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. 26 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
Amendment No. 26 [ ]
Fidelity Advisor Series V _
_ _ _
_
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, MA 02109 _
_ _
_ _ _
(Address of Principal Executive Offices) (Zip Code)
(6170 563-7000
_ _
_ _ _
Registrant's Telephone Number, Including Area Code
Arthur Loring, Esq.
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 March 3, 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 will file the notice required by such
Rule on or about April 30, 1995.
FIDELITY ADVISOR CALIFORNIA TAX-FREE INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
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1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Key Facts; Who May Want to Invest
3 a .............................. *
b .............................. *
c .............................. Performance
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices
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; Charter
ii........................... FMR and Its Affiliates; Charter; Breakdown of
Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Charter; Breakdown of Expenses; Cover Page;
FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates
5A .............................. Performance
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 ............................. FMR and Its Affiliates
c .............................. 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
c .............................. Sales Charge Reductions and Waivers
d .............................. How to Buy Shares
e .............................. Transaction Details
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
The fund seeks a high level of current income free from federal and
California income tax by investing primarily in municipal securities.
FIDELITY
ADVISOR CALIFORNIA TAX-FREE
INCOME
FUND - 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 copy of
the fund's most recent financial report and portfolio listing or a copy of
the Statement of Additional Information (SAI) dated March 3, 1995. The SAI
has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference (legally forms a part of the prospectus).
For a free copy of either document, call your Investment Professional.
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.
A Fund of Fidelity Advisor Series V
PROSPECTUS
MARCH 3, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
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 DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES
TRANSACTION DETAILS Share price calculations and
the timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
SALES CHARGE REDUCTIONS AND WAIVERS
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
The fund is offered 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 California personal income taxes. Both the
fund ' s level of risk and its potential reward depend on the quality
and maturity of its investments. Lower-quality and longer-term investments
typically carry higher risk and yield potential.
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 economic and political news. The fund is not, in
itself, a balanced investment plan. When you sell your fund shares,
they may be worth more or less than what you paid for them. You should
consider your tolerance for risk when making an investment decision.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy,
sell , exchange or hold shares of a 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 on purchases None 4.00%
(as a % of the lesser of original purchase price [A ]
or redemption proceeds)
Maximum sales charge on None None
reinvested distributions
Redemption fee None None
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Exchange fee None None
Annual account maintenance fee
$12.0 $12.0
(for accounts under $2,500) 0 0
</TABLE>
[A] Declines over 5 years from 4.00% to 0%.
ANNUAL OPERATING EXPENSES are paid out of the fund'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, a shareholder service fee. Distribution fees are paid by each
class to Fidelity Distributors Corporation (FDC) for services and
expenses in connection with the distribution of the applicable class's
shares. Shareholder service fees are paid by Class B of the fund 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 c lass' 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 .41% .41%
12b-1 fee (including 0.25% .25% 1.00
Shareholder Service Fee
%*
for Class B shares)
Other expenses .19% .19%
Total operating expenses .85% 1.60
%
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 $ $ 9 $ $ 27
Class B $ [A] $ 16 $ [A] $ 50
[A] Reflects deduction of application 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.
PERFORMANCE
Each class's performance is affected by the expenses of that class;
accordingly, performance may be different between the classes.
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 and cumulative total returns usually will include the effect
of paying the maximum applicable sales charge.
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.
In calculating yield, the fund may from time to time use a security's
coupon rate instead of its yield to maturity in order to reflect the risk
premium on that security. This practice will have the effect of reducing
the fund's yield.
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
CALIFORNIA TAX-FREE INCOME 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
t ransfer ag ent will mail proxy materials in advance,
including a voting card and informat i on 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 January 31, 1995 , FMR advised funds having approximately 22 million
shareholder accounts with a total value of more than $250 billion.
PORTFOLIO MANAGER INFORMATION FOR NEW FUND WILL BE FILED BY SUBSEQUENT
AMENDMENT AND INSERTED HERE.
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 certain
transfer agent servicing functions for the fund.
FMR Corp. is the ultimate parent company of FMR. Through ownership of
voting common stock, members of the Edward C. Johnson 3d family form a
controlling group with respect to FMR Corp. Changes may occur in the
Johnson family group, through death or disability, which would result in
changes in each individual family member 's holding of stock. Such
changes could result in one or more family members becoming holders of over
25% of the stock. FMR Corp. has received an opinion of counsel that changes
in the composition of the Johnson family group under these circumstances
would not result in the termination of the fund's management or
distribution contracts and, accordingly, would not require a shareholder
vote to continue operation under those contracts.
United Missouri Bank, N.A (UMB) is the fund's tr ansfer ag ent,
although it employs State Street Bank & Trust Company (State Street) to
perform these functions for Class A and FIIOC to perform these
functions for 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 seeks high current income free from federal income tax and
California income tax by investing primarily in municipal securities of
investment grade quality, although it can invest in lower-quality
securities. FMR normally invests so that at least 80% of the fund's net
assets will be invested in securities whose interest is free from federal
and California income taxes.
The fund has no restrictions on maturity, but it generally invests in
long-term bonds and maintains a dollar-weighted average maturity of 20
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 re paid 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, and other economic and
political news. In general, bond prices rise when interest rates fall, and
vice versa. This effect is usually more pronounced for longer-term
securities. Lower-quality securities offer higher yields, but also carry
more risk. FMR may use various investment techniques to hedge the fund's
risks, but there is no guarantee that these strategies will work as
intended. When you sell your shares, they may be worth more or less than
what you paid for them.
The fund's performance is closely tied to the economic and political
conditions within the state of California. In recent years California
experienced substantial financial difficulties related to the severe
recession from 1990-93, which caused substantial, broad-based revenue
shortfalls. Cutbacks in state assistance could adversely affect the
financial condition of cities, counties and education districts facing a
decline in their own tax collections. California's long-term credit rating
has been reduced in the past several years. California voters in the past
have approved amendments to the California Constitution and other measures
that limit the taxing and spending authority of California governmental
entities, and future voter initiatives could result in adverse consequences
affecting California municipal bonds.
On December 6, 1994, Orange County (the County) and its pooled
investment funds (the Pools) filed for protection under Chapter 9 of the
federal Bankruptcy Law, as a result of investment losses in the Pools,
which have been estimated by the County at 22%, or approximately $1.7
billion. Over 180 government agencies, most but not all located in the
County, had investments in the Pools. The County and some of the agencies
participating in the Pools have defaulted on certain of their obligations
because of the bankruptcy, and other participants in the Pools may default
on obligations in the future. These factors could reduce the credit
standing of certain issuers of California municipal bonds.
If you are subject to the federal alternative minimum tax, you should note
that the fund may invest all of its assets in municipal securities issued
to finance private activities. The interest from these investments is a
tax-preference item for purposes of the tax.
FMR normally invests the fund's assets according to its investment strategy
and does not expect to invest in federally or state taxable obligations.
The fund reserves the right to invest without limitation in short-term
instruments, to hold a substantial amount of uninvested cash, or to invest
more than normally permitted in federally taxable obligations for
temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, and strategies FMR may employ in
pursuit of the fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of the fund's policies
and limitations and more detailed information about the fund's investments
is contained in the fund's SAI. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
fund achieve its goal. Current holdings and recent investment strategies
are described in the fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, call 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. 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.
Lower-quality debt securities (sometimes called "municipal junk bonds")
may have speculative characteristics, and involve greater risk of default
or price changes due to changes in the issuer's creditworthiness, or they
may already be in default. The market prices of these securities may
fluctuate more than higher-quality securities and may decline significantly
in periods of general or regional economic difficulty.
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
in vests in lower than Baa debt securities to 35% of
its assets.
ASSET-BACKED SECURITIES may 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.
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 fund may own a municipal
security directly or through a participation interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by the state
of California or its counties, municipalities, authorities, or other
subdivisions. The ability of issuers to repay their debt can be affected by
many factors that impact the economic vitality of either the state or a
region within the state.
Other state tax-free securities include general obligations of U.S.
territories and possessions such as Guam, the U.S. Virgin Islands, and
Puerto Rico, and their political subdivisions and public corporations. The
economy of Puerto Rico is closely linked to the U.S. economy, and will
depend on the strength of the U.S. dollar, interest rates, the price
stability of oil imports, and the continued existence of favorable tax
incentives. Recent legislation revised these incentives, but the government
of Puerto Rico anticipates only a slight reduction in the average real
growth rates for the economy.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
VARIABLE AND FLOATING RATE SECURITIES may have interest rates that
move in tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, the fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, entering into currency exchange contracts or swap
agreements, purchasing indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some securities, including illiquid securities, may be subject
to legal restrictions. Difficulty in selling securities may result in a
loss or may be costly to the fund.
RESTRICTIONS. The fund may not purchase a security if, as a result, more
than 10% of its net assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
these changes, and to changes in the market value of a single issuer or
industry.
RESTRICTIONS. The fund is considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, the fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S. government
securities. The fund may invest more than 25% of its total assets in
tax-free securities that finance similar types of projects.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph s 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 and
California income taxes by investing primarily in municipal securities.
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 at right .
FMR may, from time to time, agree to reimburse the fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by the fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease the fund's expenses and boost its
performance.
MANAGEMENT FEE
The MANAGEMENT FEE is calculated and paid to FMR every month. The 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 January , 199 5 ,
the group fee rate was .1556 %. 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 with State Street pursuant to which
State Street performs certain transfer agency, dividend disbursing and
shareholder services for Class A shares. State Street has entered into
sub-arrangements with FIIOC pursuant to which FIIOC performs certain
transfer agency, dividend disbursing and shareholder services for Class A
shares of the fund. UMB has entered into sub-arrangements with FIIOC
pursuant to which FIIOC performs certain transfer agency, dividend
disbursing and shareholder services for Class B shares. UMB has entered
into sub-arrangements with Fidelity Service Co. (FSC) pursuant to
which FSC calculates the 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 State Street, FIIOC, and FSC by UMB, which is reimbursed by the
applicable class or the fund, as appropriate, for such payments. State
Street pays FIIOC a portion of its fee for Class A accounts for which FIIOC
provides limited services, or its full fee for Class A accounts which FIIOC
maintains on its behalf.
Class A shares of the fund have adopted a DISTRIBUTION AND SERVICE PLAN.
Under the Plan, Class A of the fund 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 of 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 monthly 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 of the fund 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 shares 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 the fund's shareholders.
The fund also pays other expenses, such as legal, audit, and custodian
fees; 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 200% for its
first fiscal period ending October 31, 1995. This rate will vary from year
to year. High turnover rates increase transaction costs and may increase
taxable capital gains. FMR considers these effects when evaluating the
anticipated benefits of short-term investing.
YOUR ACCOUNT
TYPES OF ACCOUNTS
If you invest through an Investment Professional, read that 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
Once each business day, two share prices are calculated for Class A shares
of the f und: 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 on page 20. 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 f und 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 17 .
Shares are purchased at the next offering price or NAV, as applicable,
calculated after your order is received and accepted. The offering price
and NAV are 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 five 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 available for Class A shares upon request only.
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) Open your account by exchanging from the same class of
another Fidelity Advisor 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
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
(small solid bullet) Contact your Investment (small solid bullet) Contact your Investment
PHONE YOUR Professional or, if you are investing Professional or, if you are investing
INVESTMENT PROFESSIONAL through a Broker-Dealer or Insurance through a Broker-Dealer or
Representative call 1-800-522-7297. Insurance Representative call
If you are investing through a Bank 1-800-522-7297. If you are
Representative call 1-800-843-3001. investing through a Bank
(small solid bullet) Exchange from another Fidelity Representative call
Advisor fund account with the same 1-800-843-3001.
registration, including name, (small solid bullet) Exchange from another Fidelity
address, and taxpayer ID number. Advisor fund account with the same
registration, including name,
address, and taxpayer ID number.
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<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (small solid bullet) Complete and sign the account (small solid bullet) Make your check payable to
application. Make your check "Fidelity Advisor California Tax-Free
payable to "Fidelity Advisor Income Fund" and note the
California Tax-Free Income Fund" applicable class. Indicate your fund
and note the applicable class. Mail to account number on your check and
the address indicated on the mail to the address printed on your
application. 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 (small solid bullet) Bring your check to your Investment
check to your Investment Professional.
Professional.
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Wire (wire_graphic) (small solid bullet) Not available (small solid bullet) Wire to: State Street Bank & Trust
Co.
routing # 01100002
ATTN: Custody &
Shareholder Services Division
CREDIT: Fidelity
Advisor California Tax-Free
Income Fund
DDA#9902-908-4
FBO: (Account Name)
(Account Number)
Specify "Fidelity Advisor California
Tax-Free Income 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,
less any applicable CDSC. NAV is normally calculated at 4:00 p.m.
Eastern time.
TO SELL CERTIFICATE SHARES, call 1-800-522-7297 for instructions. The
fund no longer issues certificate shares.
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 Advisor 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 purchase 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 All account types (small solid bullet) Maximum check request: $100,000.
1-800-221-5207 OR YOUR (small solid bullet) You may exchange to the same
INVESTMENT PROFESSIONAL class of other Fidelity Advisor funds
if both accounts are registered with
the same name(s), address, and
taxpayer ID number.
(phone_graphic)
Mail or in Person
(mail_graphic)(hand_graphic) Individual, Joint Tenant, (small solid bullet) The letter of instruction (with
Sole Proprietorship, signature guaranteed) must be
UGMA, UTMA signed by all persons required to
sign for transactions, exactly as
Trust their names 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 (with
signature guaranteed) .
Executor, Administrator, (small solid bullet) For instructions contact your
Conservator/Guardian 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.
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:
$500.00
(small solid bullet) Your wire redemption request must
be received by the t ransfer a gent
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 t ransfer a gent 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 (monthly)
(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 extra 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 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 SUBSEQUENT Monthly, bimonthly, (small solid bullet) For a new account, complete the appropriate
$1,000 $100[A] quarterly,
section on the application.
or semi-annually (small solid bullet) For existing accounts, call your Investment
Professional for an 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.
</TABLE>
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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<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly,
(small solid bullet) To establish, call your Investment Professional after
semi-annually, or both accounts are 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) Call at least 2 business days prior to your next
scheduled exchange date..
</TABLE>
[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. The fund offers 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 interest on
state tax-free investments, they will be free from California state
personal income tax. Distributions derived from obligations that are not
California state tax-free obligations, as well as distributions from short
or long-term capital gains, are subject to California state personal income
tax. Corporate taxpayers should note that the fund's income dividends and
other distributions are not exempt from California state franchise or
corporate 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 f und 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 F UND IS OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. Each class's NAV or offering price, as applicable and
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
f und's investments, cash, and other assets, subtracting that class's
pro rata share of the value of the f und's liabilities, subtracting
the liabilities allocated to that class, and dividing by the number of
shares of that class that are outstanding.
The f und'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.
CLASS A 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 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.
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" ON PAGE 9 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 convert automatically to Class A
shares of the same Fidelity Advisor f und. 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. (A portion of Class B shares that had been acquired previously by
exchange also may convert, representing the appreciated value of, and/or
reinvested dividends or capital gains earned on, Class B shares prior to
their exchange.)
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 f unds, 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 a 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 request 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
cancelled 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 f und 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,
Federal Reserve check, or direct deposit instead.
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. 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 f und may hold payment on redemptions until
it is reasonably satisfied that investments made by check or 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.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500. The fee, which is payable
to the transfer agent, is designed to offset in part the relatively higher
costs of serving smaller accounts.
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
f und for the same class of shares of other Fidelity Advisor
f unds 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) 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
f und receives or anticipates simultaneous orders affecting
significant portions of the f und's assets. In particular, a pattern
of exchanges that coincides with a "market timing" strategy may be
disruptive to the f und.
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 f und's SAI for more details about each plan or call your
Investment Professional.
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 fund, 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 Fidelity Advisor funds. (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.
If you purchased your shares through a Broker-Dealer or Insurance
Representative, call 1-800-843-3001.
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 by a trust institution or bank trust department investing on
its own behalf or on behalf of its clients;
6. Purchased in an account for which a bank or broker-dealer charges an
asset management fee, provided the bank or broker-dealer has an Agreement
with FDC;
7. Purchased as part of an employee benefit plan having more than 200
eligible employees or a minimum of $1 million of plan assets invested in
Fidelity Advisor mutual funds;
8. 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) or had a minimum of $3 million in plan assets invested in
Fidelity funds; or (ii) from an insurance company separate account
qualifying under number (9) 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;
9. 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 mutual funds;
10. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency;
11. Purchased with redemption proceeds from other mutual fund complexes on
which you have previously paid a front-end sales charge or CDSC.
Qualification for front-end sales charge waivers must be cleared through
FDC in advance, and employee benefit plan investors must meet additional
requirements specified in the fund's SAI.
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 CALIFORNIA TAX-FREE INCOME 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 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR
ii ............................ Trustees and Officers
iii ............................ Management Contracts
b ............................ Management Contracts
c, d ............................ Contracts with Companies Affiliated with FMR
e ............................ *
f ............................ Distribution and Service Plans
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with Companies Affiliated with FMR
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 of Portfolio Securities
c ............................ *
20 Distributions and Taxes
21 a, b ............................ Contracts with Companies Affiliated with FMR
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements will be filed by subsequent
amendment
</TABLE>
* Not Applicable
FIDELITY ADVISOR CALIFORNIA TAX-FREE INCOME FUND: CLASS A
FIDELITY ADVISOR CALIFORNIA TAX-FREE INCOME FUND: CLASS B
A FUND OF FIDELITY ADVISOR SERIES V
STATEMENT OF ADDITIONAL INFORMATION
MARCH 3, 1995
This Statement is not a prospectus but should be read in conjunction with
the current Prospectus for Fidelity Advisor California Tax-Free Income fund
(the fund) (dated March 3, 1995). The fund offers Class A and Class B
shares to retail investors. Please retain this document for future
reference. Additional copies of the Prospectus and this Statement of
Additional Information are available without charge upon request from
Fidelity Distributors Corporation, 82 Devonshire Street, Boston,
Massachusetts 02109, or from your investment professional.
Nationwide 800-840-6333
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Factors Affecting California
Special Factors Affecting Puerto Rico
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distribution and Taxes
FMR
Trustees and Officers
Management Contract and Other Services
Distribution and Service Plan
Description of the Trust
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
United Missouri Bank, N.A. (UMB)
SUB TRANSFER AGENT FOR CLASS A
State Street Bank and Trust (State Street)
TRANSFER AGENT FOR CLASS B
Fidelity Investments Institutional Operations Company (FIIOC)
CAX-SAI-395
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 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.
(vi) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(vii) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to purchases
of debt securities.
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) 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.
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 a 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.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. The fund may receive fees for entering
into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because the fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If the fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When the fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the fund could miss a favorable price or yield opportunity, or could suffer
a loss.
The fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, or may experience in the future, problems, including (a) the
effects of inflation upon construction and operating costs, (b) the
availability and cost of fuel, (c) the availability and cost of capital,
(d) the effects of conservation on energy demand, (e) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (f) timely and sufficient rate
increases, (g) opposition to nuclear power, and (h) increased competition.
FEDERALLY TAXABLE OBLIGATIONS. The fund does not intend to invest in
securities whose interest is federally taxable; however, from time to time,
the fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, the fund may invest in obligations whose interest is federally
taxable pending the investment or reinvestment in municipal securities of
proceeds from the sale of its shares or sales of portfolio securities.
Should the fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The fund's standards for high quality, taxable obligations are
essentially the same as those described by Moody's Investors Service, Inc.
(Moody's) in rating corporate obligations within its two highest ratings of
Prime-1 and Prime-2, and those described by Standard & Poor's Corporation
(S&P) in rating corporate obligations within its two highest ratings of A-1
and A-2.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the California 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 funds' holdings would be affected and the Trustees would
reevaluate the funds' investment objectives and policies.
The fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities
of portfolio securities, sales of fund shares, or in order to meet
redemption requests, the fund may hold cash that is not earning income. In
addition, there may be occasions when, in order to raise cash to meet
redemptions, the fund may be required to sell securities at a loss.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures can
be held until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
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;
medical and technological advances which dramatically alter the need for
health services or the way in which such services are delivered; and
efforts by employers, insurers, and governmental agencies to reduce the
costs of health insurance and healthcare services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They are secured by
the revenues derived from mortgages purchased with the proceeds from the
bond issue. It is extremely difficult to predict the supply of available
mortgages to be purchased with the proceeds of an issue or the future cash
flow from the underlying mortgages. Consequently, there are risks that
proceeds will exceed supply, resulting in early retirement of bonds, or
that the 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.
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 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 were 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. The fund has received permission from the SEC
to lend money to and borrow money from other funds advised by FMR or its
affiliates, but will participate in the interfund borrowing program only as
a borrower. Interfund loans normally will extend overnight, but can have a
maximum duration of seven days. The fund will borrow through the program
only when the costs are equal to or lower than the costs of bank loans.
Loans may be called on one day's notice, and the fund may have to borrow
from a bank at a higher interest rate if an interfund loan is called or not
renewed.
INVERSE FLOATERS. The fund may invest in inverse floaters, which are
instruments whose interest rates bear an inverse relationship to the
interest rate on another security or the value of an index. Changes in the
interest rate on the other security or index inversely affect the residual
interest rate paid on the inverse floater, with the result that the inverse
floater's price will be considerably more volatile than that of a
fixed-rate bond. For example, a municipal issuer may decide to issue two
variable-rate instruments instead of a single long-term, fixed-rate bond.
The interest rate on one instrument reflects short-term interest rates,
while the interest rate on the other instrument (the inverse floater)
reflects the approximate rate the issuer would have paid on a fixed-rate
bond, multiplied by two, minus the interest rate paid on the short-term
instrument. Depending on market availability, the two portions may be
recombined to form a fixed-rate municipal bond. The market for inverse
floaters is relatively new.
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 Statement of Additional Information, are not
fundamental policies and 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.
LOWER-QUALITY MUNICIPAL SECURITIES. The fund may invest a portion of its
assets in lower-quality municipal securities as described in the
Prospectus.
While the market for California municipal securities is considered to be
substantial, adverse publicity and changing investor perceptions may affect
the ability of outside pricing services used by the fund to value its
portfolio securities, and the fund's ability to dispose of lower-quality
bonds. The outside pricing services are monitored by FMR and reported to
the Board to to determine whether the services are furnishing prices that
accurately reflect fair value. The impact of changing investor perceptions
may be especially pronounced in markets where municipal securities are
thinly traded.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to
be in the best interest of the fund's shareholders.
MUNICIPAL LEASE OBLIGATIONS. The fund may invest a portion of its assets in
municipal leases and participation interests therein. These obligations,
which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, the fund will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives
the fund a specified, undivided interest in the obligation in proportion to
its purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
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.
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.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed-upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement is a taxable
obligation which involves the obligation of the seller to pay the
agreed-upon price, which obligation is in effect secured by the value (at
least equal to the amount of the agreed-upon resale price and marked to
market daily) of the underlying security. The fund may engage in repurchase
agreements with respect to any security in which it is authorized to
invest. While it does not presently appear possible to eliminate all risks
from these transactions (particularly the possibility of a decline in the
market value of the underlying securities, as well as delays and costs to
the fund in connection with bankruptcy proceedings), it is the fund's
current policy to limit repurchase agreements to parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
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
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, the fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for the fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating interest
rates and carry rights that permit holders to demand payment of the unpaid
principal balance plus accrued interest from the issuers or certain
financial intermediaries. Floating rate instruments have interest rates
that change whenever there is a change in a designated base rate while
variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value
for the instrument that approximates its par value.
The fund may invest in fixed-rate bonds that are subject to third party
puts and in participation interests in such bonds held in trust or
otherwise. These bonds and participation interests have tender options or
demand features that permit 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 Internal Revenue Service (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.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer 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.
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 CALIFORNIA
Certain California constitutional amendments, legislative measures,
executive orders, administrative regulations, and voter initiatives, as
discussed below, could adversely affect the market values and marketability
of, or result in default of, existing obligations, including obligations
that may be held by the fund. Obligations of the state or local governments
may also be affected by budgetary pressures affecting the State of
California (the State) and economic conditions in the State. Interest
income to the fund could also be adversely affected. The following
discussion highlights only some of the more significant financial trends
and problems, and is based on information drawn from official statements
and prospectuses relating to securities offerings of the State, its
agencies, or instrumentalities, as available as of the date of this SAI.
FMR has not independently verified any of the information contained in such
official statements and other publicly available documents, but is not
aware of any fact which would render such information inaccurate.
CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS
LIMITATION ON TAXES. Certain obligations held by the fund may be
obligations of issuers that rely in whole or in part, directly or
indirectly, on AD VALOREM property taxes as a source of revenue. The taxing
powers of local governments and districts are limited by Article XIIIA of
the California Constitution, enacted by the voters in 1978 and commonly
known as "Proposition 13." Briefly, Proposition 13 limits to 1% of full
cash value the rate of AD VALOREM property taxes on real property and
generally restricts the increase in taxes upon reassessment of property to
2% per year, except upon new construction or change of ownership (subject
to a number of exemptions). Taxing entities may, however, raise AD VALOREM
taxes above the 1% limit to pay debt service on voter-approved bonded
indebtedness.
Under Article XIIIA, the basic 1% AD VALOREM tax levy is applied against
the assessed value of property as of the owner's date of acquisition (or as
of March 1, 1975 if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits were filed challenging the acquisition-based
assessment system of Proposition 13, but on June 18, 1992, the U.S. Supreme
Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through AD
VALOREM property taxes above the 1% limit; it also requires voters of any
government unit to give 2/3 approval to levy any "special tax." However,
court decisions allowed non-voter-approved levies of "general taxes" which
were not dedicated to a specific use. In response to these decisions, the
voters of the State in 1986 adopted an initiative statute which imposed
significant new limits on the ability of local entities to raise or levy
general taxes, except by receiving majority local voter approval.
Significant elements of this initiative, "Proposition 62," have been
overturned in recent court cases, but efforts may continue to further
restrict the ability of local government agencies to levy or raise taxes.
APPROPRIATIONS LIMITS. The State and its local governments are subject to
an annual "appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB
prohibits the State or any covered local government from spending
"appropriations subject to limitation" in excess of the appropriations
limit imposed. "Appropriations subject to limitation" are authorizations to
spend "proceeds of taxes," which consist of tax revenues and certain other
funds, including proceeds from regulatory licenses, user charges, or other
fees to the extent that such proceeds exceed the cost of providing the
product or service; but "proceeds of taxes" for local governments exclude
most State subventions. No limit is imposed on appropriations of funds
which are not "proceeds of taxes," such as reasonable user charges or fees
and certain other non-tax funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations
limit are: (1) the debt service cost of bonds issued or authorized prior to
January 1, 1979, or subsequently authorized by the voters; (2)
appropriations arising from certain emergencies declared by the Governor;
(3) appropriations for certain capital outlay projects; and (4)
appropriations by the State of post-1989 increases in gasoline taxes and
vehicle weight fees.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized by Proposition 111 to more closely follow
growth in the State's economy. For the 1990-91 fiscal year, each unit of
government has recalculated its appropriations limit by taking the actual
1986-87 limit and applying the Proposition 111 annual adjustments forward
to 1990-91. This was expected to raise the limit in most cases.
Under Proposition 111, "excess" revenues are measured over a two-year
cycle. With respect to local governments, excess revenues must be returned
by a revision of tax rates or fee schedules within the two subsequent
fiscal years. The appropriations limit for a local government may be
overridden by referendum under certain conditions for up to four years at a
time. With respect to the State, 50% of any excess revenues is to be
distributed to K-12 school and community college districts (collectively,
K-14 districts) and the other 50% is to be refunded to taxpayers.
In the years immediately following enactment, very few California
governmental entities operated near their appropriations limit. In the
mid-to-late 1980's, many entities were at or approaching their limit, and
several successfully obtained voter approval for four-year waivers of the
limit. Since Proposition 111, the appropriations limit has again ceased to
be a practical limit on California governments, but this condition may
change in the future. During FY 1986-87, State receipts from proceeds of
taxes exceeded its appropriations limit by $1.138 billion, which was
returned to taxpayers. Since that time, appropriations subject to
limitation were under the State limit. The 1995-96 Governor's Budget
proposal estimates State appropriations will be more than $6.0 billion
under the limit for FY 1994-95 and over $7.2 billion under the limit for FY
1995-96.
OBLIGATIONS OF THE STATE OF CALIFORNIA
As of February 1, 1995, the State had approximately $18.6 billion of
general obligation bonds outstanding, and $4.1 billion remained authorized
but unissued. In addition, at June 30, 1994, the State had lease-purchase
obligations, payable from the State's General Fund, of approximately $5.1
billion. Of the State's outstanding general obligation debt, approximately
21% is presently self-liquidating (for which program revenues are
anticipated to be sufficient to reimburse the General Fund for debt service
payments). In FY 1993-94, debt service on general obligation bonds and
lease-purchase debt was approximately 5.2% of General Fund revenues. The
State has paid the principal of and interest on its general obligation
bonds, lease-purchase debt, and short-term obligations when due.
ECONOMY
The State's economy is the largest among the 50 states and one of the
largest in the world. The State's population grew by 27% in the 1980s and,
at over 31 million, it now represents 12.3% of the total U.S. population.
Total personal income in the State, at an estimated $683 billion in 1993,
accounts for almost 13% of all personal income in the nation. Total
employment is almost 14 million, the majority of which is in the service,
trade, and manufacturing sectors.
From mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. Construction,
manufacturing (especially aerospace), and financial services, among others,
were all severely affected, particularly in Southern California. Job
losses were the worst of any post-war recession. Employment levels
stabilized by late 1993 and steady growth occurred in 1994 and is expected
in 1995, but pre-recession job levels are not expected to be reached for
several more years. Unemployment, while higher than the national average,
has come down about 3% in 1994. Economic indicators show a steady recovery
underway in the State since the start of 1994.
RECENT STATE FINANCIAL RESULTS
The principal sources of State General Fund revenues in 1993-94 were the
California personal income tax (44% of total revenues), the sales tax
(35%), bank and corporation taxes (12%), and the gross premium tax on
insurance (3%). The State maintains a Special fund for Economic
Uncertainties (the SFEU), derived from General Fund revenues, as a reserve
to meet cash needs of the General Fund, but which is required to be
replenished as soon as sufficient revenues are available. Year-end balances
in the SFEU are included for financial reporting purposes in the General
Fund balance. In recent years (but not in the past three years, as the
recession has cut revenues), the State has budgeted to maintain the SFEU at
around 3% of General Fund expenditures.
Throughout the 1980s, State spending increased rapidly as the State
population and economy also grew rapidly, including many assistance
programs to local governments, which were constrained by Proposition 13 and
other laws. The largest State program is assistance to local public school
districts. In 1988, an initiative (Proposition 98) was enacted which
(subject to suspension by a 2/3 vote of the Legislature and the Governor)
guarantees local school districts and community college districts a minimum
share of State General Fund revenues (currently about 35%).
Since the start of FY1990-91, the State faced adverse economic, fiscal, and
budget conditions. The economic recession seriously affected State tax
revenues. It also caused increased expenditures for health and welfare
programs. The State is also facing a structural imbalance in its budget
with the largest programs supported by the General Fund (education, health,
welfare and corrections) growing at rates significantly higher than the
growth rates for the principal revenue sources of the General Fund. As a
result, the State entered a period of budget imbalance, with expenditures
exceeding revenues for four of the five completed fiscal years through
1991-92.
As the State fell into a deep recession in the summer of 1990, the State
budget fell sharply out of balance in FY 1990-91 and FY 1991-92, despite
significant expenditure cuts and tax increases. The State had accumulated a
$2.8 billion budget deficit by June 30, 1992. This deficit also severely
reduced the State's cash resources, so that it had to rely on external
borrowing in the short-term markets to meet its cash needs.
CASH FLOW REQUIREMENTS. Because of the accumulated budget deficit over the
past several years, the payment of certain unbudgeted expenditures to
schools to maintain constant per-pupil aid levels, and a reduction of the
level of available internal borrowing, the State's cash resources have been
significantly depleted. This has required the State to rely on a series of
external borrowings for the past several years to pay its normal expenses,
including repayment of previous cash flow borrowings. Since June 1992,
some of these borrowings have gone past the end of the fiscal year. In
February, 1994, the State borrowed $3.2 billion, maturing by December,
1994. In July, 1994, the State borrowed a total of $7.0 billion to meet
its cash flow requirements for FY 1994-95, and to fund a part of its
deficit into the FY 1995-96. A total of $4.0 billion of this borrowing
matures in April, 1996. The State will continue to have to rely on
external borrowing to meet its cash needs for the foreseeable future.
RECENT BUDGETS. The State failed to enact its 1992-93 budget by July 1,
1992. Although the State had no legal authority to pay many of its
vendors, certain obligations (such as debt service, school apportionments,
welfare payments, and employee salaries) were payable because of continuing
or special appropriations, or court orders. However, the State Controller
did not have enough cash to pay all of these ongoing obligations,or valid
obligations incurred in the prior fiscal year as they came due.
Starting on July 1, 1992, the Controller was required to issue "registered
warrants" in lieu of normal warrants backed by cash to pay many State
obligations. Available cash was used to pay constitutionally mandated and
priority obligations. Between July 1 and September 3, 1992, the Controller
issued an aggregate of approximately $3.8 billion of registered warrants
all of which were called for redemption by September 4, 1992 following
enactment of the 1992-93 Budget Act and issuance by the State of short-term
notes.
The 1992-93 Budget Act, when finally adopted, was projected to eliminate
the State's accumulated deficit, with additional expenditure cuts and a
$1.3 billion transfer of State education funding costs to local governments
by shifting local property taxes to school districts. However, as the
recession continued longer and deeper than expected, revenues once again
were far below projections, and only reached a level just equal to the
amount of expenditures. Thus, the State continued to carry its $2.8
billion budget deficit at June 30, 1993.
The 1993-94 Budget Act represented a third consecutive year of difficult
budget choices. As in the prior year, the budget contained no general
state tax increases, and relied principally on expenditure cuts,
particularly for health and welfare and higher education, a two-year
suspension of the renters' tax credit some one-time and accounting
adjustments, and -- the largest component -- an additional $2.6 billion
transfer of property taxes from local governments, particularly counties,
to school districts to reduce State education funding requirements. A
temporary state sales tax scheduled to expire on June 30, 1993 was extended
for six months, and dedicated to support local government public safety
costs.
A major feature of the budget was a two-year plan to eliminate the
accumulated deficit by borrowing into FY1994-95. With the recession still
continuing longer than expected, the General Fund had $800 million less
revenue and $800 million higher expenditures than budgeted. As a result
revenues only exceed expenditures by about $500 million. However, this was
the first operating surplus in four years and reduced the accumulated
deficit to $2.0 billion at June 30, 1994 (after taking account of certain
other accounting reserves).
CURRENT BUDGET. The 1994-95 Budget Act was passed on July 8, 1994, and
provides for an estimated $41.9 billion of General Fund revenues, and $40.9
billion of expenditures. The budget assumed receipt of about $750 million
of new federal assistance for the costs of incarceration, education, health
and welfare related to undocumented immigrants. Other major components of
the budget included further reductions in health and welfare costs and
miscellaneous government costs, some additional transfers of funds from
local government, and a plan to defer retirement of $1 billion of the
accumulated budget deficit to FY 1995-96. The federal government has
apparently budgeted only $33 million of the expected immigration aid.
However, this shortfall is expected to be almost fully offset by
higher-than-projected revenues, and lower-than-projected caseload growth,
as the economy improves.
As noted above under "Cash Flow Requirements," the State issued $7.0
billion of short-term debt in July, 1994 to meet its cash flow needs and to
finance the deferral of part of the accumulated budget deficit to FY
1995-96. In order to assure repayment of the $4 billion, 22-month part of
this borrowing, the State enacted legislation (the "Trigger Law") which can
lead to automatic, across-the-board costs in General Fund expenditures in
either the FY 1994-95 or FY 1995-96 if cash flow projections made at
certain times during those years show deterioration from the projections
made in July 1994 when the borrowings were made. On November 15, 1994, the
State Controller, as part of the Trigger Law, reported that the cash
position of the General Fund on June 30,1995 would be about $580 million
better than was earlier projected, so no automatic budget adjustments were
required in 1994-95. The Controller's report showed that loss of federal
funds was offset by higher revenues, lower expenditures, and certain other
increases in cash resources.
The proposed Governor's Budget for FY 1995-96 projects General Fund
revenues of $42.5 billion and expenditures of $41.7 billion. The
Governor's Budget projects that all the accumulated budget deficits will be
repaid by June 30, 1996, with a small balance ($92 million) in the SFEU,
the budget reserve. The proposed budget assumes receipt of about $830
million of new federal aid for undocumented aliens' costs, and also assumes
success in certain ongoing litigation concerning previous budget actions.
The Governor has proposed a 15% cut in personal income and corporate taxes,
to be phased in over three years starting in 1996.
The State's severe financial difficulties for the past, current and
upcoming budget years will result in continued pressure upon almost all
local governments, especially those which depend on State aid, such as
school districts and counties. While recent budgets included both
permanent tax increases and actions to reduce costs of state government
over the longer term, the Governor and other analysts have noted that
structural imbalances still exist, and there can be no assurance that the
state will not face budget gaps in the future.
State general obligation bonds are currently rated "A1" by Moody's, "A" by
Fitch Investors Service, Inc., and "A" by S&P. There can be no assurance
that such ratings will be maintained in the future. All three of these
ratings were reduced from "AAA" levels since late 1991.
ORANGE COUNTY. On December 6, 1994, Orange County, California (the
County), together with its pooled investment funds (the Pools) filed for
protection under Chapter 9 of the federal Bankruptcy Code, after reports
that the Pools had suffered significant market losses in their investments,
causing a liquidity crisis for the Pools and the County. More than 180
other public entities, most but not all located in the County, were also
depositors in the Pools. As of mid-January 1995, the County estimated the
Pools' losses at approximately $1.7 billion, or 22% of its initial deposits
of approximately $7.5 billion. Many of the entities which kept moneys in
the Pools, including the County, are facing cash flow difficulties because
of the bankruptcy filing and may be required to reduce programs or capital
projects. The County and some of these entities have defaulted, and others
may in the future default, on payment of their obligations. Moody's and S
& P have suspended, reduced to below investment grade levels, or placed on
"Credit Watch" various securities of the County and the entities
participating in the Pools.
The State has no existing obligation with respect to any obligations or
securities of the County or any of the other participating entities.
However, the State may be obligated to intervene to ensure that school
districts have sufficient funds to operate, or to maintain certain
County-administered State programs..
OBLIGATIONS OF OTHER CALIFORNIA ISSUERS
STATE ASSISTANCE. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13. Subsequently,
the State's Legislature enacted measures to provide for the redistribution
of the State's General Fund surplus to local agencies; the reallocation of
certain State revenues to local agencies; and the assumption of certain
governmental functions by the State to assist municipal issuers to raise
revenues. Total local assistance from the State's General Fund totaled
approximately $29.1 billion in FY 1993-94 (about 70% of General Fund
expenditures) and has been budgeted at $30.5 billion for FY 1994-95,
including the effect of implementing reductions in certain aid programs. To
reduce State General Fund support for school districts, the 1992-93 and
1993-94 Budget Acts caused local governments to transfer $3.8 billion of
property tax revenues to school districts, representing reversal of the
post-Proposition 13 "bailout" aid.
To the extent the State should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or
other considerations, the absolute level, or the rate of growth, of State
assistance to local governments may continue to be reduced. Any such
reductions in State aid could compound the serious fiscal constraints
already experienced by many local governments, particularly counties. At
least one rural county (Butte) publicly announced that it might enter
bankruptcy proceedings in August 1990, although such plans were put off
after the Governor approved legislation to provide additional funds for the
county. Other counties have also indicated that their budgetary condition
is extremely grave. A school district (Richmond Unified) filed for
protection under bankruptcy laws several years ago, but the petition was
later dismissed; other school districts have indicated financial stress,
although none has threatened bankruptcy.
ASSESSMENT BONDS. Municipal obligations which are assessment bonds or
Mello-Roos bonds may be adversely affected by a general decline in real
estate values or a slowdown in real estate sales activity. In many cases,
such bonds are secured by land which is undeveloped at the time of issuance
but anticipated to be developed within a few years after issuance. In the
event of such reduction or slowdown, such development may not occur or may
be delayed, thereby increasing the risk of a default on the bonds. Because
the special assessments or taxes securing these bonds are not the personal
liability of the owners of the property assessed, the lien on the property
is the only security for the bonds. Moreover, in most cases the issuer of
these bonds is not required to make payments on the bonds in the event of
delinquency in the payment of assessments or taxes, except from amounts, if
any, in a reserve fund established for the bonds.
CALIFORNIA LONG-TERM LEASE OBLIGATIONS. Certain State long-term lease
obligations, though typically payable from the General Fund of the
municipality, are subject to "abatement" in the event the facility being
leased is unavailable for beneficial use and occupancy by the municipality
during the term of the lease. Abatement is not a default, and there may be
no remedies available to the holders of the certificates evidencing the
lease obligation in the event abatement occurs. The most common causes of
abatement are failure to complete construction of the facility before the
end of the period during which lease payments have been capitalized and
uninsured casualty losses to the facility (e.g., due to earthquake). In the
event abatement occurs with respect to a lease obligation, lease payments
may be interrupted (if all available insurance proceeds and reserves are
exhausted) and the certificates may not be paid when due.
Several years ago the Richmond Unified School District ("District") entered
into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover
operating deficits. Following a fiscal crisis in which the District's
finances were taken over by a State receiver (including a brief period
under bankruptcy court protection), the District failed to make rental
payments on this lease, resulting in a lawsuit by the Trustee for the
Certificate of Participation holders. One of the defenses raised in answer
to this lawsuit was the invalidity of the original lease transaction. The
trial court upheld the validity of the District's lease, and the case has
been settled. However, any future judgment in a similar case against the
position taken by the Trustee may have implications for lease transactions
of a similar nature by other State entities.
OTHER CONSIDERATIONS. The repayment of Industrial Development Securities
secured by real property may be affected by State laws limiting foreclosure
rights of creditors. Health Care and Hospital Securities may be affected by
changes in State regulations governing cost reimbursements to health care
providers under Medi-Cal (the State's Medicaid program), including risks
related to the policy of awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by State redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment
project area after the start of redevelopment activity. In the event that
assessed values in the redevelopment project decline (for example, because
of a major natural disaster such as an earthquake), the tax increment
revenue may be insufficient to make principal and interest payments on
these bonds. Both Moody's and S&P suspended ratings on State tax allocation
bonds after the enactment of Articles XIIIA and XIIIB, and only resumed
such ratings on a selective basis.
Proposition 87, approved by State voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which, typically, are
the issuers of Tax Allocation Securities) no longer receive an increase in
tax increment when taxes on property in the project area are increased to
repay voter-approved bonded indebtedness.
Substantially all of the State is within an active geologic region subject
to major seismic activity. Any California municipal obligation held by the
fund could be affected by an interruption of revenues because of damaged
facilities or, consequently, income tax deductions for casualty losses or
property tax assessment reductions. Compensatory financial assistance could
be constrained by the inability of (i) an issuer to have obtained
earthquake insurance coverage at reasonable rates; (ii) an insurer to
perform on its contracts of insurance in the event of widespread losses; or
(iii) the federal or State government to appropriate sufficient funds
within their respective budget limitations.
On January 17, 1994 , a major earthquake with an estimated magnitude of 6.8
on the Richter scale struck the Los Angeles area, causing significant
property damage to public and private facilities, presently estimated at
$15-20 billion. While over $9.5 billion of federal aid, and a projected
$1.9 billion of state aid, plus insurance proceeds, will reimburse much of
that loss, there will be some ultimate loss of wealth and income in the
region, in addition to costs of the disruption caused by the event. These
uninsured losses are estimated to have only a small effect on the overall
State economy, with a drop of up to 0.5 percent in personal income growth.
Short-term economic projections are generally neutral, as the infusion of
aid will restore billions of dollars to the local economy within a few
months. Although the earthquake will hinder recovery from the recession in
Southern California, already hard-hit, its long-term impact is not expected
to be material in the context of the overall wealth of the region. Almost
five years after the event, there are few remaining effects of the 1989
Loma Prieta earthquake in Northern California (which, however, caused less
severe damage than the Northridge earthquake).
Because of the complex nature of Articles XIIIA and XIIIB of the California
Constitution (described briefly above), the ambiguities and possible
inconsistencies in their terms, and the impossibility of predicting future
appropriations or changes in population and the cost of living, and the
probability of continuing legal challenges, it is not currently possible to
determine fully the impact of Article XIIIA or Article XIIIB, or the
outcome of any pending litigation with respect to those provisions on State
obligations held by the fund or on the ability of the State or local
governments to pay debt service on such obligations. Legislation has been
or may be introduced (either in the State Legislature or by initiative)
which would modify existing taxes or other revenue-raising measures or
which either would further limit or, alternatively, would increase the
abilities of State and local governments to impose new taxes or increase
existing taxes. It is not presently possible to predict the extent to which
any such legislation will be enacted, or if enacted, how it would affect
California municipal obligations. It is also not presently possible to
predict the extent of future allocations of State revenues to local
governments or the abilities of State or local governments to pay the
interest on, or repay the principal of, such California municipal
obligations in light of future fiscal circumstances.
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, its agencies and instrumentalities, as available on the date of this
Statement of Additional Information. FMR has not independently verified any
of the information contained in such official statements, prospectuses and
other publicly available documents, but is not aware of any fact which
would render such information materially inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1992 trade with the United States accounted for
approximately 88% of Puerto Rico's exports and approximately 68% of its
imports. In this regard, in fiscal 1992 Puerto Rico experienced a
$2,940,300,000 positive adjusted merchandise trade balance. Since fiscal
1987 personal income, both aggregate and per capita, have increased
consistently each fiscal year. In fiscal 1992 aggregate personal income was
$22.7 billion and personal per capita income was $6,360. Gross domestic
product in fiscal 1989, 1990, 1991 and 1992 was $19,954,000, $21,619,000,
$22,857,000, and $23,620,000 respectively. For fiscal 1993, an increase in
gross domestic product of 2.9% over fiscal 1992 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, 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 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. Despite long term
improvements the unemployment rate rose from 15.2% to 16.5% from fiscal
1991 to fiscal 1992. At the end of the third quarter of fiscal 1993 the
unemployment rate in Puerto Rico stood at 17.3%. There is a possibility
that the unemployment rate will continue to increase.
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 $13.2 billion or 38.7% of gross
domestic product in 1992. However, manufacturing has experienced a basic
change over the years as a result of the influx of higher wage, high
technology industries such as the pharmaceutical industry, electronics,
computers, micro-processors, scientific instruments and high technology
machinery. The service sector, which includes wholesale and retail trade,
finance and real estate, ranks second in its contribution to gross domestic
product and is the sector that employs the greatest number of people. In
fiscal 1992, the service sector generated $13.0 billion in gross domestic
product or 38.3% of the total and employed over 449,000 workers providing
46% of total employment. The government sector and tourism also contribute
to the island economy, accounting for $3.7 billion and $1.5 billion in
fiscal 1992, respectively.
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
source 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.
On August 16, 1993, President Clinton signed a bill amending Section 936.
Under the amendments, U.S. corporations with operations in Puerto Rico can
elect to receive a federal income tax credit equal to: 40% of the credit
currently available, phased in over a five year period, starting at 60% of
the current credit, or a credit based on investment and wages. The
investment and wage credit would equal the sum of (i) 60% of qualified
compensation to employees, (ii) a specified percentage of depreciation
deductions with respect to tangible property located in Puerto Rico, and
(iii) a portion of income taxes paid to Puerto Rico, up to a 9% effective
tax rate, subject to certain requirements. It is not possible to determine
at this time whether the reductions in tax incentives for operations in
Puerto Rico will have a significant impact on the economy of Puerto Rico or
the time period in which such impact would arise.
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 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 will consider
various relevant factors, including, but not limited to, the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations) based upon the quality of research and execution services
provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and, conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other Fidelity
funds, to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to 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 ___%. Because a high turnover rate increases
transaction costs and may increase taxable gains, FMR carefully weighs the
anticipated benefits of short-term investing against these consequences.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine in the exercise of their business judgment whether
it would be advisable for each 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 or 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 to 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 Board of Trustees that the desirability of retaining FMR as
investment adviser to the fund outweighs any disadvantages that may be said
to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Valuations of portfolio securities furnished by the pricing service
employed by the fund are based upon a computerized matrix system or
appraisals by the pricing service, in each case in reliance upon
information concerning market transactions and quotations from recognized
municipal securities dealers. The methods used by the pricing service and
the quality of valuations so established are reviewed by officers of the
fund and Fidelity Service Company (FSC) under the general supervision of
the Board of Trustees. There are a number of pricing services available,
and the Trustees, or officers acting on behalf of the Trustees, on the
basis of on-going evaluation of these services, may use other pricing
services or discontinue the use of any pricing service in whole or in part.
PERFORMANCE
The fund may quote performance in various ways. All performance
information supplied by the fund in advertising is historical and is not
intended to indicate future returns. The fund's share price, yield, and
total return fluctuate in response to market conditions and other factors,
and the value of fund shares when redeemed may be more or less than their
original cost.
YIELD CALCULATIONS. Yields for the fund are computed by dividing the
fund's interest income for a given 30-day or one-month period, net of
expenses, by the average number of shares entitled to receive distributions
during the period, dividing this figure by the fund's NAV 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 the fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, the fund's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
Yield information may be useful in reviewing the fund's performance and in
providing a basis for comparison with other investment alternatives.
However, the fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates the
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to the fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
The fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment after taxes to equal the fund's tax-free
yield. Tax-equivalent yields are calculated by dividing the fund's yield
by the result of one minus a stated federal or combined federal and state
tax rate. If any portion of the fund's yield is tax-exempt, only that
portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on the
effective yield under federal and state income tax laws for 1995. They show
the approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of tax-exempt
obligations yielding from 2.0% to 7.0%. Of course, no assurance can be
given that the fund will achieve any specific tax-exempt yield. While the
fund invests principally in obligations whose interest is exempt from
federal and state income tax, other income received by the fund may be
taxable. The fund does not take into account local taxes, if any, payable
on fund distributions.
1995 TAX RATES AND TAX-EQUIVALENT YIELDS
STATE Combined California
Federal Income MARGINAL and Federal Effective
Single Return Joint Return Tax Bracket RATE Tax Bracket**
$ 23,351 - 24,519 $ 39,001 - 49,038 28.% 32.32%
24,520 - 30,987 49,039 - 61,974 28 33.76
30,988 - 66,550 61,975 - 94,250 28 34.70
66,551 - 107,464 94,251 - 143,600 31 37.42
107,465 - 117,950 -- - -- 31 37.90
-- - -- 143,601 - 214,928 36 41.95
117,951 - 214,929 214,929 - 256,500 36 42.40
214,930 - 256,500 -- - -- 36 43.04
-- - -- 256,501 - 429,858 39.6 45.64
256,501 + 429,859 + 39.6 46.24
* 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 above, use the following table
to determine the tax-equivalent yield for a given tax-free yield.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Free 32.32% 33.76% 34.70% 37.42% 37.90% 41.95% 42.40% 43.04% 45.64% 46.24%
Yield Bracket Bracket Bracket Bracket Bracket Bracket Bracket Bracket Bracket Bracket
2% 2.96% 3.02% 3.06% 3.20% 3.22% 3.45% 3.47% 3.51% 3.68% 3.72%
3% 4.43% 4.53% 4.59% 4.79% 4.83% 5.17% 5.21% 5.27% 5.52% 5.58%
4% 5.91% 6.04% 6.13% 6.39% 6.44% 6.89% 6.94% 7.02% 7.36% 7.44%
5% 7.39% 7.55% 7.66% 7.99% 8.05% 8.61% 8.68% 8.78% 9.20% 9.30%
6% 8.87% 9.06% 9.19% 9.59% 9.66% 10.34% 10.42% 10.53% 11.04% 11.16%
7% 10.34% 10.57% 10.72% 11.19% 11.27% 12.06% 12.15% 12.29% 12.88% 13.02%
8% 11.82% 12.08% 12.25% 12.78% 12.88% 13.78% 13.89% 14.04% 14.72% 14.88%
</TABLE>
The fund may invest a portion of its assets in obligations that are subject
to state or federal income taxes. When the fund invests in these
obligations, its tax-equivalent yields will be lower. In the table above,
tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
The California income tax rates are those in effect for 1994, which will be
the same in 1995 except that California law requires that the brackets be
adjusted annually for inflation using 100% of the California Consumer Price
Index through June of the tax year. As of the date of this Statement of
Additional Information, the California Franchise Tax Board had not
published the 1995 inflation-adjusted tax brackets.
Yield information may be useful in reviewing the fund's performance and in
providing a basis for comparison with other investment alternatives.
However, the fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of the respective investment companies they have
chosen to consider.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's returns, including the effect of reinvesting
dividends and capital gain distributions (if any), and any change in NAV
over the 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 return of 7.18%, which is the steady annual rate that would equal
100% growth on a compounded basis in ten years. While average annual
returns are a convenient means of comparing investment alternatives,
investors should realize that the fund's performance is not constant over
time, but changes from year to year, and that average annual total returns
represent averaged figures as opposed to the actual year-to-year
performance of the fund.
In addition to average annual returns, the fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. An example of this type of
illustration is given below. 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 the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
PERFORMANCE COMPARISONS. The fund may compare its return to the record of
the Aggregate Bond Index Portfolio Standard & Poor's 500 Composite Stock
Price Index (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.
The fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that monitors the performance of
mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to
the mutual fund rankings, the fund's performance may be compared to stock,
bond, and money market mutual fund performance indices prepared by Lipper
or other organizations. When comparing these indices, it is important to
remember the risk and return characteristics of each type of investment.
For example, while stock mutual funds may offer higher potential returns,
they also carry the highest degree of share price volatility. Likewise,
money market funds may offer greater stability of principal, but generally
do not offer the higher potential returns from stock mutual funds.
From time to time, the fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
The fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, the
fund may offer greater liquidity or higher potential returns than CDs, the
fund does not guarantee your principal or your return, and fund shares are
not FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to ASSESS savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
The fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike
tax-free mutual funds, individual municipal bonds offer a stated rate of
interest and, if held to maturity, repayment of principal. Although some
individual municipal bonds might offer a higher return, they do not offer
the reduced risk of a mutual fund that invests in many different
securities. The initial investment requirements and sales charges of many
tax-free mutual funds are lower than the purchase cost of individual
municipal bonds, which are generally issued in $5,000 denominations and are
subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college or other
goals; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
Fidelity may also reprint, and use as advertising and sales literature,
articles from Fidelity Focus, a quarterly magazine provided free of charge
to Fidelity fund shareholders.
The fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. The fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may compare
these measures to those of other funds. Measures of volatility seek to
compare the fund's historical share price fluctuations or total returns to
those of a benchmark. Measures of benchmark correlation indicate how valid
a comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, the fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate the fund's price movements over specific
periods of time. Each point on the momentum indicator represents the
fund's percentage change in price movements over that period.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more
shares when prices are low. While such a strategy does not assure a profit
or guard against loss in a declining market, the investor's average cost
per share can be lower than if fixed numbers of shares are purchased at the
same intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
In addition to performance rankings, each fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
As of January, 1995, FMR advised over $ 25 billion in tax-free fund assets,
$72 billion in money market fund assets, $ 159 billion in equity fund
assets, and $17 billion in international 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, with over 16,000 employees in over 4 foreign countries.
DURATION. Duration is a measure of volatility commonly used in the bond
market. Bonds with long durations are more volatile, or interest rate
sensitive, than bonds with short durations. (Interest rate sensitivity is
the magnitude of the change in a bond's price for a given change in a
bond's yield to maturity.) Duration also can be calculated for other fixed
income securities, or for portfolios of fixed income securities.
Unlike the maturity of a bond, which reflects only the time remaining until
the final principal payment is made to the bondholders, duration reflects
all of the coupon payments made to bondholders during the life of the bond,
as well as the final principal payment made when the bond matures. More
precisely, duration is the weighted average time remaining for the payment
of all cash flows generated by a bond, with the weights being the present
value of these cash flows. Present values are calculated using the bond's
yield to maturity.
Because there is only one payment to take into account, the duration of a
bond that pays all of its interest at maturity (a zero coupon bond) is the
same as its maturity. The duration of a coupon bearing security will be
shorter than its maturity, however, because of the effect of its regular
interest payments. Generally, bonds with lower coupons or longer maturities
will have longer durations, and thus be more volatile, than otherwise
similar bonds with higher coupons or shorter maturities.
With the investment in mortgage-backed securities, callable corporate bonds
or other bonds with embedded options, there is a degree of uncertainty
regarding the timing of these securities' cash flows. As a result, in order
to calculate the durations of these securities, forecasts of their probable
cash flow patterns must be made. These forecasts require various
assumptions to be made as to future interest rate levels and, for example,
mortgage prepayment rates. Because duration calculation for these types of
securities are based in part on assumptions, duration figures may not be
precise and may change as economic conditions change.
Examples of the effects of periodic investment plans, including the
principle of dollar cost averaging may be advertised. In such a program, an
investor invests a fixed dollar amount in a portfolio 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 had been purchased
at the same intervals. In evaluating such a plan, investors should consider
their ability to continue purchasing shares through periods of low price
levels.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The fund is open for business and the NAV of each class is calculated each
day the New York Stock Exchange (NYSE) is open for trading. The NYSE has
designated the following holiday closings for 1994: Presidents' Day, Good
Friday, Memorial Day, Independence Day (observed), Labor Day, Thanksgiving
Day, and Christmas Day (observed). Although FMR expects the same holiday
schedule, with the addition of New Years Day, to be observed in the future,
the NYSE may modify its holiday schedule at any time.
On any day when the NYSE closes early or as permitted by the SEC, the right
is reserved to advance the time on that day by which purchase and
redemption orders must be received. To the extent that the fund's
securities are traded in other markets on days when the NYSE is closed,
each class' NAV may be affected when investors may not have access to the
fund to purchase or redeem shares. Certain Fidelity funds may follow
different holiday closing schedules.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the fund's NAVs. 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 Securities and Exchange Company Act of
1940 (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
by the SEC, or the fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the Prospectus, 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.
PURCHASE INFORMATION
As provided for in Rule 22d-1 under the 1940 Act, FDC exercises its right
to waive Class A's maximum 4.75% sales charge in connection with the fund's
merger with or acquisition of any investment company or trust.
CLASS A NET ASSET VALUE PURCHASES. Front-end sales charges do not apply to
shares purchased: (1) by registered representatives, bank trust officers
and other employees (and their immediate families) of investment
professionals having agreements with FDC; (2) 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) by a
charitable organization (as defined in Section 501(c)(3) of the Internal
Revenue Code) investing $100,000 or more; (4) by 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) by trust institutions (including bank trust departments)
investing on their own behalf or on behalf of their clients; (6) in
accounts as to which a bank or broker-dealer charges an investment
management fee, provided the bank or broker-dealer has an agreement with
FDC; (7) as part of an employee benefit plan (including Fidelity-Sponsored
403(b) and Corporate IRA programs, but otherwise as defined in the Employee
Retirement Income Security Act (ERISA)), maintained by a U.S. employer
having more than 200 eligible employees, or a minimum of $1,000,000
invested in Fidelity Advisor mutual funds, and the assets of which are held
in a bona fide trust for the exclusive benefit of employees participating
therein; (8) in a Fidelity or Fidelity Advisor IRA account purchased 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; (9) with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end sales charge only;
(10) by any state, county, or city, or any governmental instrumentality,
department, authority or agency; or (11) 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 invested in Fidelity Advisor mutual funds.
CLASS B WAIVERS. The contingent deferred sales charge (CDSC) on Class B
shares may be waived in the case of disability or death, provided that the
redemption is made within one year following the death or initial
determination of disability, or in connection with a total or partial
redemption made in connection with certain distributions from retirement
plan accounts.
A sales load waiver form must accompany these transactions.
FDC compensates investment professionals with a fee of .25% on purchases of
$1 million or more, except for purchases made through a bank or
bank-affiliated broker-dealer that qualify for a Class A Sales Charge
Waiver. All assets on which the .25% fee is paid must remain within the
Fidelity Advisor funds (including shares exchanged into the Initial Class
of Daily Money fund: U.S. Treasury Portfolio, or shares of Daily Money
fund: Money Market Portfolio and 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 .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.
QUANTITY DISCOUNTS. Reduced front-end sales charges are applicable to
purchases of Class A shares of the fund in amounts of $50,000 or more of
the fund alone or in combination with purchases of Class A and Class B
shares of certain other Fidelity Advisor funds made at any one time
(including Daily Money fund: U.S. Treasury Portfolio, or shares of Daily
Money fund: Money Market Portfolio, and Daily Tax-Exempt Money fund shares
acquired by exchange from any Fidelity Advisor fund with a sales charge).
To obtain the reduction of the front-end sales charge, 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.
In addition to investing at one time in any combination of funds in an
amount entitling you to a reduced front-end sales charge, you may qualify
for a reduction in the front-end sales charge under the following programs:
COMBINED PURCHASES. When you invest in Class A shares for several accounts
at the same time, you may combine these investments into a single
transaction if purchased through one investment professional, and if the
total is at least $50,000. The following may qualify for this privilege: an
individual, or "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 single fiduciary account or for a
single or a parent-subsidiary group of "employee benefit plans" (as defined
in Section 3(3) of ERISA); and tax-exempt organizations under Section
501(c)(3) of the Internal Revenue Code.
RIGHTS OF ACCUMULATION. Your "Rights of Accumulation" permit reduced
front-end sales charges on any future purchases after you have reached a
new breakpoint in the Class A sales charge schedule (see the Class A
Prospectus for the front-end sales charge schedule). You can add the value
of existing Fidelity Advisor fund Class A and Class B shares, held by you,
your spouse, and your children under age 21 determined at the previous
day's NAV at the close of business, to the amount of your new purchase
valued at the current offering price to determine your reduced front-end
sales charge. You can also add shares of Daily Money fund: U.S. Treasury
Portfolio, or shares of Daily Money fund: Money Market Portfolio, and
shares of Daily Tax-Exempt Money fund, provided they were acquired by
exchange from any Fidelity Advisor fund with a front-end sales charge, to
the amount of your new purchase.
LETTER OF INTENT. If you anticipate purchasing $50,000 or more of Class A
shares of the fund alone or in combination with Class A and Class B shares
of other Fidelity Advisor funds within a 13-month period, you may obtain
Class A shares at the same reduced front-end sales charge as though the
total quantity were invested in one lump sum, by filing a nonbinding Letter
of Intent (the Letter) within 90 days of the start of the purchases. Each
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 toward a $50,000 Letter would
receive the same reduced front-end sales charge as if the $50,000 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 or Class B shares are purchased. Neither income dividends nor capital
gain distributions taken in additional 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 front-end 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 further front-end sales charge reduction, the 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 the total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, your front-end sales charge will be adjusted upward, corresponding
to the amount actually purchased, and if after 30 days' written notice, you
do not pay the increased front-end sales charge, sufficient escrowed Class
A shares will be redeemed to pay such charge.
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A or Class B shares of the fund or other Fidelity
Advisor funds 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.
Investments may be made monthly by automatically deducting $100 or more
from your bank checking account. You may change the amount of your monthly
purchase at any time. There is a $1,000 minimum initial investment
requirement for Systematic Investment Programs.
Your account will be drafted on or about the first business day of every
month. Class A or Class B shares will be purchased at the offering price
next determined following receipt of the order by the Transfer Agent. 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 Transfer Agent for every transaction, and a debit entry will
appear on your bank statement.
EXCHANGE INFORMATION
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM. With the Systematic Exchange
Plan, you can exchange a specific dollar amount of Class A or Class B
shares into the same class of other Fidelity Advisor funds on a monthly,
quarterly or semiannual basis.
1. The account from which the exchanges are to be processed must have a
minimum value of $10,000 before you may elect to begin exchanging
systematically. The account into which the exchanges are to be processed
must be an existing account with a minimum balance of $1,000.
2. Both accounts must have identical registrations and taxpayer
identification numbers. The minimum amount to be exchanged systematically
is $100.
3. Systematic Exchanges will be processed at the NAV determined on the
transaction date, except that Systematic Exchanges into a Fidelity Advisor
fund from any eligible money market fund will be processed at the offering
price next determined on the transaction date, unless the shares were
acquired by exchange from another Fidelity Advisor fund.
REDEMPTION INFORMATION
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A or
Class B shares you may reinvest an amount equal to all or a portion of the
redemption proceeds in the same class of the fund or 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. 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.
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. You may obtain information about the Systematic
Withdrawal Program by contacting your investment professional. Your
Systematic Withdrawal Plan payments are drawn from Class A share
redemptions. If Systematic Withdrawal Plan redemptions exceed income
dividends earned on your shares, your account eventually may be exhausted.
Since a front-end sales charge is applied on new shares you buy, it is to
your disadvantage to buy Class A shares while you are also making
systematic redemptions.
DISTRIBUTION AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or you 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 derived from federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. 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 one half of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
The fund purchases municipal obligations based on opinions of bond counsel
regarding the federal income tax status of the obligations. These opinions
generally will be based upon covenants by the issuers regarding continuing
compliance with federal tax requirements. If the issuer of an obligation
fails to comply with its covenants at any time, interest on the obligation
could become federally taxable retroactive to the date the obligation was
issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities (referred to as "qualified bonds" in the Internal
Revenue Code) is subject to the federal alternative minimum tax (AMT),
although the interest continues to be excludable from gross income for
other purposes. Interest from private activity securities will be
considered tax-exempt for purposes of the fund's policy of investing so
that at least 80% of its net assets will be invested in securities whose
interest is free from federal and California 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
tax 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.
It is the current position of the SEC Staff that a fund which uses the word
"tax-free" in its name may not derive more than 20% of its income from
municipal obligations that pay interest that is a preference item for
purposes of the AMT. Under this position, at least 80% of fund's income
distributions would have to be exempt from the AMT as well as federal
taxes.
Corporate investors should note that an adjustment 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.
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.
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. Distributions from
short-term capital gains do not qualify for the dividends-received
deduction. Dividend distributions resulting from a recharacterization of
gain from the sale of bonds purchased at a discount after April 30, 1993
are not considered income for purposes of the fund's policy investing so
that at least 80% of their net assets will be invested in securities whose
interest is free from federal and California income taxes.
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 all of its net investment income and net
realized capital gains (if any) 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.
To the extent that capital loss carryovers are used to offset any future
capital gains, it is unlikely that the gains so offset will be distributed
to shareholders, since any such distributions may be taxable to
shareholders as ordinary income.
CALIFORNIA TAX MATTERS. As long as the fund continues to qualify as a
regulated investment company under the federal Internal Revenue Code, it
will incur no California income or franchise tax liability on income and
capital gains distributed to shareholders. California personal income tax
law provides that exempt-interest dividends paid by a regulated investment
company, or series thereof, from interest on obligations that are exempt
from California personal income tax are excludable from gross income. For a
fund to qualify to pay exempt-interest dividends under California law, at
least 50% of the value of its assets must consist of such obligations at
the close of each quarter of its fiscal year. For purposes of California
personal income taxation, distributions to individual shareholders derived
from interest on other types of obligations and short-term capital gains
will be taxed as dividends, and long-term capital gain distributions will
be taxed as long-term capital gains. California has an alternative minimum
tax similar to the federal AMT described above. However, the California AMT
does not include interest from private activity municipal obligations as an
item of tax preference. Interest on indebtedness incurred or continued by a
shareholder in connection with the purchase of shares of a fund will not be
deductible for California personal income tax purposes.
FUTURES AND OPTIONS TRANSACTIONS. A special "marked-to-market" system
governs the taxation of "section 1256 contracts." These contracts generally
include options on debt securities, futures contracts, and options on
interest rate futures contracts. The fund may invest in section 1256
contracts. In general, gain or loss on section 1256 contracts will be taken
into account for tax purposes when actually realized (by a closing
transaction, by exercise, by taking delivery, or by other termination). In
addition, any section 1256 contracts held at the end of a taxable year will
be treated as sold at fair market value (marked-to-market) and the
resulting gain or loss will be recognized for tax purposes. Provided that a
section 1256 contract is not part of a "mixed" straddle which the fund
elects to exclude from the "marked-to-market" rules, both the realized and
the unrealized taxable year-end gain or loss positions (including premiums
on options that expire) will be treated as 60% long-term and 40% short-term
capital gain or loss, regardless of the period of time a particular
position is actually held by the fund.
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. Investors
should consult their tax advisers to determine whether the fund is suitable
to their particular tax situations.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company (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
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill Corporation (non-hazardous
waste, 1993) and CH2M Hill Companies (engineering). In addition, he served
on the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she is a member of the President's
Advisory Council of The University of Vermont School of Business
Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc., and RPM, Inc.
(manufacturer of chemical products, 1990). 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, One Harborside, 680 Steamboat Road, Greenwich, CT, 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 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, Trustee (1990) is Vice Chairman and Director 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, 135 Aspenwood Drive, Cleveland, OH, 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, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is a member of the Advisory
Boards of Butler Capital Corporation funds and Warburg, Pincus Partnership
funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company of
Vermont, American Software, Inc., and AppleSouth, Inc. (restaurants, 1992).
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.
STEPHEN P. JONAS, Treasurer (1995), is Treasurer and Vice President of FMR
(1993). Mr. Jonas is also Treasurer of FMR Texas Inc. (1994), Fidelity
Management & Research (U.K.) Inc. (1994), and Fidelity Management &
Research (Far East) Inc. (1994). Prior to becoming Treasurer of FMR, Mr.
Jonas was Senior Vice President, Finance - Fidelity Brokerage Services,
Inc. (1991-1992) and Senior Vice President, Strategic Business Systems -
Fidelity Investments Retail Marketing Company (1989-1991).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR (1994).
Prior to becoming Assistant Treasurer of the Fidelity funds, Mr. Rush was
Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial Officer
of Fidelity Brokerage Services, Inc. (1990-1993); and Vice President,
Assistant Controller, and Director of the Accounting Department - First
Boston Corp. (1986-1990).
MANAGEMENT CONTRACT AND OTHER SERVICES
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, and
compensates all officers of the trust, all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the trust or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the fund. These services include: providing facilities
for maintaining the fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the fund's
records and the registration of the fund's shares under federal and state
law; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
UMB and to FSC, the fund pays all 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 fund's custodian, auditor, and non-interested Trustees. Although the
fund's management contract provides that the fund will pay for typesetting,
printing and mailing prospectuses, statements of additional information,
and notices and reports to shareholders, the trust has entered into a
revised agent agreement with the Transfer Agent, pursuant to which the
Transfer Agent 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, and the costs of registering shares
under federal and state securities laws. 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.
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. On the right, the
effective fee rate schedules are the results of cumulatively applying the
annualized rates at varying asset levels. For example, the effective annual
fee rate at $250 billion of average group net assets - their approximate
level for September 30, 1994 - was .1570%, which is the weighted average of
the respective fee rates for each level of group net assets up to $255
billion.
The following fee schedule is the current fee schedule for all fixed-income
funds.
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
The fund's individual fund fee rate is .25%. Based on the average net
assets of funds advised by FMR for October 31, 1994, the annual management
fee rate for each fund would be calculated as follows:
Individual fund Management
Group Fee Rate Fee Rate Fee Rate
0.16% + 0.25% = .0.41%
One-twelfth (1/12) of this annual management fee rate is then applied to
the fund's average net assets for the current month, resulting in a dollar
amount which is the fee for that month.
The schedule shown above (minus the breakpoints added November 1, 1993) was
voluntarily adopted by FMR on January 1, 1992 until shareholders could meet
to approve the amended management contract.
FMR may, from time to time, voluntarily reimburse all or a portion of the
fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses).
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 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.
DISTRIBUTION AND SERVICE PLANS
The Trustees of the trust have adopted a Distribution and Service Plan on
behalf of Class A and Class B shares of the fund (the Plans) pursuant to
Rule 12b-1 of the 1940 Act (the Rule). As required by the Rule, the
Trustees carefully considered all pertinent factors relating to the
implementation of each Plan prior to approval, and have determined that
there is a reasonable likelihood that each Plan will benefit the applicable
class and its shareholders.
Pursuant to the Class A Plan, Class A pays FDC a distribution fee at an
annual rate of up to .40% of its 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 .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 Class A shareholders to
do so.
Pursuant to the Class B Plan, Class B pays FDC a distribution fee at an
annual rate of .75% of its average daily net assets determined as of the
close of business on each day throughout the month. Under its plan, Class B
also pays investment professionals a service fee at an annual rate of .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.
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. Under
each Plan, if the payment by the fund to FMR of management fees should be
deemed to be indirect financing of the distribution of shares of the
applicable class, such payment is authorized by the Plan. 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 or in other distribution activities relating to
that class. To the extent that each Plan gives FMR and FDC greater
flexibility in connection with the distribution of shares of the applicable
class, additional sales of fund shares may result. Additionally, certain
shareholder support services may be provided more effectively under the
Plans by local entities with whom shareholder 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 investment
professionals, the amounts remaining, if any, may be used as FDC may elect.
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, in FDC's opinion it should
not prohibit banks from being paid for shareholder support services,
servicing and recordkeeping functions. FDC may engage banks to perform only
these 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 an event, changes in the operation of the
fund might occur, including possible termination of any automatic
investment or redemption or other services then provided by the bank. It is
not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. The fund may execute
portfolio transactions with and purchase securities issued by depository
institutions that receive payments under the Plans. No preference for the
instruments of such depository institutions will be shown in the selection
of investments. In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein, and banks and
other financial institutions may be required to register as dealers
pursuant to state law.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Advisor California Tax-Free Income 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 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
three funds of the trust: Fidelity Advisor California Tax-Free Income fund,
Fidelity Advisor High Income Municipal fund and Fidelity Advisor Global
Resources fund. 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
Class A shares may subject holders of Class B shares to certain liabilities
and claims against Class B shares may subject holders of Class A 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
net asset value per share you own. The shares have no preemptive rights;
the voting and dividend rights, the right of redemption, and the privilege
of exchange are described in the Prospectus. Shares are fully paid and
nonassessable, except as set forth under the heading "Shareholder and
Trustee Liability" above. Shareholders representing 10% or more of the
Trust or Class A or Class B shares may, as set forth in the Declaration of
Trust, call meetings of the Trust or the fund 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. United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City,
Missouri, is custodian of the assets of the fund. On March 12, 1992, United
Missouri replaced State Street Bank and Trust Company as custodian of the
trust. The custodian is responsible for the safekeeping of the fund's
assets and the appointment of subcustodian banks and clearing agencies. The
custodian takes no part in determining the investment policies of the fund
or in deciding which securities are purchased or sold by the fund. The fund
may, however, invest in obligations of the custodian and may purchase
securities from or sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the Trust's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. __________________________________________________ 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.
The descriptions that follow are examples of eligible ratings for the
insured and high yield funds. The funds may, however, consider ratings for
other types of investments and the ratings assigned by other ratings
organizations when determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND
MUNICIPAL NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important in the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG-3/VMIG-3 - This designation denotes favorable quality, with all
security elements accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG-4/VMIG-4 - This designation denotes adequate quality protection
commonly regarded as required of an investment security is present and,
although not distinctly or predominantly speculative, there is specific
risk.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND
MUNICIPAL NOTES:
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
SP-3 - Speculative capacity to pay principal and interest.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments of or maintenance of other
terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
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. 26 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston, and Commonwealth of Massachusetts, on the 1st day of
March, 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 March 1, 1995
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Stephen P. Jonas Treasurer March 1, 1995
Stephen P. Jonas
/s/J. Gary Burkhead Trustee March 1, 1995
J. Gary Burkhead
/s/Ralph F. Cox * Trustee March 1, 1995
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee March 1, 1995
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee March 1, 1995
Richard J. Flynn
/s/E. Bradley Jones * Trustee March 1, 1995
E. Bradley Jones
/s/Donald J. Kirk * Trustee March 1, 1995
Donald J. Kirk
/s/Peter S. Lynch * Trustee March 1, 1995
Peter S. Lynch
/s/Edward H. Malone * Trustee March 1, 1995
Edward H. Malone
/s/Marvin L. Mann_____* Trustee March 1, 1995
Marvin L. Mann
/s/Gerald C. McDonough* Trustee March 1, 1995
Gerald C. McDonough
/s/Thomas R. Williams * Trustee March 1, 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.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a)(1) Financial Statements and Financial Highlights, included in the
Annual Report, for Fidelity Advisor Global Resources Fund for the fiscal
year ended October 31, 1994 are incorporated by reference into the fund's
Statement of Additional Information and were filed on December 27, 1994 for
Fidelity Advisor Series V (No. 811-4861) pursuant to Rule 30d-1 under the
Investment Company Act of 1940 and are incorporated herein by reference.
(a)(2) Financial Statements and Financial Highlights, included in the
Annual Report, for Fidelity Advisor High Income Municipal Fund for the
fiscal year ended October 31, 1994 are incorporated by reference into the
fund's Statement of Additional Information and were filed on December 27,
1994 for Fidelity Advisor Series V (No. 811-4861) pursuant to Rule 30d-1
under the Investment Company Act of 1940 and are incorporated herein by
reference.
(b) Exhibits:
(1) (a) Declaration of Trust dated as of April 24, 1986, is incorporated
herein by reference to Exhibit 1 to the Registration Statement.
(b) Amendment to Declaration of Trust dated October 22, 1986 is
incorporated herein by reference to Exhibit 1(b) to Pre-Effective Amendment
No. 1.
(c) Supplement to Declaration of Trust dated March 3, 1987 is
incorporated herein by reference to Exhibit 1(c) to Pre-Effective Amendment
No. 1.
(d) Supplement to Declaration of Trust dated October 23, 1987 is
incorporated herein by reference to Exhibit 1(d) to Post-Effective
Amendment No. 1.
(e) Supplement to Declaration of Trust dated November 18, 1988 is
incorporated herein by reference to Exhibit 1(e) to Post-Effective
Amendment No. 5.
(f) Amendment to the Fund's Declaration of Trust dated May 3, 1993 is
incorporated herein by reference to Exhibit 1(f) of Post-Effective
Amendment No. 14.
(2) Bylaws of the Trust are incorporated herein by reference to Exhibit 2
to Pre-Effective Amendment No. 1.
(3) None.
(4) (a) Share certificate for Plymouth High Income Municipal Portfolio is
incorporated herein by reference to Exhibit 4(a) to Post-Effective
Amendment No. 1.
(b) Share certificate for Plymouth Global Natural Resources Portfolio is
incorporated herein by reference to Exhibit 4(b) to Post-Effective
Amendment No. 2.
(5) (a) Form of Management Contract between the Registrant, on behalf of
Fidelity Advisor High Income Municipal Fund and Fidelity Management &
Research Company, is incorporated herein by reference to Exhibit 5(a) to
Post-Effective Amendment No. 23.
(b) Form of Management Contract between the Registrant, on behalf of
Fidelity Advisor Global Resources Fund and Fidelity Management & Research
Company, is incorporated herein by reference to Exhibit 5(b) to
Post-Effective Amendment No. 23.
(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 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 Income Fund, and Fidelity Management & Research
Co., dated November 17, 1994 is electronically filed herein as Exhibit
5(d).
(e) Form of Sub-Advisory Agreement between Fidelity Advisor Global
Resources Fund and FMR Far East and Fidelity Management & Research Company
is incorporated herein by reference to Exhibit 5(e) to Post-Effective
Amendment No. 23.
(f) Form of Sub-Advisory Agreement between Fidelity Advisor Global
Resources Fund and FMR U.K. and Fidelity Management & Research Company is
incorporated herein by reference to Exhibit 5(f) to Post-Effective
Amendment No. 23.
(6) (a) General Distribution Agreement between Registrant, on behalf of
Plymouth High Income Municipal Portfolio and Fidelity Distributors
Corporation, is incorporated herein by reference to Exhibit 6(a) to
Post-Effective Amendment No. 1.
(b) Forms of revised Selling Dealer Agreement and Bank Agency
Agreement are incorporated herein by reference to Exhibit 6(b) to
Post-Effective Amendment No. 3.
(c) General Distribution Agreement between Registrant, on behalf of
Plymouth Global Natural Resources Portfolio and Fidelity Distributors
Corporation, is incorporated herein by reference to Exhibit 6(c) to
Post-Effective Amendment No. 3.
(d) Amendment to the General Distribution Agreements between the
Registrant, on behalf of each portfolio thereof and Fidelity Distributors
Corporation dated January 1, 1988, is incorporated herein by reference to
Exhibit 6(d) to Post-Effective Amendment No. 3.
(e) 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 to Post Effective Amendment No. 19.
(f) General Distribution Agreement between the Registrant, on behalf of
Fidelity Advisor New York Tax-Free Income Fund, and Fidelity Distributors
Corporation, dated November 17, 1994 is electronically filed herein as
Exhibht 6(f).
(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 State Street Bank and
Trust Company dated September 1, 1987 is incorporated herein by reference
to Exhibit 8(a) to Post-Effective Amendment No. 1.
(b) Custodian Contract between Registrant and Brown Brothers Harriman
& Co. dated November 18, 1987 is incorporated herein by reference to
Exhibit 8(b) to Post-Effective Amendment No. 7.
(c) Custodian Contract between Registrant and United Missouri Bank dated
July 18, 1991 was electronically filed and is incorporated herein by
reference to Exhibit 8(c) to Post Effective Amendment No. 20.
(d) Amendment No. 1, dated January 29, 1992, to the Custodian Agreement
was electronically filed and is incorporate herein by reference to Exhibit
8(d) to Post Effective Amendment No. 20.
(e) Amendment No. 2, dated April 15, 1993, to the Custodian Agreement
was electronically and is incorporated herein by reference to Exhibit 8(e)
to Post Effective Amendment No. 20.
(9) Not applicable.
(10) None.
(11) None.
(12) None.
(13) None.
(14) (a) Form for Advisor Resource Group Individual Retirement Account
Custodial Agreement was electronically filed and is incorporated herein by
reference to Exhibit 14(a) to Post-Effective Amendment No. 20.
(b) Form for Fidelity Advisor Funds Individual Retirement Account
Custodial Agreement was electronically filed and is incorporated herein by
reference to Exhibit 14(b) to Post-Effective Amendment No. 20.
(c) 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.
(d) 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.
(e) Retirement Plan for NFSC 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.
(f) NFSC 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.
(g) 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.
(h) Fidelity 403(b)(7) Individual Custodial Agreement, as
currently in effect, was electronically filed and is incorporated herein by
reference as Exhibit 14(j) to Union Street Trust's Post-Effective Amendment
No. 87.
(i) Fidelity 403(b) Custodial Agreement, as currently in effect,
was electronically filed and is incorporated herein by reference as Exhibit
14(e) to Union Street Trust's Post-Effective Amendment No. 87.
(j) The CORPORATEplan for Retirement Profit Sharing/401k Plan,
as currently in effect, was electronically filed and is incorporated herein
by reference as Exhibit 14(l) to Union Street Trust's Post-Effective
Amendment No. 87.
(k) The CORPORATEplan for Retirement Money Purchase Pension
Plan, as currently in effect, was electronically filed and is incorporated
herein by reference as Exhibit 14(m) to Union Street Trust's Post-Effective
Amendment No. 87.
(15) (a) Form of Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor High Income Municipal Fund: Class A is incorporated herein
by reference to Exhibit 15(a) to Post-Effective Amendment No. 23.
(b) Form of Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor Global Resources Fund: Class A is incorporated herein by
reference to Exhibit 15(b) to Post-Effective Amendment No. 23.
(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 Income Fund:
Class A, and Fidelity Distributors Corp. is electronically filed herein as
Exhibit 15(d).
(e) Distribution and Service Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of Fidelity Advisor New York Tax-Free Income Fund:
Class B, and Fidelity Distributors Corp. is electronically filed herein as
Exhibit 15(e).
(f) Form of Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor High Income Municipal Fund: Class B is incorporated herein
by reference to Exhibit 15(f) to Post-Effective Amendment No. 23.
(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.
(16) (a) Schedule of computations for performance calculations for
Plymouth High Income Municipal Portfolio is incorporated herein by
reference to Exhibit 16(a) to Post-Effective Amendment No. 5.
(b) Schedule of computations for performance calculations for Plymouth
Global Natural Resources Portfolio is incorporated herein by reference to
Exhibit 16(b) to Post-Effective Amendment No. 5.
(17) Financial Data Schedule is filed herein as Exhibit 17.
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
January 31, 1995
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity Advisor High Income Municipal Fund: Class A 24,783
Fidelity Advisor High Income Municipal Fund: Class B 435
Fidelity Advisor Global Resources Fund 23,227
Fidelity Advisor California Tax-Free Income Fund: Class A 1
Fidelity Advisor California Tax-Free Income Fund: Class B 1
Fidelity Advisor New York Tax-Free Income Fund: Class A 1
Fidelity Advisor New York Tax-Free Income Fund: Class B 1
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) and Treasurer
of the funds advised by FMR (1995); 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 Jonas Treasurer of FMR U.K. (1993), Fidelity Management &
Research (Far East) Inc. (1993), and FMR Texas Inc. (1993);
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 Jonas Treasurer of FMR Far East (1993), Fidelity Management
& Research (U.K.) Inc. (1993), and FMR Texas Inc.
(1993); 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).
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 Income 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
Income 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.
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
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY ADVISOR SERIES V
and
FIDELITY DISTRIBUTORS CORPORATION
Agreement made this 17th day of November, 1994, between Fidelity Advisor
Series V, a Massachusetts business trust having its principal place of
business in Boston, Massachusetts and which may issue one or more series of
beneficial interest ("Issuer"), with respect to shares of Fidelity Advisor
New York Tax-Free Income Fund, a series of the Issuer, and Fidelity
Distributors Corporation, a Massachusetts corporation having its principal
place of business in Boston, Massachusetts ("Distributors").
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to Distributors the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: Distributors (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to Distributors shall
be nonexclusive in that the Issuer reserves the right to sell its shares to
investors on applications received and accepted by the Issuer. Further,
the Issuer reserves the right to issue shares in connection with the merger
or consolidation, or acquisition by the Issuer through purchase or
otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by Distributors or the Issuer will be sold at the public
offering price. The public offering price for all accepted subscriptions
will be the net asset value per share, as determined in the manner
described in the Issuer's current Prospectus and/or Statement of Additional
Information, plus a sales charge (if any) described in the Issuer's current
Prospectus and/or Statement of Additional Information. The Issuer shall in
all cases receive the net asset value per share on all sales. If a sales
charge is in effect, Distributors shall have the right subject to such
rules or regulations of the Securities and Exchange Commission as may then
be in effect pursuant to Section 22 of the Investment Company Act of 1940
to pay a portion of the sales charge to dealers who have sold shares of the
Issuer. If a fee in connection with shareholder redemptions is in effect,
the Issuer shall collect the fee on behalf of Distributors and, unless
otherwise agreed upon by the Issuer and Distributors, Distributors shall be
entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by Distributors except such
unconditional orders as may have been placed with Distributors before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and Distributors' authority to process orders for
shares on behalf of the Issuer if, in the judgment of the Issuer, it is in
the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to
Distributors, Distributors agrees to use all reasonable efforts, consistent
with its other business, to secure purchasers for shares of the Issuer.
This shall not prevent Distributors from entering into like arrangements
(including arrangements involving the payment of underwriting commissions)
with other issuers. This does not obligate Distributors to register as a
broker or dealer under the Blue Sky Laws of any jurisdiction in which it is
not now registered or to maintain its registration in any jurisdiction in
which it is now registered. If a sales charge is in effect, Distributors
shall have the right to enter into sales agreements with dealers of its
choice for the sale of shares of the Issuer to the public at the public
offering price only and fix in such agreements the portion of the sales
charge which may be retained by dealers, provided that the Issuer shall
approve the form of the dealer agreement and the dealer discounts set forth
therein and shall evidence such approval by filing said form of dealer
agreement and amendments thereto as an exhibit to its currently effective
Registration Statement under the 1933 Act.
7. Authorized Representations - Distributors is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for Distributors' use. This
shall not be construed to prevent Distributors from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through Distributors, and Distributors may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares Distributors may reasonably be expected to sell. The
Issuer shall make available to Distributors such number of copies of its
currently effective Prospectus and Statement of Additional Information as
Distributors may reasonably request. The Issuer shall furnish to
Distributors copies of all information, financial statements and other
papers which Distributors may reasonably request for use in connection with
the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer, it
is recognized by the Issuer that FMR may reimburse Distributors for any
direct expenses incurred in the distribution of shares of the Issuer from
any source available to it, including advisory and service or management
fees paid to it by the Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless
Distributors and each of its directors and officers and each person, if
any, who controls Distributors within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages, or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any shares,
based upon the ground that the registration statement, Prospectus,
Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time
amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make
the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify
Distributors or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Issuer by or on behalf of Distributors. In no case (i) is
the indemnity of the Issuer in favor of Distributors or any person
indemnified to be deemed to protect Distributors or any person against any
liability to the Issuer or its security holders to which Distributors or
such person would otherwise be subject by reason of wilful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
its reckless disregard of its obligations and duties under this Agreement,
or (ii) is the Issuer to be liable under its indemnity agreement contained
in this paragraph with respect to any claim made against Distributors or
any person indemnified unless Distributors or person, as the case may be,
shall have notified the Issuer in writing of the claim within a reasonable
time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon
Distributors or any such person (or after Distributors or such person shall
have received notice of service on any designated agent). However, failure
to notify the Issuer of any claim shall not relieve the Issuer from any
liability which it may have to Distributors or any person against whom such
action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Issuer shall be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the
defense of any suit brought to enforce any claims, but if the Issuer elects
to assume the defense, the defense shall be conducted by counsel chosen by
it and satisfactory to Distributors or person or persons, defendant or
defendants in the suit. In the event the Issuer elects to assume the
defense of any suit and retain counsel, Distributors, officers or directors
or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by
them. If the Issuer does not elect to assume the defense of any suit, it
will reimburse Distributors, officers or directors or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Issuer agrees to notify
Distributors promptly of the commencement of any litigation or proceedings
against it or any of its officers or trustees in connection with the
issuance or sale of any of the shares.
Distributors also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of Distributors or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of
Distributors. In no case (i) is the indemnity of Distributors in favor of
the Issuer or any person indemnified to be deemed to protect the Issuer or
any person against any liability to which the Issuer or such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is
Distributors to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Issuer or any person
indemnified unless the Issuer or person, as the case may be, shall have
notified Distributors in writing of the claim within a reasonable time
after the summons or other first written notification giving information of
the nature of the claim shall have been served upon the Issuer or any such
person (or after the Issuer or such person shall have received notice of
service on any designated agent). However, failure to notify Distributors
of any claim shall not relieve Distributors from any liability which it may
have to the Issuer or any person against whom the action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph. In the case of any notice to Distributors, it shall be entitled
to participate, at its own expense, in the defense or, if it so elects, to
assume the defense of any suit brought to enforce the claim, but if
Distributors elects to assume the defense, the defense shall be conducted
by counsel chosen by it and satisfactory to the Issuer, to its officers and
Board and to any controlling person or persons, defendant or defendants in
the suit. In the event that Distributors elects to assume the defense of
any suit and retain counsel, the Issuer or controlling persons, defendant
or defendants in the suit, shall bear the fees and expense of any
additional counsel retained by them. If Distributors does not elect to
assume the defense of any suit, it will reimburse the Issuer, officers and
Board or controlling person or persons, defendant or defendants in the
suit, for the reasonable fees and expenses of any counsel retained by them.
Distributors agrees to notify the Issuer promptly of the commencement of
any litigation or proceedings against it in connection with the issue and
sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1996 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to Distributors, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - Distributors is expressly put on notice of
the limitation of shareholder liability as set forth in the Declaration of
Trust or other organizational document of the Issuer and agrees that the
obligations assumed by the Issuer under this contract shall be limited in
all cases to the Issuer and its assets. Distributors shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Issuer. Nor shall Distributors seek satisfaction of any
such obligation from the Trustees or any individual Trustee of the Issuer.
Distributors understands that the rights and obligations of each series of
shares of the Issuer under the Issuer's Declaration of Trust or other
organizational document are separate and distinct from those of any and all
other series.
15. This agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, and its seal affixed, by one of its officers duly authorized,
and Distributors has executed this instrument in its name and behalf by one
of its officers duly authorized, as of the day and year first above
written.
FIDELITY ADVISOR SERIES V
By /s/ J. Gary Burkhead
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By /s/ Kurk A. Lange
President
Exhibit 16(d)
FORM OF
DISTRIBUTION AND SERVICE PLAN
CLASS A SHARES
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") for Class A shares of Fidelity Advisor
New York Tax-Free Income Fund ("Class A"), a class of shares of Fidelity
Advisor New York Tax-Free Income 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 of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are
required to include nor are limited to, the following: (1) formulation and
implementation of marketing and promotional activities, such as mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses of
the Fund and reports to recipients other than existing shareholders of the
Fund; (4) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Distributor may, from time to
time, deem advisable; (5) making payments to securities dealers and others
engaged in the sale of Shares or who engage in shareholder support services
("Investment Professionals"); and (6) providing training, marketing and
support to Investment Professionals with respect to the sale of Shares.
3. In consideration for the services provided and the expenses incurred by
the Distributor pursuant to the General Distribution Agreement, and
paragraph 2 hereof, all with respect to the Class A shares: Class A shall
pay to the Distributor a monthly fee at the annual rate of .___% (or such
lesser amount as the Trustees may, from time to time, determine) of the
average daily net assets of Class A throughout the month. The
determination of daily net assets shall be made at the close of business
each day throughout the month and computed in the manner specified in the
Fund's then current Prospectus for the determination of the net asset value
of Class A Shares, but shall exclude assets attributable to any other class
of shares of the Fund. The Distributor may, but shall not be required to,
use all or any portion of the fee received pursuant to the Plan to
compensate Investment Professionals who have engaged in the sale of Class A
Shares or in shareholder support services pursuant to agreements with the
Distributor, or to pay any of the expenses associated with other activities
authorized under paragraph 2 hereof.
4. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management & Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to reimburse the Distributor for expenses incurred in connection
with the distribution of Class A Shares, including the activities referred
to in paragraph 2 hereof. To the extent that the payment of management
fees by the Fund to the Adviser should be deemed to be indirect financing
of any activity primarily intended to result in the sale of Class A Shares
within the meaning of Rule 12b-1, then such payment 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" (as defined in the Act) of Class A, this
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 the Plan or in any agreement related
to the 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 until June 30, 1995, 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 increase materially the fee
provided for in paragraph 3 hereof 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 Class A, in the case of this Plan, or upon approval by
a vote of the majority of the outstanding voting securities of the Fund, in
the case of the Management Contract, and (b) any material amendment of this
Plan shall be effective only upon approval in the manner provided in the
first sentence of this paragraph 6.
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 Class A.
8. During the existence of this Plan, the Trust shall require the Adviser
and/or the Distributor to provide the Trust, for review by the 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 Class A Shares (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 Class A shares.
10. Consistent with the limitation of shareholder liability as set forth
in the Trust's Declaration of Trust, any obligation assumed by Class A
pursuant to this Plan and any agreement related to this Plan shall be
limited in all cases to Class A and its assets and shall not constitute an
obligation of any shareholder of the Trust or any other class of the Fund,
series of the Trust or class of such series.
11. If any provision of the 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.
DISTRIBUTION AND SERVICE PLAN
CLASS B SHARES
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") for the Class B shares of Fidelity
Advisor New York Tax-Free Income Fund ("Class B"), a class of shares of
Fidelity Advisor New York Tax-Free Income 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 of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are
required to include nor are limited to, the following: (1) formulation and
implementation of marketing and promotional activities, such as mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses of
the Fund and reports to recipients other than existing shareholders of the
Fund; (4) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Distributor may, from time to
time, deem advisable; (5) making payments to securities dealers and others
engaged in the sale of Shares or who engage in shareholder support services
("Investment Professionals"); and (6) providing training, marketing and
support to Investment Professionals with respect to the sale of Shares.
3. In accordance with such terms as the Trustees may, from time to time
establish, and in conjunction with its services under the General
Distribution Agreement with respect to shares of Class B ("Class B
Shares"), the Distributor is hereby specifically authorized to make
payments to Investment Professionals in connection with the sale of the
Class B Shares. Such payments may be paid as a percentage of the dollar
amount of purchases of Class B Shares attributable to a particular
Investment Professional, or may take such other form as may be approved by
the Trustees.
4. In consideration of the services provided and the expenses incurred by
the Distributor pursuant to the General Distribution Agreement and
paragraphs 2 and 3 hereof, all with respect to the Class B Shares:
(a) Class B shall pay to the Distributor a monthly distribution fee at
the annual rate of 0.75% (or such lesser amount as the Trustees may, from
time to time, determine) of the average daily net assets of Class B
throughout the month. The determination of daily net assets shall be made
at the close of business each day throughout the month and computed in the
manner specified in the Fund's then current Prospectus for the
determination of the net asset value of Class B Shares, but shall exclude
assets attributable to any other class of shares of the Fund. The
Distributor may, but shall not be required to, use all or any portion of
the distribution fee received pursuant to the Plan to compensate Investment
Professionals who have engaged in the sale of Class B Shares or in
shareholder support services pursuant to agreements with the Distributor,
or to pay any of the expenses associated with other activities authorized
under paragraphs 2 and 3 hereof; and
(b) In addition, the Plan recognizes that the Distributor may, in
accordance with such terms as the Trustees may from time to time establish,
receive all or a portion of any sales charges, including contingent
deferred sales charges, which may be imposed upon the sale or redemption of
Class B Shares.
5. Separate from any payments made as described in paragraph 4 hereof,
Class B shall also pay to the Distributor a service fee at the annual rate
of 0.25% (or such lesser amount as the Trustees may, from time to time,
determine) of the average daily net assets of Class B throughout the month.
The determination of daily net assets shall be made at the close of
business each day throughout the month and computed in the manner specified
in the Fund's then current Prospectus for the determination of the net
asset value of Class B Shares, but shall exclude assets attributable to any
other class of shares of the Fund. In accordance with such terms as the
Trustees may from time to time establish, the Distributor may use all or a
portion of such service fees to compensate Investment Professionals for
personal service and/or the maintenance of shareholder accounts, or for
other services for which "service fees" lawfully may be paid in accordance
with applicable rules and regulations.
6. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management and Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to reimburse the Distributor for expenses incurred in connection
with the distribution of Class B Shares, including the activities referred
to in paragraphs 2 and 3 hereof. To the extent that the payment of
management fees by the Fund to the Adviser should be deemed to be indirect
financing of any activity primarily intended to result in the sale of Class
B Shares within the meaning of Rule 12b-1, then such payment shall be
deemed to be authorized by this Plan.
7. 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" (as defined in the Act) of Class B, this
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 the Plan or in any agreement related
to the Plan (the "Independent Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan.
8. This Plan shall, unless terminated as hereinafter provided, remain in
effect until June 30, 1995, 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 increase materially the fees
provided for in paragraphs 4 and 5 hereof 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 Class B, in the case of this Plan, or
upon approval by a vote of the majority of the outstanding voting
securities of the Fund, in the case of the Management Contract, and (b) any
material amendment of this Plan shall be effective only upon approval in
the manner provided in the first sentence of this paragraph 8.
9. 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 Class B.
10. During the existence of this Plan, the Trust shall require the
Adviser and/or the Distributor to provide the Trust, for review by the
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 Class B Shares (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
11. 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 Class B Shares.
12. Consistent with the limitation of shareholder liability as set forth
in the Trust's Declaration of Trust, any obligation assumed by Class B
pursuant to this Plan and any agreement related to this Plan shall be
limited in all cases to Class B 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.
13. 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.
MANAGEMENT CONTRACT
between
FIDELITY ADVISOR SERIES V:
FIDELITY ADVISOR NEW YORK TAX-FREE INCOME FUND
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 17th day of November, 1994, by and between Fidelity
Advisor Series V, a Massachusetts business trust which may issue one or
more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Fidelity Advisor New York Tax-Free Income Fund
(hereinafter called the "Portfolio"), and Fidelity Management & Research
Company, a Massachusetts corporation (hereinafter called the "Adviser").
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio
office space and all necessary office facilities, equipment and personnel
for servicing the investments of the Portfolio; and shall pay the salaries
and fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or dealers
selected by the Adviser, which may include brokers or dealers affiliated
with the Adviser. The Adviser shall use its best efforts to seek to
execute portfolio transactions at prices which are advantageous to the
Portfolio and at commission rates which are reasonable in relation to the
benefits received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or the
other accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Adviser and its affiliates have with respect to
accounts over which they exercise investment discretion. The Trustees of
the Fund shall periodically review the commissions paid by the Portfolio to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a Group Fee and an Individual Fund Fee.
(a) Group Fee Rate. The Group Fee Rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the fund's Declaration of Trust or other
organizational document) determined as of the close of business on each
business day throughout the month. The Group Fee Rate shall be determined
on a cumulative basis pursuant to the following schedule:
SCHEDULE 1 - FIXED INCOME FEE SCHEDULE
Average Net Assets Annualized Fee Rate (for each level)
0 - $ 3 billion .3700%
3 - 6 .3400
6 - 9 .3100
9 - 12 .2800
12 - 15 .2500
15 - 18 .2200
18 - 21 .2000
21 - 24 .1900
24 - 30 .1800
30 - 36 .1750
36 - 42 .1700
42 - 48 .1650
48 - 66 .1600
66 - 84 .1550
84 - 120 .1500
120 - 156 .1450
156 - 192 .1400
192 - 228 .1350
228 - 264 .1300
264 - 300 .1275
300 - 336 .1250
336 - 372 .1225
Over 372 .1200
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
0.25%.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute the
Annual Management Fee Rate. One-twelfth of the Annual Management Fee Rate
shall be applied to the average of the net assets of the Portfolio
(computed in the manner set forth in the Fund's Declaration of Trust or
other organizational document) determined as of the close of business on
each business day throughout the month.
(c) In case of termination of this Contract during any month, the fee for
that month shall be reduced proportionately on the basis of the number of
business days during which it is in effect, and the fee computed upon the
average net assets for the business days it is so in effect for that month.
4. It is understood that the Portfolio will pay all its expenses, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security or other
investment instrument.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until June 30, 1995
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without payment of any
penalty, by action of its Trustees or Board of Directors, as the case may
be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust or
other organizational document and agrees that the obligations assumed by
the Fund pursuant to this Contract shall be limited in all cases to the
Portfolio and its assets, and the Adviser shall not seek satisfaction of
any such obligation from the shareholders or any shareholder of the
Portfolio or any other Portfolios of the Fund. In addition, the Adviser
shall not seek satisfaction of any such obligations from the Trustees or
any individual Trustee. The Adviser understands that the rights and
obligations of any Portfolio under the Declaration of Trust or other
organizational document are separate and distinct from those of any and all
other Portfolios.
8. This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
FIDELITY ADVISOR SERIES V
on behalf of Fidelity Advisor New York Tax-Free Income Fund
By /s/ J. Gary Burkhead
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/ J. Gary Burkhead
President
