817.83
1994/09/30 9417.60 9714.96
1994/10/31 9186.55 9560.68
1994/11/30 8960.93 9395.32
1994/12/31 9114.73 9533.73
1995/01/31 9441.34 9775.24
1995/02/28 9747.28 9993.60
1995/03/31 9847.39 10068.68
1995/04/30 9849.26 10079.53
1995/05/31 10179.87 10390.50
1995/06/30 10047.78 10292.56
1995/07/31 10139.66 10420.69
1995/08/31 10258.25 10561.79
1995/09/30 10349.57 10626.21
1995/10/31 10523.80 10768.23
1995/11/30 10733.10 10920.68
1995/12/31 10862.33 10976.68
1996/01/31 10928.45 11076.65
1996/02/29 10844.10 11050.89
1996/03/31 10678.51 10916.41
1996/04/30 10643.57 10903.17
1996/05/31 10635.95 10890.45
1996/06/30 10776.72 10988.74
1996/07/31 10881.80 11077.14
1996/08/31 10901.41 11086.44
1996/09/30 11052.31 11197.32
1996/10/31 11196.58 11344.37
1996/11/30 11435.52 11536.33
1996/12/31 11378.85 11490.63
1997/01/31 11399.23 11523.91
1997/02/28 11511.66 11599.46
1997/03/31 11346.82 11469.81
California Muni Income California Ins Muni Inc
00091 00403
1993/12/30 10000.00 10000.00
1993/12/31 10003.18 10002.84
1994/01/31 10116.40 10127.76
1994/02/28 9836.90 9786.14
1994/03/31 9333.86 9220.78
1994/04/30 9373.07 9273.73
1994/05/31 9437.60 9355.06
1994/06/30 9341.16 9237.19
1994/07/31 9531.54 9441.72
1994/08/31 9564.35 9457.66
1994/09/30 9417.60 9262.34
1994/10/31 9186.55 9030.22
1994/11/30 8960.93 8796.47
1994/12/31 9114.73 8978.43
1995/01/31 9441.34 9335.11
1995/02/28 9747.28 9659.08
1995/03/31 9847.39 9733.71
1995/04/30 9849.26 9717.84
1995/05/31 10179.87 10069.97
1995/06/30 10047.78 9873.49
1995/07/31 10139.66 9947.44
1995/08/31 10258.25 10091.37
1995/09/30 10349.57 10173.79
1995/10/31 10523.80 10358.91
1995/11/30 10733.10 10603.59
1995/12/31 10862.33 10728.89
1996/01/31 10928.45 10803.07
1996/02/29 10844.10 10669.81
1996/03/31 10678.51 10519.59
1996/04/30 10643.57 10462.39
1996/05/31 10635.95 10447.06
1996/06/30 10776.72 10566.09
1996/07/31 10881.80 10676.41
1996/08/31 10901.41 10669.50
1996/09/30 11052.31 10839.25
1996/10/31 11196.58 10971.63
1996/11/30 11435.52 11221.39
1996/12/31 11378.85 11141.18
1997/01/31 11399.23 11157.76
1997/02/28 11511.66 11255.69
1997/03/31 11346.82 11086.30
COMPARISON OF OTHER POLICIES OF THE FUNDS
DIVERSIFICATION. Spartan CA Income, Spartan CA Intermediate, Fidelity CA
Insured, and Fidelity CA Income have similar policies on diversification.
Each fund is a non-diversified fund. Generally, to meet federal tax
requirements at the close of each quarter, each fund does not invest more
than 25% of its total assets in the securities of any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in the securities of any one issuer. Because each fund can invest a
significant portion of its assets in securities of individual issuers,
changes in the market value of a single issuer could cause greater
share-price fluctuation in these funds than would occur in a more
diversified fund.
OTHER INVESTMENT POLICIES. Each fund may borrow from banks or other funds
advised by FMR, or through reverse repurchase agreements. As a matter of
fundamental policy, each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 33 1/3% of its total assets.
FMR normally invests each fund's assets according to its investment
strategy and does not expect to invest in federally or state taxable
obligations. However, each fund reserves the right to invest without
limitation in short-term instruments for temporary, defensive purposes.
Spartan CA Income and Spartan CA Intermediate also reserve the right to
hold a substantial amount of uninvested cash or to invest more than
normally permitted in taxable obligations for temporary, defensive
purposes. As a fundamental policy, during periods when FMR believes that
California municipal securities that meet the funds' standards are not
available, Fidelity CA Insured and Fidelity CA Income reserve the right to
temporarily invest more than 20% of their assets in obligations that are
only federally tax-exempt. Each fund may also enter into when-issued and
delayed delivery transactions, invest in asset-backed securities, variable
and floating rate securities, municipal lease obligations, securities with
put features, private entity securities, and illiquid and restricted
securities. As stated above, for more information about the risks and
restrictions associated with these policies, see each fund's Prospectus,
and for a more detailed discussion of the funds' investments, see their
Statements of Additional Information, which are incorporated herein by
reference.
OPERATIONS OF FIDELITY CA INCOME FOLLOWING THE REORGANIZATION
FMR does not expect Fidelity CA Income to revise its investment policies
as a result of the Reorganizations. In addition, FMR does not anticipate
significant changes to the fund's management or to agents that provide the
fund with services. Specifically, the Trustees and officers, the investment
adviser, distributor, and other agents will continue to serve Fidelity CA
Income in their current capacities. The funds currently have the same
portfolio manager, Jonathan Short, who is expected to continue to be
responsible for Fidelity CA Income's portfolio management after the
Reorganizations.
All of the current investments of Spartan CA Income, Spartan CA
Intermediate, and Fidelity CA Insured are permissible investments for
Fidelity CA Income. As explained above, however, Spartan CA Intermediate's
maturity is shorter than Fidelity CA Income's, and Fidelity CA Insured's
portfolio consists of a higher percentage of insured securities than
Fidelity CA Income. Therefore, if shareholder approval of each
Reorganization is received, FMR may sell shorter-term securities held by
Spartan CA Intermediate and insured securities held by Fidelity CA Insured
in the period between shareholder approval and the Closing Date of each
Reorganization. Such selling could cause the average portfolio maturity of
Spartan CA Intermediate to rise above 10 years and the level of insured
bonds held by Fidelity CA Insured to fall below 65% during this period. In
the event of the sale of any of the fund's assets after the effective date
of the Reorganization, any transaction costs associated with such
adjustments will be borne by Fidelity CA Income.
PURCHASES AND REDEMPTIONS
The purchase policies for all funds are identical.
Each fund's share price, or net asset value per share (NAV), is calculated
every business day. Shares of each fund are sold without a sales charge.
Shares are purchased at the next share price calculated after an investment
is received and accepted. Share price is normally calculated at 4:00 p.m.
Eastern time. Refer to a fund's Prospectus for more information regarding
how to buy shares.
The redemption policies for all funds are identical with the exception of
Spartan CA Income's redemption fee.
Shares of each fund may be redeemed on any business day at their NAV.
Shares of each fund are redeemed at the next share price calculated after
an order is received and accepted, normally 4:00 p.m. Eastern time. Spartan
CA Income imposes a 0.50% redemption fee on shares held less than 180 days
that, if applicable, is deducted from the amount redeemed.
Effective th e close of business on February 28, 1997, each of
Spartan CA Income, Spartan CA Intermediate, and Fidelity CA Insured closed
to new accounts pending the Reorganizations. Each of Spartan CA Income's,
Spartan CA Intermediate's, and Fidelity CA Insured's shareholders on or
prior to that date, including participants in an employee benefit plan
which offered the respective fund on or prior to that date (except
participants in an employee benefit plan for which an affiliate of FMR
maintains the accounts at the participant level other than pursuant to a
recordkeeping agreement), can continue to purchase shares of their
respective fund. Shareholders may redeem shares through the Closing Date of
each Reorganization. If the Reorganizations are approved, the purchase and
redemption policies of the surviving fund will remain unchanged. Fidelity
CA Income does not currently impose a redemption fee; however, the combined
fund reserves the right to adopt a redemption fee in the future if it
believes it is appropriate.
EXCHANGES
The exchange privilege currently offered by each fund is the same and is
not expected to change after the Reorganizations. Shareholders of the funds
may exchange their shares of a fund for shares of any other Fidelity fund
available in a shareholder's state. Exchanges out of Spartan CA Income are
currently subject to a 0.50% redemption fee on shares held less than 180
days, as described above in the "Purchases and Redemptions" section.
Fidelity CA Income does not currently impose a redemption fee. If the
Spartan CA Income Reorganization is approved, the redemption fee will be
eliminated; however, the combined fund reserves the right to adopt a
redemption fee in the future if it believes it is appropriate.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Each fund declares income
dividends daily and pays them monthly. Each fund normally distributes
capital gains in April and December. On or before each Closing Date, each
of Spartan CA Income, Spartan CA Intermediate, and Fidelity CA Insured may
declare additional dividends or other distributions in order to distribute
substantially all of its investment company taxable income and net realized
capital gain.
Each of Spartan CA Income, Spartan CA Intermediate, and Fidelity CA
Insured will be required to recognize gain or loss on Section 1256
contracts held by the individual fund on the last day of their taxable year
which is February 28. If the Reorganizations are approved, gains or losses
on Section 1256 contracts held on each Closing Date will be recognized on
each Closing Date.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATIONS
Each fund has received an opinion of its counsel, Kirkpatrick & Lockhart
LLP, that the Reorganizations will constitute tax-free reorganizations
within the meaning of Section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended (the Code). Accordingly, except with respect to Section
1256 contracts, no gain or loss will be recognized to the funds or their
shareholders as a result of the Reorganizations. Please see the section
entitled "Federal Income Tax Considerations" for more information.
As of February 28, 1997, Spartan CA Income, Spartan CA Intermediate,
Fidelity CA Insured, and Fidelity CA Income have capital loss carryforwards
for federal tax purposes of approximately $8,463,000, $531,000, $7,171,000,
and $4,627,000, respectively. Under current federal tax law, Fidelity CA
Income may be limited to using only a portion, if any, of its capital loss
carryforward or the capital loss carryforwards transferred by Spartan CA
Income, Spartan CA Intermediate, and Fidelity CA Insured at the time of the
Reorganizations ("capital loss carryforwards"). There is no assurance that
Fidelity CA Income will be able to realize sufficient capital gains to use
the capital loss carryforwards before they expire. The capital loss
carryforward attributable to Spartan CA Income will expire between February
28, 2003 and February 29, 2004. The capital loss carryforward attributable
to Spartan CA Intermediate will expire on February 28, 2003. The capital
loss carryforward attributable to Fidelity CA Insured will expire between
February 28, 2003 and February 29, 2004. The capital loss carryforward
attributable to Fidelity CA Income will expire on February 29, 2004.
COMPARISON OF PRINCIPAL RISK FACTORS
Each fund is subject to the risks normally associated with bond funds. As
described more fully below, the funds have identical investment objectives
and similar policies and permissible investments.
INVESTMENT STRATEGY. Spartan CA Intermediate maintains a shorter average
maturity than Fidelity CA Income. It is managed to react to changes in
interest rates similarly to municipal bonds with maturities between 7 and
10 years. This gives Spartan CA Intermediate less interest rate sensitivity
than Fidelity CA Income which is managed so that it generally reacts to
changes in interest rates similar to municipal bonds with maturities
between 8 and 18 years. Interest rate sensitivity refers to how much a fund
is affected by changes in interest rates. Generally, bond prices go down
when interest rates go up and vice versa. The effects of interest rate
sensitivity are more pronounced for longer-term securities, and therefore,
more pronounced for funds which invest in longer-term securities. Thus,
Fidelity CA Income may have better performance than Spartan CA Intermediate
during periods of falling interest rates but may have worse performance
during periods of rising interest rates.
Fidelity CA Insured is required to invest at least 65% of its assets in
municipal securities that are covered by insurance guaranteeing the timely
payment of principal and interest. Fidelity CA Income does not have a
required level for investments in insured bonds. Generally, insured bonds
receive a higher credit rating than uninsured bonds; therefore, the greater
the percentage of insured holdings, generally the higher the fund's credit
quality. The credit quality of a bond has an impact on its price. In most
cases, the higher the credit quality of a bond, the lower its yield will
be; consequently, the price of the bond may be higher.
THE PROPOSED TRANSACTIONS
1. TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN SPARTAN
CALIFORNIA MUNICIPAL INCOME FUND AND FIDELITY CALIFORNIA MUNICIPAL INCOME
FUND.
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Agreement. Significant provisions of the
Agreement are summarized below; however, this summary is qualified in its
entirety by reference to the Agreement, a copy of which is attached as
Exhibit 1 to this Proxy Statement.
The Agreement contemplates (a) Fidelity CA Income acquiring as of the
Closing Date all of the assets of Spartan CA Income in exchange solely for
shares of Fidelity CA Income and the assumption by Fidelity CA Income of
Spartan CA Income's liabilities; and (b) the distribution of shares of
Fidelity CA Income to the shareholders of Spartan CA Income as provided for
in the Agreement.
The assets of Spartan CA Income to be acquired by Fidelity CA Income
include all cash, cash equivalents, securities, receivables (including
interest or dividends receivables), claims, chooses in action, and other
property owned by Spartan CA Income, and any deferred or prepaid expenses
shown as an asset on the books of Spartan CA Income on the Closing Date.
Fidelity CA Income will assume from Spartan CA Income all liabilities,
debts, obligations, and duties of Spartan CA Income of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable on
the Closing Date, and whether or not specifically referred to in the
Agreement; provided, however, that Spartan CA Income will use its best
efforts, to the extent practicable, to discharge all of its known
liabilities prior to the Closing Date, other than liabilities incurred in
the ordinary course of business. Fidelity CA Income also will deliver to
Spartan CA Income the number of full and fractional shares of Fidelity CA
Income having an aggregate net asset value equal to the value of the assets
of Spartan CA Income less the respective liabilities of Spartan CA Income
as of the Closing Date. Spartan CA Income shall then distribute the
Fidelity CA Income shares PRO RATA to its shareholders.
The value of Spartan CA Income's assets to be acquired by Fidelity CA
Income and the amount of its liabilities to be assumed by Fidelity CA
Income will be determined as of the close of business (4:00 p.m. Eastern
time) of Spartan CA Income on the Closing Date, using the valuation
procedures set forth in Spartan CA Income's then-current Prospectus and
Statement of Additional Information. The net asset value of a share of
Fidelity CA Income will be determined as of the same time using the
valuation procedures set forth in its then-current Prospectus and Statement
of Additional Information.
As of the Closing Date, Spartan CA Income will distribute to its
shareholders of record the shares of Fidelity CA Income it received, so
that each Spartan CA Income shareholder will receive the number of full and
fractional shares of Fidelity CA Income equal in value to the aggregate net
asset value of shares of Spartan CA Income held by such shareholder on the
Closing Date; Spartan CA Income will be liquidated as soon as practicable
thereafter. Such distribution will be accomplished by opening accounts on
the books of Fidelity CA Income in the names of the Spartan CA Income
shareholders and by transferring thereto shares of Fidelity CA Income. Each
Spartan CA Income shareholder's account shall be credited with the
respective PRO RATA number of full and fractional shares (rounded to the
third decimal place) of Fidelity CA Income due that shareholder. Fidelity
CA Income shall not issue certificates representing its shares in
connection with such exchange.
Accordingly, immediately after the Reorganization, each former Spartan CA
Income shareholder will own shares of Fidelity CA Income equal to the
aggregate net asset value of that shareholder's shares of Spartan CA Income
immediately prior to the Reorganization. The net asset value per share of
Fidelity CA Income will be unchanged by the transaction. Thus, the
Reorganization will not result in a dilution of any shareholder interest.
Any transfer taxes payable upon issuance of shares of Fidelity CA Income
in a name other than that of the registered holder of the shares on the
books of Spartan CA Income as of that time shall be paid by the person to
whom such shares are to be issued as a condition of such transfer. Any
reporting responsibility of Spartan CA Income is and will continue to be
its responsibility up to and including the Closing Date and such later date
on which Spartan CA Income is liquidated.
Pursuant to its management contract with Spartan CA Income and its
all-inclusive management fee, FMR will bear the cost of the Reorganization,
including professional fees, expenses associated with the filing of
registration statements, and the cost of soliciting proxies for the
Meeting, which will consist principally of printing and mailing
prospectuses and proxy statements, together with the cost of any
supplementary solicitation. However, there may be some transaction costs
associated with portfolio adjustments to Spartan CA Income and Fidelity CA
Income due to the Reorganization prior to the Closing Date which will be
borne by Spartan CA Income and Fidelity CA Income, respectively. Any
transaction costs associated with portfolio adjustments to Spartan CA
Income and Fidelity CA Income due to the Reorganizatio n which occur
after the Closing Date and any additional merger-related costs attributable
to Fidelity CA Income which occur after the Closing Date will be borne by
Fidelity CA Income. The funds may recognize a taxable gain or loss on the
disposition of securities pursuant to these portfolio adjustments. See the
section entitled "Reasons for the Reorganization."
The consummation of the Reorganization is subject to a number of
conditions set forth in the Agreement, some of which may be waived by a
fund. In addition, the Agreement may be amended in any mutually agreeable
manner, except that no amendment that may have a materially adverse effect
on the shareholders' interests may be made subsequent to the Meeting.
REASONS FOR THE REORGANIZATION
The Board of Trustees (the Board) of the funds have determined that the
Reorganization is in the best interests of the shareholders of both funds
and that the Reorganization will not result in a dilution of the interests
of shareholders of either fund.
In considering the Reorganization, the Board considered a number of
factors, including the following:
(1) the compatibility of the funds' investment objectives and policies;
(2) the historical performance of the funds;
(3) the relative expense ratios of the funds;
(4) the costs to be incurred by each fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) the relative size of the funds;
(7) the elimination of duplicative funds;
(8) the impact of changes to the municipal bond product line on the funds
and their shareholders; and
(9) the benefit to FMR.
FMR recommended the Reorganization to the Board at a meeting of the Board
on February 20, 1997. In recommending the Reorganization, FMR also advised
the Board that the funds have identical investment objectives, policies,
and permissible investments. In particular, at that time FMR informed the
Board that the funds differed primarily with respect to their expense
structures. FMR subsequently noted to the Board that differences between
the funds with respect to minimum investments, service features, and
externalized fees have been eliminated.
The Board also considered that former shareholders of Spartan CA Income
will receive shares of Fidelity CA Income equal to the value of their
shares of Spartan CA Income. In addition, the funds have rece ived an
opinion of counsel that, except with respect to Section 1256 contracts,
the Reorganization will not result in any gain or loss for Federal income
tax purposes either to Spartan CA Income or Fidelity CA Income or to the
shareholders of either fund.
Furthermore, on February 20, 1997, the Board considered that combining the
funds would result in an immediate benefit to shareholders by lowering
expenses, as a percentage of net assets, by 0.02% for shareholders of
Spartan CA Income and approximately 0.05% for shareholders of Fidelity CA
Income (based on total fund operating expenses for the 12 months ended
December 31, 1996), following the effective date of the Reorganization.
Subsequently, FMR informed the Board that effective April 1, 1997, it would
voluntarily agree to reimburse Fidelity CA Income's total operating
expenses to the extent that they exceeded 0.55% of average net assets. FMR
also represented to the Board that it would guarantee an expense ratio of
0.53% for the surviving fund (excluding interest, taxes, brokerage
commissions and extraordinary expenses) through December 31, 1999,
resulting in a 0.02% savings to shareholders of both Spartan CA Income and
Fidelity CA Income, if the Reorganization is approved. FMR informed the
Board that it would pay all of Spartan CA Income's expenses associated with
the Reorganization, including professional fees and the costs of proxy
solicitation. The Board was informed that any expenses associated with the
Reorganization, including professional fees and the costs of proxy
solicitation, directly attributable to Fidelity CA Income would be borne by
Fidelity CA Income, provided they do not exceed the fund's 0.55% expense
cap. FMR further informed the Board that although the funds would bear any
costs (as described above) associated with portfolio adjustments resulting
from the Reorganization, FMR believed that such costs would be
counterbalanced by the reduction in the expense ratio for both funds.
Finally, the Board considered the proposed Reorganization in the context
of a general goal of reducing the number of duplicative funds managed by
FMR. While the reduction of duplicative funds and funds with lower assets
potentially would benefit FMR, it also should benefit shareholders by
facilitating increased operational efficiencies.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
Fidelity California Municipal Trust (the trust) is registered with the
Securities and Exchange Commission (the Commission) as an open-end
management investment company. The trust's Trustees are authorized to issue
an unlimited number of shares of beneficial interest of separate series.
Fidelity CA Income is one of four funds of the trust. Each share of
Fidelity CA Income represents an equal proportionate interest with each
other share of the fund, and each such share of Fidelity CA Income is
entitled to equal voting, dividend, liquidation, and redemption rights.
Each shareholder of the fund is entitled to one vote for each dollar value
of net asset value of the fund that shareholder owns. Shares of Fidelity CA
Income have no preemptive or conversion rights. The voting and dividend
rights, the right of redemption, and the privilege of exchange are
described in the fund's Prospectus. Shares are fully paid and
nonassessable, except as set forth in the fund's Statement of Additional
Information under the heading "Shareholder and Trustee Liability."
The trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing
Trustees unless less than a majority of the Trustees holding office have
been elected by shareholders, at which time the Trustees then in office
will call a shareholder meeting for the election of Trustees. Under the
1940 Act, shareholders of record of at least two-thirds of the outstanding
shares of an investment company may remove a Trustee by votes cast in
person or by proxy at a meeting called for that purpose. The Trustees are
required to call a meeting of shareholders for the purpose of voting upon
the question of removal of any Trustee when requested in writing to do so
by the shareholders of record holding at least 10% of the trust's
outstanding shares.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Spartan CA Income's assets for Fidelity CA Income's shares
and the assumption of the liabilities of Spartan CA Income by Fidelity CA
Income is intended to qualify for federal income tax purposes as a tax-free
reorganization under the Code. With respect to the Reorganization, the
participating funds have received an opinion from Kirkpatrick & Lockhart
LLP, counsel to Spartan CA Income and Fidelity CA Income, substantially to
the effect that:
(i) The acquisition by Fidelity CA Income of all of the assets of Spartan
CA Income solely in exchange for Fidelity CA Income shares and the
assumption by Fidelity CA Income of Spartan CA Income's liabilities,
followed by the distribution by Spartan CA Income of Fidelity CA Income
shares to the shareholders of Spartan CA Income pursuant to the liquidation
of Spartan CA Income and constructively in exchange for their Spartan CA
Income shares, will constitute a reorganization within the meaning of
section 368(a)(1)(C) of the Code, and Spartan CA Income and Fidelity CA
Income will each be "a party to a reorganization" within the meaning of
section 368(b) of the Code;
(ii) No gain or loss will be recognized by Spartan CA Income upon the
transfer of all of its assets to Fidelity CA Income in exchange solely for
Fidelity CA Income shares and Fidelity CA Income's assumption of Spartan CA
Income's liabilities, followed by Spartan CA Income's subsequent
distribution of those shares to shareholders in liquidation of Spartan CA
Income;
(iii) No gain or loss will be recognized by Fidelity CA Income upon the
receipt of the assets of Spartan CA Income in exchange solely for Fidelity
CA Income shares and its assumption of Spartan CA Income's liabilities;
(iv) The shareholders of Spartan CA Income will recognize no gain or loss
upon the exchange of their Spartan CA Income shares solely for Fidelity CA
Income shares;
(v) The basis of Spartan CA Income's assets in the hands of Fidelity CA
Income will be the same as the basis of those assets in the hands of
Spartan CA Income immediately prior to the Reorganization, and the holding
period of those assets in the hands of Fidelity CA Income will include the
holding period of those assets in the hands of Spartan CA Income;
(vi) The basis of Spartan CA Income shareholders in Fidelity CA Income
shares will be the same as their basis in Spartan CA Income shares to be
surrendered in exchange therefor; and
(vii) The holding period of the Fidelity CA Income shares to be received
by the Spartan CA Income shareholders will include the period during which
the Spartan CA Income shares to be surrendered in exchange therefor were
held, provided such Spartan CA Income shares were held as capital assets by
those shareholders on the date of the Reorganization.
Shareholders of Spartan CA Income should consult their tax advisers
regarding the effect, if any, of the proposed Reorganization in light of
their individual circumstances. Because the foregoing discussion only
relates to the federal income tax consequences of the Reorganization, those
shareholders also should consult their tax advisers as to state and local
tax consequences, if any, of the Reorganization.
CAPITALIZATION
The following table shows the capitalization of the funds as of February
28, 1997 and on a pro forma combined basis (unaudited) as of that date
giving effect to the Reorganization.
Net Assets Net Asset Shares
Value Outstanding
Per Share
Spartan CA Income $401,503,21 $10.60 37,882,646
2
Fidelity CA Income $485,897,91 $11.81 41,148,631
5
Pro Forma Combined Fund $887,401,12 $11.81 75,139,808
7
CONCLUSION
The Agreement and Plan of Reorganization and the transactions provided for
therein were approved by the Board at a meeting held on February 20, 1997.
The Board of Trustees of Fidelity California Municipal Trust determined
that the proposed Reorganization is in the best interests of shareholders
of each fund and that the interests of existing shareholders of Spartan CA
Income and Fidelity CA Income would not be diluted as a result of the
Reorganization. In the event that the Reorganization is not consummated,
Spartan CA Income will continue to engage in business as a fund of a
registered investment company and the Board of Fidelity California
Municipal Trust will consider other proposals for the reorganization or
liquidation of the fund.
2. TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN SPARTAN
CALIFORNIA INTERMEDIATE MUNICIPAL INCOME FUND AND FIDELITY CALIFORNIA
MUNICIPAL INCOME FUND.
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Agreement. Significant provisions of the
Agreement are summarized below; however, this summary is qualified in its
entirety by reference to the Agreement, a copy of which is attached as
Exhibit 2 to this Proxy Statement.
The Agreement contemplates (a) Fidelity CA Income acquiring as of the
Closing Date all of the assets of Spartan CA Intermediate in exchange
solely for shares of Fidelity CA Income and the assumption by Fidelity CA
Income of Spartan CA Intermediate's liabilities; and (b) the distribution
of shares of Fidelity CA Income to the shareholders of Spartan CA
Intermediate as provided for in the Agreement.
The assets of Spartan CA Intermediate to be acquired by Fidelity CA Income
include all cash, cash equivalents, securities, receivables (including
interest or dividends receivables), claims, chooses in action, and other
property owned by Spartan CA Intermediate, and any deferred or prepaid
expenses shown as an asset on the books of Spartan CA Intermediate on the
Closing Date. Fidelity CA Income will assume from Spartan CA Intermediate
all liabilities, debts, obligations, and duties of Spartan CA Intermediate
of whatever kind or nature, whether absolute, accrued, contingent, or
otherwise, whether or not arising in the ordinary course of business,
whether or not determinable on the Closing Date, and whether or not
specifically referred to in the Agreement; provided, however, that Spartan
CA Intermediate will use its best efforts, to the extent practicable, to
discharge all of its known liabilities prior to the Closing Date, other
than liabilities incurred in the ordinary course of business. Fidelity CA
Income also will deliver to Spartan CA Intermediate the number of full and
fractional shares of Fidelity CA Income having an aggregate net asset value
equal to the value of the assets of Spartan CA Intermediate less the
respective liabilities of Spartan CA Intermediate as of the Closing Date.
Spartan CA Intermediate shall then distribute the Fidelity CA Income shares
PRO RATA to its shareholders.
The value of Spartan CA Intermediate's assets to be acquired by Fidelity
CA Income and the amount of its liabilities to be assumed by Fidelity CA
Income will be determined as of the close of business (4:00 p.m. Eastern
time) of Spartan CA Intermediate on the Closing Date, using the valuation
procedures set forth in Spartan CA Intermediate's then-current Prospectus
and Statement of Additional Information. The net asset value of a share of
Fidelity CA Income will be determined as of the same time using the
valuation procedures set forth in its then-current Prospectus and Statement
of Additional Information.
As of the Closing Date, Spartan CA Intermediate will distribute to its
shareholders of record the shares of Fidelity CA Income it received, so
that each Spartan CA Intermediate shareholder will receive the number of
full and fractional shares of Fidelity CA Income equal in value to the
aggregate net asset value of shares of Spartan CA Intermediate held by such
shareholder on the Closing Date; Spartan CA Intermediate will be liquidated
as soon as practicable thereafter. Such distribution will be accomplished
by opening accounts on the books of Fidelity CA Income in the names of the
Spartan CA Intermediate shareholders and by transferring thereto shares of
Fidelity CA Income. Each Spartan CA Intermediate shareholder's account
shall be credited with the respective PRO RATA number of full and
fractional shares (rounded to the third decimal place) of Fidelity CA
Income due that shareholder. Fidelity CA Income shall not issue
certificates representing its shares in connection with such exchange.
Accordingly, immediately after the Reorganization, each former Spartan CA
Intermediate shareholder will own shares of Fidelity CA Income equal to the
aggregate net asset value of that shareholder's shares of Spartan CA
Intermediate immediately prior to the Reorganization. The net asset value
per share of Fidelity CA Income will be unchanged by the transaction. Thus,
the Reorganization will not result in a dilution of any shareholder
interest.
Any transfer taxes payable upon issuance of shares of Fidelity CA Income
in a name other than that of the registered holder of the shares on the
books of Spartan CA Intermediate as of that time shall be paid by the
person to whom such shares are to be issued as a condition of such
transfer. Any reporting responsibility of Spartan CA Intermediate is and
will continue to be its responsibility up to and including the Closing Date
and such later date on which Spartan CA Intermediate is liquidated.
Pursuant to its management contract with Spartan CA Intermediate and its
all-inclusive management fee, FMR will bear the cost of the Reorganization,
including professional fees, expenses associated with the filing of
registration statements, and the cost of soliciting proxies for the
Meeting, which will consist principally of printing and mailing
prospectuses and proxy statements, together with the cost of any
supplementary solicitation. However, there may be some transaction costs
associated with portfolio adjustments to Spartan CA Intermediate and
Fidelity CA Income due to the Reorganization prior to the Closing Date
which will be borne by Spartan CA Intermediate and Fidelity CA Income,
respectively. Any transaction costs associated with portfolio adjustments
to Spartan CA Intermediate and Fidelity CA Income due to th e
Reorganization which occur after the Closing Date and any additional
merger-related costs attributable to Fidelity CA Income which occur after
the Closing Date will be borne by Fidelity CA Income. The funds may
recognize a taxable gain or loss on the disposition of securities pursuant
to these portfolio adjustments. See the section entitled "Reasons for the
Reorganization."
The consummation of the Reorganization is subject to a number of
conditions set forth in the Agreement, some of which may be waived by a
fund. In addition, the Agreement may be amended in any mutually agreeable
manner, except that no amendment that may have a materially adverse effect
on the shareholders' interests may be made subsequent to the Meeting.
REASONS FOR THE REORGANIZATION
The Board of Trustees (the Board) of the funds have determined that the
Reorganization is in the best interests of the shareholders of both funds
and that the Reorganization will not result in a dilution of the interests
of shareholders of either Fund.
In considering the Reorganization, the Board considered a number of
factors, including the following:
(1) the compatibility of the funds' investment objectives and policies;
(2) the historical performance of the funds;
(3) the relative expense ratios of the funds;
(4) the costs to be incurred by each fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) the relative size of the funds;
(7) the elimination of duplicative funds;
(8) the impact of changes to the municipal bond product line on the funds
and their shareholders; and
(9) the benefit to FMR.
FMR recommended the Reorganization to the Board at a meeting of the Board
on February 20, 1997. In recommending the Reorganization, FMR also advised
the Board that the funds have identical investment objectives and similar
policies and permissible investments. In particular, at that time FMR
informed the Board that the funds differed primarily with respect to their
expense structures and interest rate sensitivity. FMR subsequently noted to
the Board that differences between the funds with respect to minimum
investments, service features, and externalized fees have been eliminated.
The Board also considered that former shareholders of Spartan CA
Intermediate will receive shares of Fidelity CA Income equal to the value
of their shares of Spartan CA Intermediate. In addition, the funds
hav e rec eived an opinion of counsel that, except with respect
to Section 1256 contracts, the Reorganization will not result in any gain
or loss for Federal income tax purposes either to Spartan CA Intermediate
or Fidelity CA Income or to the shareholders of either fund.
Furthermore, on February 20, 1997, the Board considered that combining the
funds would result in an immediate benefit to shareholders by lowering
expenses, as a percentage of net assets, by 0.02% for shareholders of
Spartan CA Intermediate and approximately 0.05% for shareholders of
Fidelity CA Income (based on total fund operating expenses for the 12
months ended December 31, 1996), following the effective date of the
Reorganization. Subsequently, FMR informed the Board that effective April
1, 1997, it would voluntarily agree to reimburse Fidelity CA Income's total
operating expenses to the extent that they exceeded 0.55% of average net
assets. FMR also represented to the Board that it would guarantee an
expense ratio of 0.53% for the surviving fund (excluding interest, taxes,
brokerage commissions and extraordinary expenses) through December 31,
1999, resulting in a 0.02% savings to shareholders of both Spartan CA
Intermediate and Fidelity CA Income, if the Reorganization is approved. FMR
informed the Board that it would pay all of Spartan CA Intermediate's
expenses associated with the Reorganization, including professional fees
and the costs of proxy solicitation. The Board was informed that any
expenses associated with the Reorganization, including professional fees
and the costs of proxy solicitation, directly attributable to Fidelity CA
Income would be borne by Fidelity CA Income, provided they do not exceed
the fund's 0.55% expense cap. FMR further informed the Board that although
the funds would bear any costs (as described above) associated with
portfolio adjustments resulting from the Reorganization, FMR believed that
such costs would be counterbalanced by the reduction in the expense ratio
for both funds.
Finally, the Board considered the proposed Reorganization in the context
of a general goal of reducing the number of duplicative funds managed by
FMR. While the reduction of duplicative funds and funds with lower assets
potentially would benefit FMR, it also should benefit shareholders by
facilitating increased operational efficiencies.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
Fidelity California Municipal Trust (the trust) is registered with the
Securities and Exchange Commission (the Commission) as an open-end
management investment company. The trust's Trustees are authorized to issue
an unlimited number of shares of beneficial interest of separate series.
Fidelity CA Income is one of four funds of the trust. Each share of
Fidelity CA Income represents an equal proportionate interest with each
other share of the fund, and each such share of Fidelity CA Income is
entitled to equal voting, dividend, liquidation, and redemption rights.
Each shareholder of the fund is entitled to one vote for each dollar value
of net asset value of the fund that shareholder owns. Shares of Fidelity CA
Income have no preemptive or conversion rights. The voting and dividend
rights, the right of redemption, and the privilege of exchange are
described in the fund's Prospectus. Shares are fully paid and
nonassessable, except as set forth in the fund's Statement of Additional
Information under the heading "Shareholder and Trustee Liability."
The trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing
Trustees unless less than a majority of the Trustees holding office have
been elected by shareholders, at which time the Trustees then in office
will call a shareholder meeting for the election of Trustees. Under the
1940 Act, shareholders of record of at least two-thirds of the outstanding
shares of an investment company may remove a Trustee by votes cast in
person or by proxy at a meeting called for that purpose. The Trustees are
required to call a meeting of shareholders for the purpose of voting upon
the question of removal of any Trustee when requested in writing to do so
by the shareholders of record holding at least 10% of the trust's
outstanding shares.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Spartan CA Intermediate's assets for Fidelity CA Income's
shares and the assumption of the liabilities of Spartan CA Intermediate by
Fidelity CA Income is intended to qualify for federal income tax purposes
as a tax-free reorganization under the Code. With respect to the
Reorganization, the participating funds have received an opinion from
Kirkpatrick & Lockhart LLP, counsel to Spartan CA Intermediate and Fidelity
CA Income, substantially to the effect that:
(i) The acquisition by Fidelity CA Income of all of the assets of Spartan
CA Intermediate solely in exchange for Fidelity CA Income shares and the
assumption by Fidelity CA Income of Spartan CA Intermediate's liabilities,
followed by the distribution by Spartan CA Intermediate of Fidelity CA
Income shares to the shareholders of Spartan CA Intermediate pursuant to
the liquidation of Spartan CA Intermediate and constructively in exchange
for their Spartan CA Intermediate shares, will constitute a reorganization
within the meaning of section 368(a)(1)(C) of the Code, and Spartan CA
Intermediate and Fidelity CA Income will each be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
(ii) No gain or loss will be recognized by Spartan CA Intermediate upon
the transfer of all of its assets to Fidelity CA Income in exchange solely
for Fidelity CA Income shares and Fidelity CA Income's assumption of
Spartan CA Intermediate's liabilities, followed by Spartan CA
Intermediate's subsequent distribution of those shares to shareholders in
liquidation of Spartan CA Intermediate;
(iii) No gain or loss will be recognized by Fidelity CA Income upon the
receipt of the assets of Spartan CA Intermediate in exchange solely for
Fidelity CA Income shares and its assumption of Spartan CA Intermediate's
liabilities;
(iv) The shareholders of Spartan CA Intermediate will recognize no gain or
loss upon the exchange of their Spartan CA Intermediate shares solely for
Fidelity CA Income shares;
(v) The basis of Spartan CA Intermediate's assets in the hands of Fidelity
CA Income will be the same as the basis of those assets in the hands of
Spartan CA Intermediate immediately prior to the Reorganization, and the
holding period of those assets in the hands of Fidelity CA Income will
include the holding period of those assets in the hands of Spartan CA
Intermediate;
(vi) The basis of Spartan CA Intermediate shareholders in Fidelity CA
Income shares will be the same as their basis in Spartan CA Intermediate
shares to be surrendered in exchange therefor; and
(vii) The holding period of the Fidelity CA Income shares to be received
by the Spartan CA Intermediate shareholders will include the period during
which the Spartan CA Intermediate shares to be surrendered in exchange
therefor were held, provided such Spartan CA Intermediate shares were held
as capital assets by those shareholders on the date of the Reorganization.
Shareholders of Spartan CA Intermediate should consult their tax advisers
regarding the effect, if any, of the proposed Reorganization in light of
their individual circumstances. Because the foregoing discussion only
relates to the federal income tax consequences of the Reorganization, those
shareholders also should consult their tax advisers as to state and local
tax consequences, if any, of the Reorganization.
CAPITALIZATION
The following table shows the capitalization of the funds as of February
28, 1997 and on a pro forma combined basis (unaudited) as of that date
giving effect to the Reorganization.
Net Assets Net Asset Shares
Value Outstanding
Per Share
Spartan CA Intermediate $ 74,735,701 $ 9.95 7,509,522
Fidelity CA Income $ 485,897,91 $ 11.81 41,148,631
5
Pro Forma Combined Fund $ 560,633,61 $ 11.81 47,471,094
6
CONCLUSION
The Agreement and Plan of Reorganization and the transactions provided for
therein were approved by the Board at a meeting held on February 20, 1997.
The Board of Trustees of Fidelity California Municipal Trust determined
that the proposed Reorganization is in the best interests of shareholders
of each fund and that the interests of existing shareholders of Spartan CA
Intermediate and Fidelity CA Income would not be diluted as a result of the
Reorganization. In the event that the Reorganization is not consummated,
Spartan CA Intermediate will continue to engage in business as a fund of a
registered investment company and the Board of Fidelity California
Municipal Trust will consider other proposals for the reorganization or
liquidation of the fund.
3. TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN FIDELITY
CALIFORNIA INSURED MUNICIPAL INCOME FUND AND FIDELITY CALIFORNIA MUNICIPAL
INCOME FUND.
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Agreement. Significant provisions of the
Agreement are summarized below; however, this summary is qualified in its
entirety by reference to the Agreement, a copy of which is attached as
Exhibit 3 to this Proxy Statement.
The Agreement contemplates (a) Fidelity CA Income acquiring as of the
Closing Date all of the assets of Fidelity CA Insured in exchange solely
for shares of Fidelity CA Income and the assumption by Fidelity CA Income
of Fidelity CA Insured's liabilities; and (b) the distribution of shares of
Fidelity CA Income to the shareholders of Fidelity CA Insured as provided
for in the Agreement.
The assets of Fidelity CA Insured to be acquired by Fidelity CA Income
include all cash, cash equivalents, securities, receivables (including
interest or dividends receivables), claims, chooses in action, and other
property owned by Fidelity CA Insured, and any deferred or prepaid expenses
shown as an asset on the books of Fidelity CA Insured on the Closing Date.
Fidelity CA Income will assume from Fidelity CA Insured all liabilities,
debts, obligations, and duties of Fidelity CA Insured of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable on
the Closing Date, and whether or not specifically referred to in the
Agreement; provided, however, that Fidelity CA Insured will use its best
efforts, to the extent practicable, to discharge all of its known
liabilities prior to the Closing Date, other than liabilities incurred in
the ordinary course of business. Fidelity CA Income also will deliver to
Fidelity CA Insured the number of full and fractional shares of Fidelity CA
Income having an aggregate net asset value equal to the value of the assets
of Fidelity CA Insured less the respective liabilities of Fidelity CA
Insured as of the Closing Date. Fidelity CA Insured shall then distribute
the Fidelity CA Income shares PRO RATA to its shareholders.
The value of Fidelity CA Insured's assets to be acquired by Fidelity CA
Income and the amount of its liabilities to be assumed by Fidelity CA
Income will be determined as of the close of business (4:00 p.m. Eastern
time) of Fidelity CA Insured on the Closing Date, using the valuation
procedures set forth in Fidelity CA Insured's then-current Prospectus and
Statement of Additional Information. The net asset value of a share of
Fidelity CA Income will be determined as of the same time using the
valuation procedures set forth in its then-current Prospectus and Statement
of Additional Information.
As of the Closing Date, Fidelity CA Insured will distribute to its
shareholders of record the shares of Fidelity CA Income it received, so
that each Fidelity CA Insured shareholder will receive the number of full
and fractional shares of Fidelity CA Income equal in value to the aggregate
net asset value of shares of Fidelity CA Insured held by such shareholder
on the Closing Date; Fidelity CA Insured will be liquidated as soon as
practicable thereafter. Such distribution will be accomplished by opening
accounts on the books of Fidelity CA Income in the names of the Fidelity CA
Insured shareholders and by transferring thereto shares of Fidelity CA
Income. Each Fidelity CA Insured shareholder's account shall be credited
with the respective PRO RATA number of full and fractional shares (rounded
to the third decimal place) of Fidelity CA Income due that shareholder.
Fidelity CA Income shall not issue certificates representing its shares in
connection with such exchange.
Accordingly, immediately after the Reorganization, each former Fidelity CA
Insured shareholder will own shares of Fidelity CA Income equal to the
aggregate net asset value of that shareholder's shares of Fidelity CA
Insured immediately prior to the Reorganization. The net asset value per
share of Fidelity CA Income will be unchanged by the transaction. Thus, the
Reorganization will not result in a dilution of any shareholder interest.
Any transfer taxes payable upon issuance of shares of Fidelity CA Income
in a name other than that of the registered holder of the shares on the
books of Fidelity CA Insured as of that time shall be paid by the person to
whom such shares are to be issued as a condition of such transfer. Any
reporting responsibility of Fidelity CA Insured is and will continue to be
its responsibility up to and including the Closing Date and such later date
on which Fidelity CA Insured is liquidated.
Pursuant to FMR's management contract with Fidelity CA Insured and
Fidelity CA Income, any merger-related expenses directly attributable to
Fidelity CA Insured or Fidelity CA Income will be borne by the individual
fund which incurs them. There may be some transaction costs associated with
portfolio adjustments to Fidelity CA Insured and Fidelity CA Income due
to the Re organization prior to the Closing Date which will be borne
by Fidelity CA Insured and Fidelity CA Income, respectively. Any
transaction costs associated with portfolio adjustments to Fidelity CA
Insured and Fidelity CA Income due to the Reorganization which occur after
the Closing Date will be borne by Fidelity CA Income. The funds may
recognize a taxable gain or loss on the disposition of securities pursuant
to these portfolio adjustments. See the section entitled "Reasons for the
Reorganization."
The consummation of the Reorganization is subject to a number of
conditions set forth in the Agreement, some of which may be waived by a
fund. In addition, the Agreement may be amended in any mutually agreeable
manner, except that no amendment that may have a materially adverse effect
on the shareholders' interests may be made subsequent to the Meeting.
REASONS FOR THE REORGANIZATION
The Board of Trustees (the Board) of the funds have determined that the
Reorganization is in the best interests of the shareholders of both funds
and that the Reorganization will not result in a dilution of the interests
of shareholders of either Fund.
In considering the Reorganization, the Board considered a number of
factors, including the following:
(1) the compatibility of the funds' investment objectives and policies;
(2) the historical performance of the funds;
(3) the relative expense ratios of the funds;
(4) the costs to be incurred by each fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) the relative size of the funds;
(7) the elimination of duplicative funds;
(8) the impact of changes to the municipal bond product line on the funds
and their shareholders; and
(9) the benefit to FMR.
FMR recommended the Reorganization to the Board at a meeting of the Board
on February 20, 1997. In recommending the Reorganization, FMR also advised
the Board that the funds have identical investment objectives and similar
policies and permissible investments. In particular, at that time FMR
informed the Board that the funds differed primarily with respect to their
level of holdings in insured bonds. FMR subsequently noted to the Board
that changes to the funds with respect to minimum investments have been
made.
The Board also considered that former shareholders of Fidelity CA Insured
will receive shares of Fidelity CA Income equal to the value of their
shares of Fidelity CA Insured. In addition, the funds have
receive d an opinion of counsel that, except with respect to Section
1256 contracts, the Reorganization will not result in any gain or loss for
Federal income tax purposes either to Fidelity CA Insured or Fidelity CA
Income or to the shareholders of either fund.
Furthermore, on February 20, 1997, the Board considered that combining the
funds would result in an immediate benefit to shareholders by lowering
expenses, as a percentage of net assets, by approximately 0.07% for
shareholders of Fidelity CA Insured and approximately 0.05% for
shareholders of Fidelity CA Income (based on total fund operating expenses
for the 12 months ended December 31, 1996), following the effective date of
the Reorganization. Subsequently, FMR informed the Board that effective
April 1, 1997, it would voluntarily agree to reimburse Fidelity CA
Insured's and Fidelity CA Income's total operating expenses to the extent
that they exceeded 0.55% of average net assets. FMR also represented to the
Board that it would guarantee an expense ratio of 0.53% for the surviving
fund (excluding interest, taxes, brokerage commissions and extraordinary
expenses) through December 31, 1999, resulting in a 0.02% savings to
shareholders of both Fidelity CA Insured and Fidelity CA Income, if the
Reorganization is approved. FMR informed the Board that any expenses
associated with the Reorganization, including professional fees and the
costs of proxy solicitation, directly attributable to Fidelity CA Insured
or Fidelity CA Income would be borne by the individual fund which incurred
them, provided they do not exceed the funds' 0.55% expense caps. FMR
further informed the Board that although the funds would bear any costs (as
described above) associated with portfolio adjustments resulting from the
Reorganization, FMR believed that such costs would be counterbalanced by
the reduction in the expense ratio for both funds.
Finally, the Board considered the proposed Reorganization in the context
of a general goal of reducing the number of duplicative funds managed by
FMR. While the reduction of duplicative funds and funds with lower assets
potentially would benefit FMR, it also should benefit shareholders by
facilitating increased operational efficiencies.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
Fidelity California Municipal Trust (the trust) is registered with the
Securities and Exchange Commission (the Commission) as an open-end
management investment company. The trust's Trustees are authorized to issue
an unlimited number of shares of beneficial interest of separate series.
Fidelity CA Income is one of four funds of the trust. Each share of
Fidelity CA Income represents an equal proportionate interest with each
other share of the fund, and each such share of Fidelity CA Income is
entitled to equal voting, dividend, liquidation, and redemption rights.
Each shareholder of the fund is entitled to one vote for each dollar value
of net asset value of the fund that shareholder owns. Shares of Fidelity CA
Income have no preemptive or conversion rights. The voting and dividend
rights, the right of redemption, and the privilege of exchange are
described in the fund's Prospectus. Shares are fully paid and
nonassessable, except as set forth in the fund's Statement of Additional
Information under the heading "Shareholder and Trustee Liability."
The trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing
Trustees unless less than a majority of the Trustees holding office have
been elected by shareholders, at which time the Trustees then in office
will call a shareholder meeting for the election of Trustees. Under the
1940 Act, shareholders of record of at least two-thirds of the outstanding
shares of an investment company may remove a Trustee by votes cast in
person or by proxy at a meeting called for that purpose. The Trustees are
required to call a meeting of shareholders for the purpose of voting upon
the question of removal of any Trustee when requested in writing to do so
by the shareholders of record holding at least 10% of the trust's
outstanding shares.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Fidelity CA Insured's assets for Fidelity CA Income's
shares and the assumption of the liabilities of Fidelity CA Insured by
Fidelity CA Income is intended to qualify for federal income tax purposes
as a tax-free reorganization under the Code. With respect to the
Reorganization, the participating funds have received an opinion from
Kirkpatrick & Lockhart LLP, counsel to Fidelity CA Insured and Fidelity CA
Income, substantially to the effect that:
(i) The acquisition by Fidelity CA Income of all of the assets of Fidelity
CA Insured solely in exchange for Fidelity CA Income shares and the
assumption by Fidelity CA Income of Fidelity CA Insured's liabilities,
followed by the distribution by Fidelity CA Insured of Fidelity CA Income
shares to the shareholders of Fidelity CA Insured pursuant to the
liquidation of Fidelity CA Insured and constructively in exchange for their
Fidelity CA Insured shares, will constitute a reorganization within the
meaning of section 368(a)(1)(C) of the Code, and Fidelity CA Insured and
Fidelity CA Income will each be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
(ii) No gain or loss will be recognized by Fidelity CA Insured upon the
transfer of all of its assets to Fidelity CA Income in exchange solely for
Fidelity CA Income shares and Fidelity CA Income's assumption of Fidelity
CA Insured's liabilities, followed by Fidelity CA Insured's subsequent
distribution of those shares to shareholders in liquidation of Fidelity CA
Insured;
(iii) No gain or loss will be recognized by Fidelity CA Income upon the
receipt of the assets of Fidelity CA Insured in exchange solely for
Fidelity CA Income shares and its assumption of Fidelity CA Insured's
liabilities;
(iv) The shareholders of Fidelity CA Insured will recognize no gain or
loss upon the exchange of their Fidelity CA Insured shares solely for
Fidelity CA Income shares;
(v) The basis of Fidelity CA Insured's assets in the hands of Fidelity CA
Income will be the same as the basis of those assets in the hands of
Fidelity CA Insured immediately prior to the Reorganization, and the
holding period of those assets in the hands of Fidelity CA Income will
include the holding period of those assets in the hands of Fidelity CA
Insured;
(vi) The basis of Fidelity CA Insured shareholders in Fidelity CA Income
shares will be the same as their basis in Fidelity CA Insured shares to be
surrendered in exchange therefor; and
(vii) The holding period of the Fidelity CA Income shares to be received
by the Fidelity CA Insured shareholders will include the period during
which the Fidelity CA Insured shares to be surrendered in exchange therefor
were held, provided such Fidelity CA Insured shares were held as capital
assets by those shareholders on the date of the Reorganization.
Shareholders of Fidelity CA Insured should consult their tax advisers
regarding the effect, if any, of the proposed Reorganization in light of
their individual circumstances. Because the foregoing discussion only
relates to the federal income tax consequences of the Reorganization, those
shareholders also should consult their tax advisers as to state and local
tax consequences, if any, of the Reorganization.
CAPITALIZATION
The following table shows the capitalization of the funds as of February
28, 1997 and on a pro forma combined basis (unaudited) as of that date
giving effect to the Reorganizations.
Net Assets Net Asset Shares
Value Outstanding
Per Share
Fidelity CA Insured $ 205,917,27 $ 10.35 19,890,562
9
Fidelity CA Income $ 485,897,91 $ 11.81 41,148,631
5
Pro Forma Combined Fund $ 691,815,19 $ 11.81 58,578,763
4
CONCLUSION
The Agreement and Plan of Reorganization and the transactions provided for
therein were approved by the Board at a meeting held on February 20, 1997.
The Board of Trustees of Fidelity California Municipal Trust determined
that the proposed Reorganization is in the best interests of shareholders
of each fund and that the interests of existing shareholders of Fidelity CA
Insured and Fidelity CA Income would not be diluted as a result of the
Reorganization. In the event that the Reorganization is not consummated,
Fidelity CA Insured will continue to engage in business as a fund of a
registered investment company and the Board of Fidelity California
Municipal Trust will consider other proposals for the reorganization or
liquidation of the fund.
COMBINED CAPITALIZATION
The following table shows the capitalization of the funds as of February
28, 1997 and on a pro forma combined basis (unaudited) as of that date
giving effect to all three Reorganizations.
Net Assets Net Asset Shares
Value Outstandin
Per Share g
Spartan CA Income $ 401,503,212 $ 10.60 37,882,646
Spartan CA Intermediate $ 74,735,701 $ 9.95 7,509,522
Fidelity CA Insured $ 205,917,279 $ 10.35 19,890,562
Fidelity CA Income $ 485,897,915 $ 11.81 41,148,631
Pro Forma Combined $ 1,168,054,10 $ 11.81 98,903,819
Fund 7
ADDITIONAL INFORMATION ABOUT FIDELITY CALIFORNIA
MUNICIPAL INCOME FUND
Fidelity California Municipal Income Fund's Prospectus dated April 19,
1997, is enclosed with this Proxy Statement and is incorporated herein by
reference. The Prospectus contains additional information about the fund
including its investment objective and policies, investment adviser,
advisory fees and expenses, organization, and procedures for purchasing and
redeeming shares.
FINANCIAL HIGHLIGHTS
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.Years ended 1997 1996E 1995 1994F 1993D 1992C 1991C 1990C 1989C 1988C
February 28
2.Net asset value, $ 11.7 $ 11.1 $ 12.1 $ 12.4 $ 11.5 $ 11.3 $ 10.9 $ 11.0 $ 10.6 $ 10.9
beginning 20 20 00 30 40 00 40 80 20 50
of period
3.Income from .599 .625 .685 .719 .611 .744 .752 .756 .758 .760
Investment
Operations
Net interest
income
4. Net realized and .096 .597 (.830) (.060) .890 .240 .360 (.140) .460 (.270)
unrealized
gain (loss)
5. Total from .695 1.222 (.145) .659 1.501 .984 1.112 .616 1.218 .490
investment
operations
6.Less Distributions (.602) (.622) (.685) (.719) (.611) (.744) (.752) (.756) (.758) (.760)
From net interest
income
7. From net (.003) -- (.150) (.270) -- -- -- -- -- (.060)
realized gain
8. Total (.605) (.622) (.835) (.989) (.611) (.744) (.752) (.756) (.758) (.820)
distributions
9.Net asset value, $ 11.8 $ 11.7 $ 11.1 $ 12.1 $ 12.4 $ 11.5 $ 11.3 $ 10.9 $ 11.0 $ 10.6
end of period 10 20 20 00 30 40 00 40 80 20
10.Total returnB 6.16 11.25 (.91) 5.41 13.40 8.94 10.44 5.61 11.85 4.72
% % % % % % % % % %
</TABLE>
RATIOS AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11.Net assets, end $ 486 $ 498 $ 477 $ 575 $ 587 $ 529 $ 524 $ 514 $ 494 $ 399
of period
(In millions)
12.Ratio of .57% .58% .56% .57% .60% .59% .58% .60% .61% .73%
expenses to A
average net assets
13.Ratio of net 5.19 5.44 6.16 5.78 6.17 6.52 6.71 6.73 7.05 7.15
interest income % % % % % A % % % % %
to average net
assets
14.Portfolio turnover 17% 37% 29% 44% 32% 23% 15% 34% 21% 52%
rate A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C YEARS ENDED APRIL 30
D MAY 1, 1992 TO FEBRUARY 28, 1993
E YEAR ENDED FEBRUARY 29
F EFFECTIVE MARCH 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
MISCELLANEOUS
LEGAL MATTERS. Certain legal matters in connection with the issuance of
Fidelity CA Income shares have be en passed upon by
Kirkpatrick & Lockhart LLP, counsel to the trust.
EXPERTS. The audited financial statements of Spartan CA Income, Spartan CA
Intermediate, Fidelity CA Insured, and Fidelity CA Income, incorporated by
reference into the Statements of Additional Information, have been examined
by Price Waterhouse LLP, independent accountants, whose reports thereon are
included in the Annual Reports to Shareholders for the fiscal year ended
February 28, 1997. The financial statements audited by Price Waterhouse LLP
have been incorporated by reference in reliance on their reports given on
their authority as experts in auditing and accounting.
AVAILABLE INFORMATION. Spartan CA Income, Spartan CA Intermediate, Fidelity
CA Insured, and Fidelity CA Income are each subject to the informational
requirements of the Securities Exchange Act of 1934 and the 1940 Act, and
in accordance therewith file reports, proxy material, and other information
with the SEC. Such reports, proxy material, and other information can be
inspected and copied at the Public Reference Room maintained by the SEC at
450 Fifth Street, N.W., Washington D.C. 20549 and 7 World Trade Center, New
York, NY 10048. Copies of such material can also be obtained from the
Public Reference Branch Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington D.C. 20549, at
prescribed rates.
ATTACHMENT 1
EXCERPTS FROM ANNUAL REPORT OF FIDELITY CALIFORNIA MUNICIPAL INCOME FUND
DATED FEBRUARY 28, 1997
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity California Municipal Income 6.16% 7.10% 6.68%
Lehman Brothers California Municipal 5.49% n/a n/a
Bond Index
California Municipal Debt Funds Average 4.81% 6.94% 6.67%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each fund's total return, then taking an arithmetic average. This may
produce a slightly different figure than that obtained by averaging the
cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
1987/02/28 10000.00 10000.00
1987/03/31 9928.89 9894.00
1987/04/30 9168.64 9397.52
1987/05/31 9030.60 9350.91
1987/06/30 9192.73 9625.45
1987/07/31 9297.32 9723.63
1987/08/31 9343.70 9745.51
1987/09/30 8839.66 9386.19
1987/10/31 8921.84 9419.42
1987/11/30 9133.43 9665.36
1987/12/31 9311.80 9805.60
1988/01/31 9756.04 10154.88
1988/02/29 9881.50 10262.22
1988/03/31 9562.47 10143.17
1988/04/30 9601.15 10220.26
1988/05/31 9640.37 10190.73
1988/06/30 9796.64 10339.82
1988/07/31 9854.18 10407.23
1988/08/31 9894.08 10416.39
1988/09/30 10109.48 10604.93
1988/10/31 10344.86 10791.57
1988/11/30 10226.16 10692.72
1988/12/31 10408.28 10802.11
1989/01/31 10553.08 11025.50
1989/02/28 10451.49 10899.70
1989/03/31 10436.14 10873.65
1989/04/30 10738.93 11131.79
1989/05/31 10966.42 11362.99
1989/06/30 11106.09 11517.30
1989/07/31 11206.73 11674.05
1989/08/31 11070.50 11559.76
1989/09/30 11084.77 11525.32
1989/10/31 11195.17 11666.27
1989/11/30 11369.23 11870.43
1989/12/31 11414.96 11967.53
1990/01/31 11335.13 11910.92
1990/02/28 11480.00 12016.93
1990/03/31 11505.39 12020.54
1990/04/30 11341.38 11933.51
1990/05/31 11613.96 12194.02
1990/06/30 11720.72 12301.20
1990/07/31 11901.84 12482.03
1990/08/31 11737.09 12300.79
1990/09/30 11783.67 12307.80
1990/10/31 11935.94 12531.07
1990/11/30 12163.21 12783.07
1990/12/31 12209.23 12838.67
1991/01/31 12320.09 13010.97
1991/02/28 12365.58 13124.16
1991/03/31 12379.13 13128.89
1991/04/30 12525.10 13303.50
1991/05/31 12649.53 13421.77
1991/06/30 12652.35 13408.48
1991/07/31 12811.84 13571.80
1991/08/31 12926.63 13750.54
1991/09/30 13065.19 13929.57
1991/10/31 13226.52 14054.94
1991/11/30 13228.49 14094.15
1991/12/31 13449.54 14396.61
1992/01/31 13521.98 14429.43
1992/02/29 13545.04 14434.05
1992/03/31 13537.66 14439.39
1992/04/30 13644.81 14567.90
1992/05/31 13814.63 14739.37
1992/06/30 14030.25 14986.69
1992/07/31 14464.75 15435.99
1992/08/31 14264.15 15285.49
1992/09/30 14336.93 15385.46
1992/10/31 14071.18 15234.22
1992/11/30 14399.42 15507.07
1992/12/31 14621.55 15665.39
1993/01/31 14796.09 15847.58
1993/02/28 15472.68 16420.79
1993/03/31 15289.18 16247.22
1993/04/30 15426.34 16411.15
1993/05/31 15516.13 16503.39
1993/06/30 15766.18 16778.83
1993/07/31 15766.16 16800.81
1993/08/31 16150.62 17150.60
1993/09/30 16354.82 17345.95
1993/10/31 16382.74 17379.42
1993/11/30 16213.59 17226.31
1993/12/31 16585.71 17589.96
1994/01/31 16773.43 17790.84
1994/02/28 16310.01 17330.05
1994/03/31 15475.95 16624.37
1994/04/30 15540.95 16765.35
1994/05/31 15647.95 16910.70
1994/06/30 15488.04 16807.38
1994/07/31 15803.70 17115.46
1994/08/31 15858.11 17174.68
1994/09/30 15614.79 16922.55
1994/10/31 15231.70 16622.01
1994/11/30 14857.60 16321.48
1994/12/31 15112.62 16680.72
1995/01/31 15654.16 17157.45
1995/02/28 16161.40 17656.39
1995/03/31 16327.39 17859.26
1995/04/30 16330.49 17880.34
1995/05/31 16878.67 18450.90
1995/06/30 16659.65 18290.38
1995/07/31 16811.99 18463.77
1995/08/31 17008.61 18697.89
1995/09/30 17160.04 18816.25
1995/10/31 17448.91 19089.84
1995/11/30 17795.94 19406.54
1995/12/31 18010.21 19593.03
1996/01/31 18119.84 19740.96
1996/02/29 17979.98 19607.71
1996/03/31 17705.43 19357.12
1996/04/30 17647.50 19302.34
1996/05/31 17634.86 19294.62
1996/06/30 17868.26 19504.74
1996/07/31 18042.50 19682.23
1996/08/31 18075.01 19677.51
1996/09/30 18325.21 19952.99
1996/10/31 18564.41 20178.66
1996/11/30 18960.59 20547.93
1996/12/31 18866.62 20461.63
1997/01/31 18900.42 20500.30
1997/02/28 19086.83 20688.50
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity California Municipal Income Fund on February 28, 1987. As the
chart shows, by February 28, 1997, the value of the investment would have
grown to $19,087 - a 90.87% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index, which
reflects the performance of the investment-grade municipal bond market, did
over the same period. With dividends and capital gains, if any, reinvested,
the same $10,000 would have grown to $20,688 - a 106.88% increase.
MARKET RECAP
Stable demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in the 12 months
ending February 28, 1997.
However, anticipation of
short-term interest rate increases
by the Federal Reserve Board
negatively affected all bonds. For
the period, the Lehman
Brothers Municipal Bond Index
- - a broad measure of the
municipal bond market - had a
total return of 5.51%. In
comparison, the Lehman Brothers
Aggregate Bond Index - a broad
measure of the performance of
the U.S. taxable bond market -
returned 5.35%. New issue
supply in the municipal market
was strong through the first half of
the period, but insurance
companies and individual
investors helped sustain demand.
The diminishing likelihood of
significant tax reform in the near
future also helped support the
muni market. Like most domestic
bonds, munis were affected by
signs of strength in the economy
in the first half of 1996.
Nevertheless, the market
conditions that supported the
muni market helped it enter the fall
trading at expensive levels
relative to its taxable counterparts.
Munis stalled because their rich
valuations inhibited demand and
encouraged selling. From
December on, most bond markets
suffered from fears - confirmed
by Fed Chairman Alan
Greenspan's testimony before
Congress in late February - that
latent inflation pressures might
encourage the Fed to raise
short-term rates. Munis, however,
outperformed over the past few
months, in part because of a thin
supply of new issues.
An interview with Jonathan Short, Portfolio Manager of Fidelity California
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, JON?
A. For the year ending February 28, 1997, the fund had a total return of
6.16%. For comparison purposes, the California municipal debt funds
average, as tracked by Lipper Analytical Services, returned 4.81%, and the
Lehman Brothers California Municipal Bond Index returned 5.49% for the same
one year period.
Q. WHAT TYPES OF BONDS DID WELL?
A. Baa-rated securities were some of the market's - and the fund's - best
performers and were a key reason why the fund fared better than many of its
competitors. The main driver for their strong returns was tightening credit
spreads - meaning lower-quality bonds' yields fell relative to
higher-quality bonds during the period. As a result, the prices of
lower-quality bonds generally performed better than higher-quality
securities. Toward the end of the period, I sold some of these Baa-rated
securities in order to lock in their gains. I would also point to
non-callable bonds, which can't be redeemed by their issuer prior to
maturity, as other winners during the past six months. When interest rates
fall, municipal issuers often call - or redeem - bonds before their
maturity and issue new bonds as a way to lower their interest costs.
Because the bond market experienced a small rally over the past six months,
non-callable bonds generally performed better than callable bonds.
Q. WHAT STRATEGIES DID YOU EMPLOY OVER THE PAST SIX MONTHS?
A. I focused on bonds with maturities in the intermediate range - those
with maturities of between five and 20 years - while keeping the fund's
holdings in shorter- and longer-term bonds light. I chose to emphasize
intermediate bonds because I believed that their expected total return was
greater than that of longer-maturity bonds. Additionally, I did not believe
that many longer-term securities offered enough additional yield to
compensate investors for their added interest rate sensitivity. All in all,
I felt that intermediate maturity bonds were attractive on a risk/return
basis.
Q. THERE HAS BEEN A LOT OF CONSOLIDATION IN THE HEALTH CARE SECTOR
RECENTLY. DID IT HAVE ANY EFFECT ON THE FUND?
A. Yes, it did. To the benefit of the fund, bonds issued by Sequoia
Hospital performed well when it was merged with Catholic Health Care West.
Additionally, our holdings in Eisenhower Hospital, issued by Rancho Mirage
Joint Powers Financing Authority, were advance refunded. With an advance
refunding, an issuer with existing bonds in the market will issue a second
set of bonds. Proceeds from this sale are then invested in high-quality
U.S. Treasury securities, and these Treasuries then secure the original
bonds until the call date.
Q. THE FUND'S STAKE IN GENERAL OBLIGATION BONDS (GOS) ISSUED BY THE STATE
HAS INCREASED OVER THE PAST SIX MONTHS. WHY WERE THESE SECURITIES
ATTRACTIVE?
A. GOs issued by the state are backed by its full faith and credit and are
repaid by general revenue, in contrast to revenue from a specific facility
or project built with borrowed funds. In my opinion the state's credit
worthiness has improved as its economy has rebounded. In fact, revenue
collections have improved to the point where estimates call for the state's
budget to post $1 billion more in revenues than originally projected.
Q. WHAT'S YOUR OUTLOOK?
A. From a supply and demand standpoint, I'm optimistic about municipals. I
don't expect to see a tremendous amount of new bonds issued. What increase
in supply we see likely will be easily digested if demand remains firm. How
municipals fare over the next year will depend heavily on the direction of
interest rates, but I don't think anyone can accurately pinpoint where
interest rates will be a year from now. That said, we may continue to see
some volatility in the bond market as long as there are conflicting signs
about the economy and inflation trends.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT DATED FEBRUARY 28, 1997.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
JONATHAN SHORT ON
CALIFORNIA'S ECONOMY:
"The strength of California's
economic rebound is an
important component in the
overall performance of
California municipal bonds.
For a number of reasons, I am
optimistic about California's
economy. The first is
employment growth,
which continues to outpace
the nation as a whole.
Second, the state budget is
posting revenues well ahead
of projections, thanks mostly
to rising tax collections. Third,
the rebound has grown to be
more broad-based, with
Southern California finally
showing improvements after
lagging behind the northern
part of the state. Finally,
permits to build new houses
are up about 15% this year
and sales of existing homes
seem to have stabilized."
ATTACHMENT 2
ANNUAL FUND OPERATING EXPENSES AND EXAMPLES OF FUND EXPENSES FOR CERTAIN
REORGANIZATIONS
IF JUST SPARTAN CA INCOME REORGANIZATION IS APPROVED:
Spartan Fidelity CA Pro Forma
CA IncomeA Expenses
IncomeC Combined
FundB
Management Fees 0.55% 0.37% 0.36%
(after reimbursement)
Other Expenses 0.00% 0.18% 0.17%
Total Fund Operating Expenses 0.55% 0.55% 0.53%
(after reimbursement)
A Effective April 1, 1997, FMR voluntarily agreed to reimburse the fund to
the extent that total operating expenses exceed 0.55% (excluding interest,
taxes, brokerage commissions and extraordinary expenses). If this agreement
were not in effect, the management fee, other expenses, and total fund
operating expenses, as a percentage of average net assets, would have been
0.39%, 0.18%, and 0.57%, respectively.
B FMR has agreed to limit the combined fund's total operating expenses to
0.53% of its average net assets (excluding interest, taxes, brokerage
commissions and extraordinary expenses) through December 31, 1999. If this
agreement were not in effect, the management fee, other expenses, and total
operating expenses, as a percentage of average net assets, would be 0.39%,
0.17%, and 0.56%, respectively.
C FMR has entered into arrangements on behalf of the fund with the fund's
custodian and transfer agent whereby interest earned on uninvested cash
balances is used to reduce fund expenses. Including these reductions the
total operating expenses presented in the table would have been 0.54%.
EXAMPLE:
After 1 After 3 After 5 After 10
Year Years Years Years
Spartan CA Income $6 $18 $31 $69
Fidelity CA Income $6 $18 $31 $69
Combined Fund $5 $17 $30 $66
IF JUST SPARTAN CA INTERMEDIATE REORGANIZATION IS APPROVED:
Spartan CA Fidelity CA Pro
IntermediateC IncomeA Forma
Expenses
Combined
FundB
Management Fees 0.55% 0.37% 0.35%
(after reimbursement)
Other Expenses 0.00% 0.18% 0.18%
Total Fund 0.55% 0.55% 0.53%
Operating Expenses
(after reimbursement)
A Effective April 1, 1997, FMR voluntarily agreed to reimburse the fund to
the extent that total operating expenses exceed 0.55% (excluding interest,
taxes, brokerage commissions and extraordinary expenses). If this agreement
were not in effect, the management fee, other expenses, and total fund
operating expenses, as a percentage of average net assets, would have been
0.39%, 0.18%, and 0.57%, respectively.
B FMR has agreed to limit the combined fund's total operating expenses to
0.53% of its average net assets (excluding interest, taxes, brokerage
commissions and extraordinary expenses) through December 31, 1999. If this
agreement were not in effect, the management fee, other expenses, and total
operating expenses, as a percentage of average net assets, would be 0.39%,
0.18%, and 0.57%, respectively.
C FMR has entered into arrangements on behalf of the fund with the fund's
custodian and transfer agent whereby interest earned on uninvested cash
balances is used to reduce fund expenses. Including these reductions the
total operating expenses presented in the table would have been 0.54%.
EXAMPLE:
After 1 After 3 After 5 After 10
Year Years Years Years
Spartan CA Intermediate $6 $18 $31 $69
Fidelity CA Income $6 $18 $31 $69
Combined Fund $5 $17 $30 $66
IF JUST FIDELITY CA INSURED REORGANIZATION IS APPROVED:
Fidelity CA Fidelity CA Pro
InsuredA IncomeA Forma
Expenses
Combined
FundB
Management Fees 0.34% 0.37% 0.35%
(after reimbursement)
Other Expenses 0.21% 0.18% 0.18%
Total Fund Operating 0.55% 0.55% 0.53%
Expenses
(after reimbursement)
A Effective April 1, 1997, FMR voluntarily agreed to reimburse the fund to
the extent that total operating expenses exceed 0.55% (excluding interest,
taxes, brokerage commissions and extraordinary expenses). If this agreement
were not in effect, the management fee, other expenses, and total fund
operating expenses, as a percentage of average net assets, would have been
0.39%, 0.21%, and 0.60%, respectively, for Fidelity CA Insured and 0.39%,
0.18%, and 0.57%, respectively, for Fidelity CA Income.
B FMR has agreed to limit the combined fund's total operating expenses to
0.53% of its average net assets (excluding interest, taxes, brokerage
commissions and extraordinary expenses) through December 31, 1999. If this
agreement were not in effect, the management fee, other expenses, and total
operating expenses, as a percentage of average net assets, would be 0.39%,
0.18%, and 0.57%, respectively.
EXAMPLE:
After 1 After 3 After 5 After 10
Year Years Years Years
Fidelity CA Insured $6 $18 $31 $69
Fidelity CA Income $6 $18 $31 $69
Combined Fund $5 $17 $30 $66
IF JUST SPARTAN CA INCOME AND SPARTAN CA INTERMEDIATE REORGANIZATIONS ARE
APPROVED:
Spartan Spartan CA Fidelity Pro
CA Intermediate CA Forma
IncomeC C IncomeA Expenses
Combined
FundB
Management Fees 0.55% 0.55% 0.37% 0.36%
(after
reimbursement)
Other Expenses 0.00% 0.00% 0.18% 0.17%
Total Fund 0.55% 0.55% 0.55% 0.53%
Operating
Expenses
(after
reimbursement)
A Effective April 1, 1997, FMR voluntarily agreed to reimburse the fund to
the extent that total operating expenses exceed 0.55% (excluding interest,
taxes, brokerage commissions and extraordinary expenses). If this agreement
were not in effect, the management fee, other expenses, and total fund
operating expenses, as a percentage of average net assets, would have been
0.39%, 0.18%, and 0.57%, respectively.
B FMR has agreed to limit the combined fund's total operating expenses to
0.53% of its average net assets (excluding interest, taxes, brokerage
commissions and extraordinary expenses) through December 31, 1999. If this
agreement were not in effect, the management fee, other expenses, and total
operating expenses, as a percentage of average net assets, would be 0.39%,
0.17%, and 0.56%, respectively.
C FMR has entered into arrangements on behalf of each fund with the fund's
custodian and transfer agent whereby interest earned on uninvested cash
balances is used to reduce fund expenses. Including these reductions the
total operating expenses presented in the table would have been 0.54% for
each of Spartan CA Income and Spartan CA Intermediate.
EXAMPLE:
After 1 After 3 After 5 After 10
Year Years Years Years
Spartan CA Income $6 $18 $31 $69
Spartan CA Intermediate $6 $18 $31 $69
Fidelity CA Income $6 $18 $31 $69
Combined Fund $5 $17 $30 $66
IF JUST SPARTAN CA INCOME AND FIDELITY CA INSURED REORGANIZATIONS ARE
APPROVED:
Spartan Fidelity CA Fidelity CA Pro Forma
CA InsuredA IncomeA Expenses
IncomeC Combined
FundB
Management Fees 0.55% 0.34% 0.37% 0.36%
(after
reimbursement)
Other Expenses 0.00% 0.21% 0.18% 0.17%
Total Fund 0.55% 0.55% 0.55% 0.53%
Operating
Expenses
(after
reimbursement)
A Effective April 1, 1997, FMR voluntarily agreed to reimburse the fund to
the extent that total operating expenses exceed 0.55% (excluding interest,
taxes, brokerage commissions and extraordinary expenses). If this agreement
were not in effect, the management fee, other expenses, and total fund
operating expenses, as a percentage of average net assets, would have been
0.39%, 0.21%, and 0.60%, respectively, for Fidelity CA Insured and 0.39%,
0.18%, and 0.57%, respectively for Fidelity CA Income.
B FMR has agreed to limit the combined fund's total operating expenses to
0.53% of its average net assets (excluding interest, taxes, brokerage
commissions and extraordinary expenses) through December 31, 1999. If this
agreement were not in effect, the management fee, other expenses, and total
operating expenses, as a percentage of average net assets, would be 0.39%,
0.17%, and 0.56%, respectively.
C FMR has entered into arrangements on behalf of the fund with the fund's
custodian and transfer agent whereby interest earned on uninvested cash
balances is used to reduce fund expenses. Including these reductions the
total operating expenses presented in the table would have been 0.54%.
EXAMPLE:
After 1 After 3 After 5 After 10
Year Years Years Years
Spartan CA Income $6 $18 $31 $69
Fidelity CA Insured $6 $18 $31 $69
Fidelity CA Income $6 $18 $31 $69
Combined Fund $5 $17 $30 $66
IF JUST SPARTAN CA INTERMEDIATE AND FIDELITY CA INSURED REORGANIZATIONS ARE
APPROVED:
Spartan CA Fidelity CA Fidelity Pro
Intermediate InsuredA CA Forma
C IncomeA Expenses
Combined
FundB
Management Fees 0.55% 0.34% 0.37% 0.36%
(after
reimbursement)
Other Expenses 0.00% 0.21% 0.18% 0.17%
Total Fund 0.55% 0.55% 0.55% 0.53%
Operating
Expenses (after
reimbursement)
A Effective April 1, 1997, FMR voluntarily agreed to reimburse the fund to
the extent that total operating expenses exceed 0.55% (excluding interest,
taxes, brokerage commissions and extraordinary expenses). If this agreement
were not in effect, the management fee, other expenses, and total fund
operating expenses, as a percentage of average net assets, would have been
0.39%, 0.21%, and 0.60%, respectively, for Fidelity CA Insured and 0.39%,
0.18%, and 0.57%, respectively, for Fidelity CA Income.
B FMR has agreed to limit the combined fund's total operating expenses to
0.53% of its average net assets (excluding interest, taxes, brokerage
commissions and extraordinary expenses) through December 31, 1999. If this
agreement were not in effect, the management fee, other expenses, and total
operating expenses, as a percentage of average net assets, would be 0.39%,
0.17%, and 0.56%, respectively.
C FMR has entered into arrangements on behalf of the fund with the fund's
custodian and transfer agent whereby interest earned on uninvested cash
balances is used to reduce fund expenses. Including these reductions the
total operating expenses presented in the table would have been 0.54%.
EXAMPLE:
After 1 After 3 After 5 After 10
Year Years Years Years
Spartan CA Intermediate $6 $18 $31 $69
Fidelity CA Insured $6 $18 $31 $69
Fidelity CA Income $6 $18 $31 $69
Combined Fund $5 $17 $30 $66
These examples assume that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund
Operating Expenses remain the same in the years shown. These examples
illustrate the effect of expenses, but are not meant to suggest actual or
expected costs, which may vary. The assumed return of 5% is not a
prediction of, and does not represent, actual or expected performance of
any fund.
EXHIBIT 1
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as of
the 6th day of June, 1997 by and between Spartan California Municipal
Income Fund (Spartan CA Income) and Fidelity California Municipal Income
Fund (Fidelity CA Income), funds of Fidelity California Municipal Trust
(the trust). The trust is a duly organized business trust under the laws of
the Commonwealth of Massachusetts with its principal place of business at
82 Devonshire Street, Boston, Massachusetts 02109. Spartan California
Municipal Income Fund and Fidelity California Municipal Income Fund may be
referred to herein collectively as the "funds" or each individually as the
"fund."
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the Code). The reorganization will
comprise: (a) the transfer of all of the assets of Spartan CA Income to
Fidelity CA Income solely in exchange for shares of beneficial interest in
Fidelity CA Income (the Fidelity CA Income Shares) and the assumption by
Fidelity CA Income of Spartan CA Income's liabilities; and (b) the
constructive distribution of such shares by Spartan CA Income PRO RATA to
its shareholders in complete liquidation and termination of Spartan CA
Income in exchange for all of Spartan CA Income's outstanding shares.
Spartan CA Income shall receive shares of Fidelity CA Income having an
aggregate net asset value equal to the value of the assets of Spartan CA
Income on the Closing Date (as defined in Section 6), which Spartan CA
Income shall then distribute PRO RATA to its shareholders. The foregoing
transactions are referred to herein as the "Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF SPARTAN CA INCOME.
Spartan CA Income represents and warrants to and agrees with Fidelity CA
Income that:
(a) Spartan CA Income is a series of Fidelity California Municipal Trust,
a business trust duly organized, validly existing, and in good standing
under the laws of the Commonwealth of Massachusetts, and has the power to
own all of its properties and assets and to carry out its obligations under
this Agreement. It has all necessary federal, state, and local
authorizations to carry on its business as now being conducted and to carry
out this Agreement;
(b) Fidelity California Municipal Trust is an open-end, management
investment company duly registered under the Investment Company Act of
1940, as amended (the 1940 Act), and such registration is in full force and
effect;
(c) The Prospectus and Statement of Additional Information of Spartan CA
Income dated April 19, 1997, previously furnished to Fidelity CA Income,
did not and does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Spartan CA Income, threatened against
Spartan CA Income which assert liability on the part of Spartan CA Income.
Spartan CA Income knows of no facts which might form the basis for the
institution of such proceedings;
(e) Spartan CA Income is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Amended and Restated Declaration of Trust or By-laws, or,
to the knowledge of Spartan CA Income, of any agreement, indenture,
instrument, contract, lease, or other undertaking to which Spartan CA
Income is a party or by which Spartan CA Income is bound or result in the
acceleration of any obligation or the imposition of any penalty under any
agreement, judgment or decree to which Spartan CA Income is a party or is
bound;
(f) The Statement of Assets and Liabilities, the Statement of Operations,
the Statement of Changes in Net Assets, Financial Highlights, and the
Schedule of Investments (including market values) of Spartan CA Income at
February 28, 1997, have been audited by Price Waterhouse LLP, independent
accountants, and have been furnished to Fidelity CA Income. Said Statements
of Assets and Liabilities and Schedule of Investments fairly present the
fund's financial position as of such date and said Statement of Operations,
Changes in Net Assets, and Financial Highlights fairly reflect its results
of operations, changes in financial position, and financial highlights for
the periods covered thereby in conformity with generally accepted
accounting principles consistently applied;
(g) Spartan CA Income has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on its
statement of assets and liabilities as of February 28, 1997 and those
incurred in the ordinary course of Spartan CA Income's business as an
investment company since February 28, 1997;
(h) The registration statement (Registration Statement) filed with the
Securities and Exchange Commission (Commission) by Fidelity California
Municipal Trust on Form N-14 relating to the shares of Fidelity CA Income
issuable hereunder and the proxy statement of Spartan CA Income included
therein (Proxy Statement), on the effective date of the Registration
Statement and insofar as they relate to Spartan CA Income (i) comply in all
material respects with the provisions of the Securities Act of 1933, as
amended (the 1933 Act), the Securities Exchange Act of 1934, as amended
(the 1934 Act), and the 1940 Act, and the rules and regulations thereunder,
and (ii) do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and at the time of the shareholders'
meeting referred to in Section 7 and on the Closing Date, the prospectus
contained in the Registration Statement of which the Proxy Statement is a
part (the Prospectus), as amended or supplemented, insofar as it relates to
Spartan CA Income, does not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading;
(i) All material contracts and commitments of Spartan CA Income (other
than this Agreement) will be terminated without liability to Spartan CA
Income prior to the Closing Date (other than those made in connection with
redemptions of shares and the purchase and sale of portfolio securities
made in the ordinary course of business);
(j) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Spartan CA
Income of the transactions contemplated by this Agreement, except such as
have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, and
state securities or blue sky laws (which term as used herein shall include
the District of Columbia and Puerto Rico);
(k) Spartan CA Income has filed or will file all federal and state tax
returns which, to the knowledge of Spartan CA Income's officers, are
required to be filed by Spartan CA Income and has paid or will pay all
federal and state taxes shown to be due on said returns or provision shall
have been made for the payment thereof, and, to the best of Spartan CA
Income's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(l) Spartan CA Income has met the requirements of Subchapter M of the Code
for qualification and treatment as a regulated investment company for all
prior taxable years and intends to meet such requirements for its current
taxable year ending on the Closing Date;
(m) All of the issued and outstanding shares of Spartan CA Income are, and
at the Closing Date will be, duly and validly issued and outstanding and
fully paid and nonassessable as a matter of Massachusetts law (except as
disclosed in the fund's Statement of Additional Information), and have been
offered for sale and in conformity with all applicable federal securities
laws. All of the issued and outstanding shares of Spartan CA Income will,
at the Closing Date, be held by the persons and in the amounts set forth in
the list of shareholders submitted to Fidelity CA Income in accordance with
this Agreement;
(n) As of both the Valuation Time (as defined in Section 4) and the
Closing Date, Spartan CA Income will have the full right, power, and
authority to sell, assign, transfer, and deliver its portfolio securities
and any other assets of Spartan CA Income to be transferred to Fidelity CA
Income pursuant to this Agreement. As of the Closing Date, subject only to
the delivery of Spartan CA Income's portfolio securities and any such other
assets as contemplated by this Agreement, Fidelity CA Income will acquire
Spartan CA Income's portfolio securities and any such other assets subject
to no encumbrances, liens, or security interests (except for those that may
arise in the ordinary course and are disclosed to Fidelity CA Income) and
without any restrictions upon the transfer thereof; and
(o) The execution, performance, and delivery of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of Spartan CA Income, and this Agreement constitutes a
valid and binding obligation of Spartan CA Income enforceable in accordance
with its terms, subject to shareholder approval.
2. REPRESENTATIONS AND WARRANTIES OF FIDELITY CA INCOME.
Fidelity CA Income represents and warrants to and agrees with Spartan CA
Income that:
(a) Fidelity CA Income is a series of Fidelity California Municipal Trust,
a business trust duly organized, validly existing, and in good standing
under the laws of the Commonwealth of Massachusetts, and has the power to
own all of its properties and assets and to carry out its obligations under
this Agreement. It has all necessary federal, state, and local
authorizations to carry on its business as now being conducted and to carry
out this Agreement;
(b) Fidelity California Municipal Trust is an open-end, management
investment company duly registered under the 1940 Act, and such
registration is in full force and effect;
(c) The Prospectus and Statement of Additional Information of Fidelity CA
Income, dated April 19, 1997, previously furnished to Spartan CA Income did
not and does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Fidelity CA Income, threatened against
Fidelity CA Income which assert liability on the part of Fidelity CA
Income. Fidelity CA Income knows of no facts which might form the basis for
the institution of such proceedings;
(e) Fidelity CA Income is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Amended and Restated Declaration of Trust or By-laws, or,
to the knowledge of Fidelity CA Income, of any agreement, indenture,
instrument, contract, lease, or other undertaking to which Fidelity CA
Income is a party or by which Fidelity CA Income is bound or result in the
acceleration of any obligation or the imposition of any penalty under any
agreement, judgment, or decree to which Fidelity CA Income is a party or is
bound;
(f) The Statement of Assets and Liabilities, the Statement of Operations,
the Statement of Changes in Net Assets, Financial Highlights, and the
Schedule of Investments (including market values) of Fidelity CA Income at
February 28, 1997, have been audited by Price Waterhouse LLP, independent
accountants, and have been furnished to Spartan CA Income. Said Statements
of Assets and Liabilities and Schedule of Investments fairly present its
financial position as of such date and said Statement of Operations,
Changes in Net Assets, and Financial Highlights fairly reflect its results
of operations, changes in financial position, and financial highlights for
the periods covered thereby in conformity with generally accepted
accounting principles consistently applied;
(g) Fidelity CA Income has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on its
statement of assets and liabilities as of February 28, 1997 and those
incurred in the ordinary course of Fidelity CA Income's business as an
investment company since February 28, 1997;
(h) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Fidelity CA
Income of the transactions contemplated by this Agreement, except such as
have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, and
state securities or blue sky laws (which term as used herein shall include
the District of Columbia and Puerto Rico);
(i) Fidelity CA Income has filed or will file all federal and state tax
returns which, to the knowledge of Fidelity CA Income's officers, are
required to be filed by Fidelity CA Income and has paid or will pay all
federal and state taxes shown to be due on said returns or provision shall
have been made for the payment thereof, and, to the best of Fidelity CA
Income's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(j) Fidelity CA Income has met the requirements of Subchapter M of the
Code for qualification and treatment as a regulated investment company for
all prior taxable years and intends to meet such requirements for its
current taxable year ending on February 28, 1998;
(k) As of the Closing Date, the shares of beneficial interest of Fidelity
CA Income to be issued to Spartan CA Income will have been duly authorized
and, when issued and delivered pursuant to this Agreement, will be legally
and validly issued and will be fully paid and nonassessable (except as
disclosed in the fund's Statement of Additional Information) by Fidelity CA
Income, and no shareholder of Fidelity CA Income will have any preemptive
right of subscription or purchase in respect thereof;
(l) The execution, performance, and delivery of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of Fidelity CA Income, and this Agreement constitutes a
valid and binding obligation of Fidelity CA Income enforceable in
accordance with its terms, subject to approval by the shareholders of
Spartan CA Income;
(m) The Registration Statement and the Proxy Statement, on the effective
date of the Registration Statement and insofar as they relate to Fidelity
CA Income, (i) will comply in all material respects with the provisions of
the 1933 Act, the 1934 Act, and the 1940 Act, and the rules and regulations
thereunder, and (ii) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and at the time of
the shareholders' meeting referred to in Section 7 and on the Closing Date,
the Prospectus, as amended or supplemented, insofar as it relates to
Fidelity CA Income, will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(n) The issuance of the Fidelity CA Income Shares pursuant to this
Agreement will be in compliance with all applicable federal securities
laws; and
(o) All of the issued and outstanding shares of beneficial interest of
Fidelity CA Income have been offered for sale and sold in conformity with
the federal securities laws.
3. REORGANIZATION.
(a) Subject to the requisite approval of the shareholders of Spartan CA
Income and to the other terms and conditions contained herein, Spartan CA
Income agrees to assign, sell, convey, transfer, and deliver to Fidelity CA
Income as of the Closing Date all of the assets of Spartan CA Income of
every kind and nature existing on the Closing Date. Fidelity CA Income
agrees in exchange therefor: (i) to assume all of Spartan CA Income's
liabilities existing on or after the Closing Date, whether or not
determinable on the Closing Date, and (ii) to issue and deliver to Spartan
CA Income the number of full and fractional shares of Fidelity CA Income
having an aggregate net asset value equal to the value of the assets of
Spartan CA Income transferred hereunder, less the value of the liabilities
of Spartan CA Income, determined as provided for under Section 4.
(b) The assets of Spartan CA Income to be acquired by Fidelity CA Income
shall include, without limitation, all cash, cash equivalents, securities,
receivables (including interest or dividends receivable), claims, chooses
in action, and other property owned by Spartan CA Income, and any deferred
or prepaid expenses shown as an asset on the books of Spartan CA Income on
the Closing Date. Spartan CA Income will pay or cause to be paid to
Fidelity CA Income any dividend or interest payments received by it on or
after the Closing Date with respect to the assets transferred to Fidelity
CA Income hereunder, and Fidelity CA Income will retain any dividend or
interest payments received by it after the Valuation Time with respect to
the assets transferred hereunder without regard to the payment date
thereof.
(c) The liabilities of Spartan CA Income to be assumed by Fidelity CA
Income shall include (except as otherwise provided for herein) all of
Spartan CA Income's liabilities, debts, obligations, and duties, of
whatever kind or nature, whether absolute, accrued, contingent, or
otherwise, whether or not arising in the ordinary course of business,
whether or not determinable on the Closing Date, and whether or not
specifically referred to in this Agreement. Notwithstanding the foregoing,
Spartan CA Income agrees to use its best efforts to discharge all of its
known liabilities prior to the Closing Date, other than liabilities
incurred in the ordinary course of business.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable (the Liquidation Date), Spartan CA Income will
constructively distribute PRO RATA to its shareholders of record,
determined as of the Valuation Time on the Closing Date, the Fidelity CA
Income Shares in exchange for such shareholders' shares of beneficial
interest in Spartan CA Income and Spartan CA Income will be liquidated in
accordance with Spartan CA Income's Amended and Restated Declaration of
Trust. Such distribution shall be accomplished by the funds' transfer agent
opening accounts on Fidelity CA Income's share transfer books in the names
of the Spartan CA Income shareholders and transferring the Fidelity CA
Income Shares thereto. Each Spartan CA Income shareholder's account shall
be credited with the respective PRO RATA number of full and fractional
(rounded to the third decimal place) Fidelity CA Income Shares due that
shareholder. All outstanding Spartan CA Income shares, including any
represented by certificates, shall simultaneously be canceled on Spartan CA
Income's share transfer records. Fidelity CA Income shall not issue
certificates representing the Fidelity CA Income Shares in connection with
the Reorganization.
(e) Any reporting responsibility of Spartan CA Income is and shall remain
its responsibility up to and including the date on which it is terminated.
(f) Any transfer taxes payable upon issuance of the Fidelity CA Income
Shares in a name other than that of the registered holder on Spartan CA
Income's books of the Spartan CA Income shares constructively exchanged for
the Fidelity CA Income Shares shall be paid by the person to whom such
Fidelity CA Income Shares are to be issued, as a condition of such
transfer.
4. VALUATION.
(a) The Valuation Time shall be 4:00 p.m. Eastern time on the Closing
Date, or such other date as may be mutually agreed upon in writing by the
parties hereto (the Valuation Time).
(b) As of the Closing Date, Fidelity CA Income will deliver to Spartan CA
Income the number of Fidelity CA Income Shares having an aggregate net
asset value equal to the value of the assets of Spartan CA Income
transferred hereunder less the liabilities of Spartan CA Income, determined
as provided in this Section 4.
(c) The net asset value per share of the Fidelity CA Income Shares to be
delivered to Spartan CA Income, the value of the assets of Spartan CA
Income transferred hereunder, and the value of the liabilities of Spartan
CA Income to be assumed hereunder shall in each case be determined as of
the Valuation Time.
(d) The net asset value per share of the Fidelity CA Income Shares shall
be computed in the manner set forth in the then-current Fidelity CA Income
Prospectus and Statement of Additional Information, and the value of the
assets and liabilities of Spartan CA Income shall be computed in the manner
set forth in the then-current Spartan CA Income Prospectus and Statement of
Additional Information.
(e) All computations pursuant to this Section shall be made by or under
the direction of Fidelity Service Company, Inc., a wholly owned subsidiary
of FMR Corp., in accordance with its regular practice as pricing agent for
Spartan CA Income and Fidelity CA Income.
5. FEES; EXPENSES.
(a) Pursuant to Spartan CA Income's all-inclusive management contract with
Fidelity Management & Research Company (FMR), FMR will pay all fees and
expenses, including legal, accounting, printing, filing, and proxy
solicitation expenses, portfolio transfer taxes (if any), or other similar
expenses incurred in connection with the transactions contemplated by this
Agreement (but not including costs incurred in connection with the purchase
or sale of portfolio securities). Any merger-related expenses which may be
attributable to Fidelity CA Income will be borne by Fidelity CA Income.
(b) Each of Fidelity CA Income and Spartan CA Income represents that there
is no person who has dealt with it who by reason of such dealings is
entitled to any broker's or finder's or other similar fee or commission
arising out of the transactions contemplated by this Agreement.
6. CLOSING DATE.
(a) The Reorganization, together with related acts necessary to consummate
the same (the Closing), unless otherwise provided herein, shall occur at
the principal office of the Trust, 82 Devonshire Street, Boston,
Massachusetts, as of the Valuation Time on August 14, 1997, or at some
other time, date, and place agreed to by Spartan CA Income and Fidelity CA
Income (the Closing Date).
(b) In the event that on the Closing Date: (i) any of the markets for
securities held by the funds is closed to trading, or (ii) trading thereon
is restricted, or (iii) trading or the reporting of trading on said market
or elsewhere is disrupted, all so that accurate appraisal of the total net
asset value of Spartan CA Income and the net asset value per share of
Fidelity CA Income is impracticable, the Valuation Time and the Closing
Date shall be postponed until the first business day after the day when
such trading shall have been fully resumed and such reporting shall have
been restored, or such other date as the parties may agree.
7. SHAREHOLDER MEETING AND TERMINATION OF SPARTAN CA INCOME.
(a) Spartan CA Income agrees to call a meeting of its shareholders after
the effective date of the Registration Statement, to consider transferring
its assets to Fidelity CA Income as herein provided, adopting this
Agreement, and authorizing the liquidation of Spartan CA Income.
(b) Spartan CA Income agrees that as soon as reasonably practicable after
distribution of the Fidelity CA Income Shares, Spartan CA Income shall be
terminated as a series of Fidelity California Municipal Trust pursuant to
its Amended and Restated Declaration of Trust, any further actions shall be
taken in connection therewith as required by applicable law, and on and
after the Closing Date Spartan CA Income shall not conduct any business
except in connection with its liquidation and termination.
8. CONDITIONS TO OBLIGATIONS OF FIDELITY CA INCOME.
(a) That Spartan CA Income furnishes to Fidelity CA Income a statement,
dated as of the Closing Date, signed by an officer of Fidelity California
Municipal Trust, certifying that as of the Valuation Time and the Closing
Date all representations and warranties of Spartan CA Income made in this
Agreement are true and correct in all material respects and that Spartan CA
Income has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to such
dates;
(b) That Spartan CA Income furnishes Fidelity CA Income with copies of the
resolutions, certified by an officer of Fidelity California Municipal
Trust, evidencing the adoption of this Agreement and the approval of the
transactions contemplated herein by the requisite vote of the holders of
the outstanding shares of beneficial interest of Spartan CA Income;
(c) That, on or prior to the Closing Date, Spartan CA Income will declare
one or more dividends or distributions which, together with all previous
such dividends or distributions attributable to its current taxable year,
shall have the effect of distributing to the shareholders of Spartan CA
Income substantially all of Spartan CA Income's investment company taxable
income and all of its net realized capital gain, if any, as of the Closing
Date;
(d) That Spartan CA Income shall deliver to Fidelity CA Income at the
Closing a statement of its assets and liabilities, together with a list of
its portfolio securities showing each such security's adjusted tax basis
and holding period by lot, with values determined as provided in Section 4
of this Agreement, all as of the Valuation Time, certified on Spartan CA
Income's behalf by its Treasurer or Assistant Treasurer;
(e) That Spartan CA Income's custodian shall deliver to Fidelity CA Income
a certificate identifying the assets of Spartan CA Income held by such
custodian as of the Valuation Time on the Closing Date and stating that as
of the Valuation Time: (i) the assets held by the custodian will be
transferred to Fidelity CA Income; (ii) Spartan CA Income's assets have
been duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof; and (iii) to the best of the custodian's
knowledge, all necessary taxes in conjunction with the delivery of the
assets, including all applicable federal and state stock transfer stamps,
if any, have been paid or provision for payment has been made;
(f) That Spartan CA Income's transfer agent shall deliver to Fidelity CA
Income at the Closing a certificate setting forth the number of shares of
Spartan CA Income outstanding as of the Valuation Time and the name and
address of each holder of record of any such shares and the number of
shares held of record by each such shareholder;
(g) That Spartan CA Income calls a meeting of its shareholders to be held
after the effective date of the Registration Statement, to consider
transferring its assets to Fidelity CA Income as herein provided, adopting
this Agreement, and authorizing the liquidation and termination of Spartan
CA Income;
(h) That Spartan CA Income delivers to Fidelity CA Income a certificate of
an officer of Fidelity California Municipal Trust, dated as of the Closing
Date, that there has been no material adverse change in Spartan CA Income's
financial position since February 28, 1997, other than changes in the
market value of its portfolio securities, or changes due to net redemptions
of its shares, dividends paid, or losses from operations; and
(i) That all of the issued and outstanding shares of beneficial interest
of Spartan CA Income shall have been offered for sale and sold in
conformity with all applicable state securities laws and, to the extent
that any audit of the records of Spartan CA Income or its transfer agent by
Fidelity CA Income or its agents shall have revealed otherwise, Spartan CA
Income shall have taken all actions that in the opinion of Fidelity CA
Income are necessary to remedy any prior failure on the part of Spartan CA
Income to have offered for sale and sold such shares in conformity with
such laws.
9. CONDITIONS TO OBLIGATIONS OF SPARTAN CA INCOME.
(a) That Fidelity CA Income shall have executed and delivered to Spartan
CA Income an Assumption of Liabilities, certified by an officer of Fidelity
California Municipal Trust, dated as of the Closing Date pursuant to which
Fidelity CA Income will assume all of the liabilities of Spartan CA Income
existing at the Valuation Time in connection with the transactions
contemplated by this Agreement;
(b) That Fidelity CA Income furnishes to Spartan CA Income a statement,
dated as of the Closing Date, signed by an officer of Fidelity California
Municipal Trust, certifying that as of the Valuation Time and the Closing
Date all representations and warranties of Fidelity CA Income made in this
Agreement are true and correct in all material respects, and Fidelity CA
Income has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to such
dates; and
(c) That Spartan CA Income shall have received an opinion of Kirkpatrick &
Lockhart LLP, counsel to Spartan CA Income and Fidelity CA Income, to the
effect that the Fidelity CA Income Shares are duly authorized and upon
delivery to Spartan CA Income as provided in this Agreement will be validly
issued and will be fully paid and nonassessable by Fidelity CA Income
(except as disclosed in Spartan CA Income's Statement of Additional
Information) and no shareholder of Fidelity CA Income has any preemptive
right of subscription or purchase in respect thereof.
10. CONDITIONS TO OBLIGATIONS OF FIDELITY CA INCOME AND SPARTAN CA INCOME.
(a) That this Agreement shall have been adopted and the transactions
contemplated herein shall have been approved by the requisite vote of the
holders of the outstanding shares of beneficial interest of Spartan CA
Income;
(b) That all consents of other parties and all other consents, orders, and
permits of federal, state, and local regulatory authorities (including
those of the Commission and of state Blue Sky and securities authorities,
including "no action" positions of such federal or state authorities)
deemed necessary by Fidelity CA Income or Spartan CA Income to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of Fidelity CA Income or Spartan CA
Income, provided that either party hereto may for itself waive any of such
conditions;
(c) That all proceedings taken by either fund in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto shall be satisfactory in form and substance to it and its counsel,
Kirkpatrick & Lockhart LLP;
(d) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement;
(e) That the Registration Statement shall have become effective under the
1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of Fidelity CA Income and Spartan CA
Income, threatened by the Commission; and
(f) That Fidelity CA Income and Spartan CA Income shall have received an
opinion of Kirkpatrick & Lockhart LLP satisfactory to Fidelity CA Income
and Spartan CA Income that for federal income tax purposes:
(i) The Reorganization will be a reorganization under section
368(a)(1)(C) of the Code, and Spartan CA Income and Fidelity CA Income will
each be parties to the Reorganization under section 368(b) of the Code;
(ii) No gain or loss will be recognized by Spartan CA Income upon the
transfer of all of its assets to Fidelity CA Income in exchange solely for
the Fidelity CA Income Shares and the assumption of Spartan CA Income's
liabilities followed by the distribution of those Fidelity CA Income Shares
to the shareholders of Spartan CA Income in liquidation of Spartan CA
Income;
(iii) No gain or loss will be recognized by Fidelity CA Income on the
receipt of Spartan CA Income's assets in exchange solely for the Fidelity
CA Income Shares and the assumption of Spartan CA Income's liabilities;
(iv) The basis of Spartan CA Income's assets in the hands of Fidelity CA
Income will be the same as the basis of such assets in Spartan CA Income's
hands immediately prior to the Reorganization;
(v) Fidelity CA Income's holding period in the assets to be received from
Spartan CA Income will include Spartan CA Income's holding period in such
assets;
(vi) A Spartan CA Income shareholder will recognize no gain or loss on
the exchange of his or her shares of beneficial interest in Spartan CA
Income for the Fidelity CA Income Shares in the Reorganization;
(vii) A Spartan CA Income shareholder's basis in the Fidelity CA Income
Shares to be received by him or her will be the same as his or her basis in
the Spartan CA Income shares exchanged therefor;
(viii) A Spartan CA Income shareholder's holding period for his or her
Fidelity CA Income Shares will include the holding period of Spartan CA
Income shares exchanged, provided that those Spartan CA Income shares were
held as capital assets on the date of the Reorganization.
Notwithstanding anything herein to the contrary, each of Spartan CA Income
and Fidelity CA Income may not waive the conditions set forth in this
subsection 10(f).
11. COVENANTS OF FIDELITY CA INCOME AND SPARTAN CA INCOME.
(a) Fidelity CA Income and Spartan CA Income each covenants to operate its
respective business in the ordinary course between the date hereof and the
Closing Date, it being understood that such ordinary course of business
will include the payment of customary dividends and distributions;
(b) Spartan CA Income covenants that it is not acquiring the Fidelity CA
Income Shares for the purpose of making any distribution other than in
accordance with the terms of this Agreement;
(c) Spartan CA Income covenants that it will assist Fidelity CA Income in
obtaining such information as Fidelity CA Income reasonably requests
concerning the beneficial ownership of Spartan CA Income's shares; and
(d) Spartan CA Income covenants that its liquidation and termination will
be effected in the manner provided in its Amended and Restated Declaration
of Trust in accordance with applicable law and after the Closing Date,
Spartan CA Income will not conduct any business except in connection with
its liquidation and termination.
12. TERMINATION; WAIVER.
Fidelity CA Income and Spartan CA Income may terminate this Agreement by
mutual agreement. In addition, either Fidelity CA Income or Spartan CA
Income may at its option terminate this Agreement at or prior to the
Closing Date because:
(i) of a material breach by the other of any representation, warranty, or
agreement contained herein to be performed at or prior to the Closing Date;
or
(ii) a condition herein expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears that it
will not or cannot be met.
In the event of any such termination, there shall be no liability for
damages on the part of Spartan CA Income or Fidelity CA Income, or their
respective Trustees or officers.
13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES.
(a) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the subject matter hereof,
constitutes the only understanding with respect to such subject matter, may
not be changed except by a letter of agreement signed by each party hereto
and shall be construed in accordance with and governed by the laws of the
Commonwealth of Massachusetts.
(b) This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the respective
President, any Vice President, or Treasurer of Fidelity CA Income or
Spartan CA Income; provided, however, that following the shareholders'
meeting called by Spartan CA Income pursuant to Section 7 of this
Agreement, no such amendment may have the effect of changing the provisions
for determining the number of Fidelity CA Income Shares to be paid to
Spartan CA Income shareholders under this Agreement to the detriment of
such shareholders without their further approval.
(c) Either fund may waive any condition to its obligations hereunder,
provided that such waiver does not have any material adverse effect on the
interests of such fund's shareholders.
The representations, warranties, and covenants contained in the Agreement,
or in any document delivered pursuant hereto or in connection herewith,
shall survive the consummation of the transactions contemplated hereunder.
14. DECLARATIONS OF TRUST.
A copy of the Declaration of Trust of each fund, as restated and amended,
is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed
on behalf of the Trustees of each fund as trustees and not individually and
that the obligations of each Fund under this instrument are not binding
upon any of such fund's Trustees, officers, or shareholders individually
but are binding only upon the assets and property of such fund. Each fund
agrees that its obligations hereunder apply only to such fund and not to
its shareholders individually or to the Trustees of such fund.
15. ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
of any rights or obligations hereunder shall be made by any party without
the written consent of the other parties. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any
person, firm, or corporation other than the parties hereto and their
respective successors and assigns any rights or remedies under or by reason
of this Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by an appropriate officer.
SIGNATURE LINES OMITTED
EXHIBIT 2
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as of
the 6th day of June, 1997 by and between Spartan California Intermediate
Municipal Income Fund (Spartan CA Intermediate) and Fidelity California
Municipal Income Fund (Fidelity CA Income), funds of Fidelity California
Municipal Trust (the trust). The trust is a duly organized business trust
under the laws of the Commonwealth of Massachusetts with its principal
place of business at 82 Devonshire Street, Boston, Massachusetts 02109.
Spartan California Intermediate Municipal Income Fund and Fidelity
California Municipal Income Fund may be referred to herein collectively as
the "funds" or each individually as the "fund."
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the Code). The reorganization will
comprise: (a) the transfer of all of the assets of Spartan CA Intermediate
to Fidelity CA Income solely in exchange for shares of beneficial interest
in Fidelity CA Income (the Fidelity CA Income Shares) and the assumption by
Fidelity CA Income of Spartan CA Intermediate's liabilities; and (b) the
constructive distribution of such shares by Spartan CA Intermediate PRO
RATA to its shareholders in complete liquidation and termination of Spartan
CA Intermediate in exchange for all of Spartan CA Intermediate's
outstanding shares. Spartan CA Intermediate shall receive shares of
Fidelity CA Income having an aggregate net asset value equal to the value
of the assets of Spartan CA Intermediate on the Closing Date (as defined in
Section 6), which Spartan CA Intermediate shall then distribute PRO RATA to
its shareholders. The foregoing transactions are referred to herein as the
"Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF SPARTAN CA INTERMEDIATE.
Spartan CA Intermediate represents and warrants to and agrees with
Fidelity CA Income that:
(a) Spartan CA Intermediate is a series of Fidelity California Municipal
Trust, a business trust duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts, and has the
power to own all of its properties and assets and to carry out its
obligations under this Agreement. It has all necessary federal, state, and
local authorizations to carry on its business as now being conducted and to
carry out this Agreement;
(b) Fidelity California Municipal Trust is an open-end, management
investment company duly registered under the Investment Company Act of
1940, as amended (the 1940 Act), and such registration is in full force and
effect;
(c) The Prospectus and Statement of Additional Information of Spartan CA
Intermediate dated April 19, 1997, previously furnished to Fidelity CA
Income, did not and does not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Spartan CA Intermediate, threatened against
Spartan CA Intermediate which assert liability on the part of Spartan CA
Intermediate. Spartan CA Intermediate knows of no facts which might form
the basis for the institution of such proceedings;
(e) Spartan CA Intermediate is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Amended and Restated Declaration of Trust or By-laws, or,
to the knowledge of Spartan CA Intermediate, of any agreement, indenture,
instrument, contract, lease, or other undertaking to which Spartan CA
Intermediate is a party or by which Spartan CA Intermediate is bound or
result in the acceleration of any obligation or the imposition of any
penalty under any agreement, judgment or decree to which Spartan CA
Intermediate is a party or is bound;
(f) The Statement of Assets and Liabilities, the Statement of Operations,
the Statement of Changes in Net Assets, Financial Highlights, and the
Schedule of Investments (including market values) of Spartan CA
Intermediate at February 28, 1997, have been audited by Price Waterhouse
LLP, independent accountants, and have been furnished to Fidelity CA
Income. Said Statements of Assets and Liabilities and Schedule of
Investments fairly present the fund's financial position as of such date
and said Statement of Operations, Changes in Net Assets, and Financial
Highlights fairly reflect its results of operations, changes in financial
position, and financial highlights for the periods covered thereby in
conformity with generally accepted accounting principles consistently
applied;
(g) Spartan CA Intermediate has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on its
statement of assets and liabilities as of February 28, 1997 and those
incurred in the ordinary course of Spartan CA Intermediate's business as an
investment company since February 28, 1997;
(h) The registration statement (Registration Statement) filed with the
Securities and Exchange Commission (Commission) by Fidelity California
Municipal Trust on Form N-14 relating to the shares of Fidelity CA Income
issuable hereunder and the proxy statement of Spartan CA Intermediate
included therein (Proxy Statement), on the effective date of the
Registration Statement and insofar as they relate to Spartan CA
Intermediate (i) comply in all material respects with the provisions of the
Securities Act of 1933, as amended (the 1933 Act), the Securities Exchange
Act of 1934, as amended (the 1934 Act), and the 1940 Act, and the rules and
regulations thereunder, and (ii) do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and at
the time of the shareholders' meeting referred to in Section 7 and on the
Closing Date, the prospectus contained in the Registration Statement of
which the Proxy Statement is a part (the Prospectus), as amended or
supplemented, insofar as it relates to Spartan CA Intermediate, does not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading;
(i) All material contracts and commitments of Spartan CA Intermediate
(other than this Agreement) will be terminated without liability to Spartan
CA Intermediate prior to the Closing Date (other than those made in
connection with redemptions of shares and the purchase and sale of
portfolio securities made in the ordinary course of business);
(j) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Spartan CA
Intermediate of the transactions contemplated by this Agreement, except
such as have been obtained under the 1933 Act, the 1934 Act, the 1940 Act,
and state securities or blue sky laws (which term as used herein shall
include the District of Columbia and Puerto Rico);
(k) Spartan CA Intermediate has filed or will file all federal and state
tax returns which, to the knowledge of Spartan CA Intermediate's officers,
are required to be filed by Spartan CA Intermediate and has paid or will
pay all federal and state taxes shown to be due on said returns or
provision shall have been made for the payment thereof, and, to the best of
Spartan CA Intermediate's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to such returns;
(l) Spartan CA Intermediate has met the requirements of Subchapter M of
the Code for qualification and treatment as a regulated investment company
for all prior taxable years and intends to meet such requirements for its
current taxable year ending on the Closing Date;
(m) All of the issued and outstanding shares of Spartan CA Intermediate
are, and at the Closing Date will be, duly and validly issued and
outstanding and fully paid and nonassessable as a matter of Massachusetts
law (except as disclosed in the fund's Statement of Additional
Information), and have been offered for sale and in conformity with all
applicable federal securities laws. All of the issued and outstanding
shares of Spartan CA Intermediate will, at the Closing Date, be held by the
persons and in the amounts set forth in the list of shareholders submitted
to Fidelity CA Income in accordance with this Agreement;
(n) As of both the Valuation Time (as defined in Section 4) and the
Closing Date, Spartan CA Intermediate will have the full right, power, and
authority to sell, assign, transfer, and deliver its portfolio securities
and any other assets of Spartan CA Intermediate to be transferred to
Fidelity CA Income pursuant to this Agreement. As of the Closing Date,
subject only to the delivery of Spartan CA Intermediate's portfolio
securities and any such other assets as contemplated by this Agreement,
Fidelity CA Income will acquire Spartan CA Intermediate's portfolio
securities and any such other assets subject to no encumbrances, liens, or
security interests (except for those that may arise in the ordinary course
and are disclosed to Fidelity CA Income) and without any restrictions upon
the transfer thereof; and
(o) The execution, performance, and delivery of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of Spartan CA Intermediate, and this Agreement
constitutes a valid and binding obligation of Spartan CA Intermediate
enforceable in accordance with its terms, subject to shareholder approval.
2. REPRESENTATIONS AND WARRANTIES OF FIDELITY CA INCOME.
Fidelity CA Income represents and warrants to and agrees with Spartan CA
Intermediate that:
(a) Fidelity CA Income is a series of Fidelity California Municipal Trust,
a business trust duly organized, validly existing, and in good standing
under the laws of the Commonwealth of Massachusetts, and has the power to
own all of its properties and assets and to carry out its obligations under
this Agreement. It has all necessary federal, state, and local
authorizations to carry on its business as now being conducted and to carry
out this Agreement;
(b) Fidelity California Municipal Trust is an open-end, management
investment company duly registered under the 1940 Act, and such
registration is in full force and effect;
(c) The Prospectus and Statement of Additional Information of Fidelity CA
Income, dated April 19, 1997, previously furnished to Spartan CA
Intermediate did not and does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Fidelity CA Income, threatened against
Fidelity CA Income which assert liability on the part of Fidelity CA
Income. Fidelity CA Income knows of no facts which might form the basis for
the institution of such proceedings;
(e) Fidelity CA Income is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Amended and Restated Declaration of Trust or By-laws, or,
to the knowledge of Fidelity CA Income, of any agreement, indenture,
instrument, contract, lease, or other undertaking to which Fidelity CA
Income is a party or by which Fidelity CA Income is bound or result in the
acceleration of any obligation or the imposition of any penalty under any
agreement, judgment, or decree to which Fidelity CA Income is a party or is
bound;
(f) The Statement of Assets and Liabilities, the Statement of Operations,
the Statement of Changes in Net Assets, Financial Highlights, and the
Schedule of Investments (including market values) of Fidelity CA Income at
February 28, 1997, have been audited by Price Waterhouse LLP, independent
accountants, and have been furnished to Spartan CA Intermediate. Said
Statements of Assets and Liabilities and Schedule of Investments fairly
present its financial position as of such date and said Statement of
Operations, Changes in Net Assets, and Financial Highlights fairly reflect
its results of operations, changes in financial position, and financial
highlights for the periods covered thereby in conformity with generally
accepted accounting principles consistently applied;
(g) Fidelity CA Income has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on its
statement of assets and liabilities as of February 28, 1997 and those
incurred in the ordinary course of Fidelity CA Income's business as an
investment company since February 28, 1997;
(h) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Fidelity CA
Income of the transactions contemplated by this Agreement, except such as
have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, and
state securities or blue sky laws (which term as used herein shall include
the District of Columbia and Puerto Rico);
(i) Fidelity CA Income has filed or will file all federal and state tax
returns which, to the knowledge of Fidelity CA Income's officers, are
required to be filed by Fidelity CA Income and has paid or will pay all
federal and state taxes shown to be due on said returns or provision shall
have been made for the payment thereof, and, to the best of Fidelity CA
Income's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(j) Fidelity CA Income has met the requirements of Subchapter M of the
Code for qualification and treatment as a regulated investment company for
all prior taxable years and intends to meet such requirements for its
current taxable year ending on February 28, 1998;
(k) As of the Closing Date, the shares of beneficial interest of Fidelity
CA Income to be issued to Spartan CA Intermediate will have been duly
authorized and, when issued and delivered pursuant to this Agreement, will
be legally and validly issued and will be fully paid and nonassessable
(except as disclosed in the fund's Statement of Additional Information) by
Fidelity CA Income, and no shareholder of Fidelity CA Income will have any
preemptive right of subscription or purchase in respect thereof;
(l) The execution, performance, and delivery of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of Fidelity CA Income, and this Agreement constitutes a
valid and binding obligation of Fidelity CA Income enforceable in
accordance with its terms, subject to approval by the shareholders of
Spartan CA Intermediate;
(m) The Registration Statement and the Proxy Statement, on the effective
date of the Registration Statement and insofar as they relate to Fidelity
CA Income, (i) will comply in all material respects with the provisions of
the 1933 Act, the 1934 Act, and the 1940 Act, and the rules and regulations
thereunder, and (ii) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and at the time of
the shareholders' meeting referred to in Section 7 and on the Closing Date,
the Prospectus, as amended or supplemented, insofar as it relates to
Fidelity CA Income, will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(n) The issuance of the Fidelity CA Income Shares pursuant to this
Agreement will be in compliance with all applicable federal securities
laws; and
(o) All of the issued and outstanding shares of beneficial interest of
Fidelity CA Income have been offered for sale and sold in conformity with
the federal securities laws.
3. REORGANIZATION.
(a) Subject to the requisite approval of the shareholders of Spartan CA
Intermediate and to the other terms and conditions contained herein,
Spartan CA Intermediate agrees to assign, sell, convey, transfer, and
deliver to Fidelity CA Income as of the Closing Date all of the assets of
Spartan CA Intermediate of every kind and nature existing on the Closing
Date. Fidelity CA Income agrees in exchange therefor: (i) to assume all of
Spartan CA Intermediate's liabilities existing on or after the Closing
Date, whether or not determinable on the Closing Date, and (ii) to issue
and deliver to Spartan CA Intermediate the number of full and fractional
shares of Fidelity CA Income having an aggregate net asset value equal to
the value of the assets of Spartan CA Intermediate transferred hereunder,
less the value of the liabilities of Spartan CA Intermediate, determined as
provided for under Section 4.
(b) The assets of Spartan CA Intermediate to be acquired by Fidelity CA
Income shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest or dividends receivable),
claims, chooses in action, and other property owned by Spartan CA
Intermediate, and any deferred or prepaid expenses shown as an asset on the
books of Spartan CA Intermediate on the Closing Date. Spartan CA
Intermediate will pay or cause to be paid to Fidelity CA Income any
dividend or interest payments received by it on or after the Closing Date
with respect to the assets transferred to Fidelity CA Income hereunder, and
Fidelity CA Income will retain any dividend or interest payments received
by it after the Valuation Time with respect to the assets transferred
hereunder without regard to the payment date thereof.
(c) The liabilities of Spartan CA Intermediate to be assumed by Fidelity
CA Income shall include (except as otherwise provided for herein) all of
Spartan CA Intermediate's liabilities, debts, obligations, and duties, of
whatever kind or nature, whether absolute, accrued, contingent, or
otherwise, whether or not arising in the ordinary course of business,
whether or not determinable on the Closing Date, and whether or not
specifically referred to in this Agreement. Notwithstanding the foregoing,
Spartan CA Intermediate agrees to use its best efforts to discharge all of
its known liabilities prior to the Closing Date, other than liabilities
incurred in the ordinary course of business.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable (the Liquidation Date), Spartan CA Intermediate
will constructively distribute PRO RATA to its shareholders of record,
determined as of the Valuation Time on the Closing Date, the Fidelity CA
Income Shares in exchange for such shareholders' shares of beneficial
interest in Spartan CA Intermediate and Spartan CA Intermediate will be
liquidated in accordance with Spartan CA Intermediate's Amended and
Restated Declaration of Trust. Such distribution shall be accomplished by
the funds' transfer agent opening accounts on Fidelity CA Income's share
transfer books in the names of the Spartan CA Intermediate shareholders and
transferring the Fidelity CA Income Shares thereto. Each Spartan CA
Intermediate shareholder's account shall be credited with the respective
PRO RATA number of full and fractional (rounded to the third decimal place)
Fidelity CA Income Shares due that shareholder. All outstanding Spartan CA
Intermediate shares, including any represented by certificates, shall
simultaneously be canceled on Spartan CA Intermediate's share transfer
records. Fidelity CA Income shall not issue certificates representing the
Fidelity CA Income Shares in connection with the Reorganization.
(e) Any reporting responsibility of Spartan CA Intermediate is and shall
remain its responsibility up to and including the date on which it is
terminated.
(f) Any transfer taxes payable upon issuance of the Fidelity CA Income
Shares in a name other than that of the registered holder on Spartan CA
Intermediate's books of the Spartan CA Intermediate shares constructively
exchanged for the Fidelity CA Income Shares shall be paid by the person to
whom such Fidelity CA Income Shares are to be issued, as a condition of
such transfer.
4. VALUATION.
(a) The Valuation Time shall be 4:00 p.m. Eastern time on the Closing
Date, or such other date as may be mutually agreed upon in writing by the
parties hereto (the Valuation Time).
(b) As of the Closing Date, Fidelity CA Income will deliver to Spartan CA
Intermediate the number of Fidelity CA Income Shares having an aggregate
net asset value equal to the value of the assets of Spartan CA Intermediate
transferred hereunder less the liabilities of Spartan CA Intermediate,
determined as provided in this Section 4.
(c) The net asset value per share of the Fidelity CA Income Shares to be
delivered to Spartan CA Intermediate, the value of the assets of Spartan CA
Intermediate transferred hereunder, and the value of the liabilities of
Spartan CA Intermediate to be assumed hereunder shall in each case be
determined as of the Valuation Time.
(d) The net asset value per share of the Fidelity CA Income Shares shall
be computed in the manner set forth in the then-current Fidelity CA Income
Prospectus and Statement of Additional Information, and the value of the
assets and liabilities of Spartan CA Intermediate shall be computed in the
manner set forth in the then-current Spartan CA Intermediate Prospectus and
Statement of Additional Information.
(e) All computations pursuant to this Section shall be made by or under
the direction of Fidelity Service Company, Inc., a wholly owned subsidiary
of FMR Corp., in accordance with its regular practice as pricing agent for
Spartan CA Intermediate and Fidelity CA Income.
5. FEES; EXPENSES.
(a) Pursuant to Spartan CA Intermediate's all-inclusive management
contract with Fidelity Management & Research Company (FMR), FMR will pay
all fees and expenses, including legal, accounting, printing, filing, and
proxy solicitation expenses, portfolio transfer taxes (if any), or other
similar expenses incurred in connection with the transactions contemplated
by this Agreement (but not including costs incurred in connection with the
purchase or sale of portfolio securities). Any merger-related expenses
which may be attributable to Fidelity CA Income will be borne by Fidelity
CA Income.
(b) Each of Fidelity CA Income and Spartan CA Intermediate represents that
there is no person who has dealt with it who by reason of such dealings is
entitled to any broker's or finder's or other similar fee or commission
arising out of the transactions contemplated by this Agreement.
6. CLOSING DATE.
(a) The Reorganization, together with related acts necessary to consummate
the same (the Closing), unless otherwise provided herein, shall occur at
the principal office of the Trust, 82 Devonshire Street, Boston,
Massachusetts, as of the Valuation Time on August 21, 1997, or at some
other time, date, and place agreed to by Spartan CA Intermediate and
Fidelity CA Income (the Closing Date).
(b) In the event that on the Closing Date: (i) any of the markets for
securities held by the funds is closed to trading, or (ii) trading thereon
is restricted, or (iii) trading or the reporting of trading on said market
or elsewhere is disrupted, all so that accurate appraisal of the total net
asset value of Spartan CA Intermediate and the net asset value per share of
Fidelity CA Income is impracticable, the Valuation Time and the Closing
Date shall be postponed until the first business day after the day when
such trading shall have been fully resumed and such reporting shall have
been restored, or such other date as the parties may agree.
7. SHAREHOLDER MEETING AND TERMINATION OF SPARTAN CA INTERMEDIATE.
(a) Spartan CA Intermediate agrees to call a meeting of its shareholders
after the effective date of the Registration Statement, to consider
transferring its assets to Fidelity CA Income as herein provided, adopting
this Agreement, and authorizing the liquidation of Spartan CA Intermediate.
(b) Spartan CA Intermediate agrees that as soon as reasonably practicable
after distribution of the Fidelity CA Income Shares, Spartan CA
Intermediate shall be terminated as a series of Fidelity California
Municipal Trust pursuant to its Amended and Restated Declaration of Trust,
any further actions shall be taken in connection therewith as required by
applicable law, and on and after the Closing Date Spartan CA Intermediate
shall not conduct any business except in connection with its liquidation
and termination.
8. CONDITIONS TO OBLIGATIONS OF FIDELITY CA INCOME.
(a) That Spartan CA Intermediate furnishes to Fidelity CA Income a
statement, dated as of the Closing Date, signed by an officer of Fidelity
California Municipal Trust, certifying that as of the Valuation Time and
the Closing Date all representations and warranties of Spartan CA
Intermediate made in this Agreement are true and correct in all material
respects and that Spartan CA Intermediate has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such dates;
(b) That Spartan CA Intermediate furnishes Fidelity CA Income with copies
of the resolutions, certified by an officer of Fidelity California
Municipal Trust, evidencing the adoption of this Agreement and the approval
of the transactions contemplated herein by the requisite vote of the
holders of the outstanding shares of beneficial interest of Spartan CA
Intermediate;
(c) That, on or prior to the Closing Date, Spartan CA Intermediate will
declare one or more dividends or distributions which, together with all
previous such dividends or distributions attributable to its current
taxable year, shall have the effect of distributing to the shareholders of
Spartan CA Intermediate substantially all of Spartan CA Intermediate's
investment company taxable income and all of its net realized capital gain,
if any, as of the Closing Date;
(d) That Spartan CA Intermediate shall deliver to Fidelity CA Income at
the Closing a statement of its assets and liabilities, together with a list
of its portfolio securities showing each such security's adjusted tax basis
and holding period by lot, with values determined as provided in Section 4
of this Agreement, all as of the Valuation Time, certified on Spartan CA
Intermediate's behalf by its Treasurer or Assistant Treasurer;
(e) That Spartan CA Intermediate's custodian shall deliver to Fidelity CA
Income a certificate identifying the assets of Spartan CA Intermediate held
by such custodian as of the Valuation Time on the Closing Date and stating
that as of the Valuation Time: (i) the assets held by the custodian will be
transferred to Fidelity CA Income; (ii) Spartan CA Intermediate's assets
have been duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof; and (iii) to the best of the custodian's
knowledge, all necessary taxes in conjunction with the delivery of the
assets, including all applicable federal and state stock transfer stamps,
if any, have been paid or provision for payment has been made;
(f) That Spartan CA Intermediate's transfer agent shall deliver to
Fidelity CA Income at the Closing a certificate setting forth the number of
shares of Spartan CA Intermediate outstanding as of the Valuation Time and
the name and address of each holder of record of any such shares and the
number of shares held of record by each such shareholder;
(g) That Spartan CA Intermediate calls a meeting of its shareholders to be
held after the effective date of the Registration Statement, to consider
transferring its assets to Fidelity CA Income as herein provided, adopting
this Agreement, and authorizing the liquidation and termination of Spartan
CA Intermediate;
(h) That Spartan CA Intermediate delivers to Fidelity CA Income a
certificate of an officer of Fidelity California Municipal Trust, dated as
of the Closing Date, that there has been no material adverse change in
Spartan CA Intermediate's financial position since February 28, 1997, other
than changes in the market value of its portfolio securities, or changes
due to net redemptions of its shares, dividends paid, or losses from
operations; and
(i) That all of the issued and outstanding shares of beneficial interest
of Spartan CA Intermediate shall have been offered for sale and sold in
conformity with all applicable state securities laws and, to the extent
that any audit of the records of Spartan CA Intermediate or its transfer
agent by Fidelity CA Income or its agents shall have revealed otherwise,
Spartan CA Intermediate shall have taken all actions that in the opinion of
Fidelity CA Income are necessary to remedy any prior failure on the part of
Spartan CA Intermediate to have offered for sale and sold such shares in
conformity with such laws.
9. CONDITIONS TO OBLIGATIONS OF SPARTAN CA INTERMEDIATE.
(a) That Fidelity CA Income shall have executed and delivered to Spartan
CA Intermediate an Assumption of Liabilities, certified by an officer of
Fidelity California Municipal Trust, dated as of the Closing Date pursuant
to which Fidelity CA Income will assume all of the liabilities of Spartan
CA Intermediate existing at the Valuation Time in connection with the
transactions contemplated by this Agreement;
(b) That Fidelity CA Income furnishes to Spartan CA Intermediate a
statement, dated as of the Closing Date, signed by an officer of Fidelity
California Municipal Trust, certifying that as of the Valuation Time and
the Closing Date all representations and warranties of Fidelity CA Income
made in this Agreement are true and correct in all material respects, and
Fidelity CA Income has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to such
dates; and
(c) That Spartan CA Intermediate shall have received an opinion of
Kirkpatrick & Lockhart LLP, counsel to Spartan CA Intermediate and Fidelity
CA Income, to the effect that the Fidelity CA Income Shares are duly
authorized and upon delivery to Spartan CA Intermediate as provided in this
Agreement will be validly issued and will be fully paid and nonassessable
by Fidelity CA Income (except as disclosed in Spartan CA Intermediate's
Statement of Additional Information) and no shareholder of Fidelity CA
Income has any preemptive right of subscription or purchase in respect
thereof.
10. CONDITIONS TO OBLIGATIONS OF FIDELITY CA INCOME AND SPARTAN CA
INTERMEDIATE.
(a)That this Agreement shall have been adopted and the transactions
contemplated herein shall have been approved by the requisite vote of the
holders of the outstanding shares of beneficial interest of Spartan CA
Intermediate;
(b) That all consents of other parties and all other consents, orders, and
permits of federal, state, and local regulatory authorities (including
those of the Commission and of state Blue Sky and securities authorities,
including "no action" positions of such federal or state authorities)
deemed necessary by Fidelity CA Income or Spartan CA Intermediate to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of Fidelity CA Income or Spartan CA
Intermediate, provided that either party hereto may for itself waive any of
such conditions;
(c) That all proceedings taken by either fund in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto shall be satisfactory in form and substance to it and its counsel,
Kirkpatrick & Lockhart LLP;
(d) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement;
(e) That the Registration Statement shall have become effective under the
1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of Fidelity CA Income and Spartan CA
Intermediate, threatened by the Commission; and
(f) That Fidelity CA Income and Spartan CA Intermediate shall have
received an opinion of Kirkpatrick & Lockhart LLP satisfactory to Fidelity
CA Income and Spartan CA Intermediate that for federal income tax purposes:
(i) The Reorganization will be a reorganization under section
368(a)(1)(C) of the Code, and Spartan CA Intermediate and Fidelity CA
Income will each be parties to the Reorganization under section 368(b) of
the Code;
(ii) No gain or loss will be recognized by Spartan CA Intermediate upon
the transfer of all of its assets to Fidelity CA Income in exchange solely
for the Fidelity CA Income Shares and the assumption of Spartan CA
Intermediate's liabilities followed by the distribution of those Fidelity
CA Income Shares to the shareholders of Spartan CA Intermediate in
liquidation of Spartan CA Intermediate;
(iii) No gain or loss will be recognized by Fidelity CA Income on the
receipt of Spartan CA Intermediate's assets in exchange solely for the
Fidelity CA Income Shares and the assumption of Spartan CA Intermediate's
liabilities;
(iv) The basis of Spartan CA Intermediate's assets in the hands of
Fidelity CA Income will be the same as the basis of such assets in Spartan
CA Intermediate's hands immediately prior to the Reorganization;
(v) Fidelity CA Income's holding period in the assets to be received from
Spartan CA Intermediate will include Spartan CA Intermediate's holding
period in such assets;
(vi) A Spartan CA Intermediate shareholder will recognize no gain or loss
on the exchange of his or her shares of beneficial interest in Spartan CA
Intermediate for the Fidelity CA Income Shares in the Reorganization;
(vii) A Spartan CA Intermediate shareholder's basis in the Fidelity CA
Income Shares to be received by him or her will be the same as his or her
basis in the Spartan CA Intermediate shares exchanged therefor;
(viii) A Spartan CA Intermediate shareholder's holding period for his or
her Fidelity CA Income Shares will include the holding period of Spartan CA
Intermediate shares exchanged, provided that those Spartan CA Intermediate
shares were held as capital assets on the date of the Reorganization.
Notwithstanding anything herein to the contrary, each of Spartan CA
Intermediate and Fidelity CA Income may not waive the conditions set forth
in this subsection 10(f).
11. COVENANTS OF FIDELITY CA INCOME AND SPARTAN CA INTERMEDIATE.
(a) Fidelity CA Income and Spartan CA Intermediate each covenants to
operate its respective business in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary course
of business will include the payment of customary dividends and
distributions;
(b) Spartan CA Intermediate covenants that it is not acquiring the
Fidelity CA Income Shares for the purpose of making any distribution other
than in accordance with the terms of this Agreement;
(c) Spartan CA Intermediate covenants that it will assist Fidelity CA
Income in obtaining such information as Fidelity CA Income reasonably
requests concerning the beneficial ownership of Spartan CA Intermediate's
shares; and
(d) Spartan CA Intermediate covenants that its liquidation and termination
will be effected in the manner provided in its Amended and Restated
Declaration of Trust in accordance with applicable law and after the
Closing Date, Spartan CA Intermediate will not conduct any business except
in connection with its liquidation and termination.
12. TERMINATION; WAIVER.
Fidelity CA Income and Spartan CA Intermediate may terminate this
Agreement by mutual agreement. In addition, either Fidelity CA Income or
Spartan CA Intermediate may at its option terminate this Agreement at or
prior to the Closing Date because:
(i) of a material breach by the other of any representation, warranty, or
agreement contained herein to be performed at or prior to the Closing Date;
or
(ii) a condition herein expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears that it
will not or cannot be met.
In the event of any such termination, there shall be no liability for
damages on the part of Spartan CA Intermediate or Fidelity CA Income, or
their respective Trustees or officers.
13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES.
(a) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the subject matter hereof,
constitutes the only understanding with respect to such subject matter, may
not be changed except by a letter of agreement signed by each party hereto
and shall be construed in accordance with and governed by the laws of the
Commonwealth of Massachusetts.
(b) This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the respective
President, any Vice President, or Treasurer of Fidelity CA Income or
Spartan CA Intermediate; provided, however, that following the
shareholders' meeting called by Spartan CA Intermediate pursuant to Section
7 of this Agreement, no such amendment may have the effect of changing the
provisions for determining the number of Fidelity CA Income Shares to be
paid to Spartan CA Intermediate shareholders under this Agreement to the
detriment of such shareholders without their further approval.
(c) Either fund may waive any condition to its obligations hereunder,
provided that such waiver does not have any material adverse effect on the
interests of such fund's shareholders.
The representations, warranties, and covenants contained in the Agreement,
or in any document delivered pursuant hereto or in connection herewith,
shall survive the consummation of the transactions contemplated hereunder.
14. DECLARATIONS OF TRUST.
A copy of the Declaration of Trust of each fund, as restated and amended,
is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed
on behalf of the Trustees of each fund as trustees and not individually and
that the obligations of each fund under this instrument are not binding
upon any of such fund's Trustees, officers, or shareholders individually
but are binding only upon the assets and property of such fund. Each fund
agrees that its obligations hereunder apply only to such fund and not to
its shareholders individually or to the Trustees of such fund.
15. ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
of any rights or obligations hereunder shall be made by any party without
the written consent of the other parties. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any
person, firm, or corporation other than the parties hereto and their
respective successors and assigns any rights or remedies under or by reason
of this Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by an appropriate officer.
SIGNATURE LINES OMITTED
EXHIBIT 3
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as of
the 6th day of June, 1997 by and between Fidelity California Insured
Municipal Income Fund (Fidelity CA Insured) and Fidelity California
Municipal Income Fund (Fidelity CA Income), funds of Fidelity California
Municipal Trust (the trust). The trust is a duly organized business trust
under the laws of the Commonwealth of Massachusetts with its principal
place of business at 82 Devonshire Street, Boston, Massachusetts 02109.
Fidelity California Insured Municipal Income Fund and Fidelity California
Municipal Income Fund may be referred to herein collectively as the "funds"
or each individually as the "fund."
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the Code). The reorganization will
comprise: (a) the transfer of all of the assets of Fidelity CA Insured to
Fidelity CA Income solely in exchange for shares of beneficial interest in
Fidelity CA Income (the Fidelity CA Income Shares) and the assumption by
Fidelity CA Income of Fidelity CA Insured's liabilities; and (b) the
constructive distribution of such shares by Fidelity CA Insured PRO RATA to
its shareholders in complete liquidation and termination of Fidelity CA
Insured in exchange for all of Fidelity CA Insured's outstanding shares.
Fidelity CA Insured shall receive shares of Fidelity CA Income having an
aggregate net asset value equal to the value of the assets of Fidelity CA
Insured on the Closing Date (as defined in Section 6), which Fidelity CA
Insured shall then distribute PRO RATA to its shareholders. The foregoing
transactions are referred to herein as the "Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF FIDELITY CA INSURED.
Fidelity CA Insured represents and warrants to and agrees with Fidelity CA
Income that:
(a) Fidelity CA Insured is a series of Fidelity California Municipal
Trust, a business trust duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts, and has the
power to own all of its properties and assets and to carry out its
obligations under this Agreement. It has all necessary federal, state, and
local authorizations to carry on its business as now being conducted and to
carry out this Agreement;
(b) Fidelity California Municipal Trust is an open-end, management
investment company duly registered under the Investment Company Act of
1940, as amended (the 1940 Act), and such registration is in full force and
effect;
(c) The Prospectus and Statement of Additional Information of Fidelity CA
Insured dated April 19, 1997, previously furnished to Fidelity CA Income,
did not and does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Fidelity CA Insured, threatened against
Fidelity CA Insured which assert liability on the part of Fidelity CA
Insured. Fidelity CA Insured knows of no facts which might form the basis
for the institution of such proceedings;
(e) Fidelity CA Insured is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Amended and Restated Declaration of Trust or By-laws, or,
to the knowledge of Fidelity CA Insured, of any agreement, indenture,
instrument, contract, lease, or other undertaking to which Fidelity CA
Insured is a party or by which Fidelity CA Insured is bound or result in
the acceleration of any obligation or the imposition of any penalty under
any agreement, judgment or decree to which Fidelity CA Insured is a party
or is bound;
(f) The Statement of Assets and Liabilities, the Statement of Operations,
the Statement of Changes in Net Assets, Financial Highlights, and the
Schedule of Investments (including market values) of Fidelity CA Insured at
February 28, 1997, have been audited by Price Waterhouse LLP, independent
accountants, and have been furnished to Fidelity CA Income. Said Statements
of Assets and Liabilities and Schedule of Investments fairly present the
fund's financial position as of such date and said Statement of Operations,
Changes in Net Assets, and Financial Highlights fairly reflect its results
of operations, changes in financial position, and financial highlights for
the periods covered thereby in conformity with generally accepted
accounting principles consistently applied;
(g) Fidelity CA Insured has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on its
statement of assets and liabilities as of February 28, 1997 and those
incurred in the ordinary course of Fidelity CA Insured's business as an
investment company since February 28, 1997;
(h) The registration statement (Registration Statement) filed with the
Securities and Exchange Commission (Commission) by Fidelity California
Municipal Trust on Form N-14 relating to the shares of Fidelity CA Income
issuable hereunder and the proxy statement of Fidelity CA Insured included
therein (Proxy Statement), on the effective date of the Registration
Statement and insofar as they relate to Fidelity CA Insured (i) comply in
all material respects with the provisions of the Securities Act of 1933, as
amended (the 1933 Act), the Securities Exchange Act of 1934, as amended
(the 1934 Act), and the 1940 Act, and the rules and regulations thereunder,
and (ii) do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and at the time of the shareholders'
meeting referred to in Section 7 and on the Closing Date, the prospectus
contained in the Registration Statement of which the Proxy Statement is a
part (the Prospectus), as amended or supplemented, insofar as it relates to
Fidelity CA Insured, does not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(i) All material contracts and commitments of Fidelity CA Insured (other
than this Agreement) will be terminated without liability to Fidelity CA
Insured prior to the Closing Date (other than those made in connection with
redemptions of shares and the purchase and sale of portfolio securities
made in the ordinary course of business);
(j) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Fidelity CA
Insured of the transactions contemplated by this Agreement, except such as
have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, and
state securities or blue sky laws (which term as used herein shall include
the District of Columbia and Puerto Rico);
(k) Fidelity CA Insured has filed or will file all federal and state tax
returns which, to the knowledge of Fidelity CA Insured's officers, are
required to be filed by Fidelity CA Insured and has paid or will pay all
federal and state taxes shown to be due on said returns or provision shall
have been made for the payment thereof, and, to the best of Fidelity CA
Insured's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(l) Fidelity CA Insured has met the requirements of Subchapter M of the
Code for qualification and treatment as a regulated investment company for
all prior taxable years and intends to meet such requirements for its
current taxable year ending on the Closing Date;
(m) All of the issued and outstanding shares of Fidelity CA Insured are,
and at the Closing Date will be, duly and validly issued and outstanding
and fully paid and nonassessable as a matter of Massachusetts law (except
as disclosed in the fund's Statement of Additional Information), and have
been offered for sale and in conformity with all applicable federal
securities laws. All of the issued and outstanding shares of Fidelity CA
Insured will, at the Closing Date, be held by the persons and in the
amounts set forth in the list of shareholders submitted to Fidelity CA
Income in accordance with this Agreement;
(n) As of both the Valuation Time (as defined in Section 4) and the
Closing Date, Fidelity CA Insured will have the full right, power, and
authority to sell, assign, transfer, and deliver its portfolio securities
and any other assets of Fidelity CA Insured to be transferred to Fidelity
CA Income pursuant to this Agreement. As of the Closing Date, subject only
to the delivery of Fidelity CA Insured's portfolio securities and any such
other assets as contemplated by this Agreement, Fidelity CA Income will
acquire Fidelity CA Insured's portfolio securities and any such other
assets subject to no encumbrances, liens, or security interests (except for
those that may arise in the ordinary course and are disclosed to Fidelity
CA Income) and without any restrictions upon the transfer thereof; and
(o) The execution, performance, and delivery of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of Fidelity CA Insured, and this Agreement constitutes a
valid and binding obligation of Fidelity CA Insured enforceable in
accordance with its terms, subject to shareholder approval.
2. REPRESENTATIONS AND WARRANTIES OF FIDELITY CA INCOME.
Fidelity CA Income represents and warrants to and agrees with Fidelity CA
Insured that:
(a) Fidelity CA Income is a series of Fidelity California Municipal Trust,
a business trust duly organized, validly existing, and in good standing
under the laws of the Commonwealth of Massachusetts, and has the power to
own all of its properties and assets and to carry out its obligations under
this Agreement. It has all necessary federal, state, and local
authorizations to carry on its business as now being conducted and to carry
out this Agreement;
(b) Fidelity California Municipal Trust is an open-end, management
investment company duly registered under the 1940 Act, and such
registration is in full force and effect;
(c) The Prospectus and Statement of Additional Information of Fidelity CA
Income, dated April 19, 1997, previously furnished to Fidelity CA Insured
did not and does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Fidelity CA Income, threatened against
Fidelity CA Income which assert liability on the part of Fidelity CA
Income. Fidelity CA Income knows of no facts which might form the basis for
the institution of such proceedings;
(e) Fidelity CA Income is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Amended and Restated Declaration of Trust or By-laws, or,
to the knowledge of Fidelity CA Income, of any agreement, indenture,
instrument, contract, lease, or other undertaking to which Fidelity CA
Income is a party or by which Fidelity CA Income is bound or result in the
acceleration of any obligation or the imposition of any penalty under any
agreement, judgment, or decree to which Fidelity CA Income is a party or is
bound;
(f) The Statement of Assets and Liabilities, the Statement of Operations,
the Statement of Changes in Net Assets, Financial Highlights, and the
Schedule of Investments (including market values) of Fidelity CA Income at
February 28, 1997, have been audited by Price Waterhouse LLP, independent
accountants, and have been furnished to Fidelity CA Insured. Said
Statements of Assets and Liabilities and Schedule of Investments fairly
present its financial position as of such date and said Statement of
Operations, Changes in Net Assets, and Financial Highlights fairly reflect
its results of operations, changes in financial position, and financial
highlights for the periods covered thereby in conformity with generally
accepted accounting principles consistently applied;
(g) Fidelity CA Income has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on its
statement of assets and liabilities as of February 28, 1997 and those
incurred in the ordinary course of Fidelity CA Income's business as an
investment company since February 28, 1997;
(h) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Fidelity CA
Income of the transactions contemplated by this Agreement, except such as
have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, and
state securities or blue sky laws (which term as used herein shall include
the District of Columbia and Puerto Rico);
(i) Fidelity CA Income has filed or will file all federal and state tax
returns which, to the knowledge of Fidelity CA Income's officers, are
required to be filed by Fidelity CA Income and has paid or will pay all
federal and state taxes shown to be due on said returns or provision shall
have been made for the payment thereof, and, to the best of Fidelity CA
Income's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(j) Fidelity CA Income has met the requirements of Subchapter M of the
Code for qualification and treatment as a regulated investment company for
all prior taxable years and intends to meet such requirements for its
current taxable year ending on February 28, 1998;
(k) As of the Closing Date, the shares of beneficial interest of Fidelity
CA Income to be issued to Fidelity CA Insured will have been duly
authorized and, when issued and delivered pursuant to this Agreement, will
be legally and validly issued and will be fully paid and nonassessable
(except as disclosed in the fund's Statement of Additional Information) by
Fidelity CA Income, and no shareholder of Fidelity CA Income will have any
preemptive right of subscription or purchase in respect thereof;
(l) The execution, performance, and delivery of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of Fidelity CA Income, and this Agreement constitutes a
valid and binding obligation of Fidelity CA Income enforceable in
accordance with its terms, subject to approval by the shareholders of
Fidelity CA Insured;
(m) The Registration Statement and the Proxy Statement, on the effective
date of the Registration Statement and insofar as they relate to Fidelity
CA Income, (i) will comply in all material respects with the provisions of
the 1933 Act, the 1934 Act, and the 1940 Act, and the rules and regulations
thereunder, and (ii) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and at the time of
the shareholders' meeting referred to in Section 7 and on the Closing Date,
the Prospectus, as amended or supplemented, insofar as it relates to
Fidelity CA Income, will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(n) The issuance of the Fidelity CA Income Shares pursuant to this
Agreement will be in compliance with all applicable federal securities
laws; and
(o) All of the issued and outstanding shares of beneficial interest of
Fidelity CA Income have been offered for sale and sold in conformity with
the federal securities laws.
3. REORGANIZATION.
(a) Subject to the requisite approval of the shareholders of Fidelity CA
Insured and to the other terms and conditions contained herein, Fidelity CA
Insured agrees to assign, sell, convey, transfer, and deliver to Fidelity
CA Income as of the Closing Date all of the assets of Fidelity CA Insured
of every kind and nature existing on the Closing Date. Fidelity CA Income
agrees in exchange therefor: (i) to assume all of Fidelity CA Insured's
liabilities existing on or after the Closing Date, whether or not
determinable on the Closing Date, and (ii) to issue and deliver to Fidelity
CA Insured the number of full and fractional shares of Fidelity CA Income
having an aggregate net asset value equal to the value of the assets of
Fidelity CA Insured transferred hereunder, less the value of the
liabilities of Fidelity CA Insured, determined as provided for under
Section 4.
(b) The assets of Fidelity CA Insured to be acquired by Fidelity CA Income
shall include, without limitation, all cash, cash equivalents, securities,
receivables (including interest or dividends receivable), claims, chooses
in action, and other property owned by Fidelity CA Insured, and any
deferred or prepaid expenses shown as an asset on the books of Fidelity CA
Insured on the Closing Date. Fidelity CA Insured will pay or cause to be
paid to Fidelity CA Income any dividend or interest payments received by it
on or after the Closing Date with respect to the assets transferred to
Fidelity CA Income hereunder, and Fidelity CA Income will retain any
dividend or interest payments received by it after the Valuation Time with
respect to the assets transferred hereunder without regard to the payment
date thereof.
(c) The liabilities of Fidelity CA Insured to be assumed by Fidelity CA
Income shall include (except as otherwise provided for herein) all of
Fidelity CA Insured's liabilities, debts, obligations, and duties, of
whatever kind or nature, whether absolute, accrued, contingent, or
otherwise, whether or not arising in the ordinary course of business,
whether or not determinable on the Closing Date, and whether or not
specifically referred to in this Agreement. Notwithstanding the foregoing,
Fidelity CA Insured agrees to use its best efforts to discharge all of its
known liabilities prior to the Closing Date, other than liabilities
incurred in the ordinary course of business.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable (the Liquidation Date), Fidelity CA Insured will
constructively distribute PRO RATA to its shareholders of record,
determined as of the Valuation Time on the Closing Date, the Fidelity CA
Income Shares in exchange for such shareholders' shares of beneficial
interest in Fidelity CA Insured and Fidelity CA Insured will be liquidated
in accordance with Fidelity CA Insured's Amended and Restated Declaration
of Trust. Such distribution shall be accomplished by the funds' transfer
agent opening accounts on Fidelity CA Income's share transfer books in the
names of the Fidelity CA Insured shareholders and transferring the Fidelity
CA Income Shares thereto. Each Fidelity CA Insured shareholder's account
shall be credited with the respective PRO RATA number of full and
fractional (rounded to the third decimal place) Fidelity CA Income Shares
due that shareholder. All outstanding Fidelity CA Insured shares, including
any represented by certificates, shall simultaneously be canceled on
Fidelity CA Insured's share transfer records. Fidelity CA Income shall not
issue certificates representing the Fidelity CA Income Shares in connection
with the Reorganization.
(e) Any reporting responsibility of Fidelity CA Insured is and shall
remain its responsibility up to and including the date on which it is
terminated.
(f) Any transfer taxes payable upon issuance of the Fidelity CA Income
Shares in a name other than that of the registered holder on Fidelity CA
Insured's books of the Fidelity CA Insured shares constructively exchanged
for the Fidelity CA Income Shares shall be paid by the person to whom such
Fidelity CA Income Shares are to be issued, as a condition of such
transfer.
4. VALUATION.
(a) The Valuation Time shall be 4:00 p.m. Eastern time on the Closing
Date, or such other date as may be mutually agreed upon in writing by the
parties hereto (the Valuation Time).
(b) As of the Closing Date, Fidelity CA Income will deliver to Fidelity CA
Insured the number of Fidelity CA Income Shares having an aggregate net
asset value equal to the value of the assets of Fidelity CA Insured
transferred hereunder less the liabilities of Fidelity CA Insured,
determined as provided in this Section 4.
(c) The net asset value per share of the Fidelity CA Income Shares to be
delivered to Fidelity CA Insured, the value of the assets of Fidelity CA
Insured transferred hereunder, and the value of the liabilities of Fidelity
CA Insured to be assumed hereunder shall in each case be determined as of
the Valuation Time.
(d) The net asset value per share of the Fidelity CA Income Shares shall
be computed in the manner set forth in the then-current Fidelity CA Income
Prospectus and Statement of Additional Information, and the value of the
assets and liabilities of Fidelity CA Insured shall be computed in the
manner set forth in the then-current Fidelity CA Insured Prospectus and
Statement of Additional Information.
(e) All computations pursuant to this Section shall be made by or under
the direction of Fidelity Service Company, Inc., a wholly owned subsidiary
of FMR Corp., in accordance with its regular practice as pricing agent for
Fidelity CA Insured and Fidelity CA Income.
5. FEES; EXPENSES.
(a) Fidelity CA Insured shall be responsible for all expenses, fees and
other charges, subject to FMR's voluntary expense limitation (2.5% of
average net assets), if applicable. Any merger-related expenses which may
be attributable to Fidelity CA Income will be borne by Fidelity CA Income.
(b) Each of Fidelity CA Income and Fidelity CA Insured represents that
there is no person who has dealt with it who by reason of such dealings is
entitled to any broker's or finder's or other similar fee or commission
arising out of the transactions contemplated by this Agreement.
6. CLOSING DATE.
(a) The Reorganization, together with related acts necessary to consummate
the same (the Closing), unless otherwise provided herein, shall occur at
the principal office of the Trust, 82 Devonshire Street, Boston,
Massachusetts, as of the Valuation Time on August 28, 1997, or at some
other time, date, and place agreed to by Fidelity CA Insured and Fidelity
CA Income (the Closing Date).
(b) In the event that on the Closing Date: (i) any of the markets for
securities held by the funds is closed to trading, or (ii) trading thereon
is restricted, or (iii) trading or the reporting of trading on said market
or elsewhere is disrupted, all so that accurate appraisal of the total net
asset value of Fidelity CA Insured and the net asset value per share of
Fidelity CA Income is impracticable, the Valuation Time and the Closing
Date shall be postponed until the first business day after the day when
such trading shall have been fully resumed and such reporting shall have
been restored, or such other date as the parties may agree.
7. SHAREHOLDER MEETING AND TERMINATION OF FIDELITY CA INSURED.
(a) Fidelity CA Insured agrees to call a meeting of its shareholders after
the effective date of the Registration Statement, to consider transferring
its assets to Fidelity CA Income as herein provided, adopting this
Agreement, and authorizing the liquidation of Fidelity CA Insured.
(b) Fidelity CA Insured agrees that as soon as reasonably practicable
after distribution of the Fidelity CA Income Shares, Fidelity CA Insured
shall be terminated as a series of Fidelity California Municipal Trust
pursuant to its Amended and Restated Declaration of Trust, any further
actions shall be taken in connection therewith as required by applicable
law, and on and after the Closing Date Fidelity CA Insured shall not
conduct any business except in connection with its liquidation and
termination.
8. CONDITIONS TO OBLIGATIONS OF FIDELITY CA INCOME.
(a) That Fidelity CA Insured furnishes to Fidelity CA Income a statement,
dated as of the Closing Date, signed by an officer of Fidelity California
Municipal Trust, certifying that as of the Valuation Time and the Closing
Date all representations and warranties of Fidelity CA Insured made in this
Agreement are true and correct in all material respects and that Fidelity
CA Insured has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to such
dates;
(b) That Fidelity CA Insured furnishes Fidelity CA Income with copies of
the resolutions, certified by an officer of Fidelity California Municipal
Trust, evidencing the adoption of this Agreement and the approval of the
transactions contemplated herein by the requisite vote of the holders of
the outstanding shares of beneficial interest of Fidelity CA Insured;
(c) That, on or prior to the Closing Date, Fidelity CA Insured will
declare one or more dividends or distributions which, together with all
previous such dividends or distributions attributable to its current
taxable year, shall have the effect of distributing to the shareholders of
Fidelity CA Insured substantially all of Fidelity CA Insured's investment
company taxable income and all of its net realized capital gain, if any, as
of the Closing Date;
(d) That Fidelity CA Insured shall deliver to Fidelity CA Income at the
Closing a statement of its assets and liabilities, together with a list of
its portfolio securities showing each such security's adjusted tax basis
and holding period by lot, with values determined as provided in Section 4
of this Agreement, all as of the Valuation Time, certified on Fidelity CA
Insured's behalf by its Treasurer or Assistant Treasurer;
(e) That Fidelity CA Insured's custodian shall deliver to Fidelity CA
Income a certificate identifying the assets of Fidelity CA Insured held by
such custodian as of the Valuation Time on the Closing Date and stating
that as of the Valuation Time: (i) the assets held by the custodian will be
transferred to Fidelity CA Income; (ii) Fidelity CA Insured's assets have
been duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof; and (iii) to the best of the custodian's
knowledge, all necessary taxes in conjunction with the delivery of the
assets, including all applicable federal and state stock transfer stamps,
if any, have been paid or provision for payment has been made;
(f) That Fidelity CA Insured's transfer agent shall deliver to Fidelity CA
Income at the Closing a certificate setting forth the number of shares of
Fidelity CA Insured outstanding as of the Valuation Time and the name and
address of each holder of record of any such shares and the number of
shares held of record by each such shareholder;
(g) That Fidelity CA Insured calls a meeting of its shareholders to be
held after the effective date of the Registration Statement, to consider
transferring its assets to Fidelity CA Income as herein provided, adopting
this Agreement, and authorizing the liquidation and termination of Fidelity
CA Insured;
(h) That Fidelity CA Insured delivers to Fidelity CA Income a certificate
of an officer of Fidelity California Municipal Trust, dated as of the
Closing Date, that there has been no material adverse change in Fidelity CA
Insured's financial position since February 28, 1997, other than changes in
the market value of its portfolio securities, or changes due to net
redemptions of its shares, dividends paid, or losses from operations; and
(i) That all of the issued and outstanding shares of beneficial interest
of Fidelity CA Insured shall have been offered for sale and sold in
conformity with all applicable state securities laws and, to the extent
that any audit of the records of Fidelity CA Insured or its transfer agent
by Fidelity CA Income or its agents shall have revealed otherwise, Fidelity
CA Insured shall have taken all actions that in the opinion of Fidelity CA
Income are necessary to remedy any prior failure on the part of Fidelity CA
Insured to have offered for sale and sold such shares in conformity with
such laws.
9. CONDITIONS TO OBLIGATIONS OF FIDELITY CA INSURED.
(a) That Fidelity CA Income shall have executed and delivered to Fidelity
CA Insured an Assumption of Liabilities, certified by an officer of
Fidelity California Municipal Trust, dated as of the Closing Date pursuant
to which Fidelity CA Income will assume all of the liabilities of Fidelity
CA Insured existing at the Valuation Time in connection with the
transactions contemplated by this Agreement;
(b) That Fidelity CA Income furnishes to Fidelity CA Insured a statement,
dated as of the Closing Date, signed by an officer of Fidelity California
Municipal Trust, certifying that as of the Valuation Time and the Closing
Date all representations and warranties of Fidelity CA Income made in this
Agreement are true and correct in all material respects, and Fidelity CA
Income has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to such
dates; and
(c) That Fidelity CA Insured shall have received an opinion of Kirkpatrick
& Lockhart LLP, counsel to Fidelity CA Insured and Fidelity CA Income, to
the effect that the Fidelity CA Income Shares are duly authorized and upon
delivery to Fidelity CA Insured as provided in this Agreement will be
validly issued and will be fully paid and nonassessable by Fidelity CA
Income (except as disclosed in Fidelity CA Insured's Statement of
Additional Information) and no shareholder of Fidelity CA Income has any
preemptive right of subscription or purchase in respect thereof.
10. CONDITIONS TO OBLIGATIONS OF FIDELITY CA INCOME AND FIDELITY CA
INSURED.
(a) That this Agreement shall have been adopted and the transactions
contemplated herein shall have been approved by the requisite vote of the
holders of the outstanding shares of beneficial interest of Fidelity CA
Insured;
(b) That all consents of other parties and all other consents, orders, and
permits of federal, state, and local regulatory authorities (including
those of the Commission and of state Blue Sky and securities authorities,
including "no action" positions of such federal or state authorities)
deemed necessary by Fidelity CA Income or Fidelity CA Insured to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of Fidelity CA Income or Fidelity CA
Insured, provided that either party hereto may for itself waive any of such
conditions;
(c) That all proceedings taken by either fund in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto shall be satisfactory in form and substance to it and its counsel,
Kirkpatrick & Lockhart LLP;
(d) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement;
(e) That the Registration Statement shall have become effective under the
1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of Fidelity CA Income and Fidelity CA
Insured, threatened by the Commission; and
(f) That Fidelity CA Income and Fidelity CA Insured shall have received an
opinion of Kirkpatrick & Lockhart LLP satisfactory to Fidelity CA Income
and Fidelity CA Insured that for federal income tax purposes:
(i) The Reorganization will be a reorganization under section
368(a)(1)(C) of the Code, and Fidelity CA Insured and Fidelity CA Income
will each be parties to the Reorganization under section 368(b) of the
Code;
(ii) No gain or loss will be recognized by Fidelity CA Insured upon the
transfer of all of its assets to Fidelity CA Income in exchange solely for
the Fidelity CA Income Shares and the assumption of Fidelity CA Insured's
liabilities followed by the distribution of those Fidelity CA Income Shares
to the shareholders of Fidelity CA Insured in liquidation of Fidelity CA
Insured;
(iii) No gain or loss will be recognized by Fidelity CA Income on the
receipt of Fidelity CA Insured's assets in exchange solely for the Fidelity
CA Income Shares and the assumption of Fidelity CA Insured's liabilities;
(iv) The basis of Fidelity CA Insured's assets in the hands of Fidelity
CA Income will be the same as the basis of such assets in Fidelity CA
Insured's hands immediately prior to the Reorganization;
(v) Fidelity CA Income's holding period in the assets to be received from
Fidelity CA Insured will include Fidelity CA Insured's holding period in
such assets;
(vi) A Fidelity CA Insured shareholder will recognize no gain or loss on
the exchange of his or her shares of beneficial interest in Fidelity CA
Insured for the Fidelity CA Income Shares in the Reorganization;
(vii) A Fidelity CA Insured shareholder's basis in the Fidelity CA Income
Shares to be received by him or her will be the same as his or her basis in
the Fidelity CA Insured shares exchanged therefor;
(viii) A Fidelity CA Insured shareholder's holding period for his or her
Fidelity CA Income Shares will include the holding period of Fidelity CA
Insured shares exchanged, provided that those Fidelity CA Insured shares
were held as capital assets on the date of the Reorganization.
Notwithstanding anything herein to the contrary, each of Fidelity CA
Insured and Fidelity CA Income may not waive the conditions set forth in
this subsection 10(f).
11. COVENANTS OF FIDELITY CA INCOME AND FIDELITY CA INSURED.
(a) Fidelity CA Income and Fidelity CA Insured each covenants to operate
its respective business in the ordinary course between the date hereof and
the Closing Date, it being understood that such ordinary course of business
will include the payment of customary dividends and distributions;
(b) Fidelity CA Insured covenants that it is not acquiring the Fidelity CA
Income Shares for the purpose of making any distribution other than in
accordance with the terms of this Agreement;
(c) Fidelity CA Insured covenants that it will assist Fidelity CA Income
in obtaining such information as Fidelity CA Income reasonably requests
concerning the beneficial ownership of Fidelity CA Insured's shares; and
(d) Fidelity CA Insured covenants that its liquidation and termination
will be effected in the manner provided in its Amended and Restated
Declaration of Trust in accordance with applicable law and after the
Closing Date, Fidelity CA Insured will not conduct any business except in
connection with its liquidation and termination.
12. TERMINATION; WAIVER.
Fidelity CA Income and Fidelity CA Insured may terminate this Agreement by
mutual agreement. In addition, either Fidelity CA Income or Fidelity CA
Insured may at its option terminate this Agreement at or prior to the
Closing Date because:
(i) of a material breach by the other of any representation, warranty, or
agreement contained herein to be performed at or prior to the Closing Date;
or
(ii) a condition herein expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears that it
will not or cannot be met.
In the event of any such termination, there shall be no liability for
damages on the part of Fidelity CA Insured or Fidelity CA Income, or their
respective Trustees or officers.
13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES.
(a) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the subject matter hereof,
constitutes the only understanding with respect to such subject matter, may
not be changed except by a letter of agreement signed by each party hereto
and shall be construed in accordance with and governed by the laws of the
Commonwealth of Massachusetts.
(b) This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the respective
President, any Vice President, or Treasurer of Fidelity CA Income or
Fidelity CA Insured; provided, however, that following the shareholders'
meeting called by Fidelity CA Insured pursuant to Section 7 of this
Agreement, no such amendment may have the effect of changing the provisions
for determining the number of Fidelity CA Income Shares to be paid to
Fidelity CA Insured shareholders under this Agreement to the detriment of
such shareholders without their further approval.
(c) Either fund may waive any condition to its obligations hereunder,
provided that such waiver does not have any material adverse effect on the
interests of such fund's shareholders.
The representations, warranties, and covenants contained in the Agreement,
or in any document delivered pursuant hereto or in connection herewith,
shall survive the consummation of the transactions contemplated hereunder.
14. DECLARATIONS OF TRUST.
A copy of the Declaration of Trust of each fund, as restated and amended,
is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed
on behalf of the Trustees of each fund as trustees and not individually and
that the obligations of each fund under this instrument are not binding
upon any of such fund's Trustees, officers, or shareholders individually
but are binding only upon the assets and property of such fund. Each fund
agrees that its obligations hereunder apply only to such fund and not to
its shareholders individually or to the Trustees of such fund.
15. ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
of any rights or obligations hereunder shall be made by any party without
the written consent of the other parties. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any
person, firm, or corporation other than the parties hereto and their
respective successors and assigns any rights or remedies under or by reason
of this Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by an appropriate officer.
SIGNATURE LINES OMITTED
SC-pxs-0697 CUSIP#316061506/FUND#456
CUSIP#316061605/FUND#432
CUSIP#316061308/FUND#403
(PHOTO_OF_EDWARD_C_JOHNSON_3D)PROXY MATERIALS
I M P O R T A N T
PLEASE CAST YOUR VOTE NOW!
Dear Shareholder:
I am writing to ask you for your vote in important proposals to merge
Spartan California Municipal Income Fund (Spartan CA Income), Spartan
California Intermediate Municipal Income Fund (Spartan CA Intermediate),
and Fidelity California Insured Municipal Income Fund (Fidelity CA Insured)
into Fidelity California Municipal Income Fund (Fidelity CA Income). A
shareholder meeting will be held on August 4, 1997 and votes submitted in
time to be counted at the meeting will decide whether the mergers take
place. This package contains information about the proposals and includes
all the materials you will need to vote by mail.
Each fund's Board of Trustees has reviewed the proposed mergers and
recommends presenting proposals to shareholders to approve the merger of
each of the funds into Fidelity CA Income. Each fund votes separately on
the merger proposals.
The Trustees, most of whom are not affiliated with Fidelity, are
responsible for protecting your interests as a shareholder. The Trustees
determined that the mergers are in shareholders' best interest. However,
the final decision is up to you.
Please take the time to read the enclosed materials and cast your vote on
the proxy card promptly. The matters to be voted on are important and
directly affect your investment. As a shareholder, you are entitled to one
vote for each dollar of net asset value you own of a fund on the record
date. YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
The mergers would give shareholders of Spartan CA Income, Spartan CA
Intermediate, and Fidelity CA Insured the opportunity to participate in a
larger fund with similar investment policies. The surviving fund would also
have lower expenses guaranteed for a period of more than two years. We have
attached a Q&A to assist you in understanding the proposals. The enclosed
materials include a detailed description of the funds and the proposed
mergers.
VOTING BY MAIL IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED. We
encourage you to exercise your right as a shareholder and to vote promptly.
To cast your vote, simply complete the proxy card enclosed in this package.
Be sure to sign the card before mailing it in the postage-paid envelope
provided.
If you have any questions before you vote, please call us at
1-800-544-8888. We will be glad to help you get your vote in quickly. Thank
you for your participation in this important initiative for your fund.
Sincerely,
Edward C. Johnson 3d
President
Important information to help you understand the proposals that you are
being asked to vote on
PLEASE READ THE FULL TEXT OF THE ENCLOSED PROXY STATEMENT. BELOW IS A BRIEF
OVERVIEW OF THE MATTERS TO BE VOTED UPON. YOUR VOTE IS IMPORTANT. IF YOU
HAVE ANY QUESTIONS REGARDING THE PROPOSALS, PLEASE CALL US AT
1-800-544-8888. WE APPRECIATE YOU PLACING YOUR TRUST IN FIDELITY AND LOOK
FORWARD TO HELPING YOU ACHIEVE YOUR FINANCIAL GOALS.
WHAT PROPOSALS AM I BEING ASKED TO VOTE ON?
If you are a shareholder in the following fund(s), you will be asked to
vote on the indicated proposals:
SPARTAN CALIFORNIA MUNICIPAL INCOME FUND
(small solid bullet) To approve a merger of Spartan California Municipal
Income Fund into Fidelity California Municipal Income Fund. (Proposal 1)
SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL INCOME FUND
(small solid bullet) To approve a merger of Spartan California Intermediate
Municipal Income Fund into Fidelity California Municipal Income Fund.
(Proposal 2)
FIDELITY CALIFORNIA INSURED MUNICIPAL INCOME FUND
(small solid bullet) To approve a merger of Fidelity California Insured
Municipal Income Fund into Fidelity California Municipal Income Fund.
(Proposal 3)
Each fund votes separately on the merger proposals. It will not be
necessary for all three proposals to be approved for any one of them to
take place.
WHAT IS THE REASON FOR AND ADVANTAGES OF THESE MERGERS?
Fidelity believes it can offer you a simpler and more efficient California
product line if the four funds are combined into one. Shareholders would
benefit from the more efficient product line through lower expenses,
guaranteed for more than two years.
DO THE FUNDS BEING MERGED HAVE SIMILAR INVESTMENT POLICIES?
All four funds are California municipal bond funds that seek double
tax-free income for California residents. Generally speaking, Fidelity CA
Income has a broader investment mandate than Spartan CA Intermediate or
Fidelity CA Insured.
SPARTAN CA INCOME and Fidelity CA Income have identical investment
policies.
SPARTAN CA INTERMEDIATE maintains a shorter average maturity and has less
interest rate sensitivity than Fidelity CA Income.
FIDELITY CA INSURED is required to invest at least 65% of its assets in
municipal securities that are covered by insurance guaranteeing the timely
payment of principal and interest. Fidelity CA Income does not have a
required level for investments in insured bonds.
WHO IS THE FUND MANAGER FOR THESE FUNDS?
Jonathan Short currently manages all four funds and is expected to manage
the combined fund.
HOW DO THE EXPENSE STRUCTURES AND FEES OF THE FUNDS COMPARE?
All four funds currently have the same expenses, equal to 0.55% of their
assets per year. The combined fund's expenses would be lower through
December 31, 1999, at 0.53%.
Although the funds' expenses are currently the same, they have different
contracts with Fidelity. SPARTAN CA INCOME and SPARTAN CA INTERMEDIATE each
pay an "all-inclusive" management fee to Fidelity Management & Research
Company (FMR) at a rate of 0.55% of average net assets which covers
substantially all fund expenses.
FIDELITY CA INSURED and FIDELITY CA INCOME have an expense structure that
charges separately for management fees and other operating expenses. As of
April 1, 1997, FMR has voluntarily agreed to reimburse these two funds to
the extent that the total operating expenses exceed 0.55% of average net
assets.
If any or all of the mergers are approved, the combined fund will retain
Fidelity CA Income's current expense structure. However, FMR has agreed to
limit the combined fund's expenses to 0.53% of average net assets through
December 31, 1999. This represents an expense reduction of 0.02% of the
fund's average net assets per year. After that date, the combined fund's
expenses could increase.
WHAT WILL BE THE NAME OF THE SURVIVING FUND AFTER THE MERGERS ARE COMPLETE?
Upon approval of the Spartan CA Income merger, the combined fund's name
will be changed to Spartan California Municipal Income Fund.
WHAT HAPPENS IF THE PROPOSAL FOR MY FUND IS NOT APPROVED?
If quorum is not reached by the time of the Shareholder Meeting (August 4,
1997), the meeting may be adjourned to permit further solicitation of proxy
votes. If the proposal to merge your fund is not approved by shareholders,
your fund will reopen to new accounts.
WHAT ARE THE FEDERAL TAX IMPLICATIONS OF THE MERGER?
The mergers will not be a taxable event (i.e., no gain or loss will be
recognized) to any of the funds or their shareholders.
WHAT WILL BE THE SIZE OF FIDELITY CA INCOME AFTER THE MERGER AND HOW HAS
THE FUND PERFORMED?
If all three proposals pass, the combined fund will have over $1 billion in
assets. For calendar year 1995, Fidelity CA Income returned 19.17% compared
with 17.45% for the Lehman Brothers Municipal Bond Index. For calendar year
1996, the fund returned 4.76% compared with 4.43% for the Lehman Brothers
Municipal Bond Index.
HOW WILL YOU DETERMINE THE NUMBER OF SHARES OF FIDELITY CA INCOME THAT I
WILL RECEIVE?
As of 4 P.M. Eastern Time on the Closing Date of each merger, shareholders
will receive the number of full and fractional shares of Fidelity CA Income
that is equal in value to the aggregate net asset value of their shares on
that date. Closing Dates for each fund are listed below:
FUND MERGES INTO CLOSING DATE
Spartan CA Income Fidelity CA Income August 14, 1997
Spartan CA Intermediate Fidelity CA Income August 21, 1997
Fidelity CA Insured Fidelity CA Income August 28, 1997
The Shareholder Meetings could be adjourned, or if other circumstances
arise, the Closing Date may be adjusted.
WHAT IMPACT WILL THE MERGER HAVE ON THE SHARE PRICE OF FIDELITY CA INCOME?
The net asset value per share of Fidelity CA Income will not be changed by
the merger.
WHAT ARE MY OTHER INVESTMENT ALTERNATIVES?
Fidelity offers Fidelity California Municipal Money Market Fund, a money
market fund that invests in high quality, short-term municipal securities
and seeks current income exempt from federal and California state personal
income tax. As a money market fund, it seeks to maintain a stable net asset
value. The total return on Fidelity California Municipal Money Market Fund
for calendar 1996 was 2.90%.
Additional California municipal bond funds are available through Fidelity
by calling FundsNetwork at 1-800-544-9697.
HOW DO I VOTE MY SHARES?
You can vote your shares by completing and signing the enclosed proxy card,
and mailing it in the enclosed postage paid envelope. If you need any
assistance, or have any questions regarding the proposals or how to vote
your shares, please call us at 1-800-544-8888.
(registered trademark)
SC-PXL-0597
Vote this proxy card TODAY! Your prompt response will
save the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- --------------------------------------------------------------------------
- --------------------
FIDELITY CALIFORNIA MUNICIPAL TRUST: SPARTAN CALIFORNIA MUNICIPAL INCOME
FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d and Arthur S. Loring, or any one or more of them,
attorneys, with full power of substitution, to vote all shares of Fidelity
California Municipal Trust: Spartan California Municipal Income Fund which
the undersigned is entitled to vote at the Special Meeting of Shareholders
of the fund to be held at the office of the trust at 82 Devonshire St.,
Boston, MA 02109, on August 4, 1997 at 9:00 a.m Eastern time and at any
adjournments thereof. All powers may be exercised by a majority of said
proxy holders or substitutes voting or acting or, if only one votes and
acts, then by that one. This Proxy shall be voted on the proposal
described in the Proxy Statement as specified on the reverse side. Receipt
of the Notice of the Meeting and the accompanying Proxy Statement is hereby
acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1997
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip # 316061506/fund# 456
Please refer to the Proxy Statement discussion of this matter.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSAL.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
- --------------------------------------------------------------------------
- --------------------
__________________________________________________________________________
___________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1. To approve an Agreement and Plan of Reorganization FOR [ ] AGAINST [ ] ABSTAIN [ ] 1.
between Spartan California Municipal Income Fund
and Fidelity California Municipal Income Fund,
another fund of the trust, providing for the transfer of
all of the assets of Spartan California Municipal
Income Fund to Fidelity California Municipal Income
Fund in exchange solely for shares of beneficial
interest of Fidelity California Municipal Income Fund
and the assumption by Fidelity California Municipal
Income Fund of Spartan California Municipal Income
Fund's liabilities, followed by the distribution of
Fidelity California Municipal Income Fund shares to
shareholders of Spartan California Municipal Income
Fund in liquidation of Spartan California Municipal
Income Fund.
</TABLE>
SCL -PXC-0697 cusip # 316061506/fund# 456
Vote this proxy card TODAY! Your prompt response will
save the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- --------------------------------------------------------------------------
- --------------------
FIDELITY CALIFORNIA MUNICIPAL TRUST: SPARTAN CALIFORNIA INTERMEDIATE
MUNICIPAL INCOME FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d and Arthur S. Loring, or any one or more of them,
attorneys, with full power of substitution, to vote all shares of Fidelity
California Municipal Trust: Spartan California Intermediate Municipal
Income Fund which the undersigned is entitled to vote at the Special
Meeting of Shareholders of the fund to be held at the office of the trust
at 82 Devonshire St., Boston, MA 02109, on August 4, 1997 at 9:00 a.m.
Eastern time and at any adjournments thereof. All powers may be exercised
by a majority of said proxy holders or substitutes voting or acting or, if
only one votes and acts, then by that one. This Proxy shall be voted on
the proposal described in the Proxy Statement as specified on the reverse
side. Receipt of the Notice of the Meeting and the accompanying Proxy
Statement is hereby acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1997
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip # 316061605/fund# 432
Please refer to the Proxy Statement discussion of this matter.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSAL.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
- --------------------------------------------------------------------------
- --------------------
__________________________________________________________________________
___________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
2. To approve an Agreement and Plan of Reorganization FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
between Spartan California Intermediate Municipal
Income Fund and Fidelity California Municipal
Income Fund, another fund of the trust, providing for
the transfer of all of the assets of Spartan California
Intermediate Municipal Income Fund to Fidelity
California Municipal Income Fund in exchange solely
for shares of beneficial interest of Fidelity California
Municipal Income Fund and the assumption by
Fidelity California Municipal Income Fund of Spartan
California Intermediate Municipal Income Fund's
liabilities, followed by the distribution of Fidelity
California Municipal Income Fund shares to
shareholders of Spartan California Intermediate
Municipal Income Fund in liquidation of Spartan
California Intermediate Municipal Income Fund.
</TABLE>
SCI-PXC-0697 cusip # 316061605/fund# 432
Vote this proxy card TODAY! Your prompt response will
save the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- --------------------------------------------------------------------------
- --------------------
FIDELITY CALIFORNIA MUNICIPAL TRUST: FIDELITY CALIFORNIA INSURED MUNICIPAL
INCOME FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d and Arthur S. Loring, or any one or more of them,
attorneys, with full power of substitution, to vote all shares of Fidelity
California Municipal Trust: Fidelity California Insured Municipal Income
Fund which the undersigned is entitled to vote at the Special Meeting of
Shareholders of the fund to be held at the office of the trust at 82
Devonshire St., Boston, MA 02109, on August 4, 1997 at 9:00 a.m. Eastern
time and at any adjournments thereof. All powers may be exercised by a
majority of said proxy holders or substitutes voting or acting or, if only
one votes and acts, then by that one. This Proxy shall be voted on the
proposal described in the Proxy Statement as specified on the reverse side.
Receipt of the Notice of the Meeting and the accompanying Proxy Statement
is hereby acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1997
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip # 316061308/fund# 403
Please refer to the Proxy Statement discussion of this matter.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSAL.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
- --------------------------------------------------------------------------
- --------------------
__________________________________________________________________________
___________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
3. To approve an Agreement and Plan of Reorganization FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
between Fidelity California Insured Municipal
Income Fund and Fidelity California Municipal
Income Fund, another fund of the trust, providing for
the transfer of all of the assets of Fidelity California
Insured Municipal Income Fund to Fidelity California
Municipal Income Fund in exchange solely for shares
of beneficial interest of Fidelity California Municipal
Income Fund and the assumption by Fidelity
California Municipal Income Fund of Fidelity
California Insured Municipal Income Fund's
liabilities, followed by the distribution of Fidelity
California Municipal Income Fund shares to
shareholders of Fidelity California Insured Municipal
Income Fund in liquidation of Fidelity California
Insured Municipal Income Fund.
</TABLE>
CFI -PXC-0697 cusip # 316061308/fund# 403
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
each fund's most recent financial report and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated April 19, 1997. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
available along with other related materials on the SEC's Internet Web site
(http://www.sec.gov). The SAI is incorporated herein by reference (legally
forms a part of the prospectus). For a free copy of either document, call
Fidelity 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.
CALIFORNIA MUNICIPAL MONEY MARKET FUND MAY INVEST A SIGNIFICANT PERCENTAGE
OF ITS ASSETS IN THE SECURITIES OF A SINGLE ISSUER AND THEREFORE MAY BE
RISKIER THAN OTHER TYPES OF MONEY MARKET FUNDS.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, Federal
Reserve Board, or any other agency, and are subject to investment risks,
including possible loss of principal amount invested.
FIDELITY
CALIFORNIA
MUNICIPAL
FUNDS
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.
CFR-pro-0497
Each of these funds seeks a high level of current income free from federal
income tax and California state personal income tax. The funds have
different strategies, however, and carry varying degrees of risk and yield
potential.
FIDELITY CALIFORNIA MUNICIPAL MONEY MARKET FUND
(fund number 097, trading symbol FCFXX)
FIDELITY CALIFORNIA INSURED MUNICIPAL INCOME FUND
(fund number 403, trading symbol FCXIX)
FIDELITY CALIFORNIA MUNICIPAL INCOME FUND
(fund number 091, trading symbol FCTFX)
PROSPECTUS
APRIL 19, 1997(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,
ACCOUNT POLICIES AND 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. (FMR Texas), a
subsidiary of FMR, chooses investments for Fidelity California Municipal
Money Market Fund.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
CA MONEY MARKET
GOAL: High current tax-free income for California residents while
maintaining a stable $1.00 share price.
STRATEGY: Invests in high-quality, short-term municipal money market
securities whose interest is free from federal income tax and California
personal income tax.
SIZE: As of February 28, 1997, the fund had over $819 million in assets.
CA INSURED
GOAL: High current tax-free income for California residents.
STRATEGY: Invests mainly in municipal securities that are covered by
insurance guaranteeing the timely payment of principal and interest, and
whose interest is free from federal income tax and California personal
income tax.
SIZE: As of February 28, 1997, the fund had over $205 million in assets.
CA INCOME
GOAL: High current tax-free income for California residents.
STRATEGY: Invests mainly in investment-grade municipal securities whose
interest is free from federal income tax and California personal income
tax.
SIZE: As of February 28, 1997, the fund had over $485 million in assets.
WHO MAY WANT TO INVEST
The Board of Trustees of Fidelity California Municipal Trust has
unanimously approved an Agreement and Plan of Reorganization ("Agreement")
between Fidelity California Insured Municipal Income Fund and Fidelity
California Municipal Income Fund, a fund of Fidelity California Municipal
Trust. The Agreement will be presented to Fidelity California Insured
Municipal Income shareholders for their vote of approval or disapproval at
a special meeting to be held on August 4, 1997. If the proposal is approved
by a majority of the fund's shareholders and certain conditions required by
the Agreement are satisfied, the reorganization is expected to become
effective on or about August 28, 1997.
Effective the close of business on February 28, 1997, California Insured
Municipal Income Fund was closed to new accounts. Only shareholders of the
fund on or prior to that date, including participants in an employee
benefit plan which offered the fund on or prior to that date (except
participants in an employee benefit plan for which an affiliate of FMR
maintains the accounts at the participant level other than pursuant to a
recordkeeping agreement), can continue to purchase shares of the fund.
These non-diversified funds may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal and
California income taxes. Each fund's level of risk and potential reward,
depend on the quality and maturity of its investments. California Money
Market is managed to keep its share price stable at $1.00. California
Insured and California Income with their broader range of investments, have
the potential for higher yields, but also carry a higher degree of risk.
The insured fund provides a high degree of credit quality because insurance
covers the timely payment of interest and principal. However, insurance
does not guarantee the market value of a security or the insured fund's
share price. 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 California Insured and California 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.
Non-diversified funds may invest a greater portion of their assets in
securities of individual issuers than diversified funds. As a result,
changes in the market value of a single issuer could cause greater
fluctuations in share value than would occur in a more diversified fund.
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. The
funds in this prospectus are
in the INCOME category,
except for California Money
Market, which is in the
MONEY MARKET 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 may pay when you buy or
sell shares of a fund. In addition, you may be charged an annual account
maintenance fee if your account balance falls below $2,500. See
"Transaction Details," page , for an explanation of how and when these
charges apply.
Maximum sales charge on purchases None
and reinvested distributions
Deferred sales charge on redemptions None
Exchange fee None
Annual account maintenance fee (for accounts under $2,500) $12.0
0
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. It also incurs other expenses for
services such as maintaining shareholder records and furnishing shareholder
statements and financial reports. A fund's expenses are factored into its
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following figures are based on historical expenses, adjusted to reflect
current fees, and are calculated as a percentage of average net assets. In
addition, each fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances is used
to reduce custodian and transfer agent expenses. Including this reduction,
the total operating expenses presented in the table would have been 0.61%
for California Money Market.
CA MONEY MARKET
Management fee 0.39
%
12b-1 fee None
Other expenses 0.23
%
Total fund operating expenses 0.62
%
CA INSURED
Management fee (after reimbursement) 0.34
%
12b-1 fee None
Other expenses 0.21
%
Total fund operating expenses 0.55
(after reimbursement) %
CA INCOME
Management fee (after reimbursement) 0.37
%
12b-1 fee None
Other expenses 0.18
%
Total fund operating expenses 0.55
(after reimbursement) %
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 if you
close your account after the number of years indicated:
CA MONEY MARKET
After 1 year $ 6
After 3 years $ 20
After 5 years $ 35
After 10 years $ 77
CA INSURED
After 1 year $ 6
After 3 years $ 18
After 5 years $ 31
After 10 years $ 69
CA INCOME
After 1 year $ 6
After 3 years $ 18
After 5 years $ 31
After 10 years $ 69
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
Effective April 1, 1997, FMR voluntarily agreed to implement an expense cap
for California Insured and California Income. FMR has voluntarily agreed to
reimburse each fund to the extent that total operating expenses exceed
0.55% of its average net assets. If these agreements were not in effect,
the management fee and total operating expenses would have been 0.39%, and
0.60%, respectively, for California Insured and 0.39% and 0.57%,
respectively, for California Income. Expenses eligible for reimbursement do
not include interest, taxes, brokerage commissions, or extraordinary
expenses.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow have been audited by Price
Waterhouse LLP, independent accountants. The funds' financial highlights,
financial statements, and reports of the auditor are included in the funds'
Annual Report, and are incorporated by reference into (are legally a part
of) the funds' SAI. Contact Fidelity for a free copy of the Annual Report
or the SAI.
CALIFORNIA MUNICIPAL MONEY MARKET FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.Selected Per-Share Data and
Ratios
2.Years ended 1997 1996 1995 1994 1993D 1992 1991 1990 1989C 1988C
February 28 E C C C
3.Net asset value, $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
beginning of period 0 0 0 0 0 0 0 0 0 0
4.Income from .029 .032 .026 .020 .019 .035 .047 .054 .052 .042
Investment
Operations
Net interest
income
5.Less Distributions (.029) (.032 (.026 (.020 (.019) (.035 (.047 (.054 (.052) (.042)
From net interest ) ) ) ) ) )
income
6.Net asset value, $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
end of period 0 0 0 0 0 0 0 0 0 0
7.Total returnB 2.90% 3.21 2.60 1.97 1.92% 3.59 4.85 5.53 5.36% 4.27%
% % % % % %
8.Net assets, end $ 820 $ 733 $ 675 $ 612 $ 568 $ 557 $ 539 $ 624 $ 736 $ 547
of period (In
millions)
9.Ratio of expenses .62% .64% .62% .64% .62% .63% .61% .60% .53%F .58%F
to average net A
assets
10.Ratio of .61%G .64% .62% .64% .62% .63% .61% .60% .53% .58%
expenses to A F F
average net assets
after expense
reductions
11.Ratio of net 2.86% 3.17 2.58 1.95 2.29% 3.50 4.75 5.42 5.31% 4.17%
interest income to % % % A % % %
average net assets
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE
TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C YEARS ENDED APRIL 30
D MAY 1, 1992 TO FEBRUARY 28, 1993
E YEAR ENDED FEBRUARY 29
F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
CALIFORNIA INSURED MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12.Selected Per-Share Data and
Ratios
13.Years ended 1997 1996E 1995 1994F 1993D 1992C 1991C 1990 1989C 1988C
February 28 C
14.Net asset value, $ 10.3 $ 9.84 $ 10.7 $ 11.0 $ 10.1 $ 9.74 $ 9.37 $ 9.5 $ 9.20 $ 9.28
beginning of period 30 0 40 30 00 0 0 90 0 0
15.Income from .524 .517 .558 .589 .492 .603 .605 .618 .610 .611
Investment
Operations
Net interest income
16. Net realized .022 .489 (.730) (.090) .930 .360 .370 (.220 .390 (.080)
and )
unrealized gain
(loss)
17. Total from .546 1.006 (.172) .499 1.422 .963 .975 .398 1.000 .531
investment
operations
18.Less (.525) (.516) (.558) (.589) (.492) (.603) (.605) (.618 (.610) (.611)
Distributions )
From net interest
income
19. From net (.001) -- (.170) (.200) -- -- -- -- -- --
realized
gain
20. Total (.526) (.516) (.728) (.789) (.492) (.603) (.605) (.618 (.610) (.611)
distributions )
21.Net asset value, $ 10.3 $ 10.3 $ 9.84 $ 10.7 $ 11.0 $ 10.1 $ 9.74 $ 9.3 $ 9.59 $ 9.20
50 30 0 40 30 00 0 70 0 0
end of period
22.Total returnB 5.49 10.46 (1.30) 4.59 14.48 10.14 10.67 4.15 11.20 5.97
% % % % % % % % % %
23.Net assets, end $ 206 $ 222 $ 217 $ 292 $ 275 $ 178 $ 114 $ 87 $ 69 $ 43
of period (In
millions)
24.Ratio of .60% .60% .59% .48% .63% .66% .72% .75% .83% .65%
expenses to G A G
average net assets
25.Ratio of net 5.00 5.31 5.71% 5.31 5.72 6.06 6.30 6.38 6.54 6.70
interest income to % % % % A % % % % %
average net assets
26.Portfolio 16% 49% 32% 60% 27% 19% 14% 10% 32% 76%
turnover rate A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE
TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C YEARS ENDED APRIL 30
D MAY 1, 1992 TO FEBRUARY 28, 1993
E YEAR ENDED FEBRUARY 29
F EFFECTIVE MARCH 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
G FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
CALIFORNIA MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
27.Selected Per-Share Data and
Ratios
28.Years ended 1997 1996E 1995 1994F 1993D 1992C 1991C 1990C 1989C 1988C
February 28
29.Net asset value, $ 11.7 $ 11.1 $ 12.1 $ 12.4 $ 11.5 $ 11.3 $ 10.9 $ 11.0 $ 10.6 $ 10.9
beginning of period 20 20 00 30 40 00 40 80 20 50
30.Income from .599 .625 .685 .719 .611 .744 .752 .756 .758 .760
Investment
Operations
Net interest
income
31. Net realized .096 .597 (.830) (.060) .890 .240 .360 (.140) .460 (.270)
and unrealized gain
(loss)
32. Total from .695 1.222 (.145) .659 1.501 .984 1.112 .616 1.218 .490
investment
operations
33.Less (.602) (.622) (.685) (.719) (.611) (.744) (.752) (.756) (.758) (.760)
Distributions
From net interest
income
34. From net (.003) -- (.150) (.270) -- -- -- -- -- (.060)
realized
gain
35. Total (.605) (.622) (.835) (.989) (.611) (.744) (.752) (.756) (.758) (.820)
distributions
36.Net asset value, $ 11.8 $ 11.7 $ 11.1 $ 12.1 $ 12.4 $ 11.5 $ 11.3 $ 10.9 $ 11.0 $ 10.6
end of period 10 20 20 00 30 40 00 40 80 20
37.Total returnB 6.16 11.25 (.91) 5.41 13.40 8.94 10.44 5.61 11.85 4.72
% % % % % % % % % %
38.Net assets, end $ 486 $ 498 $ 477 $ 575 $ 587 $ 529 $ 524 $ 514 $ 494 $ 399
of period (In
millions)
39.Ratio of .57% .58% .56% .57% .60% .59% .58% .60% .61% .73%
expenses to A
average net assets
40.Ratio of net 5.19 5.44 6.16 5.78 6.17 6.52 6.71 6.73 7.05 7.15
interest income to % % % % % A % % % % %
average net assets
41.Portfolio turnover 17% 37% 29% 44% 32% 23% 15% 34% 21% 52%
rate A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C YEARS ENDED APRIL 30
D MAY 1, 1992 TO FEBRUARY 28, 1993
E YEAR ENDED FEBRUARY 29
F EFFECTIVE MARCH 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
PERFORMANCE
Mutual fund performance can be measured as TOTAL RETURN or YIELD. The total
returns that follow are based on historical fund results.
Each fund's fiscal year runs from March 1 through February 28. The tables
below show each fund's performance over past fiscal years with each bond
fund's performance compared to different measures, including a comparative
index and a competitive funds average for the bond funds and a measure of
inflation for the money market fund. Data for the comparative indexes for
California Insured and California Income is available only from June 30,
1993 to the present. The charts on page present calendar year performance
for each bond fund.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Past 10
February 28, 1997 year years years
California Money Market 2.90% 2.62% 3.68%
Consumer Price Index 3.03% 2.86% 3.64%
California Insured 5.49% 6.85% 6.48%
Lehman Bros. CA Ins. 1-26 Yr. Muni. 5.24% n/a n/a
Bond Index
Lipper CA Ins. Muni. Funds Avg. 4.36% 7.34% 6.80%
California Income 6.16% 7.10% 6.68%
Lehman Bros. CA Muni Bond Index 5.49% n/a n/a
Lipper CA Muni Debt Funds Avg. 4.81% 6.94% 6.67%
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Past 10
February 28, 1997 year years years
California Money Market 2.90% 13.80% 43.53%
Consumer Price Index 3.03% 15.15% 43.01%
California Insured 5.49% 39.24% 87.28%
Lehman Bros. CA Ins. 1-26 Yr. Muni. 5.24% n/a n/a
Bond Index
Lipper CA Ins. Muni Funds Avg. 4.36% 42.55% 93.12%
California Income 6.16% 40.91% 90.87%
Lehman Bros. CA Muni Bond Index 5.49% n/a n/a
Lipper CA Muni Debt Funds Avg. 4.81% 39.94% 91.06%
EXPLANATION OF TERMS
YEAR-BY-YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
CALIFORNIA INSURED -4.48% 11.61% 8.76% 7.02% 10.96% 9.15% 13.82-% -10.24% 19.50% 3.84%
Lipper CA Ins.
Muni. Funds Avg. -4.25% 11.45% 9.84% 6.90% 10.91% 9.36% 12.83% -8.52% 19.21% 3.34%
Consumer Price
Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -4.48
Row: 1, Col: 2, Value: nil
Row: 2, Col: 1, Value: 11.61
Row: 2, Col: 2, Value: nil
Row: 3, Col: 1, Value: 8.76
Row: 3, Col: 2, Value: nil
Row: 4, Col: 1, Value: 7.02
Row: 4, Col: 2, Value: nil
Row: 5, Col: 1, Value: 10.96
Row: 5, Col: 2, Value: nil
Row: 6, Col: 1, Value: 9.15
Row: 6, Col: 2, Value: nil
Row: 7, Col: 1, Value: 13.82
Row: 7, Col: 2, Value: nil
Row: 8, Col: 1, Value: -10.24
Row: 8, Col: 2, Value: nil
Row: 9, Col: 1, Value: 19.5
Row: 9, Col: 2, Value: nil
Row: 10, Col: 1, Value: 3.84
Row: 10, Col: 2, Value: nil
(LARGE SOLID BOX) California
Insured
YEAR-BY-YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
CALIFORNIA INCOME -3.67% 11.78% 9.67% 6.96% 10.16% 8.71% 13.43% -8.88% 19.17% 4.76%
Lipper CA Muni. Debt Funds Avg. 1.96% 10.99% 9.78% 6.50% 11.11% 8.39% 12.62% -7.59% 18.32% 3.65%
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: -3.67
Row: 1, Col: 2, Value: nil
Row: 2, Col: 1, Value: 11.78
Row: 2, Col: 2, Value: nil
Row: 3, Col: 1, Value: 9.67
Row: 3, Col: 2, Value: nil
Row: 4, Col: 1, Value: 6.96
Row: 4, Col: 2, Value: nil
Row: 5, Col: 1, Value: 10.16
Row: 5, Col: 2, Value: nil
Row: 6, Col: 1, Value: 8.709999999999999
Row: 6, Col: 2, Value: nil
Row: 7, Col: 1, Value: 13.43
Row: 7, Col: 2, Value: nil
Row: 8, Col: 1, Value: -8.880000000000001
Row: 8, Col: 2, Value: nil
Row: 9, Col: 1, Value: 19.17
Row: 9, Col: 2, Value: nil
Row: 10, Col: 1, Value: 4.76
Row: 10, Col: 2, Value: nil
(LARGE SOLID BOX) California
Income
TOTAL RETURN is the change in value of an investment over a given period,
assuming reinvestment of any dividends and capital gains. A CUMULATIVE
TOTAL RETURN reflects actual performance over a stated period of time. An
AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
returns smooth out variations in performance; they are not the same as
actual year-by-year results.
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 funds
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.
LEHMAN BROTHERS CALIFORNIA INSURED 1-26 YEAR MUNICIPAL BOND INDEX is a
total return performance benchmark for insured California investment-grade
municipal bonds with maturities between one and 26 years.
LEHMAN BROTHERS CALIFORNIA MUNICIPAL BOND INDEX is a total return
performance benchmark for California investment-grade municipal bonds with
maturities of at least one year.
Unlike each fund's returns, the total returns of each comparative index do
not include the effect of any brokerage commissions, transaction fees, or
other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGES are the Lipper California Insured Municipal
Funds Average for California Insured and the Lipper California Municipal
Debt Funds Average for California Income, which currently reflect the
performance of over 28 and 98 mutual funds with similar investment
objectives, respectively. These averages, published by Lipper Analytical
Services, Inc., exclude the effect of sales charges.
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. Fidelity California Municipal Money
Market Fund is a non-diversified fund of Fidelity California Municipal
Trust II, and Fidelity California Insured Municipal Income Fund and
Fidelity California Municipal Income Fund are non-diversified funds of
Fidelity California Municipal Trust. Both trusts are open-end management
investment companies. Fidelity California Municipal Trust II was organized
as a Delaware business trust on June 20, 1991. Fidelity California
Municipal Trust was organized as a Massachusetts business trust on April
28, 1983. 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 the funds' 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. 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 230
(solid bullet) Assets in Fidelity mutual
funds: over $437 billion
(solid bullet) Number of shareholder
accounts: over 30 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 270
(checkmark)
The funds are managed by FMR, which chooses their investments and handles
their business affairs. FMR Texas, located in Irving, Texas, has primary
responsibility for providing investment management services for California
Money Market.
Jonathan D. Short is manager of California Insured and California Income,
both of which he has managed since March 1995. He also manages other
Fidelity funds. Since joining Fidelity in 1990, Mr. Short has worked as an
analyst and manager.
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.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Service Company, Inc. (FSC) performs transfer
agent servicing functions for each fund.
FMR Corp. is the ultimate parent company of FMR and FMR Texas. Members of
the Edward C. Johnson 3d family are the predominant owners of a class of
shares of common stock representing approximately 49% of the voting power
of FMR Corp. Under the Investment Company Act of 1940 (the 1940 Act),
control of a company is presumed where one individual or group of
individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form a
controlling group with respect to FMR Corp.
UMB Bank, n.a. (UMB), is each fund's transfer agent, although it employs
FSC to perform these functions for each fund. UMB is located at 1010 Grand
Avenue, Kansas City, Missouri.
FMR may use its broker-dealer affiliates and other firms that sell fund
shares to carry out a fund's transactions, provided that the fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
EACH FUND'S INVESTMENT
APPROACH
MONEY MARKET FUNDS IN GENERAL. The yield of a money market fund will change
daily based on changes in interest rates and market conditions. Money
market funds follow industry-standard guidelines on the quality, maturity,
and diversification of their investments, which are designed to help
maintain a stable $1.00 share price. Of course, there is no guarantee that
a money market fund will be able to maintain a stable $1.00 share price. 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.
FIDELITY'S APPROACH TO MONEY MARKET FUNDS. Money market funds earn income
at current money market rates. In managing money market funds, FMR stresses
preservation of capital, liquidity, and income. The fund will purchase only
high-quality securities that FMR believes present minimal credit risks and
will observe maturity restrictions on securities it buys.
CALIFORNIA MUNICIPAL MONEY MARKET seeks high current income that is free
from federal income tax and California personal income tax while
maintaining a stable $1.00 share price by investing in high-quality,
short-term municipal money market securities of all types.
BOND FUNDS IN GENERAL. The yield and share price of a bond fund change
daily based on changes in interest rates and market conditions, and in
response to other economic, political or financial events. The types and
maturities of the securities a bond fund purchases and the credit quality
of their issuers will impact a bond fund's reaction to these events.
INTEREST RATE RISK. In general, bond prices rise when interest rates fall
and fall when interest rates rise. Longer-term bonds are usually more
sensitive to interest rate changes. In other words, the longer the maturity
of a bond, the greater the impact a change in interest rates is likely to
have on the bond's price. In addition, short-term interest rates and
long-term interest rates do not necessarily move in the same amount or in
the same direction. A short-term bond tends to react to changes in
short-term interest rates and a long-term bond tends to react to changes in
long-term interest rates.
ISSUER RISK. The price of a bond is affected by the credit quality of its
issuer. Changes in the financial condition of an issuer, changes in general
economic conditions and changes in specific economic conditions that affect
a particular type of issuer can impact the credit quality of an issuer.
Lower quality bonds generally tend to be more sensitive to these changes
than higher quality bonds.
MUNICIPAL MARKET RISK. Municipal securities are backed by the entity that
issued them and/or other revenue streams. Municipal security values may be
significantly affected by political changes, as well as uncertainties in
the municipal market related to taxation of municipal securities or the
rights of municipal securities holders.
FIDELITY'S APPROACH TO BOND FUNDS. The total return from a bond includes
both income and price gains or losses. In selecting investments for a bond
fund, FMR considers a bond's expected income together with its potential
for price gains or losses. While income is the most important component of
bond returns over time, a bond fund's emphasis on income does not mean the
fund invests only in the highest-yielding bonds available, or that it can
avoid losses of principal.
FMR focuses on assembling a portfolio of income-producing bonds that it
believes will provide the best balance between risk and return within the
ranges of eligible investments for the fund. FMR's evaluation of a
potential investment includes an analysis of the credit quality of the
issuer, its structural features, its current price compared to FMR's
estimate of its long-term value, and any short-term trading opportunities
resulting from market inefficiencies.
In structuring a bond fund, FMR allocates assets among different market
sectors (for example, general obligation bonds of a state or bonds
financing a specific project) and different maturities based on its view of
the relative value of each sector or maturity. The performance of the fund
will depend on how successful FMR is in pursuing this approach.
CALIFORNIA INSURED MUNICIPAL INCOME seeks high current income that is free
from federal income tax and California personal income tax by investing
primarily in municipal securities that are covered by insurance
guaranteeing the timely payment of interest and principal.
The insurance coverage for the fund's investments is obtained either by the
bond's issuer or underwriter, or purchased by the fund. The fund pays
premiums for the insurance either directly or indirectly, which increases
the credit safety of the fund's invesments, but decreases its yield. It is
important to note that the insurance does not guarantee the market value of
a security or the fund's shares. As a result of the fund's emphasis on
insured securities, the fund's performance will be affected by conditions
affecting the insurance industry.
Although the fund does not maintain an average maturity within a specified
range, FMR seeks to manage the fund so that it generally reacts to changes
in interest rates similarly to municipal bonds with maturities between
eight and 18 years.
CALIFORNIA MUNICIPAL INCOME seeks high current income that is free from
federal income tax and California personal income tax by investing in
investment-grade municipal securities under normal conditions.
Although the fund does not maintain an average maturity within a specified
range, FMR seeks to manage the fund so that it generally reacts to changes
in interest rates similarly to municipal bonds with maturities between
eight and 18 years.
EACH FUND normally invests in municipal securities. FMR normally invests at
least 65% of the money market fund's total assets in state municipal
securities and so that at least 80% of the fund's income distributions are
free from federal income tax. FMR normally invests at least 65% of the
insured fund's total assets in municipal securities that are covered by
insurance guaranteeing the timely payment of interest and principal. The
balance, however, may be invested in other municipal securities, including
uninsured municipal bonds. FMR will invest so that at least 80% of the
fund's income distributions are free from both federal and California
personal income taxes. FMR normally invests the income fund's assets so
that at least 80% of the fund's income distributions are free from both
federal and California personal income taxes. In addition, FMR may invest
all of each fund's assets in municipal securities issued to finance private
activities. The interest from these securities is a tax-preference item for
purposes of the federal alternative minimum tax.
Each fund's performance is affected by the economic and political
conditions within the state of California. California suffered a severe
economic recession between 1990-93, which resulted in broad-based revenue
shortfalls for the State and many local governments. California's fiscal
condition has improved as its economy has been in a sustained recovery
since 1994. During the recession, the State substantially reduced local
assistance, and further reductions could adversely affect the financial
condition of cities, counties, and other government agencies facing
constraints in their own revenue collections. California's long-term credit
rating stabilized after having been reduced in the past several years.
California voters in the past have passed amendments to the California
Constitution and other measures that limit the taxing and spending
authority of California governmental entities and future voter initiatives
could result in adverse consequences affecting California municipal bonds.
The funds differ primarily with respect to the quality or maturity of their
investments and therefore their sensitivity to changes in economic and
other financial conditions and interest rates. The money market fund seeks
to provide income while maintaining a stable share price. The bond funds
seek to provide a higher level of income by investing in a broader range of
securities. As a result, the bond funds do not seek to maintain a stable
share price. Although both bond funds normally invest in investment-grade
securities, California Insured generally invests in higher quality
securities as a result of its focus on insured securities. As of February
28, 1997, the dollar-weighted average maturity for California Insured and
California Income was approximately 15.5 and 14.6 years, respectively. In
addition, since the money market fund concentrates its investment in
California municipal securities, an investment in the money market fund may
be riskier than an investment in other types of money market funds.
FMR may use various investment techniques to hedge a portion of the bond
funds' risks, but there is no guarantee that these strategies will work as
intended. When you sell your shares of the bond funds, they may be worth
more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations and the bond funds do 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 federally 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, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of each fund's limitations and more detailed information
about each fund's investments are contained in a 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
unless it believes that they are consistent with a fund's investment
objective and policies and that doing so will help a fund achieve its goal.
Fund holdings and recent investment strategies are detailed in each fund's
financial reports, which are sent to shareholders twice a year. For a free
SAI or financial report, call 1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer generally pays the investor a
fixed, variable or floating rate of interest, and must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do
not pay current interest, but are sold at a discount from their face
values.
Debt securities have varying levels of sensitivity to changes in interest
rates and varying degrees of credit quality. In general, bond prices rise
when interest rates fall, and fall when interest rates rise. Longer-term
bonds and zero coupon bonds are generally more sensitive to interest rate
changes.
In addition, bond prices are also affected by the credit quality of the
issuer. Investment-grade debt securities are medium- and high-quality
securities. Some, however, may possess speculative characteristics, and may
be more sensitive to economic changes in the financial condition of
issuers.
RESTRICTIONS: California Insured invests only in investment-grade
securities. A security is considered to be investment-grade if it is judged
by FMR to be of equivalent quality to securities rated Baa or BBB or higher
by Moody's Investors Service or Standard & Poor's, respectively. California
Income normally invests in investment-grade securities, but reserves the
right to invest up to 5% of its assets in below investment-grade securities
(sometimes called "junk bonds"). A security is considered to be
investment-grade if it is rated investment-grade by Moody's, S&P, Duff &
Phelps Credit Rating Co., or Fitch Investor Services, L.P., or is unrated
but judged by FMR to be of equivalent quality. California Income may not
invest in securities judged by FMR to be of equivalent quality to those
rated lower than B by Moody's or S&P.
MONEY MARKET SECURITIES are high-quality, short-term obligations issued by
municipalities, local and state governments, and other entities. These
obligations may carry fixed, variable, or floating interest rates. Some
money market securities employ a trust or other similar structure to modify
the maturity, price characteristics, or quality of financial assets so that
they are eligible investments for money market funds. If the structure does
not perform as intended, adverse tax or investment consequences may result.
MUNICIPAL SECURITIES are issued to raise money for a variety of public or
private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities. They
may be fully or partially backed by the local government, or by the credit
of a private issuer or the current or anticipated revenues from specific
projects or assets. Because many municipal securities are issued to finance
similar types of projects, especially those relating to education, health
care, housing, transportation, and utilities, the municipal markets can be
affected by conditions in those sectors. In addition, all municipal
securities may be affected by uncertainties regarding their tax status,
legislative changes, or rights of municipal securities holders. A municipal
security may be owned directly or through a participation interest.
CREDIT AND LIQUIDITY SUPPORT. Issuers may employ various forms of credit
and liquidity enhancement, including letters of credit, guarantees, puts
and demand features, and insurance, provided by foreign or domestic
entities such as banks and other financial institutions. These arrangements
expose a fund to the credit risk of the entity providing the credit or
liquidity support. Changes in the credit quality of the provider could
affect the value of the security and a fund's share price. In addition, in
the case of foreign providers of credit or liquidity support, extensive
public information about the provider may not be available, and unfavorable
political, economic, or governmental developments could affect its ability
to honor its commitment.
STATE MUNICIPAL SECURITIES include municipal obligations issued by the
state of California 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 municipal securities include 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.
ASSET-BACKED SECURITIES include interests in pools of purchase contracts,
financing leases, or sales agreements entered into by a municipal issuer.
The value of these securities depends on many factors, including changes in
market interest rates, the availability of information concerning the pool
and its structure, prepayment expectations, the credit quality of the
underlying assets, and the market's perception of the servicer of the loan
pool, and any credit enhancement provided.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security's market value
more volatile.
MUNICIPAL LEASE OBLIGATIONS are used by municipal issuers to acquire land,
equipment, or facilities. If the issuer stops making payments or transfers
its obligations to a private entity, the obligation could lose value or
become taxable.
PUT FEATURES entitle the holder to put (sell back) a security to the issuer
or another party. In exchange for this benefit, a fund may accept a lower
interest rate. Demand features and standby commitments are types of put
features.
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 economic viability
of a project or changes in tax incentives could affect the price of these
securities.
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 prices. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, swap agreements, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with a
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of a fund and may involve a small investment of
cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities and some other securities may be
subject to legal restrictions. Difficulty in selling securities may result
in a loss or may be costly to a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading practices
in which payment and delivery for the security take place at a later date
than is customary for that type of security. The price of the security
could change during this period.
CASH MANAGEMENT. A fund may invest in money market securities and in a
money market fund available only to funds and accounts managed by FMR or
its affiliates, whose goal is to seek a high level of current income exempt
from federal income tax while maintaining a stable $1.00 share price. A
major change in interest rates or a default on the money market fund's
investments could cause its share price to change.
RESTRICTIONS: California Insured and California Income do not currently
intend to invest in a money market fund.
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
changes in the market value of a single issuer or industry.
RESTRICTIONS: Each fund is considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, each 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 issuer. These limitations do not apply to U.S. Government
securities or to securities of other investment companies. Each fund may
invest more than 25% of its total assets in tax-free securities that
finance similar types of projects. California Insured may invest more than
25% of its assets in bonds insured by the same insurance company.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
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.
CALIFORNIA MUNICIPAL MONEY MARKET seeks as high a level of current income,
exempt from federal and California state personal income tax, as is
consistent with the preservation of capital. The fund will normally invest
so that at least 80% of its income distributions are free from federal
income tax.
CALIFORNIA INSURED MUNICIPAL INCOME seeks as high a level of current
income, exempt from federal and California state personal income tax,
available from investing primarily in municipal securities that are covered
by insurance guaranteeing the timely payment of principal and interest. FMR
will invest the fund's assets primarily in municipal bonds that are (1)
insured under an insurance policy obtained by the issuer or underwriter; or
(2) insured under an insurance policy purchased by the fund. Insurance will
be obtained from recognized insurers. The fund may invest in uninsured
municipal obligations judged to be of quality equivalent to the four
highest ratings assigned by Moody's and S&P (Baa, BBB, or better). Under
normal market conditions, such uninsured obligations may not exceed 35% of
the fund's assets. The fund will normally invest so that at least 80% of
its income distributions are exempt from federal and California state
personal income taxes. During periods when FMR believes that California
municipals that meet the fund's standards are not available, the fund may
temporarily invest more than 20% of its assets in obligations that are only
federally tax-exempt.
CALIFORNIA MUNICIPAL INCOME seeks as high a level of current income, exempt
from federal and California state personal income tax, available from
investing primarily in municipal securities judged by FMR to be of
investment-grade quality. The fund may invest up to one-third of its assets
in lower-quality bonds, but may not purchase bonds that are judged by FMR
to be equivalent quality to those rated lower than B. The fund will
normally invest so that at least 80% of its income distributions are exempt
from federal and California state personal income taxes. During periods
when FMR believes that California municipals that meet the fund's standard
are not available, the fund may temporarily invest more than 20% of its
assets in obligations that are only federally tax-exempt.
Each fund may borrow only for temporary or emergency purpose, 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 California Money Market. Each fund also
pays OTHER EXPENSES, which are explained on page .
FMR may, from time to time, agree to reimburse the funds for management
fees and other expenses above a specified limit. FMR retains the ability to
be repaid by a fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee is
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above 0.37%, and it drops as
total assets under management increase.
For February 1997, the group fee rate was 0.14%. Each fund's individual
fund fee rate is 0.25%. Each fund's total management fee rate for fiscal
1997 was 0.39%.
FMR Texas is California Money Market Fund's sub-adviser and has primary
responsibility for managing its investments. FMR is responsible for
providing other management services. FMR pays FMR Texas 50% of its
management fee (before expense reimbursements) for FMR Texas' services. FMR
paid FMR Texas a fee equal to 0.20% of California Money Market Fund's
average net assets for the fiscal year ended February 28, 1997.
OTHER EXPENSES
While the management fee is a significant component of the funds' annual
operating costs, the funds have other expenses as well.
FSC performs many transaction and accounting functions. These services
include processing shareholder transactions, valuing each fund's
investments, and handling securities loans. In the fiscal year ended
February 1997, FSC received fees equal to 0.21%, 0.17% and 0.16%,
respectively, of California Money Market's, California Insured's and
California Income's average net assets.
The funds also pay other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
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 the fiscal year ended February 1997, the portfolio turnover rates for
California Insured and California Income were 16% and 17%, respectively.
These rates vary 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 80 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. You can
choose California Money Market as your core account for your Fidelity Ultra
Service Account(registered trademark) or FidelityPlusSM brokerage account.
You may purchase or sell shares of the funds through an investment
professional, including a broker, who may charge you a transaction fee for
this service. If you invest through FBSI, another financial institution, or
an investment professional, read their program materials for any special
provisions, additional service features or fees that may apply to your
investment in a fund. Certain features of the fund, such as the minimum
initial or subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
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. California 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. Shares of California Insured are offered to current
shareholders only.
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
FOR THE MONEY MARKET FUND
TO OPEN AN ACCOUNT $5,000
TO ADD TO AN ACCOUNT $250
Through regular investment plans* $100
MINIMUM BALANCE $2,000
MINIMUM INVESTMENTS**
FOR THE BOND FUNDS
TO OPEN AN ACCOUNT
(California Income only) $10,000
TO ADD TO AN ACCOUNT $1,000
Through regular investment plans* $500
MINIMUM BALANCE $5,000
*FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
**THESE MINIMUMS DO NOT APPLY TO SHAREHOLDERS WITH EXISTING ACCOUNTS ON
RECORD MARCH 31, 1997.
These minimums may vary for investments through Fidelity Portfolio Advisory
Services. Refer to the program materials for details.
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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>
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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.
</TABLE>
<TABLE>
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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.
</TABLE>
<TABLE>
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Wire (wire_graphic) (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>
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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.
</TABLE>
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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.
TO SELL SHARES THROUGH YOUR FIDELITY ULTRA SERVICE OR FIDELITYPLUS ACCOUNT,
call 1-800-544-6262 to receive a handbook with instructions.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000
($2,000 for the money market fund) 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
that follows.
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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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 and
accepted by Fidelity before 4
p.m. Eastern time for money
to be wired on the next
business day.
</TABLE>
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Check (check_graphic) All account types (small solid bullet) Minimum check: $1,000
($500 for the money market
fund).
(small solid bullet) All account owners must sign
a signature card to receive a
checkbook.
</TABLE>
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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 TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESSSM
1-800-544-5555
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 and
prospectuses 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, prospectuses, 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.
Note that exchanges out of a fund are limited to four per calendar year
(except for California Insured Municipal Income), 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 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
($100 for the quarterly appropriate section on the fund
money market application.
fund) (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.
</TABLE>
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY
FUNDA
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<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (small solid bullet) Check the appropriate box on the fund
($100 for the period application, or call 1-800-544-6666 for an
money market authorization form.
fund) (small solid bullet) Changes require a new authorization
form.
</TABLE>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
($100 for the bimonthly, both accounts are opened.
money market quarterly, or (small solid bullet) To change the amount or frequency of
fund) annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THOSE FUNDS MAY NOT BE
APPROPRIATE CHOICES 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 funds are
normally distributed in April 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 California Money Market):
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 California 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 interest on state
tax-free investments, they will be free from California state personal
income tax.
During the fiscal year ended February 1997, 100% of each fund's income
dividends was free from federal income and California taxes. 27.44% of
California Money Market's, 0.23% of California Insured's and 0.20% of
California Income's 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 when a fund has realized but not yet
distributed income or capital gains, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
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's assets are valued 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
funds, assets are valued primarily on the basis of market quotations, if
available. Since market quotations are often unavailable, assets are
usually valued on the basis of information furnished by a pricing service
or by another method that the Board of Trustees believes accurately
reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) is its NAV. Each funds
REDEMPTION PRICE (price to sell one share) is 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) 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.
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) Remember to keep shares in your account in order to be
eligible to purchase additional shares of California Insured.
(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.
(small solid bullet) If your account is not an Ultra Service Account, there
is a $1.00 charge for each check written under $1,000 ($500 for the money
market fund).
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500, subject to an annual
maximum charge of $24.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. This fee will not be
deducted from Fidelity Brokerage Accounts, retirement accounts (except
non-prototype retirement accounts), accounts using regular investment
plans, or if total assets with Fidelity exceed $30,000. Eligibility for the
$30,000 waiver is determined by aggregating Fidelity accounts maintained by
FSC or FBSI which are registered under the same social security number or
which list the same social security number for the custodian of a Uniform
Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000, ($2,000 FOR THE MONEY MARKET
FUND), 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.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the funds without
reimbursement from the funds. Qualified recipients are securities dealers
who have sold fund shares or others, including banks and other financial
institutions, under special arrangements in connection with FDC's sales
activities. In some instances, these incentives may be offered only to
certain institutions whose representatives provide services in connection
with the sale or expected sale of significant amounts of shares.
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 available for
sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) 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 coincides
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify 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.
This prospectus is printed on recycled paper using soy-based inks.
