SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No.33-9148)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 30 [X]
and
REGISTRATION STATEMENT (No. 811-4861)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 30 [ ]
Fidelity Advisor Series V
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-563-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b)
(X ) on August 21, 1995 pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( ) on ( ) pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on ( ) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed
post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and filed the Notice required by such Rule
most recently on December 31, 1994.
FIDELITY ADVISOR NEW YORK TAX-FREE FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
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1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Who May Want to Invest
3 a .............................. *
b .............................. *
c .............................. Performance
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices; Fundamental Investment
Practices and Restrictions
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. Cover Page; FMR and Its Affiliates
ii........................... FMR and Its Affiliates; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Cover Page; Charter; Breakdown of Expenses;
FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates; Breakdown of
Expenses
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers
iii.......................... *
b ............................. *
c .............................. How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details; Sales
Charge Reductions and Waivers
c .............................. Sales Charge Reductions and Waivers
d .............................. How to Buy Shares; Transaction Details
e .............................. Breakdown of Expenses; Transaction Details
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
FIDELITY
ADVISOR NEW YORK
TAX-FREE F UND:
CLASS A AND CLASS B
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a copy of
the fund's most recent financial report and portfolio listing or a copy of
the Statement of Additional Information (SAI) dated August 2 1, 1995.
The SAI has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, contact Fidelity
Distributors Corporation (FDC), 82 Devonshire Street, Boston, MA
02109 , or your investment professional.
A fund of Fidelity Advisor Series V
The fund seeks a high level of current income free from federal income tax
and New York State and City personal income taxes by investing primarily in
municipal securities.
PROSPECTUS
AUGUST 2 1, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON,
MA 02109
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES
HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
ANYAB-pro-895
CONTENTS
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KEY FACTS WHO MAY WANT TO INVEST
EXPENSES Each class's sales charge (load) and its yearly
operating expenses.
PERFORMANCE
THE FUND IN DETAIL CHARTER How the fund is organized.
INVESTMENT PRINCIPLES AND RISKS The fund's overall
approach to investing.
BREAKDOWN OF EXPENSES How operating costs are
calculated and what they include.
YOUR ACCOUNT 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 ACCOUNT POLICIES DIVIDENDS, CAPITAL GAINS, AND TAXES
TRANSACTION DETAILS Share price calculations and the
timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
SALES CHARGE REDUCTIONS AND WAIVERS
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KEY FACTS
WHO MAY WANT TO INVEST
Class A and Class B s hares are offered through this prospectus to
investors who engage an investment professional for investment advice. This
non-diversified fund may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal and New
York State and City personal income taxes.
Non-diversified funds may invest a greater portion of their assets in
securities of a single issuer than diversified funds. As a result, changes
in the single issuer could cause greater fluctuations in share value than a
diversified fund.
The value of the fund's investments and the income they generate vary from
day to day, and generally reflect changes in market conditions, interest
rates, and other political and economic news.
The fund is not in itself a balanced investment plan. You should consider
your investment objective and tolerance for risk when making an investment
decision. When you sell your fund shares, they may be worth more or less
than what you paid for them.
The fund is composed of multiple classes of shares. Each class of the
fund has a common investment objective and investment portfolio. Class A
shares have a front-end sales charge and pay a distribution fee. Class B
shares do not have a front-end sales charge, but do have a contingent
deferred sales charge (CDSC), and pay a distribution fee and a shareholder
service fee. Institutional Class shares have no sales charge, and do not
pay a distribution fee or a shareholder service fee, but are only available
to certain types of investors. See "Sales Charge Reductions and Waivers,"
page for Institutional Class eligibility information. You may obtain more
information about Institutional Class shares, which are not offered through
this prospectus, by calling 1-800-423-7020 or from your investment
professional. Contact your investment professional to discuss which class
is appropriate for you.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell,
exchange or hold shares of the fund. Lower front-end sales charges
may be available with purchases of $50,000 or more in conjunction with
various programs. See "Transaction Details," page , for an explanation of
how and when these charges apply.
A contingent deferred sales charge (CDSC) is imposed only if you redeem
Class B shares within 5 years of purchase. See "Transaction Details," page
, for information about the CDSC.
Clas Class
s A B
Maximum sales charge on purchases 4.75 None
(as a % of offering price) %
Maximum CDSC (as a % of the lesser of None 4.00%
original purchase price or redemption proceeds) *
Maximum sales charge on reinvested distributions None None
Redemption fee None None
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Exchange fee None None
Annual account maintenance fee (for accounts under $2 , 500) $12.0 $12.0
0 0
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* DECLINES OVER 5 YEARS FROM 4.00% TO 0%.
ANNUAL OPERATING EXPENSES are paid out of each class's assets. The fund
pays a management fee to Fidelity Management & Research Company (FMR). It
also incurs other expenses for services such as maintaining shareholder
records and furnishing shareholder statements and financial reports.
12b-1 fees for Class A and Class B include a distribution fee and, for
Class B, include a shareholder service fee. Distribution fees are paid by
Class A and Class B of the fund to FDC for services and expenses in
connection with the distribution of the applicable class's shares.
Shareholder service fees are paid by Class B to investment
professionals for services and expenses incurred in connection with
providing personal service and/or maintenance of Class B shareholder
accounts. Long-term shareholders may pay more than the economic equivalent
of the maximum sales charges permitted by the National Association of
Securities Dealers, Inc. (NASD), due to 12b-1 fees.
Each class's expenses are factored into its share price or dividends and
are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page ).
The following are projections based on estimated expenses, and are
calculated as a percentage of average net assets.
Clas Clas
s A s B
Management fee 0.41 0.41
% %
12b-1 fee (including 0.25% 0.25 1.00
Shareholder Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0. 34 0. 34
% %
Total operating expenses 1.00 1. 75
% %
EXPENSE TABLE EXAMPLE: You would pay the following expenses, including the
maximum front-end sales charge or CDSC, as applicable, on a $1,000
investment, assuming a 5% annual return and either (1) full redemption or
(2) no redemption, at the end of each time period:
1 Year 3 Years
(1) (2) (1) (2)
Class A $ 57 $ 57 $ 78 $ 78
Class B $ 58 [A] $ 18 $ 85 [A] $ 55
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Class A and Class B to the extent
that total operating expenses exceed 1.00 % (Class A) and
1. 75 % (Class B) as a percentage of their respective average net
assets (excluding interest taxes, brokerage commissions, and extraordinary
expenses). If these agreements were not in effect, projected other
expenses as a percentage of their average net assets would be
.38 % (Class A) and .95 % (Class B).
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD.
The exclusion of any applicable sales charge from a performance calculation
produces a higher return.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
Average annual total returns covering periods of less than one year assume
that performance will remain constant for the rest of the year.
Average annual and cumulative total returns usually will include the effect
of paying the maximum applicable sales charge.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
THE FUND IN DETAIL
CHARTER
FIDELITY ADVISOR NEW YORK TAX-FREE FUND IS A MUTUAL FUND: an
investment that pools shareholders' money and invests it toward a specified
goal. The fund is a non-diversified fund of Fidelity Advisor Series V, an
open-end management investment company organized as a Massachusetts
business trust on April 23, 1986.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review the fund's performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. The transfer
agent will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. The number of votes you are
entitled to is based upon the dollar value of your investment. Separate
votes are taken by each class of shares, fund, or trust, if a matter
affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The fund employs various Fidelity
companies to perform activities required for its operation.
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
As of June 30 , 1995, FMR advised funds having approximately 21
m illion shareholder accounts with a total value of more than $ 305
billion.
Norman Lind is manager of Advisor New York Tax-Free Fund, which he has
managed since August 1995. Mr. Lind also manages New York Tax-Free Insured,
New York Tax-Free High Yield, Spartan New York Municipal High Yield and
Spartan Municipal Income. Previously, he served as the leader of the
municipal bond research group. Mr. Lind joined Fidelity in 1986.
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.
FDC distributes and markets Fidelity's funds and services. Fidelity
Investments Institutional Operations Company (FIIOC) performs
transfer agent servicing functions for Class A and Class B shares
of the fund.
FMR Corp. is the ultimate parent company of FMR. 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 the fund's transfer agent, although it employs
FIIOC to perform these functions for Class A and Class B. UMB is
located at 1010 Grand Avenue, Kansas City, Missouri.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and New York State and City personal
income taxes. The fund invests in municipal securities of investment grade
quality.
Although the fund can invest in securities of any maturity, it
generally invests in medium- and long-term bonds and maintains a
dollar-weighted average maturity of 10 years or longer. In determining a
security's maturity for purposes of calculating the fund's average
maturity, estimates of the expected time for its principal to be repaid may
be used. This can be substantially shorter than its stated final maturity.
The fund's yield and share price change daily and are based on changes in
interest rates, market conditions, other economic and political
news, and on the quality and maturity of its investments. In general, bond
prices rise when interest rates fall, and vice versa. This effect is
usually more pronounced for longer-term securities. FMR may use various
investment techniques to hedge a portion of the fund's risk ,
but there is no guarantee that these strategies will work as
intend ed . When you sell your shares, they may be worth more or
less than what you paid for them.
The fund's performance is affected by the economic and political
conditions within New York State. Both New York City and State have
recently experienced significant financial difficulty, and both the
City's and the State's credit rating s are among the lowest in
the country.
If you are subject to the federal alternative minimum tax, you should note
that the fund may invest a portion of its assets in municipal securities
issued to finance private activities. The interest from these investments
is a tax-preference item for purposes of the tax.
FMR normally invests the fund's assets according to its investment strategy
and does not expect to invest in federally or state taxable obligations.
The fund also reserves the right to invest without limitation in short-term
instruments, to hold a substantial amount of uninvested cash, or to invest
more than normally permitted in taxable obligations for temporary,
defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, strategies FMR may employ
in pursuit of the fund's investment objective , and a summary of
related risks . Any restrictions listed supplement those discussed
earlier in this section. A complete listing of the fund's policies and
limitations and more detailed information about the fund's investment
are contained in the fund's SAI. Policies and limitations are
considered at the time of purchase; the sale of instruments is not required
in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with the fund's investment
objectives and policies and that doing so will help the fund achieve
its goal. Current holdings and recent investment strategies are described
in the fund's financial reports, which are sent to shareholders twice a
year. For a free SAI or financial report, call your investment
professional.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
U.S. Government securities are high quality instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. Government. Not all U.S. Government securities are backed by the full
faith and credit of the United States. Some are supported only by the
credit of the agency that issued them.
Investment-grade debt securities are medium- and high-quality securities.
Some, however, may possess speculative characteristics and may be more
sensitive to economic changes and to changes in the financial condition of
issuers.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by S&P, or is unrated but judged to
be of equivalent quality by FMR. The fund currently intends to limit its
investments in debt securities to those of Baa quality and above.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. A security's credit may be enhanced by a bank,
insurance company, or other entity. The value of some or all municipal
securities may be affected by uncertainties in the municipal market related
to legislation or litigation involving the taxation of municipal securities
or the rights of municipal securities holders. The fund may own a municipal
security directly or through a participation interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by New York
State or its counties, municipalities, authorities, or other subdivisions.
The ability of issuers to repay their debt can be affected by many factors
that impact the economic vitality of either the state or a region within
the state.
Other state tax-free securities include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations. The economy
of Puerto Rico is closely linked to the U.S. economy, and will depend on
the strength of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives. Recent
legislation revised these incentives, but the government of Puerto Rico
anticipates only a slight reduction in the average real growth rates for
the economy.
ASSET-BACKED SECURITIES include interests in pools of purchase
contracts, financing leases, or sales agreements entered into by
municipalities. These securities usually rely on continued payments by a
municipality, and may also be subject to prepayment risk.
VARIABLE AND FLOATING RATE 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 municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, the fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, entering into swap agreements, and purchasing indexed
securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
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 the fund.
RESTRICTIONS: The fund may not purchase a security if, as a result, more
than 10% of its net assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
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: The fund is considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, the fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S.
g overnment securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTION: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following 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.
The fund seeks a high level of current income free from federal income tax
and New York State and City personal income taxes by investing primarily in
municipal securities.
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and New York State and City personal
income taxes.
The fund may borrow only for temporary or emergency purposes, but not in an
amount exceeding 33% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of each class's assets are reflected in that class's
share price or dividends; they are neither billed directly to shareholders
nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. The fund also pays OTHER EXPENSES, which are explained
below .
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 June 30 , 1995, the group fee rate was .1520 %. The
individual fund fee rate is 0.25%.
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
UMB has entered into sub-arrangements pursuant to which FIIOC
performs transfer agency, dividend disbursing and shareholder
services for Class A and Class B shares. UMB has entered into
sub-arrangements with Fidelity Service Co. (FSC) pursuant to which
FSC calculates the net asset value per share (NAV) and dividends for
both Class A and Class B , and maintains the fund's general
accounting records. All of the fees are paid to FIIOC and FSC by
UMB, which is reimbursed by the applicable class or the fund, as
appropriate, for such payments.
Class A shares of the fund have adopted a DISTRIBUTION AND SERVICE PLAN.
Under the Plan, Class A is authorized to pay FDC a monthly distribution fee
as compensation for its services and expenses in connection with the
distribution of Class A shares and providing personal service to and/or
maintenance of Class A shareholder accounts. Class A may pay FDC a
distribution fee at an annual rate up to 0.40% of its average net assets,
or such lesser amount as the Trustees may determine from time to time.
Class A currently pays FDC a monthly distribution fee at an annual
rate of 0.25% of its average net assets determined at the close of business
on each day throughout the month. The Class A distribution fee may be
increased only when the Trustees believe that it is in the best interest of
Class A shareholders to do so.
Up to the full amount of the Class A distribution fee may be reallowed to
investment professionals based upon the level of marketing and distribution
services provided.
Class B shares have also adopted a DISTRIBUTION AND SERVICE PLAN. Under the
Class B Plan, Class B is authorized to pay FDC a monthly distribution fee
as compensation for its services and expenses in connection with the
distribution of Class B shares. Class B currently pays FDC monthly at an
annual rate of 0.75% of its average net assets determined at the close of
business on each day throughout the month. In addition, pursuant to the
Class B Plan, investment professionals are compensated at an annual rate of
0.25% of average net assets of Class B for providing personal service to
and/or maintenance of Class B shareholder accounts.
The Plans also specifically recognize that FMR may make payments from its
management fee, revenue, past profits or other resources to investment
professionals for their services to Class A and Class B shareholders.
The Board of Trustees of the fund has not authorized such payments.
The fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity.
The fund's portfolio turnover rate is not expected to exceed 1 00%
for its first fiscal period ending October 31, 1995. This rate will vary
from year to year.
YOUR ACCOUNT
TYPES OF ACCOUNTS
R ead your investment professional's program materials in conjunction
with this prospectus for additional service features or fees that may
apply. Certain features of the fund, such as minimum initial or subsequent
investment amounts, may be modified in these programs, and administrative
charges may be imposed for the services rendered.
The different ways to set up (register) your account with Fidelity are
listed below.
If you have selected Fidelity Advisor Funds as an investment option
through an insurance company group pension program, please contact the
provider directly.
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). Contact your investment
professional.
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
Contact your investment professional.
HOW TO BUY SHARES
Once each business day, two share prices are calculated for Class A shares
of the fund: the offering price and the NAV. The offering price includes
the maximum 4.75% front-end sales charge, which you pay when you buy Class
A shares, unless you qualify for a reduction or waiver as described
beginning on page . When you buy Class A shares at the offering price, the
transfer agent deducts the applicable sales charge and invests the rest at
NAV. Class B's NAV is also calculated every business day. Class B shares of
the fund are sold without a front-end sales charge and may be subject to a
CDSC upon redemption. For information on how the CDSC is calculated, see
"Transaction Details," page .
Shares are purchased at the next offering price or NAV, as applicable,
calculated after your order is received and accepted by the transfer agent.
The offering price and NAV are normally calculated at 4:00 pm Eastern time.
I t is the responsibility of your investment professional to transmit
your order to buy shares to the appropriate transfer agent before 4:00 p.m.
Eastern time.
The transfer agent must receive payment within three business days
after an order for shares is placed; otherwise your purchase order may be
canceled and you could be held liable for resulting fees and/or losses.
Share certificates may be available for Class A shares upon request. Share
certificates are not available for Class B shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. If there is no account
application accompanying this prospectus, call your investment
professional.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund or from another Fidelity fund, or
(small solid bullet) Contact your investment professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
Through Automatic Investment Plans $1,000
TO ADD TO AN ACCOUNT $250
Through Automatic Investment Plans $100
MINIMUM BALANCE $1 , 000
PURCHASE AMOUNTS OF MORE THAN $250,000 WILL NOT BE ACCEPTED FOR CLASS B
SHARES.
For further information on opening an account, please consult your
investment professional or refer to the account application.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet)Contact your
investment professional or, if you (small solid bullet) Contact your
investment professional or, if
are investing through a broker-dealer
or you are investing through a broker-dealer or
insurance representative, call insurance representative, call
1-800-522-7297. If you are investing
through a 1-800-522-7297. If you are investing through
bank representative, call
1-800-843-3001. a bank representative, call 1-800-843-3001.
(small solid bullet)Exchange from the
same class of another (small solid bullet) Exchange from the same
class of another
Fidelity Advisor fund account with
the same Fidelity Advisor fund account with the same
registration, including name,
address, and registration, including name, address, and
taxpayer ID number. taxpayer ID number.
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Mail (mail_graphic) (small solid bullet)Complete and sign
the account application. (small solid bullet) Make your check payable to "Fidelity Advisor
Make your check payable to "Fidelity
Advisor New York Tax-Free Fund" and note the
New York Tax-Free Fund" and note the applicable class. Indicate your fund
applicable class. Mail to the address
indicated account number on your check and mail to
on the application. the address printed on
your account statement.
(small solid bullet) Exchange by mail: call your investment
professional for instructions.
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In Person (hand_graphic) (small solid bullet)Bring your
account application and check to (small solid bullet) Bring your check to your investment
your investment professional. pr ofessional.
Wire (wire_graphic) (small solid bullet)Not available. (small solid bullet) If you are investing through a broker-dealer
or insurance representative, wire to:
State Street Bank & Trust Co.
Routing # 011000028
ATTN: Custody & Shareholder
Services Division
CREDIT: Fidelity Advisor New York
Tax-Free Fund
9902-908-4
FBO: (Account name)
(Account number)
(small solid bullet) If you are investing through a bank
representative, wire to:
Banker's Trust Co.
Routing # 021001033
Custody & Shareholder Services
Division
Fidelity Advisor DART System
A/C #00159759
FBO: (Account name)
(Account number)
Specify "Fidelity Advisor New York Tax-Free
Fund , " note the applicable class, and include
your account number and your name.
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Automatically (automatic_graphic) (small solid bullet)Not
available. (small solid bullet) Use Fidelity Advisor Systematic Investment
Program. Sign up for this service when
opening your account, or call your
investment professional to begin the
program.
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted by the
transfer agent, less any applicable CDSC. NAV is normally calculated at
4:00 p.m. Eastern time.
TO SELL SHARES IN AN ACCOUNT you may use any of the methods described on
these pages.
To sell certificated shares, call your investment professional for
instructions.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE, 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 the fund 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,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, signed certificates (if applicable), and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your investment professional, or mail it to the
following address:
(small solid bullet) If you purchased your shares through a
broker-dealer or insurance representative:
Fidelity Advisor Funds
P.O. Box 8302
Boston, MA 02266-8302
(small solid bullet) If you purchased your shares through a bank
representative:
Fidelity Investments Institutional Operations Company
82 Devonshire Street ZR5
Boston, MA 02109
Unless otherwise instructed, the transfer agent will send a check to the
record address.
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) You may exchange to the same class of
other Fidelity Advisor funds or 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 Tenant,
Sole
Proprietorship,(small solid bullet) The letter of instruction must be signed by
UGMA, UTMA all persons required to sign for
transactions, exactly as their names
Trust appear on the account and sent to your
investment professional.
(small solid bullet) The trustee must sign the letter indicating
capacity as trustee. If the trustee's name
is not in the account registration, provide a
copy of the trust document certified within
the last 60 days.
Business or
Organization (small solid bullet) At least one person authorized by
corporate resolution to act on the account
must sign the letter.
Executor,
Administrator,(small solid bullet) For instructions, contact your investment
Conservator/
Guardian professional or, if you purchased your
shares through a broker-dealer or
insurance representative, call
1-800-522-7297. If you purchased your
shares through a bank representative, call
1-800-843-3001.
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,
contact your investment professional or, if
you purchased your shares through a
broker-dealer or insurance representative,
call 1-800-522-7297. If you purchased
your shares through a bank
representative, call 1-800-843-3001.
Minimum wire: $500.
(small solid bullet) Your wire redemption request must be
received by the transfer agent before 4:00
p.m. Eastern time for money to be wired
on the next business day.
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INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction
that affects your account balance or your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed,
even if you have more than one account in the fund. Call your investment
professional if you need additional copies of financial reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your shares and buy shares of the same
class of other Fidelity Advisor funds or shares of other Fidelity funds by
telephone or in writing. The Class A shares you exchange will carry credit
for any front-end sales charge you previously paid in connection with their
purchase.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "Exchange
Restrictions," page .
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
redemptions from your account. Only Class A shares with an account value of
$10,000 or more are eligible for this program. Because of Class A's
front-end sales charge, you may not want to set up a systematic withdrawal
plan during a period when you are buying Class A shares on a regular basis.
One easy way to pursue your financial goals is to invest money regularly.
Fidelity Advisor funds offer 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 retirement, a home, educational expenses, and other
long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND
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MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
Initial Additiona Monthly, bimonthly, (small solid bullet) For a new account, complete the appropriate
section on the application.
l quarterly, (small solid bullet) For existing accounts, call your investment
professional for an
$1 , 00 0 $100[A] or semi-annually application.
(small solid bullet) To change the amount or frequency of your
investment, contact your
investment professional directly or, if you purchased your shares
through a broker-dealer or insurance representative, call
1-800-522-7297. If you purchased your shares through a bank
representative, call 1-800-843-3001. Call at least 10 business days
prior to your next scheduled investment date (20 business days if you
purchased your shares through a bank).
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FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND OR A FIDELITY ADVISOR FUND
TO ANOTHER FIDELITY ADVISOR FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, (small solid bullet) To establish, call your investment professional after both accounts are
semi-annually, or opened.
annually (small solid bullet) To change the amount or frequency of your investment, contact your
investment professional directly or, if you purchased your shares
through a broker-dealer or insurance representative, call
1-800-522-7297. If you purchased your shares through a bank
representative, call 1-800-843-3001.
(small solid bullet) The account from which the exchanges are to be processed must have
a minimum balance of $10,000. The account into which the exchange is
being processed must have a minimum of $1,000.
(small solid bullet) Both accounts must have the same registration and taxpayer ID
numbers.
(small solid bullet) Call at least 2 business days prior to your next scheduled exchange
date.
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[A] BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in March and
December.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. Class A and Class B offer four
options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you do not indicate a choice on your application, you will be
assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS(registered trademark) PROGRAM. Your dividend and
capital gain distributions will be automatically invested in the same class
of shares of another identically registered Fidelity Advisor fund.
If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
those checks will be reinvested in your account at the current NAV and your
election may be converted to the Reinvestment Option.
You may change your distribution option at any time by notifying the
transfer agent in writing.
Shares purchased through reinvestment of dividend and capital gain
distributions are not subject to a sales charge. If you direct Class A
distributions to a fund with a 4.75% front-end sales charge, you will not
pay a sales charge on those purchases.
Dividends will be reinvested at the applicable class's NAV on the last day
of the month. Capital gain distributions will be reinvested at the NAV as
of the date the class deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days.
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the fund's tax implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is distributed
to shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31.
Every January, the transfer agent will send you and the IRS a statement
showing the taxable distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. The fund may invest up to 20% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
To the extent that the fund's income dividends are derived from state
tax-free investments, they will be free from New York State and City
personal income taxes.
TAXES ON TRANSACTIONS. Your redemptions-including exchanges-are subject to
capital gains tax. A capital gain or loss is the difference between the
cost of your shares and the price you receive when you sell them.
Whenever you sell shares of the fund, the transfer agent will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement at least
quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax
to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount of
your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the fund deducts a
capital gain distribution from its NAV, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Each class's NAV and offering price are normally calculated as of
the close of business of the NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value of the fund's
investments, cash, and other assets, subtracting that class's pro rata
share of the value of the fund's liabilities, subtracting the liabilities
allocated to that class, and dividing the result by the number of
shares of that class that are outstanding.
The fund's assets are valued primarily on the basis of market quotations,
if available. Since market quotations are often unavailable, assets are
usually valued by a method that the Board of Trustees believes accurately
reflects fair value.
THE OFFERING PRICE (price to buy one share) is the applicable class's NAV,
plus a sales charge for Class A shares. Class A has a maximum sales charge
of 4.75% of the offering price. The REDEMPTION PRICE (price to sell one
share) is the applicable class's NAV, minus any applicable CDSC for Class B
shares.
SALES CHARGES AND INVESTMENT PROFESSIONAL CONCESSIONS - CLASS A
Sales Charge as % of
Offering Net Investment
Price Amount Profession
Investe al
d Concession
as % of
Offering
Price
Less than $50,000 4.75 4.99 4.00%
% %
$50,000 to less than $100,000 4.50 4.71 4.00%
% %
$100,000 to less than $250,000 3.50 3.63 3.00%
% %
$250,000 to less than $500,000 2.50 2.56 2.00%
% %
$500,000 to less than $1,000,000 2.00 2.04 1.75%
% %
$1,000,000 or more None None See
Below*
* INVESTMENT PROFESSIONALS WILL BE COMPENSATED WITH A FEE OF 0.25% FOR
PURCHASES OF $1 MILLION OR MORE IF THE ASSETS ON WHICH THE 0.25% IS PAID
REMAIN WITHIN THE FIDELITY ADVISOR FUNDS FOR ONE YEAR, EXCEPT FOR PURCHASES
THROUGH A BANK OR BANK-AFFILIATED BROKER-DEALER THAT QUALIFY FOR A SALES
CHARGE WAIVER DESCRIBED BEGINNING ON PAGE . ALL ASSETS ON WHICH THE 0.25%
FEE IS PAID MUST REMAIN IN CLASS A SHARES OF THE FIDELITY ADVISOR FUNDS,
INITIAL CLASS SHARES OF DAILY MONEY FUND: U.S. TREASURY PORTFOLIO, OR
SHARES OF DAILY MONEY FUND: MONEY MARKET PORTFOLIO OR DAILY TAX-EXEMPT
MONEY FUND FOR A PERIOD OF ONE UNINTERRUPTED YEAR, OR THE INVESTMENT
PROFESSIONAL WILL BE REQUIRED TO REFUND THIS FEE TO FDC. PURCHASES BY
INSURANCE COMPANY SEPARATE ACCOUNTS WILL QUALIFY FOR THE 0.25% FEE ONLY IF
AN INSURANCE COMPANY'S/CLIENT RELATIONSHIP UNDERLYING THE SEPARATE ACCOUNT
EXCEEDS $1 MILLION. IT IS THE RESPONSIBILITY OF THE INSURANCE COMPANY TO
MAINTAIN RECORDS OF PURCHASES BY ANY SUCH CLIENT RELATIONSHIP. FDC MAY
REQUEST RECORDS EVIDENCING ANY FEES PAYABLE THROUGH THIS PROGRAM.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption, be
assessed a CDSC based on the following schedule:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 4%
1 year to less than 3 years 3%
3 years to less than 4 years 2%
4 years to less than 5 years 1%
5 years to less than 6 years [A] 0%
[A] AFTER A MAXIMUM HOLDING PERIOD OF 6 YEARS, CLASS B SHARES WILL CONVERT
AUTOMATICALLY TO CLASS A SHARES OF THE SAME FIDELITY ADVISOR FUND. SEE
"CONVERSION FEATURE" BELOW FOR MORE INFORMATION.
Investment professionals with whom FDC has agreements receive as
compensation from FDC a concession equal to 3.00% of your purchase of Class
B shares.
The CDSC will be calculated based on the lesser of the cost of Class B
shares at the initial date of purchase or the value of Class B shares at
redemption, not including any reinvested dividends or capital gains. In
determining the applicability and rate of any CDSC at redemption, Class B
shares representing reinvested dividends and capital gains, if any, will be
redeemed first, followed by Class B shares that have been held for the
longest period of time. Class B shares acquired through distributions
(dividends or capital gains) will not be subject to a CDSC.
CONVERSION FEATURE. After a maximum holding period of six years from the
initial date of purchase, Class B shares and any capital appreciation
associated therewith convert automatically to Class A shares of the same
Fidelity Advisor fund. Conversion to Class A shares will be made at NAV. At
the time of conversion, a portion of the Class B shares purchased through
the reinvestment of dividends or capital gains (Dividend Shares) will also
convert to Class A shares. The portion of Dividend Shares that will convert
is determined by the ratio of your converting Class B non-Dividend Shares
to your total Class B non-Dividend Shares.
For more information about the CDSC, including the conversion feature and
the permitted circumstances for CDSC waivers, contact your investment
professional.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A or
Class B shares of the fund, you may reinvest an amount equal to all or a
portion of the redemption proceeds in the same class of the fund or of any
of the other Fidelity Advisor funds, at the NAV next determined after
receipt of your investment order, provided that such reinvestment is made
within 30 days of redemption. Under these circumstances, the dollar amount
of the CDSC you paid on Class B shares will be reimbursed to you by
reinvesting that amount in Class B shares. You must reinstate your shares
into an account with the same registration. This privilege may be exercised
only once by a shareholder with respect to the fund and certain
restrictions may apply. For purposes of the CDSC schedule, the holding
period of your Class B shares will continue as if Class B shares had not
been redeemed.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the transfer
agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify
the identity of the caller. Fidelity and the transfer agent will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions. Additional
documentation may be required from corporations, associations and certain
fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV or offering price, as applicable, calculated after your order is
received and accepted by the transfer agent. 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) The fund does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees the fund or the
transfer agent has incurred.
(small solid bullet) Direct Purchases: You begin to earn dividends as of
the first business day following the day the fund receives payment.
(small solid bullet) Automated Purchase Orders: You begin to earn
dividends as of the business day your order is received and accepted.
AUTOMATED PURCHASE ORDERS. Shares of the fund can be purchased or sold
through investment professionals utilizing an automated order placement and
settlement system that guarantees payment for orders on a specified date.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
or Federal Reserve check.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV, minus any applicable CDSC, calculated after your order is
received and accepted by the transfer agent. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect the fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) The fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
THE TRANSFER AGENT 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 $60.00 per shareholder. In determining whether an
annual maintenance fee will be deducted, Class A accounts will be given
credit for the current maximum front-end sales charge multiplied by the
value of the account on the calculation date. 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. The fee will not
be deducted from retirement accounts (except non-Fidelity prototype
retirement accounts), accounts using a systematic investment program, or if
total assets in Fidelity mutual funds exceed $50,000. Eligibility for the
$50,000 waiver is determined by aggregating Fidelity mutual fund accounts
maintained by FIIOC or State Street Bank & Trust Company which are
registered under the same primary social security number.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, the transfer agent reserves the right to close your account and
send the proceeds to you. Your shares will be redeemed at the NAV, minus
any applicable CDSC, on the day your account is closed.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to investment professionals who support the sale
of shares of the fund. In some instances, these incentives will be offered
only to certain types of investment professionals, such as bank-affiliated
or non-bank affiliated broker-dealers, or to investment professionals 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 the fund
for the same class of shares of other Fidelity Advisor funds; or Class A
shares for Initial Class shares of Daily Money Fund: U.S. Treasury
Portfolio; Class A shares for shares of Daily Money Fund: Money Market
Portfolio or Daily Tax-Exempt Money Fund; and Class B shares for Class B
shares of Daily Money Fund: U.S. Treasury Portfolio. However, you should
note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) The fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if
the fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
SALES CHARGE REDUCTIONS AND WAIVERS
The front-end sales charge will be reduced for purchases of Class A shares
according to the Sales Charge Schedule shown on page , if your
purchase qualifies for one of the following reduction plans. Please refer
to the fund's SAI for more details about each plan or contact your
investment professional. If you purchased your shares through a
broker-dealer or insurance representative, call 1-800-522-7297. If you
purchased your shares through a bank representative, call 1-800-843-3001.
Your purchases and existing balances of Class B shares may be included in
the following programs for purposes of qualifying for a Class A front-end
sales charge reduction.
QUANTITY DISCOUNTS apply to purchases of Class A shares of a single
Fidelity Advisor fund or to combined purchases of Class A and Class B
shares of any Fidelity Advisor funds, and to purchases of Initial Class
shares and Class B shares of Daily Money Fund: U.S. Treasury Portfolio and
shares of Daily Money Fund: Money Market Portfolio and Daily Tax-Exempt
Money Fund acquired by exchange from any Fidelity Advisor fund. (Minimum
investment is $50,000, except that the minimum investment in each of
Advisor Short Fixed-Income Fund or Advisor Short-Intermediate Tax-Exempt
Fund is $1 million.)
To qualify for a quantity discount, investing in the fund's Class A shares
for several accounts at the same time will be considered a single
transaction (Combined Purchase), as long as shares are purchased through
one investment professional and the total is at least $50,000 (or at least
$1 million for each of Advisor Short Fixed-Income Fund or Advisor
Short-Intermediate Tax-Exempt Fund).
RIGHTS OF ACCUMULATION let you determine your front-end sales charge on
Class A shares by adding to your new purchase of Class A shares the value
of all of the Fidelity Advisor fund Class A and Class B shares held by you,
your spouse, and your children under age 21. You can also add the value of
Initial Class shares and Class B shares of Daily Money Fund: U.S. Treasury
Portfolio and shares of Daily Money Fund: Money Market Portfolio and Daily
Tax-Exempt Money Fund acquired by exchange from any Fidelity Advisor fund.
A LETTER OF INTENT (THE LETTER) lets you receive the same reduced
front-end sales charge on purchases of Class A shares made during a
13-month period as if the total amount invested during the period had been
invested in a single lump sum. (see Quantity Discounts above.) You must
file your non-binding Letter with the transfer agent within 90 days
of the start of your purchases. Your initial investment must be at least 5%
of the amount you plan to invest. Out of the initial investment, 5% of the
dollar amount specified in the Letter will be registered in your name and
held in escrow. You will earn income dividends and capital gain
distributions on escrowed Class A shares. Neither income dividends nor
capital gain distributions reinvested in additional Class A or Class B
shares will apply toward completion of the Letter. The escrow will be
released when your purchase of the total amount has been completed. You are
not obligated to complete the Letter, and in such a case, sufficient
escrowed Class A shares will be redeemed to pay any applicable front-end
sales charges.
A FRONT-END SALES CHARGE WILL NOT APPLY TO THE FOLLOWING CLASS A SHARES:
1. Purchased by a bank trust officer, registered representative, or other
employee (or a member of one of their immediate families) of investment
professionals having agreements with FDC;
2. Purchased by a current or former trustee or officer of a Fidelity fund
or a current or retired officer, director or regular employee of FMR Corp.
or its direct or indirect subsidiaries (a Fidelity trustee or employee),
the spouse of a Fidelity trustee or employee, a Fidelity trustee or
employee acting as custodian for a minor child, or a person acting as
trustee of trust for the sole benefit of the minor child of a Fidelity
trustee or employee;
3. Purchased by a charitable organization (as defined in Section 501(c)(3)
of the Internal Revenue Code) investing $100,000 or more;
4. Purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code);
5. Purchased for a Fidelity or Fidelity Advisor IRA account with the
proceeds of a distribution (i) from an employee benefit plan that qualified
for waiver (1 1 ) or had a minimum of $3 million in plan assets
invested in Fidelity funds; or (ii) from an insurance company separate
account qualifying under ( 6 ) below, or used to fund annuity
contracts purchased by employee benefit plans having in the aggregate at
least $3 million in plan assets invested in Fidelity funds;
6. Purchased for an insurance company separate account used to fund annuity
contracts for employee benefit plans which, in the aggregate, have more
than 200 eligible employees or a minimum of $1 million in plan assets
invested in Fidelity Advisor funds;
7. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency;
8. Purchased with redemption proceeds from other mutual fund complexes on
which you have previously paid a front-end sales charge or CDSC;
9. Purchased by a trust institution or bank trust department,
(excluding assets described in (11) and (12) below) that has
executed a participation agreement with FDC specifying certain asset
minimums and qualifications, and marketing restrictions . Assets
managed by third parties do not qualify for this waiver;
10. Purchased for use in a broker-dealer managed account program,
provided the broker-dealer has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver;
11. Purchased as part of an employee benefit plan having more than
(i) 200 eligible employees or a minimum of $1 million of plan assets
invested in Fidelity Advisor funds ; or (ii) 25 eligible employees or
$250,000 of plan assets invested in Fidelity Advisor f unds
that subscribe to the Advisor Retirement Connection or
similar FIIS-sponsored program;
12. Purchased as part of an employee benefit plan through an
intermediary that has signed a p articipation a greement with
FDC specifying certain asset minimums and qualifications, and
marketing , program and trading restrictions; or
13. Purchased on a discretionary basis by a registered investment
advisor that is not part of an organization primarily engaged
in the brokerage business , and that has executed a
participation agreement with FDC specifying certain asset minimums
and qualifications, and marketing program and trading
restrictions. Employee benefit plan assets do not qualify for this
waiver.
For the purpose of exchanging into the fund, in order to continue to
qualify for waivers (9), (10) and (13), eligible investors with existing
Class A accounts will be required to sign and comply with a participation
agreement. Eligible investors that do not meet revised asset requirements
specified in the participation agreement will be allowed to continue
investing in Class A shares under the terms of their current relationship
until June 30, 1997, after which they will be prevented from making new or
subsequent purchases in Class A load waived, except that employee benefit
plans will be permitted to make additional purchases of Class A shares load
waived.
You must notify FDC in advance if you qualify for a front-end sales charge
waiver. Employee benefit plan investors must meet additional requirements
specified in the fund's SAI.
If you have authorized a broker-dealer or investment adviser to make
investment decisions for you, or if you are investing through a trust
department, you may qualify to purchase either Class A shares without a
sales charge (as described in (9), (10) and (13), above) or Institutional
Class shares. Because Institutional Class shares have no sales charge, and
do not pay a distribution fee or a shareholder service fee, Institutional
Class shares are expected to have a higher total return than Class A or
Class B shares. Contact your investment professional to discuss if you
qualify.
THE CDSC ON CLASS B SHARES MAY BE WAIVED:
1. In cases of disability or death, provided that Class B shares are
redeemed within one year following the death or the initial determination
of disability, or
2. In connection with a total or partial redemption related to
certain distributions from retirement plans or accounts.
Your investment professional should call Fidelity for more information.
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the fund or FDC. This Prospectus and the related SAI do not
constitute an offer by the fund or by FDC to sell or to buy shares of the
fund to any person to whom it is unlawful to make such offer.
FIDELITY ADVISOR NEW YORK TAX-FREE FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Who May Want to Invest
3 a .............................. *
b .............................. *
c .............................. Performance
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices; Fundamental Investment
Practices and Restrictions
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. Cover Page; FMR and Its Affiliates
ii........................... FMR and Its Affiliates; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Cover Page; Charter; Breakdown of Expenses;
FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates; Breakdown of
Expenses
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions
iii.......................... *
b ............................. *
c .............................. How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares; Transaction Details
e .............................. Breakdown of Expenses; Transaction Details
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
FIDELITY
ADVISOR NEW YORK
TAX-FREE FUND:
INSTITUTIONAL CLASS
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a copy of
the fund's most recent financial report and portfolio listing or a copy of
the Statement of Additional Information (SAI) dated August 2 1, 1995.
The SAI has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, contact Fidelity
Distributors Corporation (FDC), 82 Devonshire Street, Boston, MA 02109 ,
or your investment professional.
A fund of Fidelity Advisor Series V
The fund seeks a high level of current income free from federal income tax
and New York State and City personal income taxes by investing primarily in
municipal securities.
PROSPECTUS
AUGUST 2 1, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON,
MA 02109
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ANYI-pro-895
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS WHO MAY WANT TO INVEST
EXPENSES Institutional Class's yearly operating
expenses.
PERFORMANCE
THE FUND IN DETAIL CHARTER How the fund is organized.
INVESTMENT PRINCIPLES AND RISKS The fund's overall
approach to investing.
BREAKDOWN OF EXPENSES How operating costs are
calculated and what they include.
YOUR ACCOUNT 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 ACCOUNT POLICIES DIVIDENDS, CAPITAL GAINS, AND TAXES
TRANSACTION DETAILS Share price calculations and the
timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
This non-diversified fund may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal and New
York State and City personal income taxes.
Non-diversified funds may invest a greater portion of their assets in
securities of a single issuer than diversified funds. As a result, changes
in the financial condition or market assessment of a single issuer could
cause greater fluctuations in share value than a diversified fund.
Institutional C las s shares are offered through this
prospectus to (i) accounts managed by a bank trust department and
other trust institutions, (ii) accounts managed on a discretionary
basis by a broker-dealer and (iii) accounts managed on a
discretionary basis by a registered investment advisor (RIA)
(collectively, eligible investors) . Shares are available only to
eligible investors that have signed a p articipation
a greement with FDC . The p articipation a greement
specifies certain aggregate asset minimums and asset
qualifications, trading guidelines , marketing restrictions and
program requirements .
For the purpose of exchanging into the fund, eligible investors with
existing Institutional Class accounts will be required to sign and comply
with a participation agreement in order to purchase additional shares. Such
eligible investors that do not meet revised asset requirements specified in
the participation agreement will be allowed to continue investing in
Institutional Class shares until June 30, 1997, after which they will be
prevented from making new or subsequent purchases in Institutional Class,
except that employee benefit plans established by the intermediary will be
permitted to make ongoing purchases. Shareholders who purchased shares
prior to June 30, 1995 but do not fall within (i), (ii) and (iii) above can
continue to buy additional shares of Institutional Class.
The value of the fund's investments and the income they generate vary from
day to day, and generally reflect changes in interest rates, market
conditions, and other political and economic news.
The fund is not in itself a balanced investment plan. You should
consider your investment objective and tolerance for risk when making an
investment decision. When you sell your fund shares, they may be worth more
or less than what you paid for them.
The fund is composed of multiple classes of shares. Each class of the fund
has a common investment objective and investment portfolio. Class A shares
have a front-end sales charge and pay a distribution fee. Class B shares do
not have a front-end sales charge, but do have a contingent deferred sales
charge (CDSC), and pay a distribution fee and a shareholder service fee.
Because Institutional Class shares have no sales charge, and do not pay a
distribution fee or a shareholder service fee, Institutional Class shares
are expected to have a higher total return than Class A or Class B shares.
You may obtain more information about Class A and Class B shares, which are
not offered through this prospectus, by calling 1-800-843-3001 or from your
investment professional.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy,
sell , or hold Institutional Class shares of the fund.
<TABLE>
<CAPTION>
<S> <C>
Maximum sales charge on purchases and reinvested distributions None
</TABLE>
Maximum deferred sales charge None
Redemption fee None
Exchange fee None
Annual account maintenance fee (for accounts under $2,500) $ 12.00
ANNUAL OPERATING EXPENSES are paid out of Institutional Class's assets. The
fund pays a management fee to Fidelity Management & Research Company (FMR).
It also incurs other expenses for services such as maintaining shareholder
records and furnishing shareholder statements and financial reports.
The class's e xpenses are factored into its share price or dividends
and are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page ).
The following are projections based on estimated expenses, and are
calculated as a percentage of average net assets of the Institutional Class
of the fund.
Management fee 0.41%
12b-1 fee (Distribution Fee) None
Other expenses (after reimbursement) 0.34 %
Total operating expenses 0.75 %
EXPENSE TABLE EXAMPLE: You would pay the following expenses on a $1,000
investment in Institutional Class shares assuming a 5% annual return and
full redemption at the end of each time period:
1 3
Year Years
$ 8 $ 24
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Institutional Class Shares
to the extent that total operating expenses as a percentage of its
average net assets (excluding interest, taxes, brokerage commissions, and
extraordinary expenses) exceed 0 .75% . If this agreement were not
in effect, projected other expenses as a percentage of Institutional
Class's average net assets would be .45 %.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
Average annual total returns covering periods of less than one year assume
that performance will remain constant for the rest of the year.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn
before taxes to equal a tax-free yield.
THE FUND IN DETAIL
CHARTER
FIDELITY ADVISOR NEW YORK TAX-FREE FUND FUND IS A MUTUAL FUND: an
investment that pools shareholders' money and invests it toward a specified
goal. The fund is a non-diversified fund of Fidelity Advisor Series V, an
open-end management investment company organized as a Massachusetts
business trust on April 23, 1986.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review the fund's performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. The transfer
agent will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. The number of votes you are
entitled to is based upon the dollar value of your investment. Separate
votes are taken by each class of shares, fund, or trust, if a matter
affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The fund employs various Fidelity
companies to perform activities required for its operation.
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
As of June 30 , 1995, FMR advised funds having approximately 21
million shareholder accounts with a total value of more than $ 305
b illion.
Norman Lind is manager of Advisor New York Tax-Free Fund, which he
has managed since August 1995. Mr. Lind also manages New York Tax-Free
Insured, New York Tax-Free High Yield, Spartan New York Municipal High
Yield and Spartan Municipal Income. Previously, he served as the leader of
the municipal bond research group. Mr. Lind joined Fidelity in 1986.
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.
FDC distributes and markets Fidelity's funds and services. Fidelity
Investments Institutional Operations Company (FIIOC) performs
transfer agent servicing functions for the Institutional Class shares
of the fund.
FMR Corp. is the ultimate parent company of FMR. 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 the fund's transfer agent, although it employs
FIIOC to perform these functions for the Institutional Class of the fund.
UMB is located at 1010 Grand Avenue, Kansas City, Missouri.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and New York State and City personal
income taxes. The fund invests in municipal securities of investment grade
quality.
Although the fund can invest in securities of any maturity, it
generally invests in medium- and long-term bonds and maintains a
dollar-weighted average maturity of 10 years or longer. In
determining a security's maturity for purposes of calculating the fund's
average maturity, estimates of the expected time for its principal to be
repaid may be used. This can be substantially shorter than its stated final
maturity.
The fund's yield and share price change daily and are based on changes in
interest rates, market conditions, other economic and political news, and
on the quality and maturity of its investments. In general, bond prices
rise when interest rates fall, and vice versa. This effect is usually more
pronounced for longer-term securities. FMR may use various investment
techniques to hedge the fund's risk, but there is no guarantee that these
strategies will work as intended. When you sell your shares, they may be
worth more or less than what you paid for them.
The fund's performance is affected by the economic and political
conditions within New York State. Both New York City and State have
recently experienced significant financial difficulty, and both the
City's and the State's credit rating s are among the lowest in
the country.
If you are subject to the federal alternative minimum tax, you should note
that the fund may invest a portion of its assets in municipal securities
issued to finance private activities. The interest from these investments
is a tax-preference item for purposes of the tax.
FMR normally invests the fund's assets according to its investment strategy
and does not expect to invest in federally or state taxable obligations.
The fund also reserves the right to invest without limitation in short-term
instruments, to hold a substantial amount of uninvested cash, or to invest
more than normally permitted in taxable obligations for temporary,
defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, strategies FMR may employ in
pursuit of the fund's investment objective , and a summary of
related risks . Any restrictions listed supplement those discussed
earlier in this section. A complete listing of the fund's policies and
limitations and more detailed information about the fund's investments
are contained in the fund's SAI. Policies and limitations are
considered at the time of purchase; the sale of instruments is not required
in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with the fund's investment
objectives and policies and that doing so will help the fund achieve
its goal. Current holdings and recent investment strategies are described
in the fund's financial reports, which are sent to shareholders twice a
year. For a free SAI or financial report, call your investment
professional.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
U.S. Government securities are high quality instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. Government. Not all U.S. Government securities are backed by the full
faith and credit of the United States. Some are supported only by the
credit of the agency that issued them.
Investment-grade debt securities are medium- and high-quality securities.
Some, however, may possess speculative characteristics and may be more
sensitive to economic changes and to changes in the financial condition of
issuers.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by S&P, or is unrated but judged to
be of equivalent quality by FMR. The fund currently intends to limit its
investments in debt securities to those of Baa-quality and above.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. A security's credit may be enhanced by a bank,
insurance company, or other entity. The value of some or all municipal
securities may be affected by uncertainties in the municipal market related
to legislation or litigation involving the taxation of municipal securities
or the rights on municipal securities holders. The value of some or all
municipal securities may be affected by uncertainties in the municipal
market related to legislation or litigation involving the taxation of
municipal securities or the rights of municipal securities holders. The
fund may own a municipal security directly or through a participation
interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by the state
of New York or its counties, municipalities, authorities, or other
subdivisions. The ability of issuers to repay their debt can be affected by
many factors that impact the economic vitality of either the state or a
region within the state.
Other state tax-free securities include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations. The economy
of Puerto Rico is closely linked to the U.S. economy, and will depend on
the strength of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives. Recent
legislation revised these incentives, but the government of Puerto Rico
anticipates only a slight reduction in the average real growth rates for
the economy.
ASSET-BACKED SECURITIES include interests in pools of purchase contracts,
financing leases, or sales agreements entered into by municipalities. These
securities usually rely on continued payments by a municipality, and may
also be subject to prepayment risk.
VARIABLE AND FLOATING RATE 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 municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, the fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, entering into swap agreements, and purchasing indexed
securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
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 the fund.
RESTRICTIONS. The fund may not purchase a security if, as a result, more
than 10% of its net assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
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: The fund is considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, the fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S.
g overnment securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 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 paragraph restates 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.
The fund seeks a high level of current income free from federal income tax
and New York State and City personal income taxes by investing primarily in
municipal securities.
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and New York State and City personal
income taxes.
The fund may borrow only for temporary or emergency purposes, but not in an
amount exceeding 331/3% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the Institutional Class's assets are reflected in its
share price or dividends; they are neither billed directly to shareholders
nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments
and business affairs. The fund also pays OTHER EXPENSES, which are
explained on page .
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 June 30 , 1995, the group
fee rate was .1520 %. The individual fund fee rate is 0.25%.
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
UMB has entered into sub-arrangements pursuant to which FIIOC
performs transfer agency, dividend disbursing and shareholder
services for the Institutional Class shares of the fund. UMB has
entered into sub-arrangements pursuant to which Fidelity Service Co.
(FSC) calculates the net asset value per share (NAV) and dividends for
the Institutional Class shares of the fund, and maintains the fund's
general accounting records. All of the fees are paid to FIIOC and FSC by
UMB, which is reimbursed by the Institutional C lass or the fund, as
appropriate, for such payments.
The Institutional Class has adopted a DISTRIBUTION AND SERVICE PLAN. This
plan recognizes that FMR may use its resources, including management fees,
to pay expenses associated with the sale of Institutional Class 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 Institutional Class shares. The Board of Trustees has not
authorized such payments. The Institutional Class does not pay FMR any
separate fees for this service.
The fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity.
The fund's portfolio turnover rate is not expected to exceed 1 00%
for its first fiscal period ending October 31, 1995. This rate will vary
from year to year.
YOUR ACCOUNT
TYPES OF ACCOUNTS
R ead your investment professional's program materials in
conjunction with this prospectus for additional service features or fees
that may apply. Certain features of the fund, such as minimum initial or
subsequent investment amounts, may be modified in these programs, and
administrative charges may be imposed for the services rendered.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA). Contact your investment
professional.
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
Contact your investment professional.
HOW TO BUY SHARES
THE INSTITUTIONAL CLASS'S SHARE PRICE, called NAV, is calculated every
business day. Institutional Class shares are sold without a sales charge.
Shares are purchased at the next NAV calculated after your order is
received and accepted by the transfer agent. NAV is normally calculated at
4:00 p.m. Eastern time.
If you are placing your order through an investment professional, it is the
responsibility of your investment professional to transmit your order to
buy shares to the transfer agent before 4:00 p.m. Eastern time.
The transfer agent must receive payment within t hree business days
after an order for shares is placed; otherwise your purchase order may be
canceled and you could be held liable for resulting fees and/or losses.
Share certificates are not available for Institutional Class shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. You may also open your
account by wire as described on page 10 . If there is no account
application accompanying this prospectus, call 1-800-843-3001 or your
investment professional.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund or from another Fidelity fund, or
(small solid bullet) Contact your investment professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $ 2,500
TO ADD TO AN ACCOUNT $ 250
MINIMUM BALANCE $ 1,000
For further information on opening an account, please consult your
investment professional or refer to the account application.
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
<TABLE>
<CAPTION>
<S> <C> <C>
PHONE (small solid bullet)Exchange from the same
class of another (small solid bullet)Exchange from the same class of another
1-800-843-3001 OR YOUR Fidelity Advisor fund or from another Fidelity Advisor fund or from another
INVESTMENT PROFESSIONAL Fidelity fund account with the same Fidelity fund account with the same
registration, including name, address, and registration, including name, address, and
taxpayer ID number. taxpayer ID number.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (small solid bullet)Complete and sign the
account application. (small solid bullet)Make your check payable to "Fidelity
Make your check payable to "Fidelity Advisor New York Tax-Free Fund"" and note
Advisor New York Tax-Free Fund"" and the applicable class. Indicate your fund
note the applicable class. Mail to the account number on your check and mail to
address indicated on the application. the address printed on your account
statement.
(small solid bullet)Exchange by mail: call 1-800-843-3001 or
your investment professional for instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet)Bring your account
application and check to (small solid bullet)Bring your check to your investment
your investment professional. professional.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (small solid bullet)Call 1-800-843-3001 to set up your
account (small solid bullet)Wire to:
and to arrange a wire transaction. Banker's Trust Co.
(small solid bullet)Wire to: Routing # 021001033
Banker's Trust Co. Custody & Shareholder Services
Routing # 021001033 Fidelity Advisor DART System
Custody & Shareholder Services DDA#: (call 1-800-843-3001)
Fidelity Advisor DART System FBO: (account name)
DDA#: (call 1-800-843-3001) (account number)
FBO: (account name)
(account number) Specify "Fidelity Advisor New York
Tax-Free Fund," note the applicable class
Specify "Fidelity Advisor New York Tax-Free and include your account number and your
Fund," note the applicable class and include name.
your new account number and your name.
</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 NAV calculated after your order is received and accepted by the
transfer agent. NAV is normally calculated at 4:00 p.m. Eastern time.
TO SELL SHARES IN AN ACCOUNT, you may use any of the methods described on
these two pages.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$ 1 ,000 worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE, you will need to sign up for this service in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and the fund 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,
(small solid bullet) The redemption proceeds are being transferred
to a Fidelity account with a different registration, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your investment professional, or mail it to the
following address:
Fidelity Investments Institutional Operations Company
P.O. Box 1182
Boston, MA 0210 3-1182
Unless otherwise instructed, the transfer agent will send a check to the
record address.
ACCOUNT TYPE SPECIAL REQUIREMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PHONE 1-800-843-3001 All account types (small solid bullet) Maximum check request: $100,000.
OR YOUR INVESTMENT
PROFESSIONAL
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(phone_graphic) All account types (small solid bullet) You may exchange to the
same class of
other Fidelity Advisor funds or 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 Tenant,
Sole Proprietorship , (small solid bullet) The letter of instruction
must be signed by
UGMA, UTMA all persons required to sign for
transactions, exactly as their names
appear on the accoun t .
Trust (small solid bullet) The trustee must sign the
letter indicating
capacity as trustee. If the trustee's name is
not in the account registration, provide a
copy of the trust document certified within
the last 60 days.
Business or Organization (small solid bullet) At least one person
authorized by
corporate resolution to act on the account
must sign the letter .
Executor, Administrator, (small solid bullet) Call 1-800-843-3001 or
your investment
Conservator/Guardian professional 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 1-800-843-3001. Minimum wire:
$1,000.
(small solid bullet) Your wire redemption
request must be
received by the transfer agent before 4:00
p.m. Eastern time for money to be wired
on the next business day.
</TABLE>
INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction
that affects your account balance or your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed,
even if you have more than one account in the fund. Call your investment
professional if you need additional copies of financial reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Institutional Class shares and buy
Institutional Class shares of other Fidelity Advisor funds or shares of
other Fidelity funds by telephone or in writing.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "Exchange
Restrictions," page .
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in March and
December.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. Institutional Class offers three
options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you do not indicate a choice on your application, you will be
assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
those checks will be reinvested in your account at the current NAV and your
election may be converted to the Reinvestment Option. You may change your
distribution option at any time by notifying the transfer agent in writing.
Dividends will be reinvested at the Institutional Class's NAV on the last
day of the month. Capital gain distributions will be reinvested at the NAV
as of the date the class deducts the distribution from its NAV. The mailing
of distribution checks will begin within seven days.
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the fund's tax implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is distributed
to shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31.
Every January, the transfer agent will send you and the IRS a statement
showing the taxable distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. The fund may invest up to 20% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
To the extent that the fund's income dividends are derived from state
tax-free investments, they will be free from New York State and City
personal income taxes.
TAXES ON TRANSACTIONS. Your redemptions-including exchanges-are subject to
capital gains tax. A capital gain or loss is the difference between the
cost of your shares and the price you receive when you sell them.
Whenever you sell shares of the fund, the transfer agent will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement at least
quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax
to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount of
your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the class deducts a
capital gain distribution from its NAV, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. The Institutional Class's NAV is normally calculated as of the
close of business of the NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value of the fund's
investments, cash, and other assets, subtracting that class's pro rata
share of the value of the fund's liabilities, subtracting the liabilities
allocated to that class, and dividing the result by the number of shares of
that class that are outstanding.
The fund's assets are valued primarily on the basis of market
quotations , if available . Since market quotations are
often unavailable , assets are usually valued by a method that
the Board of Trustees believes accurately reflects fair value.
THE INSTITUTIONAL CLASS'S OFFERING PRICE (price to buy one share) and
REDEMPTION PRICE (price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the transfer
agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify
the identity of the caller. Fidelity and the transfer agent will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions.
Additional documentation may be required from corporations, associations
and certain fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they
would disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV calculated after your order is received and accepted by the
transfer agent. 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) The fund does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees the fund or the
transfer agent has incurred.
(small solid bullet) Direct Purchases: You begin to earn dividends as of
the first business day following the day the fund receives payment.
(small solid bullet) Confirmed Purchases: You begin to earn dividends as
of the business day the fund receives payment.
(small solid bullet) Automated Purchase Orders: You begin to earn
dividends as of the business day your order is received and accepted.
CONFIRMED PURCHASES. Certain financial institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on behalf of
customers by phone with payment to follow no later than the close of
business on the next business day. If payment is not received by the next
business day, the order will be canceled and the financial institution will
be liable for any losses.
AUTOMATED PURCHASE ORDERS. Institutional Class shares of the fund can be
purchased or sold through investment professionals utilizing an automated
order placement and settlement system that guarantees payment for orders on
a specified date.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
or Federal Reserve check.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV, calculated after your order is received and accepted by the
transfer agent. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect the fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) The fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
IF YOUR ACCOUNT BALANCE FALLS BELOW $ 1 ,000, you will be given 30
days' notice to reestablish the minimum balance. If you do not increase
your balance, the transfer agent 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.
THE TRANSFER AGENT 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 $60.00 per shareholder . 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. The fee will
not be deducted from retirement accounts (except non-Fidelity prototype
retirement accounts), accounts using a systematic investment program, or if
total assets in Fidelity mutual funds exceed $50,000. Eligibility for the
$50,000 waiver is determined by aggregating Fidelity mutual fund accounts
maintained by FIIOC or State Street Bank & Trust Company which are
registered under the same primary social security number.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to investment professionals who support the sale
of shares of the fund. In some instances, these incentives will be offered
only to certain types of investment professionals, such as bank-affiliated
or non-bank affiliated broker-dealers, or to investment professionals 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 Institutional Class
shares of the fund for Institutional Class S hares of other Fidelity
Advisor funds or for shares of other Fidelity funds. However, you should
note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the difference between that fund's sales charge and any sales charge
you may have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) The fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if
the fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the fund or FDC. This Prospectus and the related SAI do not
constitute an offer by the fund or by FDC to sell or to buy shares of the
fund to any person to whom it is unlawful to make such offer.
FIDELITY ADVISOR NEW YORK TAX-FREE FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page; Table of Contents
12 ............................ *
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR
ii ............................ Trustees and Officers
iii ............................ Management Contract
b ............................ Management Contract
c, d ............................ Contracts with FMR Affiliates
e ............................ *
f ............................ Management Contract; Contracts with FMR
Affiliates; Distribution and Service Plan
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with FMR Affiliates
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Contracts with FMR Affiliates
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements will be filed by subsequent
amendment
</TABLE>
* Not Applicable
FIDELITY ADVISOR NEW YORK TAX-FREE FUND: INSTITUTIONAL CLASS
FIDELITY ADVISOR NEW YORK TAX-FREE FUND: CLASS A
FIDELITY ADVISOR NEW YORK TAX-FREE FUND: CLASS B
A FUND OF FIDELITY ADVISOR SERIES V
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 2 1, 1995
Nationwide (800) 840-6333
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the current Prospectuses for Fidelity
Advisor New York Tax-Free Fund (the fund) (dated August 21, 1995).
Please retain this document for future reference. To obtain an additional
copy of the Prospectuses please call Fidelity Distributors Corporation, 82
Devonshire Street, Boston, Massachusetts 02109, or your investment
professional.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Factors Affecting New York
Special Factors Affecting Puerto Rico
Portfolio Transactions
Valuation
Performance
Additional Purchase, Exchange and Redemption Information
Distribution and Taxes
FMR
Trustees and Officers
Management Contract
Contracts with FMR Affiliates
Distribution and Service Plans
Description of the Trust
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB)
ANYTF-ptb-895
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (the 1940
Act)) of the fund. However, except for the fundamental investment
limitations set forth below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v i ) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to purchases
of debt securities.
(v i i) The fund does not currently intend to (a) purchase securities
of other investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (b) purchase
or retain securities issued by other open-end investment companies.
Limitations (a) and (b) do not apply to securities received as dividends,
through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
( viii ) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For purposes of limitations (4) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page .
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the 1940 Act. These transactions may include
repurchase agreements with custodian banks; short-term obligations of, and
repurchase agreements with the 50 largest U.S. banks (measured by
deposits); municipal securities; U.S. Government securities with affiliated
financial institutions that are primary dealers in these securities;
short-term currency transactions; and short-term borrowings. In accordance
with exemptive orders issued by the Securities and Exchange Commission
(SEC), the Board of Trustees has established and periodically reviews
procedures applicable to transactions involving affiliated financial
institutions.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place
after the customary settlement period for that type of security .
Typically, no interest accrues to the purchaser until the security is
delivered. The fund may receive fees for entering into delayed-delivery
transactions.
When purchasing securities on a delayed-delivery basis, the fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because the fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If the fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When the fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the fund could miss a favorable price or yield opportunity, or could suffer
a loss.
The fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
FEDERALLY TAXABLE OBLIGATIONS. Under normal conditions, the fund does
not intend to invest in securities whose interest is federally taxable.
However, from time to time on a temporary basis, the fund may invest a
portion of its assets in fixed-income obligations whose interest is subject
to federal income tax.
Should the fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The fund's standards for high-quality, taxable obligations are
essentially the same as those described by Moody's Investors Service, Inc.
(Moody's) in rating corporate obligations within its two highest ratings of
Prime-1 and Prime-2, and those described by Standard & Poor's Corporation
(S&P) in rating corporate obligations within its two highest ratings of A-1
and A-2.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the New York State
legislature that would affect the state tax treatment of the fund's
distributions. If such proposals were enacted, the availability of
municipal obligations and the value of the fund's holdings would be
affected and the Trustees would reevaluate the fund's investment objectives
and policies.
FUTURES AND OPTIONS. The following paragraphs pertain to futures and
options: Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures Margin
Payments, Limitations on Futures and Options Transactions, Liquidity of
Options and Futures Contracts, OTC Options, Purchasing Put and Call
Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will
set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the fund's assets could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures can
be held until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of a FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The fund intends to comply with Rule 4.5 under the
Commodity Exchange Act, which limits the extent to which the fund can
commit assets to initial margin deposits and option premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this SAI, may be changed as regulatory agencies
permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to their needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to a FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer generally would expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining
the liquidity of the fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset th e fund's rights
and obligations relating to the investment).
Investments currently considered by the fund to be illiquid include
over-the-counter options. Also, FMR may determine some restricted
securities and municipal lease obligations to be illiquid. However, with
respect to over-the-counter options the fund writes, all or a portion of
the value of the underlying instrument may be illiquid depending on the
assets held to cover the option and the nature and terms of any agreement
the fund may have to close out the option before expiration.
In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by a committee appointed by the
Board of Trustees. If through a change in values, net assets, or other
circumstances, the fund were in a position where more than 10% of its net
assets was invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, or other
financial indicators. Indexed securities typically, but not always, are
debt securities or deposits whose value at maturity or coupon rate is
determined by reference to a specific instrument or statistic. Indexed
securities may have principal payments as well as coupon payments that
depend on the performance of one or more interest rates. Their coupon rates
or principal payments may change by several percentage points for every 1%
interest rate change. One example of indexed securities is inverse
floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
INTERFUND BORROWING PROGRAM. Pursuant to an exemptive order issued by the
SEC, the fund has received permission to lend money to, and borrow money
from, other funds advised by FMR or its affiliates, but will participate in
the interfund borrowing program only as a borrower. Interfund borrowings
normally extend overnight, but can have a maximum duration of seven days. A
fund will borrow through the program only when the costs are equal to or
lower than the costs of bank loans. Loans may be called on one day's
notice, and a fund may have to borrow from a bank at a higher interest rate
if an interfund loan is called or not renewed.
INVERSE FLOATERS are instruments whose interest rates bear an inverse
relationship to the interest rate on another security or the value of an
index. Changes in the interest rate on the other security or index
inversely affect the residual interest rate paid on the inverse floater,
with the result that the inverse floater's price will be considerably more
volatile than that of a fixed-rate bond. For example, a municipal issuer
may decide to issue two variable-rate instruments instead of a single
long-term, fixed-rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument
(the inverse floater) reflects the approximate rate the issuer would have
paid on a fixed-rate bond, multiplied by two, minus the interest rate paid
on the short-term instrument. Depending on market availability, the two
portions may be recombined to form a fixed-rate municipal bond. The market
for inverse floaters is relatively new.
MARKET DISRUPTION RISK. The value of municipal securities may be
affected by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders in the event of a bankruptcy. Municipal
bankruptcies are relatively rare, and certain provisions of the U.S.
Bankruptcy Code governing such bankruptcies are unclear and remain
untested. Further, the application of state law to municipal issuers could
produce varying results among the states or among municipal securities
issuers within a state. These legal uncertainties could affect the
municipal securities market generally, certain specific segments of the
market, or the relative credit quality of particular securities. Any of
these effects could have a significant impact on the prices of some or all
of the municipal securities held by a fund.
MUNICIPAL LEASES. and participation interests therein may take the form of
a lease, an installment purchase, or a conditional sale contract, and are
issued by state and local governments and authorities to acquire land and a
wide variety of equipment and facilities. Generally, the fund will not hold
such obligations directly as a lessor of the property, but will purchase a
participation interest in a municipal obligation from a bank or other third
party. A participation interest gives the fund a specified, undivided
interest in the obligation in proportion to its purchased interest in the
total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
MUNICIPAL SECTORS:
EDUCATION . In general, there are two types of education-related
bonds; those issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student loans.
Bonds issued to supply educational institutions with funds are subject to
the risk of unanticipated revenue decline, primarily the result of
decreasing student enrollment or decreasing state and federal funding.
Among the factors that may lead to declining or insufficient revenues are
restrictions on students' ability to pay tuition, availability of state and
federal funding, and general economic conditions. Student loan revenue
bonds are generally offered by state (or substate) authorities or
commissions and are backed by pools of student loans. Underlying student
loans may be guaranteed by state guarantee agencies and may be subject to
reimbursement by the United States Department of Education through its
guaranteed student loan program. Others may be private, uninsured loans
made to parents or students which are supported by reserves or other forms
of credit enhancement. Recoveries of principal due to loan defaults may be
applied to redemption of bonds or may be used to re-lend, depending on
program latitude and demand for loans. Cash flows supporting student loan
revenue bonds are impacted by numerous factors, including the rate of
student loan defaults, seasoning of the loan portfolio, and student
repayment deferral during periods of forbearance. Other risks associated
with student loan revenue bonds include potential changes in federal
legislation regarding student loan revenue bonds, state guarantee agency
reimbursement and continued federal interest and other program subsidies
currently in effect.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open transmission
access to any electricity supplier, although it is not presently known to
what extent competition will evolve. Other risks include: (a) the
availability and cost of fuel, (b) the availability and cost of capital,
(c) the effects of conservation on energy demand, (d) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (e) timely and sufficient rate
increases, and (f) opposition to nuclear power.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They
generally are secured by the revenues derived from mortgages purchased
with the proceeds of the bond issue. It is extremely difficult to predict
the supply of available mortgages to be purchased with the proceeds of an
issue or the future cash flow from the underlying mortgages. Consequently,
there are risks that proceeds will exceed supply, resulting in early
retirement of bonds, or that homeowner repayments will create an irregular
cash flow. Many factors may affect the financing of multi-family housing
projects, including acceptable completion of construction, proper
management, occupancy and rent levels, economic conditions, and changes to
current laws and regulations.
TRANSPORTATION. Transportation debt may be issued to finance the
construction of airports, toll roads, highways , or other transit
facilities . Airport bonds are dependent on the general stability of the
airline industry and on the stability of a specific carrier who uses the
airport as a hub. Air traffic generally follow s broader economic
trends and is also affected by the price and availability of fuel. Toll
road bonds are also affected by the cost and availability of fuel as well
as toll levels, the presence of competing roads and the general economic
health of an area. Fuel costs and availability also affect other
transportation-related securities, as does the presence of alternate forms
of transportation, such as public transportation.
WATER AND SEWER. Water and sewer revenue bonds are often considered to have
relatively secure credit as a result of their issuer's importance, monopoly
status, and generally unimpeded ability to raise rates. Despite this, lack
of water supply due to insufficient rain, run-off, or snow pack is a
concern that has led to past defaults. Further, public resistance to
rate increases, costly environmental litigation and Federal
environmental mandates are challenges faced by issuers of water and sewer
bonds.
REFUNDING CONTRACTS. The fund may purchase securities on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and the fund
to buy refunded municipal obligations at a stated price and yield on a
settlement date that may be several months or several years in the future.
The fund generally will not be obligated to pay the full purchase price if
it fails to perform under a refunding contract. Instead, refunding
contracts generally provide for payment of liquidated damages to the issuer
(currently 15-20% of the purchase price). The fund may secure its
obligations under a refunding contract by depositing collateral or a letter
of credit equal to the liquidated damages provisions of the refunding
contract. When required by SEC guidelines, the fund will place liquid
assets in a segregated custodial account equal in amount to its obligations
under refunding contracts.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time it may be permitted to
sell a security under an effective registration statement. If, during such
a period, adverse market conditions were to develop, the fund might obtain
a less favorable price than prevailed when it decided to seek registration
of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. The fund may
acquire standby commitments to enhance the liquidity of portfolio
securities.
Ordinarily the fund will not transfer a standby commitment to a third
party, although it could sell the underlying municipal security to a third
party at any time. The fund may purchase standby commitments separate from
or in conjunction with the purchase of securities subject to such
commitments. In the latter case, the fund would pay a higher price for the
securities acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
purchase an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
tax-exempt bond (generally held pursuant to a custodial arrangement) with a
tender agreement that gives the holder the option to tender the bond at its
face value. As consideration for providing the tender option, the sponsor
(usually a bank, broker-dealer, or other financial institution) receives
periodic fees equal to the difference between the bond's fixed coupon rate
and the rate (determined by a remarketing or similar agent) that would
cause the bond, coupled with the tender option, to trade at par on the date
of such determination. After payment of the tender option fee, the fund
effectively holds a demand obligation that bears interest at the prevailing
short-term tax-exempt rate. In selecting tender option bonds for the fund,
FMR will consider the creditworthiness of the issuer of the underlying
bond, the custodian, and the third party provider of the tender option. In
certain instances, a sponsor may terminate a tender option if, for example,
the issuer of the underlying bond defaults on interest payments.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit the fund to sell them at
par value plus accrued interest on short notice.
In many instances bonds and participation interests have tender options or
demand features that permit the fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. The fund considers variable rate instruments structured in this
way (Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The IRS has not ruled whether the interest on Participating
VRDOs is tax-exempt, and, accordingly, the fund intends to purchase these
instruments based on opinions of bond counsel. The fund may also invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held by a bank in trust or otherwise.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, the fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
SPECIAL FACTORS AFFECTING NEW YORK
The financial condition of New York State (the State), its public
authorities and public benefit corporations (the Authorities) and its local
governments, particularly The City of New York (the City), could affect the
market values and marketability of, and therefore the net asset value per
share and the interest income of the fund or result in the
default of existing obligations, including obligations which may be held by
the fund. The following section provides only a brief summary of the
complex factors affecting the financial situation in New York and is based
on information obtained from the State, certain of its Authorities, the
City and certain other localities, as publicly available on the date of
this Statement of Additional Information. The information contained in such
publicly available documents has not been independently verified. It should
be noted that the creditworthiness of obligations issued by local issuers
may be unrelated to the creditworthiness of the State, and that there is no
obligation on the part of the State to make payment on such local
obligations in the event of default in the absence of a specific guarantee
or pledge provided by the State.
The State and the City have each experienced recent serious
financial difficulties and declines in their credit standings. S&P and
Moody's have each assigned ratings for the State's general obligation bonds
that are among the three lowest of those states with rated general
obligation bonds. The ratings of certain related debt of other issuers for
which the State has an outstanding moral obligation, lease purchase,
guarantee or other contractual obligation are generally linked directly to
the State's rating. S&P and Moody's have each assigned ratings for the
City's general obligations that are among the four lowest of those cities
with rated general obligation bonds. Should the financial condition of
the State, its Authorities, or its local governments deteriorate, their
respective credit ratings could be further reduced, and the market value
and marketability of their outstanding notes and bonds could be adversely
affected, and their respective access to the public credit markets
jeopardized.
ECONOMIC FACTORS. New York is the third most populous state in the nation,
and has a relatively high level of personal wealth. However, the State
economy has grown more slowly than that of the nation as a whole, resulting
in the gradual erosion of its relative economic affluence (due to factors
such as relative costs for taxes, labor, and energy). The State's economy
is diverse, with a comparatively large share of the nation's financial,
insurance, transportation, communications, and services employment, and a
very small share of the nations' farming and mining activity. New York has
a declining proportion of its workforce engaged in manufacturing and
increasing proportion engaged in service industries. The State, therefore
is likely to be less affected than the nation as a whole during an economic
recession concentrated in construction and manufacturing sectors of the
economy, but is likely to be more affected during a recession concentrated
in the service-producing sector. The State's manufacturing and maritime
base have been seriously eroded, as illustrated by the decline of the steel
industry in the Buffalo area and of the apparel and textile industries in
the City. In addition, the City experienced substantial socio-economic
changes, as a large segment of its population and a significant share of
corporate headquarters and other businesses relocated (many out-of-state).
Both the State and the City experienced substantial revenue increases in
the mid-1980s attributable directly and indirectly to growth in new jobs,
rising profits, and capital appreciation derived from the finance sector of
the City's economy. The finance sector's growth was a catalyst for the New
York City metropolitan region's related business and professional
services, retail trade and residential and commercial real estate markets.
The then rising real estate market contributed to City revenues, as higher
property values and new construction added to collections from property
taxes, mortgage recording, and transfer taxes and sales taxes on building
materials. The boom on Wall Street more than compensated for the continued
erosion of the State's (and the City's) manufacturing and maritime base,
since average wages in finance and related business and professional
services were substantially higher (thereby providing a net increase of
higher incomes, taxed at even higher marginal rates).
During the calendar years 1984 through 1991, the State's rate of
economic expansion was somewhat slower than that of the nation as a whole.
In the 1990-91 national recession, the economy of the Northeast region in
general and the State in particular was more heavily damaged than that of
the rest of the nation and has been slower to recover. Although the
national economy began to expand in 1991, the State economy remained in
recession until 1993, when employment growth resumed. Employment growth has
been hindered during recent years by significant cutbacks in the computer
and instrument manufacturing, utility and defense industries. Personal
income increased substantially in 1992 and 1993. The State economy
entered the third year of a slow recovery in 1995. Most of the growth
occurred in the trade, construction and service industries, with business,
social services and health sectors accounting for most of the service
industry growth. The State's economy is expected to continue to expand
modestly during 1995 and 1996 , according to assumptions
contained in the State financial plan for fiscal year 1995-1996 .
Employment is expected to grow slightly during 1995, although the
rate of increase is expected to be below the rate experienced in 1994
due to cutbacks in federal spending and employment, as well as
continued corporate downsizing.
Notwithstanding the State budget for fiscal year 1995-96 which enacts
significant tax and program reductions, the State can expect to confront
structural deficits in future years. The 1995-96 State financial plan
includes actions that will have an effect on the budget outlook for fiscal
year 1996-97 and beyond. In part, the 1995-96 State financial plan reflects
actions which provide nonrecurring measures (sometimes referred to as
"one-shots") variously estimated to provide $900 million to $1.0 billion of
savings. Additionally, the three-year plan to reduce State personal income
taxes, as discussed below briefly, will decrease State tax receipts by an
estimated $1.7 billion in fiscal year 1996-97. Similarly, other actions
taken to reduce disbursements in the State's 1995-96 fiscal year, such as
reductions in the State workforce and Medicaid and welfare expenditures,
are expected to provide greater reductions in future fiscal years. The net
impact of these and other factors is expected to produce a potential
imbalance in receipts and disbursements for State fiscal year 1996-97 and
future fiscal years.
Further, there can be no assurance that the State economy will not
experience worse-than-predicted results in the 1995-96 fiscal year with
corresponding material and adverse effects on the State's projections of
receipts and disbursements. The State financial plan is based upon
forecasts of national and State economic activity. Many uncertainties exist
in such forecasts, including federal financial and monetary policies, the
availability of credit and the condition of the world economy. In addition,
the economic and financial condition of the State may be affected by
various financial, social, economic and political factors. These factors
can be complex, may vary from year to year and are frequently the results
of actions taken not only by the State and its agencies and
instrumentalities, but also by other entities, such as the federal
government, that are not under the control of the State.
The fiscal health of the State may also be impacted by the fiscal health of
the C ity. Although the City has had a balanced budget since 1981,
estimates of the City's future revenues and expenditures are subject to
various uncertainties. For example, the effects of the October 1987 stock
market crash and the 1990-92 national recession have had a
disproportionately adverse impact on the New York City metropolitan region,
as private sector job losses since 1989 have offset all the prior
employment gains of the 1980s. Declines in both employment and earnings
in the finance sector contributed to declines in retail sales and real
estate values. In addition, a number of widely publicized bankruptcies
among highly leveraged retailing, brokerage and real estate development
companies occurred. The effects of the recession have extended to banking,
insurance, business services (such as law, accounting and advertising),
publishing and communications. Factors which may inhibit the City's
economic recovery include (i) credit restraints imposed by the weak
financial condition of several major money center banks located in the
City; (ii) increases in combined State and local tax burdens, if
uncompetitive tax rates are imposed; (iii) perceived declines in the
quality of life attributable to service reductions and the deterioration of
the City's infrastructure; (iv) additional employment losses in the City's
banking sector or corporate headquarters complex due to further corporate
relocations or restructurings; or (v) increased expenditures for public
health assistance and care. The City's future economic condition will also
likely be affected by its competitive position as a world financial center
(compared to London, Tokyo, Frankfurt, and competing regional U.S.
centers). Investors should note that the budget for the City's 1996 fiscal
year addresses a projected $2.7 billion budget gap. Most of the budget-gap
closing initiatives may be implemented only with the cooperation of certain
City officials, the City's municipal unions, or the State or Federal
governments. No assurance can be given that such initiatives will be
taken.
While the State's economy is broader-based than that of the City,
particular industries are concentrated in and have a disproportionate
impact on certain areas , such as heavy industry in Buffalo,
photographic and optical equipment in Rochester, machinery and
transportation equipment in Syracuse and Utica-Rome, computers in
Binghamton and in the Mid-Hudson Valley, and electrical equipment in the
Albany-Troy-Schenectady area. Constraints on economic growth, taxpayer
resistance to proposed substantial increases in local tax rates, and
reductions in State aid in regions apart from the City have contributed to
financial difficulties for several county and other local governments.
THE STATE. As noted above, the financial condition of the State is affected
by several factors, including the strength of the State and its regional
economies, actions of the federal government, and State actions affecting
the level of receipts and disbursements. Owing to these and other factors,
the State may, in future years, face substantial potential budget gaps
resulting from a significant disparity between tax revenues projected from
a lower recurring receipts base and the future costs of maintaining State
programs at current levels.
The State has been experiencing and continues to experience substantial
financial difficulties, with General Fund (the principal operating account)
deficits incurred during the fiscal years 1989-1990 through 1991-1992. The
State's accumulated General Fund deficit (on a GAAP basis) grew 91% from
FY1986-87 to FY1990-91, and reached a then-record $6.265 billion (audited)
by March 31, 1991. An accumulated General Fund deficit at March 31, 1993
was restated to be $2.551 billion. The State ended its 1993-94 fiscal year
with a negative fund balance of $1.637 billion. This represented an
improvement over prior years, primarily due to an improving national and
State economy resulting in higher-than-expected receipts from personal
income tax and various business taxes and the relative success of the New
York Local Government Assistance Corporation ("LGAC"). The General Fund
showed an operating surplus of $914 million (on a GAAP basis). The State's
1994-95 fiscal year budget was adopted on June 8, 1994, more than two
months after the beginning of the State's fiscal year and has made all of
the required quarterly revisions as of the date hereof. The State ended its
1994-95 fiscal year with the General Fund in balance. Actual receipts
reported fell short of original projections by approximately $1.2 billion,
primarily in the categories of personal income and business taxes. These
shortfalls were offset by better than expected performance in the remaining
taxes, principally the user taxes and fees, which exceeded projections by
$210 million. Disbursements were also reduced from original projections by
approximately $848 million.
On June 7, 1995, the New York State legislature passed the final
legislation regarding the State's 1995-96 budget. The 1995-96 State
financial plan was formulated on June 20, 1995. Both the enacted budget
bills and the State financial plan for 1995-96 include reductions in the
actual level of spending from that which occurred in the 1994-95 fiscal
year and project reductions in Medicaid and State Authority operating
costs. The 1995-96 budget also projects an approximate increase of 3% in
all governmental funds over the amounts received in fiscal year 1994-95 and
includes the phase-in of a three-year reduction in the State's personal
income tax. There are risks and uncertainties concerning whether or not
certain spending and tax cuts will be upheld if challenged in the courts.
For example, the State Comptroller is challenging in court the proposed use
of certain pension reserves. If such suit is successful, approximately $110
million would become unavailable as a source of contribution to the
balanced State budget. Finding an additional $110 million in reductions or
from other sources may prove difficult. Additionally, even if all spending
and tax cuts contained in the State budget are successfully implemented,
resulting in a balanced budget for fiscal year 1995-96, there can be no
assurance that the State will not face budget gaps in future years,
resulting from a disparity between tax revenues projected from a lower
recurring-receipts base and the spending required to maintain State
programs at current levels. Furthermore, the State is a party to numerous
lawsuits in which an adverse decision could require extraordinary
expenditures. Certain major budgetary considerations affecting the State
are outlined below.
REVENUE BASE. The State's principal revenue sources are economically
sensitive, and include the personal income tax (5 3 % of fiscal
year 1994-95 General Fund receipts and estimated to be
approximately 52% of fiscal year 1995-96 General Fund receipts) , user
taxes and fees (20% of both fiscal year 1994-95 and estimated 1995-96
General Fund receipts) , and business taxes ( 15 % and 14%
respectively of fiscal year 1994-95 and estimated 1995-96 General Fund
receipts ). Uncertainties in taxpayer behavior as a result of actual and
proposed changes in Federal tax law also can have an adverse impact on
State tax receipts. One-fourth of the 4% State sales tax has been dedicated
to pay debt service of LGAC , and has correspondingly reduced General
Fund receipts. To the extent those moneys are not necessary for payment to
LGAC, they are transferred from the LGAC Tax fund to the General Fund and
reported as a transfer from other funds rather than as sales and use tax
receipts. During fiscal years 1991-92, 1992-93 , 1993-94, and
1994-95 moneys were so transferred. Capital gains are a
significant component of income tax collections. Auto sales and building
materials are significant components of retail sales tax collections. Tax
rates are relatively high and may impose political and economic constraints
on the ability of the State to further increase its taxes. In 1995, the
State enacted a tax-reduction program designed to reduce, by 20 percent
over three years, receipts from the personal income tax. The tax had
remained unchanged since 1989 as a result of annual deferrals of tax
reductions originally enacted in 1987. The tax-reduction program is
estimated to reduce receipts by $515 million in the 1995-96 fiscal year,
$1.7 billion in the 1996-97 fiscal year and produce further significant
reductions in fiscal year 1997-98. In addition to such reductions in
overall tax rates, the tax-reduction program also includes other
modifications to the tax laws which will have the effect of lowering the
amount of tax revenues to be received by the State. In the absence of
countervailing economic growth or expenditure cuts the tax cuts could make
the achievement of a balanced State budget more difficult in future years.
STATE DEBT. T h e State has the heaviest debt burden of any state
(with nearly $5. 2 billion of long-term general obligation , $4.7
billion of LGAC debt and $ 18 billion of lease-purchase or other
contractual debt outstanding as of March 31, 199 5 ), and debt service
costs absorb a large share of the State's budget. As of March 31,
199 5 the State is also obligated with respect to nearly $7. 0
billion for statutory moral obligations for nine of its Authorities and for
guarantees of $ 358 million of other Authority debt.
Historically , the State has had one of the largest seasonal
financing requirements of any municipal issuer, and was required
each spring to borrow substantial sums from public credit markets to
finance its accumulated General Fund deficit and its scheduled payments of
aid to local governments and school districts. To help reduce such
seasonal financing needs, the State created LGAC as a financing
vehicle to finance the State's local assistance payments by issuing
long-term debt, payable over 30 years from a portion of the State sales
tax , as discussed above. The State budget and State financial plan for
fiscal year 1995-96 each propose to utilize the remainder of authorized but
yet unissued LGAC bonds. As of June 1995, LGAC had issued bonds and notes
to provide net proceeds of $4.7 billion, thus completing the LGAC program.
The impact of LGAC's borrowing is that the State is able to meet its cash
flow needs in the first quarter of the 1995-96 fiscal year without relying
on short-term seasonal borrowings. Neither the 1995-96 State financial plan
nor the 1994-95 State financial plan included a spring borrowing, the first
time in 35 years that there was no short-term borrowing. Investors should
note that the enabling legislation for LGAC contains a covenant restricting
the amount of any future State spring borrowing, which may reduce the
State's fiscal flexibility in future years.
BUDGETARY FLEXIBILITY. A significant portion of the State's General Fund
budget is accounted for by contractually required expenses (such as pension
and debt service costs) and by federally mandated programs (such as AFDC
and Medicaid). In addition, State aid for school districts comprises a
major share of the budget, and total appropriations and distribution of
such aid is especially contentious politically. Furthermore, the State's
ability to respond to unanticipated developments in the future may have
been impaired since the State has utilized a substantial range of actions
of a non-recurring nature in recent years to finance its General fund
operations, including tapping excess monies in special funds, refinancing
outstanding debt to reduce reserve fund requirements and current (but not
long-term) debt service costs, recalculating pension fund contributions,
selling State assets, reimbursing past General Fund expenditures by the
issuance of authority debt and deferring payment for expenditures to future
fiscal years. The 199 5 -9 6 State financial plan
contain s actions of a non-recurring nature including mergers of
certain authorities payments from the sale of certain State assets, and
payments associated with the resolution of certain court cases, totalling
approximately $335 million.
LABOR COSTS. The State government workforce is mostly unionized, subject to
the Taylor Law which authorizes collective bargaining and prohibits (but
has not historically prevented) strikes and work slowdowns. Costs for
employee health benefits have increased substantially, and can be expected
to further increase. The State has a substantial unfunded liability for
future pension benefits, and has utilized changes in its pension fund
investment return assumptions to reduce current contribution requirements.
If such investment earnings assumptions are not sustained by actual
results, additional State contributions will be required in future years to
meet the State's contractual obligations. The State's change in actuarial
method from the aggregate cost method to a modified projected unit credit
in the 1990-91 fiscal year created a substantial surplus that was amortized
and applied to offset the State's contribution through the 1993-94 fiscal
year. This change in actuarial method was ruled unconstitutional by the
State's highest court and the State return ed to the aggregate
cost method in fiscal year 1994-95 using a four-year phase-in. Employer
contributions, including the State's, are expected to increase over the
next five to ten years.
PUBLIC ASSISTANCE. The State has the second largest number of persons
receiving public assistance (AFDC and Home Relief) of any state. AFDC costs
are shared among the federal government, the State and its counties
(including the City) by statutory formula. Caseloads tend to rise
significantly during economic downturns, but have fallen only in the later
stages of past economic recoveries.
MEDICAID. The State participates in the federal Medicaid program under a
state plan approved by the Health Care Financing Administration. The
federal government provides a substantial portion of eligible
program costs, with the remainder shared by the State and its counties
(including the City). Basic program eligibility and benefits are
determined by federal guidelines, but the State provides a number of
optional benefits and expanded eligibility. Program costs have increased
substantially in recent years, and account for a rising share of the State
budget. Federal law requires the State adopt reimbursement rates for
hospitals and nursing homes that are reasonable and adequate to meet the
costs that must be incurred by efficiently and economically operated
facilities in providing patient care, a standard that has led to past
litigation by hospitals and nursing homes seeking higher reimbursement from
the State. The budget for fiscal year 1995-96 includes a medicaid cost
containment program estimated to reduce General Fund costs by $1.1 billion;
such c utbacks in State spending for Medicaid may adversely affect the
financial condition of hospitals and health care institutions that are the
obligors of bonds that may be held by the fund.
THE STATE AUTHORITIES. The State's Authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the
State itself, and may issue bonds and notes within the amounts of, and as
otherwise restricted by, their legislative authorization. The New York
State Public Authorities Control Board approves the issuance of debt and
major contracts by ten of the Authorities. As of September 30, 199 4 ,
there were 18 Authorities that had outstanding debt of $100 million or
more, the aggregate debt of which (including refunding bonds and moral
obligation, lease-purchase, contractual obligation, or State-guaranteed
debt) then totaled approximately $ 70.2 billion. As of March 31,
1994 (the date of the latest data available) , aggregate public
authority debt outstanding as State-supported was approximately $28
billion and State-related debt was approximately $36 billion. In
recent years the State has provided financial assistance through
appropriations, in some cases of a recurring nature, to certain Authorities
for operating and other expenses and, (from 1976 to 1987) in fulfillment of
its commitments on moral obligation indebtedness or otherwise, for debt
service. The State budgeted operating assistance of approximately
$1.3 billion for the Metropolitan Transportation Authority (MTA) for fiscal
year 1994-1995 and estimates total State assistance in fiscal year
1995-96 to be approximately $1.1 billion . This assistance is expected
to continue to be required (and may increase) in future years. Failure by
the State to appropriate necessary amounts or to take other action to
permit the Authorities to meet their obligations could adversely affect the
ability of the State and the Authorities to obtain financing in the public
credit markets and the market price of the State's outstanding bonds and
notes.
The MTA, whose credit standing was recently reduced, oversees the operation
of the City's subway and bus lines by its affiliates, the New York City
Transit Authority and the Manhattan and Bronx Surface Transit Operating
Authority (collectively, the TA). MTA subsidiaries operate certain commuter
rail and bus lines in the New York metropolitan area. An affiliated agency,
the Triborough Bridge and Tunnel Authority (TBTA), operates certain
intrastate toll bridges and tunnels. To maintain its facilities and
equipment, which deteriorated significantly in the late 1970s due to
deferred maintenance, the MTA prepares a five year capital program subject
to approval by the MTA Capital Program Review Board. In April 1993, the
State legislature authorized the funding of a portion of a five year $9.56
billion capital plan for the MTA for 1992 through 1996. MTA's five year
capital program for 1992-96 was approved by the State capital program
review board in December 1993. There can be no assurance that all
governmental actions for the 1992-96 capital program will be taken, that
funding sources currently identified will not be decreased or eliminated,
or that the capital program will not be delayed or reduced. If the capital
program is delayed or reduced, ridership and fare revenues may decline,
which could impair the MTA's ability to meet its operating expenses without
additional State assistance . In addition, because fares are not
sufficient to finance its mass transit operations, the MTA has depended and
will continue to depend for operating support upon a System of State, Local
government and TBTA support, and to the extent available, Federal
assistance (including loans, grants and operating subsidies). There can
be no assurance that any such assistance will continue at any particular
level or in any fixed relationship to the operating costs and capital needs
of the MTA.
THE CITY. The City has required, and continues to require, significant
financial assistance from the State. The City depends on State and both to
enable the City to balance its budget and meet its cash requirements.
In the early 1970s, the City incurred substantial operating deficits,
and its financial controls, accounting practices, and disclosure policies
were widely criticized. In 1975, the City encountered severe financial
difficulties and lost access to the public credit markets. The State
Legislature responded in 1975 by creating the Municipal Assistance
Corporation For The City of New York (MAC) to provide financing assistance
for the City and the Financial Control Board to exercise certain oversight
and review functions with respect to the City's finances. The Financial
Control Board's powers over the City were suspended in June 1986, but would
be reinstated (under current law) if the City experiences certain adverse
financial circumstances. At the time of the fiscal crisis, the State
provided substantial financial assistance to the City, the federal
government provided the City with direct seasonal loans and guarantees on
the City's long-term debt, and the City's labor unions accepted deferrals
of wage increases and approved purchases of City bonds by the pension
funds. No assurance can be given that similar assistance would again be
made available if needed, particularly given the current budgetary
constraints faced by both the federal and State governments.
The City provides services usually undertaken by counties, school districts
or special districts in other large urban areas including the provision of
social services such as day care, foster care, health care, family
planning, services for the elderly and special employment services for
needy individuals and families who qualify for such assistance. State law
requires the City to allocate a large portion of its total budget to Board
of Education operations, and mandates the City to assume the local share of
public assistance and Medicaid costs. While the City has had GAAP operating
surpluses, in recent fiscal years the City has experienced and continues
to experience ongoing financial difficulties, primarily related to the
impact of the recent recession on the local economy (reducing revenues from
most major taxes and increasing public assistance and Medicaid caseloads),
rising health care costs for City employees and for Medicaid, and rising
inflation and interest rates. In response, the City implemented gap-closing
programs in recent fiscal years, which initially relied primarily on
actions of a non-recurring nature, but included substantial property tax
rate increases and a personal income tax surcharge imposed in fiscal
year 1991 and selected service cutbacks. Reductions in State aid,
larger than budgeted labor settlements and increased police expenditures
added to the adverse budgetary impact of the local recession, confronting
the City with a potential $3.3 billion imbalance during fiscal year
1992 budget negotiations. This initial budget gap was closed by
adoption of a budget providing for various tax increases and significant
service reductions. Aid to nonprofit cultural institutions in the City was
significantly reduced (as was State aid to such institutions), including
certain institutions that are obligors of bonds that may be held by the
fund. The City's budget for fiscal year 1994 identified measures to
close a $300 million budget gap, which was the result of shortfalls in
federal and State aid from previously projected levels. The City achieved
balanced operating results as reported in accordance with GAAP for the 1994
fiscal year. For fiscal year 1995, the City adopted a budget which halted
the trend in recent years of substantial increases in City-funded spending
from one year to the next. The City budget adopted for fiscal year 1996
reduces City-funded spending for the second consecutive year.
Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and includes the City's
capital, revenue and expense projections and outlines proposed budget
gap-closing programs for those years with projected budget gaps.
The mayor is responsible for preparing the City's four-year financial plan,
including the City's current financial plan for the 1996 through 1999
fiscal years (the "1996-1999 Financial Plan"). The City's projections set
forth in the 1996-1999 Financial Plan are based on various assumptions and
contingencies which are uncertain and which may not materialize. Changes in
major assumptions could significantly affect the City's ability to balance
its budget and to meet its annual cash flow and financing requirements.
Such assumptions and contingencies include the timing and pace of a
regional and local economic recovery, increases in interest rates, the
impact on real estate tax revenues of the real estate market, wage
increases for city employees consistent with those assumed in the 1996-99
Financial Plan, employment growth, the ability to implement proposed
reductions in City personnel and other cost reduction initiatives which may
require in certain cases the cooperation of the City's municipal unions,
the ability of the New York City Health and Hospitals Corporation and the
Board of Education to take actions to offset reduced revenues, the ability
to complete revenue generating transactions, provision of State and federal
aid and mandate relief, and the impact on City revenues of proposals for
Federal and State Welfare reform. No assurance can be given that the
assumptions used by the City in the 1996-99 Financial Plan will be
realized. Furthermore, actions taken in recent fiscal years to avert
deficits may have reduced the City's flexibility in responding to future
budgetary imbalances, and have deferred certain expenditures to later
fiscal years.
The original City's budget for fiscal year 1995 reflected proposed
actions to eliminate a $2.3 billion budget gap. The City submitted on
July 21, 1995 a fourth quarter modification to the City's financial plan
for the 1995 fiscal year which projects a balanced budget in accordance
with GAAP for the City's 1995 fiscal year. On July 11, 1995, the City
submitted the 1996-99 Financial Plan, which is based on the City's expense
and capital budgets of the City's 1996 fiscal year adopted on June 14, 1995
(the "1996 City Budget"). The 1996 City Budget sets forth proposed actions
by the City for the 1996 fiscal year to close a substantial projected
budget gap (approximately $3.1 billion) resulting from lower than projected
tax receipts and other revenues and greater than projected expenditures.
Proposed actions in the 1996-99 Financial Plan for the City's 1996 fiscal
year include a reduction of approximately $400 million primarily affecting
public assistance and Medicaid payments by the City, expenditure reductions
in agencies totalling approximately $1.2 billion and transitional labor
savings of approximately $600 million. These and other proposed actions
were contained in the 1996-99 Financial Plan as well as the 1996 City
Budget. The City Budget is subject to the ability of the City to
implement the proposed reductions in expenditures, personal services and
personnel, which are substantial and may be difficult to implement. For
example, the City Comptroller has announced his intention to block one of
the key items contained in the 1996 City Budget, the sale of the City's
water system for approximately $2.3 billion. Among other things, he cited
his concern that such sale proceeds would be used primarily as a "one-shot"
measure to close potential budget gaps by financing operating expenses in
fiscal year 1996 rather than be used to undertake long-term capital
projects. In addition, certain proposals may be offset by various State
and federal legislation which could mandate levels of City funding
inconsistent with the 1996 City Budget and the 1996-99 Financial Plan.
In addition, the 1996-99 Financial Plan anticipates the receipt of
substantial amounts of Federal aid . Certain proposed State and federal
actions are subject to approvals from the Legislature, the Governor and
the President , as applicable. Both federal and State actions are
uncertain ; certain legislative proposals contemplate significant
reductions in federal spending, including proposed federal welfare reform
which could result in caps on, or block grants of, federal programs.
Further, no assurance can be given that either such actions will in
fact be taken or that the projected savings will result even if such
actions are taken.
The City derives its revenues from a variety of local taxes, user charges,
miscellaneous revenues and federal and State unrestricted and categorical
grants. The City projects that local revenues will provide approximately
6 8 .0% of total revenues in fiscal year 199 6 while federal
aid, including categorical grants, will provide 1 1.7 % in fiscal year
199 6 and State aid, including unrestricted aid and categorical
grants, will provide 2 0.3 % in fiscal year 19 96 . As a
proportion of total revenues, State aid has remained relatively constant
over the period from 1980 to 1990, while federal aid was sharply reduced
(having provided nearly 20% of total fiscal year 1980 revenues). The
largest source of the City's revenues is the real estate tax (approximately
22% of total revenues projected for fiscal year 1996) , at rates
levied by the City council (subject to certain State constitutional
limits). State legislation requires that increases in assessments of
certain classes of real property be phased-in over a five-year period;
thus, property owners may receive higher assessments when property values
are declining. However, in the event of a reduction in total assessments,
higher tax rates would be required to maintain the same amount of tax
revenue. The City derives the remainder of its tax revenues from a variety
of other economically sensitive local taxes (subject to authorization by
the legislature), including: a local sales and compensating use tax
(primarily dedicated to MAC debt service) imposed in addition to the
State's retail sales tax; the personal income tax on City residents
and the earnings tax on non-residents; a general corporation tax; and a
financial corporation tax. High tax burdens in the city impose political
and economic constraints on the ability of the City to increase local tax
rates. The City's four-year financial plans have been the
subject of extensive public comment and criticism, principally questioning
the reasonableness of assumptions that the City will have the capacity to
generate sufficient revenues in the future to provide the level of services
contained in such City financial plans. On July 10, 1995,
Standard & Poor's lowered the City's credit rating from A- to BBB+, among
the lowest ratings of any major city in the country. The rating agency
cited specifically the City Budget's reliance on "one-shot" measures to
balance the budget for fiscal year 1995-96 without rectifying the
underlying structural problems, its continued optimistic projections of
State and Federal aid, and continued high debt levels. Standard & Poor's
also mentioned the feeble local economy and the City Budget's over-reliance
on the financial services sector which historically has been volatile.
The City is the largest municipal debt issuer in the nation, and has more
than doubled its debt load since the end of fiscal year 1988 , in
large measure to rehabilitate its extensive, aging physical plant. The
City's seasonal borrowing needs increased significantly during fiscal
years 1990 and 1991 , largely due to delayed State aid payments,
and totalled $2.25 billion in fiscal year 1992, $1.4 billion in
fiscal year 1993, $1.75 billion in fiscal year 1994 and $2.2
billion in fiscal year end 1995. Current projections forecast a need of
$2.4 billion of seasonal financing for fiscal year 1996. The City's current
capital financing program reflects major reductions (approximately $2.13
billion) in the size of the capital program to be implemented cumulatively
through fiscal year 1999 which is intended to reduce future debt service
requirements. Such reductions may adversely affect the condition of the
City's aging and deteriorating infrastructure and physical assets, such as
sewers, streets, bridges and tunnels, and mass transit facilities. Further,
the City's capital financing program currently contemplates receipt of
proceeds of approximately $1 billion resulting from the sale of the City's
water and sewer system to the Water Board, and proposes to utilize a
substantial portion of such proceeds for capital project improvements. It
is not certain that such proceeds will become available for capital
improvements, because, as discussed above, the City Comptroller has stated
his opposition to such proposed transfer of the water and sewer system.
In November 1993, the voters approved a proposed charter whereby Staten
Island would secede from the City. Staten Island is one of five
counties/boroughs, comprising 4% of the City's population and 19% of its
land area. State law provides a complex mechanism for such secession. The
State Legislature is also considering establishment of a similar secession
mechanism for Queens.
OTHER LOCALITIES. Certain localities in addition to the C ity could
have financial problems which, if significant, could lead to requests for
additional State assistance during the State's fiscal year and thereafter.
Fiscal difficulties experienced by the City of Yonkers, for example, could
result in State actions to allocate State resources in amounts that cannot
yet be determined. In the recent past, the State provided substantial
financial assistance to its political subdivisions, totalling approximately
6 8 % of General Fund disbursements in the State's fiscal year
1992-93 , 69% for fiscal year 1993-94, 70% for fiscal year 1994-95
and estimated to account for 6 9 % of General Fund disbursements in
the State's 199 5-96 fiscal year, primarily for aid to elementary,
secondary and higher education , M edicaid income maintenance , and
local transportation programs . The legislature enacted substantial
reductions from previously budgeted levels of State aid since December
1990. To the extent the State is constrained by its financial condition,
State assistance to localities may be further reduced, compounding the
serious fiscal constraints already experienced by many local governments.
Localities also face anticipated and potential problems resulting from
pending litigation (including challenges to local property tax
assessments), judicial decisions and socio-economic trends. The Legislature
enacted substantial reductions from previously budgeted levels of State aid
since December 1990. To the extent the State is constrained by its
financial condition, State assistance to localities may be further reduced,
compounding the serious fiscal constraints already experienced by many
local governments. Localities also face anticipated and potential problems
resulting from pending litigation (including challenges to local property
tax assessments), judicial decisions and socio-economic trends.
T he total indebtedness of all localities in the State, other than
the City, was approximately $1 7 .7 billion , as of the localities
fiscal years ending in 1993 (the date of the latest data available.) A
small portion (approximately $ 105 million) of this indebtedness
represented borrowing to finance budgetary deficits issued pursuant to
enabling State legislation (requiring budgetary review by the State
Comptroller ) . Subsequently, certain counties and other local
governments have encountered significant financial difficulties, including
the counties of Suffolk, Nassau, Monroe, and Westchester, and the City of
Buffalo. The State has imposed financial control on the City from 1977 to
1986 and on the City of Yonkers since 1984 under an appointed control board
in response to fiscal crises encountered by such municipalities. The
Legislature imposed certain limited fiscal restraints on Nassau and Suffolk
Counties, and authorized their issuance of deficit bonds to finance over
several years their respective 1992 operating deficits.
SPECIAL FACTORS AFFECTING PUERTO RICO
The following only highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the Commonwealth or
Puerto Rico), and is based on information drawn from official statements
and prospectuses relating to the securities offerings of Puerto Rico and
its agencies and instrumentalities, as available on the date of this SAI.
FMR has not independently verified any of the information contained in such
official statements, prospectuses, and other publicly available documents,
but is not aware of any fact which would render such information materially
inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1993 trade with the United States accounted for
approximately 86% of Puerto Rico's exports and approximately 69% of its
imports. In this regard, in fiscal 1993 Puerto Rico experienced a $2.5
billion positive adjusted merchandise trade balance. Since fiscal 1987,
personal income, both aggregate and per capita, has increased consistently
each year. In fiscal 1993 aggregate personal income was $24.1 billion and
personal per capita income was $6,760. Gross domestic product in fiscal
1991, 1992, and 1993 was $22.8 billion, $23.5 billion, and $25 billion,
respectively. For fiscal 1994, an increase in gross domestic product of
2.9% over fiscal 1993 is forecasted. However, actual growth in the Puerto
Rico economy will depend on several factors, including the condition of the
U.S. economy, the exchange rate for the U.S. dollar and the price stability
of oil imports and interest rates. Due to these factors, there is no
assurance that the economy of Puerto Rico will continue to grow.
Puerto Rico's economy continued to expand throughout the five-year period
from fiscal 1989 through fiscal 1993. While trends in the Puerto Rico
economy generally follow those of the United States, Puerto Rico did not
experience a recession primarily because of its strong manufacturing base,
which has a large component of non-cyclical industries. Other factors
behind the continued expansion included Commonwealth-sponsored economic
development programs, stable prices of oil imports, low exchange rates for
the U.S. dollar, and the relatively low cost of borrowing funds during the
period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it
still remains significantly above the U.S. average and has been increasing
in recent years. Despite long-term improvements the unemployment rate rose
from 16.5% to 17.5% from fiscal 1992 to fiscal 1993. However, by the end of
January 1994, the unemployment rate had dropped to 16.3%.
The economy of Puerto Rico has undergone a transformation in the later half
of this century from one centered around agriculture to one dominated by
the manufacturing and service industries. Manufacturing is the cornerstone
of Puerto Rico's economy, accounting for $14.1 billion or 39.4% of gross
domestic product in fiscal 1993. However, manufacturing has experienced a
basic change over the years as a result of the influx of higher wages, high
technology industries such as the pharmaceutical industry, electronics,
computers, micro processors, scientific instruments, and high technology
machinery. The service sector, which employs the largest number of people,
includes wholesale and retail trade, finance, and real estate, and ranks
second in its contribution to gross domestic product. In fiscal 1993, the
service sector generated $14.0 billion in gross domestic product or 39.1%
of the total and employed over 467,000 workers providing 46.7% of total
employment. The government sector of the Commonwealth plays an important
role in Puerto Rico's economy. In fiscal year 1993, the government
accounted for $3.9 billion of Puerto Rico's gross domestic product and
provided 21.7% of the total employment. Tourism also contributes
significantly to the island economy, accounting for $1.6 billion of gross
domestic product in fiscal 1993.
The present administration, which took office in January 1993, envisions
major economic reforms and has developed a new economic development program
to be implemented in the next few years. This program is based on the
premise that the private sector will be the primary vehicle for economic
development and growth. The program promotes changing the role of the
government from one of being a provider of most basic services to one of
being a facilitator for private sector initiatives and will encourage
private sector investment by reducing regulatory restraints. The program
contemplates the development of initiatives that will foster private
investment, both external and internal, in areas that are served more
efficiently and effectively by the private sector. The program also
contemplates a general revision of the tax system to expand the tax base,
reduce top personal and corporate tax rates, and simplify a highly complex
system. Other important goals for the new program are to reduce the size of
the government's direct contribution to gross domestic product and, to
facilitate private sector development and growth which would be realized
through a reduction in government consumption and an increase in government
investment in order to improve and expand Puerto Rico's infrastructure.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
("Section 936") and the Commonwealth's Industrial Incentives Program.
Section 936 currently grants U.S. corporations that meet certain criteria
and elect its application, a credit against their U.S. corporate income tax
on the portion of the tax attributable to (i) income derived from the
active conduct of a trade or business in Puerto Rico ("active income"), or
from the sale or exchange of substantially all the assets used in the
active conduct of such trade or business, and (ii) qualified possession
sources investment income ("passive income"). The Industrial Incentives
Program, through the 1987 Industrial Incentives Act, grants corporations
engaged in certain qualified activities a fixed 90% exemption from
Commonwealth income and property taxes and a 60% exemption from municipal
license taxes.
Pursuant to recently enacted amendments to the Internal Revenue Code (the
"Code"), and for taxable years commencing after 1993, two alternative
limitations will apply to the Section 936 credit against active business
income and sale of assets as previously described. The first option will
limit the credit against such income to 40% of the credit allowed under
current law, with a five-year phase-in period starting at 60% of the
current credit. The second option will limit the allowable credit to the
sum of (i) 60% of qualified compensation paid to employees (as defined in
the Code); (ii) a specified percentage of depreciation deductions; and
(iii) a portion of the Puerto Rico income taxes paid by the Section 936
corporation, up to a 9% effective tax rate.
At present, it is difficult to forecast what the short- and long-term
effects of the new limitations to the Section 936 credit will be on the
economy of Puerto Rico. However, preliminary econometric studies by the
government of Puerto Rico and private sector economists (assuming no
enhancements to the existing Industrial Incentives Program) project only a
slight reduction in average real growth rates for the economy of Puerto
Rico. These studies also show that particular industry groups will be
affected differently. For example, manufacturers of pharmaceuticals and
beverages may suffer a larger reduction in tax benefits due to their
relatively higher profit margins. In addition, the above limitations are
not expected to reduce the tax credit currently enjoyed by labor-intensive,
lower profit margin industries, which represent approximately 40% of the
total employment by Section 936 corporations in Puerto Rico.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in the fund's
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR
considers various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities ; t he advisability
of investing in, purchasing, or selling securities; and the
availability of securities or the purchasers or sellers of securities .
In addition, such broker-dealers may furnish analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and performance of accounts; effect securities
transactions and perform functions incidental thereto (such as clearance
and settlement). The selection of such broker-dealers generally is made by
FMR (to the extent possible consistent with execution considerations) based
upon the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund, or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund.
The fund's annualized turnover rate for its first fiscal period is not
expected to exceed 1 00%.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine in the exercise of their business judgement
whether it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as the fund is concerned. In other cases,
however, the ability of the fund to participate in volume transactions will
produce better executions and prices for the fund. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to the fund outweighs any disadvantages that may be said
to exist from exposure to simultaneous transactions.
VALUATION
Fidelity Service Company (FSC) normally determines each class's NAV as
of the close of the NYSE normally 4:00 p.m. Eastern time). The valuation of
portfolio securities is determined as of this time for the purpose of
computing each class's NAV.
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Fixed-income securities are valued
on the basis of information furnished by a pricing service that uses a
valuation matrix which incorporates both dealer-supplied valuations and
electronic data processing techniques. Use of pricing services has been
approved by the Board of Trustees. A number of pricing services are
available, and the Trustees, on the basis of an evaluation of these
services, may use various pricing services or discontinue the use of any
pricing service.
Futures contracts and options are valued on the basis of market quotations,
if available.
Securities and other assets for which there is no readily available market
value are valued in good faith by a committee appointed by the Board of
Trustees. The procedures set forth above need not be used to determine the
value of the securities owned by the fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more accurately
reflect the fair market value of such securities.
PERFORMANCE
Each class of fund shares may quote performance in various ways. All
performance information supplied by the fund in advertising is historical
and is not intended to indicate future returns. Each class's share price,
yield and total return fluctuate in response to market conditions and other
factors, and the value of the shares when redeemed may be more or less than
their original cost.
YIELD CALCULATIONS. Yields for each class are computed by dividing the
class's pro-rata share of the applicable interest income, if any, for a
given 30-day or one-month period, net of expenses, by the average number of
shares of that class entitled to receive distributions during the period,
dividing this figure by the class's net asset value (NAV) or offering
price, as appropriate, at the end of the period, and annualizing the
result (assuming compounding of income) in order to arrive at an annual
percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock
and bond funds. In general, interest income is reduced with respect to
bonds trading at a premium over their par value by subtracting a portion of
the premium from income on a daily basis, and is increased with respect to
bonds trading at a discount by adding a portion of the discount to daily
income. Capital gains and losses generally are excluded from the
calculation.
Income calculated for the purposes of calculating each class's yield
differs from income as determined for other accounting purposes. Because of
the different accounting methods used, and because of the compounding of
income assumed in yield calculations, a class's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
Yield information may be useful in reviewing a class's performance
in providing a basis for comparison with other investment alternatives.
However, a class's yield fluctuates, unlike investments that pay a
fixed interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates,
a class's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates, the
fund's yield will tend to be somewhat lower. Also, when interest rates are
falling, the inflow of net new money to the fund from the continuous sale
of shares will likely be invested in instruments producing lower yields
than the balance of the fund's holdings, thereby reducing the current
yield. In periods of rising interest rates, the opposite can be expected to
occur.
The tax-equivalent yield is the rate an investor would have to earn from a
fully taxable investment before taxes to equal a class's tax-free
yield. Tax-equivalent yields are calculated by dividing a class's
yield by the result of one minus a stated federal or combined federal,
state and city tax rate. If any portion of the class's yield is tax-exempt,
only that portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on the
effective yield under federal and state income tax laws for 1995. The
second table shows the approximate yield a taxable security must provide at
various income brackets to produce after-tax yields equivalent to those of
hypothetical tax-exempt obligations yielding from 3.0% to 8 .0%. Of
course, no assurance can be given that a class will achieve any specific
tax-exempt yield. While the fund invests principally in obligations whose
interest is exempt from federal and state income tax, other income received
by the fund may be taxable.
Use the first table to find your approximate effective tax bracket on
investment income as a New York State resident with triple taxes (federal,
state, and New York City) or double taxes (federal and state) for 1995.
1995 TAX RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Marginal Combined
Tax Rate New York
State and Combined New
Marginal Federal New York New York Federal York State,
Taxable Income Income State and Effective City and
Federal
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Single Return* Joint Return* Tax Bracket State City Tax Tax Bracket**
Bracket**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
$23,351 - $25,000 $39,001 - $45,000 28% 7.59% 11.98% 33.47% 36.63%
25,001 - 56,550 45,001 - 94,250 28% 7.59% 11.99% 33.47% 36.64%
56,551 - 60,000 94,251 - 108,000 31% 7.59% 11.99% 36.24% 39.28%
60,001 - 117,950 108,001 - 143,600 31% 7.59% 12.05% 36.24% 39.32%
117,951 - 256,500 143,601 - 256,500 36% 7.59% 12.05% 40.86% 43.71%
256,501 + above 256,501 + above 39.6% 7.59% 12.05% 44.19% 46.88%
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Having determined your effective tax bracket, use the appropriate table
below to determine the tax-equivalent yield for a given tax-free yield.
NEW YORK CITY RESIDENTS - TRIPLE TAXES - 1995
If your effective combined federal, state, and New York City personal
income tax rate in 1995 is:
36.63% 36.64% 39.28% 39.32% 43.71% 46.88%
<TABLE>
<CAPTION>
<S> <C>
To match these
tax-free yields: Your taxable investment would have to earn the following yield:
</TABLE>
3% 4.73% 4.73% 4.94% 4.94% 5.33% 5.65%
4% 6.31% 6.31% 6.59% 6.59% 7.11% 7.53%
5% 7.89% 7.89% 8.23% 8.24% 8.88% 9.41%
6% 9.47% 9.47% 9.88% 9.89% 10.66% 11.29%
7% 11.05% 11.05% 11.53% 11.54% 12.44% 13.18%
8% 12.62% 12.63% 13.17% 13.18% 14.21% 15.06%
NEW YORK STATE RESIDENTS (OUTSIDE NYC) - DOUBLE TAXES - 1995
If your effective combined federal and state personal income tax rate in
1995 is:
33.47% 36.24% 40.86% 44.19%
<TABLE>
<CAPTION>
<S> <C>
To match these
tax-free yields: Your taxable investment would have to earn the following yield:
</TABLE>
3% 4.51% 4.71% 5.07% 5.38%
4% 6.01% 6.27% 6.76% 7.17%
5% 7.52% 7.84% 8.45% 8.96%
6% 9.02% 9.41% 10.15% 10.75%
7% 10.52% 10.98% 11.84% 12.54%
8% 12.02% 12.55% 13.53% 14.33%
The fund may invest a portion of its assets in obligations that are subject
to state or federal income taxes. When the fund invests in these
obligations, its tax-equivalent yield will be lower. In the table above,
the tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of each class's return, including the effect of reinvesting
dividends and capital gain distributions , and any change in NAV over
a stated period. Average annual total returns are calculated by
determining the growth or decline in value of a hypothetical historical
investment over a stated period, and then calculating the annually
compounded percentage rate that would have produced the same result if the
rate of growth or decline in value had been constant over the period. For
example, a cumulative total return of 100% over ten years would produce an
average annual total return of 7.18%, which is the steady annual
rate of return that would equal 100% growth on a compounded basis in
ten years. Average annual total returns covering periods of less
than one year are calculated by determining a class's total return
for the period, extending that return for a full year (assuming that return
remains constant over the year) and quoting the result as an annual return.
While average annual total returns are a convenient means of
comparing investment alternatives, investors should realize that
performance is not constant over time, but changes from year to year, and
that average annual total returns represent averaged figures as opposed to
the actual year-to-year performance of a class .
In addition to average annual returns, each class may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and cumulative
total returns may be quoted as a percentage or as a dollar amount, and may
be calculated for a single investment, a series of investments, or a series
of redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after tax basis and may be quoted with or without taking the
maximum sales charge , as applicable, into account. Excluding the
sales charge from a total return calculation produces a higher total return
figure. Total returns, yields, and other performance information may be
quoted numerically or in a table, graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using each class's NAV ,
adjusted NAV , and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated,
each class's adjusted NAV is not adjusted for sales charges,
if any.
Each class may compare its return to the record of the Standard &
Poor's Composite Index of 500 Stocks (S&P 500), the Dow Jones Industrial
Average (DJIA), and the cost of living (measured by the Consumer Price
Index, or CPI) over the same period. The S&P 500 and DJIA comparisons would
show how the fund's total return compared to the record of a broad average
of common stocks and a narrower set of stocks of major industrial
companies, respectively, over the same period. Of course, since the fund
invests in fixed-income securities, common stocks represent a different
type of investment from the fund. Common stocks generally offer greater
growth potential than the fund, but generally experience greater price
volatility, which means greater potential for loss. In addition, common
stocks generally provide lower income than a fixed-income investment such
as the fund. Figures for the S&P 500 and DJIA are based on the prices of
unmanaged groups of stocks and, unlike the fund's returns, their returns do
not include the effect of paying brokerage commissions or other costs of
investing.
PERFORMANCE COMPARISONS. Each class's performance may be compared to
the performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as
mutual fund rankings prepared by Lipper Analytical Services, Inc. (Lipper),
an independent service located in Summit, New Jersey that monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of
total return, assuming reinvestment of distributions, but does not take
sales charges or redemption fees into consideration, and is prepared
without regard to tax consequences. Lipper may also rank funds based on
yield. In addition to the mutual fund rankings, performance may be compared
to mutual fund performance indices prepared by Lipper or other
organizations. When comparing these indices, it is important to remember
the risk and return characteristics of each type of investment. For
example, while stock mutual funds may offer higher potential returns, they
also carry the highest degree of share price volatility. Likewise, money
market funds may offer greater stability of principal, but generally do not
offer the higher potential returns available from stock mutual funds.
From time to time, performance may also be compared to other mutual funds
tracked by financial or business publications and periodicals. For example,
a class may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the
performance of Fidelity funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.
A class may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks. Mutual funds differ from bank
investments in several respects. For example, the fund may offer greater
liquidity or higher potential returns than CDs, and the fund does not
guarantee your principal or your return, and fund shares are not FDIC
insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principals of
investing, such as asset allocation, diversification, risk tolerance and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return; and action plans
offering investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A class may compare its performance or the performance of securities in
which the fund may invest to averages published by IBC USA (Publications),
Inc. of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's Money Fund Averages (trademark) ,
which is reported in the Money Fund Report (registered trademark) ,
covers over 695 money market funds. The Bond Fund Report
AverageS(trademark)/All Tax-Free, which is reported in the BOND FUND
REPORT(registered trademark), covers over 355 tax-free bond funds. When
evaluating comparisons to money market funds, investors should consider the
relevant differences in investment objectives and policies. Specifically,
money market funds invest in short-term, high-quality instruments and seek
to maintain a stable $1.00 share price. The fund, however, invest in
longer-term instruments and their share prices change daily in response to
a variety of factors.
The fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike
tax-free mutual funds, individual municipal bonds offer a stated rate of
interest and, if held to maturity, repayment of principal. Although some
individual municipal bonds might offer a higher return, they do not offer
the reduced risk of a mutual fund that invests in many different
securities. The initial investment requirements and sales charges of many
tax-free mutual funds are lower than the purchase cost of individual
municipal bonds, which are generally issued in $5,000 denominations and are
subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include other Fidelity funds; retirement investing;
model portfolios or allocations; and saving for college or other
goals. In addition, Fidelity may quote or reprint financial or business
publications and periodicals as they relate to current economic and
political conditions, fund management, portfolio composition, investment
philosophy, investment techniques, the desirability of owning a particular
mutual fund, and Fidelity services and products.
The fund may be advertised as part of certain asset allocation programs
involving other Fidelity or non-Fidelity mutual funds. These asset
allocation programs may advertise a model portfolio and its performance
results.
The fund may be advertised as part of a no transaction fee (NTF) program in
which Fidelity and non-Fidelity mutual funds are offered. An NTF program
may advertise performance results.
The fund may present its fund numbers, Quotron(trademark) number and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. Each class may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may compare
these measures to those of other funds. Measures of volatility seek to
compare the fund's historical share price fluctuations or total returns to
those of a benchmark. Measures of benchmark correlation indicate how valid
a comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, the fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate each class's price movements over
specific periods of time. Each point on the momentum indicator represents
each class's percentage change in price movements over that period.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program,
an investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
willingness to continue purchasing shares during periods of low
price levels.
As of June 30 , 1995, FMR advised over $ 2 5 billion in tax-free
fund assets, $ 75 billion in money market fund assets, $ 200
billion in equity fund assets, $ 45 billion in international fund
assets, and $ 22 billion in Spartan fund assets. The fund may
reference the growth and variety of money market mutual funds and the
adviser's innovation and participation in the industry. The equity funds
under management figure represents the largest amount of equity fund assets
under management by a mutual fund investment adviser in the United States,
making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
In addition to performance rankings, each class may compare its
total expense ratio to the average total expense ratio of similar funds
tracked by Lipper. Each class's total expense ratio is a significant
factor in comparing bond and money market investments because of its effect
on yield.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
CLASS A SHARES ONLY :
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to waive
Class A's maximum 4.75% front-end sales charge in connection with
the fund's merger with or acquisition of any investment company or trust.
In addition, FDC has chosen to waive Class A's sales charge in certain
instances because of efficiencies involved in those sales of shares. The
sales charge will not apply:
(1) to shares purchased by a bank trust officer, registered representative,
or other employee (and their immediate families) of investment
professional s under special arrangements in connection with FDC's sales
activities;
(2) to shares purchased by a current or former Trustee or officer of a
Fidelity fund or a current or retired officer, director, or regular
employee of FMR Corp. or its direct or indirect subsidiaries (a Fidelity
Trustee or employee), the spouse of a Fidelity Trustee or employee, a
Fidelity Trustee or employee acting as custodian for a minor child, or a
person acting as trustee of a trust for the sole benefit of the minor child
of a Fidelity Trustee or employee;
(3) to shares purchased by a charitable organization (as defined in Section
501(c)(3) of the Internal Revenue Code) investing $100,000 or more;
(4) to shares purchased for a charitable remainder trust or life income
pool established for the benefit of a charitable organization (as defined
by Section 501(c)(3) of the Internal Revenue Code ) ;
(5) to shares in a Fidelity IRA or Fidelity Advisor IRA account
purchased (including purchases by exchange) with the proceeds of a
distribution from an employee benefit plan having more than 200 eligible
employees or a minimum of $3,000,000 in plan assets invested in Fidelity
mutual funds or $1,000,000 invested in Fidelity Advisor mutual funds;
(6) to shares purchased by an insurance company separate account used to
fund annuity contracts purchased by employee benefit plans (including
403(b) programs, but otherwise as defined in ERISA), which, in the
aggregate, have either more than 200 eligible employees or a minimum of
$1,000,000 in assets invested in Fidelity Advisor funds;
(7) to shares purchased by any state, county, city, or government
instrumentality, department or authority or agency;
(8) to shares purchased with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end or contingent deferred
sales charge;
( 9 ) to shares purchased by a trust institution or bank trust
department, excluding assets described in (11 ) and (12)
below, that has executed a p articipation a greement with
FDC specifying certain asset minimums, and qualifications, and
marketing program restrictions . Assets managed by third parties do
not qualify for this waiver;
( 10 ) to shares purchased for use in a broker-dealer managed account
program, provided the broker-dealer has executed a participation agreement
with FDC specifying certain asset minimums and qualifications, and
marketing , program and trading restrictions. Employee benefit
plan assets do not qualify for this waiver;
( 11 ) to shares purchased as part of an employee benefit plan having
more than (i) 200 eligible employees or a minimum of $1,000,000 in plan
assets invested in Fidelity Advisor f unds, or (ii) 25
eligible employees or $250,000 in plan assets invested in Fidelity Advisor
f unds that subscribe s to Fidelity Advisor Retirement
Connection or similar program sponsored by Fidelity Investments
Institutional Services Company , Inc. (FIIS);
(12) to shares purchased as part of an employee benefit plan purchased
through an intermediary that has signed a p articipation
a greement with F DC specifying certain asset minimums and
qualifications, and marketing program and trading restrictions; or
(13) to shares purchased on a discretionary basis by a registered
investment advisor that is not part of an organization principally
engaged in the brokerage business, that has executed a p articipation
a greement with FDC specifying certain asset minimums, and
qualifications, marketing program and trading restrictions. Employee
benefit plan assets do not qualify for this waiver.
In order to qualify for waivers (9), (10) and (13), eligible investors
with existing Class A accounts will be required to sign and comply with a
participation agreement. Eligible investors that do not meet revised asset
requirements specified in the participation agreement will be allowed to
continue investing in Class A shares under the terms of their current
relationship until June 30, 1997, after which they will be prevented from
making new or subsequent purchases in Class A load waived, except that
employee benefit plans will be permitted to make additional purchases of
Class A shares load waived.
CLASS B SHARES ONLY :
The contingent deferred sales charge (CDSC) on Class B shares may be waived
in the case of (1) disability or death, provided that the redemption is
made within one year following the death or initial determination of
disability, or (2) in connection with a total or partial redemption made in
connection with certain distributions from retirement plan accounts at age
70 1/2 which are permitted without penalty pursuant to the Internal Revenue
Code.
A sales load waiver form must accompany these transactions.
CLASS A AND CLASS B SHARES ONLY :
QUANTITY DISCOUNTS. To obtain a reduction of the front-end sales charge on
Class A shares, you or your investment professional must notify the
transfer agent at the time of purchase whenever a quantity discount is
applicable to your purchase. Upon such notification, you will receive the
lowest applicable front-end sales charge.
For purposes of qualifying for a reduction in front-end sales charges under
the Combined Purchase, Rights of Accumulation or Letter of Intent programs,
the following may qualify as an individual or a "company" as defined in
Section 2(a)(8) of the 1940 Act: an individual, spouse, and their children
under age 21 purchasing for his, her, or their own account; a trustee,
administrator or other fiduciary purchasing for a single trust estate or a
single fiduciary account or for a single or a parent-subsidiary group of
"employee benefits plans" (as defined in Section 3(3) of ERISA); and
tax-exempt organizations as defined under Section 501(c)(3) of the
Internal Revenue Code.
RIGHTS OF ACCUMULATION permit reduced front-end sales charges on any future
purchases of Class A shares after you have reached a new breakpoint in a
fund's sales charge schedule. The value of currently held Fidelity Advisor
fund Class A and Class B shares, and Initial Class shares and Class B
shares of Daily Money Fund: U.S. Treasury Portfolio , and shares of
Daily Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund
acquired by exchange from any Fidelity Advisor fund, is determined at the
current day's NAV at the close of business, and is added to the amount of
your new purchase valued at the current offering price to determine your
reduced front-end sales charge.
LETTER OF INTENT. You may obtain Class A shares at the same reduced
front-end sales charge by filing a non-binding Letter of Intent (the
Letter) within 90 days of the start of Class A purchases. Each Class A
investment you make after signing the Letter will be entitled to the
front-end sales charge applicable to the total investment indicated in the
Letter. For example, a $2,500 purchase of Class A shares toward a $50,000
Letter would receive the same reduced sales charge as if the $50,000
($1,000,000 for Advisor Short Fixed-Income Fund or Advisor
Short-Intermediate Tax-Exempt Fund) had been invested at one time. To
ensure that the reduced front-end sales charge will be received on future
purchases, you or your investment professional must inform the
transfer agent that the Letter is in effect each time Class A shares are
purchased. Neither income nor capital gain distributions taken in
additional Class A or Class B shares will apply toward the completion of
the Letter.
Your initial investment must be at least 5% of the total amount you plan to
invest. Out of the initial purchase, 5% of the dollar amount specified in
the Letter will be registered in your name and held in escrow. The Class A
shares held in escrow cannot be redeemed or exchanged until the Letter is
satisfied or the additional sales charges have been paid. You will earn
income dividends and capital gain distributions on escrowed Class A shares.
The escrow will be released when your purchase of the total amount has been
completed. You are not obligated to complete the Letter.
If you purchase more than the amount specified in the Letter and qualify
for a future front-end sales charge reduction, the front-end sales charge
will be adjusted to reflect your total purchase at the end of 13 months.
Surplus funds will be applied to the purchase of additional Class A shares
at the then current offering price applicable to your total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, 30 days' written notice will be provided for you to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed Class
A shares will be redeemed to pay such charges.
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A or Class B shares of the fund or with the Systematic
Investment Program by completing the appropriate section of the account
application and attaching a voided personal check with your bank's magnetic
ink coding number across the front. If your bank account is jointly owned,
be sure that all owners sign.
Your account will be drafted on or about the first business day of every
month. You may cancel your participation in the Systematic Investment
Program at any time without payment of a cancellation fee. You will receive
a confirmation from the t ransfer a gent for every transaction,
and a debit entry will appear on your bank statement.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM. If you own Class A shares
worth $10,000 or more, you can have monthly, quarterly or semiannual checks
sent from your account to you, to a person named by you, or to your bank
checking account. Your Systematic Withdrawal Program payments are
drawn from Class A share redemptions. If Systematic Withdrawal
Program redemptions exceed income dividends earned on your shares,
your account eventually may be exhausted.
CLASS A, CLASS B, AND INSTITUTIONAL CLASS SHARES:
The fund is open for business and each class's NAV is calculated each day
the New York Stock Exchange (NYSE) is open for trading. The NYSE has
designated the following holiday closings for 1995: New Year's Day
(observed), Washington's Birthday (observed), Good Friday, Memorial Day
(observed), Independence Day (observed), Labor Day, Thanksgiving Day, and
Christmas Day (observed). Although FMR expects the same holiday schedule,
to be observed in the future, the NYSE may modify its holiday schedule at
any time.
Each class's NAV is normally determined as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated
earlier if trading on the NYSE is restricted or as permitted by the SEC. To
the extent that portfolio securities are traded in other markets on days
when the NYSE is closed, each class's NAV may be affected on days when
investors do not have access to the fund to purchase or redeem shares. In
addition, trading in some of the fund's portfolio securities may not occur
on days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing each class's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, the fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the p rospectus, the fund has notified shareholders that it
reserves the right at any time, without prior notice, to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest effectively in accordance with its investment objective
and policies, or would otherwise potentially be adversely affected.
DISTRIBUTION AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that the fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short term capital gains are distributed as dividend
income, but do not qualify for the dividends-received deduction. These
gains will be taxed as ordinary income. The fund will send each shareholder
a notice in January describing the tax status of dividends and capital gain
distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
The fund purchases securities that are free of federal income tax
based on opinions of counsel regarding the tax status. These opinions will
generally be based on covenants by the issuers or other parties regarding
continuing compliance with federal tax requirements. If at any time the
covenants are not complied with, distribution to shareholders of interest
on a security could become federally taxable retroactive to the date the
security was issued. For certain types of structured securities, opinions
of counsel may also be based on the effect of the structure on the federal
and state tax treatment of the income.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of the fund's policies of investing so
that at least 80% of its net assets will be invested in securities whose
interest is free from federal and New York State and City personal income
taxes. Interest from private activity securities is a tax preference item
for the purposes of determining whether a taxpayer is subject to the AMT
and the amount of AMT to be paid, if any. Private activity securities
issued after August 7, 1986 to benefit a private or industrial user or to
finance a private facility are affected by this rule.
A portion of the gain on bonds purchased at a discount after April 30, 1993
and short-term capital gains distributed by the fund are federally taxable
to shareholders as dividends, not as capital gains.
It is the current position of the staff of the SEC that a fund that
uses the term "tax-free" in its name may not invest more than
20% of its assets in municipal obligations that pay interest that is
a preference item for purposes of the AMT. According to this position, at
least 80% of the fund's assets would have to be exempt from the AMT
as well as from federal taxes.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which, adjusted current earnings
(which includes tax-exempt interest) exceeds the alternative minimum
taxable income of the corporation. If a shareholder receives an
exempt-interest dividend and sells shares at a loss after holding them for
a period of six months or less, the loss will be disallowed to the extent
of the amount of exempt-interest dividend.
NEW YORK TAX MATTERS. It is not expected that the fund will incur New York
income or franchise tax liability. In addition, New York personal income
tax law also provides that exempt-interest dividends paid by a regulated
investment company, or series thereof, from interest on obligations which
are exempt from tax under New York law are excludable from gross income.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time that
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed by
the fund are taxable to shareholders as dividends, not as capital gains.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
the fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. The fund intends to comply with other tax rules
applicable to regulated investment companies, including a requirement that
capital gains from the sale of securities held less than three months
constitute less than 30% of the fund's gross income for each fiscal year.
Gains from some futures contracts and options are included in this 30%
calculation, which may limit the fund's investments in such instruments.
The fund is treated as a separate entity from the other funds of Fidelity
Advisor Series V for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions, and shares may be subject to state and
local property taxes. Investors should consult their tax advisers to
determine whether the fund is suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two classes.
Class B is held predominantly by members of the Edward C. Johnson 3d family
and is entitled to 49% of the vote on any matter acted upon by the voting
common stock. Class A is held predominantly by non-Johnson family members,
employees of FMR Corp. and its affiliates and is entitled to 51% of the
vote on any such matter. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Under 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, through their ownership of voting common
stock and the execution of the shareholders' voting agreement, members of
the Johnson family may be deemed, under the 1940 Act, to form a controlling
group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company (FIIOC), which
performs shareholder servicing functions for institutional customers and
funds sold through intermediaries; and Fidelity Investments Retail
Marketing Company, which provides marketing services to various companies
within the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. The
business address of each Trustee and officer who is an "interested person"
(as defined in the Investment Company Act of 1940) is 82 Devonshire
Street, Boston, MA 02109, which is also the address of FMR. The business
address of all the other Trustees is Fidelity Investments, P.O. Box 9235,
Boston, Massachusetts 02205-9235. Those Trustees who are "interested
persons" virtue of their affiliation with either the trust or FMR are
indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, (65), Trustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman of
the Board and of the Executive Committee of FMR; Chairman and a Director of
FMR Texas Inc., Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, (54), Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, (63), Trustee (1991), is a consultant to Western
Mining Corporation (1994). Prior to February 1994, he was President of
Greenhill Petroleum Corporation (petroleum exploration and production,
1990). Until March 1990, Mr. Cox was President and Chief Operating Officer
of Union Pacific Resources Company (exploration and production). He is a
Director of Sanifill Corporation (non-hazardous waste, 1993) and CH2M Hill
Companies (engineering). In addition, he served on the Board of Directors
of the Norton Company (manufacturer of industrial devices, 1983-1990) and
continues to serve on the Board of Directors of the Texas State Chamber of
Commerce, and is a member of advisory boards of Texas A&M University and
the University of Texas at Austin.
PHYLLIS BURKE DAVIS, (63), Trustee (1992). Prior to her retirement
in September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of BellSouth
Corporation (telecommunications), Eaton Corporation (manufacturing, 1991),
and the TJX Companies, Inc. (retail stores, 1990), and she previously
served as a Director of Hallmark Cards, Inc. (1985-1991) and Nabisco
Brands, Inc. In addition, she is a member of the President's Advisory
Council of The University of Vermont School of Business Administration.
RICHARD J. FLYNN, (71), Trustee, is a financial consultant. Prior to
September 1986, Mr. Flynn was Vice Chairman and a Director of the Norton
Company (manufacturer of industrial devices). He is currently a Trustee of
College of the Holy Cross and Old Sturbridge Village, Inc. and he
previously served as Director of Mechanics Bank (1971-1995).
E. BRADLEY JONES, (67), Trustee (1990). Prior to his retirement in
1984, Mr. Jones was Chairman and Chief Executive Officer of LTV Steel
Company. He is a Director of TRW Inc. (original equipment and replacement
products), Cleveland-Cliffs Inc (mining), Consolidated Rail
Corporation, Birmingham Steel Corporation, and RPM, Inc.
(manufacturer of chemical products, 1990), and he previously served as a
Director of NACCO Industries, Inc. (mining and marketing, 1985-1995) and
Hyster-Yale Materials Handling, Inc. (1985-1995) . In addition, he
serves as a Trustee of First Union Real Estate Investments, a Trustee and
member of the Executive Committee of the Cleveland Clinic Foundation, a
Trustee and member of the Executive Committee of University School
(Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, (62), Trustee, is Executive-in-Residence (1995) at
Columbia University Graduate School of Business and a financial consultant.
From 1987 to January 1995, Mr. Kirk was a Professor at Columbia University
Graduate School of Business. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and he previously served as Director of Valuation
Research Corp. (appraisals and valuations, 1993). In addition, he serves as
Vice Chairman of the Board of Directors of the National Arts Stabilization
Fund, Vice Chairman of the Board of Trustees of the Greenwich Hospital
Association, and as a Member of the Public Oversight Board of the American
Institute of Certified Public Accountants' SEC Practice Section (1995).
*PETER S. LYNCH, (52), Trustee (1990) is Vice Chairman of FMR (1992). Prior
to May 31, 1990, he was a Director of FMR and Executive Vice President of
FMR (a position he held until March 31, 1991); Vice President of Fidelity
Magellan Fund and FMR Growth Group Leader; and Managing Director of FMR
Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate
Services (1991-1992). He is a Director of W.R. Grace & Co. (chemicals) and
Morrison Knudsen Corporation (engineering and construction). In addition,
he serves as a Trustee of Boston College, Massachusetts Eye & Ear
Infirmary, Historic Deerfield and Society for the Preservation of New
England Antiquities, and as an Overseer of the Museum of Fine Arts of
Boston (1990).
GERALD C. McDONOUGH, (66), Trustee, is Chairman of G.M. Management
Group (strategic advisory services). Prior to his retirement in July 1988,
he was Chairman and Chief Executive Officer of Leaseway Transportation
Corp. (physical distribution services). Mr. McDonough is a Director of
ACME-Cleveland Corp. (metal working, telecommunications and electronic
products), Brush-Wellman Inc. (metal refining), York International Corp.
(air conditioning and refrigeration), Commercial Intertech Corp. (water
treatment equipment, 1992), and Associated Estates Realty Corporation (a
real estate investment trust, 1993).
EDWARD H. MALONE, (70), Trustee. Prior to his retirement in 1985,
Mr. Malone was Chairman, General Electric Investment Corporation and a Vice
President of General Electric Company. He is a Director of Allegheny Power
Systems, Inc. (electric utility), General Re Corporation (reinsurance) and
Mattel Inc. (toy manufacturer). In addition, he serves as a Trustee of
Corporate Property Investors, the EPS Foundation at Trinity College, the
Naples Philharmonic Center for the Arts, and Rensselaer Polytechnic
Institute, and he is a member of the Advisory Boards of Butler Capital
Corporation Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, (62), Trustee (1993) is Chairman of the Board,
President, and Chief Executive Officer of Lexmark International, Inc.
(office machines, 1991). Prior to 1991, he held the positions of Vice
President of International Business Machines Corporation ("IBM") and
President and General Manager of various IBM divisions and subsidiaries.
Mr. Mann is a Director of M.A. Hanna Company (chemicals, 1993) and Infomart
(marketing services, 1991), a Trammell Crow Co. In addition, he serves as
the Campaign Vice Chairman of the Tri-State United Way (1993) and is a
member of the University of Alabama President's Cabinet (1990).
THOMAS R. WILLIAMS, (66), Trustee, is President of The Wales Group,
Inc. (management and financial advisory services). Prior to retiring in
1987, Mr. Williams served as Chairman of the Board of First Wachovia
Corporation (bank holding company), and Chairman and Chief Executive
Officer of The First National Bank of Atlanta and First Atlanta Corporation
(bank holding company). He is currently a Director of BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company (electric
utility), Gerber Alley & Associates, Inc. (computer software), National
Life Insurance Company of Vermont, American Software, Inc., and AppleSouth,
Inc. (restaurants, 1992).
KENNETH A. RATHGEBER (48), Treasurer (1995), is Treasurer of the
Fidelity funds and is an employee of FMR (1995). Before joining FMR, Mr.
Rathgeber was a Vice President of Goldman Sachs & Co. (1978-1995), where he
served in various positions, including Vice President of Proprietary
Accounting (1988-1992), Global Co-Controller (1992-1994), and Chief
Operations Officer of Goldman Sachs (Asia) LLC (1994-1995).
JOHN H. COSTELLO, (48), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, (49), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- First Boston Corp. (1986-1990).
ARTHUR S. LORING, (47), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
The following table sets forth information describing the compensation of
each current Trustee of the fund for his or her services as trustee for the
fiscal year ended October 31, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Trustees Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from Benefits Accrued Retirement from from the Fund
the Fund(dagger) as Part of Fund the Fund Complex*
Expenses from the Complex*
Fund Complex*
J. Gary Burkhead** $ 0 $ 0 $ 0 $ 0
Ralph F. Cox 2 5 5,200 52,000 125,000
Phyllis Burke Davis 2 5 5,200 52,000 122,000
Richard J. Flynn 3 0 0 52,000 154,500
E. Bradley Jones 2 5 5,200 49,400 123,500
Edward C. Johnson 3d** 0 0 0 0
Donald J. Kirk 2 5 5,200 52,000 125,000
Peter S. Lynch** 0 0 0 0
Gerald C. McDonough 2 5 5,200 52,000 125,000
Edward H. Malone 2 5 5,200 44,200 128,000
Marvin L. Mann 2 5 5,200 52,000 125,000
Thomas R. Williams 2 5 5,200 52,000 126,500
</TABLE>
(dagger) Estimated
* Information is as of December 31, 1994 for 206 funds in the complex.
** Interested trustees of the fund are compensated by FMR.
As of August 21, 1995 , the Trustees and officers of the fund owned,
in the aggregate, less than 1% of the outstanding shares of the fund.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments is not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program.
MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under its management contract with the fund, FMR acts as investment adviser
and, subject to the supervision of the Board of Trustees, directs the
investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments,
compensates all officers of the t rust, all Trustees who are
"interested persons" of the trust or of FMR, and all personnel of the fund
or FMR performing services relating to research, statistical, and
investment activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the fund. These services include providing facilities
for maintaining the fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the fund's
records and the registration of the fund's shares under federal and state
laws; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Trustees.
In addition to the management fee payable to FMR and the fees payable to
UMB, the fund pays all of its expenses, without limitation, that are not
assumed by those parties. The fund pays for typesetting, printing, and
mailing of proxy material to shareholders, legal expenses, and the fees of
the custodian, auditor, and non-interested Trustees. Although the fund's
current management contract provides that the fund will pay for
typesetting, printing and mailing prospectuses, statements of additional
information, notices and reports to shareholders, the t rust, on
behalf of the fund, has entered into a revised transfer agent agreement
with UMB, pursuant to which UMB bears the cost of providing these services
to shareholders. Other expenses paid by the fund include interest, taxes,
brokerage commissions, the fund's proportionate share of insurance premiums
and Investment Company Institute dues. The fund is also liable for such
non-recurring expenses as may arise, including costs of litigation to which
the fund may be a party and any obligation it may have to indemnify its
officers and Trustees with respect to litigation.
FMR is the fund's manager pursuant to a management contract dated November
17, 1994, which was approved by shareholders on December 8 , 1994.
For the services of FMR under the contract, the fund pays FMR a monthly
management fee composed of the sum of two elements: a group fee rate and an
individual fund fee rate.
COMPUTING THE BASIC FEE. The group fee rate is based on the monthly average
net assets of all of the registered investment companies with which FMR has
management contracts and is calculated on a cumulative basis pursuant to
the graduated fee rate schedule shown below on the left. The schedule below
on the right shows the effective annual group fee rate at various asset
levels which is the result of cumulatively applying the annualized rates on
the left. For example, the effective annual fee rate at $ 317.5
billion of average group net assets - the approximate level for June
30 , 1995 is . 1520 %, which was the weighted average of the
respective fee rates for each level of group net assets up to $ 317.5
billion.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
$ 0 - 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350
228 - 264 .1300
264 - 300 .1275
300 - 336 .1250
336 - 372 .1225
Over 372 .1200
</TABLE>
The individual fund fee rate is 0.25%. Based on the average net assets of
funds advised by FMR for June 30, 1995, the annual management fee
rate for the fund would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
.1520 % + 0.25% = .4020 %
One-twelfth (1/12) of this annual management fee rate is then applied to
the fund's average net assets for the current month, giving a dollar amount
which is the fee for that month.
Effective August 1, 1995, FMR voluntarily agreed, subject to revision or
termination, to reimburse the fund if and to the extent that its aggregate
operating expenses, including management fees, were in excess of an annual
rate of 0.75%, 1.00%, and 1.75% of average net assets for Institutional
Class, Class A and Class B shares of the fund, respectively.
To comply with the California Code of Regulations, FMR will reimburse the
fund if and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages for the fund are 2 1/2% of the first $30 million, 2%
of the next $70 million, and 1 1/2% of average net assets in excess of $100
million. When calculating the fund's expenses for purposes of this
regulation, the fund may exclude interest, taxes, brokerage commissions,
and extraordinary expenses, as well as a portion of its distribution plan
expenses.
CONTRACTS WITH FMR AFFILIATES
UMB is the transfer, dividend disbursing, and shareholders' servicing agent
for Institutional Class, Class A and Class B shares of the fund. On behalf
of Institutional Class , Class A and Class B shares, UMB has entered
into a sub- contract with FIIOC , an affiliate of FMR,
pursuant to which FIIOC performs the processing activities
associated with providing transfer, dividend disbursing, and
shareholders' servicing agent functions . For every account, each of
Institutional Class, Class A and Class B of the fund pays an annual
account fee and an asset-based fee based on account size. FIIOC also
collects small account fees from certain accounts with balances of less
than $2,500.
FIIOC pay s out-of-pocket expenses associated with providing transfer
agent services. In addition, FIIOC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional information,
and all other reports, notices, and statements to shareholders, with the
exception of proxy statements.
UMB has an additional sub-contract with FSC , pursuant to
which FSC performs the calculations necessary to determine the NAV and
dividends for each of Institutional Class, Class A and Class B, and
maintains the fund's accounting records. The annual fee rates
for pricing and bookkeeping services are based on the fund's average net
assets, specifically, .04 % for the first $500 million of average net
assets and .02 % for average net assets in excess of $500 million.
The fee is limited to a minimum of $ 45,000 and a maximum of $750,000
per year.
The transfer agent fees and charges, and pricing and bookkeeping fees
described above are paid to FIIOC and FSC by UMB, which is entitled to
reimbursement from the fund or the class, as applicable, for these
expenses.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to use
all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered.
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by FDC.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved a Distribution and Service Plan on behalf of
Institutional Class, Class A and Class B shares of the fund (the Plans)
pursuant to Rule 12b-1 under the 1940 Act (the Rule). The Rule provides in
substance that a mutual fund may not engage directly or indirectly in
financing any activity that is primarily intended to result in the sale of
shares of a fund except pursuant to a plan approved on behalf of the fund
under the Rule. The Plans, as approved by the Trustees, allow Institutional
Class, Class A and Class B of the fund and FMR to incur certain expenses
that might be considered to constitute direct or indirect payment by the
fund of distribution expenses.
Pursuant to the Plans, FDC is paid a distribution fee at an annual rate of
up to 0.40% of Class A's average net assets and 0.75% of Class B's average
net assets determined as of the close of business on each day throughout
the month. Currently, the Trustees have approved a distribution fee for
Class A at an annual rate of 0.25% of its average net assets. This fee may
be increased only when, in the opinion of the Trustees, it is in the best
interests of the shareholders of Class A to do so. Class B also pays
investment professional s a service fee at an annual rate of 0.25% of
its average daily net assets determined as of the close of business on each
day throughout the month for personal service and/or the maintenance of
shareholder accounts.
Under each Plan, if the payment of management fees by the fund to FMR is
deemed to be indirect financing by the fund of the distribution of its
shares, such payment is authorized by the Plans. Each Plan also
specifically recognizes that FMR, either directly or through FDC, may use
its management fee revenue, past profits, or other resources, without
limitation, to pay promotional and administrative expenses in connection
with the offer and sale of shares of the applicable class of the fund. In
addition, each Plan provides that FMR may use its resources, including its
management fee revenues, to make payments to third parties that assist in
selling shares of the applicable class of the fund, or to third parties,
including banks, that render shareholder support services. The Trustees
have not authorized such payments to date.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of each Plan and have
determined that there is a reasonable likelihood that the Plan will benefit
the applicable class of the fund and its shareholders. With respect to the
Institutional Class Plan, the Trustees noted in particular that the Plan
does not authorize payments by the Institutional Class of the fund other
than those made by FMR under its management contract with the fund. To the
extent that each Plan gives FMR and FDC greater flexibility in connection
with the distribution of shares of the applicable class of the fund,
additional sales of fund shares may result. Furthermore, certain
shareholder support services may be provided more effectively under the
Plans by local entities with whom shareholders have other relationships.
None of the Plans provides for specific payments by the applicable class of
any of the expenses of FDC, or obligates FDC or FMR to perform any specific
type or level of distribution activities or incur any specific level of
expense in connection with distribution activities. After payments by FDC
for advertising, marketing and distribution, and payments to third parties,
the amounts remaining, if any, may be used as FDC may elect.
The Plans were approved by shareholders of Class A and Class B on
December 8 , 1994 , and on August 21, 1995 for
shareholders of Institutional Class.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed
herein, and banks and other financial institutions may be required to
register as dealers pursuant to state law.
The fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plans.
No preference for the instruments of such depository institutions will be
shown in the selection of investments.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Advisor New York Tax-Free Fund is a series of
Fidelity Advisor Series V (the Trust), formerly Fidelity Investment Series,
an open-end investment company organized as Plymouth Municipal Fund, a
Massachusetts business trust, on April 23, 1986. On July 18, 1991, the
Board of Trustees voted to change the name of the Trust from Plymouth
Investment Series to Fidelity Investment Series, and on April 15, 1993,
the Board voted to change the Trust's name to Fidelity Advisor Series V.
Currently, there are four series of the Trust: Fidelity Advisor New York
Tax-Free Fund, Fidelity Advisor California Tax-Free Income Fund, Fidelity
Advisor High Income Municipal Fund and Fidelity Advisor Global Resources
Fund. An amended and restated Declaration of Trust dated March 16, 1995
was filed on April 12, 1995. The Declaration of Trust permits the
Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the fund, the
right of the Trust or fund to use the identifying name "Fidelity" may be
withdrawn.
The assets of the Trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the Trust. Expenses with respect to the Trust are to be
allocated in proportion to the asset value of the respective funds except
where allocations of direct expense can otherwise be fairly made. The
officers of the Trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general and allocable to all of the funds. In the
event of the dissolution or liquidation of the Trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The Trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the Trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
Trust or the Trustees include a provision limiting the obligations created
thereby to the Trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The Declaration of Trust
also provides that each fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the fund
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which a fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office. Claims asserted
against one class of shares may subject holders of another class of shares
to certain liabilities.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value of
NAV you own. The shares have no preemptive rights and Class A and
Institutional Class have no conversion rights; the voting and dividend
rights and the conversion rights of Class B shares, the right of
redemption, and the privilege of exchange are described in the Prospectus.
Shares are fully paid and nonassessable, except as set forth under the
heading "Shareholder and Trustee Liability" above. Shareholders
representing 10% or more of the Trust, the fund, or class may, as set forth
in the Declaration of Trust, call meetings of the Trust, the fund, or the
applicable class for any purpose, as the case may be, including, in the
case of a meeting of the entire Trust, the purpose of voting on removal of
one or more Trustees. The Trust or any fund may be terminated upon the sale
of its assets to another open-end management investment company, or upon
liquidation and distribution of its assets, if approved by vote of the
holders of a majority of the Trust or fund , as determined by the
current value of each shareholder's investment in the fund or Trust. If not
so terminated, the Trust or fund will continue indefinitely. The fund may
invest all of its assets in another investment company.
CUSTODIAN. UMB, 1010 Grand Avenue, Kansas City, Missouri, is custodian of
the assets of the fund. The custodian is responsible for the safekeeping of
the fund's assets and the appointment of subcustodian banks and clearing
agencies. The custodian takes no part in determining the investment
policies of the fund or in deciding which securities are purchased or sold
by the fund. However, the fund may invest in obligations of the custodian
and may purchase securities from or sell securities to the custodian.
Morgan Guaranty Trust Company of New York, The Bank of New York, and
Chemical Bank, each headquartered in New York, also may serve as a
special purpose custodian of certain assets in connection with pooled
repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and the Board of
Trustees may from time to time conduct transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts , serves as the fund's independent accountant. The auditor
examines financial statements for the fund and provides other audit, tax
and related services.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a)(1) Financial Statements and Financial Highlights for Advisor New York
Tax-Free Fund will be filed by subsequent amendment.
(b) Exhibits:
(1) Declaration of Trust, as amended and restated on March 16, 1995, was
electronically filed and is incorporated herein by reference as Exhibit 1
to Post-Effective Amendment No. 27.
(2) Bylaws of the Trust were electronically filed and are incorporated
herein by reference to Exhibit 2 to Union Street Trust Post-Effective
amendment No. 87.
(3) None.
(4) Form of Share Certificate was electronically filed and is
incorporated herein by reference to Exhibit 4 to Post-Effective Amendment
No. 29.
(5) (a) Management Contract between the Registrant, on behalf of Fidelity
Advisor High Income Municipal Fund and Fidelity Management & Research
Company, dated December 1, 1994, was electronically filed and is
incorporated herein by reference to Exhibit 5(a) to Post-Effective
Amendment No. 27.
(b) Management Contract between the Registrant, on behalf of Fidelity
Advisor Global Resources Fund, and Fidelity Management & Research Co.,
dated December 1, 1994, was electronically filed and is incorporated herein
by reference to Exhibit 5(b) to Post-Effective Amendment No. 27.
(c) Form of Management Contract between the Registrant, on behalf of
Fidelity Advisor California Tax-Free Income Fund, and Fidelity Management &
Research Co.,was electronically filed and is incorporated herein by
reference as Exhibit 5(c) to Post-Effective Amendment No. 19.
(d) Management Contract between the Registrant, on behalf of Fidelity
Advisor New York Tax-Free Fund, and Fidelity Management & Research Co.,
dated November 17, 1994 was electronically filed and is incorporated herein
by reference to Exhibit 5(d) to Post-Effective Amendment No. 26.
(e) Sub-Advisory Agreement between FMR Far East and Fidelity Management
& Research Company, on behalf of Fidelity Advisor Global Resources Fund,
dated December 1, 1994, was electronically filed and is incorporated herein
by reference as Exhibit 5(e) to Post-Effective Amendment No. 27.
(f) Sub-Advisory Agreement between FMR U.K. and Fidelity Management &
Research Company, on behalf of Fidelity Advisor Global Resources Fund,
dated December 1, 1994, was electronically filed and is incoporated herein
by reference as Exhibit 5(f) to Post-Effective Amendment No. 27.
(6) (a) General Distribution Agreement between Registrant, on behalf of
Plymouth High Income Municipal Portfolio and Fidelity Distributors
Corporation was electronically filed and is incorporated herein by
reference to Exhibit 6(a) to Post-Effective Amendment No. 29.
(b) General Distribution Agreement between Registrant, on behalf of
Plymouth Global Natural Resources Portfolio, and Fidelity Distributors
Corporation was electronically filed and is incorporated herein by referene
to Exhibit 6(b) to Post-Effective Amendment No. 29.
(c) Amendment to the General Distribution Agreements between the
Registrant, on behalf of each portfolio thereof and Fidelity Distributors
Corporation dated January 1, 1988, was electronically filed and is
incorporatedherein by reference to Exhibit 6(c) to Post-Effective Amendment
No. 29.
(d) Form of General Distribution Agreement between the Registrant, on
behalf of Fidelity Advisor California Tax-Free Income Fund, and Fidelity
Distributors Corporation, was electronically filed and is incorporated
herein by reference as Exhibit 6(d) to Post-Effective Amendment No. 19.
(e) General Distribution Agreement between the Registrant, on behalf of
Fidelity Advisor New York Tax-Free Fund, and Fidelity Distributors
Corporation, dated November 17, 1994 was electronically filed and is
incorporated herein by reference to Exhibht 6(f) to Post-Effective
Amendment No. 26.
(f) Form of Bank Agency Agreement (most recently revised May 1994) was
electronically filed and is incorporated herein by reference as Exhibit
6(f) to Post-Effective Amendment No. 27.
(g) Form of Selling Dealer Agreement (most recently revised May 1994)
was electronically filed and is incorporated herein by reference as Exhibit
6(g) to Post-Effective Amendment No. 27.
(h) Form of Selling Dealer Agreement for Bank Related
Transactions (most recently revised June 1994) was electronically filed and
is incorporated herein as Exhibit 6(h) to Post-Effective Amendment No. 27.
(7) Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, effective November 1, 1989, was electronically filed and
is incorporated herein by reference to Exhibit 7 to Union Street Trust's
Post Effective Amendment No. 87.
(8) (a) Custodian Contract between Registrant and Brown Brothers Harriman
& Co. dated September 1, 1994 was electronically filed and is incorporated
herein by reference as Exhibit 8(a) to Post-Effective Amendment No. 27.
(b) Custodian Contract between Registrant and United Missouri Bank dated
December 1, 1994 was electronically filed and is incorporated herein by
reference as Exhibit 8(b) to Post-Effective Amendment No. 27.
(9) Not applicable.
(10) None.
(11) Auditor's consent is electronically filed herein as Exhibit 11.
(12) None.
(13) Not applicable.
(14) (a) Retirement Plan for Fidelity Individual Retirement Accounts, as
currently in effect, was electronically filed and is incorporated herein by
reference as Exhibit 14(a) to Union Street Trust's Post-Effective Amendment
No. 87.
(b) Retirement Plan for Portfolio Advisory Services Individual
Retirement Account, as currently in effect, was electronically filed and is
incorporated herein by reference as Exhibit 14(i) to Union Street Trust's
Post-Effective Amendment No. 87.
(c) Retirement Plan for National Financial Services Corporation
Individual Retirement Account, as currently in effect, was electronically
filed and is incorporated herein by reference as Exhibit 14(h) to Union
Street Trust's Post-Effective Amendment No. 87.
(d) National Financial Services Corporation Defined Contribution
Plan, as currently in effect, was electronically filed and is incorporated
herein by reference as Exhibit 14(k) to Union Street's Trust Post-Effective
Amendment No. 87.
(e) Fidelity Institutional Individual Retirement Account
Custodian Agreement and Disclosure Statement, as currently in effect, was
electronically filed and is incorporated herein by reference as Exhibit
14(d) to Union Street Trust's Post-Effective Amendment No. 87.
(f) Fidelity Advisor Funds Individual Retirement Account
Custodial Agreement Disclosure Statement in effect as of January 1, 1994
was filed electronically and is incorporated herein by reference to Exhibit
14(b) to Advisor Series I Post-Effective Amendment No. 22.
(g) Plymouth Defined Contribution Plan, as currently in effect,
was electronically filed and is incorporated herein by reference to Exhibit
14(o) to Commonwealth Trust's Post-Effective Amendment No. 57.
(15) (a) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor High Income Municipal Fund: Class A was electronically
filed and is incorporated herein by reference as Exhibit 15(a) to
Post-Effective Amendment No. 27.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Global Resources Fund: Class A was electronically filed and is
incorporated herein by reference as Exhibit 15(b) to Post-Effective
Amendment No. 27.
(c) Form of Distribution and Service Plan pursuant to Rule 12b-1 between
the Registrant, on behalf of Fidelity Advisor California Tax-Free Income
Fund, Class A, and Fidelity Distributors Corporation, was electronically
filed and is incorporated by reference to Post Effective Amendment No. 19.
(d) Distribution and Service Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of Fidelity Advisor New York Tax-Free Fund: Class A,
and Fidelity Distributors Corp. was electronically filed and is
incorporated herein by reference to Exhibit 15(d) to Post-Effective
Amendment No. 26.
(e) Distribution and Service Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of Fidelity Advisor New York Tax-Free Fund: Class B,
and Fidelity Distributors Corp. was electronically filed and is
incorporated herein by reference to Exhibit 15(e) to Post-Effective
Amendment No. 26.
(f) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor High Income Municipal Fund: Class B was electronically filed and is
incorporated herein by reference to Exhibit 15(f) to Post-Effective
Amendment No. 27.
(g) Form of Distribution and Service Plan pursuant to Rule 12b-1 between
the Registrant, on behalf of Fidelity Advisor California Tax-Free Income
Fund, Class B, and Fidelity Distributors Corporation, was electronically
filed and is incorporated by reference to Post Effective Amendment No. 19.
(h) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Global Resources Fund: Class B was electronically filed and is
incorporated herein by reference to Exhibit 15(h) to Post-Effective
Amendment No. 29.
(i) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Global Resources Fund: Institutional Class was electronically filed
and is incorporated herein by reference to Exhibit 15(i) to Post-Effective
Amendment No. 29.
(j) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor High Income Municipal Fund: Institutional Class was electronically
filed and is incorporated herein by reference to Exhibit 15(j) to
Post-Effective Amendment No. 29.
(k) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor New York Tax-Free Fund: Institutional Class is electronically filed
herein as Exhibit 15(k).
(16) (a) Schedule of computations for performance calculations was
electronically filed and is incorporated herein by reference to Exhibit
16(a) to Post-Effective Amendment No. 29.
(b) Schedule of computations for moving average calculations was
electronically filed and is incorporated herein by reference to Exhibit
16(b) to Post-Effective Amendment No. 29.
(c) Schedule of computations for 30-day yield calculations was
electronically filed and is incorporated herein by reference to Exhibit
16(b) to Post-Effective Amendment No. 29.
(17) A Financial Data Schedule for Fidelity Advisor High Income Municpal
Fund and Fidelity Advisor Global Resources Fund were electronically filed
and are incorporated herein by reference as Exhibit 17 to Post-Effective
Amendment No. 29.
(18) Rule 18f-3 Plan was electronically filed and is incorporated herein
by reference to Exhibit 18 to Post-Effective Amendment No. 29.
Item 25. Persons Controlled by or Under Common Control with Registrant
The Board of Trustees of Registrant is the same as the boards of the other
Fidelity funds, each of which has Fidelity Management & Research Company as
its investment adviser. In addition, the officers of these funds are
substantially identical. Nonetheless, Registrant takes the position that
it is not under common control with these other funds since the power
residing in the respective Boards and officers arises as the result of an
official position with the respective funds.
Item 26. Number of Holders of Securities
July 31, 1995
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity Advisor High Income Municipal Fund: Class A 17,825
Fidelity Advisor High Income Municipal Fund: Class B 860
Fidelity Advisor High Income Municipal Fund: Institutional Class 1
Fidelity Advisor Global Resources Fund: Class A 19,835
Fidelity Advisor Global Resources Fund: Class B 44
Fidelity Advisor Global Resources Fund: Institutional Class 1
Fidelity Advisor California Tax-Free Income Fund: Class A 1
Fidelity Advisor California Tax-Free Income Fund: Class B 1
Fidelity Advisor California Tax-Free Income Fund: Institutional Class 0
Fidelity Advisor New York Tax-Free Fund: Class A 1
Fidelity Advisor New York Tax-Free Fund: Class B 1
Fidelity Advisor New York Tax-Free Fund: Institutional Class 0
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee, or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action suit or
proceeding in which he is involved by virtue of his service as a trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.; President
and Trustee of funds advised by FMR.
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman and Director of FMR.
Robert Beckwitt Vice President of FMR and of funds advised by FMR.
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Dwight Churchill Vice President of FMR (1993).
William Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR (1993).
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Equity Division Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Richard Haberman Senior Vice President of FMR (1993).
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephen P. Jonas Treasurer and Vice President of FMR (1993)); Treasurer of
FMR Texas Inc. (1993), Fidelity Management & Research
(U.K.) Inc. (1993), and Fidelity Management & Research
(Far East) Inc. (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income
Division Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Malcolm W. MacNaught III Vice President of FMR (1993).
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Andrew Offit Vice President of FMR (1993).
Judy Pagliuca Vice President of FMR (1993).
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Lee Sandwen Vice President of FMR (1993).
Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund advised by
FMR.
Thomas T. Soviero Vice President of FMR (1993).
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Thomas Sweeney Vice President of FMR (1993).
Donald Taylor Vice President of FMR (1993) and of funds advised by
FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of
FMR; Vice President, Legal of FMR Corp.; and Secretary
of funds advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
FMR U.K. provides investment advisory services to Fidelity Management &
Research Company and Fidelity Management Trust Company. The directors and
officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR U.K.; Chairman of the
Executive Committee of FMR; Chief Executive Officer of FMR
Corp.; Chairman of the Board and a Director of FMR, FMR
Corp., FMR Texas Inc., and Fidelity Management & Research
(Far East) Inc.; President and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR U.K.; President of FMR;
Managing Director of FMR Corp.; President and a Director of
FMR Texas Inc. and Fidelity Management & Research (Far
East) Inc.; Senior Vice President and Trustee of funds advised
by FMR.
Richard C. Habermann Senior Vice President of FMR U.K.; Senior Vice President of
Fidelity Management & Research (Far East) Inc.; Director of
Worldwide Research of FMR.
Rick Spillane Senior Vice President and Director of Operations and
Compliance of FMR U.K. (1993).
Stephen P. Jonas Treasurer of FMR U.K. (1993), Fidelity Management &
Research (Far East) Inc. (1993), and FMR Texas Inc. (1993);
and Treasurer and Vice President of FMR (1993).
David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management & Research
(Far East) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
FMR Far East provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The directors
and officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman of the
Executive Committee of FMR; Chief Executive Officer of
FMR Corp.; Chairman of the Board and a Director of
FMR, FMR Corp., FMR Texas Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Far East; President of
FMR; Managing Director of FMR Corp.; President and a
Director of FMR Texas Inc. and Fidelity Management &
Research (U.K.) Inc.; Senior Vice President and Trustee
of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice
President of Fidelity Management & Research (U.K.)
Inc.; Director of Worldwide Research of FMR.
William R. Ebsworth Vice President of FMR Far East.
Bill Wilder Vice President of FMR Far East (1993).
Stephen P. Jonas Treasurer of FMR Far East (1993), Fidelity Management
& Research (U.K.) Inc. (1993), and FMR Texas Inc.
(1993); and Treasurer and Vice President of FMR
(1993).
David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity Management &
Research (U.K.) Inc.; Secretary of FMR Texas Inc.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109, or the funds' respective
custodian: Brown Brothers Harriman & Co., 40 Water Street, Boston, MA
(Advisor Global Resources) and United Missouri Bank, N.A., 1010 Grand
Avenue, Kansas City, MO (Advisor High Income Municipal, Advisor California
Tax-Free Income Fund, and Advisor New York Tax-Free Fund).
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant, on behalf of Fidelity Advisor Global Resources Fund
and Fidelity Advisor High Income Municipal Fund undertakes, provided the
information required by Item 5A is contained in the annual report, to
furnish each person to whom a prospectus has been delivered, upon their
request and without charge, a copy of the Registrant's latest annual report
to shareholders.
(b) The Registrant undertakes to file a Post-Effective Amendment, using
financial statements for Fidelity Advisor California Tax-Free Income Fund
and Fidelity Advisor New York Tax-Free Fund, which need not be certified,
within six months of the fund's effectiveness, unless permitted by the SEC
to extend this period.
(c) The Registrant undertakes for Fidelity Advisor New York Tax-Free
Fund and Fidelity Advisor California Tax-Free Income Fund: (1) to call a
meeting of shareholders for the purpose of voting upon the questions of
removal of a trustee or trustees, when requested to do so by record holders
of not less than 10% of its outstanding shares; and (2) to assist in
communications with other shareholders pursuant to Section 16(c)(1) and
(2), whenever shareholders meeting the qualifications set forth in Section
16(c) seek the opportunity to communicate with other shareholders with a
view toward requesting a meeting.
(d) The Registrant, on behalf of each fund, undertakes to deliver to each
person who has received the prospectus or annual or semiannual financial
report for a fund in an electronic format, upon his or her request and
without charge, a paper copy of the prospectus or annual or semiannual
report for the fund.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Annuity Fund Fidelity Income Fund
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Djinis, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this fifteenth day of December, 1994.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Marvin L. Mann
Ralph F. Cox Marvin L. Mann
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Annuity Fund Fidelity Institutional Trust
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series II Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust Spartan U.S. Treasury Money Market
Fidelity Exchange Fund Fund
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as President and Board Member (collectively, the "Funds"), hereby
severally constitute and appoint J. Gary Burkhead, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to
sign for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorney-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission. I hereby ratify
and confirm all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d December 15, 1994
Edward C. Johnson 3d
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for the effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 30 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston, and MA, on the 14th day of August, 1995.
Fidelity Advisor Series V
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee August 14, 1995
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Kenneth A. Rathgeber Treasurer August 14, 1995
Kenneth A. Rathgeber
/s/J. Gary Burkhead Trustee August 14, 1995
J. Gary Burkhead
/s/Ralph F. Cox * Trustee August 14, 1995
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee August 14, 1995
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee August 14, 1995
Richard J. Flynn
/s/E. Bradley Jones * Trustee August 14, 1995
E. Bradley Jones
/s/Donald J. Kirk * Trustee August 14, 1995
Donald J. Kirk
/s/Peter S. Lynch * Trustee August 14, 1995
Peter S. Lynch
/s/Edward H. Malone * Trustee August 14, 1995
Edward H. Malone
/s/Marvin L. Mann_____* Trustee August 14, 1995
Marvin L. Mann
/s/Gerald C. McDonough* Trustee August 14, 1995
Gerald C. McDonough
/s/Thomas R. Williams * Trustee August 14, 1995
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated December 15, 1994 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated December 15, 1994 and filed herewith.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our Firm in the Statement of Additional
Information in Post-Effective Amendment No. 30 to the Registration
Statement on Form N-1A of Fidelity Advisor Series V: Fidelity Advisor New
York Tax-Free Fund under the heading"Auditor" in the Statement of
Additional Information.
/s/COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
August 11, 1995
EXHIBIT 15(K)
DISTRIBUTION AND SERVICE PLAN
Fidelity Advisor New York Tax-Free Fund
Institutional Class Shares
June 30, 1995
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act") for
Institutional Class Shares of Fidelity Advisor New York Tax-Free Fund
("Institutional Class"), a class of shares of Fidelity Advisor New York
Tax-Free Fund (the "Fund"), a series of Fidelity Advisor Series V (the
"Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor")
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers for the Fund's shares of
beneficial interest ("Shares"). Under the agreement, the Distributor pays
the expenses of printing and distributing any prospectuses, reports and
other literature used by the Distributor, advertising, and other
promotional activities in connection with the offering of Shares of the
Fund for sale to the public. It is understood that the Adviser may
reimburse the Distributor for these expenses from any source available to
it, including management fees paid to it by the Fund.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of Shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Fund, processing shareholder transactions and providing such other
shareholder services as the Trust may reasonably request.
4. The Fund will not make separate payments as a result of this Plan to
the Adviser, Distributor or any other party, it being recognized that the
Fund presently pays, and will continue to pay, a management fee to the
Adviser. To the extent that any payments made by the Fund to the Adviser,
including payment of management fees, should be deemed to be indirect
financing of any activity primarily intended to result in the sale of
Shares of the Fund within the context of Rule 12b-1 under the Act, then
such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Fund" (as defined in the Act), the
plan having been approved by a vote of a majority of the Trustees of the
Trust, including a majority of Trustees who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect from the date specified above until June 30 1996, and from year to
year thereafter, provided, however, that such continuance is subject to
approval annually by a vote of a majority of the Trustees of the Trust,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may be
amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Fund to finance any activity
primarily intended to result in the sale of Shares of the Fund, to increase
materially the amount spent by the Fund for distribution, or any amendment
of the Management Contract to increase the amount to be paid by the Fund
thereunder shall be effective only upon approval by a vote of a majority of
the outstanding voting securities of the Fund, and (b) any material
amendments of this Plan shall be effective only upon approval in the manner
provided in the first sentence in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Fund.
8. During the existence of this Plan, the Trust shall require the Adviser
and/or Distributor to provide the Trust, for review by the Trust's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of Shares of the Fund (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of Shares of the Fund.
10. Consistent with the limitation of shareholder liability as set forth
in the Trust's Declaration of Trust, any obligation assumed by
Institutional Class pursuant to this Plan and any agreement related to this
Plan shall be limited in all cases to Institutional Class and its assets
and shall not constitute an obligation of any shareholder of the Trust or
of any other class of the Fund, series of the Trust or class of such
series.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
