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. 28 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
Amendment No. 28 [ ]
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)
( ) on ____________pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( x ) on August 1, 1995 pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on ( ) pursuant to paragraph (a)(ii) of rule 485
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed
post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and filed the notice required by such Rule
most recently on or about December 31, 1994.
FIDELITY ADVISOR CALIFORNIA TAX-FREE INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Who May Want to Invest
3 a .............................. *
b .............................. *
c .............................. Performance
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices; Fundamental Investment
Practices and Restrictions
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. Cover Page; FMR and Its Affiliates
ii........................... FMR and Its Affiliates; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Cover Page; Charter; Breakdown of Expenses;
FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates; Breakdown of
Expenses
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers
iii.......................... *
b ............................. *
c .............................. How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details; Sales
Charge Reductions and Waivers
c .............................. Sales Charge Reductions and Waivers
d .............................. How to Buy Shares; Transaction Details
e .............................. Breakdown of Expenses; Transaction Details
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
FIDELITY
ADVISOR 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 o btain
a copy of the fund's most recent financial report and portfolio
listing or a copy of the Statement of Additional Information (SAI) dated
August 1, 1995. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is incorporated herein by reference (legally forms a
part of the prospectus). For a free copy of either document, contact
Fidelity Distributors Corporation (FDC), 82 Devonshire Street, Boston, MA
02109 or 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 f und of Fidelity Advisor Series V
The fund seeks a high level of current income free from federal income tax
and California state income tax by investing primarily in municipal
securities.
PROSPECTUS
AUGUST 1, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
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
KEY FACTS
WHO MAY WANT TO INVEST
Shares are offered through this prospectus to investors who
engage an Investment Professional for investment advice. This
non-diversified fund may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal and
California income taxes.
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. You should
consider your investment objective and tolerance for risk when making an
investment decision. When you sell your fund shares, they may be worth
more or less than what you paid for them.
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 CDS C 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
Exchange fee None None
Annual account maintenance fee $12.0 $12.0
(for accounts under $2,500) 0 0
[A] Declines over 5 years from 4.00% to 0%.
ANNUAL OPERATING EXPENSES are paid out of each class's assets. The
fund pays a management fee to Fidelity Management & Research Company (FMR).
It also incurs other expenses for services such as maintaining shareholder
records and furnishing shareholder statements and financial reports.
12b-1 fees for Class A and Class B include a distribution fee and, for
Class B, a shareholder service fee. Distribution fees are paid by each
class to FDC for services and expenses in connection with the
distribution of the applicable class's shares. Shareholder service fees are
paid by Class B 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 class' 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 (after reimbursement) .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 applica ble CDSC.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Class A and Class B to the
extent that total operating expenses are in excess of 0.85% (Class A) and
1.60% (Class B) of their respective average net assets. If these agreements
were not in effect, projected other expenses and total operating expenses
as a percentage of their respective average net assets would be %,
and %, respectively (Class A) and % and %,
respectively (Class B). Interest, taxes, brokerage commissions, or
extraordinary expenses are not included in these expense limitations.
PERFORMANCE
Bond performance can be measured as TOTAL RETURN or YIELD.
The exclusion of any applicable sales charge from a performance calculation
produces a higher return.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
Average annual total returns covering periods of less than one year assume
that performance will remain constant for the rest of the year.
Average annual and cumulative total returns usually will include the effect
of paying the maximum applicable sales charge.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
THE FUND IN DETAIL
CHARTER
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 comprised of classes of shares. Each class has a common
investment objective and investment portfolio. The classes may have
different sales charges and other expenses which may affect
performance.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review the fund's performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. The transfer
agent will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. The number of votes you are
entitled to is based upon the dollar value of your investment.Separate
votes are taken by each class of shares, fund, or trust, if a matter
affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The fund employs various Fidelity
companies to perform activities required for its operation.
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
As of J une 3 0 , 1995 , FMR advised funds having approximately
million shareholder accounts with a total value of more than $
billion.
[INSERT FUND MANAGER BIO] .
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 Class A and Class B shares.
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.
U MB Bank, n.a. (UMB) is the fund's transfer agent, 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. State Street's
address is P.O. Box 8302, Boston, Massachusetts 02266-8302.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and California income taxes. The fund
invests in municipal securities of investment grade quality.
The fund has no restrictions on maturity, but it generally invests in
long-term bonds and maintains a dollar-weighted average maturity of
15 years or longer. In determining a security's maturity for
purposes of calculating the fund's average maturity, estimates of the
expected time for its principal to be repaid may be used. This can be
substantially shorter than its stated final maturity.
The fund's yield and share price change daily and are based on changes in
interest rates, market conditions, and other economic and political news
and on the quality and maturity of its investments . In general, bond
prices rise when interest rates fall, and vice versa. This effect is
usually more pronounced for longer-term securities . FMR may use
various investment techniques to hedge the fund's 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, which has been in a recession
since 1990. In recent years California experienced substantial financial
difficulties related to the severe recession from 1990-93, which caused
substantial, broad-based revenue shortfalls. State cutbacks of local
assistance could adversely affect the financial condition of cities,
counties and education districts facing a fall 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 passed amendments
to the California Constitution and other measures that limit the taxing and
spending authority of California governmental entities, and future voter
initiatives could result in adverse consequences affecting California
municipal bonds.
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. The losses
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 others may 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 a portion o f 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 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. In
general, bond prices rise when interest rates fall, and vice versa.
Debt securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
U.S. G overnment securities are high quality instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. G overnment. Not all U.S. G overnment securities are
backed by the full faith and credit of the United States. Some are
supported only by the credit of the agency that issued them.
Investment-grade debt securities are medium- and high-quality
securities. Some, however, may possess speculative characteristics and may
be more sensitive to economic changes and to changes in the financial
condition of issuers.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by S&P or is unrated but judged to be
of equivalent quality by FMR.
The fund currently intends to limit its investments in debt securities
to those of Baa quality and above.
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 value of some or all municipal
securities may be affected by uncertainties in the municipal market related
to legislation or litigation involving the taxation of municipal securities
or the rights of municipal securities holders. The fund may own a
municipal security directly or through a participation interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by the state
of 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 V irgin 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, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other
securities, may be subject to legal restrictions. Difficulty in selling
securities may result in a loss or may be costly to the fund.
RESTRICTIONS. The fund may not purchase a security if, as a result, more
than 10% of its net assets would be invested in illiquid securities.
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.
G overnment securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
The fund seeks a high level of current income free from federal income
tax and California state income tax by investing primarily in
municipal securities.
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and California income taxes.
The fund may borrow only for temporary or emergency purposes, but not in an
amount exceeding 33% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of each class's assets are reflected in that class's
share price or dividends; they are neither billed directly to shareholders
nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. The fund also pays OTHER EXPENSES which are explained 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 J une , 1995, the group
fee rate was . %. 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 net asset value per share ( NAV ) and dividends
for both Class A and Class B, and maintains the fund's general accounting
records. All of the fees are paid to 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 that FIIOC maintains on its behalf.
Class A shares of the fund have adopted a DISTRIBUTION AND SERVICE PLAN.
Under the Plan, Class A is authorized to pay FDC a monthly
distribution fee as compensation for its services and expenses in
connection with the distribution of Class A shares and providing personal
service to and/or maintenance of Class A shareholder accounts. Class A may
pay FDC a distribution fee at an annual rate up to 0.40% of its
average net assets, or such lesser amount as the Trustees may determine
from time to time. Class A currently pays FDC a monthly
distribution fee at an annual rate of 0.25% of its average net
assets determined at the close of business on each day throughout the
month. The Class A distribution fee may be increased only when the Trustees
believe that it is in the best interest of Class A shareholders to do so.
Up to the full amount of the Class A distribution fee may be reallowed to
Investment Professionals based upon the level of marketing and distribution
services provided.
Class B shares 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 Class A and Class B
shareholders.
The fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the
compensation of trustees who are not affiliated with Fidelity.
The fund's portfolio turnover rate is not expected to exceed 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
R ead your Investment Professional's program materials in
conjunction with this prospectus for additional service features or fees
that may apply. Certain features of the fund, such as minimum initial or
subsequent investment amounts, may be modified in these programs, and
administrative charges may be imposed for the services rendered.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA). Contact your Investment
Professional.
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your Investment Professional.
HOW TO BUY SHARES
Once each business day, two share prices are calculated for Class A shares
of the fund: the offering price and the NAV. The offering price includes
the maximum 4.75% front-end sales charge, which you pay when you buy Class
A shares, unless you qualify for a reduction or waiver as described 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 fund are
sold without a front-end sales charge and may be subject to a CDSC upon
redemption. For information on how the CDSC is calculated, see "Transaction
Details," page 17.
Shares are purchased at the next offering price or NAV, as applicable,
calculated after your order is received and accepted by the transfer
agent . The offering price and NAV are normally calculated at 4:00 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 appropriate 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 may be available for Class A shares upon request
only. S hare certificates are not available for Class B shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR F UNDS, complete and sign an
account application and mail it along with your check. If there is no
account application accompanying this prospectus, call your Investment
Professional.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, YOU CAN:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Wire money into your account
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund, or
(small solid bullet) Contact your Investment Professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
Through automatic investment plans $1,000
TO ADD TO AN ACCOUNT $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
PURCHASE AMOUNTS OF MORE THAN $250,000 WILL NOT BE ACCEPTED FOR CLASS B
SHARES.
For further information on opening an account, please consult your
Investment Professional or refer to the account application.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
(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
the same class of Representative call
another Fidelity Advisor fund
account 1-800-843-3001.
with the same registration, including (small solid bullet) Exchange from the same class of
name, address, and taxpayer ID another Fidelity Advisor fund
number. account with the same registration,
including name, address, and
taxpayer ID number.
</TABLE>
<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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<CAPTION>
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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) If you are investing through a
Broker-Dealer or Insurance
Representative, w ire to: State
Street Bank & Trust Co.
R outing # 01100002 8
ATTN: Custody &
Shareholder Services Division
CREDIT: Fidelity
Advisor California Tax-Free
Income Fund
DDA#9902-908-4
FBO: (Account Name)
(Account Number)
If you are investing through a Bank
Representative, wire to:
Bankers Trust Co.
Routing # 021001033
Custody &Shareholder
Services Division
Fidelity Advisor DART System
A/C # 00159759
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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<TABLE>
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Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Advisor Systematic
Investment Program. Sign up for
this service when opening your
account, or call your Investment
Professional to begin the program.
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted by the
transfer agent , less any applicable CDSC. NAV is normally calculated at
4:00 p.m. Eastern time.
To sell shares in an account, you may use any of the methods described
on these two pages.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE, you will need to sign up for these services in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and the fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
signed certificates (if applicable), and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your Investment Professional, or mail it to the
following address:
(small solid bullet) If you purchase d 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.
YOUR INVESTMENT PROFESSIONAL (small solid bullet) You may exchange to the same
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.
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
(small solid bullet) Your wire redemption request must
be received by the transfer agent
before 4:00 p.m. Eastern time for
money to be wired on the next
business day.
</TABLE>
INVESTOR SERVICES
Fidelity Advisor f unds provide a variety of services to help you
manage your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction that
affects your account balance or your account registration)
(small solid bullet) Account statements ( quarterly )
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed,
even if you have more than one account in the fund. Call your Investment
Professional if you need additional copies of financial reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your shares and buy shares of the same
class of other Fidelity Advisor funds or shares of other Fidelity funds by
telephone or in writing. The Class A shares you exchange will carry credit
for any front-end sales charge you previously paid in connection with their
purchase.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "Exchange
Restrictions," page .
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
redemptions from your account. Only Class A shares with an account value
of $10,000 or more are eligible for this program. Because of Class A's
front-end sales charge, you may not want to set up a systematic withdrawal
plan during a period when you are buying Class A shares on a regular basis.
One easy way to pursue your financial goals is to invest money regularly.
Fidelity Advisor funds offer convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an excellent
way to invest for retirement, a home, educational expenses, and other
long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND
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MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL ADDITIONAL 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 (20 days if
you purchased your shares through a bank).
</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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<CAPTION>
<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 fund deducts a
capital gain distribution from its NAV, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Each class's NAV and offering price, are normally
calculated as of the close of business of the NYSE, normally 4:00 p.m.
Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value of the fund's
investments, cash, and other assets, subtracting that class's pro rata
share of the value of the fund's liabilities, subtracting the liabilities
allocated to that class, and dividing by the number of shares of that class
that are outstanding.
The fund's assets are valued primarily on the basis of market quotations,
if available. Since market quotations are often unavailable, assets are
usually valued by a method that the Board of Trustees believes accurately
reflects fair value.
THE OFFERING PRICE (price to buy one share) is the applicable class's NAV,
plus a sales charge for Class A shares. Class A has a maximum sales charge
of 4.75% of the offering price. The REDEMPTION PRICE (price to sell one
share) is the applicable class's NAV, minus any applicable CDSC for Class B
shares.
S ALES 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 21 FOR MORE INFORMATION.
Investment Professionals with whom FDC has agreements receive as
compensation from FDC a concession equal to 3.00% of your purchase of Class
B shares.
The CDSC will be calculated based on the lesser of the cost of Class B
shares at the initial date of purchase or the value of Class B shares at
redemption, not including any reinvested dividends or capital gains. In
determining the applicability and rate of any CDSC at redemption, Class B
shares representing reinvested dividends and capital gains, if any, will be
redeemed first, followed by Class B shares that have been held for the
longest period of time. Class B shares acquired through distributions
(dividends or capital gains) will not be subject to a CDSC.
CONVERSION FEATURE. After a maximum holding period of six years from the
initial date of purchase, Class B shares and any capital appreciation
associated therewith, convert automatically to Class A shares of the
same Fidelity Advisor fund. Conversion to Class A shares will be made at
NAV. At the time of conversion, a portion of the Class B shares purchased
through the reinvestment of dividends or capital gains (Dividend Shares)
will also convert to Class A shares. The portion of Dividend Shares that
will convert is determined by the ratio of your converting Class B
non-Dividend Shares to your total Class B non-Dividend Shares .
For more information about the CDSC, including the conversion feature and
the permitted circumstances for CDSC waivers, contact your Investment
Professional.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A or
Class B shares of the fund, you may reinvest an amount equal to all or a
portion of the redemption proceeds in the same class of the fund or of any
of the other Fidelity Advisor funds, at the NAV next determined after
receipt of your investment order, provided that such reinvestment is made
within 30 days of redemption. Under these circumstances, the dollar amount
of the CDSC you paid on Class B shares will be reimbursed to you by
reinvesting that amount in Class B shares. You must reinstate your shares
into an account with the same registration. This privilege may be exercised
only once by a shareholder with respect to the fund and certain
restrictions may apply. For purposes of the CDSC schedule, the holding
period of your Class B shares will continue as if Class B shares had not
been redeemed.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the
fund to withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the transfer
agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify
the identity of the caller. Fidelity and the transfer agent will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions. Additional
documentation may be required from corporations, associations and certain
fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV or offering price, as applicable, calculated after your 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
cance l ed and you could be liable for any losses or fees the fund or
the transfer agent has incurred.
(small solid bullet) Direct Purchases: You begin to earn dividends as of
the first business day following the day the fund receives payment.
(small solid bullet) Automated Purchase Orders: You begin to earn dividends
as of the business day your order is received and accepted.
AUTOMATED PURCHASE ORDERS. Shares of the fund can be purchased or sold
through Investment Professionals utilizing an automated order placement and
settlement system that guarantees payment for orders on a specified date.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
or Federal Reserve check.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV, minus any applicable CDSC, calculated after your order is
received and accepted by the transfer agent . Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect the fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) The fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
THE TRANSFER AGENT RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE
of $12.00 from accounts with a value of less than $2,500. The fee, which is
payable to the transfer agent, is designed to offset in part the relatively
higher costs of servi cing 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 fund
for the same class of shares of other Fidelity Advisor funds ; or Class A
shares for Initial Class shares of Daily Money Fund: U.S. Treasury
Portfolio; Class A shares for shares of Daily Money Fund: Money Market
Portfolio or Daily Tax-Exempt Money Fund; and Class B shares for Class B
shares of Daily Money Fund: U.S. Treasury Portfolio. However, you
should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) The f und reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the f und
would be unable to invest the money effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
(small solid bullet) Your exchanges may be restricted or refused if the
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
SALES CHARGE REDUCTIONS AND WAIVERS
The front-end sales charge will be reduced for purchases of Class A shares
according to the Sales Charge Schedule shown on page if your purchase
qualifies for one of the following reduction plans. Please refer to the
fund's SAI for more details about each plan or call your Investment
Professional. If you purchased your shares through a Broker-Dealer or
Insurance Representative, call 1 - 800 - 522 - 7297. If you
purchased your shares through a Bank Representative, call 1-800-843-3001.
Your purchases and existing balances of Class B shares may be included in
the following programs for purposes of qualifying for a Class A front-end
sales charge reduction.
QUANTITY DISCOUNTS apply to purchases of Class A shares of a single
Fidelity Advisor fund or to combined purchases of Class A and Class B
shares of any Fidelity Advisor 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.
A LETTER OF INTENT lets you receive the same reduced front-end sales
charge on purchases of Class A shares made during a 13-month period as if
the total amount invested in a single lump sum. (See Quantity Discounts on
left.) You must file your non-binding Letter within 90 days of the start of
your purchases. Your initial investment must be at least 5% of the amount
you plan to invest. Out of the initial investment, 5% of the dollar amount
specified in the Letter will be registered in your name and held in escrow.
You will earn dividends and capital gain distributions on escrowed Class A
shares. Neither income dividends nor capital gain distributions reinvested
in additional Class A or Class B shares will apply toward completion of the
Letter. The escrow will be released when your purchase of the total amount
has been completed. You are not obligated to complete the Letter, and in
such a case, sufficient escrowed Class A shares will be redeemed to pay any
applicable front-end sales charges.
A FRONT-END SALES CHARGE WILL NOT APPLY TO THE FOLLOWING CLASS A SHARES:
1. Purchased by a bank trust officer, registered representative, or other
employee (or a member of one of their immediate families) of Investment
Professionals having agreements with FDC;
2. Purchased by a current or former trustee or officer of a Fidelity fund
or a current or retired officer, director or regular employee of FMR Corp.
or its direct or indirect subsidiaries (a Fidelity trustee or employee),
the spouse of a Fidelity trustee or employee, a Fidelity trustee or
employee acting as custodian for a minor child, or a person acting as
trustee of trust for the sole benefit of the minor child of a Fidelity
trustee or employee;
3. Purchased by a charitable organization (as defined in Section 501(c)(3)
of the Internal Revenue Code) investing $100,000 or more;
4. Purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code);
5. Purchased by a trust institution or bank trust department , (excluding
assets described in (7) and (12) below) not advised by a third party, that
has executed a Participation Agreement with FDC specifying certain asset
minimums and qualifications, marketing program restrictions,
6. Purchased for use in a broker-dealer managed account program,
provided the broker-dealer has executed a Participation Agreement with FDC
specifying certain asset minimums and qualifications, marketing program and
trading restrictions. Employee benefit plan assets do not qualify for this
waiver ;
7. Purchased as part of an employee benefit plan having more than (i)
200 eligible employees or a minimum of $1 million in plan assets
invested in Fidelity Advisor funds , or (ii) 25 eligible employees or
$250,000 in plan assets invested in Fidelity Advisor Funds that subscribe
to Fidleity Advisor Retirement Connection, or similar participant directed
employee benefit plan program sponsored by Fidelity Investments
Institutional Services Company (FIIS) ;
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 (7) or had a minimum of $3 million in plan assets
invested in Fidelity funds; or (ii) from an insurance company separate
account qualifying under ( 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 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 ; or
12. Purchased as part of an employee benefit plan purchased through through
an intermediary that has signed a Participation Agreement with FIIS
specifying certain asset minimums and qualifications, and marketing program
and trading restrictions; or
13. Purchased by a registered investment advisor which is not part of an
organization principally engaged in the brokerage business, that has
executed a Participation Agreement with FIIS specifying certain asset
minimums and qualifications, and marketing program and trading
restrictions. Employee benefit plan assets do not qualify for this waiver.
You must notify FDC in advance if you qualify for a front-end sales charge
waiver. E mployee 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 PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Who May Want to Invest
3 a .............................. *
b .............................. *
c .............................. Performance
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices; Fundamental Investment
Practices and Restrictions
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. Cover Page; FMR and Its Affiliates
ii........................... FMR and Its Affiliates; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Cover Page; Charter; Breakdown of Expenses;
FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates; Breakdown of
Expenses
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions
iii.......................... *
b ............................. *
c .............................. How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares; Transaction Details
e .............................. Breakdown of Expenses; Transaction Details
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
FIDELITY
ADVISOR CALIFORNIA
TAX-FREE
INCOME FUND
INSTITUTIONAL CLASS
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain copy of
the fund's most recent financial report and portfolio listing or a copy of
the Statement of Additional Information (SAI) dated August 1, 1995 The SAI
has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference (legally forms a part of the prospectus).
For a free copy of either document, c ontact Fidelity Distributors
Corporation (FDC) 82 Devonshire Street, Boston, MA 02109 or your Investment
Professional.
A fund of Fidelity Advisor Series V
The fund seeks a high level of current income free from federal income tax
and California state income tax by investing primarily in municipal
securities.
PROSPECTUS
AUGUST 1, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
(fidelity_logo_graphic) 82 Devonshire Street, Boston, MA 02109
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS WHO MAY WANT TO INVEST
EXPENSES Institutional Class's yearly operating
expenses.
PERFORMANCE
THE FUND IN DETAIL CHARTER How the fund is organized.
INVESTMENT PRINCIPLES AND RISKS The fund's
overall approach to investing.
BREAKDOWN OF EXPENSES How operating costs
are calculated and what they include.
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
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
This non-diversified fund may be appropriate for investors in high er
tax brackets who seek high current income that is free from federal and
California income taxes.
Institutional Class shares are offered through this prospectus to (i) bank
trust departments and other trust institutions, (ii) accounts managed by a
broker-dealer, (iii) accounts managed by a registered investment advisor
(RIA), and (iv) insurance company general accounts. Shares are available
only to entities that have signed a Participation Agreement with Fidelity
Institutional Services Company (FIIS). The Participation Agreement
specifies certain asset minimums, asset qualifications, trading guidelines
and marketing program restrictions.
The value of the fund's investments and the income they generate vary from
day to day, and generally reflect changes in interest rates, market
conditions, and other political and economic news. The fund is not in
itself a balanced investment plan. You should consider your investment
objective and tolerance for risk when making an investment decision. When
you sell your fund shares, they may be worth more or less than what you
paid for them.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
Institutional Class shares of the fund.
Maximum sales charge on purchases and None
reinvested distributions
Maximum deferred sales None
charge
Redemption fee None
Exchange fee None
Annual account maintenance fee $12.0
(for accounts under $2,500) 0
ANNUAL OPERATING EXPENSES are paid out of Institutional Class's assets. The
fund pays a management fee to Fidelity Management & Research Company (FMR).
It also incurs other expenses for services such as maintaining shareholder
records and furnishing shareholder statements and financial reports.
The Institutional Class's expenses are factored into its share price
or dividends and are not charged directly to shareholder accounts (see
"Breakdown of Expenses" on page ).
The following are projections based on estimated expenses, and are
calculated as a percentage of average net assets of the Institutional Class
of the fund.
Management fee .41%
12b-1 fee (Distribution Fee) None
Other expenses %
Total operating expenses %
EXPENSE TABLE EXAMPLE: You would pay the following expenses on a $1,000
investment in Institutional Class shares , assuming a 5% annual
return and full redemption at the end of each time period:
1 3
Year Years
$ $
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Institutional Class to the
extent that total operating expenses are in excess of _____% of
Institutional Class's average net assets. If this agreement were not in
effect, projected other expenses and total operating expenses as a
percentage of Institutional Class's average net assets would be ____%.
Interest, taxes, brokerage commissions, or extraordinary expenses are not
included in these expense limitations.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
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 a fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
THE FUND IN DETAIL
CHARTER
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 comprised of three classes of shares, Institutional Class,
Class A, and Class B. Each class has a common investment objective and
investment portfolio. The classes may have different sales charges and
other expenses which may affect performance.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review the fund's performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. The transfer
agent will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. The number of votes you
are entitled to is based upon the dollar value of your investment.
Separate votes are taken by each class of shares, fund, or trust, if a
matter affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The fund employs various Fidelity
companies to perform activities required for its operation.
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
As of June 30, 1995, FMR advised funds having approximately __million
shareholder accounts with a total value of more than $__ billion.
[INSERT FUND MANAGER BIO]
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 Institutional Class shares
of 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.
UMB Bank, n.a. (UMB) is the fund's transfer agent, although it employs
FIIOC to perform these functions for the Institutional Class of the fund.
UMB is located at 1010 Grand Avenue, Kansas City, Missouri.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and California income taxes. The fund
invests in municipal securities of investment grade quality.
The fund has no restrictions on maturity, but it generally invests in
long-term bonds and maintains a dollar-weighted average maturity of 15
years or longer. In determining a security's maturity for purposes of
calculating the fund's average maturity, estimates of the expected time for
its principal to be repaid may be used. This can be substantially shorter
than its stated final maturity.
The fund's yield and share price change daily and are based on changes in
interest rates, market conditions, other economic and political news, and
on the quality and maturity of its investments. In general, bond prices
rise when interest rates fall, and vice versa. This effect is usually more
pronounced for longer-term securities. FMR may use various investment
techniques to hedge the fund's 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, which has been in a recession
since 1990. In recent years California experienced substantial financial
difficulties related to the severe recession from 1990-93, which caused
substantial, broad-based revenue shortfalls. State cutbacks of local
assistance could adversely affect the financial condition of cities,
counties and education districts facing a fall 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 passed amendments
to the California Constitution and other measures that limit the taxing and
spending authority of California governmental entities, and future voter
initiatives could result in adverse consequences affecting California
municipal bonds.
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. The losses
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 others may 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 a portion of its assets in municipal securities
issued to finance private activities. The interest from these investments
is a tax-preference item for purposes of the tax.
FMR normally invests the fund's assets according to its investment strategy
and does not expect to invest in federally or state taxable obligations.
The fund reserves the right to invest without limitation in short-term
instruments, to hold a substantial amount of uninvested cash, or to invest
more than normally permitted in taxable obligations for temporary,
defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, 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. In
general, bond prices rise when interest rates fall, and vice versa.
Debt securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
U.S. Government securities are high quality instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. Government. Not all U.S. Government securities are backed by the full
faith and credit of the United States. Some are supported only by the
credit of the agency that issued them.
Investment-grade debt securities are medium- and high-quality securities.
Some, however, may possess speculative characteristics and may be more
sensitive to economic changes and to changes in the financial condition of
issuers.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by S&P, or is unrated but judged to
be of equivalent quality by FMR.
The f und currently intends to limit its investments in debt
securities to those of Baa - quality and above.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. A security's credit may be enhanced by a bank,
insurance company, or other entity. The value of some or all municipal
securities may be affected by uncertainties in the municipal market related
to legislation or litigation involving the taxation of municipal securities
or the rights o f municipal securities holders. The fund may own a
municipal security directly or through a participation interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by the state
of 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 Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations. The economy
of Puerto Rico is closely linked to the U.S. economy, and will depend on
the strength of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives. Recent
legislation revised these incentives, but the government of Puerto Rico
anticipates only a slight reduction in the average real growth rates for
the economy.
ASSET-BACKED SECURITIES 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.
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.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, the fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, entering into currency exchange contracts or swap
agreements, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities may be
subject to legal restrictions. Difficulty in selling securities may result
in a loss or may be costly to the fund.
RESTRICTIONS. The fund may not purchase a security if, as a result, more
than 10% of its net assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risk of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all
securities of a similar type. A fund that is not diversified may be more
sensitive to changes in the market value of a single issuer or industry.
RESTRICTIONS: The fund is considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, the fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S. Government
securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 331/3% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph s , can be changed without shareholder approval.
The fund seeks a high level of current income free from federal income tax
and California state income tax by investing primarily in municipal
securities.
The fund normally invests so that at least 80% of its net assets are in
securities whose interest is free from federal and California income
taxes.
The fund may borrow only for temporary or emergency purposes, but not in an
amount exceeding 331/3% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the Institutional Class 's assets are
reflected in its share price or dividends; they are neither billed directly
to shareholders nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. The fund also pays OTHER EXPENSES, which are explained on
the 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 June 1995, the group fee
rate was %. 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 FIIOC and Fidelity Service
Company ( FSC ) . FIIOC performs certain transfer agency, dividend
disbursing and shareholder services for the Institutional Class shares of
the fund. UMB has also entered into sub-arrangements pursuant to which FSC
calculates the net asset value per share ( NAV ) and dividends
for the Institutional Class shares of the fund, and maintains the fund's
general accounting records. All of the fees are paid to FIIOC and FSC
by UMB, which is reimbursed by the Institutional Class or the fund, as
appropriate, for such payments.
The Institutional Class has adopted a DISTRIBUTION AND SERVICE PLAN.
This plan recognizes that FMR may use its resources, including management
fees, to pay expenses associated with the sale of Institutional Class
shares. This may include payments to third parties, such as banks or
broker-dealers, that provide shareholder support services or engage in the
sale of Institutional Class shares. The Board of Trustees has not
authorized such payments. The Institutional Class does not pay FMR
any separate fees for this service.
The fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity.
The fund's portfolio turnover rate i s 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).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your Investment Professional.
HOW TO BUY SHARES
THE I NSTITUTIONAL CLASS'S SHARE PRICE, called NAV, is calculated
every business day. Institutional Class shares are sold without a sales
charge.
Shares are purchased at the next NAV calculated after your order is
received and accepted by the transfer agent. NAV is normally calculated at
4:00 p.m. Eastern time.
If you are placing your order through an Investment Professional, it is the
responsibility of your Investment Professional to transmit your order to
buy shares to the transfer agent before 4:00 p.m. Eastern time.
The transfer agent must receive payment within 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 not available for Institutional Class shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. You may also open your
account by wire as described on page 15. If there is no account application
accompanying this prospectus, call 1-800-843-3001 or your Investment
Professional.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund or from another Fidelity fund, or
(small solid bullet) Contact your Investment Professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $100,000
TO ADD TO AN ACCOUNT $2,500
MINIMUM BALANCE $40,000
For further information on opening an account, please consult your
Investment Professional or refer to the account application.
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
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PHONE (small solid bullet) Exchange from the
same class of (small solid bullet) Exchange from the same class of
1-800-843-3001 OR YOUR INVESTMENT another Fidelity Advisor fund or from another Fidelity Advisor fund or from
PROFESSIONAL another Fidelity fund account with another Fidelity fund account with
the same registration, including the same registration, including
name, address, and taxpayer ID name, address, and taxpayer ID
number. number.
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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
1-800-843-3001 or 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) Call 1-800-843-3001 to set up your (small solid bullet) Wire to:
account and to arrange a wire Banker's Trust Co.
transaction. Routing # 021001033
(small solid bullet) Wire to: Custody & Shareholder Services
Banker's Trust Co. Fidelity Advisor DART System
Routing # 021001033 DDA#: (call 1-800-843-3001)
Custody & Shareholder Services FBO: (account name)
Fidelity Advisor DART System (account number)
DDA#: (call 1-800-843-3001)
FBO: (account name) Specify the complete name of the
(account number) fund of your choice , and note the
applicable class and include your
Specify the complete name of the account number and your name.
fund of your choice , note the
applicable class and include your
new account number and your name.
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted by the
transfer agent, NAV i s normally calculated at 4:00 p.m. Eastern
time.
TO SELL SHARES IN AN ACCOUNT, you may use any of the methods described on
th e s e two page s .
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $40,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE, you will need to sign up for this service in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and the fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner ,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account w ith a different registration, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your Investment Professional, or mail it to the
following address:
Fidelity Investments Institutional Operations Co mpany
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.
1-800-843-300 1 OR YOUR
INVESTMENT PROFESSIONAL
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(phone_graphic) All account types (small solid bullet) You may exchange to the same
class of other Fidelity Advisor funds
or into other Fidelity funds if both
accounts are registered with the
same name(s), address, and
taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint Tenant,(small solid bullet) The letter of instruction (with
Sole Proprietorship, signature guarantee d ) must be
signed by all persons required to
sign for transactions, exactly as
their names appear on the account
and sent to your Investment
Professional.
Trust (small solid bullet) The trustee must sign the letter
indicating capacity as trustee. If the
trustee's name is not in the account
registration, provide a copy of the
trust document certified within the
last 60 days.
Business or Organization (small solid bullet) At least one person authorized by
corporate resolution to act on the
account must sign the letter (with
signature guarantee d ).
Executor, Administrator, (small solid bullet) Call 1-800-843-3001 or your
Conservator/Guardian Investment Professional for
instructioons.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To verify that
it is in place ,call 1-800-843-3001.
Minimum wire: $1,000
(small solid bullet) Your wire redemption request must
be received by the transfer agent
before 4:00 p.m. Eastern time for
money to be wired on the next
business day.
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INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you
manage your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except a reinvestment, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed,
even if you have more than one account in the fund. Call your Investment
Professional if you need additional copies of financial reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Institutional Class shares and buy
Institutional Class shares of other Fidelity Advisor funds or shares of
other Fidelity funds by telephone or in writing.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "Exchange
Restrictions," on page 20 .
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 three options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you do not indicate a choice on your application, you will be
assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
those checks will be reinvested in your account at the current NAV and your
election may be converted to the Reinvestment Option. You may change your
distribution option at any time by notifying the transfer agent in writing.
Dividends will be reinvested at the Institutional Class's NAV on the
last day of the month. Capital gain distributions will be reinvested at the
NAV as of the date the class deducts the distribution from its NAV.
The mailing of distribution checks will begin within seven days.
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the fund's tax implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is distributed
to shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31.
Every January, the transfer agent will send you and the IRS a statement
showing the taxable distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. The fund may invest up to 20% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
To the extent that the fund's income dividends are derived from 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 class deducts
a capital gain distribution from its NAV, you will pay the full price for
the shares and then receive a portion of the price back in the form of a
taxable distribution.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open . The Institutional Class's NAV is normally calculated as of
the close of business of the NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class
is computed by adding that class's pro rata share of the value of the
fund's investments, cash, and other assets, subtracting that class's pro
rata share of the value of the fund's liabilities, subtracting the
liabilities allocated to that class, and dividing the result by the
number of shares of that class that are outstandin g.
The fund's assets are valued primarily on the basis of market quotations,
if available. Since market quotations are often unavailable, assets are
usually valued by a method that the Board of Trustees believes accurately
reflects fair value.
THE INSTITUTIONAL CLASS 'S OFFERING PRICE (price to buy one
share) and REDEMPTION PRICE (price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the
fund to withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the transfer
agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to
verify the identity of the caller. Fidelity and the transfer agent will
request personalized security codes or other information, and may also
record calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions. Additional
documentation may be required from corporations, associations and certain
fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page 20 . Purchase orders may be refused if, in FMR's opinion,
they would disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV calculated after your order is received and accepted by the
transfer agent. Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) The fund does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees the fund or the
transfer agent has incurred.
(small solid bullet) Direct Purchases: You begin to earn dividends as of
the first business day following the day the fund receives payment.
(small solid bullet) Confirmed Purchases: You begin to earn dividends as of
the business day the fund receives payment.
(small solid bullet) Automated Purchase Orders : You begin to earn
dividends as of the business day your order is received and accepted.
CONFIRMED PURCHASES. Certain Financial Institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on behalf of
customers by phone, with payment to follow no later than close of
business on the next business day. If payment is not received by the next
business day, the order will be canceled and the Financial Institution will
be liable for any losses.
AUTOMATED PURCHASE ORDERS. Institutional Class s hares of the
fund can be purchased or sold through Investment Professionals
utilizing an automated order placement and settlement system that
guarantees payment for orders on a specified date.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
Federal Reserve check, or automatic investment plans.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your order is received and accepted by the
transfer agent . Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect the fund, it may take up to seven days to pay you.
(small solid bullet) Shares of the fund will earn dividends through the
date of redemption; however, shares redeemed on a Friday or prior to a
holiday will continue to earn dividends until the next business day.
(small solid bullet) The fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
IF YOUR ACCOUNT BALANCE FALLS BELOW $40,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, the transfer agent reserves the right to close your account and
send the proceeds to you. Your shares will be redeemed at the NAV on the
day your account is closed.
THE TRANSFER AGENT RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE
FEE of $12.00 from accounts with a value of less than $2,500. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts.
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 Professional s who support
the sale of shares of the fund. In some instances, these incentives will be
offered only to certain types of Investment Professionals, such as
bank-affiliated or non-bank affiliated broker-dealers, or to Investment
Professionals whose representatives provide services in connection with the
sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging Institutional Class
shares of the fund for the same class of shares of other Fidelity Advisor
funds or for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the difference between that fund's sales charge and any sales charge
you may have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) The fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if the
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the fund or FDC. This Prospectus and the related SAI do not
constitute an offer by the fund or by FDC to sell or to buy shares of the
fund to any person to whom it is unlawful to make such offer.
FIDELITY ADVISOR CALIFORNIA TAX-FREE INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
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10, 11 ............................ Cover Page; Table of Contents
12 ............................ *
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR
ii ............................ Trustees and Officers
iii ............................ Management Contract
b ............................ Management Contract
c, d ............................ Contracts with FMR Affiliates
e ............................ *
f ............................ Management Contract; Contracts with FMR
Affiliates; Distribution and Service Plan
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with FMR Affiliates
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Contracts with FMR Affiliates
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements will be filed by subsequent
amendment
</TABLE>
* Not Applicable
FIDELITY ADVISOR CALIFORNIA TAX-FREE INCOME FUND: CLASS A
FIDELITY ADVISOR CALIFORNIA TAX-FREE INCOME FUND: CLASS B
FIDELITY ADVISOR CALIFORNIA TAX-FREE INCOME FUND: INSTITUTIONAL CLASS
A FUND OF FIDELITY ADVISOR SERIES V
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1 , 1995
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated August 1 , 1995). Please
retain this document for future reference. To obtain a dditional
copies of the Prospectus , please call Fidelity Distributors
Corporation, 82 Devonshire Street, Boston, Massachusetts 02109, or your
investment professional.
Nationwide 800-840-6333
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 2
Special Factors Affecting California 9
Special Factors Affecting Puerto Rico 13
Portfolio Transactions 15
Valuation 16
Performance 16
Additional Purchase , Exchnage and Redemption Information 20
Distribution and Taxes 22
FMR 24
Trustees and Officers 24
Management Contract 26
Contracts with FMR Affiliates 28
Distribution and Service Plan 28
Description of the Trust 29
Appendix 30
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
U MB Ban k, n . a . (UMB)
CAX-SAI- 8 95
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 5.
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the 1940 Act. These transactions may include
repurchase agreements with custodian banks; short-term obligations of, and
repurchase agreements with the 50 largest U.S. banks (measured by
deposits); municipal securities; U.S. Government securities with affiliated
financial institutions that are primary dealers in these securities;
short-term currency transactions; and short-term borrowings. In accordance
with exemptive orders issued by the Securities and Exchange Commission
(SEC), the Board of Trustees has established and periodically reviews
procedures applicable to transactions involving affiliated financial
institutions.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the fund to purchase or sell specific securities at a
predetermined price and/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.
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student loans.
Bonds issued to supply educational institutions with funds are subject to
the risk of unanticipated revenue decline, primarily the result of
decreasing student enrollment or decreasing state and federal funding.
Among the factors that may lead to declining or insufficient revenues are
restrictions on students' ability to pay tuition, availability of state and
federal funding, and general economic conditions. Student loan revenue
bonds are generally offered by state (or substate) authorities or
commissions and are backed by pools of student loans. Underlying student
loans may be guaranteed by state guarantee agencies and may be subject to
reimbursement by the United States Department of Education through its
guaranteed student loan program. Others may be private, uninsured loans
made to parents or students which are supported by reserves or other forms
of credit enhancement. Recoveries of principal due to loan defaults may be
applied to redemption of bonds or may be used to re-lend, depending on
program latitude and demand for loans. Cash flows supporting student loan
revenue bonds are impacted by numerous factors, including the rate of
student loan defaults, seasoning of the loan portfolio, and student
repayment deferral during periods of forbearance. Other risks associated
with student loan revenue bonds include potential changes in federal
legislation regarding student loan revenue bonds, state guarantee agency
reimbursement and continued federal interest and other program subsidies
currently in effect.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open transmission
access to any electricity supplier, although it is not presently known to
what extent competition will evolve. Other risks include: (a) the
availability and cost of fuel, (b) the availability and cost of capital,
(c) the effects of conservation on energy demand, (d) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (e) timely and sufficient rate
increases, and (f) opposition to nuclear power.
FUTURES AND OPTIONS. The following sections pertain to futu r es and
options: Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures Margin
Payments, Limitations on Futures and Options Transactions, Liquidity of
Options and Futures Contracts, OTC Options, Purchasing Put and Call
Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will
set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the fund's assets could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures can
be held until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of a FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The fund intends to comply with Rule 4.5 under the
Commodity Exchange Act, which limits the extent to which the fund can
commit assets to initial margin deposits and option premiums.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to their needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to a FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer generally would expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
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.
FEDERALLY TAXABLE OBLIGATIONS. The fund does not intend to invest in
securities whose interest is federally taxable; however, from time to time,
the fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, the fund may invest in obligations whose interest is federally
taxable pending the investment or reinvestment in municipal securities of
proceeds from the sale of its shares or sales of portfolio securities.
Should the fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The fund's standards for high-quality, taxable obligations are
essentially the same as those described by Moody's Investors Service, Inc.
(Moody's) in rating corporate obligations within its two highest ratings of
Prime-1 and Prime-2, and those described by Standard & Poor's Corporation
(S&P) in rating corporate obligations within its two highest ratings of A-1
and A-2.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the New York legislature
that would affect the state tax treatment of the fund's distributions. If
such proposals were enacted, the availability of municipal obligations and
the value of the fund's holdings would be affected and the Trustees would
reevaluate the fund's investment objectives and policies.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They are secured by
the revenues derived from mortgages purchased with the proceeds of the bond
issue. It is extremely difficult to predict the supply of available
mortgages to be purchased with the proceeds of an issue or the future cash
flow from the underlying mortgages. Consequently, there are risks that
proceeds will exceed supply, resulting in early retirement of bonds, or
that homeowner repayments will create an irregular cash flow. Many factors
may affect the financing of multi-family housing projects, including
acceptable completion of construction, proper management, occupancy and
rent levels, economic conditions, and changes to current laws and
regulations.
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 of Trustees 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 a 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. Pursuant to an exemptive order issued by the
SEC, the fund has received permission to lend money to, and borrow money
from, other funds advised by FMR or its affiliates, but will participate in
the interfund borrowing program only as a borrower. Interfund borrowings
normally extend overnight, but can have a maximum duration of seven days. A
fund will borrow through the program only when the costs are equal to or
lower than the costs of bank loans. Loans may be called on one day's
notice, and a fund may have to borrow from a bank at a higher interest rate
if an interfund loan is called or not renewed.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this SAI, may be changed as regulatory agencies
permit.
INVERSE FLOATERS are instruments whose interest rates bear an inverse
relationship to the interest rate on another security or the value of an
index. Changes in the interest rate on the other security or index
inversely affect the residual interest rate paid on the inverse floater,
with the result that the inverse floater's price will be considerably more
volatile than that of a fixed-rate bond. For example, a municipal issuer
may decide to issue two variable-rate instruments instead of a single
long-term, fixed-rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument
(the inverse floater) reflects the approximate rate the issuer would have
paid on a fixed-rate bond, multiplied by two, minus the interest rate paid
on the short-term instrument. Depending on market availability, the two
portions may be recombined to form a fixed-rate municipal bond. The market
for inverse floaters is relatively new.
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.
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.
REFUNDING CONTRACTS. The fund may purchase securities on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and the fund
to buy refunded municipal obligations at a stated price and yield on a
settlement date that may be several months or several years in the future.
The fund generally will not be obligated to pay the full purchase price if
it fails to perform under a refunding contract. Instead, refunding
contracts generally provide for payment of liquidated damages to the issuer
(currently 15-20% of the purchase price). The fund may secure its
obligations under a refunding contract by depositing collateral or a letter
of credit equal to the liquidated damages provisions of the refunding
contract. When required by SEC guidelines, the fund will place liquid
assets in a segregated custodial account equal in amount to its obligations
under refunding contracts.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time the fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the fund might
obtain a less favorable price than prevailed when it decided to seek
registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. The fund may
acquire standby commitments to enhance the liquidity of portfolio
securities.
Ordinarily the fund will not transfer a standby commitment to a third
party, although it could sell the underlying municipal security to a third
party at any time. The fund may purchase standby commitments separate from
or in conjunction with the purchase of securities subject to such
commitments. In the latter case, the fund would pay a higher price for the
securities acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
purchase an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
tax-exempt bond (generally held pursuant to a custodial arrangement) with a
tender agreement that gives the holder the option to tender the bond at its
face value. As consideration for providing the tender option, the sponsor
(usually a bank, broker-dealer, or other financial institution) receives
periodic fees equal to the difference between the bond's fixed coupon rate
and the rate (determined by a remarketing or similar agent) that would
cause the bond, coupled with the tender option, to trade at par on the date
of such determination. After payment of the tender option fee, the fund
effectively holds a demand obligation that bears interest at the prevailing
short-term tax-exempt rate. In selecting tender option bonds for the fund,
FMR will consider the creditworthiness of the issuer of the underlying
bond, the custodian, and the third party provider of the tender option. In
certain instances, a sponsor may terminate a tender option if, for example,
the issuer of the underlying bond defaults on interest payments.
TRANSPORTATION. Transportation debt may be issued to finance the
construction of airports, toll roads, or highways. Airport bonds are
dependent on the general stability of the airline industry and on the
stability of a specific carrier who uses the airport as a hub. Air traffic
generally tracks broader economic trends and is also affected by the price
and availability of fuel. Toll road bonds are also affected by the cost and
availability of fuel as well as toll levels, the presence of competing
roads, and the general economic health of the area. Fuel costs and
availability also affect other transportation-related securities, as does
the presence of alternate forms of transportation, such as public
transportation.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit the fund to sell them at
par value plus accrued interest on short notice.
In many instances bonds and participation interests have tender options or
demand features that permit the fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. The fund considers variable rate instruments structured in this
way (Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The IRS has not ruled whether the interest on Participating
VRDOs is tax-exempt, and, accordingly, the fund intends to purchase these
instruments based on opinions of bond counsel. The fund may also invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held by a bank in trust or otherwise.
WATER AND SEWER. Water and sewer revenue bonds are often considered to have
relatively secure credit as a result of their issuer's importance, monopoly
status, and generally unimpeded ability to raise rates. Despite this, lack
of water supply due to insufficient rain, run-off, or snow pack is a
concern that has led to past defaults. Further, costly environmental
litigation and Federal environmental mandates are challenges faced by
issuers of water and sewer bonds.
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 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 i n 1994 was over 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,
c a me down about 3% in 1994. Economic indicators show a steady
recovery underway in California 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 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 form
official statements and prospectuses relating to the securities offerings
of Puerto Rico and its agencies and instrumentalities, as available on the
date of this Statement of Additional Information. FMR has not
independently verified any of the information contained in such official
statements, prospectuses, and other publicly available documents, but is
not aware of any fact which would render such information materially
inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1993 trade with the United States accounted for
approximately 86% of Puerto Rico's exports and approximately 69% of its
imports. In this regard, in fiscal 1993 Puerto Rico experienced a $2.5
billion positive adjusted merchandise trade balance. Since fiscal 1987,
personal income, both aggregate and per capita, has increased consistently
each year. In fiscal 1993 aggregate personal income was $24.1 billion and
personal per capita income was $6,760. Gross domestic product in fiscal
1991, 1992, and 1993 was $22.8 billion, $23.5 billion, and $25 billion,
respectively. For fiscal 1994, an increase in gross domestic product of
2.9% over fiscal 1993 is forecasted. However, actual growth in the Puerto
Rico economy will depend on several factors, including the condition of the
U.S. economy, the exchange rate for the U.S. dollar and the price stability
of oil imports and interest rates. Due to these factors, there is no
assurance that the economy of Puerto Rico will continue to grow.
Puerto Rico's economy continued to expand throughout the five-year period
from fiscal 1989 through fiscal 1993. While trends in the Puerto Rico
economy generally follow those of the United States, Puerto Rico did not
experience a recession primarily because of its strong manufacturing base,
which has a large component of non-cyclical industries. Other factors
behind the continued expansion included Commonwealth-sponsored economic
development programs, stable prices of oil imports, low exchange rates for
the U.S. dollar, and the relatively low cost of borrowing funds during the
period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it
still remains significantly above the U.S. average and has been increasing
in recent years. Despite long-term improvements the unemployment rate rose
from 16.5% to 17.5% from fiscal 1992 to fiscal 1993. However, by the end of
January 1994, the unemployment rate had dropped to 16.3%.
The economy of Puerto Rico has undergone a transformation in the latter
half of this century from one centered around agriculture to one dominated
by the manufacturing and service industries. Manufacturing is the
cornerstone of Puerto Rico's economy, accounting for $14.1 billion or 39.4%
of gross domestic product in fiscal 1993. However, manufacturing has
experienced a basic change over the years as a result of the influx of
higher wages, high technology industries such as the pharmaceutical
industry, electronics, computers, micro processors, scientific instruments,
and high technology machinery. The service sector, which employs the
largest number of people, includes wholesale and retail trade, finance, and
real estate, and ranks second in its contribution to gross domestic
product. In fiscal 1993, the service sector generated $14.0 billion in
gross domestic product or 39.1% of the total and employed over 467,000
workers providing 46.7% of total employment. The government sector of the
Commonwealth plays an important role in Puerto Rico's economy. In fiscal
year 1993, the government accounted for $3.9 billion of Puerto Rico's gross
domestic product and provided 21.7% of the total employment. Tourism also
contributes significantly to the island economy, accounting for $1.6
billion of gross domestic product in fiscal 1993.
The present administration, which took office in January 1993, envisions
major economic reforms and has developed a new economic development program
to be implemented in the next few years. This program is based on the
premise that the private sector will be the primary vehicle for economic
development and growth. The program promotes changing the role of the
government from one of being a provider of most basic services to one of
being a facilitator for private sector initiatives and will encourage
private sector investment by reducing regulatory restraints. The program
contemplates the development of initiatives that will foster private
investment, both external and internal, in areas that are served more
efficiently and effectively by the private sector. The program also
contemplates a general revision of the tax system to expand the tax base,
reduce top personal and corporate tax rates, and simplify a highly complex
system. Other important goals for the new program are to reduce the size of
the government's direct contribution to gross domestic product and, to
facilitate private sector development and growth which would be realized
through a reduction in government consumption and an increase in government
investment in order to improve and expand Puerto Rico's infrastructure.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
(Section 936) and the Commonwealth's Industrial Incentives Program. Section
936 currently grants U.S. corporations that meet certain criteria and elect
its application, a credit against their U.S. corporate income tax on the
portion of the tax attributable to (i) income derived from the active
conduct of a trade or business in Puerto Rico (active income), or from the
sale or exchange of substantially all the assets used in the active conduct
of such trade or business, and (ii) qualified possession sources investment
income (passive income). The Industrial Incentives Program, through the
1987 Industrial Incentives Act, grants corporations engaged in certain
qualified activities a fixed 90% exemption from Commonwealth income and
property taxes and a 60% exemption from municipal license taxes.
Pursuant to recently enacted amendments to the Internal Revenue Code (the
Code), and for taxable years commencing after 1993, two alternative
limitations will apply to the Section 936 credit against active business
income and sale of assets as previously described. The first option will
limit the credit against such income to 40% of the credit allowed under
current law, with a five-year phase-in period starting at 60% of the
current credit. The second option will limit the allowable credit to the
sum of (i) 60% of qualified compensation paid to employees (as defined in
the Code); (ii) a specified percentage of depreciation deductions; and
(iii) a portion of the Puerto Rico income taxes paid by the Section 936
corporation, up to a 9% effective tax rate.
At present, it is difficult to forecast what the short- and long-term
effects of the new limitations to the Section 936 credit will be on the
economy of Puerto Rico. However, preliminary econometric studies by the
government of Puerto Rico and private sector economists (assuming no
enhancements to the existing Industrial Incentives Program) project only a
slight reduction in average real growth rates for the economy of Puerto
Rico. These studies also show that particular industry groups will be
affected differently. For example, manufacturers of pharmaceuticals and
beverages may suffer a larger reduction in tax benefits due to their
relatively higher profit margins. In addition, the above limitations are
not expected to reduce the tax credit currently enjoyed by labor-intensive,
lower profit margin industries, which represent approximately 40% of the
total employment by Section 936 corporations in Puerto Rico.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in the fund's
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR 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 200 %. 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
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
trust 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
Each class of fund shares may quote performance in various ways.
All performance information supplied in advertising is historical and is
not intended to indicate future returns. Each class's share price,
yield, and total return fluctuate in response to market conditions and
other factors, and the value of each class of shares when redeemed
may be more or less than their original cost.
YIELD CALCULATIONS. Yields for each class are computed by dividing the
class's pro-rata share of the applicable interest income, if any, for a
given 30-day or one-month period, net of expenses, by the average number of
shares of that class entitled to receive distributions during the period,
dividing this figure by the class's offering price 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 the 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 class's yield
differs from income as determined for other accounting purposes. Because
of the different accounting methods used, and because of the compounding of
income assumed in yield calculations, a class's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
Yield information may be useful in reviewing the fund's performance 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 shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the current yield. In periods of rising
interest rates, the opposite can be expected to occur.
Each class's tax-equivalent yield is the rate an investor would have to
earn from a fully taxable investment after taxes to equal the class's
tax-free yield. Tax-equivalent yields are calculated by dividing the
class's yield by the result of one minus a stated federal or combined
federal and state tax rate. If any portion of the class's yield is
tax-exempt, only that portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on the
effective yield under federal and state income tax laws for 1995. The
second table shows the approximate yield a taxable security must provide at
various income brackets to produce after-tax yields equivalent to those of
hypothetical tax-exempt obligations yielding from 2.0% to 7.0%. Of course,
no assurance can be given that a class will achieve any specific tax-exempt
yield. While the fund invests principally in obligations whose interest is
exempt from federal and state income tax, other income received by the fund
may be taxable. The tables do not take into account local taxes, if any,
payable on fund distributions.
Use the first table to find your appropriate effective tax bracket taking
into account federal and state taxes for 1995.
1995 TAX RATES AND TAX-EQUIVALENT YIELDS
Taxable Income* 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 , use the following
table to determine the tax-equivalent yield for a given tax-free yield.
If your effective combined federal and state personal tax rate in 1995
is:
<TABLE>
<CAPTION>
<S> <C> <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 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 S AI , the
California Franchise Tax Board had not published the 1995
inflation-adjusted tax brackets.
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.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's NAV
over the stated period. Average annual total returns are calculated
by determining the growth or decline in value of a hypothetical historical
investment 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. Average annual
returns covering periods of less than one year are calculated by
determining the fund's total return for the period, extending that return
for a full year (assuming that return remains constant over the year), and
quoting the results as an annual return. 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. Total returns may be quoted on
a before-tax or after tax basis and may be quoted with or without taking
the maximum sales charge into account. Excluding the fund's sales charge
from a total return calculation produces a higher total return figure.
Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using 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 Portfolio Standard & Poor's Composite Index of 500 Stocks (S&P
500), the Dow Jones Industrial Average (DJIA), and the cost of living
(measured by the Consumer Price Index, or CPI) over the same period. The
S&P 500 and DJIA comparisons would show how the fund's total return
compared to the record of a broad average of common stocks and a narrower
set of stocks of major industrial companies, respectively, over the same
period. Of course, since the fund invests in fixed-income securities,
common stocks represent a different type of investment from the fund.
Common stocks generally offer greater growth potential than the fund, but
generally experience greater price volatility, which means greater
potential for loss. In addition, common stocks generally provide lower
income than a fixed-income investment such as the fund. Figures for the
S&P 500 and DJIA are based on the prices of unmanaged groups of stocks and,
unlike the fund's returns, their returns do not include the effect of
paying brokerage commissions or other costs of investing.
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 available 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, a class may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A class may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks 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.
A class may compare its performance or the performance of securities in
which the fund may invest to averages published by IBC USA (Publications),
Inc. of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The BOND FUND REPORT AVERAGES /All Tax-Free, which is
reported in the BOND FUND REPORT, covers over 355 tax-free bond funds. When
evaluating comparisons to money market funds, investors should consider the
relevant differences in investment objectives and policies. Specifically,
money market funds invest in short-term, high-quality instruments and seek
to maintain a stable $1.00 share price. The fund, however, invests in
longer-term instruments and their share prices change daily in response to
a variety of factors.
The fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike
tax-free mutual funds, individual municipal bonds offer a stated rate of
interest and, if held to maturity, repayment of principal. Although some
individual municipal bonds might offer a higher return, they do not offer
the reduced risk of a mutual fund that invests in many different
securities. The initial investment requirements and sales charges of many
tax-free mutual funds are lower than the purchase cost of individual
municipal bonds, which are generally issued in $5,000 denominations and are
subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; model portfolios or
allocations ; saving for college or other goals . In addition,
Fidelity may quote or reprint financial or business publications and
periodicals as they relate to current economic and political
conditions, fund management, portfolio composition, investment philosophy,
investment techniques, the desirability of owning a particular mutual fund,
and Fidelity services and products. 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.
As of June , 1995, FMR advised over $ billion in tax-free
fund assets, $ billion in money market fund assets, $
billion in equity fund assets, and $ 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 .
In addition to performance rankings, the 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.
The fund may be advertised as part of certain asset allocation programs
involving other Fidelity mutual funds. These asset allocation programs may
advertise a model portfolio and its performance results.
The fund may be advertised as part of a no transaction fee ("NTF") program
in which Fidelity and non-Fidelity mutual funds are offered. The Fidelity
Spectrum Program, an NTF program offered to institutional clients, may
include the fund and may advertise performance results.
ADDITIONAL PURCHASE , EXCHANGE AND REDEMPTION INFORMATION
CLASS A SHARES:
Pursuant to 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. In addition, FDC
has chosen to waive Class A's sales charge in certain instances because of
efficiencies involved in those sales of shares. The sales charge will not
apply:
(1) to shares purchased by a bank trust officer, registered representative,
or other employee (and their immediate families) of Investment
Professionals under special arrangements in connection with FDC's sales
activities;
(2) to shares purchased by a current or former Trustee or officer of a
Fidelity fund or a current or retired officer, director, or regular
employee of FMR Corp. or its direct or indirect subsidiaries (a Fidelity
Trustee or employee), the spouse of a Fidelity Trustee or employee, a
Fidelity Trustee or employee acting as custodian for a minor child, or a
person acting as trustee of a trust for the sole benefit of the minor child
of a Fidelity Trustee or employee;
(3) to shares purchased by a charitable organization (as defined in Section
501(c)(3) of the Internal Revenue Code) investing $100,000 or more;
(4) to shares purchased for a charitable remainder trust or life income
pool established for the benefit of a charitable organization (as defined
by Section 501(c)(3) of the Internal Revenue Code;
(5) to shares purchased by a trust institution or bank trust department,
(excluding assets described in (7) and (12) below not advised by a third
party, that has executed a Participation Agreement with FDC specifying
certain asset minimums, and qualifications, marketing program and trading
restrictions;
(6) to shares purchased for use in a broker-dealer managed account program,
provided the broker-dealer has executed a Participation Agreement with FDC
specifying certain asset minimums, and qualifications, marketing program
and trading restrictions. Employee benefit plan assets do not qualify for
this waiver;
(7) to shares purchased as part of an employee benefit plan having more
than (i) 200 eligible employees or a minimum of $1,000,000 in plan assets
invested Fidelity Advisor Funds, or (ii) 25 eligible employees or $250,000
in plan assets invested in Fidelity Advisor Funds that subscribe to
Fidelity Advisor Retirement Connection, or similar participant directed
employee benefit plan program sponsored by Fidelity Investments
Institutional Services Company (FIIS);
(8) to shares in a Fidelity IRA or Fidelity Advisor IRA account purchased
(including purchases by exchange) with the proceeds of a distribution from
an employee benefit plan having more than 200 eligible employees or a
minimum of 3,000,000 in plan assets invested in Fidelity mutual funds or
$1,000,000 invested in Fidelity Advisor mutual funds;
(9) to shares purchased by an insurance company separate account used to
fund annuity contracts purchased by employee benefit plans (including
403(b) programs, but otherwise as defined in ERISA), which, in the
aggregate, have either more than 200 eligible employees or a minimum of
$1,000,000 in assets invested in Fidelity Advisor Funds;
(10) to shares purchased by any state, county, city, or government
instrumentality, department or authority or agency;
(11) to shares purchased with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end or contingent deferred
sales charge only; or
(12) to shares purchased as part of an employee benefit plan purchased
through an intermediary that has signed a Participation Agreement with FIIS
specifying certain asset minimums, and qualifications, marketing program
and trading restrictions; or
(13) to shares purchased by a registered investment advisor which is not
part of an organization principally engaged in the brokerage business, that
has executed a Participation Agreement with FIIS specifying certain asset
minimums, and qualifications, marketing program and trading restrictions.
Employee benefit plan assets do not qualify for this waiver.
FDC compensates investment professionals with a fee of 0.25% 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 0.25% fee is paid must remain within the Fidelity
Advisor Funds (including shares exchanged into Daily Money Fund 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 025%
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.
CLASS B SHARES:
The contingent deferred sales charge (CDSC) on Class B shares may be waived
in the case of (1) disability or death, provided that the redemption is
made within one year following the death or initial determination of
disability, or (2) in connection with a total or partial redemption made in
connection with certain distributions from retirement plan accounts at age
70 1/2 which are permitted without penalty pursuant to the Internal Revenue
Code.
A sales load waiver form must accompany these transactions.
CLASS A AND B SHARES:
QUANTITY DISCOUNTS. To obtain a reduction of the front-end sales charge on
Class A shares, you or your Investment Professional must notify the
transfer agent at the time of purchase whenever a quantity discount is
applicable to your purchase. Upon such notification, you will receive the
lowest applicable front-end sales charge.
For purposes of qualifying for a reduction in front-end sales charges under
the Combined Purchase, Rights of Accumulation or Letter of Intent programs,
the following may qualify as an individual or a "company " as defined in
Section 2(a)(8) of the 1940 Act: an individual, spouse, and their children
under age 21 purchasing for his, her, or their own account; a trustee,
administrator or other fiduciary purchasing for a single trust estate or a
single fiduciary account or for a single or a parent-subsidiary group of
"employee benefits plans" (as defined in Section 3(3) of ERISA); and
tax-exempt organizations as defined under Section 501(c)(3) of the Code.
RIGHTS OF ACCUMULATION permit reduced front-end sales charges on any future
purchases of Class A shares after you have reached a new breakpoint in a
fund's sales charge schedule. The value of currently held Fidelity Advisor
fund Class A and Class B shares, and Initial Class shares and Class B
shares of Daily Money Fund: U.S. Treasury Portfolio and shares of Daily
Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund acquired
by exchange from any Fidelity Advisor fund, is determined at the current
day's NAV at the close of business, and is added to the amount of your new
purchase valued at the current offering price to determine your reduced
front-end sales charge.
LETTER OF INTENT. You may obtain Class A shares at the same reduced
front-end sales charge by filing a non-binding Letter of Intent (the
Letter) within 90 days of the start of Class A purchases. Each Class A
investment you make after signing the Letter will be entitled to the
front-end sales charge applicable to the total investment indicated in the
Letter. For example, a $2,500 purchase of Class A shares toward a $50,000
Letter would receive the same reduced sales charge as if the $50,000
($1,000,000 for Advisor Short Fixed-Income Fund or Advisor
Short-Intermediate Tax-Exempt Fund) had been invested at one time. To
ensure that the reduced front-end sales charge will be received on future
purchases, you or your Investment Professional must inform the transfer
agent that the Letter is in effect each time Class A shares are purchased.
Neither income nor capital gain distributions taken in additional Class A
or Class B shares will apply toward the completion of the Letter.
Your initial investment must be at least 5% of the total amount you plan to
invest. Out of the initial purchase, 5% of the dollar amount specified in
the Letter will be registered in your name and held in escrow. The Class A
shares held in escrow cannot be redeemed or exchanged until the Letter is
satisfied or the additional sales charges have been paid. You will earn
income dividends and capital gain distributions on escrowed Class A shares.
The escrow will be released when your purchase of the total amount has been
completed. You are not obligated to complete the Letter.
If you purchase more than the amount specified in the Letter and qualify
for a future front-end sales charge reduction, the front-end sales charge
will be adjusted to reflect your total purchase at the end of 13 months.
Surplus funds will be applied to the purchase of additional Class A shares
at the then current offering price applicable to your total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, 30 days' written notice will be provided for you to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed Class
A shares will be redeemed to pay such charges.
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A or Class B shares of the fund or other Fidelity
Advisor funds or Class A shares for Initial Class shares of Daily Money
Fund: U.S. Treasury Porfolio; Class A shares for shares of Daily Money
Fund: Mony Market Portfolio or Daily Tax-Exempt Money Fund; and Class B
shares for Class B shares of Daily Money Fund: U.S. Treasury Portfolio 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.
E XCHANGE 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.
R EDEMPTION 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.
CLASS A, CLASS B, AND INSTITUTIONAL CLASS SHARES :
The fund is open for business and each class's NAV is calculated
each day the New York Stock Exchange (NYSE) is open for trading. The NYSE
has designated the following holiday closings for 1995: New Year's Day
(observed), Washington's Birthday (observed), Good Friday, Memorial Day
(observed), Independence Day (observed), Labor Day, Thanksgiving Day, and
Christmas Day (observed). Although FMR expects the same holiday schedule,
to be observed in the future, the NYSE may modify its holiday schedule at
any time.
Each class's NAV is normally determined as of the close of the NYSE
(normally 4:00 Eastern time). However, NAV may be calculated earlier if
trading on the NYSE is restricted or as permitted by the SEC. To the extent
that portfolio securities are traded in other markets on days when the NYSE
is closed, each class's NAV may be affected on days when investors do not
have access to the fund to purchase or redeem shares. In addition, trading
in some of the fund's portfolio securities may not occur on days when the
fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing each class's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, the fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the 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.
DISTRIBUTION AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and
the U.S. Postal Service cannot deliver your checks, or if your checks
remain uncashed for six months, Fidelity may reinvest your distributions at
the then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that the fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short-term capital gains are distributed as dividend
income, but do not qualify for the dividends-received deduction. These
gains will be taxed as ordinary income. The fund will send each shareholder
a notice in January describing the tax status of dividend and capital gain
distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
The fund purchases securities that are free from federal income tax based
on opinions of counsel regarding their tax status. These opinions will
generally be based on covenants by the issuers or other parties regarding
continuing compliance with federal tax requirements. If at any time the
covenants are not complied with, distribution to shareholders of interest
on a security could become federally taxable retroactive to the date the
security was issued. For certain types of structure securities, opinions of
counsel may also be based on the effect of the structure on the federal and
state tax treatment of the income.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of the fund's policies of investing so
that at least 80% of the fund's 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 to be paid, if any. Private activity securities issued after August 7,
1986 to benefit a private or industrial user or to finance a private
facility are affected by this rule.
A portion of the gain on bonds purchased with market discount after April
30, 1993 and short-term capital gains distributed by the fund are taxable
to shareholders as dividends, not as capital gains.
It is the current position of the staff of the SEC 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. According to this position, at least 80% of the fund's
income distributions would have to be exempt from the AMT as well as exempt
from federal income taxes.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest) exceeds the alternative minimum
taxable income of the corporation. If a shareholder receives an
exempt-interest dividend and sells shares at a loss after holding them for
a period of six months or less, the loss will be disallowed to the extent
of the amount of exempt-interest dividend.
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.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time that
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed by
the fund are taxable to shareholders as dividends, not as capital
gains.
TAX STATUS OF THE F UND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
the fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar year
as well as on a fiscal year basis. The fund intends to comply with other
tax rules applicable to regulated investment companies, including a
requirement that capital gains from the sale of securities held less than
three months constitute less than 30% of the fund's gross income for each
fiscal year. Gains from some futures contracts and options are included in
this 30% calculation, which may limit the fund's investments in such
instruments.
The fund is treated as a separate entity from the other funds of Fidelity
Advisor Series V for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting the fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether the fund is suitable to their particular tax
situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company (FIIOC) , which
performs shareholder servicing functions for institutional customers and
funds sold through intermediaries; and Fidelity Investments Retail
Marketing Company, which provides marketing services to various companies
within the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. All persons named as
Trustees also serve in similar capacities for other funds advised by FMR.
Unless otherwise noted, the business address of each Trustee and officer is
82 Devonshire Street, Boston, MA 02109, which is also the address of FMR.
Those Trustees who are "interested persons" (as defined in the 1940 Act) by
virtue of their affiliation with either trust or with FMR are indicated by
an asterisk (*).
*EDWARD C. JOHNSON 3d, (65), Trustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman of
the Board and of the Executive Committee of FMR; Chairman and a Director of
FMR Texas Inc. (1989), Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.
*J. GARY BURKHEAD, (54), Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, (63), 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, (63), 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 she previously served as a Director of Hallmark Cards, Inc. (1985-1991)
and Nabisco Brands, Inc. In addition, she is a member of the President's
Advisory Council of The University of Vermont School of Business
Administration.
RICHARD J. FLYNN, (71), 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 Trustee of College of the Holy Cross and Old Sturbridge
Village, Inc., and he previously served as Director of Mechanics Bank
(1971-1995).
E. BRADLEY JONES, (67), 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, (62), 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 he previously served as a Director of Valuation Research
Corp. (appraisals and valuations, 1993). In addition, he serves as Vice
Chairman of the Board of Directors of the National Arts Stabilization Fund,
Vice Chairman of the Board of Trustees of the Greenwich Hospital
Association, and as a Member of the Public Oversight Board of the American
Institute of Certified Public Accountants' SEC Practice Section (1995).
*PETER S. LYNCH, (52), Trustee (1990) is Vice Chairman of FMR (1992). Prior
to May 31, 1990, he was a Director of FMR and Executive Vice President of
FMR (a position he held until March 31, 1991); Vice President of Fidelity
Magellan Fund and FMR Growth Group Leader; and Managing Director of FMR
Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate
Services (1991-1992). He is a Director of W.R. Grace & Co. (chemicals) and
Morrison Knudsen Corporation (engineering and construction). In addition,
he serves as a Trustee of Boston College, Massachusetts Eye & Ear
Infirmary, Historic Deerfield and Society for the Preservation of New
England Antiquities, and as an Overseer of the Museum of Fine Arts of
Boston (1990).
GERALD C. McDONOUGH, (66), 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, (70), 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, (62), 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, (66), 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, (47), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
STEPHEN P. JONAS, (42), 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, (48), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, (49), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
The following table sets forth information describing the compensation of
each current trustee of the fund for his or her services as trustee for the
fiscal year ended October 31, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Trustees Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from Benefits Accrued Retirement from from the Fund
the Fund(dagger) as Part of Fund the Fund Complex*
Expenses from the Complex*
Fund Complex*
J. Gary Burkhead $ 0 $ 0 $ 0 $ 0
Ralph F. Cox 5,200 52,000 125,000
Phyllis Burke Davis 5,200 52,000 122,000
Richard J. Flynn 0 52,000 154,500
E. Bradley Jones 5,200 49,400 123,500
Edward C. Johnson 3d** 0 0 0 0
Donald J. Kirk 5,200 52,000 125,000
Peter S. Lynch** 0 0 0 0
Gerald C. McDonough 5,200 52,000 125,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 125,000
Thomas R. Williams 5,200 52,000 126,500
</TABLE>
(dagger) Estimated
* Information is as of December 31, 1994 for 206 funds in the complex.
** Interested trustees of the fund are compensated by FMR.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments is not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program
As of , 1995, the Trustees and officers of the fund owned, in
the aggregate, less than 1% of the outstanding shares of the fund.
MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under its management contract with the fund, FMR acts as investment adviser
and, subject to the supervision of the Board of Trustees, directs the
investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments, 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 , 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 , on behalf of the
fund has entered into a revised agent agreement with the UMB ,
pursuant to which UMB bears the cost of providing these services to
shareholders. Other expenses paid by the fund include interest, taxes,
brokerage commissions, the fund's proportionate share of insurance premiums
and Investment Company Institute dues, 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.
FMR is the fund's manager pursuant to a management contract dated
, which was approved by sole shareholders on .
For the services of FMR under the contract, the fund pays FMR a monthly
management fee composed of the sum of two elements: a group fee rate and
an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown below on the left. The schedule below o n the right,
shows the effective annual group fee rate at various asset
levels, which is the result of cumulatively applying the annualized
rates on the left . For example, the effective annual fee rate at
$ billion of average group net assets - their approximate level
for , 199 5 - was 0%, which is the
weighted average of the respective fee rates for each level of group net
assets up to $ 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 .135 0
228 - 264 .13 0 0
264 - 300 .1 275
300 - 336 .1250
336 - 372 .1225
Over 372 .1200
The individual fund fee rate is 0 .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 F und 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, giving a dollar
amount which is the fee for that month.
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). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense
reimbursements by FMR will increase the fund's total returns and yield and
repayment of the reimbursement by the fund will lower its total returns and
yield.
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.
CONTRACTS WITH FMR AFFILIATES
UMB is the fund's transfer, dividend disbursing, and shareholders'
servicing agent for Institutional Class, Class A and Class B shares of the
fund. On behalf of Class A shares, UMB has entered into sub-arrangements
with State Street pursuant to which State Street performs as transfer,
dividend disbursing, and shareholders' servicing agent. State Street has
further delegated certain transfer, dividend disbursing, and shareholders'
services for Class A shares to FIIOC. On behalf of Institutional Class and
Class B shares, UMB has entered into sub-arrangements with FIIOC pursuant
to which FIIOC performs as transfer, dividend disbursing, and shareholders'
servicing agent. For every account, each of Institutional Class, Class A
and Class B of the fund pays an annual fee and an asset-based fee based on
account size. FIIOC also collects small account fees from certain accounts
with balances of less than $2,500.
For accounts that State Street maintains on behalf of UMB, State Street
receives all such fees. For accounts that FIIOC maintains on behalf of UMB
or State Street, FIIOC receives all such fees. For accounts for which FIIOC
provides limited services, FIIOC receives a portion of related account fees
and asset-based fees, less applicable charges and expenses of State Street
for account maintenance and transactions.
State Street or FIIOC, as applicable, pay out-of-pocket expenses associated
with providing transfer agent services. In addition, State Street or FIIOC,
as applicable, bears the expense of typesetting, printing, and mailing
prospectuses, statements of additional information, and all other reports,
notices, and statements to shareholders, with the exception of proxy
statements.
UMB has sub-arrangements with FSC pursuant to which FSC performs the
calculations necessary to determine the NAV and dividends for each of
Institutional Class, Class A and Class B, and maintains the accounting
records for the fund. The fee rates for pricing and bookkeeping services
are based on the fund's average net assets, specifically, .04% for the
first $500 million of average net assets and .02% for average net assets in
excess of $500 million. The fee is limited to a minimum of $45,000 and a
maximum of $750,000 per year.
The transfer agent fees and charges, and pricing and bookkeeping fees
described above are paid to State Street, FIIOC and FSC by UMB, which is
entitled to reimbursement from the fund or the class, as applicable, for
these expenses.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to use
all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered.
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by FDC.
DISTRIBUTION AND SERVICE PLANS
The Trustees have adopted a Distribution and Service Plan on behalf of
Institutional Class, Class A and Class B shares of the fund (the Plans)
pursuant to Rule 12b-1 under the 1940 Act (the Rule). The Rule provides in
substance that a mutual fund may not engage directly or indirectly in
financing any activity that is primarily intended to result in the sale of
shares of a fund except pursuant to a plan adopted on behalf of the fund
under the Rule. The Plans, as approved by the Trustees, allow
Institutional Class, Class A and Class B of the fund and FMR to incur
certain expenses that might be considered to constitute direct or indirect
payment by the fund of distribution expenses.
Pursuant to the Class A Plan and Class B Plan, FDC is paid a distribution
fee at an annual rate of up to 0.40% of Class A's average net assets and
0.75%% of Class B's average net assets determined as of the close of
business on each day throughout the month. Currently, the Trustees have
approved a distribution fee for Class A at an annual rate of 0.25% of its
average net assets. This fee may be increased only when, in the opinion of
the Trustees, it is in the best interests of the shareholders of Class A to
do so. Class B also pays investment professionals a service fee at an
annual rate of 0.25% of its average daily net assets determined as of the
close of business on each day throughout the month for personal service
and/or the maintenance of shareholder accounts.
Under each Plan, if the payment of management fees by the fund to FMR is
deemed to be indirect financing by the fund of the distribution of its
shares, such payment is authorized by the Plans. Each Plan also
specifically recognizes that FMR, either directly or through FDC, may use
its management fee revenue, past profits, or other resources, without
limitation, to pay promotional and administrative expenses in connection
with the offer and sale of shares of the applicable class of the fund. In
addition, each Plan provides that FMR may use its resources, including its
management fee revenues, to make payments to third parties that assist in
selling shares of the applicable class of the fund, or to third parties,
including banks, that render shareholder support services. The Trustees
have not authorized such payments to date.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of each Plan and have
determined that there is a reasonable likelihood that the Plan will benefit
the applicable class of the fund and its shareholders. With respect tothe
Institutional Class Plan, the Trustees noted in particular that the Plan
does not authorize payments by the Institutional Class of the fund other
than those made to FMR under its management contract with the fund. To the
extent that each Plan gives FMR and FDC greater flexibility in connection
with the distribution of shares of the applicable class of the fund,
additional sales of fund shares may result. Furthermore, certain
shareholder support services may be provided more effectively under the
Plans by local entities with whom shareholders have other relationships.
None of the Plans provides for specific payments by the applicable class of
any of the expenses of FDC, or obligates FDC or FMR to perform any specific
type or level of distribution activities or incur any specific level of
expense in connection with distribution activities. After payments by FDC
for advertising, marketing and distribution, and payments to third parties,
the amounts remaining, if any, may be used as FDC may elect.
The Plans were approved by sole shareholders of Class A and Class B on
, and Institutional Class on .
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed
herein, and banks and other financial institutions may be required to
register as dealers pursuant to state law.
The fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plans.
No preference for the instruments of such depository institutions will be
shown in the selection of investments.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Advisor California Tax-Free Income
F und 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
t rust to Fidelity Investment Series, and on April 15, 1993, the
Board voted to change the trust's name to Fidelity Advisor Series V. An
amended and restated Declaration of Trust dated March 16, 1995 was filed on
. Currently, there are four funds of the trust:
Fidelity Advisor California Tax-Free Income F und, Fidelity
Advisor New York Tax-Free Income Fund, Fidelity Advisor High Income
Municipal F und and Fidelity Advisor Global Resources F und.
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 t rust or fund to use the identifying name "Fidelity"
may be withdrawn.
The assets of the t rust 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 t rust. Expenses with respect to the
t rust 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 t rust, 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
t rust, 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 t rust 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 t rust 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 t rust or the Trustees include a provision
limiting the obligations created thereby to the t rust and its
assets. The Declaration of Trust provides for indemnification out of each
fund's property of any shareholder held personally liable for the
obligations of the fund. The Declaration of Trust also provides that each
fund shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the fund and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which a
fund itself would be unable to meet its obligations. FMR believes that, in
view of the above, the risk of personal liability to shareholders is
remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value of
net asset value per share you own. The shares have no preemptive rights ,
and Class A and Institutional Class shares have no conversion rights;
the voting and dividend rights, the conversion rights of Class B
shares, the right of redemption, and the privilege of exchange are
described in the Prospectus. Shares are fully paid and nonassessable,
except as set forth under the heading "Shareholder and Trustee Liability"
above. Shareholders representing 10% or more of the t rust , a fund
or a class may, as set forth in the Declaration of Trust, call meetings
of the t rust or the fund or the class for any purpose, as the
case may be, including, in the case of a meeting of the entire
t rust, the purpose of voting on removal of one or more Trustees. The
t rust 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 t rust or fund., as determined by the current value
of each shareholder's investment in the fund or t rust. If not so
terminated, the t rust or fund will continue indefinitely. The fund
may invest all of its assets in another investment company.
CUSTODIAN. U MB , 1010 Grand Avenue, Kansas City, Missouri, is
custodian of the assets of the fund. The custodian is responsible
for the safekeeping of the fund's assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the fund or in deciding which
securities are purchased or sold by the fund. However, t he fund may
invest in obligations of the custodian and may purchase securities from or
sell securities to the custodian. Morgan Guaranty Trust of New York, the
Bank of New York, and Chemical Bank, each headquartered in New York, also
may serve as special purpose custodian of certain assets in connection with
pooled repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and the Board
of Trustees may from time to time conduct transactions with
various banks, including banks serving as custodians for certain 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.
Also, the maturities of mortgage-backed securities and some asset-backed
securities, such as collateralized mortgage obligations, are determined on
a weighted average life basis, which is the average time for principal to
be repaid. For a mortgage security, this average time is calculated by
estimating the expected principal payments during the life of the mortgage.
The weighted average life of these securities is likely to be substantially
shorter than their stated final maturity.
FIDELITY ADVISOR NEW YORK TAX-FREE INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Who May Want to Invest
3 a .............................. *
b .............................. *
c .............................. Performance
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices; Fundamental Investment
Practices and Restrictions
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. Cover Page; FMR and Its Affiliates
ii........................... FMR and Its Affiliates; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Cover Page; Charter; Breakdown of Expenses;
FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates; Breakdown of
Expenses
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers
iii.......................... *
b ............................. *
c .............................. How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details; Sales
Charge Reductions and Waivers
c .............................. Sales Charge Reductions and Waivers
d .............................. How to Buy Shares; Transaction Details
e .............................. Breakdown of Expenses; Transaction Details
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
FIDELITY
ADVISOR NEW YORK
TAX-FREE 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 a
copy of the fund's most recent financial report and portfolio listing
or a copy of the Statement of Additional Information (SAI) dated August
1, 1995. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is incorporated herein by reference (legally forms a
part of the prospectus). For a free copy of either document, contact
Fidelity Distributors Corporation (FDC), 82 Devonshire Street, Boston, MA
02109 or call your Investment Professional.
A f und of Fidelity Advisor Series V
The fund seeks a high level of current income free from federal income tax
and New York State and City personal income taxes by investing primarily in
municipal securities.
PROSPECTUS
AUGUST 1, 1995 (FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON,
MA 02109
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ANYAB-pro-895
CONTENTS
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KEY FACTS WHO MAY WANT TO INVEST
EXPENSES Each class' s sales charge (load) and its
yearly operating expenses.
PERFORMANCE
THE FUND IN DETAIL CHARTER How the fund is organized.
INVESTMENT PRINCIPLES AND RISKS The fund's
overall approach to investing.
BREAKDOWN OF EXPENSES How operating costs
are calculated and what they include.
YOUR ACCOUNT TYPES OF ACCOUNTS Different ways to set up your
account.
HOW TO BUY SHARES Opening an account and
making additional investments.
HOW TO SELL SHARES Taking money out and closing
your account.
INVESTOR SERVICES Services to help you manage
your account.
SHAREHOLDER AND 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
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KEY FACTS
WHO MAY WANT TO INVEST
Shares are offered through this prospectus to investors who engage an
Investment Professional for investment advice. This non-diversified
fund may be appropriate for investors in higher tax brackets who seek high
current income that is free from federal and New York State and City
personal income taxes .
The value of the f und's investments and the income they
generate vary from day to day , and generally reflect changes in
interest rates, market conditions, and other po litical and
economic news.
The fund is not in itself a balanced investment plan. You should
consider your investment objective and tolerance for risk when making an
investment decision. When you sell your fund shares, they may be worth
more or less than what you paid for them.
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 Clas
s A s B
Maximum sales charge on purchases 4.75 Non
(as a % of offering price) % e
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Maximum CDSC (as a % of the lesser of None 4.00
original purchase price or redemption proceeds) %*
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Maximum sales charge on reinvested distributions None Non
e
Redemption fee None Non
e
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Exchange fee None None
Annual account maintenance fee (for accounts under $2500) $12.0 $12.0
0 0
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* DECLINES OVER 5 YEARS FROM 4.00% TO 0% .
ANNU AL OPERATING EXPENSES are paid out of each class's
assets. The fund pays a management fee to Fidelity Management &
Research Company (FMR). It also incurs other expenses for services such as
maintaining shareholder records and furnishing shareholder statements and
financial reports.
12b-1 fees for Class A and Class B include a distribution fee and, for
Class B, include a shareholder service fee. Distribution fees are paid by
each class of the fund to FDC for services and expenses in connection with
the distribution of the applicable class's shares. Shareholder service fees
are paid by Class B 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 sa les charges
permitted by the National Association of Securities Dealers, Inc.
(NASD) , due to 12b-1 fees.
Each class' s expenses are factored into its share price or dividends
and are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page ).
The following are projections based on estimated expenses, and are
calculated as a percentage of average net assets.
Clas Clas
s A s B
Management fee 0 .41 0 .41
% %
12b-1 fee (including 0 .25% 0 .25 1.00
Shareholder Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0 .19 0 .19
% %
Total operating expenses 0 .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 $ $ $ $
Class B $ [ A $ $ [ A $
] ]
[ A ] REFLECTS DEDUCTION OF APPLICABLE CDSC.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Class A and Class B to the
extent that total operating expenses are in excess of 0.85% (Class A) and
1.60% (Class B) of their respective average net assets. If these
agreements were not in effect, projected other expenses and total operating
expenses as a percentage of their respective average net assets would be
___% and ___%, respectively (Class A) and ___% and ___%, respectively
(Class B). Interest, taxes, brokerage commissions, or extraordinary
expenses are not included in these expense limitations.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD.
The exclusion of any applicable sales charge from a performance
calculation produces a higher return.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
Average annual total returns covering periods of less than one year
assume that performance will remain constant for the rest of the year.
Average annual and cumulative total returns usually will include the effect
of paying the maximum applicable sales charge.
YIELD refers to the income generated by an investment in the fund
over a given period of time, expressed as an annual percentage rate. Yields
are calculated according to a standard that is required for all stock and
bond funds. Because this differs from other accounting methods, the quoted
yield may not equal the income actually paid to shareholders.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
THE FUND IN DETAIL
CHARTER
NEW YORK TAX-FREE INCOME FUND IS A MUTUAL FUND: an investment that
pools shareholders' money and invests it toward a specified goal. The
f und 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 comprised of three classes of shares; Institutional Class,
Class A and Class B. Each class has a common investment objective and
investment portfolio. The classes may have different sales charges and
other expenses which may affect performance.
THE F UND 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 a gent will mail proxy materials in advance,
including a voting card and information about the proposals to be voted on.
The number of votes you are entitled to is based upon the dollar value of
your investment. Separate votes are taken by each class of shares,
fund, or trust, if a matter affects just that class of shares, fund, or
trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109 . It includes a
number of different subsidiaries and divisions which provide a variety of
financial services and products. The fund employs various Fidelity
companies to perform activities required for its operation.
The fund is managed by FMR, which chooses the f und's
investments and handles its business affairs.
As of June 30, 199 5 , FMR advised funds having approximately
__ million shareholder accounts with a total value of more
than $ ___ billion.
Norman Lind is manager of Advisor New York Tax-Free Income Fund, which
he has managed since August 1995. Mr. Lind also manages New York Tax-Free
Insured, New York Tax-Free High Yield, Spartan New York Municipal High
Yield and Spartan Municipal Income. Previously, he served as the leader of
the municipal bond research group. Mr. Lind joined Fidelity in 1986.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services. Fidelity
Investments Institutional Operations Company (FIIOC) performs
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.
UMB Bank, n . a ., ( UMB ) is the fund 's
transfer agent, 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. State Street's address is P.O. Box 8302,
Boston, Massachusetts 02266-8302.
To carry out the fund 's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the
fund receives services and commission rates comparable to those of
other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and New York State and City personal
income taxes. The fund invests in municipal securities of investment grade
quality.
The f und has no restrictions on maturity, but it generally
invests in long-term bonds and maintains a dollar-weighted average
maturity of 15 years or longer. In determining a security's
maturity for purposes of calculating the fund's average maturity, estimates
of the expected time for its principal to be repaid may be used. This can
be substantially shorter than its stated final maturity.
The fund 's yield and share price change daily and are based
on changes in interest rates, market conditions , and other
economic and political news , and on the quality and maturity of
its investments. In general, bond prices rise when interest rates fall,
and vice versa. This effect is usually more pronounced for longer-term
securities. FMR may use various investment techniques to hedge the
fund 's 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
tha n what you paid for them.
The fund 's performance is closely tied to the economic and political
conditions within New York State. Both New York City and State have
recently experienced significant financial difficulty, and the state's
credit rating is one of the lowest in the country.
If you are subject to the federal alternative minimum tax, you should note
that the fund may invest a portion of its assets in municipal
securities issued to finance private activities. The interest from these
investments is a tax-preference item for purposes of the tax.
FMR normally invests the fund 's assets according to its investment
strategy and does not expect to invest in federally or state taxable
obligations. The fund also reserves the right to invest without
limitation in short-term instruments, to hold a substantial amount of
uninvested cash, or to invest more than normally permitted in taxable
obligations for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, 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. In
general, bond prices rise when interest rates fall and vice versa.
Debt securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
U.S. Government securities are high quality instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. Government. Not all U.S. Government securities are backed by the full
faith and credit of the United States. Some are supported only by the
credit of the agency that issued them.
Investment-grade debt securities are medium- and high-quality securities.
Some, however, may possess speculative characteristics and may be more
sensitive to economic changes and to changes in the financial condition of
issuers.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by S&P, or is unrated but judged to
be of equivalent quality by FMR. The fund currently intends to limit its
investments in debt securities to those of Baa quality and above.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be
issued in anticipation of future revenues, and may be backed by the full
taxing power of a municipality, the revenues from a specific project, or
the credit of a private organization. A security's credit may be enhanced
by a bank, insurance company, or other entity . The value of some
or all municipal securities may be affected by uncertainties in the
municipal market related to legislation or litigation involving the
taxation of municipal securities or the rights of municipal securities
holders. The fund may own a municipal security directly or through a
participation interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by New
York State or its counties, municipalities, authorities, or other
subdivisions. The ability of issuers to repay their debt can be affected by
many factors that impact the economic vitality of either the state or a
region within the state.
Other state tax-free securities include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations. The economy
of Puerto Rico is closely linked to the U.S. economy, and will depend on
the strength of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives. Recent
legislation revised these incentives, but the government of Puerto Rico
anticipates only a slight reduction in the average real growth rates for
the economy.
ASSET-BACKED SECURITIES 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.
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.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, the fund
may pay periodic fees or accept a lower interest rate. Demand features
and standby commitments are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques
to increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts , entering into swap agreements, and purchasing
indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market
conditions incorrectly or employs a strategy that does not correlate well
with the fund 's investments, these techniques could result in a
loss, regardless of whether the intent was to reduce risk or
i ncrease return. These techniques may increase the volatility of the
fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could result
in a loss if the counterparty to the transaction does not perform as
promised.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other
securities, may be subject to legal restrictions. Difficulty in selling
securities may result in a loss or may be costly to the fund.
RESTRICTIONS: The fund may not purchase a security if, as a result,
more than 10% of its net assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
DIVERSIFICATION. Diversifying a fund 's investment portfolio can
reduce the risks of investing. This may include limiting the amount of
money invested in any one issuer or, on a broader scale, in any one
industry or type of project. Economic, business, or political changes can
affect all securities of a similar type. A fund that is not diversified may
be more sensitive to changes in the market value of a single issuer
or industry.
RESTRICTIONS: The fund is considered non-diversified. Generally, to
meet federal tax requirements at the close of each quarter, the fund
does not invest more than 25% of its total assets in any one issuer and,
with respect to 50% of total assets, does not invest more than 5% of its
total assets in any one issuer. These limitations do not apply to U.S.
government securities.
BORROWING. The fund may borrow from banks or from other funds
advised by FMR, or through reverse repurchase agreements. If the
fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off . If the fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
RESTRICTION: The fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
The fund seeks a high level of current income free from federal
income tax and New York State and City personal income taxes
by investing primarily in municipal securities.
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and New York State and City personal
income taxes.
The f und 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
on page __.
MANAGEMENT FEE
The MANAGEMENT FEE is calculated and paid to FMR every month. The fee is
calculated by adding a GROUP FEE rate to an INDIVIDUAL FUND FEE rate, and
multiplying the result by the fund 's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above 0 .37% , and
it drops as total assets under management increase.
For June 30, 1995, the group fee rate was ___ %. 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 net asset value per share (NAV) and dividends for both Class
A and Class B and maintains the fund's general accounting records. All of
the fees are paid to State Street, FIIOC, and FSC by UMB, which is
reimbursed by the applicable class or 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 that FIIOC maintains on its behalf.
Class A shares of the fund have adopted a DISTRIBUTION AND SERVICE
PLAN . Under the Plan, Class A is authorized to pay FDC a monthly
distribution fee as compensation for its services and expenses in
connection with the distribution of Class A shares and providing personal
service to and/or maintenance of Class A shareholder accounts. Class A may
pay FDC a distribution fee at an annual rate up to 0.40% of its average net
assets, or such lesser amount as the Trustees may determine from time to
time. Class A currently pays FDC a monthly distribution fee 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 have also adopted a DISTRIBUTION AND SERVICE PLAN .
Under the Class B Plan, Class B is authorized to pay FDC a monthly
distribution fee as compensation for its services and expenses in
connection with the distribution of Class B shares. Class B currently pays
FDC monthly at an annual rate of 0.75% of its average net assets determined
at the close of business on each day throughout the month. In addition,
pursuant to the Class B Plan, Investment Professionals are compensated at
an annual rate of 0.25% of average net assets of Class B for providing
personal service to and/or maintenance of Class B shareholder
accounts .
The Plans also specifically recognize that FMR may make payments from its
management fee, revenue, past profits or other resources to Investment
Professionals for their services to Class A and Class B shareholders.
The f und also pays other expenses, such as legal, audit, and
custodian fees; in some instances, proxy solicitation costs; and the
compensation of trustees who are not affiliated with Fidelity.
The f und'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 your Investment
Professional's program materials in conjunction with this prospectus for
additional service features or fees that may apply. Certain features of the
fund, such as minimum initial or subsequent investment amounts, may be
modified in these programs, and administrative charges may be imposed for
the services rendered.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA). Contact your Investment
Professional.
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your Investment Professional.
HOW TO BUY SHARES
Once each business day, two share prices are calculated for Class A shares
of the fund : the offering price and the NAV . The offering
price includes the maximum 4.75% front-end sales charge, which you pay when
you buy Class A shares, unless you qualify for a reduction or waiver as
described beginning on page 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 fund are sold without a
front-end sales charge and may be subject to a CDSC upon redemption. For
information on how the CDSC is calculated, see " Transaction
Details ," page .
Shares are purchased at the next offering price or NAV, as
applicable, calculated after your order is received and
accepted by the transfer agent . The offering price and NAV are
normally calculated at 4:00 pm Eastern time.
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 appropriate 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 may be available for Class A shares upon request.
Share certificates are not available for Class B shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR F UNDS, complete and sign an
account application and mail it along with your check. If there is no
account application accompanying this prospectus, call your Investment
Professional.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund, or
(small solid bullet) Contact your Investment Professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
Through A utomatic I nvestment P lans $1,000
TO ADD TO AN ACCOUNT $250
Through A utomatic I nvestment P lans $ 100
MINIMUM BALANCE $100 0
PURCHASE AMOUNTS OF MORE THAN $250,000 WILL NOT BE ACCEPTED FOR CLASS B
SHARES.
For further information on opening an account, please consult your
Investment Professional or refer to the account application.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777
(phone_graphic) (small solid bullet) Contact your Investment (small solid bullet) Contact your Investment
Professional
Professional or, if you are investing or, if you are investing through a
through a Broker-Dealer or Insurance Broker-Dealer or Insurance
Representative, call 1-800-522-7297. Representative, call 1-800-522-7297. If
If you are investing through a Bank you are investing through a Bank
Representative, call 1-800-843-3001. Representative, call 1-800-843-3001.
(small solid bullet) Exchange from the same
class of (small solid bullet) Exchange from the same
class of
another Fidelity Advisor fund account another Fidelity Advisor fund account
with the same registration, including with the same registration, including
name, address, and taxpayer ID name, address, and taxpayer ID
number. number.
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Mail (mail_graphic) (small solid bullet) Complete and sign the
account (small solid bullet) Make your check payable to "Fidelity
application. Make your check Advisor New York Tax-Free Income
payable to "Fidelity Advisor New Fund" and note the applicable class .
York Tax-Free Income Fund" and I ndicate your f und account number on
note the applicable class. Mail to the your check and mail to the address
address indicated on the application. printed on your account statement.
(small solid bullet) Exchange by mail: call your Investment
Professional for instructions.
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In Person (hand_graphic) (small solid bullet) Bring your account
application and (small solid bullet) Bring your check to your Investment
check to your Investment Professional.
Professional.
Wire (wire_graphic) (small solid bullet) Not available. (small solid bullet) If you are investing through a
Broker-Dealer or Insurance
Representative, wire to:
State Street Bank & Trust Co.
Routing # 011000028
ATTN: Custody & Shareholder
Services Division
CREDIT: Fidelity Advisor New
York Tax-Free
Income Fund
9902-908-4
FBO: (Account name)
(Account number)
If you are investing through a Bank
Representative, wire to:
Banker's Trust Co.
Routing # 021001033
Custody & Shareholder Services
Division
Fidelity Advisor DART System
A/C #00159759
FBO: (Account name)
(Account number)
Specify "Fidelity Advisor New York
Tax-Free 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 by the transfer agent , less any applicable CDSC. NAV
is normally calculated at 4:00 p.m. Eastern time.
TO SELL SHARES IN AN ACCOUNT you may use any of the methods described on
these pages.
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 ac count with a different registration, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, signed certificates (if applicable), and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your Investment Professional, or mail it to the
following address:
(small solid bullet) If you purchased your shares through a
Broker-Deal er 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 t ransfer a gent will send a
check to the record address.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request: $ 100,000 .
(small solid bullet) You may exchange to the same
class of other Fidelity Advisor funds
if both accounts are registered with
the same name(s), address, and
taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual,
Joint Tenant, (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 .
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.
(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.
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INVESTOR SERVICES
Fidelity Advisor f unds 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,
except a reinvestment, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed,
even if you have more than one account in the fund . Call your
Investment Professional if you need additional copies of financial
reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your shares and buy shares of the same
class of other Fidelity Advisor funds or shares of other Fidelity
funds by telephone or in writing. The Class A shares you
exchange will carry credit for any front-end sales charge you previously
paid in connection with their purchase.
Note that exchanges out of the fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or revoked,
see "Exchange Restrictions," page .
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
redemptions from your account. Only Class A shares with an account value
of $10,000 or more are eligible for this program. Because of Class A's
front-end sales charge, you may not want to set up a systematic withdrawal
plan during a period when you are buying Class A shares on a regular basis.
One easy way to pursue your financial goals is to invest money
regularly. Fidelity Advisor funds offer convenient services that let you
transfer money into your fund account, or between fund accounts,
automatically. While regular investment plans do not guarantee a profit and
will not protect you against loss in a declining market, they can be an
excellent way to invest for retirement, a home, educational expenses, and
other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND
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MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
Initial Monthly,
bimonthly, (small solid bullet) For a new account, complete the appropriate section on
Additional quarterly, the application.
$100 $100[ or
semi-annually (small solid bullet) For existing accounts, call your Investment Professional
A] 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 (20 business days
if you purchased your shares through a bank).
</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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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, (small solid bullet) To establish, call your Investment Professional after both
semi-annually, or 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.
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[ A ] BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE
AN APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in March and
December.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. 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 state
tax-free investments, they will be free from New York State and City
personal income taxes.
TAXES ON TRANSACTIONS. Your redemptions-including exchanges-are subject to
capital gains tax. A capital gain or loss is the difference between the
cost of your shares and the price you receive when you sell them.
Whenever you sell shares of the fund, the transfer agent will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement at least
quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax
to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount of
your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the fund deducts a
capital gain distribution from its NAV, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Each class's NAV and offering price are normally calculated
as of the close of business of the NYSE, normally 4:00 p.m. Eastern
time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value of the fund's
investments, cash, and other assets, subtracting that class's pro rata
share of the value of the fund's liabilities, subtracting the liabilities
allocated to that class, and dividing by the number of shares of that class
that are outstanding.
The fund's assets are valued primarily on the basis of market quotations,
if available. Since market quotations are often unavailable, assets are
usually valued by a method that the Board of Trustees believes accurately
reflects fair value.
THE OFFERING PRICE (price to buy one share) is the applicable
class's NAV, plus a sales charge for Class A shares. Class A has a maximum
sales charge of 4.75% of the offering price. The REDEMPTION PRICE
(price to sell one share) is the applicable class's NAV, minus any
applicable CDSC for Class B shares.
SALES CHARGES AND INVESTMENT PROFESSIONAL CONCESSIONS - CLASS A
Sales Charge as % of
Offering Net Investment
Price Amount Profession
Investe al
d Concession
as % of
Offering
Price
Less than $50,000 4.75 4 .99 4 .00 %
% %
$50,000 to less than $100,000 4.50 4.71 4.00%
% %
$100,000 to less than $250,000 3.50 3.63 3.00%
% %
$250,000 to less than $500,000 2.50 2.56 2.00%
% %
$500,000 to less than $1,000,000 2.00 2.04 1.75%
% %
$1,000,000 or more None None See
Below*
* INVESTMENT PROFESSIONALS WILL BE COMPENSATED WITH A FEE OF 0 .25%
FOR PURCHASES OF $1 MILLION OR MORE IF THE ASSETS ON WHICH THE 0 .25%
IS PAID REMAIN WITHIN THE FIDELITY ADVISOR F UNDS FOR ONE YEAR,
EXCEPT FOR PURCHASES THROUGH A BANK OR BANK-AFFILIATED BROKER-DEALER THAT
QUALIFY FOR A SALES CHARGE WAIVER DESCRIBED BEGINNING ON PAGE . ALL
ASSETS ON WHICH THE 0 .25% FEE IS PAID MUST REMAIN IN CLASS A SHARES
OF THE FIDELITY ADVISOR F UNDS, 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 I NVESTMENT P ROFESSIONAL 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 F UND.
SEE "CONVERSION FEATURE" ON PAGE FOR MORE INFORMATION.
Investment Professionals with whom FDC has agreements receive as
compensation from FDC a concession equal to 3.00% of your purchase of Class
B shares.
The CDSC will be calculated based on the lesser of the cost of Class B
shares at the initial date of purchase or the value of Class B shares at
redemption, not including any reinvested dividends or capital gains. In
determining the applicability and rate of any CDSC at redemption, Class B
shares representing reinvested dividends and capital gains, if any, will be
redeemed first, followed by Class B shares that have been held for the
longest period of time. Class B shares acquired through distributions
(dividends or capital gains) will not be subject to a CDSC.
CONVERSION FEATURE. After a maximum holding period of six years from
the initial date of purchase, Class B shares and any capital
appreciation associated therewith convert automatically to Class A
shares of the same Fidelity Advisor 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 .
For more information about the CDSC, including the conversion feature and
the permitted circumstances for CDSC waivers, contact your Investment
Professional.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A or
Class B shares of the fund, you may reinvest an amount equal to all or a
portion of the redemption proceeds in the same class of the fund or of any
of the other Fidelity Advisor funds, at the NAV next determined after
receipt of your investment order, provided that such reinvestment is made
within 30 days of redemption. Under these circumstances, the dollar amount
of the CDSC you paid on Class B shares will be reimbursed to you by
reinvesting that amount in Class B shares. You must reinstate your shares
into an account with the same registration. This privilege may be exercised
only once by a shareholder with respect to the fund and certain
restrictions may apply. For purposes of the CDSC schedule, the holding
period of your Class B shares will continue as if Class B shares had not
been redeemed.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your social security or taxpayer identification number is correct and
that you are not subject to 31% backup withholding for failing to report
income to the IRS. If you violate IRS regulations, the IRS can require the
fund to withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the
t ransfer a gent 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
t he transfer agent will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
the confirmation statements immediately after receipt. If you do not want
the ability to redeem and exchange by telephone, call the transfer agent
for instructions. Additional documentation may be required from
corporations, associations and certain fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a
period of time. The fund also reserves the right to reject any
specific purchase order, including certain purchases by exchange. See
"Exchange Restrictions" on page . Purchase orders may be refused if,
in FMR's opinion, they would disrupt management of the fund .
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV or offering price , as applicable, calculated after
your order is received and accepted by the transfer agent. Note the
following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) The fund does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees the fund or
the transfer agent has incurred.
(small solid bullet) Direct Purchases: You begin to earn dividends as of
the first business day following the day the fund receives payment.
(small solid bullet) Automated Purchase Orders: You begin to earn dividends
as of the business day your order is received and accepted.
AUTOMATED PURCHASE ORDERS. Shares of the fund can be purchased
or sold through Investment Professionals utilizing an automated order
placement and settlement system that guarantees payment for orders on a
specified date .
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
or Federal Reserve check.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV , minus any applicable CDSC, calculated after your order is
received and accepted by the transfer agent . Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect the fund , it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) The fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check have been
collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
THE TRANSFER AGENT RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE
FEE of $12.00 from accounts with a value of less than $2,500. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing 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 t ransfer a gent 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 T RANSFER A GENT MAY CHARGE A FEE FOR SPECIAL SERVICES,
such as providing historical account documents, that are beyond the normal
scope of its services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to Investment Professionals who support the sale
of shares of the fund. In some instances, these incentives will be offered
only to certain types of Investment Professionals, such as bank-affiliated
or non-bank affiliated broker-dealers, or to Investment Professionals whose
representatives provide services in connection with the sale or expected
sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of the
fund for the same class of shares of other Fidelity Advisor
funds; or Class A shares for Initial Class shares of Daily Money Fund:
U.S. Treasury Portf oli o; Class A shares for shares of Daily Money
Fund: Money Market Portfolio or Daily Tax-Exempt Money Fund; and Class
B shares for Class B shares of Daily Money Fund: U.S. Treasury Portfolio.
However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, the fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) The fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if the
fund receives or anticipates simultaneous orders affecting
significant portions of the fund's assets. In particular, a pattern of
exchanges that coincid es with a "market timing" strategy may be
disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it
is reasonably able to do so, it may impose these restrictions at any time.
The fund reserves the right to terminate or modify the exchange
privilege in the future.
SALES CHARGE REDUCTIONS AND WAIVERS
The front-end sales charge will be reduced for purchases of Class A
shares according to the Sales Charge Schedule shown on page 20 if
your purchase qualifies for one of the following reduction plans. Please
refer to the fund's SAI for more details about each plan or contact your
Investment Professional. If you purchased your shares through a
Broker-Dealer or Insurance Representative, call 1-800-522-7297. If you
purchased your shares through a Bank Representative, call
1-800-843-3001 .
Your purchases and existing balances of Class B shares may be included in
the following programs for purposes of qualifying for a Class A front-end
sales charge reduction.
QUANTITY DISCOUNTS apply to purchases of Class A shares of a single
Fidelity Advisor fund or to combined purchases of Class A and Class B
shares of any Fidelity Advisor funds , and to purchases of Initial
Class shares and Class B shares of Daily Money Fund: U.S. Treasury
Portfolio and shares of Daily Money Fund: Money Market Portfolio and Daily
Tax-Exempt Money Fund acquired by exchange from 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 I nvestment P rofessional and the total is at least $50,000
(or at least $1 million for each of Advisor Short
Fixed - Income Fund or Advisor Short-Intermediate Tax-Exempt
Fund).
RIGHTS OF ACCUMULATION let you determine your front-end sales charge on
Class A shares by adding to your new purchase of Class A shares the value
of all of the Fidelity Advisor fund Class A and Class B shares held
by you, your spouse, and your children under age 21. You can also add the
value of Initial Class shares and Class B shares of Daily Money
Fund: U.S. Treasury Portfolio and shares of Daily Money Fund: Money Market
Portfolio and Daily Tax-Exempt Money Fund acquired by exchange from any
Fidelity Advisor fund .
A LETTER OF INTENT lets you receive the same reduced front-end sales
charge on purchases of Class A shares made during a 13-month period as if
the total amount invested during the period had been invested in a single
lump sum. (see Quantity Discounts above.) You must file your non-binding
Letter within 90 days of the start of your purchases. Your initial
investment must be at least 5% of the amount you plan to invest. Out of
the initial investment, 5% of the dollar amount specified in the Letter
will be registered in your name and held in escrow. You will earn income
dividends and capital gain distributions on escrowed Class A shares.
Neither income dividends nor capital gain distributions reinvested in
additional Class A or Class B shares will apply toward completion of the
Letter. The escrow will be released when your purchase of the total amount
has been completed. You are not obligated to complete the Letter, and in
such a case, sufficient escrowed Class A shares will be redeemed to pay any
applicable front-end sales charges.
A FRONT-END SALES CHARGE WILL NOT APPLY TO THE FOLLOWING CLASS A
SHARES:
1. Purchased by a bank trust officer, registered representative, or
other employee (or a member of one of their immediate families) of
Investment Professionals having agreements with FDC;
2. Purchased by a current or former trustee or officer of a Fidelity fund
or a current or retired officer, director or regular employee of FMR Corp.
or its direct or indirect subsidiaries (a Fidelity trustee or employee),
the spouse of a Fidelity trustee or employee, a Fidelity trustee or
employee acting as custodian for a minor child, or a person acting as
trustee of trust for the sole benefit of the minor child of a Fidelity
trustee or employee;
3. Purchased by a charitable organization (as defined in Section 501(c)(3)
of the Internal Revenue Code) investing $100,000 or more;
4. Purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code);
5. Purchased by a trust institution or bank trust department, (excluding
assets described in (7) and (12) below) not advised by a third party, which
has executed a Participation Agreement with Fidelity Investments
Institutional Services Company (FIIS) specifying certain asset minimums and
qualifications, marketing restrictions, and program requirements.
6.Purchased for use in a broker-dealer managed account program, provided
the broker-dealer has executed a Participation Agreement with FDC
specifying certain asset minimums and qualifications, and marketing program
and trading restrictions. Employee benefit plan assets do not qualify for
this waiver;
7. Purchase d as part of an employee benefit plan having more than
(i) 200 eligible employees or a minimum of $1 million of plan assets
invested in Fidelity Advisor funds or (ii) 25 eligible employees or
$250,000 in plan assets invested in Fidelity Advisor Funds that subscribes
to Fidelity Retirement Connection, or similar participant directed employee
benefit plan program sponsored by FIIS;
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 (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 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;
12. Purchased as part of an employee benefit plan purchased through an
intermediary that has signed a Participation Agreement with FIIS specifying
certain asset minimums and qualifications, and marketing program and
trading restrictions; or
13. Purchased by a registered investment advisor which is not part of an
organization principally engaged in the brokerage business and which has
executed a Participation Agreement with FIIS specifying certain asset
minimums and qualifications, marketing programs and trading restrictions.
You must notify FDC in advance if you qualify for a front-end sales charge
waiver. E mployee 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
required distributions from retirement plans or accounts.
Your Investment Professional should call Fidelity for more information.
No dealer, sales representative or any other person has been authorized
to give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the fund or FDC. This Prospectus and the related SAI do not
constitute an offer by the fund or by FDC to sell or to buy shares of the
fund to any person to whom it is unlawful to make such offer.
FIDELITY ADVISOR NEW YORK TAX-FREE INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Who May Want to Invest
3 a .............................. *
b .............................. *
c .............................. Performance
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices; Fundamental Investment
Practices and Restrictions
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. Cover Page; FMR and Its Affiliates
ii........................... FMR and Its Affiliates; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Cover Page; Charter; Breakdown of Expenses;
FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates; Breakdown of
Expenses
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions
iii.......................... *
b ............................. *
c .............................. How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares; Transaction Details
e .............................. Breakdown of Expenses; Transaction Details
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
FIDELITY
ADVISOR NEW YORK
TAX-FREE INCOME FUND:
INSTITUTIONAL CLASS
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a
copy of the fund's most recent financial report and portfolio listing
or a copy of the Statement of Additional Information (SAI) dated August 1,
1995 . The SAI has been filed with the Securities and Exchange
Commission (SEC) and is incorporated herein by reference (legally forms a
part of the prospectus). For a free copy of either document, c ontact
Fidelity Distributors Corporation (FDC), 82 Devonshire Street, Boston,
MA 02109 at 1-800-843-3001 call your Investment Professional.
A fund of Fidelity Advisor Series V
The fund seeks a high level of current income free from federal income tax
and New York State and City personal income taxes by investing primarily in
municipal securities.
PROSPECTUS
AUGUST 1, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ANYI-pro-895
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS WHO MAY WANT TO INVEST
EXPENSES I nstitutional Class's yearly operating
expenses.
PERFORMANCE
THE FUND IN DETAIL CHARTER How the fund is organized.
INVESTMENT PRINCIPLES AND RISKS The fund's
overall approach to investing.
BREAKDOWN OF EXPENSES How operating costs
are calculated and what they include.
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
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
This non-diversified fund may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal and New
York State and City personal income taxes.
Institutional Class shares are offered through this prospectus to (i)
ban k trust departments and other trust institutions, (ii) accounts
managed by a broker-dealer, (iii) accounts managed by a registered
investment advisor (RIA), and (iv) insurance company general accounts.
Shares are available only to entities that have signed a Participation
Agreement with Fidelity Institutional Services Company (FIIS). The
Participation Agreement specifies certain asset minimums , asset
qualification s trading guidelines and marketing program
restrictions.
The value of the fund's investments and the income they generate vary from
day to day, and generally reflect changes in interest rates, market
conditions, and other political and economic news. The fund is not in
itself a balanced investment plan. You should consider your investment
objective and tolerance for risk when making an investment decision. When
you sell your fund shares, they may be worth more or less than what you
paid for them.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy ,
sell or hold Institutional Class shares of the fund.
Maximum sales charge on purchases and None
reinvested distributions
Maximum deferred sales charge None
Redemption fee None
Exchange fee None
Annual account maintenance fee $12.00
(for accounts under $2,500)
ANNUAL OPERATING EXPENSES are paid out of Institutional Class's
assets. The fund pays a management fee to Fidelity Management & Research
Company (FMR). It also incurs other expenses for services such as
maintaining shareholder records and furnishing shareholder statements and
financial reports.
Expenses are factored into its share price or dividends and are not
charged directly to shareholder accounts (see "Breakdown of Expenses" on
page __).
T he following are projections based on estimated expenses, and are
calculated as a percentage of average net assets of the Institutional Class
of the fund.
Management fee 0.41%
12b-1 fee (Distribution Fee) None
Other expenses (after ___%
reimbursement)
Total operating expenses ___ %
EXPENSE TABLE EXAMPLE: You would pay the following expenses on a
$1,0 0 0 investment in Institutional Class shares assuming a 5%
annual return and full redemption at the end of each time period:
1 3
Year Years
$ $
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Institutional Class to the
extent that total operating expenses are in excess of ___% of Institutional
Class's average net assets. If this agreement were not in effect,
projected other expenses and total operating expenses as a percentage of
Institutional Class's average net assets would be ___%. Interest, taxes,
brokerage commissions, or extraordinary expenses are not included in these
expense limitations.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
Average annual total returns covering periods of less than one year assume
that performance will remain constant for the rest of the year.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
THE FUND IN DETAIL
CHARTER
NEW YORK 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 comprised of three classes of shares ; Institutional
Class, Class A and Class B. Each clas s has a common investment
objective and investment portfolio. The classes may have different sales
charges and other expenses which may affect performance.
T HE FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review the fund's performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. The transfer
agent will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. The number of votes you are
entitled to is based upon the dollar value of your investment. Separate
votes are taken by each class of shares, fund, or trust, if a matter
affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The fund employs various Fidelity
companies to perform activities required for its operation.
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
As of June 30, 1995, FMR advised funds having approximately __million
shareholder accounts with a total value of more than $__ billion.
Norman Lind is manager of Advisor New York Tax-Free Income Fund, which
he has managed since August 1995. Mr. Lind also manages New York Tax-Free
Insured, New York Tax-Free High Yield, Spartan New York Municipal High
Yield and Spartan Municipal Income. Previously, he served as the leader of
the municipal bond research group. Mr. Lind joined Fidelity in 1986.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services. Fidelity
Investments Institutional Operations Company (FIIOC) performs certain
transfer agent servicing functions for the Institutional Class shares
of 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.
UMB Bank, n.a. (UMB) i s the fund's transfer agent, although it
employs FIIOC to perform these functions for the I nstitutional Class
of the fund. UMB is located at 1010 Grand Avenue, Kansas City, Missouri.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and New York State and City personal
income taxes. The fund invests in municipal securities of investment grade
quality.
The fund has no restrictions on maturity, but it generally invests in
long-term bonds and maintains a dollar-weighted average maturity of 15
years or longer. In determining a security's maturity for purposes of
calculating the fund's average maturity, estimates of the expected time for
its principal to be repaid may be used. This can be substantially shorter
than its stated final maturity.
The fund's yield and share price change daily and are based on changes in
interest rates, market conditions, other economic and political news, and
on the quality and maturity of its investments. In general, bond prices
rise when interest rates fall, and vice versa. This effect is usually more
pronounced for longer-term securities. FMR may use various investment
techniques to hedge the fund's 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 New York State. Both New York City and State have
recently experienced significant financial difficulty, and the State's
credit rating is one of the lowest in the country.
If you are subject to the federal alternative minimum tax, you should note
that the fund may invest a portion of its assets in municipal
securities issued to finance private activities. The interest from these
investments is a tax-preference item for purposes of the tax.
FMR normally invests the fund's assets according to its investment strategy
and does not expect to invest in federally or state taxable obligations.
The fund also reserves the right to invest without limitation in short-term
instruments, to hold a substantial amount of uninvested cash, or to invest
more than normally permitted in taxable obligations for temporary,
defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, 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. In
general, bond prices rise when interest rates fall and vice versa.
Debt securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
U.S. Government securities are high quality instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. Government. Not all U.S. Government securities are backed by the full
faith and credit of the United States. Some are supported only by the
credit of the agency that issued them.
Investment-grade debt securities are medium- and high-quality securities.
Some, however, may possess speculative characteristics and may be more
sensitive to economic changes and to changes in the financial condition of
issuers.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by S&P, or is unrated but judged to
be of equivalent quality by FMR.
The fund currently intends to limit its investments in debt securities to
those of B aa -quality and above.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. A security's credit may be enhanced by a bank,
insurance company, or other entity. The value of some or all municipal
securities may be affected by uncertainties in the municipal market related
to legislation or litigation involving the taxation of municipal securities
or the rights on municipal securities holders. The value of some or all
municipal securities may be affected by uncertainties in the municipal
market related to legislation or litigation involving the taxation of
municipal securities or the rights of municipal securities holders. The
fund may own a municipal security directly or through a participation
interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by the state
of New York or its counties, municipalities, authorities, or other
subdivisions. The ability of issuers to repay their debt can be affected by
many factors that impact the economic vitality of either the state or a
region within the state.
Other state tax-free securities include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations. The economy
of Puerto Rico is closely linked to the U.S. economy, and will depend on
the strength of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives. Recent
legislation revised these incentives, but the government of Puerto Rico
anticipates only a slight reduction in the average real growth rates for
the economy.
ASSET-BACKED SECURITIES 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.
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.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, the fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, entering into swap agreements, and purchasing indexed
securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities , may
be subject to legal restrictions. Difficulty in selling securities may
result in a loss or may be costly to the fund.
RESTRICTIONS. The fund may not purchase a security if, as a result, more
than 10% of its net assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all
securities of a similar type. A fund that is not diversified may be more
sensitive to changes in the market value of a single issuer or industry.
RESTRICTIONS: The fund is considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, the fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S. Government
securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 331/3% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph s , can be changed without shareholder approval.
The fund seeks a high level of current income free from federal income
tax and New York State and City personal income taxes by
investing primarily in municipal securities.
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and New York State and City personal
income taxes.
The fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the Institutional Class's assets are reflected
in its share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. The fund also pays OTHER EXPENSES, which are explained on
page__.
MANAGEMENT FEE
The MANAGEMENT FEE is calculated and paid to FMR every month. The fee is
calculated by adding a GROUP FEE rate to an INDIVIDUAL FUND FEE rate, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above 0.37%, and it drops as
total assets under management increase. For June 30, 1995, the group fee
rate was %. 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 FIIOC and Fidelity Service
Co. (F SC ) . FIIOC performs certain transfer agency, dividend
disbursing and shareholder services for the Institutional Class shares
of the fund. UMB has also entered into sub-arrangements pursuant to
which FSC calculates the net asset value per share (N AV ) and
dividends for t he Institutional Class shares of the fund, and
maintains the fund's general accounting records. All of the fees are paid
to FIIOC and FSC by UMB, which is reimbursed by t he Institutional
class or the fund, as appropriate, for such payments .
The Institutional Class has adopted a DISTRIBUTION AND SERVICE PLAN.
This plan recognizes that FMR may use its resources, including management
fees, to pay expenses associated with the sale of Institutional Class
shares. This may include payments to third parties, such as banks or
broker-dealers, that provide shareholder support services or engage in the
sale of the Institutional Class shares. The Board of Trustees has not
authorized such payments. The Institutional Class does not pay FMR
any separate fees for this service.
The fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity.
The fund's portfolio turnover rate is not expected to exceed 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).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your Investment Professional.
HOW TO BUY SHARES
THE INSTITUTIONAL C LASS'S SHARE PRICE, called NAV, is calculated
every business day. Institutional Class shares are sold without a sales
charge.
Shares are purchased at the next NAV calculated after your order is
received and accepted by the transfer agent. NAV is normally calculated at
4:00 p.m. Eastern time.
If you are placing your order through an Investment Professional, it is the
responsibility of your Investment Professional to transmit your order to
buy shares to the t ransfer 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 no t available for Institutional Class shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. You may also open your
account by wire as described on page __. If there is no account application
accompanying this prospectus, call 1-800-843-3001 or your Investment
Professional.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Wire money into your account ,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund or from another Fidelity fund , or
(small solid bullet) Contact your Investment Professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $100,000
TO ADD TO AN ACCOUNT $2,500
MINIMUM BALANCE $40,000
For further information on opening an account, please consult your
Investment Professional or refer to the account application.
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
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PHONE (small solid bullet) Exchange from the
same class of (small solid bullet) Exchange from the same class of
1-800-843-3001 OR YOUR another Fidelity Advisor fund or from another Fidelity Advisor fund or from
INVESTMENT PROFESSIONAL another Fidelity fund account with another Fidelity fund account with
the same registration, including the same registration, including
name, address, and taxpayer ID name, address, and taxpayer ID
number. number.
</TABLE>
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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 New York Tax-Free
payable to "Fidelity Advisor New Income Fund" and note the
York Tax-Free Income Fund" and applicable class. Indicate your fund
note the applicable class. Mail to the account number on your check and
address indicated on the application. mail to the address printed on your
account statement.
(small solid bullet) Exchange by mail: call
1-800-843-3001 or 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) Call 1-800-843-3001 to set up your (small solid bullet) Wire to:
account and to arrange a wire Banker's Trust Co.
transaction. Routing # 021001033
(small solid bullet) Wire t o: Custody & Shareholder Services
Banker's Trust Co. Fidelity Advisor DART System
Routing # 021001033 DDA#: (call 1-800-843-3001)
Custody & Shareholder Services FBO: (account name)
Fidelity Advisor DART System (account number)
DDA#: (call 1-800-843-3001)
FBO: (account name) Specify the complete name of the
(account number) fund of your choice , note the
applicable class and include your
Specify the complete name of the account number and your name.
fund of your choice , note the
applicable class and include your
new account number and your name.
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted by the
transfer agent. NAV is normally calculated at 4:00 p.m. Eastern time.
TO SELL SHARES IN AN ACCOUNT, you may use any of the methods described on
these two pages.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$ 40,000 worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE, you will need to sign up for this
service in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and the fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner ,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity a ccount with a different registration, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your Investment Professional, or mail it to the
following address:
Fidelity Investments Institutional Operations Co mpany
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 type s (small solid bullet) Maximum check request: $100,000.
1-800-843-3001 OR YOUR
INVESTMENT PROFESSIONAL
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(phone_graphic) All account types(small solid bullet) You may exchange to the same
class of other Fidelity Advisor funds
or into other Fidelity funds if both
accounts are registered with the
same name(s), address, and
taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual,
Joint Tenant, (small solid bullet) The letter of instruction (with
Sole
Proprietorship signature guarantee d ) must be
signed by all persons required to
sign for transactions, exactly as
their names appear on the account
and sent to your Investment
Professional.
Trust (small solid bullet) The trustee must sign the letter
indicating capacity as trustee. If the
trustee's name is not in the account
registration, provide a copy of the
trust document certified within the
last 60 days.
Business or
Organization (small solid bullet) At least one person authorized by
corporate resolution to act on the
account must sign the letter (with
signature guarantee d ).
Executor,
Administrator, (small solid bullet) C all 1-800-843-3001 or your
Conservator/
Guardian Investment Professional for
instructions.
Wire (wire_graphic) All account
types (small solid bullet) You must sign up for the wire
feature before using it. To verify that
it is in place, call 1-800-843-3001.
Minimum wire: $ 1,000.
(small solid bullet) Your wire redemption request must
be received by the transfer agent
before 4:00 p.m. Eastern time for
money to be wired on the next
business day.
</TABLE>
INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except a reinvestment, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed,
even if you have more than one account in the fund. Call your Investment
Professional if you need additional copies of financial reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Institutional Class shares and buy
Institutional Class shares of other Fidelity Advisor funds or shares of
other Fidelity funds by telephone or in writing.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "Exchange
Restrictions," page ___.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in March and
December.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. The fund offers three options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you do not indicate a choice on your application, you will be
assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
those checks will be reinvested in your account at the current NAV and your
election may be converted to the Reinvestment Option. You may change your
distribution option at any time by notifying the transfer agent in writing.
Dividends will be reinvested at the Institutional Class's NAV on the
last day of the month. Capital gain distributions will be reinvested at the
NAV as of the date the class deducts the distribution from its NAV. The
mailing of distribution checks will begin within seven days.
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the fund's tax implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is distributed
to shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31.
Every January, the transfer agent will send you and the IRS a statement
showing the taxable distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. The fund may invest up to 20% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
To the extent that the fund's income dividends are derived from state
tax-free investments, they will be free from New York State and City
personal income taxes.
TAXES ON TRANSACTIONS. Your redemptions-including exchanges-are subject to
capital gains tax. A capital gain or loss is the difference between the
cost of your shares and the price you receive when you sell them.
Whenever you sell shares of the fund, the transfer agent will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement at least
quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax
to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount of
your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the class deducts a
capital gain distribution from its NAV, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. The Institutional Class's NAV is normally calculated as of the
close of business of the NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class
is computed by adding that class's pro rata share of the value
of the fund's investments, cash, and other assets, subtracting that
class's pro rata share of the value of the fund's liabilities,
subtracting the liabilities allocated to that class, and dividing the
result by the number of shares of that class outstanding.
The fund's assets are valued primarily on the basis of market quotations,
if available. Since market quotations are often unavailable, assets are
usually valued by a method that the Board of Trustees believes accurately
reflects fair value.
THE INSTITUTIONAL CLASS ' S OFFERING PRICE (price to buy
one share) and REDEMPTION PRICE (price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the
fund to withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the transfer
agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify
the identity of the caller. Fidelity and the transfer agent will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions.
Additional documentation may be required from corporations, associations
and certain fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page __. Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV of that class calculated after your order is received and
accepted by the transfer agent. Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) The fund does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase
will be canceled and you could be liable for any losses or fees the fund or
the transfer agent has incurred.
(small solid bullet) Direct Purchases: You begin to earn dividends
as of the first business day following the day the fund receives payment.
(small solid bullet) Confirmed Purchases: You begin to earn dividends
as of the business day the fund receives payment.
(small solid bullet) Automated Purchase Orders : You begin to earn
dividends as of the business day your order is received and accepted.
CONFIRMED PURCHASES. Certain Financial Institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on behalf of
customers by phone with payment to follow no later than the close of
business on the next business day. If payment is not received by the next
business day, the order will be canceled and the Financial Institution will
be liable for any losses.
AUTOMATED PURCHASE ORDERS. Institutional Class shares of the fund can be
purchased or sold through Investment Professionals utilizing an automated
order placement and settlement system that guarantees payment for orders on
a specified date.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury
check, or Federal Reserve check .
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV, calculated after your order is received and accepted by the
transfer agent . Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect the fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) The fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
IF YOUR ACCOUNT BALANCE FALLS BELOW $40,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, the transfer agent reserves the right to close your account and
send the proceeds to you. Your shares will be redeemed at the NAV on the
day your account is closed.
THE TRANSFER AGENT RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE
of $12.00 from accounts with a value of less than $2,500. The fee, which is
payable to the transfer agent, is designed to offset in part the relatively
higher costs of servicing smaller accounts.
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 Professional s who support
the sale of shares of the fund. In some instances, these incentives will be
offered only to certain types of Investment Professionals, such as
bank-affiliated or non-bank affiliated broker-dealers, or to Investment
Professionals whose representatives provide services in connection with the
sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging Institutional
C lass shares of the fund for the same class of shares of other
Fidelity Advisor funds or for shares of other Fidelity funds .
However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the difference between that fund's sales charge and any sales charge
you may have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge .
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) The fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if the
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the fund or FDC. This Prospectus and the related SAI do not
constitute an offer by the fund or by FDC to sell or to buy shares of the
fund to any person to whom it is unlawful to make such offer.
FIDELITY ADVISOR NEW YORK TAX-FREE INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
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10, 11 ............................ Cover Page; Table of Contents
12 ............................ *
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR
ii ............................ Trustees and Officers
iii ............................ Management Contract
b ............................ Management Contract
c, d ............................ Contracts with FMR Affiliates
e ............................ *
f ............................ Management Contract; Contracts with FMR
Affiliates; Distribution and Service Plan
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with FMR Affiliates
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Contracts with FMR Affiliates
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements will be filed by subsequent
amendment
</TABLE>
* Not Applicable
FIDELITY ADVISOR NEW YORK TAX-FREE INCOME FUND: INSTITUTIONAL CLASS
FIDELITY ADVISOR NEW YORK TAX-FREE INCOME FUND: CLASS A
FIDELITY ADVISOR NEW YORK TAX-FREE INCOME FUND: CLASS B
A FUND OF FIDELITY ADVISOR SERIES V
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1995
NATIONWIDE 800-840-6333
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the current Prospectus for Fidelity
Advisor New York Tax-Free Income Fund (the f und) (dated August 1,
1995 ). Please retain this document for future reference. To
obtain an a dditional cop y of the Prospectus please call
Fidelity Distributors Corporation, 82 Devonshire Street, Boston,
Massachusetts 02109 , or your Investment Professional.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Factors Affecting New York
Special Factors Affecting Puerto Rico
Portfolio Transactions
Valuatio n
Performance
Additional Purchase , Exchange and Redemption Information 20
Distribution and Taxes
FMR
Trustees and Officers
Management Contract
Contracts with FMR Affiliates 28
Distribution and Service Plan s
Description of the Trust
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB)
FANYTFI-ptb- 895
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the f und's assets that may
be invested in any security or other asset, or sets forth a policy
regarding quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund 's
acquisition of such security or other asset. Accordingly, any subsequent
change in values, net assets, or other circumstances will not be considered
when determining whether the investment complies with the fund 's
investment policies and limitations.
The fund 's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (the 1940
Act)) of the fund . However, except for the fundamental investment
limitations set forth below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
THE FOLLOWING ARE THE FUND 'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(8) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund .
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the
close of each quarter of its taxable year: (a) with regard to at least 50%
of total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to " G overnment 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 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.
G overnment securities with affiliated financial institutions that
are primary dealers in these securities; short-term currency transactions;
and short-term borrowings. In accordance with exemptive orders issued by
the Securities and Exchange Commission (SEC), the Board of Trustees has
established and periodically reviews procedures applicable to transactions
involving affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities
on a delayed-delivery or when-issued basis. These transactions involve a
commitment by the fund to purchase or sell specific securities at a
predetermined price and/ 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.
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student loans.
Bonds issued to supply educational institutions with funds are subject to
the risk of unanticipated revenue decline, primarily the result of
decreasing student enrollment or decreasing state and federal funding.
Among the factors that may lead to declining or insufficient revenues are
restrictions on students' ability to pay tuition, availability of state and
federal funding, and general economic conditions. Student loan revenue
bonds are generally offered by state (or substate) authorities or
commissions and are backed by pools of student loans. Underlying student
loans may be guaranteed by state guarantee agencies and may be subject to
reimbursement by the United States Department of Education through its
guaranteed student loan program. Others may be private, uninsured loans
made to parents or students which are supported by reserves or other forms
of credit enhancement. Recoveries of principal due to loan defaults may be
applied to redemption of bonds or may be used to re-lend, depending on
program latitude and demand for loans. Cash flows supporting student loan
revenue bonds are impacted by numerous factors, including the rate of
student loan defaults, seasoning of the loan portfolio, and student
repayment deferral during periods of forbearance. Other risks associated
with student loan revenue bonds include potential changes in federal
legislation regarding student loan revenue bonds, state guarantee agency
reimbursement and continued federal interest and other program subsidies
currently in effect.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open transmission
access to any electricity supplier, although it is not presently known to
what extent competition will evolve. Other risks include: (a) the
availability and cost of fuel, (b) the availability and cost of capital,
(c) the effects of conservation on energy demand, (d) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (e) timely and sufficient rate
increases, and (f) opposition to nuclear power.
FUTURES AND OPTIONS. The following sections pertain to futures and
options: Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures Margin
Payments, Limitations on Futures and Options Transactions, Liquidity of
Options and Futures Contracts, OTC Options, Purchasing Put and Call
Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will
comply with guidelines established by the SEC with respect to coverage of
options and futures strategies by mutual funds, and if the guidelines so
require will set aside appropriate liquid assets in a segregated custodial
account in the amount prescribed. Securities held in a segregated account
cannot be sold while the futures or option strategy is outstanding, unless
they are replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of the fund 's
assets could impede portfolio management or the fund 's ability to
meet redemption requests or other current obligations.
COMBINED POSITIONS. The fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the fund may purchase a put option and write
a call option on the same underlying instrument, in order to construct a
combined position whose risk and return characteristics are similar to
selling a futures contract. Another possible combined position would
involve writing a call option at one strike price and buying a call option
at a lower price, in order to reduce the risk of the written call option in
the event of a substantial price increase. Because combined options
positions involve multiple trades, they result in higher transaction costs
and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund 's current
or anticipated investments exactly. The fund may invest in options
and futures contracts based on securities with different issuers,
maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures
position will not track the performance of the fund 's other
investments.
FUTURES CONTRACTS. When the fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future
date. When the fund sells a futures contract, it agrees to sell the
underlying instrument at a specified future date. The price at which the
purchase and sale will take place is fixed when the fund enters into
the contract. Some currently available futures contracts are based on
specific securities, such as U.S. Treasury bonds or notes, and some are
based on indices of securities prices, such as the Bond Buyer Municipal
Bond Index. Futures can be held until their delivery dates, or can be
closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund 's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a
futures contract, by contrast, the value of its futures position will tend
to move in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund 's investment limitations. In the event of
the bankruptcy of a FCM that holds margin on behalf of the
fund , the fund may be entitled to return of margin owed to it
only in proportion to the amount received by the FCM's other customers,
potentially resulting in losses to the fund .
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed
a notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The fund intends to comply with Rule 4.5 under the
Commodity Exchange Act, which limits the extent to which the fund
can commit assets to initial margin deposits and option premiums.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the
fund to enter into new positions or close out existing positions. If
the secondary market for a contract is not liquid because of price
fluctuation limits or otherwise, it could prevent prompt liquidation of
unfavorable positions, and potentially could require the fund to
continue to hold a position until delivery or expiration regardless of
changes in its value. As a result, the fund 's access to other assets
held to cover its options or futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to their needs, OTC
options generally involve greater credit risk than exchange-traded options,
which are guaranteed by the clearing organization of the exchanges where
they are traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the
fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right,
the fund pays the current market price for the option (known as the
option premium). Options have various types of underlying instruments,
including specific securities, indices of securities prices, and futures
contracts. The fund may terminate its position in a put option it
has purchased by allowing it to expire or by exercising the option. If the
option is allowed to expire, the fund will lose the entire premium
it paid. If the fund exercises the option, it completes the sale of
the underlying instrument at the strike price. The fund may also
terminate a put option position by closing it out in the secondary market
at its current price, if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it
takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the fund assumes the obligation
to pay the strike price for the option's underlying instrument if the other
party to the option chooses to exercise it. When writing an option on a
futures contract, the fund will be required to make margin payments
to a FCM as described above for futures contracts. The fund
may seek to terminate its position in a put option it writes before
exercise by closing out the option in the secondary market at its current
price. If the secondary market is not liquid for a put option the
fund has written, however, the fund must continue to be
prepared to pay the strike price while the option is outstanding,
regardless of price changes, and must continue to set aside assets to cover
its position.
If security prices rise, a put writer generally would expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the
option's underlying instrument, in return for the strike price, upon
exercise of the option. The characteristics of writing call options are
similar to those of writing put options, except that writing calls
generally is a profitable strategy if prices remain the same or fall.
Through receipt of the option premium, a call writer mitigates the effects
of a price decline. At the same time, because a call writer must be
prepared to deliver the underlying instrument in return for the strike
price, even if its current value is greater, a call writer gives up some
ability to participate in security price increases.
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.
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. G overnment or
its agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. The fund 's standards for high - quality,
taxable obligations are essentially the same as those described by Moody's
Investors Service, Inc. (Moody's) in rating corporate obligations within
its two highest ratings of Prime-1 and Prime-2, and those described by
Standard & Poor's Corporation (S&P) in rating corporate obligations within
its two highest ratings of A-1 and A-2.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the New York legislature
that would affect the state tax treatment of the fund 's
distributions. If such proposals were enacted, the availability of
municipal obligations and the value of the fund 's holdings would be
affected and the Trustees would reevaluate the fund 's investment
objectives and policies.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They are secured by
the revenues derived from mortgages purchased with the proceeds of the bond
issue. It is extremely difficult to predict the supply of available
mortgages to be purchased with the proceeds of an issue or the future cash
flow from the underlying mortgages. Consequently, there are risks that
proceeds will exceed supply, resulting in early retirement of bonds, or
that homeowner repayments will create an irregular cash flow. Many factors
may affect the financing of multi-family housing projects, including
acceptable completion of construction, proper management, occupancy and
rent levels, economic conditions, and changes to current laws and
regulations.
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 of Trustees 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 a
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.
Index ed securities may have principal payments as well as coupon
payments that depend on the performance of one or more interest rates.
Their coupon rates or principal payments may change by several percentage
points for every 1% interest rate change. One example of indexed securities
is inverse floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
INTERFUND BORROWING PROGRAM. Pursuant to an exemptive order issued by
the SEC, the fund has received permission to lend money to, and borrow
money from, other funds advised by FMR or its affiliates, but will
participate in the interfund borrowing program only as a borrower.
Interfund borrowings normally extend overnight, but can have a maximum
duration of seven days. A fund will borrow through the program only
when the costs are equal to or lower than the costs of bank loans. Loans
may be called on one day's notice, and a fund may have to borrow
from a bank at a higher interest rate if an interfund loan is called or not
renewed.
In addition, the fund will not: (a) sell futures contracts, purchase
put options, or write call options if, as a result, more than 25% of the
fund 's total assets would be hedged with futures and options under
normal conditions; (b) purchase futures contracts or write put options if,
as a result, the fund 's total obligations upon settlement or
exercise of purchased futures contracts and written put options would
exceed 25% of its total assets; or (c) purchase call options if, as a
result, the current value of option premiums for call options purchased by
the fund would exceed 5% of the fund 's total assets. These
limitations do not apply to options attached to or acquired or traded
together with their underlying securities, and do not apply to securities
that incorporate features similar to options.
The above limitations on the fund 's investments in futures contracts
and options, and the fund 's policies regarding futures contracts and
options discussed elsewhere in this SAI, may be changed as
regulatory agencies permit.
INVERSE FLOATERS are instruments whose interest rates bear an
inverse relationship to the interest rate on another security or the value
of an index. Changes in the interest rate on the other security or index
inversely affect the residual interest rate paid on the inverse floater,
with the result that the inverse floater's price will be considerably more
volatile than that of a fixed-rate bond. For example, a municipal issuer
may decide to issue two variable-rate instruments instead of a single
long-term, fixed-rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument
(the inverse floater) reflects the approximate rate the issuer would have
paid on a fixed-rate bond, multiplied by two, minus the interest rate paid
on the short-term instrument. Depending on market availability, the two
portions may be recombined to form a fixed-rate municipal bond. The market
for inverse floaters is relatively new.
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.
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.
REFUNDING CONTRACTS. The fund may purchase securities on a
when-issued basis in connection with the refinancing of an issuer's
outstanding indebtedness. Refunding contracts require the issuer to sell
and the fund to buy refunded municipal obligations at a stated price
and yield on a settlement date that may be several months or several years
in the future. The fund generally will not be obligated to pay the
full purchase price if it fails to perform under a refunding contract.
Instead, refunding contracts generally provide for payment of liquidated
damages to the issuer (currently 15-20% of the purchase price). The
fund may secure its obligations under a refunding contract by
depositing collateral or a letter of credit equal to the liquidated damages
provisions of the refunding contract. When required by SEC guidelines, the
fund will place liquid assets in a segregated custodial account
equal in amount to its obligations under refunding contracts.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or
part of the registration expense and a considerable period may elapse
between the time it decides to seek registration and the time the
fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions
were to develop, the fund might obtain a less favorable price than
prevailed when it decided to seek registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
fund sells a portfolio instrument to another party, such as a bank
or broker-dealer, in return for cash and agrees to repurchase the
instrument at a particular price and time. While a reverse repurchase
agreement is outstanding, the fund will maintain appropriate liquid
assets in a segregated custodial account to cover its obligation under the
agreement. The fund will enter into reverse repurchase agreements
only with parties whose creditworthiness has been found satisfactory by
FMR. Such transactions may increase fluctuations in the market value of the
fund 's assets and may be viewed as a form of leverage.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. The fund may
acquire standby commitments to enhance the liquidity of portfolio
securities.
Ordinarily the fund will not transfer a standby commitment to a
third party, although it could sell the underlying municipal security to a
third party at any time. The fund may purchase standby commitments
separate from or in conjunction with the purchase of securities subject to
such commitments. In the latter case, the fund would pay a higher
price for the securities acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
purchase an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the fund ; and the possibility that the maturities of
the underlying securities may be different from those of the commitments.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
tax-exempt bond (generally held pursuant to a custodial arrangement) with a
tender agreement that gives the holder the option to tender the bond at its
face value. As consideration for providing the tender option, the sponsor
(usually a bank, broker-dealer, or other financial institution) receives
periodic fees equal to the difference between the bond's fixed coupon rate
and the rate (determined by a remarketing or similar agent) that would
cause the bond, coupled with the tender option, to trade at par on the date
of such determination. After payment of the tender option fee, the
fund effectively holds a demand obligation that bears interest at
the prevailing short-term tax-exempt rate. In selecting tender option bonds
for the fund , FMR will consider the creditworthiness of the issuer
of the underlying bond, the custodian, and the third party provider of the
tender option. In certain instances, a sponsor may terminate a tender
option if, for example, the issuer of the underlying bond defaults on
interest payments.
TRANSPORTATION. Transportation debt may be issued to finance the
construction of airports, toll roads, or highways. Airport bonds are
dependent on the general stability of the airline industry and on the
stability of a specific carrier who uses the airport as a hub. Air traffic
generally tracks broader economic trends and is also affected by the price
and availability of fuel. Toll road bonds are also affected by the cost and
availability of fuel as well as toll levels, the presence of competing
roads, and the general economic health of the area. Fuel costs and
availability also affect other transportation-related securities, as does
the presence of alternate forms of transportation, such as public
transportation.
VARIABLE OR FLOATING RATE OBLIGATIONS , including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit the fund to sell them at
par value plus accrued interest on short notice.
In many instances bonds and participation interests have tender options or
demand features that permit the fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. The fund considers variable rate instruments structured in this
way (Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The IRS has not ruled whether the interest on Participating
VRDOs is tax-exempt, and, accordingly, the fund intends to purchase these
instruments based on opinions of bond counsel. The fund may also invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held by a bank in trust or otherwise.
WATER AND SEWER. Water and sewer revenue bonds are often considered to have
relatively secure credit as a result of their issuer's importance, monopoly
status, and generally unimpeded ability to raise rates. Despite this, lack
of water supply due to insufficient rain, run-off, or snow pack is a
concern that has led to past defaults. Further, costly environmental
litigation and Federal environmental mandates are challenges faced by
issuers of water and sewer bonds.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, the fund takes into account as
income a portion of the difference between a zero coupon bond's purchase
price and its face value.
SPECIAL FACTORS AFFECTING NEW YORK
The financial condition of New York State (the State), its public
authorities and public benefit corporations (the Authorities) and its local
governments, particularly The City of New York (the City), could affect the
market values and marketability of, and therefore the net asset value per
share and the interest income of, the fund , or result in the default
of existing obligations, including obligations which may be held by the
fund . The following section provides only a brief summary of the
complex factors affecting the financial situation in New York and is based
on information obtained from the State, certain of its Authorities, the
City and certain other localities, as publicly available on the date of
this Statement of Additional Information. The information contained in such
publicly available documents has not been independently verified. It should
be noted that the creditworthiness of obligations issued by local issuers
may be unrelated to the creditworthiness of the State, and that there is no
obligation on the part of the State to make payment on such local
obligations in the event of default in the absence of a specific guarantee
or pledge provided by the State.
The State and the City have experienced serious financial
difficulties and recent declines in their credit standings. S&P and Moody's
have each assigned ratings for the State's general obligation bonds that
are among the three lowest of those states with rated general obligation
bonds. The ratings of certain related debt of other issuers for which
the State has an outstanding moral obligation, lease purchase, guarantee or
other contractual obligation are generally linked directly to the State's
rating. Should the financial condition of the State, its Authorities, or
its local governments deteriorate, their respective credit ratings could be
further reduced, and the market value and marketability of their
outstanding notes and bonds could be adversely affected, and their
respective access to the public credit markets jeopardized.
ECONOMIC FACTORS. New York is the third most populous state in
the nation , and has a relatively high level of personal wealth.
However, the State economy has grown more slowly than that of the nation as
a whole, resulting in the gradual erosion of its relative economic
affluence (due to factors such as relative costs for taxes, labor, and
energy). The State's economy is diverse, with a comparatively large
share of the nation's financial, insurance, transportation, communications,
and services employment, and a very small share of the nations' farming and
mining activity. New York has a declining proportion of its workforce
engaged in manufacturing and increasing proportion engaged in service
industries. The State, therefore is likely to be less affected than the
nation as a whole during an economic recession concentrated in construction
and manufacturing sectors of the economy, but is likely to be more affected
during a recession concentrated in the service-producing sector. The
State's manufacturing and maritime base have been seriously eroded, as
illustrated by the decline of the steel industry in the Buffalo area and of
the apparel and textile industries in the City. In addition, the City
experienced substantial socio-economic changes, as a large segment of its
population and a significant share of corporate headquarters and other
businesses relocated (many out-of-state).
Both the State and the City experienced substantial revenue increases in
the mid-1980s attributable directly (corporate income and financial
corporations taxes) and indirectly (personal income and a variety of other
taxes) to growth in new jobs, rising profits, and capital appreciation
derived from the finance sector of the City's economy. From 1977 to its
1988 peak, the finance, insurance, and real estate sectors rose 55%, to
account in 1988 for 23% of total earnings in the City and 14% statewide
(compared to 7% nationwide). The finance sector's growth was a catalyst for
the New York metropolitan region's related business and professional
services, retail trade and residential and commercial real estate markets.
The then rising real estate market contributed to City revenues, as higher
property values and new construction added to collections from property
taxes, mortgage recording, and transfer taxes and sales taxes on building
materials. The boom on Wall Street more than compensated for the continued
erosion of the State's (and the City's) manufacturing and maritime base,
since average wages in finance and related business and professional
services were substantially higher (thereby providing a net increase of
higher incomes, taxed at even higher marginal rates).
Although the national economy began to expand in 1991, the State economy
remained in recession until 1993, when employment growth resumed.
Employment growth has been hindered during recent years by significant
cutbacks in the computer and instrument manufacturing, utility and defense
industries. Personal income increased substantially in 1992 and 1993. The
State's economy is expected to continue to expand during 1995, according to
assumptions contained in the State financial plan. Both upstate and
downstate regions of the State are expected to share in the renewed growth
prospects stemming from growing national and international markets' use of
State-based industries that export goods and services both nationwide and
abroad. Employment is expected to grow moderately during 1995, although the
rate of increase is expected to be below the experience of the 1980s due to
cutbacks in federal spending and employment, as well as continued corporate
downsizing.
There can be no assurance, however, that the State economy will not
experience worse-than-predicted results in the 1994-95 and 1995-96 fiscal
years with corresponding material and adverse effects on the State's
projections of receipts and disbursements. The State financial plan is
based upon forecasts of national and State economic activity. Many
uncertainties exist in such forecasts, including federal financial and
monetary policies, the availability of credit and the condition of the
world economy. In addition, the economic and financial condition of the
State may be affected by various financial, social, economic and political
factors. These factors can be complex, may vary from year to year and are
frequently the results of actions taken not only by the State and its
agencies and instrumentalities, but also by other entities, such as the
federal government, that are not under the control of the State.
The fiscal health of the State may also be impacted by the fiscal health of
the city. Although the City has had a balanced budget since 1981, estimates
of the City's future revenues and expenditures are subject to various
uncertainties. For example, the effects of the October 1987 stock market
crash and the 1990-92 national recession have had a disproportionately
adverse impact on the New York City metropolitan region, as private sector
job losses since 1989 have offset all the prior employment gains of the
1980s.
Declines in both employment and earnings in the finance sector contributed
to declines in retail sales and real estate values. In addition, a number
of widely publicized bankruptcies among highly leveraged retailing,
brokerage and real estate development companies occurred. The effects of
the recession have extended to banking, insurance, business services (such
as law, accounting and advertising), publishing and communications. Factors
which may inhibit the City's economic recovery include (i) credit
restraints imposed by the weak financial condition of several major money
center banks located in the City; (ii) increases in combined State and
local tax burdens, if uncompetitive tax rates are imposed; (iii) perceived
declines in the quality of life attributable to service reductions and the
deterioration of the City's infrastructure; (iv) additional employment
losses in the City's banking sector or corporate headquarters complex due
to further corporate relocations or restructurings ; or (v) increased
expenditures for public health assistance and care . The City's future
economic condition will also likely be affected by its competitive position
as a world financial center (compared to London, Tokyo, Frankfurt, and
competing regional U.S. centers).
While the State's economy is broader-based than that of the City,
particular industries are concentrated in and have a disproportionate
impact on certain areas, such as aerospace in Long Island, heavy industry
in Buffalo, photographic and optical equipment in Rochester, machinery and
transportation equipment in Syracuse and Utica-Rome, computers in
Binghamton and in the Mid-Hudson Valley, and electrical equipment in the
Albany-Troy- Schenectady area . Constraints on economic growth,
taxpayer resistance to proposed substantial increases in local tax rates,
and reductions in State aid in regions apart from the City have contributed
to financial difficulties for several county and other local governments.
For calendar year 1993, the economy of the State grew faster than in 1992,
but at a very moderate pace compared to other recoveries. Moderate economic
growth continue d in 1994 and is projected to continue in 1995.
However, there can be no assurance that the State economy will not
experience worse-than-predicted results in the 1994-95 fiscal year with
corresponding material and adverse effects on the State's projections of
receipts and disbursements.
THE STATE. As noted above, the financial condition of the State is
affected by several factors, including the strength of the State and its
regional economies, actions of the federal government, and State actions
affecting the level of receipts and disbursements. Owing to these and other
factors, the State may, in future years, face substantial potential budget
gaps resulting from a significant disparity between tax revenues projected
from a lower recurring receipts base and the future costs of maintaining
State programs at current levels. The State has been experiencing
substantial financial difficulties in the recent past , with General
Fund (the principal operating account) deficits incurred during the
fiscal years 1989-1990 through 1991-1992. The State's accumulated
General Fund deficit (on a GAAP basis) grew 91% from FY1986-87 to
FY1990-91, and reached a then-record $6.265 billion (audited) by March 31,
1991.
An accumulated General Fund deficit at March 31, 1993 was restated to be
$2.551 billion. The State ended its 1993-94 fiscal year with a negative
fund balance of $1.637 billion. This represented an improvement over prior
years, primarily due to an improving national and State economy resulting
in higher-than-expected receipts from personal income tax and various
business taxes and the relative success of the New York Local Government
Assistance Corporation ("LGAC"). The General Fund showed an operating
surplus of $914 million (on a GAAP basis). The State's 1994-95 fiscal year
budget was adopted on June 8, 1994, more than two months after the
beginning of the State's fiscal year and has made two of three required
quarterly revisions as of October 28, 1994. The current fiscal year 1994-95
budget projects a balanced General fund, with a surplus of $14 million and
does not require an intra-year note issuance for cash flow purposes,
although it does include plans to borrow $154 million in March 1995 to pay
income tax refunds. The fiscal year 1994-95 budget reduces taxes on
business, provides for increased State aid for local government and schools
but projects reductions in most other social services programs. In the
process of adopting the fiscal year 1994-95 budget, the State was required
to close a potential $3.0 billion revenue and expenditure gap. There
can be no assurance that the State will not face budget gaps in future
years, resulting from a disparity between tax revenues projected from a
lower recurring-receipts base and the spending required to maintain State
programs at current levels. Furthermore, the State is a party to numerous
lawsuits in which an adverse decision could require extraordinary
expenditures. Certain major budgetary considerations affecting the State
are outlined below.
REVENUE BASE. The State's principal revenue sources are economically
sensitive, and include the personal income tax (57% of estimated FY1993-94
General Fund tax receipts), user taxes and fees (15%), and business taxes
(19%). Uncertainties in taxpayer behavior as a result of actual and
proposed changes in Federal tax law also can have an adverse impact on
State tax receipts. One-fourth of the 4% State sales tax has been dedicated
to pay debt service of the New York Local Government Assistance
Corporation, and has correspondingly reduced General Fund receipts. To the
extent those moneys are not necessary for payment to LGAC, they are
transferred from the LGAC Tax fund to the General Fund and reported
as a transfer from other funds rather than as sales and use tax receipts.
During fiscal years 1991-92 , 1992-93 and 1993-94, moneys were
so transferred. $1.3 billion is recommended to be transferred
from the LGAC Tax Fund to the General Fund in fiscal year
199 4 -9 5 . Capital gains are a significant component of income
tax collections. Auto sales and building materials are significant
components of retail sales tax collections. Tax rates are relatively high
and may impose political and economic constraints on the ability of the
State to further increase its taxes. State legislation enacted in 1987
phased in a reduction in the top rate of the State's personal income tax;
these tax cuts have substantially reduced the recurring revenues of the
State. The final phase-in (originally scheduled for October 1990)
was deferred for the fifth consecutive year to avoid a reduction
in receipts of approximately $800 million for the 1994-95 fiscal year.
In the absence of countervailing economic growth or expenditure cuts
the tax cuts could make the achievement of a balanced State budget more
difficult in future years.
STATE DEBT. T e State has the heaviest debt burden of any state (with
nearly $5. 4 billion of long-term general obligation and $2 1
billion of lease-purchase or other contractual debt outstanding as of
March 31, 1994 ), and debt service costs absorb a large share of the
State's budget. As of March 31, 1994 the State is also obligated
with respect to nearly $7. 2 billion for statutory moral obligations
for nine of its Authorities and for guarantees of $4 12
million of other Authority debt. In addition, the State has one of the
largest seasonal financing requirements of any municipal issuer, and is
required each spring to borrow substantial sums from public credit markets
to finance its accumulated General Fund deficit and its scheduled payments
of aid to local governments and school districts. No assurance can be given
that the State will be able to continue to meet its financing requirements
in the public credit markets at the times or in the amounts required. The
annual Spring Borrowing is contingent on the certification by the State
Comptroller that the newly adopted State budget is balanced. D elays
in the Spring Borrowing in recent years owing to delayed enactment of the
State budget have resulted in delays in the scheduled payments of State aid
and have consequently caused various local governments and school districts
to experience cash flow difficulties. To help reduce such seasonal
financing needs, t he State recently created LGAC as a financing
vehicle to finance the State's local assistance payments by issuing
long-term debt, payable over 30 years from a portion of the State sales
tax. The enabling legislation for LGAC contains a covenant restricting the
amount of the State's Spring Borrowing, which may reduce the State's fiscal
flexibility. LGAC has issued bonds, that, together with certain cash
reserves, resulted in the fiscal year 1994-1995 State financial plan which
included no seasonal borrowing.
BUDGETARY FLEXIBILITY. A significant portion of the State's General
Fund budget is accounted for by contractually required expenses (such as
pension and debt service costs) and by federally mandated programs (such as
AFDC and Medicaid). In addition, State aid for school districts comprises a
major share of the budget, and total appropriations and distribution of
such aid is especially contentious politically. Furthermore, the State's
ability to respond to unanticipated developments in the future may have
been impaired since the State has utilized a substantial range of actions
of a non-recurring nature in recent years to finance its General fund
operations, including tapping excess monies in special funds, refinancing
outstanding debt to reduce reserve fund requirements and current (but not
long-term) debt service costs, recalculating pension fund contributions,
selling State assets, reimbursing past General Fund expenditures by the
issuance of authority debt and deferring payment for expenditures to future
fiscal years. The 1993-94 State financial plan contained actions of a
non-recurring nature including federal reimbursements relating to a
Medicaid payment and of the costs of educating handicapped children and a
transfer to the State of abandoned property held by title companies,
totalling to $270 million.
LABOR COSTS. T he State government workforce is mostly unionized,
subject to the Taylor Law which authorizes collective bargaining and
prohibits (but has not historically prevented) strikes and work slowdowns.
Costs for employee health benefits have increased substantially, and can be
expected to further increase. The State has a substantial unfunded
liability for future pension benefits, and has utilized changes in its
pension fund investment return assumptions to reduce current contribution
requirements. If such investment earnings assumptions are not sustained by
actual results, additional State contributions will be required in future
years to meet the State's contractual obligations. The State's change in
actuarial method from the aggregate cost method to a modified projected
unit credit in the 1990-91 fiscal year created a substantial surplus that
was amortized and applied to offset the State's contribution through the
1993-94 fiscal year. This change in actuarial method was ruled
unconstitutional by the State's highest court and the State will return to
the aggregate cost method in fiscal year 1994-95 using a four-year
phase-in. Employer contributions, including the State's, are expected to
increase over the next five to ten years.
PUBLIC ASSISTANCE. T he State has the second largest number of
persons receiving public assistance (AFDC and Home Relief) of any state.
AFDC costs are shared among the federal government, the State and its
counties (including the City) by statutory formula. Caseloads tend to rise
significantly during economic downturns, but have fallen only in the later
stages of past economic recoveries.
MEDICAID. Th e State participates in the federal Medicaid program
under a state plan approved by the Health Care Financing Administration.
The federal government provides 50% of eligible program costs, with the
remainder shared by the State and its counties (including the City). The
Governor has proposed that the State assume local costs for Medicaid, but
enabling legislation has not yet been adopted. Basic program eligibility
and benefits are determined by federal guidelines, but the State provides a
number of optional benefits and expanded eligibility. Program costs have
increased substantially in recent years, and account for a rising share of
the State budget. Federal law requires the State adopt reimbursement rates
for hospitals and nursing homes that are reasonable and adequate to meet
the costs that must be incurred by efficiently and economically operated
facilities in providing patient care, a standard that has led to past
litigation by hospitals and nursing homes seeking higher reimbursement from
the State. Cutbacks in State spending for Medicaid may adversely affect the
financial condition of hospitals and health care institutions that are the
obligors of bonds that may be held by the f und.
THE STATE AUTHORITIES. The State's Authorities are not subject to
the constitutional restrictions on the incurrence of debt which apply to
the State itself, and may issue bonds and notes within the amounts of, and
as otherwise restricted by, their legislative authorization. The New York
State Public Authorities Control Board approves the issuance of debt and
major contracts by ten of the Authorities. As of September 30, 1993, there
were 18 Authorities that had outstanding debt of $100 million or more, the
aggregate debt of which (including refunding bonds and moral obligation,
lease-purchase, contractual obligation, or State-guaranteed debt) then
totaled approximately $63.5 billion. As of March 31, 1994, aggregate
public authority debt outstanding as State-supported was $21.1 billion and
State-related debt was $29.4 billion. In recent years the State has
provided financial assistance through appropriations, in some cases of a
recurring nature, to certain Authorities for operating and other expenses
and, (from 1976 to 1987) in fulfillment of its commitments on moral
obligation indebtedness or otherwise, for debt service. The State has
budgeted operating assistance of approximately $ 1.3 billion for the
Metropolitan Transportation Authority (MTA) for fiscal year
1994-1995. This assistance is expected to continue to be required (and
may increase) in future years. Failure by the State to appropriate
necessary amounts or to take other action to permit the Authorities to meet
their obligations could adversely affect the ability of the State and the
Authorities to obtain financing in the public credit markets and the market
price of the State's outstanding bonds and notes.
The MTA, whose credit standing was recently reduced , oversees the
operation of the City's subway and bus lines by its affiliates, the New
York City Transit Authority and the Manhattan and Bronx Surface Transit
Operating Authority (collectively, the T A). MTA subsidiaries operate
certain commuter rail and bus lines in the New York metropolitan area. An
affiliated agency, the Triborough Bridge and Tunnel Authority (TBTA),
operates certain intrastate toll bridges and tunnels. To maintain its
facilities and equipment, which deteriorated significantly in the late
1970s due to deferred maintenance, the MTA prepares a f ive year
capital program subject to approval by the MTA Capital Program Review
Board. In April 1993, the State legislature authorized the funding of a
portion of a five year $9.56 billion capital plan for the MTA for 1992
through 1996. MTA's five year capital program for 1992-96 was approved by
the State capital program review board in December 1993. There can be no
assurance that all governmental actions for the 1992-96 capital program
will be taken, that funding sources currently identified will not be
decreased or eliminated, or that the capital program will not be delayed or
reduced. If the capital program is delayed or reduced, ridership and fare
revenues may decline, which could impair the MTA's ability to meet its
operating expenses without additional State assistance. There can be no
assurance that any such assistance will continue at any particular level or
in any fixed relationship to the operating costs and capital needs of the
MTA.
THE CITY. In the early 1970s, the City incurred substantial
operating deficits, and its financial controls, accounting practices, and
disclosure policies were widely criticized. In 1975, the City encountered
severe financial difficulties and lost access to the public credit markets.
The State Legislature responded in 1975 by creating the Municipal
Assistance Corporation For The City of New York (MAC) to provide financing
assistance for the City and the Financial Control Board to exercise certain
oversight and review functions with respect to the City's finances. The
Financial Control Board's powers over the City were suspended in June 1986,
but would be reinstated (under current law) if the City experiences certain
adverse financial circumstances. At the time of the fiscal crisis, the
State provided substantial financial assistance to the City, the federal
government provided the City with direct seasonal loans and guarantees on
the City's long-term debt, and the City's labor unions accepted deferrals
of wage increases and approved purchases of City bonds by the pension
funds. No assurance can be given that similar assistance would again be
made available if needed, particularly given the current budgetary
constraints faced by both the federal and State governments.
The City provides services usually undertaken by counties, school districts
or special districts in other large urban areas including the provision
of social services such as day care, foster care, health care, family
planning, services for the elderly and special employment services for
needy individuals and families who qualify for such assistance. State
law requires the City to allocate a large portion of its total budget to
Board of Education operations, and mandates the City to assume the local
share of public assistance and Medicaid costs. While the City has
had GAAP operating surpluses , in recent fiscal years the City
has experienced growing financial difficulties, primarily related to
the impact of the recent recession on the local economy (reducing
revenues from most major taxes and increasing public assistance and
Medicaid caseloads), rising health care costs for City employees and for
Medicaid, and rising inflation and interest rates. In response, the
City implemented gap-closing programs in recent fiscal years, w hich
initially relied primarily on actions of a non-recurring nature, but
included substantial property tax rate increases and a personal income tax
surcharge imposed in FY1991 and selected service cutbacks. Reductions in
State aid, larger than budgeted labor settlements and increased police
expenditures added to the adverse budgetary impact of the local recession,
confront ing the City with a potential $3.3 billion imbalance during
FY1992 budget negotiations. This initial budget gap was closed by adoption
of a budget providing for various tax increases and significant service
reductions. Aid to nonprofit cultural institutions in the City was
significantly reduced (as was State aid to such institutions), including
certain institutions that are obligors of bonds that may be held by the
fund .
The City's budget for fiscal year 1994 identified measures to close a
$300 million budget gap, which was the result of shortfalls in federal and
State aid from previously projected levels. The City achieved balanced
operating results as reported in accordance with GAAP for the 1994 fiscal
year. The mayor is responsible for preparing the City's four-year financial
plan. The City's 1995-1998 financial plan contains numerous assumptions
concerning factors which may impact the City's budget such as: the timing
and pace of a regional and local economic recovery, increases in interest
rates, the impact on real estate tax revenues of the current downturn in
the real estate market, wage increases for city employees consistent with
those assumed in the financial plan, employment growth, the ability to
implement proposed reductions in City personnel and other cost reduction
initiatives which may require in certain cases the cooperation of the
City's municipal unions and MAC, provision of State and federal aid and
mandate relief, and the impact on the New York City region of the tax
increases contained in President Clinton's economic plan. No assurance can
be given that the assumptions used by the City will be realized.
Furthermore, actions taken in recent fiscal years to avert deficits may
have reduced the City's flexibility in responding to future budgetary
imbalances, and have deferred certain expenditures to later fiscal years.
The original City's budget for fiscal year 1995 reflected proposed actions
to eliminate a $2.3 billion budget gap. On October 25, 1994, the City
published its financial plan for the 1995-1988 fiscal years (the "Current
Plan") modifying the financial plan its previously submitted on July 8,
1994 (the "Previous Plan"). The Current Plan reflects actual receipts and
expenditures and changes in forecast revenues and expenditures since the
Previous Plan, and projects revenues and expenditures for the 1995 fiscal
year balanced in accordance with GAAP. For the 1995 fiscal year, the
Current Plan includes actions to offset an additional potential $1.1
billion budget gap, resulting principally from lower projected tax
revenues, increased City pension contributions, shortfalls in federal
assistance, and other decreased projected revenues. In order to close the
deficit, the budget includes plans to reduce the City's workforce
substantially, decrease expenses in all City agencies, refinance a portion
of the City's debt and merge of the police department with the transit and
housing police forces. Certain of these initiatives may be subject to
negotiations with the City's municipal unions. The plan to close the
deficit does not depend upon increasing taxes; rather it includes modest
decreases in taxes for business. The Current Plan is subject to the ability
of the City to implement the proposed reductions in expenditures, personal
services and personnel, which are substantial and may be difficult to
implement. In addition, certain proposals may be offset by various State
and federal legislation which could mandate levels of City funding
inconsistent with the Current Plan. Certain proposed State and federal
actions are subject to legislative, the governor's and the president's
approvals, as applicable. Both federal and State actions are uncertain and
no assurance can be given that either such actions will in fact be taken or
that the projected savings will result even if such actions are taken.
The City derives its revenues from a variety of local taxes, user charges,
miscellaneous revenues and federal and State unrestricted and categorical
grants. The City projects that local revenues will provide approximately
66.0% of total revenues in fiscal year 1995 while federal aid, including
categorical grants, will provide 12.3% in fiscal year 1995 and State aid,
including unrestricted aid and categorical grants, will provide 21.6% in
fiscal year 1995. As a proportion of total revenues, State aid has remained
relatively constant over the period from 1980 to 1990, while federal aid
was sharply reduced (having provided nearly 20% of total fiscal year 1980
revenues). The largest source of the City's revenues is the real estate tax
(approximately 22% of total revenues for fiscal year 1995), at rates levied
by the City council (subject to certain State constitutional limits). State
legislation requires that increases in assessments of certain classes of
real property be phased-in over a five-year period; thus, property owners
may receive higher assessments when property values are declining. However,
in the event of a reduction in total assessments, higher tax rates would be
required to maintain the same amount of tax revenue. The City derives the
remainder of its tax revenues from a variety of other economically
sensitive local taxes (subject to authorization by the legislature),
including: a local sales and compensating use tax (primarily dedicated to
MAC debt service) imposed in addition to the State's tax; the personal
income tax on City residents and the earnings tax on non-residents; a
general corporation tax; and a financial corporation tax. High tax burdens
in the city impose political and economic constraints on the ability of the
City to increase local tax rates. The Current Plan projects a $135 million
reduction in personal income tax, an $82 reduction in the bank tax, a $25
million reduction in sales tax and a $27 million reduction in the general
property tax. The City's financial plans have been the subject of extensive
public comment and criticism, principally questioning the reasonableness of
assumptions that the City will have the capacity to generate sufficient
revenues in the future to provide the level of services contained in the
City's financial plans.
The City is the largest municipal debt issuer in the nation, and has more
than doubled its debt load since the end of FY1988, in large measure to
rehabilitate its extensive, aging physical plant. The City's seasonal
borrowing needs increased significantly during FY1990 and FY1991, largely
due to delayed State aid payments, and totalled $2.25 billion in
FY1992, $1.4 billion in FY1993 and $ 1.75 billion in FY1994.
The City's current capital financing program reflects major
reductions in the City's four-year capital plan, which will reduce
future debt service requirements, but may adversely affect the condition of
its deteriorating physical plant.
In November 1993, the voters approved a proposed charter whereby Staten
Island would secede from the City. Staten Island is one of five
counties/boroughs, comprising 4% of the City's population and 19% of its
land area. State law provides a complex mechanism for such secession. The
State Legislature is also considering establishment of a similar secession
mechanism for Queens.
OTHER LOCALITIES. Certain localities in addition to the city could have
financial problems which, if significant, could lead to requests for
additional State assistance during the State's 1994-95 fiscal years and
thereafter. Fiscal difficulties experienced by the City of Yonkers, for
example, could result in State actions to allocate State resources in
amounts that cannot yet be determined. In the recent past, the State
provided substantial financial assistance to its political subdivisions,
totalling approximately 67% of General Fund disbursements in the State's
fiscal year 1992-93 and estimated to account for 68% of General Fund
disbursements in the State's 1993-94 fiscal year, primarily for aid to
elementary, secondary and higher education (34% in fiscal year 1992-93 and
34% in fiscal year 1993-94 of local assistance) and medicaid and income
maintenance (33% in fiscal year 1992-93 and 34% in fiscal year 1993-94%).
The legislature enacted substantial reductions from previously budgeted
levels of State aid since December 1990. To the extent the State is
constrained by its financial condition, State assistance to localities may
be further reduced, compounding the serious fiscal constraints already
experienced by many local governments. Localities also face anticipated and
potential problems resulting from pending litigation (including challenges
to local property tax assessments), judicial decisions and socio-economic
trends. The Legislature e nacted substantial reductions from
previously budgeted levels of State aid since December 1990. To the extent
the State is constrained by its financial condition, State assistance to
localities may be further reduced, compounding the serious fiscal
constraints already experienced by many local governments. Localities also
face anticipated and potential problems resulting from pending litigation
(including challenges to local property tax assessments), judicial
decisions and socio-economic trends.
In 1992, the total indebtedness of all localities in the State, other than
the City, was approximately $15.7 billion. A small portion
(approximately $71.6 million) of this indebtedness represented borrowing to
finance budgetary deficits issued pursuant to enabling State legislation
(requiring budgetary review by the State Comptroller. Subsequently, certain
counties and other local governments have encountered significant financial
difficulties, including the counties of Suffolk, Nassau, Monroe, and
Westchester, and the City of Buffalo. The State has imposed financial
control on the City from 1977 to 1986 and on the City of Yonkers
since 1984 under an appointed control board in response to fiscal crises
encountered by such municipalities. The Legislature imposed certain limited
fiscal restraints on Nassau and Suffolk Counties, and authorized their
issuance of deficit bonds to finance over several years their respective
1992 operating deficits.
SPECIAL FACTORS AFFECTING PUERTO RICO
The following only highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico ( the Commonwealth
or Puerto Rico), and is based on information drawn from official
statements and prospectuses relating to the securities offerings of Puerto
Rico and its agencies and instrumentalities, as available on the date of
this SAI . FMR has not independently verified any of the information
contained in such official statements, prospectuses, and other publicly
available documents, but is not aware of any fact which would render such
information materially inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1993 trade with the United States accounted for
approximately 86% of Puerto Rico's exports and approximately 69% of its
imports. In this regard, in fiscal 1993 Puerto Rico experienced a $2.5
billion positive adjusted merchandise trade balance. Since fiscal 1987,
personal income, both aggregate and per capita, has increased consistently
each year. In fiscal 1993 aggregate personal income was $24.1 billion and
personal per capita income was $6,760. Gross domestic product in fiscal
1991, 1992, and 1993 was $22.8 billion, $23.5 billion, and $25 billion,
respectively. For fiscal 1994, an increase in gross domestic product of
2.9% over fiscal 1993 is forecasted. However, actual growth in the Puerto
Rico economy will depend on several factors, including the condition of the
U.S. economy, the exchange rate for the U.S. dollar and the price stability
of oil imports and interest rates. Due to these factors, there is no
assurance that the economy of Puerto Rico will continue to grow.
Puerto Rico's economy continued to expand throughout the five-year period
from fiscal 1989 through fiscal 1993. While trends in the Puerto Rico
economy generally follow those of the United States, Puerto Rico did not
experience a recession primarily because of its strong manufacturing base,
which has a large component of non-cyclical industries. Other factors
behind the continued expansion included Commonwealth-sponsored economic
development programs, stable prices of oil imports, low exchange rates for
the U.S. dollar, and the relatively low cost of borrowing funds during the
period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it
still remains significantly above the U.S. average and has been increasing
in recent years. Despite long-term improvements the unemployment rate rose
from 16.5% to 17.5% from fiscal 1992 to fiscal 1993. However, by the end of
January 1994, the unemployment rate had dropped to 16.3%.
The economy of Puerto Rico has undergone a transformation in the later half
of this century from one centered around agriculture to one dominated by
the manufacturing and service industries. Manufacturing is the cornerstone
of Puerto Rico's economy, accounting for $14.1 billion or 39.4% of gross
domestic product in fiscal 1993. However, manufacturing has experienced a
basic change over the years as a result of the influx of higher wages, high
technology industries such as the pharmaceutical industry, electronics,
computers, micro processors, scientific instruments, and high technology
machinery. The service sector, which employs the largest number of people,
includes wholesale and retail trade, finance, and real estate, and ranks
second in its contribution to gross domestic product. In fiscal 1993, the
service sector generated $14.0 billion in gross domestic product or 39.1%
of the total and employed over 467,000 workers providing 46.7% of total
employment. The government sector of the Commonwealth plays an important
role in Puerto Rico's economy. In fiscal year 1993, the government
accounted for $3.9 billion of Puerto Rico's gross domestic product and
provided 21.7% of the total employment. Tourism also contributes
significantly to the island economy, accounting for $1.6 billion of gross
domestic product in fiscal 1993.
The present administration, which took office in January 1993, envisions
major economic reforms and has developed a new economic development program
to be implemented in the next few years. This program is based on the
premise that the private sector will be the primary vehicle for economic
development and growth. The program promotes changing the role of the
government from one of being a provider of most basic services to one of
being a facilitator for private sector initiatives and will encourage
private sector investment by reducing regulatory restraints. The program
contemplates the development of initiatives that will foster private
investment, both external and internal, in areas that are served more
efficiently and effectively by the private sector. The program also
contemplates a general revision of the tax system to expand the tax base,
reduce top personal and corporate tax rates, and simplify a highly complex
system. Other important goals for the new program are to reduce the size of
the government's direct contribution to gross domestic product and, to
facilitate private sector development and growth which would be realized
through a reduction in government consumption and an increase in government
investment in order to improve and expand Puerto Rico's infrastructure.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
("Section 936") and the Commonwealth's Industrial Incentives Program.
Section 936 currently grants U.S. corporations that meet certain criteria
and elect its application, a credit against their U.S. corporate income tax
on the portion of the tax attributable to (i) income derived from the
active conduct of a trade or business in Puerto Rico ("active income"), or
from the sale or exchange of substantially all the assets used in the
active conduct of such trade or business, and (ii) qualified possession
sources investment income ("passive income"). The Industrial Incentives
Program, through the 1987 Industrial Incentives Act, grants corporations
engaged in certain qualified activities a fixed 90% exemption from
Commonwealth income and property taxes and a 60% exemption from municipal
license taxes.
Pursuant to recently enacted amendments to the Internal Revenue Code (the
"Code"), and for taxable years commencing after 1993, two alternative
limitations will apply to the Section 936 credit against active business
income and sale of assets as previously described. The first option will
limit the credit against such income to 40% of the credit allowed under
current law, with a five-year phase-in period starting at 60% of the
current credit. The second option will limit the allowable credit to the
sum of (i) 60% of qualified compensation paid to employees (as defined in
the Code); (ii) a specified percentage of depreciation deductions; and
(iii) a portion of the Puerto Rico income taxes paid by the Section 936
corporation, up to a 9% effective tax rate.
At present, it is difficult to forecast what the short- and long-term
effects of the new limitations to the Section 936 credit will be on the
economy of Puerto Rico. However, preliminary econometric studies by the
government of Puerto Rico and private sector economists (assuming no
enhancements to the existing Industrial Incentives Program) project only a
slight reduction in average real growth rates for the economy of Puerto
Rico. These studies also show that particular industry groups will be
affected differently. For example, manufacturers of pharmaceuticals and
beverages may suffer a larger reduction in tax benefits due to their
relatively higher profit margins. In addition, the above limitations are
not expected to reduce the tax credit currently enjoyed by labor-intensive,
lower profit margin industries, which represent approximately 40% of the
total employment by Section 936 corporations in Puerto Rico.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the fund by FMR pursuant to authority contained in the fund's
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR
considers various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; 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
generally is made by FMR (to the extent possible consistent with execution
considerations) based upon the quality of research and execution services
provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund, or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund.
The fund's annualized turnover rate for its first fiscal period is not
expected to exceed 200%. 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 judgement
whether it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as the fund is concerned. In other cases,
however, the ability of the fund to participate in volume transactions will
produce better executions and prices for the fund. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to the fund outweighs any disadvantages that may be said
to exist from exposure to simultaneous transactions.
VALUATION
Valuations of portfolio securities furnished by the pricing service
employed by the fund are based upon a computerized matrix system
and/ 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 trust and Fidelity Service Co. (FSC) under the general
supervision of the 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 servicing in whole or in
part.
PERFORMANCE
Each class of fund shares may quote performance in various ways. All
performance information supplied by the fund in advertising is
historical and is not intended to indicate future returns. Each class's
share price, yield and total return fluctuate in response to market
conditions and other factors , and the value of the shares when
redeemed may be more or less than their original cost.
YIELD CALCULATIONS. Yields for each class are computed by dividing the
class's pro-rata share of the applicable interest income, if any, for a
given 30-day or one-month period, net of expenses, by the average
number of shares of that class entitled to receive
di stributions during the period, dividing this figure by the
class's offering price 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 the
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 class's yield
differs from income as determined for other accounting purposes. Because
of the different accounting methods used, and because of the compounding of
income assumed in yield calculations, a class's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
Yield information may be useful in reviewing the fund's performance 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 prevailing market
rates, and in periods of rising interest rates, the fund's yield
will tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to the fund from the continuous sale of
shares will likely be invested in instruments producing lower yields than
the balance of the fund 's holdings, thereby reducing the current
yield. In periods of rising interest rates, the opposite can be expected to
occur.
The TAX-EQUIVALENT YIELD is the rate an investor would have to earn from a
fully taxable investment before taxes to equal the class's tax-free
yield. Tax-equivalent yields are calculated by dividing the class's
yield by the result of one minus a stated federal or combined
federal , state and city tax rate. If any portion of
the class's yield is tax-exempt, only that portion is adjusted in
the calculation.
The following tables show the effect of a shareholder's tax status on the
effective yield under federal and state income tax laws for 199 5 .
The second table shows the approximate yield a taxable security must
provide at various income brackets to produce after-tax yields equivalent
to those of hypothetical tax-exempt obligations yielding from 2.0%
to 7.0%. Of course, no assurance can be given that a class will
achieve any specific tax-exempt yield. While the fund invests
principally in obligations whose interest is exempt from federal and state
income tax, other income received by the fund may be taxable.
Use the first table to find your approximate effective tax bracket
on investment income as a New York State r esident with triple taxes
(federal, state, and New York City) or double taxes (federal and state) for
199 5 .
1995 TAX RATES
<TABLE>
<CAPTION>
<S> <C> <C>
Marginal Combined
Tax Rate New York
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
State and Combined New
Marginal Federal New York New York Federal York State,
Taxable Income Income State and Effective City and
Federal
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Single Return* Joint Return* Tax Bracket State City Tax Tax Bracket**
Bracket**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
$23,351 - $25,000 $39,001 - $45,000 28% 7.59% 11.98% 33.47% 36.63%
25,001 - 56,550 45,001 - 94,250 28% 7.59% 11.99% 33.47% 36.64%
56,551 - 60,000 94,251 - 108,000 31% 7.59% 11.99% 36.24% 39.28%
60,001 - 117,950 108,001 - 143,600 31% 7.59% 12.05% 36.24% 39.32%
117,951 - 256,500 143,601 - 256,500 36% 7.59% 12.05% 40.86% 43.71%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
256,501 + above 256,501 + above 39.6% 7.59% 12.05% 44.19% 46.88%
</TABLE>
* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Having determined your effective tax bracket, use the appropriate table
below to determine the tax-equivalent yield for a given tax-free yield.
NEW YORK CITY RESIDENTS - TRIPLE TAXES - 1995
If your effective combined federal, state, and New York City personal
income tax rate in 1995 is:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
36.63% 36.64% 39.28% 39.32% 43.71% 46.88%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
To match these
tax-free yields: Your taxable investment would have to earn the following yield:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
3% 4.73% 4.73% 4.94% 4.94% 5.33% 5.65%
4% 6.31% 6.31% 6.59% 6.59% 7.11% 7.53%
5% 7.89% 7.89% 8.23% 8.24% 8.88% 9.41%
6% 9.47% 9.47% 9.88% 9.89% 10.66% 11.29%
7% 11.05% 11.05% 11.53% 11.54% 12.44% 13.18%
8% 12.62% 12.63% 13.17% 13.18% 14.21% 15.06%
</TABLE>
NEW YORK STATE RESIDENTS (OUTSIDE NYC) - DOUBLE TAXES - 1995
If your effective combined federal and state personal income tax rate in
1995 is:
33.47% 36.24% 40.86% 44.19%
<TABLE>
<CAPTION>
<S> <C>
To match these
tax-free yields: Your taxable investment would have to earn the following yield:
</TABLE>
3% 4.51% 4.71% 5.07% 5.38%
4% 6.01% 6.27% 6.76% 7.17%
5% 7.52% 7.84% 8.45% 8.96%
6% 9.02% 9.41% 10.15% 10.75%
7% 10.52% 10.98% 11.84% 12.54%
8% 12.02% 12.55% 13.53% 14.33%
The fund may invest a portion of its assets in obligations that are
subject to state or federal income taxes. When the fund invests in these
obligations, its tax-equivalent yield will be lower. In the table above,
the tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's return, 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. Average annual returns covering periods of
less than one year are calculated by determining the fund's total return
for the period, extending that return for a full year (assuming that return
remains constant over the year) and quoting the result as an annual return.
While average annual returns are a convenient means of comparing investment
alternatives, investors should realize that performance is not constant
over time, but changes from year to year, and that average annual total
returns represent averaged figures as opposed to the actual year-to-year
performance of 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. Total returns may be quoted on a
before-tax or after tax basis and may be quoted with or without taking the
maximum sales charge into account. Excluding the sales charge from a total
return calculation produces a higher total return figure. Total returns,
yields, and other performance information may be quoted numerically or in a
table, graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using the fund's NAVs, adjusted NAVs,
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 Standard & Poor's Composite Index of 500 Stocks (S&P 500), the Dow
Jones Industrial Average (DJIA), and the cost of living (measured by the
Consumer Price Index, or CPI) over the same period. The S&P 500 and DJIA
comparisons would show how the fund's total return compared to the record
of a broad average of common stocks and a narrower set of stocks of major
industrial companies, respectively, over the same period. Of course, since
the fund invests in fixed-income securities, common stocks represent a
different type of investment from the fund. Common stocks generally offer
greater growth potential than the fund, but generally experience greater
price volatility, which means greater potential for loss. In addition,
common stocks generally provide lower income than a fixed-income investment
such as the funds. 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 p erformance may be compared to the performance of other
mutual funds in general, or to the performance of particular types of
mutual funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that monitors the performance of
mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to the
mutual fund rankings, performance may be compared to mutual fund
performance indices prepared by Lipper or other organizations .
When comparing these indices, it is important to remember the risk and
return characteristics of each type of investment. For example, while
stock mutual funds may offer higher potential returns, they also carry the
highest degree of share price volatility. Likewise, money market funds may
offer greater stability of principal, but generally do not offer the higher
potential returns available from stock mutual funds.
From time to time, p erformance may also be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, a class may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A class may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks. Mutual funds differ from bank
investments in several respects. For example, the fund may offer greater
liquidity or higher potential returns than CDs, and the fund does not
guarantee your principal or your return, and fund shares are not FDIC
insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principals of
investing, such as asset allocation, diversification, risk tolerance and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to 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 C PI), 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 p erforman ce to that
of other compilations or indices that may be developed and made available
in the future.
A class may compare its performance or the performance of securities in
which the fund may invest to averages published by IBC USA (Publications),
Inc. of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The Bond Fund Report AverageS(trademark)/All Tax-Free, which
is reported in the BOND FUND REPORT(registered trademark), covers over 355
tax-free bond funds. When evaluating comparisons to money market funds,
investors should consider the relevant differences in investment objectives
and policies. Specifically, money market funds invest in short-term,
high-quality instruments and seek to maintain a stable $1.00 share price.
The fund, however, invest in longer-term instruments and their share prices
change daily in response to a variety of factors.
The fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal
bond. Unlike tax-free mutual funds, individual municipal bonds offer a
stated rate of interest and, if held to maturity, repayment of principal.
Although some individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales charges
of many tax-free mutual funds are lower than the purchase cost of
individual municipal bonds, which are generally issued in $5,000
denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; model portfolios or allocations; saving for college or other
goals. In addition, Fidelity may quote or reprint financial or business
publications and periodicals, as they relate to current economic and
political conditions, fund management, portfolio composition, investment
philosophy, investment techniques, the desirability of owning a particular
mutual fund, and Fidelity services and products.
The fund may present its fund numbers, 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.
As of June 30, 1995, FMR advised over $__billion in tax-free fund assets,
$__ billion in money market fund assets, $__ billion in equity fund assets,
$__ billion in international fund assets, and $__ billion in Spartan fund
assets. The funds may reference the growth and variety of money market
mutual funds and the adviser's innovation and participation in the
industry. The equity funds under management figure represents the largest
amount of equity fund assets under management by a mutual fund investment
adviser in the United States, making FMR America's leading equity (stock)
fund manager. FMR, its subsidiaries, and affiliates maintain a worldwide
information and communications network for the purpose of researching and
managing investments abroad.
In addition to performance rankings, the 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.
The fund may be advertised as part of certain asset allocation programs
involving other Fidelity mutual funds. These asset allocation programs may
advertise a model portfolio and its performance results.
The fund may be advertised as part of a no transaction fee ("NTF") program
in which Fidelity and non-Fidelity mutual funds are offered. An NTF
program may advertise performance results.
ADDITIONAL PURCHASE , EXCHANGE AND REDEMPTION INFORMATION
CLASS A SHARES:
Pursuant to 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. In addition, FDC
has chosen to waive Class A's sales charge in certain instances because of
efficiencies involved in those sales of shares. The sales charge will not
apply:
(1) to shares purchased by a bank trust officer, registered representative,
or other employee (and their immediate families) of Investment
Professionals under special arrangements in connection with FDC's sales
activities;
(2) to shares purchased by a current or former Trustee or officer of a
Fidelity fund or a current or retired officer, director, or regular
employee of FMR Corp. or its direct or indirect subsidiaries (a Fidelity
Trustee or employee), the spouse of a Fidelity Trustee or employee, a
Fidelity Trustee or employee acting as custodian for a minor child, or a
person acting as trustee of a trust for the sole benefit of the minor child
of a Fidelity Trustee or employee;
(3) to shares purchased by a charitable organization (as defined in Section
501(c)(3) of the Internal Revenue Code) investing $100,000 or more;
(4) to shares purchased for a charitable remainder trust or life income
pool established for the benefit of a charitable organization (as defined
by Section 501(c)(3) of the Internal Revenue Code;
(5) to shares purchased by a trust institution or bank trust department,
(excluding assets described in (7) and (12) below not advised by a third
party, that has executed a Participation Agreement with FDC specifying
certain asset minimums, and qualifications, marketing program and trading
restrictions;
(6) to shares purchased for use in a broker-dealer managed account program,
provided the broker-dealer has executed a Participation Agreement with FDC
specifying certain asset minimums, and qualifications, marketing program
and trading restrictions. Employee benefit plan assets do not qualify for
this waiver;
(7) to shares purchased as part of an employee benefit plan having more
than (i) 200 eligible employees or a minimum of $1,000,000 in plan assets
invested Fidelity Advisor Funds, or (ii) 25 eligible employees or $250,000
in plan assets invested in Fidelity Advisor Funds that subscribe to
Fidelity Advisor Retirement Connection, or similar participant directed
employee benefit plan program sponsored by Fidelity Investments
Institutional Services Company (FIIS);
(8) to shares in a Fidelity IRA or Fidelity Advisor IRA account purchased
(including purchases by exchange) with the proceeds of a distribution from
an employee benefit plan having more than 200 eligible employees or a
minimum of 3,000,000 in plan assets invested in Fidelity mutual funds or
$1,000,000 invested in Fidelity Advisor mutual funds;
(9) to shares purchased by an insurance company separate account used to
fund annuity contracts purchased by employee benefit plans (including
403(b) programs, but otherwise as defined in ERISA), which, in the
aggregate, have either more than 200 eligible employees or a minimum of
$1,000,000 in assets invested in Fidelity Advisor Funds;
(10) to shares purchased by any state, county, city, or government
instrumentality, department or authority or agency;
(11) to shares purchased with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end or contingent deferred
sales charge only; or
(12) to shares purchased as part of an employee benefit plan purchased
through an intermediary that has signed a Participation Agreement with FIIS
specifying certain asset minimums, and qualifications, marketing program
and trading restrictions; or
(13) to shares purchased by a registered investment advisor which is not
part of an organization principally engaged in the brokerage business, that
has executed a Participation Agreement with FIIS specifying certain asset
minimums, and qualifications, marketing program and trading restrictions.
Employee benefit plan assets do not qualify for this waiver.
FDC compensates investment professionals with a fee of 0.25% 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 0.25% fee is paid must remain within the Fidelity
Advisor Funds (including shares exchanged into Daily Money Fund 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 025%
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.
CLASS B SHARES:
The contingent deferred sales charge (CDSC) on Class B shares may be waived
in the case of (1) disability or death, provided that the redemption is
made within one year following the death or initial determination of
disability, or (2) in connection with a total or partial redemption made in
connection with certain distributions from retirement plan accounts at age
70 1/2 which are permitted without penalty pursuant to the Internal Revenue
Code.
A sales load waiver form must accompany these transactions.
CLASS A AND B SHARES:
QUANTITY DISCOUNTS. To obtain a reduction of the front-end sales charge on
Class A shares, you or your Investment Professional must notify the
transfer agent at the time of purchase whenever a quantity discount is
applicable to your purchase. Upon such notification, you will receive the
lowest applicable front-end sales charge.
For purposes of qualifying for a reduction in front-end sales charges under
the Combined Purchase, Rights of Accumulation or Letter of Intent programs,
the following may qualify as an individual or a "company " as defined in
Section 2(a)(8) of the 1940 Act: an individual, spouse, and their children
under age 21 purchasing for his, her, or their own account; a trustee,
administrator or other fiduciary purchasing for a single trust estate or a
single fiduciary account or for a single or a parent-subsidiary group of
"employee benefits plans" (as defined in Section 3(3) of ERISA); and
tax-exempt organizations as defined under Section 501(c)(3) of the Code.
RIGHTS OF ACCUMULATION permit reduced front-end sales charges on any future
purchases of Class A shares after you have reached a new breakpoint in a
fund's sales charge schedule. The value of currently held Fidelity Advisor
fund Class A and Class B shares, and Initial Class shares and Class B
shares of Daily Money Fund: U.S. Treasury Portfolio and shares of Daily
Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund acquired
by exchange from any Fidelity Advisor fund, is determined at the current
day's NAV at the close of business, and is added to the amount of your new
purchase valued at the current offering price to determine your reduced
front-end sales charge.
LETTER OF INTENT. You may obtain Class A shares at the same reduced
front-end sales charge by filing a non-binding Letter of Intent (the
Letter) within 90 days of the start of Class A purchases. Each Class A
investment you make after signing the Letter will be entitled to the
front-end sales charge applicable to the total investment indicated in the
Letter. For example, a $2,500 purchase of Class A shares toward a $50,000
Letter would receive the same reduced sales charge as if the $50,000
($1,000,000 for Advisor Short Fixed-Income Fund or Advisor
Short-Intermediate Tax-Exempt Fund) had been invested at one time. To
ensure that the reduced front-end sales charge will be received on future
purchases, you or your Investment Professional must inform the transfer
agent that the Letter is in effect each time Class A shares are purchased.
Neither income nor capital gain distributions taken in additional Class A
or Class B shares will apply toward the completion of the Letter.
Your initial investment must be at least 5% of the total amount you plan to
invest. Out of the initial purchase, 5% of the dollar amount specified in
the Letter will be registered in your name and held in escrow. The Class A
shares held in escrow cannot be redeemed or exchanged until the Letter is
satisfied or the additional sales charges have been paid. You will earn
income dividends and capital gain distributions on escrowed Class A shares.
The escrow will be released when your purchase of the total amount has been
completed. You are not obligated to complete the Letter.
If you purchase more than the amount specified in the Letter and qualify
for a future front-end sales charge reduction, the front-end sales charge
will be adjusted to reflect your total purchase at the end of 13 months.
Surplus funds will be applied to the purchase of additional Class A shares
at the then current offering price applicable to your total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, 30 days' written notice will be provided for you to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed Class
A shares will be redeemed to pay such charges.
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A or Class B shares of the fund or other Fidelity
Advisor funds or Class A shares for Initial Class shares of Daily Money
Fund: U.S. Treasury Portfolio; Class A shares for shares of Daily Money
Fund: Money Market Portfolio or Daily Tax-Exempt Money Fund; and Class B
shares for Class B shares of Daily Money Fund: U.S. Treasury Portfolio 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.
E XCHANGE 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.
R EDEMPTION 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.
CLASS A, CLASS B, AND INSTITUTIONAL CLASS SHARES :
The fund is open for business and each class's NAV is calculated
each day the New York Stock Exchange (NYSE) is open for trading. The NYSE
has designated the following holiday closings for 1995: New Year's Day
(observed), Washington's Birthday (observed), Good Friday, Memorial Day
(observed), Independence Day (observed), Labor Day, Thanksgiving Day, and
Christmas Day (observed). Although FMR expects the same holiday schedule,
to be observed in the future, the NYSE may modify its holiday schedule at
any time.
Each class's NAV is normally determined as of the close of the NYSE
(normally 4:00 Eastern time). However, NAV may be calculated earlier if
trading on the NYSE is restricted or as permitted by the SEC. To the extent
that portfolio securities are traded in other markets on days when the NYSE
is closed, each class's NAV may be affected on days when investors do not
have access to the fund to purchase or redeem shares. In addition, trading
in some of the fund's portfolio securities may not occur on days when the
fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing each class's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, the fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the 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.
DISTRIBUTION AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and
the U.S. Postal Service cannot deliver your checks, or if your checks
remain uncashed for six months, Fidelity may reinvest your distributions at
the then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that the fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short term capital gains are distributed as dividend
income, but do not qualify for the dividends-received deduction. These
gains will be taxed as ordinary income. The fund will send each
shareholder a notice in January describing the tax status of dividends and
capital gain distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
The fund purchases securities that are free from federal income
tax based on opinions of counsel regarding the tax status. These opinions
will generally be based on covenants by the issuers or other parties
regarding continuing compliance with federal tax requirements. If at any
time the covenants are not complied with, distribution to shareholders of
interest on a security could become federally taxable retroactive to the
date the security was issued . For certain types of structured
securities, opinions of counsel may also be based on the effect of the
structure on the federal and state tax treatment of the income.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum
tax (AMT), although the interest continues to be excludable from gross
income for other tax purposes. Interest from private activity
securities will be considered tax-exempt for purposes of the fund 's
policies of investing so that at least 80% of its net assets will be
invested in securities whose interest is free from federal and New
York State and City personal income taxes . Interest from private
activity securities is a tax preference item for the purposes of
determining whether a taxpayer is subject to the AMT and the amount of AMT
to be paid, if any. Private activity securities issued after August 7, 1986
to benefit a private or industrial user or to finance a private facility
are affected by this rule.
A portion of the gain on bonds purchased at a discount after April 30,
1993 and short-term capital gains distributed by the fund are federally
taxable to shareholders as dividends, not as capital gains.
It is the current position of the s taff of the SEC 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. According to this position, at least
80% of the fund 's income distributions would have to be exempt from
the AMT as well as exempt from federal taxes.
Corporate investors should note that a tax preference item for
purposes of the corporate AMT is 75% of the amount by which, adjusted
current earnings (which includes tax-exempt interest) exceeds the
alternative minimum taxable income of the corporation. If a shareholder
receives an exempt-interest dividend and sells shares at a loss after
holding them for a period of six months or less, the loss will be
disallowed to the extent of the amount of exempt-interest dividend.
NEW YORK TAX MATTERS. It is not expected that the fund will incur New York
income or franchise tax liability. In addition, New York personal income
tax law also provides that exempt-interest dividends paid by a regulated
investment company, or series thereof, from interest on obligations which
are exempt from tax under New York law are excludable from gross
income.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the
fund on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length of
time that shareholders have held their shares. If a shareholder receives a
long-term capital gain distribution on shares of the fund and such
shares are held six months or less and are sold at a loss, the portion of
the loss equal to the amount of the long-term capital gain distribution
will be considered a long-term loss for tax purposes. Short-term
capital gains distributed by the fund are taxable to shareholders as
dividends, not as capital gains.
TAX STATUS OF THE FUND . The fund intends to qualify each year
as a "regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund
level, the fund intends to distribute substantially all of
its net investment income and net realized capital gains within each
calendar year as well as on a fiscal year basis. The fund intends to
comply with other tax rules applicable to regulated investment companies,
including a requirement that capital gains from the sale of securities held
less than three months constitute less than 30% of the fund 's gross
income for each fiscal year. Gains from some futures contracts and options
are included in this 30% calculation, which may limit the fund 's
investments in such instruments.
The fund is treated as a separate entity from the other funds of
Fidelity Advisor Series V for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal income taxes, shareholders may be
subject to state and local taxes on fund distributions, and shares may be
subject to state and local property taxes. Investors should consult
their tax advisers to determine whether the fund is suitable to
their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp. , its parent 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
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, MA 02109, which is also the address of FMR.
Those Trustees who are "interested persons" (as defined in the 1940 Act) by
virtue of their affiliation with either trust or with FMR are indicated by
an asterisk (*).
*EDWARD C. JOHNSON 3d, (65), Trustee and President, is Chairman,
Chief Executive Officer and a Director of FMR Corp.; a Director and
Chairman of the Board and of the Executive Committee of FMR; Chairman and a
Director of FMR Texas Inc. (1989), Fidelity Management & Research (U.K.)
Inc., and Fidelity Management & Research (Far East) Inc.
*J. GARY BURKHEAD, (54), Trustee and Senior Vice President, is
President of FMR; and President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX, (63), 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, (63), 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 she previously served as a Director of Hallmark Cards, Inc. (1985-1991)
and Nabisco Brands, Inc. In addition, she is a member of the President's
Advisory Council of The University of Vermont School of Business
Administration.
RICHARD J. FLYNN, (71), 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 Trustee of College of the Holy Cross and Old
Sturbridge Village, Inc. and he previously served as Director of
Mechanics Bank (1971-1995).
E. BRADLEY JONES, (67), 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, (62), One Harborside, 680 Steamboat Road, Greenwich,
CT, Trustee, is Executive-in-Residence (1995) at Colu mbia University
Graduate School of Business and a financial consultant. From 1987 to
January 1995, Mr. Kirk was a Professor at Columbia University Graduate
School of Business. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and he previously served as Director of
Valuation Research Corp. (appraisals and valuations, 1993). In
addition, he serves as Vice Chairman of the Board of Directors of the
National Arts Stabilization Fund , Vice Chairman of the Board of
Trustees of the Greenwich Hospital Association , and as a Member of the
Public Oversight Board of the American Institute of Certified Public
Accountants' SEC Practice Section (1995) .
*PETER S. LYNCH, (52), Trustee (1990) is Vice Chairman of FMR
(1992). Prior to M ay 31, 1990, he was a Director of FMR and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals) and Morrison Knudsen Corporation (engineering
and construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield and Society for the
Preservation of New England Antiquities, and as an Overseer of the Museum
of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, (66), 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, (70), 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, (62), 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, (66), 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).
STEPHEN P. JONAS, (42), 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, (48), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, (49), Assistant Treasurer (1994), is an employee of
FMR (1994). Prior to becoming Assistant Treasurer of the Fidelity funds,
Mr. Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993); and
Vice President, Assistant Controller, and Director of the Accounting
Department - First Boston Corp. (1986-1990).
ARTHUR S. LORING, (47), Secretary, is Senior Vice President (1993)
and General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
The following table sets forth information describing the compensation
of each current Trustee of the fund for his or her services as trustee for
the fiscal year ended October 31, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Trustees Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from Benefits Accrued Retirement from from the Fund
the Fund(dagger) as Part of Fund the Fund Complex*
Expenses from the Complex*
Fund Complex*
J. Gary Burkhead** $ 0 $ 0 $ 0 $ 0
Ralph F. Cox 5,200 52,000 125,000
Phyllis Burke Davis 5,200 52,000 122,000
Richard J. Flynn 0 52,000 154,500
E. Bradley Jones 5,200 49,400 123,500
Edward C. Johnson 3d** 0 0 0 0
Donald J. Kirk 5,200 52,000 125,000
Peter S. Lynch** 0 0 0 0
Gerald C. McDonough 5,200 52,000 125,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 125,000
Thomas R. Williams 5,200 52,000 126,500
</TABLE>
(dagger) Estimated
* Information is as of December 31, 1994 for 206 funds in the complex.
** Interested trustees of the fund are compensated by FMR.
As of September 23, 1994, the Trustees and officers of the fund owned, in
the aggregate, less than 1% of the outstanding shares of the fund.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments is not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program
MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other
services. Under its management contract with the fund, FMR acts as
investment adviser and, subject to the supervision of the Board of
Trustees, directs the investments of the fund in accordance with its
investment objective, policies, and limitations. FMR also provides the
fund with all necessary office facilities and personnel for
servicing the fund 's investments, compensates all officers of the
Trust, all Trustees who are "interested persons" of the t rust or of
FMR, and all personnel of the fund or FMR performing services
relating to research, statistical, and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the fund . These services include providing
facilities for maintaining the fund 's organization; supervising
relations with custodians, transfer and pricing agents, accountants,
underwriters, and other persons dealing with the fund ; preparing all
general shareholder communications and conducting shareholder relations;
maintaining the fund 's records and the registration of the
fund 's shares under federal and state law s ; developing
management and shareholder services for the fund ; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.
In addition to the management fee payable to FMR and the fees payable to
UMB, the fund pays all of its expenses, without
limitation, that are not assumed by those parties. The fund pays for
typesetting, printing, and mailing of proxy material to shareholders, legal
expenses, and the fees of the custodian, auditor, and non-interested
Trustees. Although the fund 's current m anagement
c ontract provides that the fund will pay for typesetting,
printing and mailing prospectuses, statements of additional information,
notices and reports to shareholders, the Trust , on behalf of the fund,
has entered into a revised transfer agent agreement with
UMB , pursuant to which UMB bears the cost of providing these
services to shareholders. Other expenses paid by the fund include
interest, taxes, brokerage commissions, the fund 's proportionate
share of insurance premiums and Investment Company Institute due s .
The fund is also liable for such non-recurring expenses as may
arise, including costs of litigation to which the fund may be a
party and any obligation it may have to indemnify its officers and Trustees
with respect to litigation.
FMR is the fund's manager pursuant to a management contract dated
November 17, 1994, which was approved by shareholders on November 16, 1994.
For the services of FMR under the contract, the fund pays FMR a monthly
management fee composed of the sum of two elements: a group fee rate and
an individual fund fee rate.
COMPUTING THE BASIC FEE. The group fee rate is based on the monthly average
net assets of all of the registered investment companies with which FMR has
management contracts and is calculated on a cumulative basis pursuant to
the graduated fee rate schedule shown below on the left. The schedule below
on the right shows the effective annual group fee rate at various asset
levels which is the result of cumulatively applying the annualized rates on
the left. For example, the effective annual fee rate at $___ billion of
average group net assets - the approximate level for June 30, 1995 is
.____%, which was the weighted average of the respective fee rates for each
level of group net assets up to $___ billion.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
$ 0 - 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .169 0
24 - 30 .1800 200 .16 52
30 - 36 .1750 225 .16 18
36 - 42 .1700 250 .1 587
42 - 48 .1650 275 . 1560
48 - 66 .1600 300 . 1536
66 - 84 .1550 325 . 1514
84 - 120 .1500 350 . 1494
120 - 1 56 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .13 50
228 - 264 .13 00
264 - 300 .1 275
300 - 336 .1250
336 - 372 .1225
Over 372 .1200
</TABLE>
The individual fund fee rate is 0.25 %. Based on the average
net assets of funds advised by FMR for _________ 1995 , the annual
management fee rate for the fund would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
____ % + 0.25 % = ____ %
One-twelfth (1/12) of this annual management fee rate is then applied to
the fund 's average net assets for the current month, giving a
dollar amount which is the fee for that month.
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). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense
reimbursements by FMR will increase the fund's total returns and yield and
repayment of the reimbursement by the fund will lower its total returns and
yield.
To comply with the California Code of Regulations, FMR will reimburse the
fund if and to the extent that the fund 's aggregate annual
operating expenses exceed specified percentages of its average net assets.
The applicable percentages for the fund are 2 1/2% of the first $30
million, 2% of the next $70 million, and 1 1/2% of average net assets in
excess of $100 million. When calculating the fund 's expenses for
purposes of this regulation, the fund may exclude interest, taxes,
brokerage commissions, and extraordinary expenses, as well as a portion of
its distribution plan expenses.
CONTRACTS WITH FMR AFFILIATES
UMB is the transfer, dividend disbursing, and shareholders' servicing agent
for Institutional Class, Class A and Class B shares of the fund. On behalf
of Class A shares, UMB has entered into sub-arrangements with State Street
pursuant to which State Street performs as transfer, dividend disbursing,
and shareholders' servicing agent. State Street has further delegated
certain transfer, dividend disbursing, and shareholders' services for Class
A shares to FIIOC. On behalf of Institutional Class and Class B shares, UMB
has entered into sub-arrangements with FIIOC pursuant to which FIIOC
performs as transfer, dividend disbursing, and shareholders' servicing
agent. For every account, each of Institutional Class, Class A and Class B
of the fund pays an annual fee and an asset-based fee based on account
size. FIIOC also collects small account fees from certain accounts with
balances of less than $2,500.
For accounts that State Street maintains on behalf of UMB, State Street
receives all such fees. For accounts that FIIOC maintains on behalf of UMB
or State Street, FIIOC receives all such fees. For accounts for which FIIOC
provides limited services, FIIOC receives a portion of related account fees
and asset-based fees, less applicable charges and expenses of State Street
for account maintenance and transactions.
State Street or FIIOC, as applicable, pay out-of-pocket expenses associated
with providing transfer agent services. In addition, State Street or FIIOC,
as applicable, bears the expense of typesetting, printing, and mailing
prospectuses, statements of additional information, and all other reports,
notices, and statements to shareholders, with the exception of proxy
statements.
UMB has sub-arrangements with FSC pursuant to which FSC performs the
calculations necessary to determine the NAV and dividends for each of
Institutional Class, Class A and Class B, and maintains the accounting
records for the fund. The fee rates for pricing and bookkeeping services
are based on the fund's average net assets, specifically, ___% for the
first $500 million of average net assets and ___% for average net assets in
excess of $500 million. The fee is limited to a minimum of $_____ and a
maximum of $750,000 per year.
The transfer agent fees and charges, and pricing and bookkeeping fees
described above are paid to State Street, FIIOC and FSC by UMB, which is
entitled to reimbursement from the fund or the class, as applicable, for
these expenses.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to use
all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered.
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by FDC.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved a Distribution and Service Plan on behalf
of Institutional Class, Class A and Class B shares of the
fund (the Plans) pursuant to Rule 12b-1 under the
Investment Company Act of 1940 Act (the Rule) . The Rule provides
in substance that a mutual fund may not engage directly or indirectly in
financing any activity that is primarily intended to result in the sale of
shares of a fund except pursuant to a plan approved on behalf of the fund
under the Rule. The Plans, as approved by the Trustees, allow
Institutional Class, Class A and Class B of the fund and FMR to incur
certain expenses that might be considered to constitute direct or indirect
payment by the fund of distribution expenses.
Pursuant to the Plans, FDC is paid a distribution fee at an annual rate of
up to 0.40% of Class A's average net assets and 0.75% of Class B's average
net assets determined as of the close of business on each day throughout
the month. Currently, the Trustees have approved a distribution fee for
Class A at an annual rate of 0.25% of its average net assets. This fee may
be increased only when, in the opinion of the Trustees, it is in the best
interests of the shareholders of Class A to do so. Class B also pays
investment professionals a service fee at an annual rate of 0.25% of its
average daily net assets determined as of the close of business on each day
throughout the month for personal service and/or the maintenance of
shareholder accounts.
Under each Plan, if the payment of management fees by the fund to FMR is
deemed to be indirect financing by the fund of the distribution of its
shares, such payment is authorized by the Plans. Each Plan also
specifically recognizes that FMR, either directly or through FDC, may use
its management fee revenue, past profits, or other resources, without
limitation, to pay promotional and administrative expenses in connection
with the offer and sale of shares of the applicable class of the fund. In
addition, each Plan provides that FMR may use its resources, including its
management fee revenues, to make payments to third parties that assist in
selling shares of the applicable class of the fund, or to third parties,
including banks, that render shareholder support services. The Trustees
have not authorized such payments to date.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of each Plan and have
determined that there is a reasonable likelihood that the Plan will benefit
the applicable class of the fund and its shareholders. With respect to the
Institutional Class Plan, the Trustees noted in particular that the Plan
does not authorize payments by the Institutional Class of the fund other
than those made by FMR under its management contract with the fund. To the
extent that each Plan gives FMR and FDC greater flexibility in connection
with the distribution of shares of the applicable class of the fund,
additional sales of fund shares may result. Furthermore, certain
shareholder support services may be provided more effectively under the
Plans by local entities with whom shareholders have other relationships.
None of the Plans provides for specific payments by the applicable class of
any of the expenses of FDC, or obligates FDC or FMR to perform any specific
type or level of distribution activities or incur any specific level of
expense in connection with distribution activities. After payments by FDC
for advertising, marketing and distribution, and payments to third parties,
the amounts remaining, if any, may be used as FDC may elect.
The Plans were approved by shareholders of Class A, Class B on November 16,
1994 and on ___________ for shareholders of Institutional Class.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed
herein, and banks and other financial institutions may be required to
register as dealers pursuant to state law.
The fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plans.
No preference for the instruments of such depository institutions will be
shown in the selection of investments.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Advisor New York Tax-Free 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
four series of the Trust: Fidelity Advisor New York Tax-Free Income
Fund , 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 .
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
and Class A and Institutional Class have no conversion rights ; the
voting and dividend rights and the conversion rights of Class B
shares , the right of redemption, and the privilege of exchange are
described in the Prospectus. Shares are fully paid and nonassessable,
except as set forth under the heading "Shareholder and Trustee Liability"
above. Shareholders representing 10% or more of the Trust , the fund,
or c lass ma y, as set forth in the Declaration of Trust, call
meetings of the Trust , the fund, or the applicable class for
any purpose, as the case may be, including, in the case of a meeting of the
entire Trust, the purpose of voting on removal of one or more Trustees. The
Trust or any fund may be terminated upon the sale of its assets to
another open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the Trust or fund as determined by the current value of
each shareholder's investment in the fund or Trust. If not so
terminated, the Trust or fund will continue indefinitely. The
fund may invest all of its assets in another investment company.
CUSTODIAN. U MB, 1010 Grand Avenue, Kansas City, Missouri, is
custodian of the assets of the fund . The custodian is responsible
for the safekeeping of the fund 's assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the fund or in deciding which
securities are purchased or sold by the fund . However, t he
fund may invest in obligations of the custodian and may purchase
securities from or sell securities to the custodian. Morgan Guaranty
Trust Company of New York, The Bank of New York, and Chemical Bank, each
headquartered in New York, also may serve as a special purpose custodian of
certain assets in connection with pooled repurchase agreement
transactions.
FMR, its officers and directors, its affiliated companies, and the Board
of Trustees may from time to time conduct transactions with
various banks, including banks serving as custodians for certain of the
fund s 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.
Also, the maturities of mortgage-backed securities and some asset-backed
securities, such as collateralized mortgage obligations, are determined on
a weighted average life basis, which is the average time for principal to
be repaid. For a mortgage security, this average time is calculated by
estimating the expected principal payments during the life of the mortgage.
The weighted average life of these securities is likely to be substantially
shorter than their stated final maturity.
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) Declaration of Trust, as amended and restated on March 16, 1995, was
electronically filed and is incorporated herein by reference as Exhibit 1
to Post-Effective Amendment No. 27.
(2) Bylaws of the Trust are incorporated herein by reference to Exhibit 2
to Union Street Trust Post-Effective amendment No. 87.
(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) Management Contract between the Registrant, on behalf of Fidelity
Advisor High Income Municipal Fund and Fidelity Management & Research
Company, dated December 1, 1994, was electronically filed and is
incorporated herein by reference as Exhibit 5(a) to Post-Effective
Amendment No. 27.
(b) Management Contract between the Registrant, on behalf of Fidelity
Advisor Global Resources Fund, and Fidelity Management & Research Co.,dated
December 1, 1994, was electronically filed and is incorporated herein by
reference as Exhibit 5(b) to Post-Effective Amendment No. 27.
(c) Form of Management Contract between the Registrant, on behalf of
Fidelity Advisor California Tax-Free Income Fund, and Fidelity Management &
Research Co.,was electronically 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 was electronically filed and is incorporated
herein by reference to Exhibit 5(d) to Post-Effective Amendment No. 26.
(e) Sub-Advisory Agreement between FMR Far East and Fidelity Management
& Research Company,, on behalf of Fidelity Advisor Global Resources Fund,
dated December 1, 1994, was electronically filed and is incorporated herein
by reference as Exhibit 5(e) to Post-Effective Amendment No. 27.
(f) Sub-Advisory Agreement between FMR U.K. and Fidelity Management &
Research Company, on behalf of Fidelity Advisor Global Resources Fund,
dated December 1, 1994, was electronically filed and is incoporated herein
by reference as Exhibit 5(f) to Post-Effective Amendment No. 27.
(6) (a) General Distribution Agreement between Registrant, on behalf of
Plymouth High Income Municipal Portfolio and Fidelity Distributors
Corporation, is incorporated herein by reference as Exhibit 6(a) to
Post-Effective Amendment No. 1.
(b) General Distribution Agreement between Registrant, on behalf of
Plymouth Global Natural Resources Portfolio and Fidelity Distributors
Corporation, is incorporated herein by reference as Exhibit 6(c) to
Post-Effective Amendment No. 3.
(c) 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 as
Exhibit 6(d) to Post-Effective Amendment No. 3.
(d) Form of General Distribution Agreement between the Registrant, on
behalf of Fidelity Advisor California Tax-Free Income Fund, and Fidelity
Distributors Corporation, was electronically filed and is incorporated
herein by reference as Exhibit 6(d) to Post-Effective Amendment No. 19.
(e) General Distribution Agreement between the Registrant, on behalf of
Fidelity Advisor New York Tax-Free Income Fund, and Fidelity Distributors
Corporation, dated November 17, 1994 was electronically filed and is
incorporated herein by reference to Exhibht 6(f) to Post-Effective
Amendment No. 26.
(f) Form of Bank Agency Agreement (most recently revised May
1994) was electronically filed and is incorporated herein by reference as
Exhibit 6(f) to Post-Effective Amendment No. 27.
(g) Form of Selling Dealer Agreement (most recently revised
May 1994) was electronically filed and is incorporated herein by reference
as Exhibit 6(g) to Post-Effective Amendment No. 27.
(h) Form of Selling Dealer Agreement for Bank Related
Transactions (most recently revised June 1994) was electronically filed and
is incorporated herein as Exhibit 6(h) to Post-Effective Amendment No. 27.
(7) Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, effective November 1, 1989, was electronically filed and
is incorporated herein by reference to Exhibit 7 to Union Street Trust's
Post Effective Amendment No. 87.
(8) (a) Custodian Contract between Registrant and Brown Brothers Harriman
& Co. dated September 1, 1994 was electronically filed and is incorporated
herein by reference as Exhibit 8(a) to Post-Effective Amendment No. 27.
(b) Custodian Contract between Registrant and United Missouri Bank dated
December 1, 1994 was electronically filed and is incorporated herein by
reference as Exhibit 8(b) to Post-Effective Amendment No. 27.
(9) Not applicable.
(10) None.
(11) 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) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor High Income Municipal Fund: Class A was electronically
filed and is incorporated herein by reference as Exhibit 15(a) to
Post-Effective Amendment No. 27.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Global Resources Fund: Class A was electronically filed and is
incorporated herein by reference as Exhibit 15(b) to Post-Effective
Amendment No. 27.
(c) Form of Distribution and Service Plan pursuant to Rule 12b-1 between
the Registrant, on behalf of Fidelity Advisor California Tax-Free Income
Fund, Class A, and Fidelity Distributors Corporation, was electronically
filed and is incorporated by reference to Post Effective Amendment No. 19.
(d) Distribution and Service Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of Fidelity Advisor New York Tax-Free Income Fund:
Class A, and Fidelity Distributors Corp. was electronically filed and is
incorporated herein by reference to Exhibit 15(d) to Post-Effective
Amendment No. 26.
(e) Distribution and Service Plan pursuant to Rule 12b-1 between the
Registrant, on behalf of Fidelity Advisor New York Tax-Free Income Fund:
Class B, and Fidelity Distributors Corp. was electronically filed and is
incorporated herein by reference to Exhibit 15(e) to Post-Effective
Amendment No. 26.
(f) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor High Income Municipal Fund: Class B was electronically filed and is
incorporated herein by reference to Exhibit 15(f) to Post-Effective
Amendment No. 27.
(g) Form of Distribution and Service Plan pursuant to Rule 12b-1 between
the Registrant, on behalf of Fidelity Advisor California Tax-Free Income
Fund, Class B, and Fidelity Distributors Corporation, was electronically
filed and is incorporated by reference to Post Effective Amendment No. 19.
(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) A Financial Data Schedule for Fidelity Advisor High Income Municpal
Fund and Fidelity Advisor Global Resources Fund is incorporated herein by
reference as Exhibit 17 to Post-Effective Amendment No. 27.
(18) Rule 18f-3 Plan will be filed by subsequent amendment.
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
March 31, 1995
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity Advisor High Income Municipal Fund: Class A 16,663
Fidelity Advisor High Income Municipal Fund: Class B 625
Fidelity Advisor High Income Municipal Fund: Institutional Class 0
Fidelity Advisor Global Resources Fund: Class A 17,349
Fidelity Advisor Global Resources Fund: Class B 0
Fidelity Advisor Global Resources Fund: Institutional Class 0
Fidelity Advisor California Tax-Free Income Fund: Class A 1
Fidelity Advisor California Tax-Free Income Fund: Class B 1
Fidelity Advisor California Tax-Free Income Fund: Institutional Class 0
Fidelity Advisor New York Tax-Free Income Fund: Class A 1
Fidelity Advisor New York Tax-Free Income Fund: Class B 1
Fidelity Advisor New York Tax-Free Income Fund: Institutional Class 0
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee, or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action suit or
proceeding in which he is involved by virtue of his service as a trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.; President
and Trustee of funds advised by FMR.
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman and Director of FMR.
Robert Beckwitt Vice President of FMR and of funds advised by FMR.
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Dwight Churchill Vice President of FMR (1993).
William Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR (1993).
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Equity Division Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Richard Haberman Senior Vice President of FMR (1993).
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephen P. Jonas Treasurer and Vice President of FMR (1993) 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 P. 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); and Treasurer of
the funds advised by FMR (1995).
David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management & Research
(Far East) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
FMR Far East provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The directors
and officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman of the
Executive Committee of FMR; Chief Executive Officer of
FMR Corp.; Chairman of the Board and a Director of
FMR, FMR Corp., FMR Texas Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Far East; President of
FMR; Managing Director of FMR Corp.; President and a
Director of FMR Texas Inc. and Fidelity Management &
Research (U.K.) Inc.; Senior Vice President and Trustee
of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice
President of Fidelity Management & Research (U.K.)
Inc.; Director of Worldwide Research of FMR.
William R. Ebsworth Vice President of FMR Far East.
Bill Wilder Vice President of FMR Far East (1993).
Stephen P. Jonas Treasurer of FMR Far East (1993), Fidelity Management
& Research (U.K.) Inc. (1993), and FMR Texas Inc.
(1993); Treasurer and Vice President of FMR (1993);
and Treasurer of the funds advised by FMR (1995).
David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity Management &
Research (U.K.) Inc.; Secretary of FMR Texas Inc.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109, or the funds' respective
custodian: Brown Brothers Harriman & Co., 40 Water Street, Boston, MA
(Advisor Global Resources) and United Missouri Bank, N.A., 1010 Grand
Avenue, Kansas City, MO (Advisor High Income Municipal, Advisor California
Tax-Free Income Fund, and Advisor New York Tax-Free Income Fund).
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant, on behalf of Fidelity Advisor Global Resources Fund
and Fidelity Advisor High Income Municipal Fund undertakes, provided the
information required by Item 5A is contained in the annual report, to
furnish each person to whom a prospectus has been delivered, upon their
request and without charge, a copy of the Registrant's latest annual report
to shareholders.
(b) The Registrant undertakes to file a Post-Effective Amendment, using
financial statements for Fidelity Advisor California Tax-Free Income Fund
and Fidelity Advisor New York Tax-Free 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 28 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and MA, on the 1st day of June 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)
/s/Edward C. Johnson 3d(dagger) President and Trustee June 1, 1995
Edward C. Johnson 3d (Principal Executive Officer)
/s/Stephen P. Jonas Treasurer June 1, 1995
Stephen P. Jonas
/s/J. Gary Burkhead Trustee June 1, 1995
J. Gary Burkhead
/s/Ralph F. Cox * Trustee June 1, 1995
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee June 1, 1995
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee June 1, 1995
Richard J. Flynn
/s/E. Bradley Jones * Trustee June 1, 1995
E. Bradley Jones
/s/Donald J. Kirk * Trustee June 1, 1995
Donald J. Kirk
/s/Peter S. Lynch * Trustee June 1, 1995
Peter S. Lynch
/s/Edward H. Malone * Trustee June 1, 1995
Edward H. Malone
/s/Marvin L. Mann * Trustee June 1, 1995
Marvin L. Mann
/s/Gerald C. McDonough* Trustee June 1, 1995
Gerald C. McDonough
/s/Thomas R. Williams * Trustee June 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.
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
