SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 33-42890)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 11 [X]
and
REGISTRATION STATEMENT (No. 811-6397)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [ ]
Fidelity California Municipal Trust II
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-563-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b)
(X) on April 17, 1995 pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( ) on ( ) pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on ( ) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed
post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the Notice required by
such Rule before April 30, 1995.
FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Funds at a Glance; Who May Want
to Invest
3 a .............................. Financial Highlights
b .............................. *
c, d .............................. Performance
4 a i............................. Charter
ii........................... The Funds at a Glance; Investment Principles and
Risks; Fundamental Investment Policies and
Restrictions
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page; The Funds at a Glance; Doing
Business with Fidelity; Charter
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Cover Page; Charter
f .............................. Expenses
g .............................. *
5 A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Exchange
Restrictions; Transaction Details
iii.......................... Charter
b ............................. *
c .............................. Exchange Restrictions; Transaction Details
d .............................. *
e .............................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. Expenses; How to Buy Shares; Transaction
Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ Description of the Trusts
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR; Portfolio Transactions
ii ............................ Trustees and Officers
iii ............................ Management Contracts
b ............................ Management Contracts
c, d ............................ Interest of FMR Affiliates
e ............................ Management Contracts
f ............................ Distribution and Service Plans
g ............................ *
h ............................ Description of the Trusts
i ............................ Interest of FMR Affiliates
17 a - c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trusts
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Interest of FMR Affiliates
c ............................ *
22 a ............................ Performance
b ............................ *
23 ............................ Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a copy of
the funds' most recent financial reports and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated April 17, 1995. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference (legally forms a part of the prospectus).
For a free copy of either document, call Fidelity at 1-800-544-8888.
Investments in the money market fund are neither insured nor guaranteed by
the U.S. government, and there can be no assurance that the fund will
maintain a stable $1.00 share price.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
CFR-pro-495
FIDELITY
CALIFORNIA
TAX-FREE
FUNDS
Each of these funds seeks a high level of current income free from federal
income tax and California state personal income tax. The funds have
different strategies, however, and carry varying degrees of risk and yield
potential.
FIDELITY CALIFORNIA TAX-FREE
MONEY MARKET PORTFOLIO
FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO
FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO
PROSPECTUS
APRIL 17, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL CHARTER How each fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management
arm of Fidelity Investments, which was established in 1946 and is now
America's largest mutual fund manager. FMR Texas Inc. (FTX), a subsidiary
of FMR, chooses investments for California Tax-Free Money Market.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
CALIFORNIA MONEY MARKET
GOAL: High current tax-free income for California residents while
maintaining a stable $1.00 share price.
STRATEGY: Invests in high-quality, short-term municipal money market
securities whose interest is free from federal income tax and California
personal income tax.
CALIFORNIA INSURED
GOAL: High current tax-free income for California residents.
STRATEGY: Invests mainly in long-term municipal securities that are covered
by insurance guaranteeing the timely payment of principal and interest, and
whose interest is free from federal income tax and California personal
income tax.
CALIFORNIA HIGH YIELD
GOAL: High current tax-free income for California residents.
STRATEGY: Invests mainly in longer-term, investment-grade municipal
securities whose interest is free from federal income tax and California
personal income tax.
WHO MAY WANT TO INVEST
These non-diversified funds may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal and
California income taxes. Each fund's level of risk and potential reward,
depend on the quality and maturity of its investments.
California Tax-Free Money Market is managed to keep its share price stable
at $1.00. California Tax-Free Insured and California Tax-Free High Yield,
with their broader range of investments, have the potential for higher
yields, but also carry a higher degree of risk. California Tax-Free
Insured provides a high degree of credit quality because insurance
covers the timely payment of interest and principal. However, the cost of
insurance lowers the fund's yield. You should consider your investment
objective and tolerance for risk when making an investment decision.
The value of the funds' investments and the income they generate will vary
from day to day, and generally reflect interest rates, market conditions,
and other federal and state political and economic news. Except for the
money market fund, when you sell your shares of the other funds, they may
be worth more or less than what you paid for them. By themselves, these
funds do not constitute a balanced investment plan.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell, or
hold shares of a fund. See page for more information about these
fees.
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Exchange fee None
Annual account maintenance fee
(for accounts under $2,500) $12.00
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. It also incurs other expenses for
services such as maintaining shareholder records and furnishing shareholder
statements and financial reports. A fund's expenses are factored into its
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets.
CALIFORNIA MONEY MARKET
Management fee .41 %
12b-1 fee None
Other expenses .21 %
Total fund operating expenses .62 %
CALIFORNIA INSURED
Management fee .41 %
12b-1 fee None
Other expenses .18 %
Total fund operating expenses .59 %
CALIFORNIA HIGH YIELD
Management fee .41 %
12b-1 fee None
Other expenses .15 %
Total fund operating expenses .56 %
EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses if you
close your account after the number of years indicated:
After 1 After 3 After 5 After 10
year years years years
California
Money Market $6 $ 20 $ 35 $ 77
California
Insured $6 $ 19 $ 33 $ 74
California
High Yield $6 $ 18 $ 31 $ 70
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
FINANCIAL HIGHLIGHTS
The tables that follow are included in the funds' Annual Report and have
been audited by Price Waterhouse LLP, independent accountants. Their
reports on the financial statements and financial highlights are included
in the Annual Report. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the funds' Statement
of Additional Information.
CALIFORNIA TAX-FREE MONEY MARKET
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.Selected Per-Share Data
and Ratios
2.Years
1986C 1987C 1988C 1989C 1990C 1991C 1992C 1993D 1994 1995
ended
February 28
3.Net asset
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.000 $ 1.00 $ 1.00
value,
0 0 0 0 0 0 0 0 0
beginning of
period
4.Income
.048 .038 .042 .052 .054 .047 .035 .019 .020 .026
from
Investment
Operations
Net
interest
income
5.Less
(.048) (.038) (.042) (.052) (.054) (.047) (.035) (.019) (.020) (.026)
Distributions
From net
interest
income
6.Net asset
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.000 $ 1.00 $ 1.00
value, end of
0 0 0 0 0 0 0 0 0
period
7.Total
4.95 3.88 4.27 5.36 5.53 4.85 3.59 1.92 1.97 2.60
return B
% % % % % % % % % %
8.Net
$ 120,5 $ 413,4 $ 546,5 $ 735,6 $ 623,7 $ 538,7 $ 556,5 $ 568,2 $ 611,7 $ 675,1
assets, end
94 98 53 23 48 91 16 80 65 85
of period
(000
omitted)
9.Ratio of
.60 .60 .58 .53 .60 .61 .63 .62 .64 .62
expenses to
% % % % % % % %A % %
average
net assets
10.Ratio of
.79 .67 .62 .65 .60 .61 .63 .62 .64 .62
expenses to
% % % % % % % %A % %
average net
assets
before
expense
reductions
11.Ratio of
4.92 3.84 4.17 5.31 5.42 4.75 3.50 2.29 1.95 2.58
net interest
% % % % % % % %A % %
income to
average net
assets
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE
TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C YEARS ENDED APRIL 30
D MAY 1, 1992 TO FEBRUARY 28, 1993
CALIFORNIA TAX-FREE INSURED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12.Selected Per-Share
Data and Ratios
13.Years ended 1987C 1988D 1989D 1990D 1991D 1992D 1993E 1994 1995
February 28
14.Net asset $ 10.00 $ 9.28 $ 9.20 $ 9.59 $ 9.37 $ 9.74 $ 10.10 $ 11.03 $ 10.74
value, 0 0 0 0 0 0 0 0 0
beginning of period
15.Income from .373 .611 .610 .618 .605 .603 .492 .589 .558
Investment
Operations
Net interest
income
16. Net realized (.720) (.080) .390 (.220) .370 .360 .930 (.090) (.730)
and
unrealized gain
(loss)
on investments
17. Total from (.347) .531 1.000 .398 .975 .963 1.422 .499 (.172)
investment
operations
18.Less (.373) (.611) (.610) (.618) (.605) (.603) (.492) (.589) (.558)
Distributions
From net interest
income
19. From net -- -- -- -- -- -- -- (.200) (.170)
realized gain
on investments
20. Total (.373) (.611) (.610) (.618) (.605) (.603) (.492) (.789) (.728)
distributions
21.Net asset $ 9.280 $ 9.20 $ 9.59 $ 9.37 $ 9.74 $ 10.1 $ 11.03 $ 10.7 $ 9.840
value, 0 0 0 0 00 0 40
end of period
22.Total return B (3.69) 5.97 11.20 4.15 10.67 10.14 14.48 4.59 (1.30)
% % % % % % % % %
23.Net assets, end $ 35,24 $ 42,84 $ 69,35 $ 87,43 $ 113,7 $ 177,7 $ 274,8 $ 291,7 $ 216,9
of period (000 7 7 0 8 11 63 72 60 06
omitted)
24.Ratio of .45 .65 .83 .75 .72 .66 .63 .48 .59
expenses to %A % % % % % %A % %
average net
assets
25.Ratio of 1.12 .88 .83 .75 .72 .66 .63 .60 .59
expenses to %A % % % % % %A % %
average net assets
before expense
reductions
26.Ratio of net 6.27 6.70 6.54 6.38 6.30 6.06 5.72 5.31 5.71
interest income %A % % % % % %A % %
to average net
assets
27.Portfolio 28 76 32 10 14 19 27 60 32
turnover rate %A % % % % % %A % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE
TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C FROM SEPTEMBER 18, 1986 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1987
D YEARS ENDED APRIL 30
E MAY 1, 1992 TO FEBRUARY 28, 1993
CALIFORNIA TAX-FREE HIGH YIELD
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
28.Selected Per-Share
Data and Ratios
29.Years
1986C 1987C 1988C 1989C 1990C 1991C 1992C 1993D 1994 1995
ended
February 28
30.Net asset
$ 10.43 $ 11.51 $ 10.95 $ 10.62 $ 11.08 $ 10.94 $ 11.30 $ 11.54 $ 12.43 $ 12.10
value,
0 0 0 0 0 0 0 0 0 0
beginning of
period
31.Income
.884 .782 .760 .758 .756 .752 .744 .611 .719 .685
from
Investment
Operations
Net interest
income
32. Net
1.080 (.510) (.270) .460 (.140) .360 .240 .890 (.060) (.830)
realized
and
unrealized
gain (loss)
on
investments
33. Total
1.964 .272 .490 1.218 .616 1.112 .984 1.501 .659 (.145)
from
investment
operations
34.Less
(.884) (.782) (.760) (.758) (.756) (.752) (.744) (.611) (.719) (.685)
Distributions
From net
interest
income
35. From
- -- (.050) (.060) -- -- -- -- -- (.270) (.150)
net realized
gain on
investments
36. Total
(.884) (.832) (.820) (.758) (.756) (.752) (.744) (.611) (.989) (.835)
distributions
37.Net asset
$ 11.51 $ 10.95 $ 10.62 $ 11.08 $ 10.94 $ 11.30 $ 11.54 $ 12.43 $ 12.10 $ 11.12
value,
0 0 0 0 0 0 0 0 0 0
end of period
38.Total
19.70 2.22% 4.72% 11.85 5.61% 10.44 8.94% 13.40 5.41% (.91)
return B
% % % % %
39.Net
$ 323,6 $ 460,6 $ 399,1 $ 493,9 $ 513,6 $ 523,5 $ 529,4 $ 586,7 $ 575,2 $ 477,0
assets, end of
32 35 86 77 82 90 45 91 89 44
period (000
omitted)
40.Ratio of
.72% .68% .73% .61% .60% .58% .59% .60% .57% .56%
expenses to A
average net
assets
41.Ratio of
7.75% 6.68% 7.15% 7.05% 6.73% 6.71% 6.52% 6.17% 5.78% 6.16%
net interest A
income to
average net
assets
42.Portfolio
16% 46% 52% 21% 34% 15% 23% 32% 44% 29%
turnover rate A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C YEARS ENDED APRIL 30
D MAY 1, 1992 TO FEBRUARY 28, 1993
PERFORMANCE
Mutual fund performance can be measured as TOTAL RETURN or YIELD. The total
returns that follow are based on historical fund results.
Each fund's fiscal year runs from March 1 through February 28. The tables
below show each fund's performance over past fiscal years compared to a
measure of inflation.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Past 10
February 28,1995 year years Years
California
Money Market 2.60 % 3.16 % 3.96 %
California Insured -1.30 % 7.20 % 6.50 % A
California
High Yield -.91 % 7.08 % 8.39 %
Consumer Price
Index 2.86 % 3.35 % N/A
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Past 10
February 28, 1995 year years Years
California
Money Market 2.60 % 16.81 % 47.52 %
California Insured -1.30 % 41.54 % 70.27 % A
California
High Yield -.91 % 40.78 % 123.76 %
Consumer Price
Index 2.86 % 17.89% N/A
A FROM SEPTEMBER 18, 1986
EXPLANATION OF TERMS
UNDERSTANDING
PERFORMANCE
YIELD illustrates the income
earned by a fund over a
recent period. Seven-day
yields are the most common
illustration of money market
performance. 30-day yields
are usually used for bond
funds. Yields change daily,
reflecting changes in interest
rates.
TOTAL RETURN reflects both the
reinvestment of income and
capital gain distributions, and
any change in a fund's share
price.
(checkmark)
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. When a money
market fund yield assumes that income earned is reinvested, it is called an
EFFECTIVE YIELD. A TAX-EQUIVALENT YIELD shows what an investor would have
to earn before taxes to equal a tax-free yield. Yields for the bond funds
are calculated according to a standard that is required for all stock and
bond funds. Because this differs from other accounting methods, the quoted
yield may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. In technical terms, Fidelity
California Tax-Free Money Market Portfolio is currently a non-diversified
fund of Fidelity California Municipal Trust II, and Fidelity California
Tax-Free Insured Portfolio and Fidelity California Tax-Free High Yield
Portfolio are currently non-diversified funds of Fidelity California
Municipal Trust. Both trusts are open-end management investment companies.
Fidelity California Municipal Trust II was organized as a Delaware business
trust on June 20, 1991. Fidelity California Municipal Trust was organized
as a Massachusetts business trust on April 28, 1983. There is a remote
possibility that one fund might become liable for a misstatement in the
prospectus about another fund.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. For the money market fund,
you are entitled to one vote for each share you own. For the bond funds,
the number of votes you are entitled to is based upon the dollar value of
your investment.
FMR AND ITS AFFILIATES
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 200
(solid bullet) Assets in Fidelity mutual
funds: over $250 billion
(solid bullet) Number of shareholder
accounts: over 20 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 200
(checkmark)
The funds are managed by FMR, which chooses their investments and handles
their business affairs. FTX has primary responsibility for providing
investment management services for California Tax-Free Money Market.
Jonathan D. Short is manager of California Tax-Free High Yield and
California Tax-Free Insured, both of which he has managed since March 1995.
Mr. Short also manages Spartan California Municipal High Yield and Spartan
California Intermediate Municipal. Previously, he was a municipal bond
analyst and assistant manager of High Yield Tax-Free. Mr. Short joined
Fidelity in 1990, after receiving his MBA from Northwestern University.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Service Co. (FSC) performs transfer agent
servicing functions for the funds.
FMR Corp. is the parent company of FMR and FTX. Through ownership of voting
common stock, members of the Edward C. Johnson 3d family form a controlling
group with respect to FMR Corp. Changes may occur in the Johnson family
group, through death or disability, which would result in changes in each
individual family member's holding of stock. Such changes could result in
one or more family members becoming holders of over 25% of the stock. FMR
Corp. has received an opinion of counsel that changes in the composition of
the Johnson family group under these circumstances would not result in the
termination of the funds' management or distribution contracts and,
accordingly, would not require a shareholder vote to continue operation
under those contracts.
UMB Bank, n.a., is each fund's transfer agent, although it employs
FSC to perform these functions for the funds. It is located at 1010 Grand
Avenue, Kansas City, Missouri.
To carry out the funds' transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that a fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
CALIFORNIA TAX-FREE MONEY MARKET seeks high current income that is free
from federal income tax and California personal income tax while
maintaining a stable $1.00 share price by investing in high-quality,
short-term municipal money market securities of all types. FMR normally
invests at least 65% of the fund's total assets in state tax-free
securities, and normally invests so that at least 80% of the fund's income
distributions are free from federal income tax.
When you sell your shares, they should be worth the same amount as when you
bought them. Of course, there is no guarantee that the fund will maintain a
stable $1.00 share price. The fund follows industry-standard guidelines on
the quality and maturity of its investments, which are designed to help
maintain a stable $1.00 share price. The fund will purchase only
high-quality securities that FMR believes present minimal credit risks and
will observe maturity restrictions on securities it buys. It is possible
that a major change in interest rates or a default on the fund's
investments could cause its share price (and the value of your investment)
to change.
CALIFORNIA TAX-FREE INSURED seeks high current income that is free from
federal income tax and California personal income tax by investing
primarily in municipal securities that are covered by insurance
guaranteeing the timely payment of interest and principal. The 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.
FMR normally invests so that at least 80% of the fund's income
distributions are free from federal and California personal income taxes.
The insurance coverage for the fund's investments is obtained either by the
bond's issuer or underwriter, or purchased by the fund. The fund pays
premiums for the insurance either directly or indirectly, which increases
the credit safety of the fund's investments, but decreases its yield. It is
important to note that the insurance does not guarantee the market value of
a security or the fund's shares.
The insurance feature provides high credit quality to the fund's portfolio,
but the fund may also invest in some uninsured securities that are judged
by FMR to be of investment-grade quality.
CALIFORNIA TAX-FREE HIGH YIELD seeks high current income that is free from
federal income tax and California personal income tax by investing
primarily in municipal securities judged by FMR to be of investment-grade
quality, although it can also invest in lower-quality securities. The fund
has no restrictions on maturity, but it generally invests in medium- and
long-term bonds and maintains a dollar-weighted average maturity of 15
years or longer. FMR normally invests so that at least 80% of the fund's
income distributions are free from federal and California personal income
taxes.
EACH FUND'S performance is closely tied to the economic and
political conditions within the state of 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 and its pooled investment fund (the
Pool) filed for protection under Chapter 9 of the Federal Bankruptcy Law,
as a result of investment losses in the Pool. 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 Orange County, had
investments in the Pool. The County and some of the participating agencies
in the Pool 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.
The money market fund stresses income, preservation of capital, and
liquidity. The bond funds seek to provide a higher level of income by
investing in a broader range of securities. Each fund's yield and each bond
fund's share price change daily based on changes interest
rates, market conditions, other political and economic news, and on the
quality and maturity of its investments. In general, bond prices rise when
interest rates fall, and vice versa. This effect is usually more pronounced
for longer-term securities. Lower-quality securities offer higher yields,
but also carry more risk. FMR may use various techniques to hedge a
portion of the bond funds' risks, but there is no guarantee that these
strategies will work as intended. When you sell your shares of the bond
funds, they may be worth more or less than what you paid for them.
If you are subject to the federal alternative minimum tax, you should note
that each 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 each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations, and the bond funds do not expect to invest in state taxable
obligations. Each fund also reserves the right to invest without limitation
in short-term instruments, or to invest more than normally permitted in
state taxable obligations for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of each fund's policies
and limitations and more detailed information about the funds' investments
is contained in the funds' SAI. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
funds achieve their goals. Current holdings and recent investment
strategies are described in the funds' financial reports which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
CALIFORNIA TAX-FREE HIGH YIELD
Fiscal 1995 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa 31.4% AAA 35.1%
High quality Aa 8.8% AA 5.6%
Upper-medium grade A 17.7% A 31.6%
Medium grade Baa 8.2% BBB 7.9%
LOWER QUALITY
Moderately speculative Ba 0.0% BB 0.0%
Speculative B 0.0% B 0.0%
Highly speculative Caa 0.1% CCC 0.0%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C C
In default, in arrears -- D 0.0%
66.2% 80.2%
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED DIRECTLY OR
INDIRECTLY BY MOODY'S OR S&P AMOUNTED TO 12.5%. THIS MAY INCLUDE
SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS
UNRATED SECURITIES. FMR HAS DETERMINED THAT UNRATED SECURITIES THAT ARE
LOWER-QUALITY ACCOUNT FOR 5.4% OF THE FUND'S TOTAL SECURITY INVESTMENTS.
REFER TO THE FUND'S STATEMENT OF ADDITIONAL INFORMATION FOR A MORE
COMPLETE DISCUSSION OF THESE RATINGS.
Lower-quality debt securities (sometimes called "municipal junk bonds")
often have speculative characteristics, and involve greater risk of
default or price changes due to changes in the issuer's creditworthiness.
The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of
general or regional economic difficulty.
The following table provides a summary of ratings assigned to debt holdings
(not including money market instruments) in California Tax-Free High
Yield's portfolio. These figures are dollar-weighted averages of month-end
portfolio holdings during fiscal 1995, and are presented as a percentage of
total security investments. These percentages are historical and do not
necessarily indicate the fund's current or future debt holdings.
RESTRICTIONS: California Tax-Free Insured may not invest more than 35% of
its assets in uninsured securities, and may not invest in uninsured
securities judged by FMR to be of equivalent quality to those rated below
Baa by Moody's or BBB by S&P. California Tax-Free High Yield may not invest
more than one-third of its assets in bonds judged by FMR to be of
equivalent quality to those rated Ba or lower by Moody's and BB or lower by
S&P, and may not invest in bonds of equivalent quality to bonds rated lower
than B. The fund does not currently intend to invest in bonds rated below
Caa by Moody's or CCC by S&P.
MONEY MARKET SECURITIES are high-quality, short-term obligations issued
by municipalities, local and state governments, and other entities. These
obligations may carry fixed, variable, or floating interest rates. Some
money market securities employ a trust or other similar structure to modify
the maturity, price characteristics, or quality of financial assets so that
they are eligible investments for money market funds. If the structure does
not perform as intended, adverse tax or investment consequences may
result.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
or private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities. They
may be 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. A fund may own a municipal security directly or through a
participation interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by the state
of 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 commercial paper
and obligations of the U.S. territories and possessions such as
Guam, the Virgin Islands, and Puerto Rico, and their political subdivisions
and public corporations. The economy of Puerto Rico is closely linked to
the U.S. economy, and will be affected by the strength of the U.S.
dollar, interest rates, the price stability of oil imports, and the
continued existence of favorable tax incentives. Recent legislation revised
these incentives, but the government of Puerto Rico anticipates only a
slight reduction in the average real growth rates for the economy.
VARIABLE- AND FLOATING-RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security's market value
more volatile.
RESTRICTIONS: California Tax-Free Money Market may not purchase certain
types of variable- or floating-rate securities which are inconsistent with
the fund's goal of maintaining a stable share price.
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) a security to the issuer
or a financial intermediary. In exchange for this benefit, the fund s
may pay periodic fees or accept a lower interest rate. The credit quality
of the investment may be affected by the creditworthiness of the put
provider. Demand features, standby commitments, and tender options 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.
ASSET-BACKED SECURITIES include interests in pools of purchase
contracts, financing leases, or sales agreements entered into by
municipalities. These securities usually rely on continued payments by a
municipality, and may also be subject to prepayment risk.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
RESTRICTIONS: California Tax-Free Money Market may not use investment
techniques which are inconsistent with the fund's goal of maintaining a
stable share price.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities and some other securities
may be subject to legal restrictions. Difficulty in selling securities
may result in a loss or may be costly to a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield or the market value of its assets.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
these changes, and also to changes in the market value of a single issuer
or industry.
RESTRICTIONS: The funds are considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, a fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S. government
securities. A fund may invest more than 25% of its total assets in tax-free
securities that finance similar types of projects. California Tax-Free
Insured may invest more than 25% of its assets in bonds insured by the same
insurance company.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a bond fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
CALIFORNIA TAX-FREE MONEY MARKET seeks as high a level of current income,
exempt from federal and California state personal income tax, as is
consistent with the preservation of capital. The fund will normally invest
so that at least 80% of its income distributions are free from federal
income tax.
CALIFORNIA TAX-FREE INSURED seeks as high a level of current income, exempt
from federal and California state personal income tax, available from
investing primarily in municipal securities that are covered by insurance
guaranteeing the timely payment of principal and interest. FMR will invest
the fund's assets primarily in municipal bonds that are (1) insured under
an insurance policy obtained by the issuer or underwriter; or (2) insured
under an insurance policy purchased by the fund. Insurance will be obtained
from recognized insurers. The fund may invest in uninsured municipal
obligations judged to be of quality equivalent to the four highest ratings
assigned by Moody's and S&P (Baa, BBB, or better). Under normal market
conditions, such uninsured obligations may not exceed 35% of the fund's
assets. The fund will normally invest so that at least 80% of its income
distributions are exempt from federal and California state personal income
taxes. During periods when FMR believes that California municipals that
meet the fund's standards are not available, the fund may temporarily
invest more than 20% of its assets in obligations that are only federally
tax-exempt.
CALIFORNIA TAX-FREE HIGH YIELD seeks as high a level of current income,
exempt from federal and California state personal income tax, available
from investing primarily in municipal securities judged by FMR to be of
investment-grade quality. The fund may invest up to one-third of its assets
in lower-quality bonds, but may not purchase bonds that are judged by FMR
to be equivalent quality to those rated lower than B. The fund will
normally invest so that at least 80% of its income distributions are exempt
from federal and California state personal income taxes. During periods
when FMR believes that California municipals that meet the fund's standards
are not available, the fund may temporarily invest more than 20% of its
assets in obligations that are only federally tax-exempt.
EACH FUND may borrow only for temporary or emergency purposes, but not in
an amount exceeding 33% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price or dividends; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to an affiliate who provides
assistance with these services for Fidelity California Tax-Free Money
Market Portfolio. Each fund also pays OTHER EXPENSES, which are explained
on page .
FMR may, from time to time, agree to reimburse the funds for management
fees and other expenses above a specified limit. FMR retains the ability to
be repaid by a fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee is
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above .37%, and it drops as
total assets under management increase.
UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR
receives is designed to be
responsive to changes in
FMR's total assets under
management. Building this
variable into the fee
calculation assures
shareholders that they will
pay a lower rate as FMR's
assets under management
increase.
(checkmark)
For February 1995, the group fee rate was .1552 %. Each fund's
individual fund fee rate is .25%. Each fund's total management fee rate for
fiscal 1995 was .41 %.
FMR HAS A SUB-ADVISORY AGREEMENT with FTX, which has primary responsibility
for providing investment management for Fidelity California Tax-Free Money
Market Portfolio, while FMR retains responsibility for providing other
management services. FMR pays FTX 50% of its management fee (before expense
reimbursements) for these services.
OTHER EXPENSES
While the management fee is a significant component of the funds' annual
operating costs, the funds have other expenses as well.
FSC performs many transaction and accounting functions. These services
include processing shareholder transactions, valuing each fund's
investments, and handling securities loans. In fiscal 1995, FSC received
fees equal to .20 %, .16 %, and .14 %, respectively, of
California Tax-Free Money Market's, California Tax-Free Insured's, and
California Tax-Free High Yield's average net assets.
The funds also pay other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the fund's shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
For fiscal 1995, the portfolio turnover rates for California Tax-Free
Insured and California Tax-Free High Yield were 32 % and 29 %,
respectively. Th ese rates vary from year to year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account. You can
choose California Tax-Free Money Market as your core account for your
Fidelity Ultra Service Account(registered trademark) or FidelityPlusSM
brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. California Tax-Free Money Market is managed to keep its share
price stable at $1.00. Each fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity
fund.
If you buy shares by check or Fidelity Money Line(registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For California Tax-Free Money $5,000
TO ADD TO AN ACCOUNT $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
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Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to the complete
check payable to the name of the fund.
complete name of the Indicate your fund
fund of your choice. account number on
Mail to the address your check and mail to
indicated on the the address printed on
application. your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (small solid bullet) Bring your application (small solid bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
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Wire (wire_graphic) (small solid bullet) Call 1-800-544-7777 to (small solid bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
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Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
TO SELL SHARES THROUGH YOUR FIDELITY ULTRA SERVICE OR FIDELITYPLUS ACCOUNT,
call 1-800-544-6262 to receive a handbook with instructions.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner, or
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the table
at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited number
of checks. Do not, however, try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $100,000.
(small solid bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
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Check (check_graphic) All account types (small solid bullet) Minimum check: $500.
(small solid bullet) All account owners must sign
a signature card to receive a
checkbook.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing.
Note that exchanges out of a fund are limited to four per calendar year
(except for California Tax-Free Money Market), and that they may have tax
consequences for you. For details on policies and restrictions governing
exchanges, including circumstances under which a shareholder's exchange
privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
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<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
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A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THOSE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains, if any, to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains earned by the bond funds are
normally distributed in April and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. Each fund offers four
options (three for California Tax-Free Money Market):
1. REINVESTMENT OPTION. Your dividend and capital gain distributions, if
any, will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned this
option.
2. INCOME-EARNED OPTION. Your capital gain distributions, if any, will be
automatically reinvested, but you will be sent a check for each dividend
distribution. This option is not available for California Tax-Free Money
Market.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions, if any.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions, if any, will be automatically invested in
another identically registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions, if any, will be reinvested at the NAV as
of the date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS. Money
market funds usually don't
make capital gain
distributions.
(checkmark)
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the funds' tax implications.
TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31. Fidelity will send you and the IRS a
statement showing the tax status of the distributions paid to you in the
previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Each fund may invest up to 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 a fund's income dividends are derived from interest on state
tax-free investments, they will be free from California state personal
income tax.
During fiscal 1995, 100 % of each fund's income dividends was free
from federal income tax and California state personal income taxes.
18.9 % of California Tax-Free Money Market's income dividends and
none of California Tax-Free Insured's and California Tax-Free
High Yield's income dividends were subject to the federal alternative
minimum tax.
TAXES ON TRANSACTIONS. Your bond fund redemptions - including exchanges to
other Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price you
receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital
gain distribution from its NAV, you will pay the full price for the shares
and then receive a portion of the price back in the form of a taxable
distribution.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The money market fund values the securities it owns on the basis of
amortized cost. This method minimizes the effect of changes in a security's
market value and helps the fund to maintain a stable $1.00 share price. For
the bond funds, assets are valued primarily on the basis of market
quotations, if available. Since market quotations are often unavailable,
assets are usually valued by a method that the Board of Trustees believes
accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow reasonable procedures designed to verify the identity of the caller.
Fidelity will request personalized security codes or other information, and
may also record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the
ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees a fund or its
transfer agent has incurred.
(small solid bullet) You begin to earn dividends as of the first business
day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge
you a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when a fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line
have been collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500, subject to an annual
maximum charge of $60.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts, accounts using regular investment plans,
core accounts for a Fidelity Ultra Service Account or a FidelityPlus
brokerage account, or if total assets in Fidelity funds exceed $50,000.
Eligibility for the $50,000 waiver is determined by aggregating Fidelity
mutual fund accounts maintained by FSC or FBSI which are registered under
the same social security number or which list the same social security
number for the custodian of a Uniform Gifts/Transfers to Minors Act
account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the funds without
reimbursement from the funds. Qualified recipients are securities dealers
who have sold fund shares or others, including banks and other financial
institutions, under special arrangements in connection with FDC's sales
activities. In some instances, these incentives may be offered only to
certain institutions whose representatives provide services in connection
with the sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, California Tax-Free Insured and California Tax-Free High
Yield reserve the right to temporarily or permanently terminate the
exchange privilege of any investor who makes more than four exchanges out
of the fund per calendar year. Accounts under common ownership or control,
including accounts with the same taxpayer identification number, will be
counted together for purposes of the four exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO
A FUND OF FIDELITY CALIFORNIA MUNICIPAL TRUST II
FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO
FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO
FUNDS OF FIDELITY CALIFORNIA MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
APRIL 17, 1995
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated April 17, 1995). Please retain this
document for future reference. The funds' financial statements and
financial highlights, included in the Annual Report for the fiscal year
ended February 28, 1995, are incorporated herein by reference. To obtain an
additional copy of the Prospectus or the Annual Report, please call
Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Factors Affecting California
Special Factors Affecting Puerto Rico
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Distribution and Service Plans
Interest of FMR Affiliates
Description of the Trusts
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER
FMR Texas Inc. (FTX) (money market fund)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB) and Fidelity Service Co. (FSC)
CFR-ptb-495
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
A fund's fundamental investment policies and limitations cannot be changed
without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
However, with respect to the money market fund, except for the fundamental
investment limitations set forth below, the investment policies and
limitations described in this Statement of Additional Information are not
fundamental and may be changed without shareholder approval.
INVESTMENT LIMITATIONS OF FIDELITY CALIFORNIA TAX-FREE MONEY MARKET
PORTFOLIO
(MONEY MARKET FUND)
THE FOLLOWING ARE THE MONEY MARKET FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities;
(2) make short sales of securities (unless it owns or by virtue of its
ownership of other securities has the right to obtain securities equivalent
in kind and amount to the securities sold);
(3) purchase any securities on margin;
(4) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not to
exceed 33 1/3% of the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed 33 1/3% of the fund's total assets by reason of a decline in
net assets will be reduced within 3 business days to the extent necessary
to comply with the 33 1/3% limitation;
(5) underwrite any issue of securities, except to the extent that the
purchase of municipal bonds in accordance with the fund's investment
objective, policies, and limitations, either directly from the issuer, or
from an underwriter for an issuer, may be deemed to be underwriting;
(6) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or 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;
(7) purchase or sell real estate, but this shall not prevent the fund from
investing in municipal bonds or other obligations secured by real estate or
interests therein;
(8) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments;
(9) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties (but this
limitation does not apply to purchases of debt securities or to repurchase
agreements); or
(10) invest in oil, gas or other mineral exploration or development
programs.
Investment limitation (4) is construed in conformity with the 1940 Act;
and, accordingly, "3 business days" means three days, exclusive of Sundays
and holidays.
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.
(iii) 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 (4)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as
a result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to invest more than 25% of its total
assets in industrial revenue bonds related to a single industry.
(vi) The fund does not currently intend to purchase or sell future
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(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.
For the fund's policies on quality and maturity, see the section entitled
"Quality and Maturity" on page .
For purposes of limitations (6) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
INVESTMENT LIMITATIONS OF FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO
(INSURED FUND)
THE FOLLOWING ARE THE INSURED 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 in oil, gas, or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations (4) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the insured fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
INSURANCE FEATURE. Under normal market conditions, the insured fund will
invest primarily in municipal bonds that, at the time of purchase, either
(1) are insured under fund insurance issued to the fund by an insurer or
(2) are insured under an insurance policy obtained by the issuer or
underwriter of such municipal bonds at the time of original issuance
thereof (issuer insurance). If a municipal bond is already covered by
issuer insurance when acquired by the fund, then coverage will not be
duplicated by fund insurance; if a municipal bond is not covered by issuer
insurance, it may be covered by fund insurance purchased by the fund. The
fund may also purchase municipal notes that are insured, although, in
general, municipal notes are not presently issued with issuer insurance,
and the fund does not generally expect to cover municipal notes under its
fund insurance. Accordingly, the fund does not presently expect that any
significant portion of the municipal notes it purchases will be covered by
insurance. Securities other than municipal bonds and notes purchased by the
fund will not be covered by insurance. Based upon the expected composition
of the fund, FMR estimates that the annual premiums for fund insurance will
range from .10% to .35% of the fund's average net assets. During the fiscal
year March 1 , 1994 to February 28 , 1995, no insurance was
purchased by the fund . Although the insurance feature reduces certain
financial risks, the premiums for fund insurance, which are paid from the
fund's assets, and the restrictions on investments imposed by fund
insurance guidelines, reduce the fund's current yield.
Insurance will cover the timely payment of interest and principal on
municipal obligations and will be obtained from recognized insurers. In
order to be considered as eligible insurance by the fund, such insurance
policies must guarantee the timely payment of all principal and interest on
the municipal bonds as they become due. However, such insurance may provide
that in the event of non-payment of interest or principal when due, with
respect to an insured municipal bond, the insurer is not obligated to make
such payment until a specified time period (which may be thirty days or
more) after it has been notified by the fund that such non-payment has
occurred. For these purposes, a payment of principal is due only at final
maturity of the municipal bond and not at the time any earlier sinking fund
payment is due. The insurance does not guarantee the market value of the
municipal bonds or the value of the shares of the fund and, except as
described below and in the section entitled "Valuation of Portfolio
Securities," has no effect on the price or redemption value of fund shares.
Municipal bonds are generally eligible for insurance under fund insurance
if, at the time of purchase by the fund, they are identified separately or
by category in qualitative guidelines furnished by the fund insurer and are
in compliance with the aggregate limitations on amounts set forth in such
guidelines. Premium variations are based in part on the rating of the
municipal bond being insured at the time the fund purchases the bond. The
insurer may prospectively withdraw particular municipal bonds from the
classifications of bonds eligible for insurance or change the aggregate
amount limitation of each issue or category of eligible municipal bonds,
but must continue to insure the full amount of such bonds previously
acquired which the insurer has indicated are eligible so long as they
remain in the fund. The qualitative guidelines and aggregate amount
limitations established by the insurer from time to time will not
necessarily be the same as those the fund or FMR would use to govern
selection of municipal bonds for the fund's investments. Therefore, from
time to time such guidelines and limitations may affect investment
decisions.
Because coverage under the fund insurance terminates upon sale of a
municipal bond from the fund, the insurance does not have any effect on the
resale value of such a bond. Therefore, FMR may decide to retain any
insured municipal bonds which are in default or, in FMR's view, in
significant risk of default, and place a value on the insurance. This value
will be equal to the difference between the market value of the defaulted
municipal bond and the market value of similar municipal bonds that are not
in default. As a result, FMR may be limited in its ability to manage the
fund to the extent that it holds defaulted municipal bonds, which will
limit its ability in certain circumstances to purchase other municipal
bonds. While a defaulted municipal bond is held by the fund, the fund
continues to pay the insurance premium thereon but also collects interest
payments from the insurer and retains the right to collect the full amount
of principal from the insurer when the municipal bond comes due. The fund
expects that the market value of a defaulted municipal bond covered by
issuer insurance will generally be greater than the market value of an
otherwise comparable defaulted municipal bond covered by fund insurance.
PRINCIPAL BOND INSURERS. AMBAC Indemnity Corporation (AMBAC Indemnity)
is a Wisconsin-domiciled stock insurance corporation regulated by the
Office of the Commissioner of Insurance of the State of Wisconsin and
licensed to do business in 50 states, the District of Columbia, and the
Commonwealth of Puerto Rico, with admitted assets of approximately $2.1
billion (unaudited) and statutory capital of approximately $1.2 billion
(unaudited) as of December 31, 1994. Statutory capital consists of AMBAC
Indemnity's policyholders' surplus and statutory contingency reserve. AMBAC
Indemnity is a wholly-owned subsidiary of AMBAC Inc., a 100% publicly-held
company. Moody's and S&P have both assigned a triple-A claims-paying
ability rating to AMBAC Indemnity.
Capital Guaranty Insurance Company (Capital Guaranty) is a monoline
financial guaranty insurance company whose policies guarantee the timely
payment of principal and interest when due for payment (as defined in
Capital Guaranty coverage) on new issues and secondary market issue
municipal bond transactions. Capital Guaranty's claims-paying ability is
rated AAA by S&P and Aaa by Moody's. Therefore, if Capital Guaranty insures
an issue with a stand alone rating of less than "AAA" and "Aaa",
respectively, such issue would be "upgraded" to "AAA" and "Aaa" by virtue
of Capital Guaranty's insurance. On December 31, 1994, Capital Guaranty's
statutory capital (audited, consisting of contingency reserve and statutory
policyholders' surplus) was over $196,528,000. As of that date, Capital
Guaranty's insured principal and interest outstanding was over
$15,800,000,000.
FGIC Corporation, through its wholly owned subsidiary Financial Guaranty
Insurance Company, is a leading insurer of municipal bonds, including new
issues and bonds held in unit investment trusts and mutual funds. Municipal
bonds insured by Financial Guaranty are rated Aaa/AAA/AAA by Moody's, S&P,
and Fitch, respectively. In accordance with statutory accounting
principles, Financial Guaranty's capital base as of December 31, 1994
totalled $1 billion, comprised of capital and surplus of $777 million and a
contingency reserve of $252 million.
Municipal Bond Investors Assurance Corporation (MBIA) is the monoline
insurance company created from an unincorporated association (the Municipal
Bond Insurance Association) through which its members wrote municipal bond
insurance on a several and not joint basis through 1986. Bond Investors
Guaranty Insurance Company (BIG) issued municipal bond insurance policies
guarantying the timely payment of principal and interest on new issue,
secondary market, and unit investment trust bonds. On January 5, 1990, MBIA
acquired all of the outstanding stock of Bond Investors Group, Inc., the
parent of BIG. Through a reinsurance agreement, BIG ceded all of its net
insured risks, as well as its related unearned premium and contingency
reserves, to MBIA. Moody's rates all bond issues insured by MBIA and BIG
"Aaa" and short-term loans "MIG-1," both designated to be of the highest
quality; S&P rates all new issues insured by MBIA and BIG "AAA" Prime
Grade. As of December 31, 1993, MBIA (consolidated) had admitted assets of
$3.1 billion (unaudited) and total liabilities of $2.1 billion (audited),
and total capital and surplus of $978 million (audited) prepared in
accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. As of September 30, 1994, MBIA had
admitted assets of $3.3 billion (unaudited), total liabilities of $2.2
billion (unaudited), and total capital and surplus of $1.1 billion
(unaudited) determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities.
INVESTMENT LIMITATIONS OF FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO
(HIGH YIELD FUND)
THE FOLLOWING ARE THE HIGH YIELD 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 in oil, gas, or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations (4) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the high yield fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
Each fund's investments must be consistent with its investment objective
and policies. Accordingly, not all of the security types and investment
techniques discussed below are eligible investments for each of the funds.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
QUALITY AND MATURITY (MONEY MARKET FUND ONLY). Pursuant to procedures
adopted by the Board of Trustees, the fund may purchase only high-quality
securities that FMR believes present minimal credit risks. To be considered
high-quality, a security must be rated in accordance with applicable rules
in one of the two highest categories for short-term securities by at least
two nationally recognized rating services (or by one, if only one rating
service has rated the security); or, if unrated, judged to be of equivalent
quality by FMR.
The fund currently intends to limit its investments to securities with
remaining maturities of 397 days or less, and to maintain a dollar-weighted
average maturity of 90 days or less. When determining the maturity of a
security, the fund may look to an interest rate reset or demand feature.
LOWER-QUALITY MUNICIPAL SECURITIES. The high yield fund may invest a
portion of its assets in lower-quality municipal securities as described in
the Prospectus.
While the market for California municipals is considered to be substantial,
adverse publicity and changing investor perceptions may affect the ability
of outside pricing services used by a fund to value its portfolio
securities, and the fund's ability to dispose of lower-quality bonds. The
outside pricing services are monitored by FMR and reported to the Board to
determine whether the services are furnishing prices that accurately
reflect fair value. The impact of changing investor perceptions may be
especially pronounced in markets where municipal securities are thinly
traded.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to
be in the best interest of the fund's shareholders.
INDEXED SECURITIES. Each 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.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. A fund may receive fees for entering into
delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the fund could miss
a favorable price or yield opportunity, or could suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
REFUNDING CONTRACTS. A 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 funds generally
will not be obligated to pay the full purchase price if they fail 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). A 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, each fund will place liquid assets in a segregated
custodial account equal in amount to its obligations under refunding
contracts.
INVERSE FLOATERS. A fund may invest in inverse floaters, which are
instruments whose interest rates bear an inverse relationship to the
interest rate on another security or the value of an index. Changes in the
interest rate on the other security or index inversely affect the residual
interest rate paid on the inverse floater, with the result that the inverse
floater's price will be considerably more volatile than that of a
fixed-rate bond. For example, a municipal issuer may decide to issue two
variable-rate instruments instead of a single long-term, fixed-rate bond.
The interest rate on one instrument reflects short-term interest rates,
while the interest rate on the other instrument (the inverse floater)
reflects the approximate rate the issuer would have paid on a fixed-rate
bond, multiplied by two, minus the interest rate paid on the short-term
instrument. Depending on market availability, the two portions may be
recombined to form a fixed-rate municipal bond. The market for inverse
floaters is relatively new.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. Subject to applicable regulatory requirements, the money market fund
may buy tender option bonds if the agreement gives the fund the right to
tender the bond to its sponsor no less frequently than once every 397 days.
In selecting tender option bonds for the funds, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. Each fund may
acquire standby commitments to enhance the liquidity of portfolio
securities, but, in the case of the money market fund only when the issuers
of the commitments present minimal risk of default.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments. In
the latter case, the fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity. Standby commitments will
not affect the dollar-weighted average maturity of the money market fund,
or the valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the funds; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. Each fund may invest a portion of its assets
in municipal leases and participation interests therein. These obligations,
which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, the funds will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives
a fund a specified, undivided interest in the obligation in proportion to
its purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
FEDERALLY TAXABLE OBLIGATIONS. The funds do not intend to invest in
securities whose interest is federally taxable; however, from time to time,
each fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, each fund may invest in obligations whose interest is
federally taxable pending the investment or reinvestment in municipal
securities of proceeds from the sale of its shares or sales of portfolio
securities.
Should a fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The bond funds' standards for high-quality, taxable obligations
are essentially the same as those described by Moody's Investors Service,
Inc. (Moody's) in rating corporate obligations within its two highest
ratings of Prime-1 and Prime-2, and those described by Standard & Poor's
Corporation (S&P) in rating corporate obligations within its two highest
ratings of A-1 and A-2. The money market fund will purchase taxable
obligations only if they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the California legislature
that would affect the state tax treatment of the funds' distributions. If
such proposals were enacted, the availability of municipal obligations and
the value of the funds' holdings would be affected and the Trustees would
reevaluate the funds' investment objectives and policies.
Each fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities
of portfolio securities, sales of fund shares, or in order to meet
redemption requests, a fund may hold cash that is not earning income. In
addition, there may be occasions when, in order to raise cash to meet
redemptions, a fund may be required to sell securities at a loss.
MARKET DISRUPTION RISK. 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. Municipal bankruptcies are
relatively rare and certain provisions of the U.S. Bankruptcy Code that
govern municipal bankruptcies are unclear and remain untested. Further,
different results could be obtained in different states or with respect to
different types of municipal securities issuers within a state due to the
application of state law to municipal issues. The legislative or judicial
resolution of these issues could affect the market for municipal securities
generally, certain segments of the market, or the relative credit quality
of particular securities, which could have a significant impact on the
prices of some or all of the municipal securities held by a fund and which
could make it more difficult for the money market fund to maintain a stable
net asset value per share.
STRUCTURED SECURITIES employ a trust or other similar structure to modify
the maturity, price characteristics, or quality of financial assets. For
example, structural features can be used to modify the maturity of a
security or interest rate adjustment features can be used to enhance price
stability. If the structure does not perform as intended, adverse tax or
investment consequences may result. Neither the Internal Revenue Service
(IRS) nor any other regulatory authority has ruled definitively on certain
legal issues presented by structured securities. Future tax or other
regulatory determinations could adversely affect the value, liquidity, or
tax treatment of the income received from these securities or the nature
and timing of distributions made by a fund. The payment of principal and
interest on structured securities may be largely dependent on the cash
flows generated by the underlying financial assets.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments of
the interest rate paid. Variable rate securities provide for a specified
periodic adjustment in the interest rate, while floating rate securities
have interest rates that change whenever there is a change in a designated
benchmark rate. Some variable or floating rate securities have put
features.
PUT FEATURES entitle the holder to sell a security back to the issuer or a
third party at any time or at specified intervals. They are subject to the
risk that the put provider is unable to honor the put feature (purchase the
security). Put providers often support their ability to buy securities on
demand by obtaining letters of credit or other guarantees from domestic or
foreign banks. FMR may rely on its evaluation of a bank's credit in
determining whether to purchase a security supported by a letter of credit.
Demand features, standby commitments, and tender options are types of put
features.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
For the money market fund, FMR may determine some restricted securities and
municipal lease obligations to be illiquid.
For the bond funds, investments currently considered 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 a fund writes, all or a portion of the
value of the underlying instrument may be illiquid depending on the assets
held to cover the option and the nature and terms of any agreement the fund
may have to close out the option before expiration.
In the absence of market quotations, illiquid investments for the money
market fund are valued for purposes of monitoring amortized cost valuation,
and for the bond funds 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, a fund were in a position where
more than 10% of its net assets was invested in illiquid securities, it
would seek to take appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security. However, in general, the money market fund anticipates
holding restricted securities to maturity or selling them in an exempt
transaction.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security
will be less than the resale price, as well as delays and costs to a fund
in connection with bankruptcy proceedings), it is each fund's current
policy to engage in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement. A
fund will enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of the fund's assets and may be
viewed as a form of leverage.
INTERFUND BORROWING PROGRAM. Pursuant to an exemptive order issued by
the SEC, e ach 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.
1. LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each bond 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 funds intend to comply with Rule 4.5
under the Commodity Exchange Act, which limits the extent to which the
funds can commit assets to initial margin deposits and option premiums.
In addition, each 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 funds' investments in futures contracts and
options, and the funds' policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
a 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 a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a 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 a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, the fund may be
entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a 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. A 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 a fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the
option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. A fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. A 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, a 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 a fund's current or
anticipated investments exactly. The funds may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which they typically
invest, which involves a risk that the options or futures position will not
track the performance of a fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a 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. A 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 a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for a 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 a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
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 (OTC) 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 funds greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will comply
with guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of a
fund's assets could impede portfolio management or the fund's ability to
meet redemption requests or other current obligations.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open transmission
access to any electricity supplier, although it is not presently known to
what extent competition will evolve. Other risks include: (a) the
availability and cost of fuel, (b) the availability and cost of capital,
(c) the effects of conservation on energy demand, (d) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (e) timely and sufficient rate
increases, and (f) opposition to nuclear power.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They 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.
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.
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.
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 funds. Obligations of the state or local
governments may also be affected by budgetary pressures affecting the State
and economic conditions in the State. Interest income to a fund could also
be adversely affected. The following 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 of California, its agencies, or instrumentalities,
as available on the date of this Statement of Additional Information. FMR
has not independently verified any of the information contained in such
official statements and other publicly available documents, but is not
aware of any fact which would render such information inaccurate.
CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS
LIMITATION ON TAXES. Certain obligations held by the funds 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 California 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, XIIIA limits to 1% of full
cash value the rate of ad valorem property taxes on real property and
generally restricts the 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 levy 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 consists 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 excludes
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 4-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 fiscal year 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 199 5 -9 6 Governor's
Budget proposal estimates State appropriations will be more than $ 6
billion under the limit for fiscal year 199 4 -9 5 and
over $ 7.2 billion under the limit for fiscal year
199 5 -9 6 .
OBLIGATIONS OF THE STATE OF CALIFORNIA
As of February , 199 5 , 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, 199 4 , 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 2 2 % is presently
self-liquidating (for which program revenues are anticipated to be
sufficient to reimburse the General Fund for debt service payments). In
fiscal year 199 3 -9 4 , 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
California's economy is the largest among the 50 states and one of the
largest in the world. The State's population grew by 26 % in the
1980s and, at over 31 million, it now represents 12.3% of the total United
States population. Total personal income in the State, at an estimated
$6 83 billion in 199 3 , accounts for almost 13% of all
personal income in the nation. Total employment in 1994 was over 14
million, the majority of which was in the service, trade, and
manufacturing sectors.
From mid-1990 to late 1993, the State suffered a recession with the
worst economic, fiscal and budget conditions since the 1930s. Construction,
manufacturing (especially aerospace), and financial services, among others,
were all severely affected, particularly in Southern California. Job losses
were the worst of any post-war recession. Employment levels stabilized by
late 1993 and steady growth occurred in 1994 and is expected in 1995, but
pre-recession job levels are not expected to be reached for several more
years. Unemployment, while higher than the national average, has come down
about 3% in 1994. Economic indicators show a steady recovery underway in
California since the start of 1994.
RECENT STATE FINANCIAL RESULTS
The principal sources of State General Fund revenues in
199 3 -9 4 were the California personal income tax (44% of total
revenues), the sales tax (3 5 %), 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
t hree years, as the recession has cut revenues), the State has
budgeted to maintain the Economic Uncertainties Fund 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 3 5 %).
Since the start of the 1990-91 Fiscal Year, 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 the 1990-91 and 1991-92 fiscal years,
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 the 1995-96 fiscal year. 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 as they came due all of these ongoing
obligations, as well as valid obligations incurred in the prior fiscal
year.
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 government, 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 the 1994-95 fiscal year. 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 include 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 the 1995-96 fiscal year. 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 the
1995-96 fiscal year. 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 cuts in
General Fund expenditures in either the 1994-95 or 1995-96 fiscal years 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 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 the 1995-96 fiscal year 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 Special
Fund for Economic Uncertainties, 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, the 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 "A 1 " by Moody's,
"A" by Fitch, 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 fund (the Pool) filed for
protection under Chapter 9 of the Federal Bankruptcy Code, after reports
that the Pool had suffered significant market losses in its investments
causing a liquidity crisis for the Pool and the County. More than 180 other
public entities, most but not all located in the County, were also
depositors in the Pool. As of mid-January, 1995, the County estimated the
Pool's loss at about $1.7 billion, or 22% of its initial deposits of around
$7.5 billion. Many of the entities which kept moneys in the Pool, 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, and others may in the future,
default in payment of their obligations. Moody's and Standard & Poor's have
suspended, reduced to below investment grade levels, or placed on "Credit
Watch" various securities of the County and the entities participating in
the Pool.
The State of California has no obligation with respect to any obligations
or securities of the County or any of the other participating entities,
although under existing legal precedents, the State may be obligated to
ensure that school districts have sufficient funds to operate.
OBLIGATIONS OF OTHER ISSUERS
STATE ASSISTANCE. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13. Subsequently,
the California 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
fiscal year 199 3 -9 4 (about 7 0 % of General Fund
expenditures) and has been budgeted at $ 30.5 billion for fiscal
year 199 4 - 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 California 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 California entities.
OTHER CONSIDERATIONS. The repayment of Industrial Development Securities
secured by real property may be affected by California 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 California 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 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 California tax allocation bonds
after the enactment of Articles XIIIA and XIIIB, and only resumed such
ratings on a selective basis.
Proposition 87, approved by California 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 California is within an active geologic region subject
to major seismic activity. Any California municipal obligation in the funds
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, has 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
California obligations in the funds 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 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 Ric o ), and is based on
information drawn from official statements and prospectuses relating to the
securities offerings of Puerto Rico and its agencies and instrumentalities,
as available on the date of this Statement of Additional Information. FMR
has not independently verified any of the information contained in such
official statements, prospectuses, and other publicly available documents,
but is not aware of any fact which would render such information materially
inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1993 trade with the United States accounted for
approximately 86% of Puerto Rico's exports and approximately 69% of its
imports. In this regard, in fiscal 1993 Puerto Rico experienced a $2.5
billion positive adjusted merchandise trade balance. Since fiscal 1987,
personal income, both aggregate and per capita, has increased consistently
each year. In fiscal 1993 aggregate personal income was $24.1 billion and
personal per capita income was $6,760. Gross domestic product in fiscal
1991, 1992, and 1993 was $22.8 billion, $23.5 billion, and $25 billion,
respectively. For fiscal 1994, an increase in gross domestic product of
2.9% over fiscal 1993 is forecasted. However, actual growth in the Puerto
Rico economy will depend on several factors, including the condition of the
U.S. economy, the exchange rate for the U.S. dollar and the price stability
of oil imports and interest rates. Due to these factors, there is no
assurance that the economy of Puerto Rico will continue to grow.
Puerto Rico's economy continued to expand throughout the five-year period
from fiscal 1989 through fiscal 1993. While trends in the Puerto Rico
economy generally follow those of the United States, Puerto Rico did not
experience a recession primarily because of its strong manufacturing base,
which has a large component of non-cyclical industries. Other factors
behind the continued expansion included Commonwealth-sponsored economic
development programs, stable prices of oil imports, low exchange rates for
the U.S. dollar, and the relatively low cost of borrowing funds during the
period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it
still remains significantly above the U.S. average and has been increasing
in recent years. Despite long-term improvements the unemployment rate rose
from 16.5% to 17.5% from fiscal 1992 to fiscal 1993. However, by the end of
January 1994, the unemployment rate had dropped to 16.3%.
The economy of Puerto Rico has undergone a transformation in the
lat t er 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 Cod e ), and for taxable years commencing after 1993, two
alternative limitations will apply to the Section 936 credit against active
business income and sale of assets as previously described. The first
option will limit the credit against such income to 40% of the credit
allowed under current law, with a five-year phase-in period starting at 60%
of the current credit. The second option will limit the allowable credit to
the sum of (i) 60% of qualified compensation paid to employees (as defined
in the Code); (ii) a specified percentage of depreciation deductions; and
(iii) a portion of the Puerto Rico income taxes paid by the Section 936
corporation, up to a 9% effective tax rate.
At present, it is difficult to forecast what the short- and long-term
effects of the new limitations to the Section 936 credit will be on the
economy of Puerto Rico. However, preliminary econometric studies by the
government of Puerto Rico and private sector economists (assuming no
enhancements to the existing Industrial Incentives Program) project only a
slight reduction in average real growth rates for the economy of Puerto
Rico. These studies also show that particular industry groups will be
affected differently. For example, manufacturers of pharmaceuticals and
beverages may suffer a larger reduction in tax benefits due to their
relatively higher profit margins. In addition, the above limitations are
not expected to reduce the tax credit currently enjoyed by labor-intensive,
lower profit margin industries, which represent approximately 40% of the
total employment by Section 936 corporations in Puerto Rico.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the
management contract. In the case of the money market fund, FMR has granted
investment management authority to the sub-adviser (see section entitled
"Management Contracts"), and the sub-adviser is authorized to place orders
for the purchase and sale of portfolio securities, and will do so in
accordance with the policies described below. FMR is also responsible for
the placement of transaction orders for other investment companies and
accounts for which it or its affiliates act as investment adviser.
Securities purchased and sold by the money market fund generally will be
traded on a net basis (i.e., without commission). In selecting
broker-dealers, subject to applicable limitations of the federal securities
laws, FMR 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 funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). FMR maintains a listing of broker-dealers who
provide such services on a regular basis. However, as many transactions on
behalf of the money market fund are placed with broker-dealers (including
broker-dealers on the list) without regard to the furnishing of such
services, it is not possible to estimate the proportion of such
transactions directed to such broker-dealers solely because such services
were provided. The selection of such broker-dealers generally is made by
FMR (to the extent possible consistent with execution considerations) based
upon the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid 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
each fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the funds and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds, or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
Each fund's Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the funds and review the commissions paid by each fund over
representative periods of time to determine if they are reasonable in
relation to the benefits to the fund.
For the fiscal years ended February 28, 1995 and 1994, the insured
fund's portfolio turnover rates were 32 % and 60 % ,
respectively, and the high yield fund's portfolio turnover rates
were 29 % and 44 %, respectively.
For fiscal 1995 and 1994 and the fiscal period May 1, 1992 to February 28,
1993, the funds paid no brokerage commissions.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of the funds to participate in volume transactions
will produce better executions and prices for the funds. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
INSURED AND HIGH YIELD FUNDS. Valuations of portfolio securities furnished
by the pricing service employed by the insured and high yield funds 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 funds and FSC under the general
supervision of the Board of Trustees. There are a number of pricing
services available, and the Trustees, or officers acting on behalf of the
Trustees, on the basis of on-going evaluation of these services, may use
other pricing services or discontinue the use of any pricing service in
whole or in part.
MONEY MARKET FUND. The fund values its investments on the basis of
amortized cost. This technique involves valuing an instrument at its cost
as adjusted for amortization of premium or accretion of discount rather
than its value based on current market quotations or appropriate
substitutes which reflect current market conditions. The amortized cost
value of an instrument may be higher or lower than the price the money
market fund would receive if it sold the instrument.
Valuing the fund's instruments on the basis of amortized cost and use of
the term "money market fund" are permitted by Rule 2a-7 under the 1940 Act.
The money market fund must adhere to certain conditions under Rule 2a-7.
The Board of Trustees of the money market fund oversees FMR's adherence to
SEC rules concerning money market funds, and has established procedures
designed to stabilize the fund's NAV at $1.00. At such intervals as they
deem appropriate, the Trustees consider the extent to which NAV calculated
by using market valuations would deviate from $1.00 per share. If the
Trustees believe that a deviation from the fund's amortized cost per share
may result in material dilution or other unfair results to shareholders,
the Trustees have agreed to take such corrective action, if any, as they
deem appropriate to eliminate or reduce, to the extent reasonably
practicable, the dilution or unfair results. Such corrective action could
include selling portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding
dividends; redeeming shares in kind; establishing NAV by using available
market quotations; and such other measures as the Trustees may deem
appropriate.
During periods of declining interest rates, the money market fund's yield
based on amortized cost may be higher than the yield based on market
valuations. Under these circumstances, a shareholder in the money market
fund would be able to obtain a somewhat higher yield than would result if
the money market fund utilized market valuations to determine its NAV. The
converse would apply in a period of rising interest rates.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. A bond fund's share price, and each
fund's yield and total return fluctuate in response to market conditions
and other factors, and the value of a bond fund's shares when redeemed may
be more or less than their original cost.
YIELD CALCULATIONS. To compute the money market fund's yield for a period,
the net change in value of a hypothetical account containing one share
reflects the value of additional shares purchased with dividends from the
one original share and dividends declared on both the original share and
any additional shares. The net change is then divided by the value of the
account at the beginning of the period to obtain a base period return. This
base period return is annualized to obtain a current annualized yield. The
money market fund also may calculate a compound effective yield by
compounding the base period return over a one-year period. In addition to
the current yield, the money market fund may quote yields in advertising
based on any historical seven-day period. Yields for the money market fund
are calculated on the same basis as other money market funds, as required
by regulation.
For each bond fund, yields are computed by dividing the fund's interest
income for a given 30-day or one-month period, net of expenses, by the
average number of shares entitled to receive dividends during the period,
dividing this figure by the fund's net asset value per share (NAV) at the
end of the period, and annualizing the result (assuming compounding of
income) in order to arrive at an annual percentage rate. Income is
calculated for purposes of the bond fund's yield quotations in accordance
with standardized methods applicable to all stock and bond funds. In
general, interest income is reduced with respect to bonds trading at a
premium over their par value by subtracting a portion of the premium from
income on a daily basis, and is increased with respect to bonds trading at
a discount by adding a portion of the discount to daily income. Capital
gains and losses generally are excluded from the calculation.
Income calculated for the purposes of determining a bond fund's
yield differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, the bond fund's yield
may not equal its distribution rate, the income paid to your account, or
the income reported in the fund's financial statements.
Yield information may be useful in reviewing a fund's performance and in
providing a basis for comparison with other investment alternatives.
However, each 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 a
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
A fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment after taxes to equal the fund's tax-free
yield. Tax-equivalent yields are calculated by dividing a fund's yield by
the result of one minus a stated federal or combined federal and state tax
rate. If only a portion of a fund's yield is tax-exempt, only that portion
is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and state income tax laws for 1995. The
second table shows the approximate yield a taxable security must provide at
various income brackets to produce after-tax yields equivalent to those of
hypothetical tax-exempt obligations yielding from 2.0% to 8.0%. Of course,
no assurance can be given that a fund will achieve any specific tax-exempt
yield. While the funds invest principally in obligations whose interest is
exempt from federal and state income tax, other income received by the
funds may be taxable. The tables do not take into account local taxes, if
any, payable on fund distributions.
Use the first table to find your approximate effective tax bracket taking
into account federal and state taxes for 1995.
1995 TAX RATES
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.% 6.0% 32.32%
24,520 - 30,987 49,039 - 61,974 28 8.0 33.76
30,988 - 5 6,550 61,975 - 94,250 28 9.3 34.70
5 6,551 - 107,464 94,251 - 143,600 31 9.3 37.42
107,465 - 117,950 -- - -- 31 10.0 37.90
-- - -- 143,601 - 214,928 36 9.3 41.95
117,951 - 214,929 214,929 - 256,500 36 10.0 42.40
214,930 - 256,500 -- - -- 36 11.0 43.04
-- - -- 256,501 - 429,858 39.6 10.0 45.64
256,501 + 429,859 + 39.6 11.0 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>
32.32% 33.76% 34.70% 37.42% 37.90% 41.95% 42.40% 43.04% 45.64% 46.24%
</TABLE>
To match
these
tax-free
yields: Your taxable investment would have to earn the following yield:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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% o f the California
Consumer Price Index through June of the tax year. As of the date of this
Statement of Additional Information, the California Franchise Tax Board had
not published the 1995 inflation adjusted tax brackets.
Each fund may invest a portion of its assets in obligations that are
subject to state or federal income taxes. When a fund invests in these
obligations, its tax-equivalent yield will be lower. In the table above,
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 a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's NAV over a
stated period. Average annual total returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in a
fund over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of
growth or decline in value had been constant over the period. For example,
a cumulative total return of 100% over ten years would produce an average
annual return of 7.18%, which is the steady annual rate of return that
would equal 100% growth on a compounded basis in ten years. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that a fund's performance is not constant over
time, but changes from year to year, and that average annual returns
represent averaged figures as opposed to the actual year-to-year
performance of the fund.
In addition to average annual total returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis. 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 a 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 a fund and
reflects all elements of its return. Unless otherwise indicated, a fund's
adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following tables show the money market fund's
7-day yields, each bond fund's 30-day yields, each fund's tax-equivalent
yields, and total returns for periods ended February 28, 1995.
The tax-equivalent yield is based on a combined effective federal and state
income tax rate of 43.04 % and reflects that, as of February 28,
1995, none of the funds' income was subject to state taxes. Note
that each fund may invest in securities whose income is subject to the
federal alternative minimum tax.
Average Annual Cumulative
Total Returns Total Returns
Tax Equivalent One Five Ten One Five Ten
Yield Yield Years Years Year Years Years Years
Money Market Fund (dagger) 3.44% 6.04% 2.60% 3.16% 3.96% 2.60% 16.81%
47.52%
Insured Fund (dagger) 5.49% 9.64% -1.30% 7.20% 6.50% -1.30% 41.54%
70.27%
High Yield Fund 5.81% 10.20% -.91% 7.08% 8.39% -.91% 40.78% 123.76%
(dagger) If FMR had not reimbursed certain fund expenses during the
periods, the funds' total returns would have been lower.
* Ten year figures actually represent life of fund figures from September
18, 1986 (commencement of operations) through February 28, 1995.
The following table s show the income and capital elements of each
fund's cumulative total return. The table s compare each
fund's return to the record of the Standard & Poor's Composite Index of 500
Stocks (S&P 500(registered trademark)), the Dow Jones Industrial Average
(DJIA), and the cost of living (measured by the Consumer Price Index, or
CPI) over the same period. The CPI information is as of the month end
closest to the initial investment date for each fund. The S&P 500 and DJIA
comparisons are provided to show how each fund's total return compared to
the record of a broad average of common stocks and a narrower set of stocks
of major industrial companies, respectively, over the same period. Of
course, since each fund invests in short-term fixed-income securities,
common stocks represent a different type of investment from the fund.
Common stocks generally offer greater growth potential than the funds, but
generally experience greater price volatility, which means greater
potential for loss. In addition, common stocks generally provide lower
income than a fixed-income investment such as the funds. Figures for the
S&P 500 and DJIA are based on the prices of unmanaged groups of stocks and,
unlike the funds' returns, do not include the effect of paying brokerage
commissions or other costs of investing.
MONEY MARKET FUND. During the ten year period ended February 28,
1995, a hypothetical $10,000 investment in the money market fund would have
grown to $ 14,752 , assuming all distributions were reinvested. This
was a period of fluctuating interest rates and bond prices and the figures
below should not be considered representative of the dividend income or
capital gain or loss that could be realized from an investment in the fund
today.
FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Period Initial Value of Reinvested Cost
Ended $10,000 Reinvested Capital Total of
February 28 Investment Dividend Gains Value S&P 500 DJIA Living
</TABLE>
1995 $9,990 $4,762 $0 $14,752 $37,470 $43,798 14,236
1994 $9,990 $4,388 $0 $14,378 $34,904 $40,712 13,840
1993 $9,990 $4,110 $0 $14,100 $32,216 $34,824 13,500
1992 $9,990 $3,777 $0 $13,767 $29,110 $32,772 13,075
1991 $9,990 $3,277 $0 $13,267 $25,093 $27,999 12,717
1990 $9,990 $2,639 $0 $12,629 $21,887 $24,563 12,075
1989 $9,990 $1,954 $0 $11,944 $18,407 $20,336 11,472
1988 $9,990 $1,386 $0 $11,376 $16,452 $17,997 10,943
1987 $9,990 $925 $0 $10,915 $16,902 $18,719 10,528
1986 $9,990 $508 $0 $10,498 $13,050 $13,893 10,311
Explanatory Notes: With an initial investment of $10,000 made on March 1,
1985, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ 14,762 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments(dividends) for the period would have amounted to
$ 3,901 . The fund did not distribute any capital gains during the
period. Tax consequences of different investments have not been factored
into the above figures.
INSURED FUND. During the period from September 18, 1986
(commencement of operations) to February 28, 1995, a hypothetical $10,000
investment in the insured fund would have grown to $ 17,027 , assuming
all distributions were reinvested. This was a period of fluctuating
interest rates and bond prices and the figures below should not be
considered representative of the dividend income or capital gain or loss
that could be realized from an investment in the fund today.
FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Period Initial Reinvested Reinvested Cost
Ended $10,000 Dividend Capital Gain Total of
February 28 Investment Distributions Distributions Value S&P 500 DJIA Living**
</TABLE>
1995 $ 9,840 $ 6,632 $554 $ 17,027 $ 27,600
$ 29,858 13,693
1994 $10,740 $6,203 $ 307 $17,251 $25,707 $27,748 13,312
1993 $11,030 $5,464 $0 $16,494 $23,730 $23,740 12,985
1992 $10,090 $4,159 $0 $14,249 $21,442 $22,342 12,577
1991 $9,710 $3,198 $0 $12,908 $18,483 $19,087 12,232
1990 $9,640 $2,389 $0 $12,029 $16,121 $16,745 11,615
1989 $9,440 $1,609 $0 $11,049 $13,558 $13,863 11,034
1988 $9,640 $ 935 $0 $10,575 $12,118 $12,269 10,526
1987(dagger) $10,320 $ 274 $0 $10,594 $12,450 $12,761 10,127
(dagger) From September 18, 1986 (Commencement of Operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on September
18, 1986, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ 17,245 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments for the period would have amounted to $ 5,059 for
dividends and $ 370 for capital gains distributions. Tax consequences
of different investments have not been factored into the above figures.
HIGH YIELD FUND. During the ten year period ended February 28, 1995,
a hypothetical $10,000 investment in the high yield fund would have grown
to $ 22,376 , assuming all distributions were reinvested. This was a
period of fluctuating interest rates and bond prices and the figures below
should not be considered representative of the dividend income or capital
gain or loss that could be realized from an investment in the fund today.
FIDELITY CALIFORNIA HIGH YIELD TAX-FREE PORTFOLIO INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Year Initial Reinvested Reinvested Cost
Ended $10,000 Dividend Capital Gain Total of
February 28 Investment Distributions Distributions Value S&P 500 DJIA Living
</TABLE>
1995 $10,891 $10,639 $846 $22,376 $37,470 $43,798 14,236
1994 11,851 10,113 618 22,582 34,904 40,712 13,840
1993 12,174 9,107 141 21,422 32,216 34,824 13,500
1992 11,342 7,280 131 18,753 29,110 32,772 13,075
1991 11,048 5,945 128 17,120 25,093 27,999 12,717
1990 10,970 4,798 127 15,894 21,887 24,563 12,075
1989 10,686 3,661 124 14,470 18,407 20,336 11,472
1988 10,833 2,723 125 13,681 16,452 17,997 10,943
1987 11,832 1,954 59 13,845 16,902 18,719 10,528
1986 11,303 1,004 0 12,307 13,050 13,893 10,311
Explanatory Notes: With an initial investment of $10,000 made on March
1, 1985 , the net amount invested in fund shares was $10,000. The cost
of the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ 21,701 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments for the period would have amounted to $ 7,454 for
dividends and $ 519 for capital gains distributions. Tax consequences
of different investments have not been factored into the above figures.
A fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to the
mutual fund rankings, a fund's performance may be compared to stock, bond,
and money market mutual fund performance indices prepared by Lipper or
other organizations. When comparing these indices, it is important to
remember the risk and return characteristics of each type of investment.
For example, while stock mutual funds may offer higher potential returns,
they also carry the highest degree of share price volatility. Likewise,
money market funds may offer greater stability of principal, but generally
do not offer the higher potential returns from stock mutual funds.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, a fund
may offer greater liquidity or higher potential returns than CDs, a fund
does not guarantee your principal or your return, and fund shares are not
FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AVERAGES(trademark)/All
Tax-Free, which is reported in the MONEY FUND REPORT(registered trademark),
covers over 389 tax-free money market funds. The Bond Fund Report
AverageS(trademark)/All Tax-Free, which is reported in the BOND FUND
REPORT(registered trademark), covers over 400 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. Bond funds,
however, invest in longer-term instruments and their share price changes
daily in response to a variety of factors.
A fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike
tax-free mutual funds, individual municipal bonds offer a stated rate of
interest and, if held to maturity, repayment of principal. Although some
individual municipal bonds might offer a higher return, they do not offer
the reduced risk of a mutual fund that invests in many different
securities. The initial investment requirements and sales charges of many
tax-free mutual funds are lower than the purchase cost of individual
municipal bonds, which are generally issued in $5,000 denominations and are
subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college or other
goals; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
Fidelity may also reprint, and use as advertising and sales literature,
articles from Fidelity Focus, a quarterly magazine provided free of charge
to Fidelity fund shareholders.
A fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. A 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, a fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a 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.
A 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 February 28, 1995, FMR advised over $ 25 billion in tax-free
fund assets, $ 70 billion in money market fund assets, $ 165
billion in equity fund assets, $ 40 billion in international fund
assets, and $ 20 billion in Spartan fund assets. The funds may
reference the growth and variety of money market mutual funds and the
adviser's innovation and participation in the industry. The equity funds
under management figure represents the largest amount of equity fund assets
under management by a mutual fund investment adviser in the United States,
making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
In addition to performance rankings, each fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1995: New Year's
Day, Presidents' Day , Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Although
FMR expects the same holiday schedule, to be observed in the future,
the NYSE may modify its holiday schedule at any time.
FSC normally determines each fund's NAVs as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the Securities and
Exchange Commission. To the extent that portfolio securities are traded in
other markets on days when the NYSE is closed, a fund's NAV may be affected
on days when investors do not have access to the fund to purchase or redeem
shares. In addition, trading in some of a fund's portfolio securities may
not occur on days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing a fund's NAV. Shareholders receiving securities or other property
on redemption may realize a gain or loss for tax purposes, and will incur
any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (the 1940
Act), each fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the Prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that each fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short-term capital gains are distributed as dividend
income, but do not qualify for the dividends-received deduction. These
gains will be taxed as ordinary income. Each fund will send each
shareholder a notice in January describing the tax status of dividend and
capital gain distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
Each fund purchases municipal obligations based on opinions of bond counsel
regarding the federal income tax status of the obligations. These opinions
generally will be based on covenants by the issuers regarding continuing
compliance with federal tax requirements. If the issuer of an obligation
fails to comply with its covenant at any time, interest on the obligation
could become federally taxable retroactive to the date the obligation was
issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of each fund's policies of investing so
that at least 80% of its income is free from federal income tax. Interest
from private activity securities is a tax preference item for the purposes
of determining whether a taxpayer is subject to the AMT and the amount of
AMT to be paid, if any. Private activity securities issued after August 7,
1986 to benefit a private or industrial user or to finance a private
facility are affected by this rule.
A portion of the gain on bonds purchased with market discount after April
30, 1993 and short-term capital gains distributed by each bond fund are
taxable to shareholders as dividends, not as capital gains. Dividend
distributions resulting from a recharacterization of gain from the sale of
bonds purchased with market discount after April 30, 1993 are not
considered income for purposes of each fund's policy of investing so that
at least 80% of its income is free from federal income tax. The money
market fund may distribute any net realized short-term capital gains and
taxable market discount once a year or more often, as necessary, to
maintain its net asset value at $1.00 per share.
It is the current position of the staff of the Securities and Exchange
Commission 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 each 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 a 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 percent 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 each fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of a fund, and such shares are held six
months or less and are sold at a loss, the portion of the loss equal to the
amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed by
each fund are taxable to shareholders as dividends, not as capital gains.
As of February 28, 1995, the funds had capital loss carryovers available
to offset future capital gains, approximated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Aggregate Amount that Expires on February 28,
Capital Loss
Carryovers 1996 1997 1998 2003
Fidelity California Money Market
$585,900 $27,400 $52,500 $28,800 $477,200
Fidelity California Intermediate
$1,010,900 $1,010,900
Fidelity California High Yield
$2,269,900 $2,269,900
</TABLE>
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. Each 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 a fund's investments in such instruments.
The money market fund is treated as a separate entity from the other funds
of Fidelity California Municipal Trust II. Each bond fund is treated as a
separate entity from the other funds of Fidelity California Municipal
Trust for tax purposes .
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether a fund is suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for 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. Trustees and officers elected or
appointed to Fidelity California Municipal Trust II prior to the money
market fund's conversion from a series of Fidelity California Municipal
Trust served Fidelity California Municipal Trust in identical capacities.
All persons named as Trustees also serve in similar capacities for other
funds advised by FMR. Unless otherwise noted, the business address of each
Trustee and officer is 82 Devonshire Street, Boston, Massachusetts 02109,
which is also the address of FMR. Those Trustees who are "interested
persons" (as defined in the Investment Company Act of 1940) by virtue of
their affiliation with either the trust or FMR are indicated by an asterisk
(*).
*EDWARD C. JOHNSON 3d (64) , 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 (53), Trustee and Senior Vice President, is President
of FMR; and President and a Director of FMR Texas Inc. (1989), Fidelity
Management & Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX (62), 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 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.
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. (1989), 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 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 his retirement on 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 (65), 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 (61), 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. (1989), and AppleSouth, Inc. (restaurants,
1992).
FRED L. HENNING, JR. (55), Vice President (1994) (money market fund only),
is Vice President of Fidelity's money market funds and Senior Vice
President of FMR Texas Inc.
DEBORAH F. WATSON (35), is a Vice President of the money market fund (1992)
and other funds advised by FMR and an employee of FMR.
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).
THOMAS D. MAHER (50), Assistant Vice President (1990) (money market fund
only), is Assistant Vice President of Fidelity's money market funds and
Vice President and Associate General Counsel of FMR Texas Inc. (1990).
Prior to 1990, Mr. Maher was an employee of FMR and Assistant Secretary of
all the Fidelity funds (1985-1989).
MICHAEL D. CONWAY (41), Assistant Treasurer (1995) (money market fund
only), is Assistant Treasurer of Fidelity's money market funds and is an
employee of FMR (1995). Before joining FMR, Mr. Conway was an employee of
Waddell & Reed Inc. (investment advisor, 1986-1994), where he served as
Assistant Treasurer (1992) and as Assistant Vice President and Director of
Operations of Waddell & Reed Asset Management Company (1994).
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 of 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 each fund for his or her services as Trustee for
the fiscal year ended February 28, 1995.
COMPENSATION TABLE
Aggregate Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ralph F. Phyllis Richard E. Donald Gerald C. Edward Marvin Thomas
Cox Burke J. Flynn Bradley J. Kirk McDonough H. L. Mann R.
Davis Jones Malone Williams
Money Market $ 319 $ 304 $ 398 $ 315 $ 323 $ 323 $ 327 $ 315 $ 323
Fund
Insured Fund 115 111 144 114 117 117 119 114 117
High Yield Fund 245 235 306 242 249 249 252 243 249
</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 as Part of Fund the Fund Complex Complex*
Expenses from the
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>
* Information is as of December 31, 1994 for all 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 are 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.
On February 28, 1995 the Trustees and officers of the fund s
owned, in the aggregate, less than 1 % of each fund's total
outstanding shares.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides each fund with all necessary
office facilities and personnel for servicing each fund's investments,
compensates all officers of each fund and all Trustees who are "interested
persons" of the trusts or of FMR, and all personnel of each 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 each fund. These services include providing facilities
for maintaining each fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with each fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining each
fund's records and the registration of each fund's shares under federal and
state laws; developing management and shareholder services for each 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, each fund pays all of its expenses, without limitation, that are not
assumed by those parties. Each fund pays for typesetting, printing, and
mailing of proxy materials to shareholders, legal expenses, and the fees of
the custodian, auditor and non-interested Trustees. Although each fund's
current management contract provides that each fund will pay for
typesetting, printing, and mailing prospectuses, statements of additional
information, notices, and reports to existing shareholders, the trust, on
behalf of each fund has entered into a revised transfer agent agreement
with UMB, pursuant to which UMB bears the cost of providing these services
to existing shareholders. Other expenses paid by each fund include
interest, taxes, brokerage commissions, and each fund's proportionate share
of insurance premiums and Investment Company Institute dues. Each fund is
also liable for such nonrecurring expenses as may arise, including costs of
any litigation to which a fund may be the party, and any obligation it may
have to indemnify its officers and Trustees with respect to litigation.
FMR is the manager of the insured and high yield funds pursuant to
management contracts dated March 1, 1994, which were approved by
shareholders on February 16, 1994. FMR is the manager of the money market
fund pursuant to a management contract dated December 30, 1991 which
was approved by Fidelity California Municipal Trust as the then
sole shareholder of the money market fund on December 30, 1991, pursuant to
an Agreement and Plan of Conversion approved by public shareholders of the
money market fund on October 23, 1991. (The terms of the money market
fund's current contract with FMR duplicate those of its previous contract,
which was dated November 1, 1989.)
For the services of FMR under the contracts, each 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 on the left of the following page. The schedule o n
the right shows the effective annual group fee rate
various asset levels , which is the result of cumulatively
applying the annualized rates on the left . For example, the effective
annual fee rate at $ 282.2 billion of group net assets - the
approximate level for February 1995 - was .1552 %, which is the
weighted average of the respective fee rates for each level of group net
assets up to $ 282.2 billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Group
Annualized
Group Net
Effective Annual
Assets Rate Assets Fee Rate
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
$ 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 .1695
24 - 30 .1800 200 .1658
30 - 36 .1750 225 .1629
36 - 42 .1700 250 .1604
42 - 48 .1650 275 .1583
48 - 66 .1600 300 .1565
66 - 84 .1550 325 .1548
84 - 120 .1500 350 .1533
120 - 174 .1450 400 .1507
174 - 228 .1400
228 - 282 .1375
282 - 336 .1350
Over 336 .1325
</TABLE>
Under the money market fund's current management contract with FMR, the
group fee rate is based on a schedule with breakpoints ending at .1500% for
average group assets in excess of $84 billion. The group fee rate
breakpoints shown above for average group assets in excess of $120 billion
and under $228 billion were voluntarily adopted by FMR on January 1, 1992.
The additional breakpoints shown above for average group assets in excess
of $228 billion were voluntarily adopted by FMR on November 1, 1993.
Prior to March 1, 1994 for the bond funds, the group fee rate was based on
a schedule with breakpoints ending at .1500% for average group assets in
excess of $84 billion. The group fee rate breakpoints shown above for
average group assets in excess of $120 billion and under $228 billion were
voluntarily adopted by FMR on January 1, 1992. The additional breakpoints
shown above for average group assets in excess of $228 billion were
voluntarily adopted by FMR on November 1, 1993. The bond
funds ' current management contract s reflects these
extensions of the group fee rate schedule.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints, pending shareholder
approval of a new management contract reflecting the revised schedule. The
revised group fee rate schedule provides for lower management fee rates as
FMR's assets under management increase. The revised group fee rate schedule
is identical to the above schedule for average group assets under $156
billion. For average group assets in excess of $156 billion, the group fee
rate schedule voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
120 - $156 billion .1450% $150 billion .1736%
156 - 192 .1400 175 .1690
192 - 228 .1350 200 .1652
228 - 264 .1300 225 .1618
264 - 300 .1275 250 .1587
300 - 336 .1250 275 .1560
336 - 372 .1225 300 .1536
Over 372 .1200 325 .1514
350 .1494
375 .1476
400 .1459
Each fund's individual fund fee rate is .25%. Based on the average net
assets of funds advised by FMR for February 1995, the annual management fee
rate for each fund would be calculated as follows:
Individual Fund Management
Group Fee Rate Fee Rate Fee Rate
.1552 % + .25% = . 4052 %
One-twelfth (1/12) of this annual management fee rate is then applied to
each fund's average net assets for the most recent month, giving a dollar
amount, which is the fee for that month.
The table below shows the management fees paid to FMR by each fund for
the last three fiscal years:
MONEY MARKET FUND
Years Ended
Management Fees Management Fees as a
February 28 % of Average Net Assets
1995 $ 2,723,476 .4078%
1994 2,236,908 .4192
1993* 1,921,573 .4204**
INSURED FUND
Years Ended
Management Fees Management Fees as a
February 28 % of Average Net Assets
1995 $ 940,793 .4077%
1994(dagger) 888,113 (dagger) .4141
1993* 748,875 .4214**
(dagger) Net of $352,015 reimbursement
HIGH YIELD FUND
Years Ended
Management Fees Management Fees as a
February 28 % of Average Net Assets
1995 $ 2,030,213 .4077%
1994 2,434,987 .4141
1993* 1,905,430 .4208**
* May 1, 1992 to February 28, 1993
** Annualized
FMR may, from time to time, voluntarily reimburse all or a portion of each
fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). 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 each fund's total returns and yield and repayment of
the reimbursement by each fund will lower its total returns and yield.
During the fiscal periods reported, FMR voluntarily agreed to reimburse the
insured fund to the extent that the fund's aggregate operating expenses
were in excess of an annual rate of its average net assets. The table below
identifies the levels of and periods for such reimbursement. The table
above shows the dollar amount reimbursed by FMR, if any, for each period.
From To Expense Limitation
March 10, 1993 July 31, 1993 .35%
August 1, 1993 August 31, 1993 .45%
September 1, 1993 September 30, 1993 .55%
If FMR had not voluntarily limited the total expenses of the insured
fund, management fees paid to FMR for fiscal 1994 would ha ve amounted
to $1,240,128.
To comply with the California Code of Regulations, FMR will reimburse each
fund if and to the extent that each 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 each fund's expenses for purposes of this regulation, each
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its distribution plan expenses.
SUB-ADVISER. On behalf of the money market fund, FMR has entered into a
sub-advisory agreement with FTX pursuant to which FTX has primary
responsibility for providing portfolio investment management services to
the fund.
Under the sub-advisory agreement, dated December 30, 1991, which was
approved by shareholders on October 23, 1991, FMR pays FTX a fee equal to
50% of the management fee payable to FMR under its current management
contract with the fund. The fees paid to FTX are not reduced by any
voluntary or mandatory expense reimbursements that may be in effect from
time to time on behalf of the money market fund, for fiscal 1995, 1994, and
1993, FMR paid FTX total fees of, $1,346,814, $1,102,480, and $897,622,
respectively.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved a Distribution and Service Plan on behalf of
each fund (the Plans) pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the Rule). The Rule provides in substance
that a mutual fund may not engage directly or indirectly in financing any
activity that is primarily intended to result in the sale of shares of
a fund except pursuant to a plan approved on behalf of the
fund under the Rule. The Plans, as approved by the Trustees, allow each
fund and FMR to incur certain expenses that might be considered to
constitute indirect payment by the funds of distribution expenses.
Under each Plan, if the payment of management fees by the funds to FMR is
deemed to be indirect financing by the funds of the distribution of their
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 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 each fund, or to third parties, including banks,
that render shareholder support services.
Payments made by FMR to third parties during the fiscal year ended
February 28, 1995 amounted to $29,848 for the money market fund, $2,117 for
the insured fund, and $2,034 for the high yield fund.
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 fund and its shareholders. In particular, the Trustees noted
that each Plan does not authorize payments by the fund other than those
made to FMR under its management contract with the fund. To the extent that
each Plan gives FMR and FDC greater flexibility in connection with the
distribution of shares of the fund, additional sales of fund s
shares may result. Furthermore , certain shareholder support services
may be provided more effectively under each Plan by local entities with
whom shareholders have other relationships.
The insured and high yield funds' Plans were approved by shareholders on
November 18, 1987 and December 30, 1985, respectively. The money market
fund's Plan was approved by shareholder s, in connection with a
reorganization transaction on December 30, 1991, pursuant to an
Agreement and Plan of Conversion .
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws
on this issue may differ from the interpretations of federal law expressed
herein, and banks and financial institutions may be required to register as
dealers pursuant to state law.
Each fund may execute portfolio transactions with and purchase securities
issued by , depository institutions that receive payments under the
Plan s . No preference for the instruments of such depository
institutions will be shown in the selection of investments.
INTEREST OF FMR AFFILIATES
UMB , is each fund's custodian and transfer agent. UMB has
entered into sub-contracts with FSC, an affiliate of FMR, under the terms
of which FSC performs the processing activities associated with providing
transfer agent and shareholder servicing functions for each fund. Under the
sub-contract s , FSC bears the expense of typesetting, printing, and
mailing, prospectuses, statements of additional information, and all other
reports, notices, and statements to shareholders, except proxy statements.
FSC also pays all out-of-pocket expenses associated with transfer agent
services.
UMB pays FSC an annual fee of $14.04 (money market fund) and $26.03
(bond funds) per regular account with a balance of $5,000 or more, $10.21
(money market fund) and $15.31 (bond funds) per regular account with a
balance of less than $5,000, and a supplemental activity charge of $2.25
for standard order transactions and $6.11 for other monetary transactions.
The account fee and monetary transaction charge for accounts set up as Core
Accounts in the Fidelity Ultra Service Account program are $12.61 and $.76,
respectively. These fees and charges are subject to annual cost escalation
based on postal rate changes and changes in wage and price levels as
measured by the National Consumer Price Index for Urban Areas. With respect
to institutional client master accounts, UMB pays FSC per account
fees of $95 and monetary transactions charges of $20 and $17.50
depending on the nature of services provided.
Transfer agent fees, including reimbursement for out-of-pocket expenses,
paid to FSC for the fiscal years ended February 28, 1995 and 1994 and the
fiscal period May 1, 1992 to February 28, 1993 are indicated on in the
table below.
Transfer Agent Fees
1995 1994 1993
Money Market Fund $1,205,669 $1,016,834 $706,501
Insured Fund 264,495 346,638 206,003
High Yield Fund 468,720 558,014 448,116
UMB has an additional sub-contract with FSC, pursuant to which FSC
performs the calculations necessary to determine each fund's net asset
value per share and dividends and maintains each fund's accounting records.
The annual fee rates for these pricing and bookkeeping services are based
on the fund's average net assets and presented in the table below:
Pricing and Bookkeeping Annual Fee Rates
$0-$500M Greater Than $500M Minimum Per Year Maximum Per Year
Money Market Fund .0175% .0075% $20,000 $750,000
Insured and High Yield Funds .04 .02 45,000 750,000
Pricing and bookkeeping fees, including reimbursement for out of pocket
expenses, paid to FSC for fiscal 1995, 1994, and 1993 are indicated
in the table below.
Pricing and Bookkeeping Fees
1995 1994 1993
Money Market Fund $117,152 $107,448 $ 94,157
Insured Fund 101,423 134,786 86,888
High Yield Fund 214,470 243,183 206,909
The transfer agent fees and charges and pricing and bookkeeping fees
described above are paid to FSC by UMB , which is entitled to
reimbursement from the funds for these expenses.
FSC has entered into an agreement with Fidelity Brokerage Services, Inc.
(FBSI), a subsidiary of FMR Corp., pursuant to which FBSI performs certain
recordkeeping, communication, and other services for money market fund
shareholders participating in the Fidelity Ultra Service Account program.
FBSI directly charges each Ultra Service Account client that chooses the
enhanced features, an administrative fee at a rate of $5.00 per month for
these services, which is in addition to the transfer agency fee received by
FSC. Administrative fees paid to FBSI by money market fund shareholders
participating in the Fidelity Ultra Service Account program amounted to
approximately $ 143,858 for fiscal 1995.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at net asset value. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Fidelity California Tax-Free Insured Portfolio
and Fidelity California Tax-Free High Yield Portfolio are funds
(series) of Fidelity California Municipal Trust (the Massachusetts trust),
an open-end management investment company organized as a Massachusetts
business trust on April 28, 1983. On February 27, 1984 the trust's name was
changed from Fidelity California Tax-Exempt Money Market Trust to Fidelity
California Tax-Free Fund and on November 1, 1989 its name was changed to
Fidelity California Municipal Trust. Currently, there are four funds of the
Massachusetts trust: Fidelity California Tax-Free Insured Portfolio,
Fidelity California Tax-Free High Yield Portfolio, Spartan California
Intermediate Municipal Portfolio, and Spartan California Municipal High
Yield Portfolio. The Massachusetts trust's Declaration of Trust permits the
Trustees to create additional funds.
Fidelity California Tax-Free Money Market Portfolio is a fund (series) of
Fidelity California Municipal Trust II (the Delaware trust), an open-end
management investment company organized as a Delaware Business trust on
June 20, 1991. Currently, there are two funds of the Delaware trust:
Fidelity California Tax-Free Money Market Portfolio and Spartan California
Municipal Money Market Portfolio. Fidelity California Tax-Free Money Market
Portfolio and Spartan California Municipal Money Market Portfolio entered
into agreements to acquire all of the assets of the Fidelity California
Tax-Free Money Market Portfolio and Spartan California Municipal Money
Market Portfolio, respectively, series of the Fidelity California Municipal
Trust, on December 30, 1991 and April 18, 1994, respectively. The Delaware
trust's Trust Instrument permits the trustees to create additional funds.
In the event that FMR ceases to be investment adviser to a trust or any of
its funds, the right of the trust or the fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn. There is a remote possibility
that one fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
The assets of each trust received for the issue or sale of shares of each
of its funds and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general liabilities of their respective trusts. Expenses with respect
to each trust are to be allocated in proportion to the asset value of their
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of the trusts, subject to the general
supervision of the Board of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds of a certain trust. In the event of the dissolution or
liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY - MASSACHUSETTS TRUST. The Massachusetts
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 Massachusetts trust shall
not have any claim against shareholders except for the payment of the
purchase price of shares and requires that each agreement, obligation, or
instrument entered into or executed by the trust or its Trustees shall
include a provision limiting the obligations created thereby to the
Massachusetts trust and its assets. The Declaration of trust provides for
indemnification out of each fund's property of any shareholders held
personally liable for the obligations of the fund. The Declaration of Trust
also provides that each fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the fund
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
SHAREHOLDER AND TRUSTEE LIABILITY - DELAWARE TRUST. The Delaware trust is a
business trust organized under Delaware law. Delaware law provides that
shareholders shall be entitled to the same limitations of personal
liability extended to stockholders of private corporations for profit. The
courts of some states, however, may decline to apply Delaware law on this
point. The Trust Instrument contains an express disclaimer of shareholder
liability for the debts, liabilities, obligations, and expenses of the
Delaware trust and requires that a disclaimer be given in each contract
entered into or executed by the Delaware trust or its Trustees. The Trust
Instrument provides for indemnification out of each fund's property of any
shareholder or former shareholder held personally liable for the
obligations of the fund. The Trust Instrument also provides that each fund
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the fund and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which
Delaware law does not apply, no contractual limitation of liability was in
effect, and the fund is unable to meet its obligations. FMR believes that,
in view of the above, the risk of personal liability to shareholders is
extremely remote.
The Trust Instrument further provides that the Trustees shall not be
personally liable to any person other than the Delaware trust or its
shareholders; moreover, the Trustees shall not be liable for any conduct
whatsoever, provided that Trustees are not protected against any liability
to which they would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved
in the conduct of their office.
VOTING RIGHTS - BOTH TRUSTS. Each fund's capital consists of shares of
beneficial interest. As a shareholder of the Massachusetts trust, you
receive one vote for each dollar value of net asset value you own. The
shares have no preemptive or conversion rights; voting and dividend rights,
the right of redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set forth
under the respective "Shareholder and Trustee Liability" headings above.
Shareholders representing 10% or more of a trust or one of its funds may,
as set forth in the Declaration of Trust or Trust Instrument, call meetings
of the trust or fund for any purpose related to the trust or fund, as the
case may be, including, in the case of a meeting of an entire trust, the
purpose on voting on removal of one or more Trustees.
A trust or any fund may be terminated upon the sale of its assets to (or,
in the case of the Delaware trust and its funds, merger with) another
open-end management investment company or series thereof, or upon
liquidation and distribution of its assets. Generally such terminations
must be approved by vote of the holders of a majority of the outstanding
shares of the trust or the fund (for the Delaware trust), or by a vote of
the holders of a majority of the trust or fund, as determined by the
current value of each shareholder's investment in the trust or fund (for
the Massachusetts trust); however, the Trustees of the Delaware trust may,
without prior shareholder approval, change the form of the organization of
the Delaware trust by merger, consolidation, or incorporation. If not so
terminated or reorganized, the trusts and their funds will continue
indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the Delaware trust to merge or consolidate into one or more trusts,
partnerships, or corporations, so long as the surviving entity is an
open-end management investment company that will succeed to or assume the
Delaware trust registration statement, or cause the Delaware trust to be
incorporated under Delaware law. Each fund of the Massachusetts trust may
also invest all of its assets in another investment company.
CUSTODIAN. UMB Bank, n.a. , 1010 Grand Avenue, Kansas City, Missouri
64106, is custodian of the assets of the funds. The custodian is
responsible for the safekeeping of the funds' assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the funds or in deciding which
securities are purchased or sold by the funds. The funds may, however,
invest in obligations of the custodian and may purchase securities from or
sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and each trust's
Trustees may from time to time have transactions with various banks,
including banks serving as custodian for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts
serves as each trust's independent accountant. The auditor examines
financial statements for the funds and provides other audit, tax, and
related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the fiscal
year ended February 28, 1995 are included in the funds' Annual Report,
which is a separate report supplied with this Statement of Additional
Information. Each fund's financial statements and financial highlights are
incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the pre
refunded bond is considered to be the number of days to the announced call
date of the bonds.
The descriptions that follow are examples of eligible ratings for the
funds. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations when
determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND
MUNICIPAL NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important in the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG-3/VMIG-3 - This designation denotes favorable quality, with all
security elements accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG-4/VMIG-4 - This designation denotes adequate quality protection
commonly regarded as required of an investment security is present and,
although not distinctly or predominantly speculative, there is specific
risk.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND
MUNICIPAL NOTES:
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
SP-3 - Speculative capacity to pay principal and interest.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium grade obligations, i.e, they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments of or maintenance of other
terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Funds at a Glance; Who May Want
to Invest
3 a .............................. Financial Highlights
b .............................. *
c, d .............................. Performance
4 a i............................. Charter
ii........................... The Funds at a Glance; Investment Principles and
Risks; Fundamental Investment Policies and
Restrictions
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page; The Funds at a Glance; Doing
Business with Fidelity; Charter
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Cover Page; Charter
f .............................. Expenses
g .............................. *
5 A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... Charter
b ............................. *
c .............................. Exchange Restrictions; Transaction Details
d .............................. *
e .............................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. Expenses; How to Buy Shares; Transaction
Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ Description of the Trusts
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR; Portfolio Transactions
ii ............................ Trustees and Officers
iii ............................ Management Contracts
b ............................ Management Contracts
c, d ............................ Interest of FMR Affiliates
e ............................ Management Contracts
f ............................ Distribution and Service Plans
g ............................ *
h ............................ Description of the Trusts
i ............................ Interest of FMR Affiliates
17 a - c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trusts
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 ............................. Distributions and Taxes
21 a, b ............................ Interest of FMR Affiliates
c ............................ *
22 a ............................ Performance
b ............................ *
23 ............................ Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a copy of
the funds' most recent financial reports and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated April 17, 1995. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference (legally forms a part of the prospectus).
For a free copy of either document, call Fidelity at 1-800-544-8888.
Investments in the money market fund are neither insured nor guaranteed by
the U.S. government, and there can be no assurance that the fund will
maintain a stable $1.00 share price.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
SCR-pro-495
SPARTAN(REGISTERED TRADEMARK)
CALIFORNIA
MUNICIPAL
FUNDS
Each of these funds seeks a high level of current income free from federal
income tax and California state personal income tax. The funds have
different strategies, however, and carry varying degrees of risk and yield
potential.
SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO
SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO
SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO
PROSPECTUS
APRIL 17, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL CHARTER How each fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management
arm of Fidelity Investments, which was established in 1946 and is now
America's largest mutual fund manager. FMR Texas Inc. (FTX), a subsidiary
of FMR, chooses investments for Spartan California Municipal Money Market
Portfolio.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
SPARTAN CA MONEY MARKET
GOAL: High current tax-free income for California residents while
maintaining a stable $1.00 share price.
STRATEGY: Invests in high-quality, short-term municipal money market
securities whose interest is free from federal income tax and California
personal income tax.
SPARTAN CA INTERMEDIATE
GOAL: High current tax-free income for California residents.
STRATEGY: Invests mainly in investment-grade municipal securities whose
interest is free from federal income tax and California personal income
tax, while maintaining an average maturity of three to 10 years.
SPARTAN CA HIGH YIELD
GOAL: High current tax-free income for California residents.
STRATEGY: Invests mainly in longer-term, investment-grade municipal
securities whose interest is free from federal income tax and California
personal income tax.
WHO MAY WANT TO INVEST
These non-diversified funds may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal and
California income taxes. Each fund's level of risk, and potential reward,
depends on the quality and maturity of its investments. Spartan California
Municipal Money Market Portfolio is managed to keep its share price stable
at $1.00. Spartan California Intermediate Municipal Portfolio and Spartan
California Municipal High Yield Portfolio , with their broader range
of investments, have the potential for higher yields, but also carry a
higher degree of risk. You should consider your investment objective and
tolerance for risk when making an investment decision.
The value of the funds' investments and the income they generate will vary
from day to day, generally reflecting interest rates, market conditions,
and other federal and state political and economic news. Except for the
money market fund, when you sell your shares of the funds, they may be
worth more or less than what you paid for them. By themselves, these funds
do not constitute a balanced investment plan.
The Spartan family of funds is designed for cost-conscious investors
looking for higher yields through lower costs. The Spartan
Approach(registered trademark) requires investors to make high minimum
investments and, in some cases, to pay for individual transactions.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell, or
hold shares of a fund. See page for more information about these
fees.
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Redemption fee (on shares held less than 180 days)
for Spartan CA Money Market None
for Spartan CA Intermediate None
for Spartan CA High Yield .50%
Exchange and wire transaction fees $5.00
Checkwriting fee, per check written
(available for Spartan CA Money Market
and Spartan CA Intermediate) $2.00
Account closeout fee $5.00
Annual account maintenance fee
(for accounts under $2,500) $12.00
THESE FEES ARE WAIVED (except for the redemption fee) if your account
balance at the time of the transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. Expenses are factored into each fund's
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following are projections based on historical expenses, adjusted to
reflect current fees, and are calculated as a percentage of average net
assets.
SPARTAN CA MONEY MARKET
Management fee (after reimbursement) 0.30 %
12b-1 fee None
Other expenses 0.00 %
Total fund operating expenses 0.30 %
SPARTAN CA INTERMEDIATE
Management fee (after reimbursement) 0.10 %
12b-1 fee None
Other expenses 0.00 %
Total fund operating expenses 0.10 %
SPARTAN CA HIGH YIELD
Management fee 0.55 %
12b-1 fee None
Other expenses 0.00 %
Total fund operating expenses 0.55 %
EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses after
the number of years indicated, first assuming that you leave your account
open, and then assuming that you close your account at the end of the
period:
SPARTAN CA MONEY MARKET
Account open Account closed
After 1 year $ 3 $ 8
After 3 years $ 10 $ 15
After 5 years $ 17 $ 22
After 10 years $ 38 $ 43
SPARTAN CA INTERMEDIATE
Account open Account closed
After 1 year $ 1 $ 6
After 3 years $ 3 $ 8
After 5 years $ 6 $ 11
After 10 years $ 13 $ 18
SPARTAN CA HIGH YIELD
Account open Account closed
After 1 year $ 6 $ 11
After 3 years $ 18 $ 23
After 5 years $ 31 $ 36
After 10 years $ 69 $ 74
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 temporarily limit Spartan California
Municipal Money Market Portfolio's operating expenses to . 30 % of its
average net assets, and Spartan California Intermediate Municipal
Portfolio's operating expenses to . 10 % of its average net
assets. If these agreements were not in effect, the management fee, other
expenses, and total operating expenses would be .50%, .00%, and .50%,
respectively, for Spartan California Municipal Money Market and
.55%, .00%, and .55%, respectively, for Spartan California Intermediate
Municipal. Expenses eligible for reimbursement do not include interest,
taxes, brokerage commissions, or extraordinary expenses.
FINANCIAL HIGHLIGHTS
The tables that follow are included in the funds' Annual Report and have
been audited by Price Waterhouse LLP, independent accountants. Their
reports on the financial statements and financial highlights are included
in the Annual Report. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the funds' Statement
of Additional Information.
SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C>
44.Selected Per-Share Data
and Ratios
45.Years ended February
1990C 1991D 1992D 1993E 1994 1995
28
46.Net asset value,
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
47.Income from Investment
.025 .054 .041 .022 .024 .030
Operations
Net interest income
48. Dividends from net
(.025) (.054) (.041) (.022) (.024) (.030)
interest income
49.Net asset value, end of
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
period
50.Total returnB
2.54 5.52 4.15 2.24 2.45 3.00
% % % % % %
51.Net assets, end of period
$ 396,652 $ 763,95 $ 917,64 $ 855,59 $ 1,064,6 $ 1,163,2
(000 omitted)
9 0 0 03 51
52.Ratio of expenses to
-- .07 .10 .30 .21 .28
average net assets
% % %A % %
53.Ratio of expenses to
.50 .50 .50 .50 .50 .50
average net assets before
%A % % %A % %
expense reductions
54.Ratio of net interest
5.99 5.33 4.05 2.67 2.42 2.96
income to average net
%A % % %A % %
assets
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
C FROM NOVEMBER 27, 1989 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1990
D YEARS ENDED APRIL 30
E MAY 1, 1992 TO FEBRUARY 28, 1993
SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL
<TABLE>
<CAPTION>
<S> <C> <C>
55.Selected Per-Share Data and Ratios
56.Years ended February 28 1994C 1995
57.Net asset value, beginning of period $ 10.000 $ 9.760
58.Income from Investment Operations
.070 .477
Net interest income
59. Net realized and unrealized gain (loss) on investments (.240) (.330)
60. Total from investment operations (.170) .147
61.Less Distributions
(.070) (.477)
From net interest income
62.Net asset value, end of period $ 9.760 $ 9.430
63.Total returnB (1.71) 1.67
% %
64.Net assets, end of period (000 omitted) $ 22,713 $ 45,771
65.Ratio of expenses to average net assets -- .05
%
66.Ratio of expenses to average net assets before expense .55 .55
reductions %A %
67.Ratio of net interest income to average net assets 4.66 5.16
%A %
68.Portfolio turnover rate -- 55
%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
C FROM DECEMBER 30, 1993 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1994
SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C>
69.Selected Per-Share Data
and Ratios
70.Years ended February 28
1990C 1991D 1992D 1993E 1994 1995
71.Net asset value,
$ 10.000 $ 9.760 $ 10.240 $ 10.540 $ 11.330 $ 10.930
beginning of period
72.Income from Investment
.301 .706 .663 .543 .631 .603
Operations
Net interest income
73. Net realized and
(.249) .472 .297 .858 (.012) (.732)
unrealized gain (loss)
on investments
74. Total from investment
.052 1.178 .960 1.401 .619 (.129)
operations
75.Less Distributions
(.301) (.706) (.663) (.543) (.631) (.603)
From net interest income
76. From net realized gain
-- -- -- (.070) (.330) (.180)
on investments
77. Distributions in excess
-- -- -- -- (.060) --
of net realized gain
78. Total distributions
(.301) (.706) (.663) (.613) (1.021) (.783)
79. Redemption fees
.009 .008 .003 .002 .002 .002
added to paid in capital
80.Net asset value, end of
$ 9.760 $ 10.240 $ 10.540 $ 11.330 $ 10.930 $ 10.020
period
81.Total returnB
.59 12.52 9.66 13.76 5.63 -.85
% % % % % %
82.Net assets, end of period
$ 107,40 $ 281,72 $ 479,13 $ 573,87 $ 566,61 $ 395,76
(000 omitted)
9 5 7 1 3 0
83.Ratio of expenses to
-- .19 .36 .40 .52 .55
average net assets
% % %A % %
84.Ratio of expenses to
.55 .55 .55 .55 .55 .55
average net assets before
%A % % %A % %
expense reductions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
85.Ratio of net interest 7.42 7.02 6.36 6.07 5.58 6.04
income to average %A % % %A % %
net assets
86.Portfolio turnover rate 5 15 13 26 54 33
%A % % %A % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
C FROM NOVEMBER 27, 1989 (COMMENCEMENT OF OPERATIONS) THROUGH APRIL 30,
1990
D YEARS ENDED APRIL 30
E MAY 1, 1992 TO FEBRUARY 28, 1993
PERFORMANCE
Mutual fund performance can be measured as TOTAL RETURN or YIELD. The total
returns that follow are based on historical fund results and do not
reflect the effect of any transaction fees you may have paid. The figures
would be lower if fees were taken into account.
Each fund's fiscal year runs from March 1 through February 28. The tables
below show each fund's performance over past fiscal years compared to a
measure of inflation.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
February 28, 1995 year Years Fund
Spartan CA
Money Market 3.00 % 3.67 % 3.79 %A
Spartan CA
Intermediate 1.67 % n/a -.06 %B
Spartan CA
High Yield -.85 % 7.77 % 7.72 %A
Consumer Price
Index 2.86 % 3.35 % n/a
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
February 28, 1995 year Years Fund
Spartan CA
Money Market 3.00 % 19.74 % 21.59 %A
Spartan CA
Intermediate 1.67 % n/a -.05 %B
Spartan CA
High Yield -.85 % 45.37 % 47.86 %A
Consumer Price
Index 2.86 % 17.89% n/a
A FROM NOVEMBER 27, 1989
B FROM DECEMBER 30, 1993
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. When a money
market fund yield assumes that income earned is reinvested, it is called an
EFFECTIVE YIELD. A TAX-EQUIVALENT YIELD shows what an investor would have
to earn before taxes to equal a tax-free yield. Yields for the bond funds
are calculated according to a standard that is required for all stock and
bond funds. Because this differs from other accounting methods, the quoted
yield may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. In technical terms, Spartan
California Municipal Money Market Portfolio is currently a non-diversified
fund of Fidelity California Municipal Trust II, and Spartan California
Intermediate Municipal Portfolio and Spartan California Municipal High
Yield Portfolio are currently non-diversified funds of Fidelity
California Municipal Trust. Both trusts are open-end management investment
companies. Fidelity California Municipal Trust II was organized as a
Delaware business trust on June 20, 1991. Fidelity California Municipal
Trust was organized as a Massachusetts business trust on April 28, 1983.
There is a remote possibility that one fund might become liable for a
misstatement in the prospectus about another fund.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. For the money market fund,
you are entitled to one vote for each share you own. For the bond funds,
the number of votes you are entitled to is based upon the dollar value of
your investment.
FMR AND ITS AFFILIATES
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 200
(solid bullet) Assets in Fidelity mutual
funds: over $250 billion
(solid bullet) Number of shareholder
accounts: over 20 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 200
(checkmark)
The funds are managed by FMR, which chooses their investments and handles
their business affairs. FTX has primary responsibility for providing
investment management services for Spartan California Municipal Money
Market Portfolio.
Jonathan D. Short is manager of Spartan California Municipal High Yield
and Spartan California Intermediate Municipal, both of which he has managed
since March 1995. Mr. Short also manages California Tax-Free High Yield and
California Tax-Free Insured. Previously, he was a municipal bond analyst
and assistant manager of High Yield Tax-Free. Mr. Short joined Fidelity in
1990, after receiving his MBA from Northwestern University.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Service Co. (FSC) performs transfer agent
servicing functions for the funds.
FMR Corp. is the parent company of FMR and FTX. Through ownership of voting
common stock, members of the Edward C. Johnson 3d family form a controlling
group with respect to FMR Corp. Changes may occur in the Johnson family
group, through death or disability, which would result in changes in each
individual family member's holding of stock. Such changes could result in
one or more family members becoming holders of over 25% of the stock. FMR
Corp. has received an opinion of counsel that changes in the composition of
the Johnson family group under these circumstances would not result in the
termination of the funds' management or distribution contracts and,
accordingly, would not require a shareholder vote to continue operation
under those contracts.
UMB Bank , n . a ., is each fund's transfer agent,
although it employs FSC to perform these functions for the funds. It is
located at 1010 Grand Avenue, Kansas City, Missouri.
To carry out the funds' transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that a fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET seeks high current income that is
free from federal income tax and California personal income tax while
maintaining a stable $1.00 share price by investing in high-quality,
short-term municipal money market securities of all types. FMR normally
invests at least 65% of the fund's total assets in state tax-free
securities, and normally invests so that at least 80% of the fund's income
distributions are free from federal income tax.
When you sell your shares, they should be worth the same amount as when you
bought them. Of course, there is no guarantee that the fund will maintain a
stable $1.00 share price. The fund follows industry-standard guidelines on
the quality and maturity of its investments, which are designed to help
maintain a stable $1.00 share price. The fund will purchase only
high-quality securities that FMR believes present minimal credit risks and
will observe maturity restrictions on securities it buys. It is possible
that a major change in interest rates or a default on the fund's
investments could cause its share price (and the value of your investment)
to change.
SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL seeks high current income that is
free from federal income tax and California personal income tax by
investing mainly in high-quality and upper-medium-grade-quality municipal
securities, although it can also invest in some lower-quality securities.
The fund normally maintains a dollar weighted average maturity of three to
ten years. FMR normally invests at least 65% of the fund's total assets in
state tax-free securities, and normally invests at least 80% of the fund's
assets in municipal securities whose interest is free from federal income
tax.
SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO seeks high current income
that is free from federal income tax and California personal income tax by
investing primarily in municipal securities judged by FMR to be of
investment-grade quality, although it can also invest in lower-quality
securities. Although the fund can invest in securities of any
maturity, it generally invests in medium and long-term bonds and
maintains a dollar -weighted average maturity of 15 years or
longer . FMR normally invests so that at least 80% of the fund's income
distributions are free from federal and California personal income tax.
EACH 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 and its pooled investment fund(the
Pool) filed for protection under Chapter 9 of the Federal Bankruptcy Law,
as a result of investment losses in the Pool. 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 Orange County, had
investments in the Pool. The County and some of the participating agencies
in the Pool 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.
The money market fund stresses income, preservation of capital, and
liquidity. The bond funds seek to provide a higher level of income by
investing in a broader range of securities. Each fund's yield and each bond
fund's share price change daily based on changes interest
rates, market conditions, other political and economic news,
and on the quality and maturity of its investments. In general, bond prices
rise when interest rates fall, and vice versa. This effect is usually more
pronounced for longer-term securities. Lower-quality securities offer
higher yields, but also carry more risk. FMR may use various investment
techniques to hedge a portion of the bond funds' risks, but there is
no guarantee that these strategies will work as intended. When you sell
your shares of the bond funds, they may be worth more or less than what you
paid for them.
If you are subject to the federal alternative minimum tax, you should note
that each fund may invest all of its assets in municipal securities issued
to finance private activities. The interest from these investments is a
tax-preference item for purposes of the tax.
FMR normally invests each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations, and the bond funds do not expect to invest in state taxable
obligations. Each fund also reserves the right to invest without limitation
in short-term instruments, to hold a substantial amount of uninvested cash,
or to invest more than normally permitted in taxable obligations for
temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of each fund's policies
and limitations and more detailed information about the funds' investments
is contained in the funds' SAI. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
funds achieve their goals. Current holdings and recent investment
strategies are described in the funds' financial reports which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "municipal junk bonds")
often have speculative characteristics, and involve greater risk of
default or price changes due to changes in the issuer's creditworthiness.
The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of
general or regional economic difficulty.
SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD
SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD
Fiscal 1995 Debt Holdings, by Rating
MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa 28.9% AAA 30.1%
High quality Aa 8.4 % AA 5.7 %
Upper-medium grade A 19.2% A 34.1%
Medium grade Baa 9.8% BBB 9.2%
LOWER QUALITY
Moderately speculative Ba 0.0% BB 0.0%
Speculative B 0.0% B 0.0%
Highly speculative Caa 0.1% CCC 0.0%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C C
In default, in arrears -- D 0.0%
66. 4 % 79.1%
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED DIRECTLY OR
INDIRECTLY BY MOODY'S OR S&P AMOUNTED TO 11.4%. THIS MAY INCLUDE
SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS
UNRATED SECURITIES. FMR HAS DETERMINED THAT UNRATED SECURITIES THAT ARE
LOWER-QUALITY ACCOUNT FOR 4.2% OF THE FUND'S TOTAL SECURITY
INVESTMENTS.
REFER TO THE FUND'S STATEMENT OF ADDITIONAL INFORMATION FOR A MORE
COMPLETE DISCUSSION OF THESE RATINGS.
The table below provides a summary of ratings assigned to debt
holdings (not including money market instruments) in Spartan California
Municipal High Yield's portfolio. These figures are dollar-weighted
averages of month-end portfolio holdings during fiscal 1995, and are
presented as a percentage of total security investments. These percentages
are historical and do not necessarily indicate the fund's current or future
debt holdings.
RESTRICTIONS: For Spartan California Intermediate Municipal Portfolio
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 lower than A-quality debt securities to 40% of its total
assets and in lower than Baa-quality debt securities to 5% of its assets.
Spartan California Municipal High Yield Portfolio does not currently intend
to invest more than one-third of its assets in bonds judged by FMR to be of
equivalent quality to those rated Ba or lower by Moody's and BB or lower by
S&P, and does not currently intend to invest in bonds of equivalent quality
to bonds rated lower than B. The fund does not currently intend to invest
in bonds rated below Caa by Moody's or CCC by S&P.
MONEY MARKET SECURITIES are high-quality, short-term obligations issued
by municipalities, local and state governments, and other entities. These
obligations may carry fixed, variable, or floating interest rates. Some
money market securities employ a trust or other similar structure to modify
the maturity, price characteristics, or quality of financial assets so that
they are eligible investments for money market funds. If the structure does
not perform as intended, adverse tax or investment consequences may
result.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
or private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities. They
may be 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. A fund may own a municipal security directly or through a
participation interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by the state
of 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 be
affected by the strength of the U.S. dollar, interest rates, the price
stability of oil imports, and the continued existence of favorable tax
incentives. Recent legislation revised these incentives, but the government
of Puerto Rico anticipates only a slight reduction in the average real
growth rates for the economy.
ASSET-BACKED SECURITIES include interests in pools of purchase
contracts, financing leases, or sales agreements entered into by
municipalities. These securities usually rely on continued payments by a
municipality, and may also be subject to prepayment risk.
VARIABLE- AND FLOATING-RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security's market value
more volatile.
RESTRICTIONS: Spartan California Municipal Money Market may not purchase
certain types of variable- and floating-rate securities which are
inconsistent with the fund's goal of maintaining a stable share price.
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) a security to the issuer
or a financial intermediary. In exchange for this benefit, the fund s
may pay periodic fees or accept a lower interest rate. The credit quality
of the investment may be affected by the creditworthiness of the put
provider. Demand features, standby commitments, and tender options 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. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
RESTRICTIONS: Spartan California Municipal Money Market may not use
investment techniques which are inconsistent with the fund's goal of
maintaining a stable share price.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities and some other
securities may be subject to legal restrictions. Difficulty in selling
securities may result in a loss or may be costly to a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield or the market value of its assets.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
these changes, and also to changes in the market value of a single issuer
or industry.
RESTRICTIONS: The funds are considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, a fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S. government
securities. A fund may invest more than 25% of its total assets in tax-free
securities that finance similar types of projects.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a bond fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET seeks as high a level of current
income, exempt from federal i ncome tax and California state personal
income tax, as is consistent with preservation of capital by investing in
high-quality, short-term California municipal obligations. The fund will
normally invest so that at least 80% of its income distributions are exempt
from federal income tax.
SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL seeks a high level of current
income, exempt from federal income tax and California state personal income
tax. The fund will normally invest at least 80% of its assets in municipal
securities whose interest is free from federal income tax.
SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD seeks the highest level of current
income, exempt from federal income tax and California state personal income
tax, available from California municipal bonds. The fund will normally
invest so that at least 80% of its income distributions are exempt from
federal and California state personal income taxes.
EACH FUND may borrow only for temporary or emergency purposes, but not in
an amount exceeding 33% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price or dividends; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to an affiliate who provides
assistance with these services for Spartan California Municipal Money
Market Portfolio.
FMR may, from time to time, agree to reimburse the funds for management
fees above a specified limit. FMR retains the ability to be repaid by a
fund if expenses fall below the specified limit prior to the end of the
fiscal year. Reimbursement arrangements, which may be terminated at any
time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. Each fund
pays a management fee at a fixed annual rate of its average net assets:
.50% for Spartan California Municipal Money Market Portfolio and .55% for
Spartan California Intermediate Municipal Portfolio and Spartan California
Municipal High Yield Portfolio. The total management fee rate for Spartan
California Municipal Money Market , Spartan California Intermediate
Municipal and Spartan California Municipal High Yield for fiscal
1995, after reimbursement, was .28 % , .05% and .55 %,
respectively.
FMR HAS A SUB-ADVISORY AGREEMENT with FTX, which has primary responsibility
for providing investment management for Spartan California Municipal Money
Market Portfolio, while FMR retains responsibility for providing other
management services. FMR pays FTX 50% of its management fee (before expense
reimbursements) for these services.
FSC performs many transaction and accounting functions for the funds. These
services include processing shareholder transactions and calculating each
fund's share price. FMR, and not the funds, pays for these services.
To offset shareholder service costs, FMR or its affiliates also collect the
funds' $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for wire
purchases and redemptions, and, for Spartan California Municipal Money
Market and Spartan California Intermediate Municipal, the $2.00
checkwriting charge. For fiscal 1995, these fees amounted to $ 8,370 ,
$ 2,319 , $ 1,540 , and $ 12,864 , respectively, for Spartan
California Municipal Money Market; $ 965 , $ 170 , $ 75 ,
and $ 80 , respectively, for Spartan California Intermediate
Municipal; and, $ 7,690 , $ 2,445 , and $ 610 ,
respectively, for Spartan California Municipal High Yield.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the fund's shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
For fiscal 1995, the portfolio turnover rates for Spartan California
Intermediate Municipal Portfolio and Spartan California Municipal High
Yield Portfolio were 55 % and 33 %, respectively. These rates
vary from year to year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. Spartan California Municipal Money Market Portfolio is
managed to keep its share price stable at $1.00. Each fund's shares are
sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity
fund.
If you buy shares by check or Fidelity Money Line(registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
For Spartan CA Money Market $25,000
TO ADD TO AN ACCOUNT $1,000
Through automatic investment plans $500
MINIMUM BALANCE $5,000
For Spartan CA Money Market $10,000
UNDERSTANDING THE
SPARTAN APPROACH(registered trademark)
Fidelity's Spartan Approach is
based on the principle that
lower fund expenses can
increase returns. The Spartan
funds keep expenses low in
two ways. First, higher
investment minimums reduce
the effect of a fund's fixed
costs, many of which are paid
on a per-account basis.
Second, unlike most mutual
funds that include transaction
costs as part of overall fund
expenses, Spartan
shareholders pay directly for
the transactions they make.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
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Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to the complete
check payable to the name of the fund.
complete name of the Indicate your fund
fund of your choice. account number on
Mail to the address your check and mail to
indicated on the the address printed on
application. your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (small solid bullet) Bring your application (small solid bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
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Wire (wire_graphic) (small solid bullet) There may be a $5.00 (small solid bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(small solid bullet) Call 1-800-544-7777 to (small solid bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
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Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000
worth of shares in the account ($10,000 for Spartan California Municipal
Money Market Portfolio) to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner, or
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the table
at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account in Spartan California Municipal
Money Market or Spartan California Intermediate Municipal, you may write an
unlimited number of checks. Do not, however, try to close out your account
by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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IF YOU SELL SHARES OF SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD AFTER HOLDING THEM LESS
THAN 180 DAYS, THE FUND WILL DEDUCT A REDEMPTION FEE EQUAL TO .50% OF THE VALUE OF
THOSE SHARES. IF YOUR ACCOUNT BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR INDIVIDUAL
REDEMPTION TRANSACTIONS: $2.00 FOR EACH CHECK YOU WRITE AND $5.00 FOR EACH EXCHANGE,
BANK WIRE, AND ACCOUNT CLOSEOUT.
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Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $100,000.
(small solid bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
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Check (check_graphic) All account types (small solid bullet) Minimum check: $1,000.
(small solid bullet) All account owners must sign
a signature card to receive a
checkbook.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. There may be a $5.00 fee for
each exchange out of the funds, unless you place your transaction on
Fidelity's automated exchange services.
Note that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
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A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THOSE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains, if any, to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains earned by the bond funds are
normally distributed in April and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. Each fund offers four
options (three for Spartan California Municipal Money Market):
5. REINVESTMENT OPTION. Your dividend and capital gain distributions, if
any, will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned this
option.
6. INCOME-EARNED OPTION. Your capital gain distributions, if any, will be
automatically reinvested, but you will be sent a check for each dividend
distribution. This option is not available for Spartan California Municipal
Money Market.
7. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions, if any.
8. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions, if any, will be automatically invested in
another identically registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions, if any, will be reinvested at the NAV as
of the date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS. Money
market funds usually don't
make capital gain
distributions.
(checkmark)
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the funds' tax implications.
TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31. Fidelity will send you and the IRS a
statement showing the tax status of the distributions paid to you in the
previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Each fund may invest up to 100% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
To the extent a fund's income dividends are derived from interest on state
tax-free investments, they will be free from California state personal
income tax.
During fiscal 1995, 100% of Spartan California Municipal Money Market
Portfolios, 100% of Spartan California Intermediate Municipal Portfolio's
and 100% of Spartan California Municipal High Yield Portfolio's income
dividends were free from federal income tax and from California
state personal income taxes. 43.6 % of Spartan California Municipal
Money Market's, 3.2 % of Spartan California Intermediate Municipal's,
and 5.5 % of Spartan California Municipal High Yield's income
dividends were subject to the federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your bond fund redemptions - including exchanges to
other Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price you
receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital
gain distribution from its NAV, you will pay the full price for the shares
and then receive a portion of the price back in the form of a taxable
distribution.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The money market fund values the securities it owns on the basis of
amortized cost. This method minimizes the effect of changes in a security's
market value and helps the fund to maintain a stable $1.00 share price. For
the bond funds, assets are valued primarily on the basis of market
quotations, if available. Since market quotations are often unavailable,
assets are usually valued by a method that the Board of Trustees believes
accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow reasonable procedures designed to verify the identity of the caller.
Fidelity will request personalized security codes or other information, and
may also record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the
ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees a fund or its
transfer agent has incurred.
(small solid bullet) Spartan California Municipal Money Market and Spartan
California Intermediate Municipal reserve the right to limit all accounts
maintained or controlled by any one person to a maximum total balance of $2
million.
(small solid bullet) You begin to earn dividends as of the first business
day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge
you a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when a fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line
have been collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
THE REDEMPTION FEE for Spartan California Municipal High Yield, if
applicable, will be deducted from the amount of your redemption. This fee
is paid to the fund rather than FMR, and it does not apply to shares that
were acquired through reinvestment of distributions. If shares you are
redeeming were not all held for the same length of time, those shares you
held longest will be redeemed first for purposes of determining whether the
fee applies.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at
the time of the transaction is $50,000 or more. Otherwise, you should note
the following:
(small solid bullet) The $2.00 checkwriting charge will be deducted from
your account.
(small solid bullet) The $5.00 exchange fee will be deducted from the
amount of your exchange.
(small solid bullet) The $5.00 wire fee will be deducted from the amount of
your wire.
(small solid bullet) The $5.00 account closeout fee does not apply to
exchanges or wires, but it will apply to checkwriting.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500, subject to an annual
maximum charge of $60.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts, accounts using regular investment plans,
or if total assets in Fidelity funds exceed $50,000. Eligibility for the
$50,000 waiver is determined by aggregating Fidelity mutual fund accounts
maintained by FSC or FBSI which are registered under the same social
security number or which list the same social security number for the
custodian of a Uniform Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000 ($10,000 for Spartan California
Municipal Money Market, you will be given 30 days' notice to reestablish
the minimum balance. If you do not increase your balance, Fidelity reserves
the right to close your account and send the proceeds to you. Your shares
will be redeemed at the NAV on the day your account is closed and the $5.00
account closeout fee will be charged.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, each fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
SPARTAN(Registered trademark) CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO
A FUND OF FIDELITY CALIFORNIA MUNICIPAL TRUST II
SPARTAN(Registered trademark) CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO
SPARTAN(Registered trademark) CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO
FUNDS OF FIDELITY CALIFORNIA MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
APRIL 17, 1995
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated April 17, 1995). Please retain this
document for future reference. The funds' financial statements and
financial highlights, included in the Annual Report for the fiscal year
ended February 28, 1995, are incorporated herein by reference. To obtain an
additional copy of the Prospectus or the Annual Report, please call
Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Factors Affecting California
Special Factors Affecting Puerto Rico
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Distribution and Service Plans
Interest of FMR Affiliates
Description of the Trusts
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER
FMR Texas Inc. (FTX) (money market fund)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB) and Fidelity Service Co. (FSC)
SCR-ptb-495
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
A fund's fundamental investment policies and limitations cannot be changed
without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
However, except for the fundamental investment limitations set forth below,
the investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET
PORTFOLIO
(MONEY MARKET FUND)
THE FOLLOWING ARE THE MONEY MARKET FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue bonds or any other class of securities preferred over shares of
the fund in respect of the fund's assets or earnings, provided that
Fidelity California Municipal Trust may issue additional series of shares
in accordance with its Declaration of Trust;
(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 the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation;
(3) underwrite securities issued by others (except to the extent that the
fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities; or
(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 purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, acquired or traded together with, their underlying securities,
and does not apply to securities that incorporate features similar to
options or futures contracts.
(viii) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to purchases
of debt securities.
(ix) The fund does not currently intend to (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(x) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment 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 money market fund's policies on quality and maturity, see the
section entitled "Quality and Maturity" on page .
INVESTMENT LIMITATIONS OF SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL
PORTFOLIO
(INTERMEDIATE FUND)
THE FOLLOWING ARE THE INTERMEDIATE 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 objectives, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(vii) The fund does not currently intend to 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 with
substantially the same fundamental investment objectives, policies, and
limitations as the fund.
For purposes of limitations (4) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the intermediate fund's limitations on futures and options
transactions, see the section entitled "Limitations on Futures and Options
Transactions" beginning on page .
INVESTMENT LIMITATIONS OF SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO
(HIGH YIELD FUND)
THE FOLLOWING ARE THE HIGH YIELD FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS
SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue bonds or any other class of securities preferred over shares of
the fund in respect of the fund's assets or earnings, provided that
Fidelity California Municipal Trust may issue additional series of shares
in accordance with its Declaration of Trust;
(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 the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation;
(3) underwrite securities issued by others (except to the extent that the
fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities (but this shall not prevent the fund from
purchasing and selling futures contracts); 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 fund for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(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 ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(ix) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations (4) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the high yield fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
Each fund's investments must be consistent with its investment objective
and policies. Accordingly, not all of the security types and investment
techniques discussed below are eligible investments for each of the funds.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
QUALITY AND MATURITY (MONEY MARKET FUND ONLY). Pursuant to procedures
adopted by the Board of Trustees, the fund may purchase only high-quality
securities that FMR believes present minimal credit risks. To be considered
high-quality, a security must be rated in accordance with applicable rules
in one of the two highest categories for short-term securities by at least
two nationally recognized rating services (or by one, if only one rating
service has rated the security); or, if unrated, judged to be of equivalent
quality by FMR.
The fund currently intends to limit its investments to securities with
remaining maturities of 397 days or less, and to maintain a dollar-weighted
average maturity of 90 days or less. When determining the maturity of a
security, the fund may look to an interest rate reset or demand feature.
LOWER-QUALITY MUNICIPAL SECURITIES. The bond funds may invest a portion of
their assets in lower-quality municipal securities as described in the
Prospectus.
While the market for California municipals is considered to be substantial,
adverse publicity and changing investor perceptions may affect the ability
of outside pricing services used by a fund to value its portfolio
securities, and the fund's ability to dispose of lower-quality bonds. The
outside pricing services are monitored by FMR and reported to the Board to
determine whether the services are furnishing prices that accurately
reflect fair value. The impact of changing investor perceptions may be
especially pronounced in markets where municipal securities are thinly
traded.
Each fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to
be in the best interest of the fund's shareholders.
INDEXED SECURITIES. Each 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.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. A fund may receive fees for entering into
delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the fund could miss
a favorable price or yield opportunity, or could suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
REFUNDING CONTRACTS. A 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 funds generally
will not be obligated to pay the full purchase price if they fail 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). A 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, each fund will place liquid assets in a segregated
custodial account equal in amount to its obligations under refunding
contracts.
INVERSE FLOATERS. A fund may invest in inverse floaters, which are
instruments whose interest rates bear an inverse relationship to the
interest rate on another security or the value of an index. Changes in the
interest rate on the other security or index inversely affect the residual
interest rate paid on the inverse floater, with the result that the inverse
floater's price will be considerably more volatile than that of a
fixed-rate bond. For example, a municipal issuer may decide to issue two
variable-rate instruments instead of a single long-term, fixed-rate bond.
The interest rate on one instrument reflects short-term interest rates,
while the interest rate on the other instrument (the inverse floater)
reflects the approximate rate the issuer would have paid on a fixed-rate
bond, multiplied by two, minus the interest rate paid on the short-term
instrument. Depending on market availability, the two portions may be
recombined to form a fixed-rate municipal bond. The market for inverse
floaters is relatively new.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. Subject to applicable regulatory requirements, the money market fund
may buy tender option bonds if the agreement gives the fund the right to
tender the bond to its sponsor no less frequently than once every 397 days.
In selecting tender option bonds for the funds, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. Each fund may
acquire standby commitments to enhance the liquidity of portfolio
securities, but, in the case of the money market fund, only when the
issuers of the commitments present minimal risk of default.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments. In
the latter case, the fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity. Standby commitments will
not affect the dollar-weighted average maturity of the money market fund,
or the valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the funds; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. Each fund may invest a portion of its assets
in municipal leases and participation interests therein. These obligations,
which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, the funds will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives
a fund a specified, undivided interest in the obligation in proportion to
its purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
FEDERALLY TAXABLE OBLIGATIONS. The funds do not intend to invest in
securities whose interest is federally taxable; however, from time to time,
each fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, each fund may invest in obligations whose interest is
federally taxable pending the investment or reinvestment in municipal
securities of proceeds from the sale of its shares or sales of portfolio
securities.
Should a fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The bond funds' standards for high-quality, taxable obligations
are essentially the same as those described by Moody's Investors Service,
Inc. (Moody's) in rating corporate obligations within its two highest
ratings of Prime-1 and Prime-2, and those described by Standard & Poor's
Corporation (S&P) in rating corporate obligations within its two highest
ratings of A-1 and A-2. The money market fund will purchase taxable
obligations only if they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the California legislature
that would affect the state tax treatment of the funds' distributions. If
such proposals were enacted, the availability of municipal obligations and
the value of the funds' holdings would be affected and the Trustees would
reevaluate the funds' investment objectives and policies.
Each fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities
of portfolio securities, sales of fund shares, or in order to meet
redemption requests, a fund may hold cash that is not earning income. In
addition, there may be occasions when, in order to raise cash to meet
redemptions, a fund may be required to sell securities at a loss.
MARKET DISRUPTION RISK. 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. Municipal bankruptcies are
relatively rare and certain provisions of the U.S. Bankruptcy Code that
govern municipal bankruptcies re unclear and remain untested. Further,
different results could be obtained in different states or with respect to
different types of municipal securities issuers within a state due to the
application of state law to municipal issuers. The legislative or judicial
resolution of these issues could affect the market for municipal securities
generally, certain segments of the market, or the relative credit quality
of particular securities, which could have a significant impact on the
prices of some or all of the municipal securities held by a fund and which
could make it more difficult for the money market fund to maintain a stable
net asset value per share.
STRUCTURED SECURITIES employ a trust or other similar structure to modify
the maturity, price characteristics, or quality of financial assets. For
example, structural features can be used to modify the maturity of a
security or interest rate adjustment features can be used to enhance price
stability. If the structure does not perform as intended, adverse tax or
investment consequences may result. Neither the Internal Revenue Service
(IRS) nor any other regulatory authority has ruled definitively on certain
legal issues presented by structured securities. Future tax or other
regulatory determinations could adversely affect the value, liquidity, or
tax treatment of the income received from these securities or the nature
and timing of distributions made by a fund. The payment of principal and
interest on structured securities may be largely dependent on the cash
flows generated by the underlying financial assets.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments of
the interest rate paid. Variable rate securities provide for a specified
periodic adjustment in the interest rate, while floating rate securities
have interest rates that change whenever there is a change in a designated
benchmark rate. Some variable or floating rate securities have put
features.
PUT FEATURES entitle the holder to sell a security back to the issuer or a
third party at any time or at specified intervals. They are subject to the
risk that the put provider is unable to honor the put feature (purchase the
security). Put providers often support their ability to buy securities on
demand by obtaining letters of credit or other guarantees from domestic or
foreign banks. FMR may rely on its evaluation of a bank's credit in
determining whether to purchase a security supported by a letter of credit.
Demand features, standby commitments, and tender options are types of put
features.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
For the money market fund, FMR may determine some restricted securities and
municipal lease obligations to be illiquid.
For the bond funds, investments currently considered 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 a fund writes, all or a portion of the
value of the underlying instrument may be illiquid depending on the assets
held to cover the option and the nature and terms of any agreement the fund
may have to close out the option before expiration.
In the absence of market quotations, illiquid investments for the money
market fund are valued for purposes of monitoring amortized cost valuation,
and for the bond funds 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, a fund were in a position where
more than 10% of its net assets was invested in illiquid securities, it
would seek to take appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security. However, in general, the money market fund anticipates
holding restricted securities to maturity or selling them in an exempt
transaction.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security
will be less than the resale price, as well as delays and costs to a fund
in connection with bankruptcy proceedings), it is each fund's current
policy to engage in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement. A
fund will enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of the fund's assets and may be
viewed as a form of leverage.
INTERFUND BORROWING PROGRAM. Pursuant to an exemptive order issued by
the SEC, e ach 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.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each bond 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 funds intend to comply with Rule 4.5 under the
Commodity Exchange Act, which limits the extent to which the funds can
commit assets to initial margin deposits and option premiums.
In addition, each 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 funds' investments in futures contracts and
options, and the funds' policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
a 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 a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a 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 a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, the fund may be
entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a 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. A 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 a fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the
option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. A fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. A 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, a 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 a fund's current or
anticipated investments exactly. The funds may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which they typically
invest, which involves a risk that the options or futures position will not
track the performance of a fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a 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. A 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 a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for a 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 a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
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 (OTC) 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 funds greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will comply
with guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of a
fund's assets could impede portfolio management or the fund's ability to
meet redemption requests or other current obligations.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open transmission
access to any electricity supplier, although it is not presently known to
what extent competition will evolve. Other risks include: (a) the
availability and cost of fuel, (b) the availability and cost of capital,
(c) the effects of conservation on energy demand, (d) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (e) timely and sufficient rate
increases, and (f) opposition to nuclear power.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They 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.
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.
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.
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 funds. Obligations of the state or local
governments may also be affected by budgetary pressures affecting the State
and economic conditions in the State. Interest income to a fund could also
be adversely affected. The following 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 of California, its agencies, or instrumentalities,
as available on the date of this Statement of Additional Information. FMR
has not independently verified any of the information contained in such
official statements and other publicly available documents, but is not
aware of any fact which would render such information inaccurate.
CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS
LIMITATION ON TAXES. Certain obligations held by the funds 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 California 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, XIIIA limits to 1% of full
cash value the rate of ad valorem property taxes on real property and
generally restricts the 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 levy 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 consists 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 excludes
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 4-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 fiscal year 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 199 5 -9 6 Governor's
Budget proposal estimates State appropriations will be more than $ 6
billion under the limit for fiscal year 199 4 -9 5 and
over $ 7.2 billion under the limit for fiscal year
199 5 -9 6 .
OBLIGATIONS OF THE STATE OF CALIFORNIA
As of February , 199 5 , 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, 199 4 , 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 2 2 % is presently
self-liquidating (for which program revenues are anticipated to be
sufficient to reimburse the General Fund for debt service payments). In
fiscal year 199 3 - 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
California's economy is the largest among the 50 states and one of the
largest in the world. The State's population grew by 2 6 % in the
1980s and, at over 31 million, it now represents 12.3% of the total United
States population. Total personal income in the State, at an estimated
$6 83 billion in 199 3 , accounts for almost 13% of all
personal income in the nation. Total employment in 1994 was almost
14 million, the majority of which was in the service, trade, and
manufacturing sectors.
From mid-1990 to late 1993, the State suffered a recession with the
worst economic, fiscal and budget conditions since the 1930s. Construction,
manufacturing (especially aerospace), and financial services, among others,
were all severely affected, particularly in Southern California. Job losses
were the worst of any post-war recession. Employment levels stabilized by
late 1993 and steady growth occurred in 1994 and is expected in 1995, but
pre-recession job levels are not expected to be reached for several more
years. Unemployment, while higher than the national average, has come down
about 3% in 1994. Economic indicators show a steady recovery underway in
California since the start of 1994.
RECENT STATE FINANCIAL RESULTS
The principal sources of State General Fund revenues in
199 3 -9 4 were the California personal income tax (44% of total
revenues), the sales tax (3 5 %), 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
t hree years, as the recession has cut revenues), the State has
budgeted to maintain the Economic Uncertainties Fund 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 3 5 %).
Since the start of the 1990-91 Fiscal Year, 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 the 1990-91 and 1991-92 fiscal years,
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 the 1995-96 fiscal year. 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 as they came due all of these ongoing
obligations, as well as valid obligations incurred in the prior fiscal
year.
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 government, 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 the 1994-95 fiscal year. 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 include 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 the 1995-96 fiscal year. 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 the
1995-96 fiscal year. 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 cuts in
General Fund expenditures in either the 1994-95 or 1995-96 fiscal years 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 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 the 1995-96 fiscal year 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 Special
Fund for Economic Uncertainties, 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, the 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 "A 1 " by Moody's,
"A" by Fitch, 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 fund (the Pool) filed for
protection under Chapter 9 of the Federal Bankruptcy Code, after reports
that the Pool had suffered significant market losses in its investments
causing a liquidity crisis for the Pool and the County. More than 180 other
public entities, most but not all located in the County, were also
depositors in the Pool. As of mid-January, 1995, the County estimated the
Pool's loss at about $1.7 billion, or 22% of its initial deposits of around
$7.5 billion. Many of the entities which kept moneys in the Pool, 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, and others may in the future,
default in payment of their obligations. Moody's and Standard & Poor's have
suspended, reduced to below investment grade levels, or placed on "Credit
Watch" various securities of the County and the entities participating in
the Pool.
The State of California has no obligation with respect to any obligations
or securities of the County or any of the other participating entities,
although under existing legal precedents, the State may be obligated to
ensure that school districts have sufficient funds to operate.
OBLIGATIONS OF OTHER ISSUERS
STATE ASSISTANCE. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13. Subsequently,
the California 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
fiscal year 199 3 -9 4 (about 7 0 % of General Fund
expenditures) and has been budgeted at $ 30.5 billion for fiscal
year 199 4 - 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 California 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 California entities.
OTHER CONSIDERATIONS. The repayment of Industrial Development Securities
secured by real property may be affected by California 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 California 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 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 California tax allocation bonds
after the enactment of Articles XIIIA and XIIIB, and only resumed such
ratings on a selective basis.
Proposition 87, approved by California 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 California is within an active geologic region subject
to major seismic activity. Any California municipal obligation in the funds
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, has 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
California obligations in the funds 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 Legislature or by initiative) which
would modify existing taxes or other revenue-raising measures or which
either would further limit or, alternatively, would increase the abilities
of state and local governments to impose new taxes or increase existing
taxes. It is not presently possible to predict the extent to which any such
legislation will be enacted, or if enacted, how it would affect California
municipal obligations. It is also not presently possible to predict the
extent of future allocations of state revenues to local governments or the
abilities of state or local governments to pay the interest on, or repay
the principal of, such California municipal obligations in light of future
fiscal circumstances.
SPECIAL FACTORS AFFECTING PUERTO RICO
The following only highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the Commonwealth or
Puerto Rico), and is based on information drawn from official statements
and prospectuses relating to the securities offerings of Puerto Rico 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 each fund by FMR pursuant to authority contained in the fund's
management contract. In the case of the money market fund, FMR has granted
investment management authority to the sub-adviser (see the section
entitled "Management Contracts"), and the sub-adviser is authorized to
place orders for the purchase and sale of portfolio securities, and will do
so in accordance with the policies described below. FMR is also responsible
for the placement of transaction orders for other investment companies and
accounts for which it or its affiliates act as investment adviser.
Securities purchased and sold by the money market fund generally will be
traded on a net basis (i.e., without commission). In selecting
broker-dealers, subject to applicable limitations of the federal securities
laws, FMR 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 funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). FMR maintains a listing of broker-dealers who
provide such services on a regular basis. However, as many transactions on
behalf of the money market fund are placed with broker-dealers (including
broker-dealers on the list) without regard to the furnishing of such
services, it is not possible to estimate the proportion of such
transactions directed to such broker-dealers solely because such services
were provided. The selection of such broker-dealers generally is made by
FMR (to the extent possible consistent with execution considerations) based
upon the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid 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
each fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the funds and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds, or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
Each fund's Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the funds and review the commissions paid by each fund over
representative periods of time to determine if they are reasonable in
relation to the benefits to the fund.
For the fiscal year ended February 28, 1995 and the fiscal period December
30, 1993( commencement of operations) to February 28, 1994, the
intermediate fund's portfolio turnover rates were 55 % and 0 %
( annualized ) , respectively. For the fiscal years ended
February 28, 1995 and 1994, the high yield fund's portfolio turnover rates
were 33 % and 54 %, respectively.
For fiscal 1995, 1994, and the fiscal period May 1, 1992 to February 28,
1993, the money market fund and high yield fund paid no brokerage
commissions. For fiscal 1995 and 1994, the intermediate fund paid no
brokerage commissions.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of the funds to participate in volume transactions
will produce better executions and prices for the funds. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
INTERMEDIATE AND HIGH YIELD FUNDS. Valuations of portfolio securities
furnished by the pricing service employed by the funds are based upon a
computerized matrix system or appraisals by the pricing service, in each
case in reliance upon information concerning market transactions and
quotations from recognized municipal securities dealers. The methods used
by the pricing service and the quality of valuations so established are
reviewed by officers of the fund and FSC under the general supervision of
the Board of Trustees. There are a number of pricing services available,
and the Trustees, or officers acting on behalf of the Trustees, on the
basis of on-going evaluation of these services, may use other pricing
services or discontinue the use of any pricing service in whole or in part.
MONEY MARKET FUND. The money market fund values its investments on the
basis of amortized cost. This technique involves valuing an instrument at
its cost as adjusted for amortization of premium or accretion of discount
rather than its value based on current market quotations or appropriate
substitutes which reflect current market conditions. The amortized cost
value of an instrument may be higher or lower than the price the fund would
receive if it sold the instrument.
Valuing the money market fund's instruments on the basis of amortized cost
and use of the term "money market fund" are permitted by Rule 2a-7 under
the 1940 Act. The fund must adhere to certain conditions under Rule 2a-7.
The Board of Trustees oversees FMR's adherence to SEC rules concerning
money market funds, and has established procedures designed to stabilize
the fund's NAV at $1.00. At such intervals as they deem appropriate, the
Trustees consider the extent to which NAV calculated by using market
valuations would deviate from $1.00 per share. If the Trustees believe that
a deviation from the fund's amortized cost per share may result in material
dilution or other unfair results to shareholders, the Trustees have agreed
to take such corrective action, if any, as they deem appropriate to
eliminate or reduce, to the extent reasonably practicable, the dilution or
unfair results. Such corrective action could include selling portfolio
instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends; redeeming shares
in kind; establishing NAV by using available market quotations; and such
other measures as the Trustees may deem appropriate.
During periods of declining interest rates, the money market fund's yield
based on amortized cost may be higher than the yield based on market
valuations. Under these circumstances, a shareholder in the fund would be
able to obtain a somewhat higher yield than would result if the fund
utilized market valuations to determine its NAV. The converse would apply
in a period of rising interest rates.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. A bond fund's share price, and each
fund's yield and total return fluctuate in response to market conditions
and other factors, and the value of a bond fund's shares when redeemed may
be more or less than their original cost.
YIELD CALCULATIONS. To compute the money market fund's yield for a period,
the net change in value of a hypothetical account containing one share
reflects the value of additional shares purchased with dividends from the
one original share and dividends declared on both the original share and
any additional shares. The net change is then divided by the value of the
account at the beginning of the period to obtain a base period return. This
base period return is annualized to obtain a current annualized yield. The
money market fund also may calculate a compound effective yield by
compounding the base period return over a one-year period. In addition to
the current yield, the money market fund may quote yields in advertising
based on any historical seven-day period. Yields for the money market fund
are calculated on the same basis as other money market funds, as required
by regulation.
For the bond funds, yields are computed by dividing the fund's interest
income for a given 30-day or one-month period, net of expenses, by the
average number of shares entitled to receive dividends during the period,
dividing this figure by the fund's net asset value per share (NAV) at the
end of the period, and annualizing the result (assuming compounding of
income) in order to arrive at an annual percentage rate. Yields do not
reflect the high yield fund's .50% redemption fee, which applies to shares
held less than less than 180 days days. Income is calculated for purposes
of the bond fund's yield quotations in accordance with standardized methods
applicable to all stock and bond funds. In general, interest income is
reduced with respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and is
increased with respect to bonds trading at a discount by adding a portion
of the discount to daily income. Capital gains and losses generally are
excluded from the calculation.
Income calculated for the purposes of determining the bond fund's yield
differs from income as determined for other accounting purposes. Because of
the different accounting methods used, and because of the compounding of
income assumed in yield calculations, the bond fund's yield may not equal
its distribution rate, the income paid to your account, or the income
reported in the fund's financial statements.
Yield information may be useful in reviewing a fund's performance and in
providing a basis for comparison with other investment alternatives.
However, each 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 a
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
A fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment after taxes to equal the fund's tax-free
yield. Tax-equivalent yields are calculated by dividing a fund's yield by
the result of one minus a stated federal or combined federal and state tax
rate. If only a portion of a fund's yield is tax-exempt, only that portion
is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and state income tax laws for 1995. The
second table shows the approximate yield a taxable security must provide at
various income brackets to produce after-tax yields equivalent to those of
hypothetical tax-exempt obligations yielding from 2.0% to 8.0%. Of course,
no assurance can be given that a fund will achieve any specific tax-exempt
yield. While the funds invest principally in obligations whose interest is
exempt from federal and state income tax, other income received by the
funds may be taxable. The tables do not take into account local taxes, if
any, payable on fund distributions.
Use the first table to find your approximate effective tax bracket taking
into account federal and state taxes for 1995.
1995 TAX RATES
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.% 6. % 32.32%
24,520 - 30,987 49,039 - 61,974 28 8 33.76
30,988 - 56,550 61,975 - 94,250 28 9.3 34.70
56,551 - 107,464 94,251 - 143,600 31 9.3 37.42
107,465 - 117,950 -- - -- 31 10.0 37.90
-- - -- 143,601 - 214,928 36 9.3 41.95
117,951 - 214,929 214,929 - 256,500 36 10.0 42.40
214,930 - 256,500 -- - -- 36 11.0 43.04
-- - -- 256,501 - 429,858 39.6 10.0 45.64
256,501 + 429,859 + 39.6 11.0 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>
32.32% 33.76% 34.70% 37.42% 37.90% 41.95% 42.40% 43.04% 45.64% 46.24%
</TABLE>
To match
these
tax-free
yields: Your taxable investment would have to earn the following
yield:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 Statement of
Additional Information, the California Franchise Tax Board had not
published the 1995 inflation adjusted tax brackets. Each fund may invest a
portion of its assets in obligations that are subject to state or federal
income taxes. When a fund invests in these obligations, its tax-equivalent
yield will be lower. In the table above, 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 a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's net asset
value over a stated period. Average annual total returns are calculated by
determining the growth or decline in value of a hypothetical historical
investment in a fund over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative total return of 100% over ten years would
produce an average annual return of 7.18%, which is the steady annual rate
of return that would equal 100% growth on a compounded basis in ten years.
While average annual returns are a convenient means of comparing investment
alternatives, investors should realize that a fund's performance is not
constant over time, but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of the fund.
In addition to average annual total returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis and may or may not include the effect of the
high yield fund's .50% redemption fee on shares held less than less than
180 days days. Excluding a fund's redemption fee from a total return
calculation produces a higher total return figure. Total returns, yields,
and other performance information may be quoted numerically or in a table,
graph, or similar illustration, and may omit or include the effect of the
$5.00 account closeout fee.
NET ASSET VALUE. Charts and graphs using a 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 a fund and
reflects all elements of its return. Unless otherwise indicated, a fund's
adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following tables show the money market fund's
7-day yields, the bond funds' 30-day yields, each fund's tax-equivalent
yields, and total returns for periods ended February 28, 1995. Total return
figures include the effect of the $5.00 account closeout fee based on an
average size account, but not the high yield fund's .50% redemption fee,
applicable to shares held less than 180 days.
The tax-equivalent yield is based on a combined effective federal and state
income tax rate of 4 3.0 4% and reflects that, as of February 28,
1995, none of the funds' income was subject to state taxes. Note that each
fund may invest in securities whose income is subject to the federal
alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns (dagger) Cumulative Total Returns (dagger)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax One Five Life of One Five Life of
Yield (dagger) Equivalen Year Years Fund Year Years Fund
t
Yield
Money Market Fund 3.90% 6.85% 3.00% 3.67% 3.79% 3.00% 19.74% 21.58*
* %
Intermediate Fund 5.23% 9.18% 1.66 N/A -.06** 1.66 N/A -.07**
High Yield Fund 5.97% 10.48% -.86 7.77* 7.72* -.86 45.36 47.85*
</TABLE>
(dagger) If FMR had not reimbursed certain fund expenses during the period,
the yield and tax equivalent yield for the money market fund and the
intermediate fund would have been 3.70% and 6.50% and 4.78% and 8.39%,
respectively, and each fund's total returns would have been lower.
* From November 27, 1989 (commencement of operations).
** From December 30, 1993 (commencement of operations).
The following table shows the income and capital elements of each fund's
cumulative total return. The table compares each fund's return to the
record of the Standard & Poor's Composite Index of 500 Stocks (S&P
500(registered trademark)), the Dow Jones Industrial Average (DJIA), and
the cost of living (measured by the Consumer Price Index, or CPI) over the
same period. The CPI information is as of the month end closest to the
initial investment date for each fund. The S&P 500 and DJIA comparisons are
provided to show how each fund's total return compared to the record of a
broad average of common stocks and a narrower set of stocks of major
industrial companies, respectively, over the same period. Of course, since
each fund invests in short-term fixed-income securities, common stocks
represent a different type of investment from the fund. Common stocks
generally offer greater growth potential than the funds, but generally
experience greater price volatility, which means greater potential for
loss. In addition, common stocks generally provide lower income than a
fixed-income investment such as the funds. Figures for the S&P 500 and DJIA
are based on the prices of unmanaged groups of stocks and, unlike the
funds' returns, do not include the effect of paying brokerage commissions
or other costs of investing. If FMR had not reimbursed certain fund
expenses during the period, each fund's total returns would have been
lower. The figures in the tables do not include the effect of a fund's
$5.00 account closeout fee or the .50% redemption fee applicable to shares
held less than 180 days.
During the period from November 27, 1989 (commencement of operations) to
February 28, 1995, a hypothetical $10,000 investment in the money market
fund would have grown to $12,159, assuming all distributions were
reinvested. This was a period of fluctuating interest rates and bond prices
and the figures below should not be considered representative of the
dividend income or capital gain or loss that could be realized from an
investment in the fund today.
Spartan California Municipal Money Market Portfolio Indices
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Period Initial Reinvested Cost
Ended $10,000 Dividend Total of
February 28 Investment Distributions Value S&P 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 10,000 $ 2,159 $ 12,159 $ 16,671 $ 17,68 $11,986
6
1994 10,000 1,804 11,804 15,529 16,439 11,652
1993 10,000 1,522 11,522 14,334 14,062 11,366
1992 10,000 1,206 11,206 12,952 13,234 11,009
1991 10,000 738 10,738 11,164 11,306 10,707
1990* 10,000 154 10,154 9,738 9,919 10,167
</TABLE>
* From November 27, 1989 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on November
27, 1989, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ 12,159 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments (dividends) for the period would have amounted to
$ 1,958 . The fund did not distribute any capital gains during the
period. Tax consequences of different investments have not been factored
into the above figures.
During the period from December 30, 1993 (commencement of operations) to
February 28, 1995, a hypothetical $10,000 investment in the intermediate
fund would have grown to $ 9,994 , assuming all distributions were
reinvested. This was a period of fluctuating interest rates and bond prices
and the figures below should not be considered representative of the
dividend income or capital gain or loss that could be realized from an
investment in the fund today.
Spartan California Intermediate Municipal Portfolio Indices
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Period Initial Reinvested Reinvested Cost
Ended $10,000 Dividend Capital Gain Total of
February 28 Investment Distributions Distributions Value S&P 500 DJIA Living**
1995 $ 9,430 $ 564 $ 0 $ 9,994 $ 10,706 $ 10,91 10,350
3
1994(dagger) 9,760 69 0 9,829 9,973 10,147 10,062
</TABLE>
(dagger) From December 30, 1993 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on December
30, 1993, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ 10,562 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments for the period would have amounted to $ 547 for
dividends and $ 0 for capital gains distributions. Tax consequences
of different investments have not been factored into the above figures.
During the period from November 27, 1989 (commencement of operations) to
February 28, 1995, a hypothetical $10,000 investment in the high yield fund
would have grown to $ 14,786, assuming all distributions were
reinvested. This was a period of fluctuating interest rates and bond prices
and the figures below should not be considered representative of the
dividend income or capital gain or loss that could be realized from an
investment in the fund today.
Spartan California Municipal High Yield Portfolio Indices
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Period Initial Reinvested Reinvested Cost
Ended $10,000 Dividend Capital Gain Total of
February 28 Investment Distributions Distributions Value S&P 500 DJIA Living**
1995 $ 10,020 $ 3,985 $ 782 $ 14,786 $ 16,671 $ 17,68 11,986
6
1994 10,930 3,398 586 14,914 15,529 16,439 11,652
1993 11,330 2,699 90 14,120 14,334 14,062 11,366
1992 10,530 1,742 0 12,272 12,952 13,234 11,009
1991 10,180 949 0 11,129 11,164 11,306 10,707
1990 (dagger) 9, 990 182 0 10,172 9,738 9,919 10,167
</TABLE>
(dagger) From November 27, 1989 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on November
27, 1989 the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ 14,983 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments for the period would have amounted to $ 3,447 for
dividends and $ 640 for capital gains distributions. Tax consequences
of different investments have not been factored into the above figures.
A fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to the
mutual fund rankings, a fund's performance may be compared to stock, bond,
and money market mutual fund performance indices prepared by Lipper or
other organizations. When comparing these indices, it is important to
remember the risk and return characteristics of each type of investment.
For example, while stock mutual funds may offer higher potential returns,
they also carry the highest degree of share price volatility. Likewise,
money market funds may offer greater stability of principal, but generally
do not offer the higher potential returns from stock mutual funds.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, a fund
may offer greater liquidity or higher potential returns than CDs, a fund
does not guarantee your principal or your return, and fund shares are not
FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AverageS(trademark)/All
Tax-Free, which is reported in the MONEY FUND REPORT(registered trademark),
covers over 389 tax-free money market funds. The Bond Fund Report
AverageS(trademark)/All Tax-Free, which is reported in the BOND FUND
REPORT(registered trademark), covers over 400 tax-free bond funds.
When evaluating comparisons to money market funds, investors should
consider the relevant differences in investment objectives and policies.
Specifically, money market funds invest in short-term, high-quality
instruments and seek to maintain a stable $1.00 share price. The bond
funds, however, invest in longer-term instruments and their share price
changes daily in response to a variety of factors.
A fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike
tax-free mutual funds, individual municipal bonds offer a stated rate of
interest and, if held to maturity, repayment of principal. Although some
individual municipal bonds might offer a higher return, they do not offer
the reduced risk of a mutual fund that invests in many different
securities. The initial investment requirements and sales charges of many
tax-free mutual funds are lower than the purchase cost of individual
municipal bonds, which are generally issued in $5,000 denominations and are
subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college or other
goals; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
Fidelity may also reprint, and use as advertising and sales literature,
articles from Fidelity Focus, a quarterly magazine provided free of charge
to Fidelity fund shareholders.
A fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. A 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, a fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a 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.
A 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 February 28, 1995, FMR advised over $ 25 billion in tax-free
fund assets, $ 75 billion in money market fund assets, $ 165
billion in equity fund assets, $ 40 billion in international fund
assets, and $ 20 billion in Spartan fund assets. The funds may
reference the growth and variety of money market mutual funds and the
adviser's innovation and participation in the industry. The equity funds
under management figure represents the largest amount of equity fund assets
under management by a mutual fund investment adviser in the United States,
making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
In addition to performance rankings, each fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1995: New Year's
Day, Presidents' Day , Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Although
FMR expects the same holiday schedule to be observed in the future,
the NYSE may modify its holiday schedule at any time.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the Securities and
Exchange Commission. To the extent that portfolio securities are traded in
other markets on days when the NYSE is closed, a fund's NAV may be affected
on days when investors do not have access to the fund to purchase or redeem
shares. In addition, trading in some of a fund's portfolio securities may
not occur on days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing a fund's NAV. Shareholders receiving securities or other property
on redemption may realize a gain or loss for tax purposes, and will incur
any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (the 1940
Act), each fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the Prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that each fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short-term capital gains are distributed as dividend
income, but do not qualify for the dividends-received deduction. These
gains will be taxed as ordinary income. Each fund will send each
shareholder a notice in January describing the tax status of dividend and
capital gain distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
Each fund purchases municipal obligations based on opinions of bond counsel
regarding the federal income tax status of the obligations. These opinions
generally will be based on covenants by the issuers regarding continuing
compliance with federal tax requirements. If the issuer of an obligation
fails to comply with its covenant at any time, interest on the obligation
could become federally taxable retroactive to the date the obligation was
issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of each fund's policy of investing so
that at least 80% of its income distributions are free from federal income
tax. Interest from private activity securities is a tax preference item for
the purposes of determining whether a taxpayer is subject to the AMT and
the amount of AMT to be paid, if any. Private activity securities issued
after August 7, 1986 to benefit a private or industrial user or to finance
a private facility are affected by this rule.
A portion of the gain on bonds purchased with market discount after April
30, 1993 and short-term capital gains distributed by each fund are taxable
to shareholders as dividends, not as capital gains. Dividend distributions
resulting from a recharacterization of gain from the sale of bonds
purchased with market discount after April 30, 1993 are not considered
income for purposes of the money market and high yield funds'
policies of investing so that at least 80% of their income distributions
are free from federal income tax. The money market fund may distribute any
net realized short-term capital gains and taxable market discount once a
year or more often, as necessary, to maintain its net asset value at $1.00
per share.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest) exceeds 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 a 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 each fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of a fund, and such shares are held six
months or less and are sold at a loss, the portion of the loss equal to the
amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed by
each fund are taxable to shareholders as dividends, not as capital gains.
As of February 28, 1995, the funds had capital loss carryovers available
to offset future capital gains, approximated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Aggregate
Amount that Expires on February 28,
Capital
Loss
Carryovers 2001 2003
Spartan California Money Market $ 756,900 $ 34,400 $ 722,500
Spartan California Intermediate 586,600 586,600
Spartan California High Yield 2,477,400 2,477,400
</TABLE>
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. Each 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 a fund's investments in such instruments.
The money market fund is treated as a separate entity from the other funds
of Fidelity California Municipal Trust II for tax purposes . Each
bond fund is treated as a separate entity from the other funds of Fidelity
California Municipal Trust for tax purposes .
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether a fund is suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for 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. Trustees and officers elected or
appointed to Fidelity California Municipal Trust II prior to the money
market fund's conversion from a series of Fidelity California Municipal
Trust served Fidelity California Municipal Trust in identical capacities.
All persons named as Trustees also serve in similar capacities for other
funds advised by FMR. Unless otherwise noted, the business address of each
Trustee and officer is 82 Devonshire Street, Boston, Massachusetts 02109,
which is also the address of FMR. Those Trustees who are "interested
persons" (as defined in the Investment Company Act of 1940) by virtue of
their affiliation with either the trust or FMR are indicated by an asterisk
(*).
*EDWARD C. JOHNSON 3d (64) , 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 (53) , Trustee and Senior Vice President, is
President of FMR; and President and a Director of FMR Texas Inc. (1989),
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
RALPH F. COX (62) , 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 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.
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. (1989), 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 a Executive-in-Residence (1995)
Columbia University Graduate School of Business and a financial consultant.
From 1987 to January 1995, Mr. Kirk was a Professor at Columbia
University Graduate School of Business. Prior to 1987, he was Chairman
of the Financial Accounting Standards Board. Mr. Kirk is a Director of
General Re Corporation (reinsurance) and Valuation Research Corp.
(appraisals and valuations, 1993). In addition, he serves as Vice Chairman
of the Board of Directors of the National Arts Stabilization Fund ,
Vice Chairman of the Board of Trustees of the Greenwich Hospital
Association , and as a member of the Public Oversight Board of the
American Institute of Certified Public Accountants' SEC Practice Section
(1995).
*PETER S. LYNCH (52) , Trustee (1990) is Vice Chairman of FMR (1992).
Prior to his retirement on 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 (65) , 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 (61) , 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. (1989), and AppleSouth, Inc. (restaurants,
1992).
FRED L. HENNING (55) , JR., Vice President (1994) (money market
fund only), is Vice President of Fidelity's money market funds and
Senior Vice President of FMR Texas Inc.
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).
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.
THOMAS D. MAHER (50) , Assistant Vice President (1990) (money market
fund only), is Assistant Vice President of Fidelity's money market funds
and Vice President and Associate General Counsel of FMR Texas Inc. (1990).
Prior to 1990, Mr. Maher was an employee of FMR .
DEBORAH F. WATSON (35) , is a Vice President of the money market fund
(1992) and other funds advised by FMR and an employee of FMR.
MICHAEL D. CONWAY (41), Assistant Treasurer (1995) (money market fund
only), is Assistant Treasurer of Fidelity's money market funds and is an
employee of FMR (1995). Before joining FMR, Mr. Conway was an employee of
Waddell & Reed Inc. (investment advisor, 1986-1994), where he served as
Assistant Treasurer (1992) and as Assistant Vice President and Director of
Operations of Waddell & Reed Asset Management Company (1994).
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 of 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 each fund for his or her services as Trustee for
the fiscal year ended February 28, 1995.
COMPENSATION TABLE
AGGREGATE COMPENSATION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ralph F. Phyllis Richard E. Donald Gerald C. Edward Marvin Thomas
Cox Burke J. Flynn Bradley J. Kirk McDonough H. L. Mann R.
Davis Jones Malone Williams
Money Market $ 579 $ 551 $ 721 $ 572 $ 585 $ 585 $ 592 $ 571 $ 585
Fund
Intermediate Fund 17 17 23 17 19 19 17 17 17
High Yield Fund 222 213 277 220 226 226 229 220 226
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Trustees Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from the Fund Benefits Accrued Retirement from from the Fund
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>
* Information is as December 31, 1994 for all 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 are 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 February 28, 1995, the Trustees and officers of the funds owned,
in the aggregate, less than 1% of each fund's total outstanding shares.
Also, as of that date, Mr. Fred C. Applegate, 885 La Jolla Corona Court, La
Jolla, CA, was known to own of record or beneficially approximately 9.28%
of the total outstanding shares of Spartan California Intermediate
Municipal Portfolio.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment
objective, policies, and limitations. FMR also provides each fund
with all necessary office facilities and personnel for servicing
each fund ' s investments, compensates all officers of each
fund and all Trustees who are "interested persons" of the trust s
or of FMR, and all personnel of each 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 each fund. These services include providing facilities
for maintaining each fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with each fund; preparing all general
shareholder communications and conducting shareholder relations;
maintaining each fund's records and the registration of each
fund's shares under federal and state law s ; developing management
and shareholder services for each fund; and furnishing reports,
evaluations, and analyses on a variety of subjects to the Trustees.
FMR is responsible for the payment of all expenses of each fund with
certain exceptions. Specific expenses payable by FMR include, without
limitation, expenses for the typesetting , printing , and
mailing proxy materials to shareholders; legal expenses, and the fees of
the custodian, auditor, and non-interested Trustees; costs of typesetting,
printing, and mailing prospectuses and statements of additional
information, notices and reports to shareholders; each fund's proportionate
share of insurance premiums and Investment Company Institute dues. FMR also
provides for transfer agent and dividend disbursing services and portfolio
and general accounting record maintenance through FSC.
FMR pays all other expenses of each fund with the following exceptions:
fees and expenses of all Trustees of the trust who are not
"interested persons" of the trust or FMR (the non-interested Trustees);
interest on borrowings; taxes; brokerage commissions (if any); and such
nonrecurring expenses as may arise, including costs of any litigation to
which a fund may be a party, and any obligation they may have to
indemnify the officers and Trustees with respect to litigation.
FMR is the high yield fund's manager pursuant to a management contract
dated October 19, 1989, which was approved by shareholders on October 3,
1990, and is the manager of the money market fund pursuant to a management
contract dated April 18, 1994. The April 18, 1994 contract was approved by
Fidelity California Municipal Trust as sole shareholder of the money market
fund on April 18, 1994, pursuant to an Agreement and Plan of Conversion
approved by public shareholders of the money market fund on February 16,
1994. (The terms of the money market fund's current contract with FMR
duplicate those of its previous contract, which was dated October 19,
1989.) FMR is the intermediate fund's manager pursuant to a management
contract dated December 17, 1993, which was approved by FMR as sole
shareholder of the fund on December 20, 1993. The management fee paid to
FMR is reduced by an amount equal to the fees and expenses of the
non-interested Trustees.
For the services of FMR under each contract, the money market fund,
the intermediate fund, and the high yield fund pay FMR a monthly management
fee at the annual rate of .50%, .55%, and .55%, respectively, of average
net assets throughout the month.
FMR may, from time to time, voluntarily reimburse all or a portion of
each fund's operating expenses (exclusive of interest, taxes,
brokerage commissions, and extraordinary expenses). 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 each fund's total returns and yield and
repayment of the reimbursement by each fund will lower its total returns
and yields.
During the fiscal periods reported, FMR voluntarily agreed to reimburse
certain funds to the extent that the fund's aggregate operating expenses
were in excess of an annual rate of its average net assets. The table below
identifies the funds in reimbursement; the level of an periods for such
reimbursement; the amount of management fees incurred under each contract
before reimbursement; and the dollar amount reimbursed by FMR, if any, for
each period.
MONEY MARKET FUND:
From To Expense Limitation
May 1, 1992 May 31, 1992 .20%
June 1, 1992 July 31, 1992 .25%
August 1, 1992 August 31, 1992 .30%
September 1, 1992 October 31, 1992 .33%
November 1, 1992 April 30, 1993 .35%
May 1, 1993 August 31, 1993 .15%
September 1, 1993 February 28, 1994 .20%
March 1, 1994 July 31, 1994 .25%
August 1, 1994 -- .30%
Management Fees Amount of
Period* Before Reimbursement Reimbursements
1995 $5,998,081 $2,654,441
1994 4,714,027 2,767,561
1993 3,699,983 1,439,000
* The 1993 fiscal period was from May 1, 1992 to February 28, 1993. The
1994 figures are for March 1, 1993 to February 28, 1994. The 1995 figures
are for March 1, 1994 to February 28, 1995.
INTERMEDIATE FUND:
From To Expense Limitation
December 30, 1993 September 30, 1994 0%
October 1, 1994 -- .10%
Management Fees Amount of
Period* Before Reimbursement Reimbursements
1995 $196,443 $180,062
1994 7,123 7,123
* 1994 figures are from December 30, 1993 (commencement of operations)
to February 28, 1994 . The 1995 figures are for March 1, 1994 to
February 28, 1995.
HIGH YIELD FUND:
From To Expense Limitation
April 1, 1992 March 10, 1993 .40%
March 11, 1993 May 31, 1993 .45%
June 1, 1993 July 31, 1993 .50%
Management Fees Amount of
Period* Before Reimbursement Reimbursements
1995 $2,432,384 --
1994 3,287,940 $ 202,856
1993 2,353,081 642,664
* The 1993 fiscal period was from May 1, 1992 to February 28, 1993. The
1994 figures are for March 1, 1993 to February 28, 1994.The 1995 figures
are for March 1, 1994 to February 28, 1995.
To defray shareholder service costs, FMR or its affiliates also collect
each fund ' s $5.00 exchange fee, $5.00 account closeout fee,
$5.00 fee for wire purchases and redemptions, and the money market and
intermediate funds' $2.00 checkwriting charge. Shareholder transaction fees
and charges collected by FMR are indicated in the tables below.
MONEY MARKET FUND:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Period Ended
Exchange Fees Account Closeout Wire Fees Checkwriting
February 28 Fees Charge
1995 $ 8,370 $ 2,319 $ 1,540 $ 12,864
1994 15,035 2,506 1,970 14,645
1993 27,185 2,589 5,400 26,557
</TABLE>
INTERMEDIATE FUND:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Period Ended
Exchange Fees Account Closeout Wire Fees Checkwriting
February 28 Fees Charge
1995 $ 965 $ 170 $75 $ 80
1994 85 10 0 0
</TABLE>
HIGH YIELD FUND:
Period Ended
Exchange Fees Account Closeout Fees Wire Fees
February 28
1995 $ 7,690 $ 2,445 $ 610
1994 9,400 1,520 805
1993 10,705 1,280 1,670
To comply with the California Code of Regulations, FMR will reimburse
each fund if and to the extent that each 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 each fund's expenses for purposes of this regulation, each
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its distribution plan expenses and
custodian fees attributable to investments in foreign securities.
SUB-ADVISER. On behalf of the money market fund, FMR has entered into a
sub-advisory agreement with FTX pursuant to which FTX has primary
responsibility for providing portfolio investment management services to
the fund.
Under the sub-advisory agreement, dated April 18, 1994, which was
approved by shareholders on February 16, 1994, FMR pays FTX a fee equal
to 50% of the management fee payable to FMR under its management contract
with the fund. The fees paid to FTX are not reduced by any voluntary or
mandatory expense reimbursements that may be in effect from time to time.
On behalf of the money market fund, f or fiscal 1995, 1994, and 1993,
FMR paid FTX fees of $ 2,999,041 , $2,357,014, and $1,849,992,
respectively .
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
the funds (the Plans) pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the Rule). The Rule provides in substance
that a mutual fund may not engage directly or indirectly in financing any
activity that is primarily intended to result in the sale of shares of
a fund except pursuant to a plan approved on behalf of the
fund under the Rule. The Plans, as approved by the Trustees, allow the
funds and FMR to incur certain expenses that might be considered to
constitute indirect payment by the funds of distribution expenses.
Under each Plan, if the payment of management fees by the funds to FMR is
deemed to be indirect financing by the funds of the distribution of their
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 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 each 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 fund and its shareholders. In particular, the Trustees noted
that each Plan does not authorize payments by each 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 fund, additional sales of
fund's shares may result. Furthermore, certain shareholder
support services may be provided more effectively under each plan by local
entities with whom shareholders have other relationships.
The high yield fund's plan was approved by shareholders on October 3, 1990.
The intermediate fund's plan was approved by FMR as the then sole
shareholder of the fund on December 20, 1993. The money market fund's plan
was approved by Fidelity California Municipal Trust on April 18, 1994 as
the then sole shareholder of the fund, pursuant to an Agreement and Plan of
Conversion approved by public shareholders of the fund on February 16,
1994.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws
on this issue may differ from the interpretations of federal law expressed
herein, and banks and financial institutions may be required to register as
dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plan. No
preference for the instruments of such depository institutions will be
shown in the selection of investments.
INTEREST OF FMR AFFILIATES
UMB is the fund's custodian and transfer agent. UMB has
entered into a sub-contract with FSC, an affiliate of FMR, under the terms
of which FSC performs the processing activities associated with providing
transfer agent and shareholder servicing functions for the fund. UMB
has an additional sub-contract with FSC, pursuant to which FSC performs the
calculations necessary to determine the fund's net asset value per share
and dividends and maintains the fund's accounting records. UMB is
entitled to reimbursement for fees paid to FSC from FMR, which must bear
these costs pursuant to its management contract with the fund.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at net asset value. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Spartan California Intermediate Municipal Portfolio
and Spartan California Municipal High Yield Portfolio are funds (series) of
Fidelity California Municipal Trust (the Massachusetts trust), an open-end
management investment company organized as a Massachusetts business trust
on April 28, 1983. On February 27, 1984 the trust's name was changed from
Fidelity California Tax-Exempt Money Market Trust to Fidelity California
Tax-Free Fund and on November 1, 1989 its name was changed to Fidelity
California Municipal Trust. Currently, there are four funds of the
Massachusetts trust: Fidelity California Tax-Free Insured Portfolio,
Fidelity California Tax-Free High Yield Portfolio, Spartan California
Intermediate Municipal Portfolio, and Spartan California Municipal High
Yield Portfolio. The Massachusetts trust's Declaration of Trust permits the
Trustees to create additional funds.
Spartan California Municipal Money Market Portfolio is a fund (series) of
Fidelity California Municipal Trust II (the Delaware trust), an open-end
management investment company organized as a Delaware Business trust on
June 20, 1991. Currently, there two funds of the Delaware trust: Fidelity
California Tax-Free Money Market Portfolio and Spartan California Municipal
Money Market Portfolio. Fidelity California Tax-Free Money Market Portfolio
and Spartan California Municipal Money Market Portfolio entered into
agreements to acquire all of the assets of the Fidelity California Tax-Free
Money Market Portfolio and Spartan California Municipal Money Market
Portfolio, series of the Fidelity California Municipal Trust, on December
30, 1991 and April 18, 1994, respectively. The Delaware trust's Trust
Instrument permits the Trustees to create additional funds.
In the event that FMR ceases to be investment adviser to a trust or any of
its funds, the right of the trust or the fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn. There is a remote possibility
that one fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
The assets of each trust received for the issue or sale of shares of each
of its funds and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general liabilities of their respective trusts. Expenses with respect
to each trust are to be allocated in proportion to the asset value of their
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of the trusts, subject to the general
supervision of the Board of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds of a certain trust. In the event of the dissolution or
liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY - MASSACHUSETTS TRUST. The Massachusetts
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 Massachusetts trust shall
not have any claim against shareholders except for the payment of the
purchase price of shares and requires that each agreement, obligation, or
instrument entered into or executed by the trust or its Trustees shall
include a provision limiting the obligations created thereby to the
Massachusetts trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholders held
personally liable for the obligations of the fund. The Declaration of Trust
also provides that each fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the fund
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
SHAREHOLDER AND TRUSTEE LIABILITY - DELAWARE TRUST. The Delaware trust is a
business trust organized under Delaware law. Delaware law provides that
shareholders shall be entitled to the same limitations of personal
liability extended to stockholders of private corporations for profit. The
courts of some states, however, may decline to apply Delaware law on this
point. The Trust Instrument contains an express disclaimer of shareholder
liability for the debts, liabilities, obligations, and expenses of the
Delaware trust and requires that a disclaimer be given in each contract
entered into or executed by the Delaware trust or its Trustees. The Trust
Instrument provides for indemnification out of each fund's property of any
shareholder or former shareholder held personally liable for the
obligations of the fund. The Trust Instrument also provides that each fund
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the fund and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which
Delaware law does not apply, no contractual limitation of liability was in
effect, and the fund is unable to meet its obligations. FMR believes that,
in view of the above, the risk of personal liability to shareholders is
extremely remote.
The Trust Instrument further provides that the Trustees shall not be
personally liable to any person other than the Delaware Trust or its
shareholders; moreover, the Trustees shall not be liable for any conduct
whatsoever, provided that Trustees are not protected against any liability
to which they would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved
in the conduct of their office.
VOTING RIGHTS - BOTH TRUSTS. Each fund's capital consists of shares of
beneficial interest. As a shareholder of the Massachusetts trust, you
receive one vote for each dollar value of net asset value you own. The
shares have no preemptive or conversion rights; voting and dividend rights,
the right of redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set forth
under the respective "Shareholder and Trustee Liability" headings above.
Shareholders representing 10% or more of a trust or one of its funds may,
as set forth in the Declaration of Trust or Trust Instrument, call meetings
of the trust or fund for any purpose related to the trust or fund, as the
case may be, including, in the case of a meeting of an entire trust, the
purpose on voting on removal of one or more Trustees.
A trust or any fund may be terminated upon the sale of its assets to (or,
in the case of the Delaware Trust and its funds, merger with) another
open-end management investment company or series thereof, or upon
liquidation and distribution of its assets. Generally such terminations
must be approved by vote of the holders of a majority of the outstanding
shares of the trust or the fund (for the Delaware trust), or by a vote of
the holders of a majority of the trust or fund, as determined by the
current value of each shareholder's investment in the trust or fund (for
the Massachusetts trust); however, the Trustees of the Delaware trust may,
without prior shareholder approval, change the form of the organization of
the Delaware trust by merger, consolidation, or incorporation. If not so
terminated or reorganized, the trusts and their funds will continue
indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the Delaware trust to merge or consolidate into one or more trusts,
partnerships, or corporations, so long as the surviving entity is an
open-end management investment company that will succeed to or assume the
Delaware trust registration statement, or cause the Delaware Trust to be
incorporated under Delaware law. Each fund of both trusts may also invest
all of its assets in another investment company.
CUSTODIAN. UMB Bank, n.a. , 1010 Grand Avenue, Kansas City, Missouri
64106, is custodian of the assets of the funds. The custodian is
responsible for the safekeeping of the funds' assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the funds or in deciding which
securities are purchased or sold by the funds. The funds may, however,
invest in obligations of the custodian and may purchase securities from or
sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the trusts'
Trustees may from time to time have transactions with various banks,
including banks serving as custodian for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts
serves as each trust's independent accountant. The auditor examines
financial statements for the funds and provides other audit, tax, and
related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the fiscal
year ended February 28, 1995 are included in the funds' Annual Report,
which is a separate report supplied with this Statement of Additional
Information. Each fund's financial statements and financial highlights are
incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the pre
refunded bond is considered to be the number of days to the announced call
date of the bonds.
The descriptions that follow are examples of eligible ratings for the
intermediate and high yield funds. The funds may, however, consider ratings
for other types of investments and the ratings assigned by other ratings
organizations when determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND
MUNICIPAL NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important in the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG-3/VMIG-3 - This designation denotes favorable quality, with all
security elements accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG-4/VMIG-4 - This designation denotes adequate quality protection
commonly regarded as required of an investment security is present and,
although not distinctly or predominantly speculative, there is specific
risk.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND
MUNICIPAL NOTES:
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
SP-3 - Speculative capacity to pay principal and interest.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium grade obligations, i.e, they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments of or maintenance of other
terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a)(1) Financial Statements and Financial Highlights included in the Annual
Report, for Spartan California Municipal Money Market Portfolio, Spartan
California Intermediate Municipal Portfolio, and Spartan California
Municipal High Yield Portfolio for the fiscal year ended February 28, 1995,
are incorporated herein by reference to the funds' Statement of Additional
Information and were filed on April 10, 1995 for Fidelity California
Municipal Trust (No. 2-83367) and Fidelity California Municipal Trust II
(No. 33-42890) 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 California Tax-Free Money Market Portfolio, Fidelity
California Tax-Free Insured Portfolio, and Fidelity California Tax-Free
High Yield Portfolio for the fiscal year ended February 28, 1995, are
incorporated herein by reference to the funds' Statement of Additional
Information and were filed on April 10, 1995 for Fidelity California
Municipal Trust (No. 2-83367) and Fidelity California Municipal Trust II
(No. 33-42890) pursuant to Rule 30d-1 under the Investment Company Act of
1940 and are incorporated herein by reference.
(b) Exhibits:
(1) Trust Instrument, dated June 20, 1991, is filed herein as Exhibit 1.
(2) By-laws of the Trust, as amended, are incorporated herein by reference
to Exhibit 2(a) to Fidelity Union Street Trust II's Post-Effective
Amendment No. 10 (File No. 33-43757).
(3) Not applicable.
(4) Not applicable.
(5)(a) Management Contract, dated December 30, 1991, between Fidelity
California Tax-Free Money Market Portfolio and Fidelity Management &
Research Company is filed herein as Exhibit (5)(a).
(b) Management Contract, dated April 18, 1994, between Spartan California
Municipal Money Market Portfolio and Fidelity Management & Research Company
is filed herein as Exhibit 5(b).
(c) Sub-Advisory Agreement, dated December 30, 1991, between FMR Texas
Inc. and Fidelity Management & Research Company on behalf of Fidelity
California Tax-Free Money Market Portfolio is filed herein as Exhibit
(5)(c).
(d) Sub-Advisory Agreement, dated April 18, 1994, between FMR Texas Inc.
and Fidelity Management & Research Company on behalf of Spartan California
Municipal Money Market Portfolio is filed herein as Exhibit (5)(d).
(6)(a) General Distribution Agreement, dated December 30, 1991, between
Fidelity California Tax-Free Money Market Portfolio and Fidelity
Distributors Corporation is filed herein as Exhibit (6)(a).
(b) General Distribution Agreement, dated October 19, 1989, between
Spartan California Municipal Money Market Portfolio and Fidelity
Distributors Corporation is filed herein as Exhibit 6(b).
(c) Amendment to General Distribution Agreement, dated January 1,
1988 between Fidelity California Tax-Free Money Market Portfolio and
Fidelity Distributors Corporation is filed herein as Exhibit 6(c).
(7) Retirement Plan for Non-Interested Person Trustees, Directors, or
General Partners is incorporated herein by reference to Exhibit 7 to
Fidelity Union Street Trust's Post Effective Amendment No. 87 (File No.
2-50318).
(8)(a) Custodian Agreement, Appendix A, Appendix B, and Appendix C, dated
December 1, 1994, between UMB Bank, n.a. and the Registrant is incorporated
herein by reference to Exhibit (8) to Fidelity California Municipal Trust's
Post-Effective Amendment No. 28 (File No. 2-83367).
(9) Not applicable.
(10) Not applicable.
(11) Consent of Price Waterhouse LLP is filed herein as Exhibit 11.
(12) Not applicable.
(13) Not applicable.
(14)(a) Fidelity Individual Retirement Account Custodial Agreement and
Disclosure Statement, as currently in effect, is incorporated herein by
reference to Exhibit 14(a) to Fidelity Union Street Trust's Post-Effective
Amendment No. 87 (File No. 2-50318).
(b) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(d) to Fidelity Union Street Trust's
Post-Effective Amendment No. 87 (File No. 2-50318).
(c) Fidelity 403(b)(7) Custodial Account Agreement, as currently in
effect, is incorporated herein by reference to Exhibit 14(e) to Fidelity
Union Street Trust's Post-Effective Amendment No. 87 (File No. 2-50318).
(d) National Financial Services Corporation Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(h) to Fidelity
Union Street Trust's Post-Effective Amendment No. 87 (File No. 2-50318).
(e) Fidelity Portfolio Advisory Services Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(i) to Fidelity
Union Street Trust's Post-Effective Amendment No. 87 (File No. 2-50318).
(f) Fidelity Investments Section 403(b)(7) Individual Custodial
Account Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(j) to Fidelity Union Street
Trust's Post-Effective Amendment No. 87 (File No. 2-50318).
(g) National Financial Services Corporation Defined Contribution
Retirement Plan and Trust Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(k) to Fidelity Union Street
Trust's Post-Effective Amendment No. 87 (File No. 2-50318).
(h) The CORPORATEplan for Retirement Profit Sharing/401K Plan, as
currently in effect, is incorporated herein by reference to Exhibit 14(l)
to Fidelity Union Street Trust's Post-Effective Amendment No. 87 (File No.
2-50318).
(i) The CORPORATEplan for Retirement Money Purchase Pension Plan, as
currently in effect, is incorporated herein by reference to Exhibit 14(m)
to Fidelity Union Street Trust's Post-Effective Amendment No. 87 (File No.
2-50318).
(15)(a) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
California Tax-Free Money Market Portfolio is filed herein as Exhibit
(15)(a).
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
California Municipal Money Market Portfolio is filed herein as Exhibit
(15)(b).
(16) Schedule for the the 7-day yields, tax-equivalent yields, and total
returns for Spartan California Municipal Money Market Portfolio on behalf
of the trust is filed herein as Exhibit 16.
(17) Financial Data Schedules for the funds are filed herein as Exhibit 27.
Item 25. Persons Controlled by or under Common Control with Registrant
The Registrant's Board of Trustees is the same as the boards of other
funds managed by Fidelity Management & Research Company. In addition, the
officers of these funds are substantially identical. Nonetheless, the
Registrant takes the position that it is not under common control with
these other funds since the power residing in the respective boards and
officers arises as the result of an official position with the respective
funds.
Item 26. Number of Holders of Securities
January 31, 1995
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity California Tax-Free
Money Market Portfolio 29,896
Spartan California Municipal
Money Market Portfolio 10,093
Item 27. Indemnification
Pursuant to Del. Code Ann. title 12 (sub-section) 3817, a Delaware
business trust may provide in its governing instrument for the
indemnification of its officers and trustees from and against any and all
claims and demands whatsoever. Article X, Section 10.02 of the Declaration
of Trust states that the Registrant shall indemnify any present trustee or
officer to the fullest extent permitted by law against liability, and all
expenses reasonably incurred by him or her in connection with any claim,
action, suit or proceeding in which he or she is involved by virtue of his
or her service as a trustee, officer, or both, and against any amount
incurred in settlement thereof. Indemnification will not be provided to a
person adjudged by a court or other adjudicatory body to be liable to the
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties (collectively,
"disabling conduct"), or not to have acted in good faith in the reasonable
belief that his or her action was in the best interest of the Registrant.
In the event of a settlement, no indemnification may be provided unless
there has been a determination, as specified in the Declaration of Trust,
that the officer or trustee did not engage in disabling conduct.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information, shareholder
reports or other information filed or made public by the Registrant
included a materially misleading statement or omission. However, the
Registrant does not agree to indemnify the Distributor or hold it harmless
to the extent that the statement or omission was made in reliance upon, and
in conformity with, information furnished to the Registrant by or on behalf
of the Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of their own
disabling conduct.
Pursuant to the agreement by which Fidelity Service Company ("Service") is
appointed sub-transfer agent, the Transfer Agent agrees to indemnify
Service for its losses, claims, damages, liabilities and expenses to the
extent the Transfer Agent is entitled to and receives indemnification from
the Registrant for the same events. Under the Transfer Agency Agreement,
the Registrant agrees to indemnify and hold the Transfer Agent harmless
against any losses, claims, damages, liabilities, or expenses resulting
from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, which names the Transfer Agent and/or the Registrant as a party
and is not based on and does not result from the Transfer Agent's willful
misfeasance, bad faith, negligence or reckless disregard of its duties, and
arises out of or in connection with the Transfer Agent's performance under
the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by the Transfer Agent's willful misfeasance, bad faith, negligence or
reckless disregard of its duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of the Transfer
Agent's acting in reliance upon advice reasonably believed by the Transfer
Agent to have been given by counsel for the Registrant, or as a result of
the Transfer Agent's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
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) FMR TEXAS INC. (FMR Texas)
FMR Texas provides investment advisory services to Fidelity Management &
Research Company. The directors and officers of the Sub-Adviser have held
the following positions of a substantial nature during the past two fiscal
years.
Edward C. Johnson 3d Chairman and Director of FMR Texas; Chairman of the
Executive Committee of FMR; President and Chief
Exective Officer of FMR Corp.; Chairman of the Board
and a Director of FMR, FMR Corp., Fidelity
Management & Research (Far East) Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Texas; President of FMR;
Managing Director of FMR Corp.; President and a
Director of Fidelity Management & Research (Far East)
Inc. and Fidelity Management & Research (U.K.) Inc.;
Senior Vice President and Trustee of funds advised by
FMR.
Fred L. Henning, Jr. Senior Vice President of FMR Texas; Money Market
Division Leader.
Robert Auld Vice President of FMR Texas (1993).
Leland Barron Vice President of FMR Texas and of funds advised by
FMR.
Robert Litterst Vice President of FMR Texas and of funds advised by
FMR (1993).
Thomas D. Maher Vice President of FMR Texas and Assistant Vice
President of funds advised by FMR.
Burnell R. Stehman Vice President of FMR Texas and of funds advised by
FMR.
John J. Todd Vice President of FMR Texas and of funds advised by
FMR.
Sarah H. Zenoble Vice President of FMR Texas and of funds advised by
FMR.
Stephen P. Jonas Treasurer of FMR Texas Inc. (1993), Fidelity
Management & Research (U.K.) Inc. (1993), and Fidelity
Mangement & Research (Far East) Inc. (1993); Treasurer
and Vice President of FMR (1993); and Treasurer of the
funds advised by FMR (1995).
David C. Weinstein Secretary of FMR Texas; Clerk of Fidelity Management
& Research (U.K.) Inc.; Clerk of Fidelity Management &
Research (Far East) Inc.
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' custodian UMB
Bank, n.a., 1010 Grand Avenue, Kansas City, MO.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for the effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 11 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston, and the Commonwealth of Massachusetts, on the 12th
day of April 1995.
FIDELITY CALIFORNIA MUNICIPAL TRUST II
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee April 12, 1995
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Stephen P. Jonas Treasurer April 12, 1995
Stephen P. Jonas
/s/J. Gary Burkhead Trustee April 12, 1995
J. Gary Burkhead
/s/Ralph F. Cox * Trustee April 12, 1995
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee April 12, 1995
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee April 12, 1995
Richard J. Flynn
/s/E. Bradley Jones * Trustee April 12, 1995
E. Bradley Jones
/s/Donald J. Kirk * Trustee April 12, 1995
Donald J. Kirk
/s/Peter S. Lynch * Trustee April 12, 1995
Peter S. Lynch
/s/Edward H. Malone * Trustee April 12, 1995
Edward H. Malone
/s/Marvin L. Mann_____* Trustee April 12, 1995
Marvin L. Mann
/s/Gerald C. McDonough* Trustee April 12, 1995
Gerald C. McDonough
/s/Thomas R. Williams * Trustee April 12, 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
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Portfolios Fidelity Union Street Trust II
</TABLE>
in addition to 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 any
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Pre-Effective Amendments or
Post-Effective Amendments to said Registration Statements on Form N-1A or
any successor thereto, 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
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>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Portfolios Fidelity Union Street Trust II
</TABLE>
in addition to any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Director, Trustee or General Partner (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, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to
each of them, to sign for me and my name in the appropriate capacities any
Registration Statements of the Funds on Form N-1A or any successor thereto,
any and all subsequent Pre-Effective Amendments or Post-Effective
Amendments to said Registration Statements on Form N-1A or any successor
thereto, 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
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 attorney-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
Exhibit 1
TABLE OF CONTENTS
Page
ARTICLE I -- NAME AND DEFINITIONS 1
Section 1.01 Name 2
Section 1.02 Definitions 2
ARTICLE II -- BENEFICIAL INTEREST 3
Section 2.01 Shares of Beneficial Interest 3
Section 2.02 Issuance of Shares 3
Section 2.03 Register of Shares and Share Certificates 3
Section 2.04 Transfer of Shares 3
Section 2.05 Treasury Shares 3
Section 2.06 Establishment of Series 4
Section 2.07 Investment in the Trust 4
Section 2.08 Assets and Liabilities of Series 4
Section 2.09 No Preemptive Rights 4
Section 2.10 Personal Liability of Shareholders 5
Section 2.11 Assent to Trust Instrument 5
ARTICLE III -- THE TRUSTEES 5
Section 3.01 Management of the Trust 5
Section 3.02 Initial Trustees 6
Section 3.03 Term of Office of Trustees 6
Section 3.04 Vacancies and Appointment of Trustees 6
Section 3.05 Temporary Absence of Trustee 6
Section 3.06 Number of Trustees 6
Section 3.07 Effect of Death, Resignation, Etc. of a Trustee 6
Section 3.08 Ownership of Assets of the Trust 6
ARTICLE IV -- POWERS OF THE TRUSTEES 7
Section 4.01 Powers 7
Section 4.02 Issuance and Repurchase of Shares 8
Section 4.03 Trustees and Officers as Shareholders 9
Section 4.04 Action By the Trustees 9
Section 4.05 Chairman of the Trustees 9
Section 4.06 Principal Transactions 9
ARTICLE V -- EXPENSES OF THE TRUST 9
Section 5.01 Trustee Reimbursement 9
ARTICLE VI -- INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
10
Section 6.01 Investment Adviser 10
Section 6.02 Principal Underwriter 10
Section 6.03 Transfer Agent 10
Section 6.04 Parties to Contract 10
Section 6.05 Provisions and Amendments 11
- -i-
ARTICLE VII -- SHAREHOLDERS' VOTING POWERS AND MEETINGS 11
Section 7.01 Voting Powers 11
Section 7.02 Meetings 11
Section 7.03 Quorum and Required Vote 12
ARTICLE VIII -- CUSTODIAN 12
Section 8.01 Appointment and Duties 12
Section 8.02 Central Certificate System 13
ARTICLE IX -- DISTRIBUTIONS AND REDEMPTIONS 13
Section 9.01 Distributions 13
Section 9.02 Redemptions 13
Section 9.03 Determination of Net Asset Value and Valuation of Portfolio
Assets 13
Section 9.04 Suspension of the Right of Redemption 14
Section 9.05 Redemption of Shares in Order to Qualify as 14
Regulated Investment Company
ARTICLE X -- LIMITATION OF LIABILITY AND INDEMNIFICATION 14
Section 10.01 Limitation of Liability 14
Section 10.02 Indemnification 15
Section 10.03 Shareholders 16
ARTICLE XI - MISCELLANEOUS 16
Section 11.01 Trust Not a Partnership 16
Section 11.02 Trustee's Good Faith Action, Expert Advice,No Bond or Surety
16
Section 11.03 Establishment of Record Dates 16
Section 11.04 Termination of Trust 16
Section 11.05 Reorganization 17
Section 11.06 Filing of Copies, References, Headings 17
Section 11.07 Applicable Law 17
Section 11.08 Amendments 18
Section 11.09 Fiscal Year 18
Section 11.10 Use of the Word "Fidelity" 18
Section 11.11 Provisions in Conflict with Law 18
- -ii-
FIDELITY CALIFORNIA MUNICIPAL TRUST II
TRUST INSTRUMENT
DATED JUNE 20, 1991
FIDELITY CALIFORNIA MUNICIPAL TRUST II
DATED JUNE 20, 1991
TRUST INSTRUMENT, made as of June 20, 1991 by Edward C. Johnson 3d, J.
Gary Burkhead and John E. Ferris (the "Trustees").
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust hereunder shall be held and managed in trust under
this Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1.01. The name of the trust created hereby is the "Fidelity
California Municipal Trust II."
DEFINITIONS.
Section 1.02. Wherever used herein, unless otherwise required by the
context or specifically provided:
(a) "Bylaws" means the Bylaws referred to in Article IV, Section 4.01(e)
hereof, as from time to time amended;
(b) The term "Commission" has the meaning given it in the 1940 Act. The
terms "Affiliated Person", "Assignment", "Interested Person" and "Principal
Underwriter" shall have the meanings given them in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted or interpretive releases of
the Commission thereunder. "Majority Shareholder Vote" shall have the same
meaning as the term "vote of a majority of the outstanding voting
securities" is given in the 1940 Act, as modified by or interpreted by any
applicable order or orders of the Commission or any rules or regulations
adopted or interpretive releases of the Commission thereunder.
(c) The "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware
Code entitled "Treatment of Delaware Business Trusts," as it may be amended
from time to time.
(d) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 9.03 hereof;
(e) "Outstanding Shares" means those Shares shown from time to time in the
books of the Trust or its Transfer Agent as then issued and outstanding,
but shall not include Shares which have been redeemed or repurchased by the
Trust and which are at the time held in the treasury of the Trust;
(f) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06 hereof.
(g) "Shareholder" means a record owner of Outstanding Shares of the Trust;
(h) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of
the Trust or class thereof shall be divided and may include fractions of
Shares as well as whole Shares;
(i) The "Trust" refers to Fidelity California Municipal Trust II and
reference to the Trust, when applicable to one or more Series of the Trust,
shall refer to any such Series;
(j) The "Trustees" means the person or persons who has or have signed this
Trust Instrument, so long as he or they shall continue in office in
accordance with the terms hereof, and all other persons who may from time
to time be duly qualified and serving as Trustees in accordance with the
provisions of Article III hereof and reference herein to a Trustee or to
the Trustees shall refer to the individual Trustees in their capacity as
Trustees hereunder;
(k) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one
or more of the Trust or any Series, or the Trustees on behalf of the Trust
or any Series.
(l) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time.
ARTICLE II
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 2.01. The beneficial interest in the Trust shall be divided into
such transferable Shares of one or more separate and distinct Series or
classes of a Series as the Trustees shall from time to time create and
establish. The number of Shares of each Series, and class thereof,
authorized hereunder is unlimited. Each Share shall have no par value.
All Shares issued hereunder, including without limitation, Shares issued in
connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
ISSUANCE OF SHARES
Section 2.02. The Trustees in their discretion may, from time to time,
without vote of the Shareholders, issue Shares, in addition to the then
issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on
such terms as the Trustees may deem appropriate, and may in such manner
acquire other assets (including the acquisition of assets subject to, and
in connection with, the assumption of liabilities) and businesses. In
connection with any issuance of Shares, the Trustees may issue fractional
Shares and Shares held in the treasury. The Trustees may from time to time
divide or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall be
redeemed as, whole Shares and/or 1/1,000th of a Share or integral multiples
thereof.
REGISTER OF SHARES AND SHARE CERTIFICATES
Section 2.03. A register shall be kept at the principal office of the
Trust or an office of the Trust's transfer agent which shall contain the
names and addresses of the Shareholders of each Series, the number of
Shares of that Series (or any class or classes thereof) held by them
respectively and a record of all transfers thereof. As to Shares for which
no certificate has been issued, such register shall be conclusive as to who
are the holders of the Shares and who shall be entitled to receive
dividends or other distributions or otherwise to exercise or enjoy the
rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or other distribution, nor to have notice given to
him as herein or in the Bylaws provided, until he has given his address to
the transfer agent or such other officer or agent of the Trustees as shall
keep the said register for entry thereon. The Trustees, in their
discretion, may authorize the issuance of share certificates and promulgate
appropriate rules and regulations as to their use. Such certificates may
be issuable for any purpose limited in the Trustees discretion. In the
event that one or more certificates are issued, whether in the name of a
shareholder or a nominee, such certificate or certificates shall constitute
evidence of ownership of Shares for all purposes, including transfer,
assignment or sale of such Shares, subject to such limitations as the
Trustees may, in their discretion, prescribe.
TRANSFER OF SHARES
Section 2.04. Except as otherwise provided by the Trustees, Shares shall
be transferable on the records of the Trust only by the record holder
thereof or by his agent thereunto duly authorized in writing, upon delivery
to the Trustees or the Trust's transfer agent of a duly executed instrument
of transfer, together with a Share certificate, if one is outstanding, and
such evidence of the genuineness of each such execution and authorization
and of such other matters as may be required by the Trustees. Upon such
delivery the transfer shall be recorded on the register of the Trust.
Until such record is made, the Shareholder of record shall be deemed to be
the holder of such Shares for all purposes hereunder and neither the
Trustees nor the Trust, nor any transfer agent or registrar nor any
officer, employee or agent of the Trust shall be affected by any notice of
the proposed transfer.
TREASURY SHARES
Section 2.05. Shares held in the treasury shall, until reissued pursuant
to Section 2.02 hereof, not confer any voting rights on the Trustees, nor
shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
ESTABLISHMENT OF SERIES
Section 2.06. The Trust created hereby shall consist of one or more
Series and separate and distinct records shall be maintained by the Trust
for each Series and the assets associated with any such Series shall be
held and accounted for separately from the assets of the Trust or any other
Series. The Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time
to time determine, to divide or combine the Shares or any Series or classes
thereof into a greater or lesser number, to classify or reclassify any
issued Shares or any Series or classes thereof into one or more Series or
classes of Shares, and to take such other action with respect to the Shares
as the Trustees may deem desirable. The establishment and designation of
any Series shall be effective upon the adoption of a resolution by a
majority of the Trustees setting forth such establishment and designation
and the relative rights and preferences of the Shares of such Series. A
Series may issue any number of Shares and need not issue shares. At any
time that there are no Shares outstanding of any particular Series
previously established and designated, the Trustees may by a majority vote
abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may
require. All provisions herein relating to the Trust shall apply equally
to each Series of the Trust, and each class thereof, except as the context
otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a
Series shall be entitled to receive his pro rata share of distributions of
income and capital gains, if any, made with respect to such Series. Upon
redemption of his Shares, such Shareholder shall be paid solely out of the
funds and property of such Series of the Trust.
INVESTMENT IN THE TRUST
Section 2.07. The Trustees shall accept investments in any Series of the
Trust from such persons and on such terms as they may from time to time
authorize. At the Trustees' discretion, such investments, subject to
applicable law, may be in the form of cash or securities in which the
affected Series is authorized to invest, valued as provided in Article IX,
Section 9.03 hereof. Investments in a Series shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however,
that the Trustees may, in their sole discretion, (a) fix the Net Asset
Value per Share of the initial capital contribution, (b) impose a sales
charge upon investments in the Trust in such manner and at such time
determined by the Trustees or (c) issue fractional Shares.
ASSETS AND LIABILITIES OF SERIES
Section 2.08. All consideration received by the Trust for the issue or
sale of Shares of a particular Series, together with all assets in which
such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as
"assets belonging to" that Series. The assets belonging to a particular
Series shall belong to that Series for all purposes, and to no other
Series, subject only to the rights of creditors of that Series. In
addition, any assets, income, earnings, profits or funds, or payments and
proceeds with respect thereto, which are not readily identifiable as
belonging to any particular Series shall be allocated by the Trustees
between and among one or more of the Series in such manner as the Trustees,
in their sole discretion, deem fair and equitable. Each such allocation
shall be conclusive and binding upon the Shareholders of all Series for all
purposes, and such assets, income, earnings, profits or funds, or payments
and proceeds with respect thereto shall be assets belonging to that Series.
The assets belonging to a particular Series shall be so recorded upon the
books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to
each particular Series shall be charged with the liabilities of that Series
and all expenses, costs, charges and reserves attributable to that Series.
Any general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular Series
shall be allocated and charged by the Trustees between or among any one or
more of the Series in such manner as the Trustees in their sole discretion
deem fair and equitable. Each such allocation shall be conclusive and
binding upon the Shareholders of all Series for all purposes. Without
limitation of the foregoing provisions of this Section 2.08, but subject to
the right of the Trustees in their discretion to allocate general
liabilities, expenses, costs, charges or reserves as herein provided, the
debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular Series shall be enforceable
against the assets of such Series only, and not against the assets of the
Trust generally. Notice of this contractual limitation on inter-Series
liabilities may, in the Trustee's sole discretion, be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as
filed or to be filed in the Office of the Secretary of State of the State
of Delaware pursuant to the Delaware Act, and upon the giving of such
notice in the certificate of trust, the statutory provisions of Section
3804 of the Delaware Act relating to limitations on inter-Series
liabilities (and the statutory effect under Section 3804 of setting forth
such notice in the certificate of trust) shall become applicable to the
Trust and each Series. Any person extending credit to, contracting with or
having any claim against any Series may look only to the assets of that
Series to satisfy or enforce any debt, liability, obligation or expense
incurred, contracted for or otherwise existing with respect to that Series.
No Shareholder or former Shareholder of any Series shall have a claim on or
any right to any assets allocated or belonging to any other Series.
NO PREEMPTIVE RIGHTS
Section 2.09. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust
or the Trustees, whether of the same or other Series.
PERSONAL LIABILITY OF SHAREHOLDERS
Section 2.10. Each Shareholder of the Trust and of each Series shall not
be personally liable for the debts, liabilities, obligations and expenses
incurred by, contracted for, or otherwise existing with respect to, the
Trust or by or on behalf of any Series. The Trustees shall have no power
to bind any Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription
for any Shares or otherwise. Every note, bond, contract or other
undertaking issued by or on behalf of the Trust or the Trustees relating to
the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
ASSENT TO TRUST INSTRUMENT
Section 2.11. Every Shareholder, by virtue of having purchased a Share
shall become a Shareholder and shall be held to have expressly assented and
agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 3.01. The Trustees shall have exclusive and absolute control over
the Trust Property and over the business of the Trust to the same extent as
if the Trustees were the sole owners of the Trust Property and business in
their own right, but with such powers of delegation as may be permitted by
this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the State of
Delaware, in any and all states of the United States of America, in the
District of Columbia, in any and all commonwealths, territories,
dependencies, colonies, or possessions of the United States of America, and
in any foreign jurisdiction and to do all such other things and execute all
such instruments as they deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests
of the Trust made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Trust Instrument, the presumption shall
be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall not
be construed as limiting the aforesaid power. The powers of the Trustees
may be exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected
by the Shareholders owning of record a plurality of the Shares voting at a
meeting of Shareholders. Such a meeting shall be held on a date fixed by
the Trustees. In the event that less than a majority of the Trustees
holding office have been elected by Shareholders, the Trustees then in
office will call a Shareholders' meeting for the election of Trustees.
INITIAL TRUSTEES
Section 3.02. The initial Trustees shall be the persons named herein. On
a date fixed by the Trustees, the Shareholders shall elect at least three
but not more than twelve Trustees, as specified by the Trustees pursuant to
Section 3.06 of this Article III.
TERM OF OFFICE OF TRUSTEES
Section 3.03. The Trustees shall hold office during the lifetime of this
Trust, and until its termination as herein provided; except (a) that any
Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery
or upon such later date as is specified therein; (b) that any Trustee may
be removed at any time by written instrument, signed by at least two-thirds
of the number of Trustees prior to such removal, specifying the date when
such removal shall become effective; (c) that any Trustee who requests in
writing to be retired or who has died, become physically or mentally
incapacitated by reason of disease or otherwise, or is otherwise unable to
serve, may be retired by written instrument signed by a majority of the
other Trustees, specifying the date of his retirement; and (d) that a
Trustee may be removed at any meeting of the Shareholders of the Trust by a
vote of Shareholders owning at least two-thirds of the outstanding Shares.
VACANCIES AND APPOINTMENT OF TRUSTEES
Section 3.04. In case of the declination to serve, death, resignation,
retirement, removal, physical or mental incapacity by reason of disease or
otherwise, or a Trustee is otherwise unable to serve, or an increase in the
number of Trustees, a vacancy shall occur. Whenever a vacancy in the Board
of Trustees shall occur, until such vacancy is filled, the other Trustees
shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing such
other person as they in their discretion shall see fit consistent with the
limitations under the 1940 Act. Such appointment shall be evidenced by a
written instrument signed by a majority of the Trustees in office or by
resolution of the Trustees, duly adopted, which shall be recorded in the
minutes of a meeting of the Trustees, whereupon the appointment shall take
effect.
An appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that
said appointment shall become effective only at or after the effective date
of said retirement, resignation or increase in number of Trustees. As soon
as any Trustee appointed pursuant to this Section 3.04 shall have accepted
this trust, the trust estate shall vest in the new Trustee or Trustees,
together with the continuing Trustees, without any further act or
conveyance, and he shall be deemed a Trustee hereunder. The power to
appoint a Trustee pursuant to this Section 3.04 is subject to the
provisions of Section 16(a) of the 1940 Act.
TEMPORARY ABSENCE OF TRUSTEE
Section 3.05. Any Trustee may, by power of attorney, delegate his power
for a period not exceeding six months at any one time to any other Trustee
or Trustees, provided that in no case shall less than two Trustees
personally exercise the other powers hereunder except as herein otherwise
expressly provided.
NUMBER OF TRUSTEES
Section 3.06. The number of Trustees shall be at least three, and
thereafter shall be such number as shall be fixed from time to time by a
majority of the Trustees, provided, however, that the number of Trustees
shall in no event be more than twelve (12).
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 3.07. The declination to serve, death, resignation, retirement,
removal, incapacity, or inability of the Trustees, or any one of them,
shall not operate to terminate the Trust or to revoke any existing agency
created pursuant to the terms of this Trust Instrument.
OWNERSHIP OF ASSETS OF THE TRUST
Section 3.08. The assets of the Trust and of each Series shall be held
separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or any successor Trustees.
Legal title in all of the assets of the Trust and the right to conduct any
business shall at all times be considered as vested in the Trustees on
behalf of the Trust, except that the Trustees may cause legal title to any
Trust Property to be held by, or in the name of the Trust, or in the name
of any person as nominee. No Shareholder shall be deemed to have a
severable ownership in any individual asset of the Trust or of any Series
or any right of partition or possession thereof, but each Shareholder shall
have, except as otherwise provided for herein, a proportionate undivided
beneficial interest in the Trust or Series. The Shares shall be personal
property giving only the rights specifically set forth in this Trust
Instrument.
ARTICLE IV
POWERS OF THE TRUSTEES
POWERS
Section 4.01. The Trustees in all instances shall act as principals, and
are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust.
The Trustees shall not in any way be bound or limited by present or future
laws or customs in regard to trust investments, but shall have full
authority and power to make any and all investments which they, in their
sole discretion, shall deem proper to accomplish the purpose of this Trust
without recourse to any court or other authority. Subject to any
applicable limitation in this Trust Instrument or the Bylaws of the Trust,
the Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by
any present or future law or custom in regard to investments by trustees,
and to sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other evidence
of indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other
Person and to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or
by the Trust itself, or both, or otherwise pursuant to a plan of
distribution of any kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument providing
for the conduct of the business of the Trust and to amend and repeal them
to the extent that they do not reserve that right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to
any conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing
agents, or both;
(i) To set record dates in the manner provided herein or in the Bylaws;
(j) To delegate such authority as they consider desirable to any officers
of the Trust and to any investment adviser, manager, custodian, underwriter
or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust, subject to
the provisions of Article XI, Section 11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any trust,
whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee
or nominees, subject in either case to proper safeguards according to the
usual practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish
classes of such Series having relative rights, powers and duties as they
may provide consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular
Series or to apportion the same between or among two or more Series,
provided that any liabilities or expenses incurred by a particular Series
shall be payable solely out of the assets belonging to that Series as
provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited
to, claims for taxes;
(s) To make distributions of income and of capital gains to Shareholders
in the manner hereinafter provided;
(t) To establish, from time to time, a minimum investment for Shareholders
in the Trust or in one or more Series or class, and to require the
redemption of the Shares of any Shareholders whose investment is less than
such minimum upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers of
the Trustees to said committees and to adopt a committee charter providing
for such responsibilities, membership (including Trustees, officers or
other agents of the Trust therein) and any other characteristics of said
committees as the Trustees may deem proper. Notwithstanding the provisions
of this Article IV, and in addition to such provisions or any other
provision of this Trust Instrument or of the Bylaws, the Trustees may by
resolution appoint a committee consisting of less than the whole number of
Trustees then in office, which committee may be empowered to act for and
bind the Trustees and the Trust, as if the acts of such committee were the
acts of all the Trustees then in office, with respect to the institution,
prosecution, dismissal, settlement, review or investigation of any action,
suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body;
(v) To interpret the investment policies, practices or limitations of any
Series;
(w) To establish a registered office and have a registered agent in the
state of Delaware; and
(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the attainment
of any object or the furtherance of any power hereinbefore set forth,
either alone or in association with others, and to do every other act or
thing incidental or appurtenant to or growing out of or connected with the
aforesaid business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees. Any action by
one or more of the Trustees in their capacity as such hereunder shall be
deemed an action on behalf of the Trust or the applicable Series, and not
an action in an individual capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or
upon their order.
ISSUANCE AND REPURCHASE OF SHARES
Section 4.02. The Trustees shall have the power to issue, sell,
repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose
of, and otherwise deal in Shares and, subject to the provisions set forth
in Article II and Article IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property of
the Trust, or the particular Series of the Trust, with respect to which
such Shares are issued.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 4.03. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of Shares to the same extent as if he were not a
Trustee, officer or agent; and the Trustees may issue and sell or cause to
be issued and sold Shares to and buy such Shares from any such person or
any firm or company in which he is interested, subject only to the general
limitations herein contained as to the sale and purchase of such Shares;
and all subject to any restrictions which may be contained in the Bylaws.
ACTION BY THE TRUSTEES
Section 4.04. The Trustees shall act by majority vote at a meeting duly
called or by unanimous written consent without a meeting or by telephone
meeting provided a quorum of Trustees participate in any such telephone
meeting, unless the 1940 Act requires that a particular action be taken
only at a meeting at which the Trustees are present in person. At any
meeting of the Trustees, a majority of the Trustees shall constitute a
quorum. Meetings of the Trustees may be called orally or in writing by the
Chairman of the Board of Trustees or by any two other Trustees. Notice of
the time, date and place of all meetings of the Trustees shall be given by
the party calling the meeting to each Trustee by telephone, telefax, or
telegram sent to his home or business address at least twenty-four hours in
advance of the meeting or by written notice mailed to his home or business
address at least seventy-two hours in advance of the meeting. Notice need
not be given to any Trustee who attends the meeting without objecting to
the lack of notice or who executes a written waiver of notice with respect
to the meeting. Any meeting conducted by telephone shall be deemed to take
place at the principal office of the Trust, as determined by the Bylaws or
by the Trustees. Subject to the requirements of the 1940 Act, the Trustees
by majority vote may delegate to any one or more of their number their
authority to approve particular matters or take particular actions on
behalf of the Trust. Written consents or waivers of the Trustees may be
executed in one or more counterparts. Execution of a written consent or
waiver and delivery thereof to the Trust may be accomplished by telefax.
CHAIRMAN OF THE TRUSTEES
Section 4.05. The Trustees shall appoint one of their number to be
Chairman of the Board of Trustees. The Chairman shall preside at all
meetings of the Trustees, shall be responsible for the execution of
policies established by the Trustees and the administration of the Trust,
and may be (but is not required to be) the chief executive, financial
and/or accounting officer of the Trust.
PRINCIPAL TRANSACTIONS
Section 4.06. Except to the extent prohibited by applicable law, the
Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer
of the Trust or any firm of which any such Trustee or officer is a member
acting as principal, or have any such dealings with any investment adviser,
distributor or transfer agent for the Trust or with any Interested Person
of such person; and the Trust may employ any such person, or firm or
company in which such person is an Interested Person, as broker, legal
counsel, registrar, investment adviser, distributor, transfer agent,
dividend disbursing agent, custodian or in any other capacity upon
customary terms.
ARTICLE V
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 5.01. Subject to the provisions of Article II, Section 2.08
hereof, the Trustees shall be reimbursed from the Trust estate or the
assets belonging to the appropriate Series for their expenses and
disbursements, including, without limitation, fees and expenses of Trustees
who are not Interested Persons of the Trust, interest expense, taxes, fees
and commissions of every kind, expenses of pricing Trust portfolio
securities, expenses of issue, repurchase and redemption of shares,
including expenses attributable to a program of periodic repurchases or
redemptions, expenses of registering and qualifying the Trust and its
Shares under Federal and State laws and regulations or under the laws of
any foreign jurisdiction, charges of third parties, including investment
advisers, managers, custodians, transfer agents, portfolio accounting
and/or pricing agents, and registrars, expenses of preparing and setting up
in type prospectuses and statements of additional information and other
related Trust documents, expenses of printing and distributing prospectuses
sent to existing Shareholders, auditing and legal expenses, reports to
Shareholders, expenses of meetings of Shareholders and proxy solicitations
therefor, insurance expenses, association membership dues and for such
non-recurring items as may arise, including litigation to which the Trust
(or a Trustee acting as such) is a party, and for all losses and
liabilities by them incurred in administering the Trust, and for the
payment of such expenses, disbursements, losses and liabilities the
Trustees shall have a lien on the assets belonging to the appropriate
Series, or in the case of an expense allocable to more than one Series, on
the assets of each such Series, prior to any rights or interests of the
Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
INVESTMENT ADVISER
Section 6.01. The Trustees may in their discretion, from time to time,
enter into an investment advisory or management contract or contracts with
respect to the Trust or any Series whereby the other party or parties to
such contract or contracts shall undertake to furnish the Trustees with
such management, investment advisory, statistical and research facilities
and services and such other facilities and services, if any, and all upon
such terms and conditions, as the Trustees may in their discretion
determine; provided, however, that the initial approval and entering into
of such contract or contracts shall be subject to a Majority Shareholder
Vote. Notwithstanding any other provision of this Trust Instrument, the
Trustees may authorize any investment adviser (subject to such general or
specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales or exchanges of portfolio securities, other
investment instruments of the Trust, or other Trust Property on behalf of
the Trustees, or may authorize any officer, agent, or Trustee to effect
such purchases, sales or exchanges pursuant to recommendations of the
investment adviser (and all without further action by the Trustees). Any
such purchases, sales and exchanges shall be deemed to have been authorized
by all of the Trustees.
The Trustees may authorize, subject to applicable requirements of the 1940
Act, including those relating to Shareholder approval, the investment
adviser to employ, from time to time, one or more sub-advisers to perform
such of the acts and services of the investment adviser, and upon such
terms and conditions, as may be agreed upon between the investment adviser
and sub-adviser. Any reference in this Trust Instrument to the investment
adviser shall be deemed to include such sub-advisers, unless the context
otherwise requires.
PRINCIPAL UNDERWRITER
Section 6.02. The Trustees may in their discretion from time to time
enter into an exclusive or non-exclusive underwriting contract or contracts
providing for the sale of Shares, whereby the Trust may either agree to
sell Shares to the other party to the contract or appoint such other party
its sales agent for such Shares. In either case, the contract shall be on
such terms and conditions, if any, as may be prescribed in the Bylaws, and
such further terms and conditions as the Trustees may in their discretion
determine not inconsistent with the provisions of this Article VI, or of
the Bylaws; and such contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust.
TRANSFER AGENT
Section 6.03. The Trustees may in their discretion from time to time
enter into one or more transfer agency and Shareholder service contracts
whereby the other party or parties shall undertake to furnish the Trustees
with transfer agency and Shareholder services. The contract or contracts
shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Trust
Instrument or of the Bylaws.
PARTIES TO CONTRACT
Section 6.04. Any contract of the character described in Sections 6.01,
6.02 and 6.03 of this Article VI or any contract of the character described
in Article VIII hereof may be entered into with any corporation, firm,
partnership, trust or association, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract, and no such contract shall be
invalidated or rendered void or voidable by reason of the existence of any
relationship, nor shall any person holding such relationship be
disqualified from voting on or executing the same in his capacity as
Shareholder and/or Trustee, nor shall any person holding such relationship
be liable merely by reason of such relationship for any loss or expense to
the Trust under or by reason of said contract or accountable for any profit
realized directly or indirectly therefrom, provided that the contract when
entered into was not inconsistent with the provisions of this Article VI or
Article VIII hereof or of the Bylaws. The same person (including a firm,
corporation, partnership, trust, or association) may be the other party to
contracts entered into pursuant to Sections 6.01, 6.02 and 6.03 of this
Article VI or pursuant to Article VIII hereof, and any individual may be
financially interested or otherwise affiliated with persons who are parties
to any or all of the contracts mentioned in this Section 6.04.
PROVISIONS AND AMENDMENTS
Section 6.05. Any contract entered into pursuant to Sections 6.01 or 6.02
of this Article VI shall be consistent with and subject to the requirements
of Section 15 of the 1940 Act or other applicable Act of Congress hereafter
enacted with respect to its continuance in effect, its termination, and the
method of authorization and approval of such contract or renewal thereof,
and no amendment to any contract, entered into pursuant to Section 6.01 of
this Article VI shall be effective unless assented to in a manner
consistent with the requirements of said Section 15, as modified by any
applicable rule, regulation or order of the Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 7.01. The Shareholders shall have power to vote only (i) for the
election of Trustees as provided in Article III, Sections 3.01 and 3.02
hereof, (ii) for the removal of Trustees as provided in Article III,
Section 3.03(d) hereof, (iii) with respect to any investment advisory or
management contract as provided in Article VI, Sections 6.01 and 6.05
hereof, and (iv) with respect to such additional matters relating to the
Trust as may be required by law, by this Trust Instrument, or the Bylaws or
any registration of the Trust with the Commission or any State, or as the
Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall be
voted separately by individual Series, except (i) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual Series;
and (ii) when the Trustees have determined that the matter affects the
interests of more than one Series, then the Shareholders of all such Series
shall be entitled to vote thereon. The Trustees may also determine that a
matter affects only the interests of one or more classes of a Series, in
which case any such matter shall be voted on by such class or classes.
Each whole Share shall be entitled to vote as to any matter on which it is
entitled to vote, and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy or in any
manner provided for in the Bylaws. A proxy may be given in writing. The
Bylaws may provide that proxies may also, or may instead, be given by any
electronic or telecommunications device or in any other manner.
Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Trust is
submitted to a vote of the Shareholders of one or more Series or of the
Trust, or in the event of any proxy contest or proxy solicitation or
proposal in opposition to any proposal by the officers or Trustees of the
Trust, Shares may be voted only in person or by written proxy. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and
may take any action required or permitted by law, this Trust Instrument or
any of the Bylaws of the Trust to be taken by Shareholders.
MEETINGS
Section 7.02. The first Shareholders' meeting shall be held in order to
elect Trustees as specified in Section 3.02 of Article III hereof at the
principal office of the Trust or such other place as the Trustees may
designate. Meetings may be held within or without the State of Delaware.
Special meetings of the Shareholders of any Series may be called by the
Trustees and shall be called by the Trustees upon the written request of
Shareholders owning at least one-tenth of the Outstanding Shares entitled
to vote. Whenever ten or more Shareholders meeting the qualifications set
forth in Section 16(c) of the 1940 Act, as the same may be amended from
time to time, seek the opportunity of furnishing materials to the other
Shareholders with a view to obtaining signatures on such a request for a
meeting, the Trustees shall comply with the provisions of said Section
16(c) with respect to providing such Shareholders access to the list of the
Shareholders of record of the Trust or the mailing of such materials to
such Shareholders of record, subject to any rights provided to the Trust or
any Trustees provided by said Section 16(c). Notice shall be sent, by
First Class Mail or such other means determined by the Trustees, at least
15 days prior to any such meeting.
QUORUM AND REQUIRED VOTE
Section 7.03. One-third of Shares entitled to vote in person or by proxy
shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of this Trust Instrument
permits or requires that holders of any Series shall vote as a Series (or
that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote
shall be necessary to constitute a quorum for the transaction of business
by that Series (or that class). Any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held, within a
reasonable time after the date set for the original meeting, without the
necessity of further notice. Except when a larger vote is required by law
or by any provision of this Trust Instrument or the Bylaws, a majority of
the Shares voted in person or by proxy shall decide any questions and a
plurality shall elect a Trustee, provided that where any provision of law
or of this Trust Instrument permits or requires that the holders of any
Series shall vote as a Series (or that the holders of any class shall vote
as a class), then a majority of the Shares present in person or by proxy of
that Series or, if required by law, a Majority Shareholder Vote of that
Series (or class), voted on the matter in person or by proxy shall decide
that matter insofar as that Series (or class) is concerned. Shareholders
may act by unanimous written consent. Actions taken by Series (or class)
may be consented to unanimously in writing by Shareholders of that Series.
ARTICLE VIII
CUSTODIAN
APPOINTMENT AND DUTIES
Section 8.01. The Trustees shall at all times employ a bank, a company
that is a member of a national securities exchange, or a trust company,
each having capital, surplus and undivided profits of at least two million
dollars ($2,000,000) as custodian with authority as its agent, but subject
to such restrictions, limitations and other requirements, if any, as may be
contained in the Bylaws of the Trust:
(1) to hold the securities owned by the Trust and deliver the same upon
written order or oral order confirmed in writing;
(2) to receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may direct;
and
(3) to disburse such funds upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
(4) to keep the books and accounts of the Trust or of any Series or class
and furnish clerical and accounting services; and
(5) to compute, if authorized to do so by the Trustees, the Net Asset Value
of any Series, or class thereof, in accordance with the provisions hereof;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services
of the custodian, and upon such terms and conditions, as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall be a bank, a company
that is a member of a national securities exchange, or a trust company
organized under the laws of the United States or one of the states thereof
and having capital, surplus and undivided profits of at least two million
dollars ($2,000,000) or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act.
CENTRAL CERTIFICATE SYSTEM
Section 8.02. Subject to such rules, regulations and orders as the
Commission may adopt, the Trustees may direct the custodian to deposit all
or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities
exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such
other person as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act, pursuant to which system all securities of
any particular class or series of any issuer deposited within the system
are treated as fungible and may be transferred or pledged by bookkeeping
entry without physical delivery of such securities, provided that all such
deposits shall be subject to withdrawal only upon the order of the Trust or
its custodians, subcustodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Section 9.01.
(a) The Trustees may from time to time declare and pay dividends or other
distributions with respect to any Series. The amount of such dividends or
distributions and the payment of them and whether they are in cash or any
other Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other
distribution or among the Shareholders of record at such other date or time
or dates or times as the Trustees shall determine, which dividends or
distributions, at the election of the Trustees, may be paid pursuant to a
standing resolution or resolutions adopted only once or with such frequency
as the Trustees may determine. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans
or related plans as the Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a stock dividend pro rata
among the Shareholders of a particular Series, or class thereof, as of the
record date of that Series fixed as provided in Section (b) hereof.
REDEMPTIONS
Section 9.02. In case any holder of record of Shares of a particular
Series desires to dispose of his Shares or any portion thereof, he may
deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees
may from time to time authorize, requesting that the Series purchase the
Shares in accordance with this Section 9.02; and the Shareholder so
requesting shall be entitled to require the Series to purchase, and the
Series or the principal underwriter of the Series shall purchase his said
Shares, but only at the Net Asset Value thereof (as described in Section
9.03 of this Article IX). The Series shall make payment for any such
Shares to be redeemed, as aforesaid, in cash or property from the assets of
that Series and payment for such Shares shall be made by the Series or the
principal underwriter of the Series to the Shareholder of record within
seven (7) days after the date upon which the request is effective. Upon
redemption, shares shall become Treasury shares and may be re-issued from
time to time.
DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS
Section 9.03. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value shall be
determined separately for each Series and shall be determined on such days
and at such times as the Trustees may determine. Such determination shall
be made with respect to securities for which market quotations are readily
available, at the market value of such securities; and with respect to
other securities and assets, at the fair value as determined in good faith
by the Trustees; provided, however, that the Trustees, without Shareholder
approval, may alter the method of valuing portfolio securities insofar as
permitted under the 1940 Act and the rules, regulations and interpretations
thereof promulgated or issued by the Commission or insofar as permitted by
any Order of the Commission applicable to the Series. The Trustees may
delegate any of their powers and duties under this Section 9.03 with
respect to valuation of assets and liabilities. The resulting amount,
which shall represent the total Net Asset Value of the particular Series,
shall be divided by the total number of shares of that Series outstanding
at the time and the quotient so obtained shall be the Net Asset Value per
Share of that Series. At any time the Trustees may cause the Net Asset
Value per Share last determined to be determined again in similar manner
and may fix the time when such redetermined value shall become effective.
If, for any reason, the net income of any Series, determined at any time,
is a negative amount, the Trustees shall have the power with respect to
that Series (i) to offset each Shareholder's pro rata share of such
negative amount from the accrued dividend account of such Shareholder, or
(ii) to reduce the number of Outstanding Shares of such Series by reducing
the number of Shares in the account of each Shareholder by a pro rata
portion of that number of full and fractional Shares which represents the
amount of such excess negative net income, or (iii) to cause to be recorded
on the books of such Series an asset account in the amount of such negative
net income (provided that the same shall thereupon become the property of
such Series with respect to such Series and shall not be paid to any
Shareholder), which account may be reduced by the amount, of dividends
declared thereafter upon the Outstanding Shares of such Series on the day
such negative net income is experienced, until such asset account is
reduced to zero; (iv) to combine the methods described in clauses (i) and
(ii) and (iii) of this sentence; or (v) to take any other action they deem
appropriate, in order to cause (or in order to assist in causing) the Net
Asset Value per Share of such Series to remain at a constant amount per
Outstanding Share immediately after each such determination and
declaration. The Trustees shall also have the power not to declare a
dividend out of net income for the purpose of causing the Net Asset Value
per Share to be increased. The Trustees shall not be required to adopt,
but may at any time adopt, discontinue or amend the practice of maintaining
the Net Asset Value per Share of the Series at a constant amount.
SUSPENSION OF THE RIGHT OF REDEMPTION
Section 9.04. The Trustees may declare a suspension of the right of
redemption or postpone the date of payment as permitted under the 1940 Act.
Such suspension shall take effect at such time as the Trustees shall
specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no
right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the Net Asset Value per Share next determined
after the termination of the suspension. In the event that any Series is
divided into classes, the provisions of this Section 9.03, to the extent
applicable as determined in the discretion of the Trustees and consistent
with applicable law, may be equally applied to each such class.
REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED INVESTMENT COMPANY
Section 9.05. If the Trustees shall, at any time and in good faith, be of
the opinion that direct or indirect ownership of Shares of any Series has
or may become concentrated in any Person to an extent which would
disqualify any Series as a regulated investment company under the Internal
Revenue Code, then the Trustees shall have the power (but not the
obligation) by lot or other means deemed equitable by them (i) to call for
redemption by any such person of a number, or principal amount, of Shares
sufficient to maintain or bring the direct or indirect ownership of Shares
into conformity with the requirements for such qualification and (ii) to
refuse to transfer or issue Shares to any person whose acquisition of the
Shares in question would result in such disqualification. The redemption
shall be effected at the redemption price and in the manner provided in
this Article IX.
The holders of Shares shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of Shares as
the Trustees deem necessary to comply with the provisions of the Internal
Revenue Code, or to comply with the requirements of any other taxing
authority.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
Section 10.01. A Trustee, when acting in such capacity, shall not be
personally liable to any person other than the Trust or a beneficial owner
for any act, omission or obligation of the Trust or any Trustee. A Trustee
shall not be liable for any act or omission or any conduct whatsoever in
his capacity as Trustee, provided that nothing contained herein or in the
Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee hereunder.
INDEMNIFICATION
Section 10.02.
(a) Subject to the exceptions and limitations contained in Section (b)
below:
(i) every Person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as a "Covered Person") shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him in connection with any
claim, action, suit or proceeding in which he becomes involved as a party
or otherwise by virtue of his being or having been a Trustee or officer and
against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and
the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office or (B) not to
have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither Interested
Persons of the Trust nor are parties to the matter based upon a review of
readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a review
of readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now
or hereafter be entitled, shall continue as to a person who has ceased to
be a Covered Person and shall inure to the benefit of the heirs, executors
and administrators of such a person. Nothing contained herein shall affect
any rights to indemnification to which Trust personnel, other than Covered
Persons, and other persons may be entitled by contract or otherwise under
law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described
in paragraph (a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be
paid over by him to the Trust or Series if it is ultimately determined that
he is not entitled to indemnification under this Section 10.02; provided,
however, that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust is insured against
losses arising out of any such advance payments or (c) either a majority of
the Trustees who are neither Interested Persons of the Trust nor parties to
the matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe
that such Covered Person will be found entitled to indemnification under
this Section 10.02.
SHAREHOLDERS
Section 10.03. In case any Shareholder or former Shareholder of any
Series shall be held to be personally liable solely by reason of his being
or having been a Shareholder of such Series and not because of his acts or
omissions or for some other reason, the Shareholder or former Shareholder
(or his heirs, executors, administrators or other legal representatives,
or, in the case of a corporation or other entity, its corporate or other
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss
and expense arising from such liability. The Trust, on behalf of the
affected Series, shall, upon request by the Shareholder, assume the defense
of any claim made against the Shareholder for any act or obligation of the
Series and satisfy any judgment thereon from the assets of the Series.
ARTICLE XI
MISCELLANEOUS
TRUST NOT A PARTNERSHIP
Section 11.01. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power
to bind personally either the Trust's officers or any Shareholder. All
persons extending credit to, contracting with or having any claim against
the Trust or the Trustees shall look only to the assets of the appropriate
Series or (if the Trustees shall have yet to have established Series) of
the Trust for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past,
present or future, shall be personally liable therefor. Nothing in this
Trust Instrument shall protect a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee hereunder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 11.02. The exercise by the Trustees of their powers and
discretions hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested.
Subject to the provisions of Article X hereof and to Section 11.01 of this
Article XI, the Trustees shall not be liable for errors of judgment or
mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Trust Instrument,
and subject to the provisions of Article X hereof and Section 11.01 of this
Article XI, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor any surety if
a bond is obtained.
ESTABLISHMENT OF RECORD DATES
Section 11.03. The Trustees may close the Share transfer books of the
Trust for a period not exceeding sixty (60) days preceding the date of any
meeting of Shareholders, or the date for the payment of any dividends or
other distributions, or the date for the allotment of rights, or the date
when any change or conversion or exchange of Shares shall go into effect;
or in lieu of closing the stock transfer books as aforesaid, the Trustees
may fix in advance a date, not exceeding sixty (60) days preceding the date
of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date
when any change or conversion or exchange of Shares shall go into effect,
as a record date for the determination of the Shareholders entitled to
notice of, and to vote at, any such meeting, or entitled to receive payment
of any such dividend or other distribution, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion
or exchange of Shares, and in such case such Shareholders and only such
Shareholders as shall be Shareholders of record on the date so fixed shall
be entitled to such notice of, and to vote at, such meeting, or to receive
payment of such dividend or other distribution, or to receive such
allotment or rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust after
any such record date fixed as aforesaid.
TERMINATION OF TRUST
Section 11.04.
(a) This Trust shall continue without limitation of time but subject to
the provisions of sub-section (b) of this Section 11.04.
(b) The Trustees may, subject to a Majority Shareholder Vote of each
Series affected by the matter or, if applicable, to a Majority Shareholder
Vote of the Trust, and subject to a vote of a majority of the Trustees,
(i) sell and convey all or substantially all of the assets of the Trust or
any affected Series to another trust, partnership, association or
corporation, or to a separate series of shares thereof, organized under the
laws of any state which trust, partnership, association or corporation is
an open-end management investment company as defined in the 1940 Act, or is
a series thereof, for adequate consideration which may include the
assumption of all outstanding obligations, taxes and other liabilities,
accrued or contingent, of the Trust or any affected Series, and which may
include shares of beneficial interest, stock or other ownership interests
of such trust, partnership, association or corporation or of a series
thereof; or
(ii) at any time sell and convert into money all of the assets of the
Trust or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for
the payment of all such liabilities in either (i) or (ii), by such
assumption or otherwise, the Trustees shall distribute the remaining
proceeds or assets (as the case may be) of each Series (or class) ratably
among the holders of Shares of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in sub-section (b), the Trust or any affected
Series shall terminate and the Trustees and the Trust shall be discharged
of any and all further liabilities and duties hereunder and the right,
title and interest of all parties with respect to the Trust or Series shall
be cancelled and discharged.
Upon termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the
Trust's certificate of trust to be filed in accordance with the Delaware
Act, which certificate of cancellation may be signed by any one Trustee.
REORGANIZATION
Section 11.05. Notwithstanding anything else herein, the Trustees, in
order to change the form of organization of the Trust, may, without prior
Shareholder approval, (i) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations or corporations so long
as the surviving or resulting entity is an open-end management investment
company under the 1940 Act, or is a series thereof, that will succeed to or
assume the Trust's registration under that Act and which is formed,
organized or existing under the laws of a state, commonwealth possession or
colony of the United States or (ii) cause the Trust to incorporate under
the laws of Delaware. Any agreement of merger or consolidation or
certificate of merger may be signed by a majority of Trustees and facsimile
signatures conveyed by electronic or telecommunication means shall be
valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of the
Delaware Act, and notwithstanding anything to the contrary contained in
this Trust Instrument, an agreement of merger or consolidation approved by
the Trustees in accordance with this Section 11.05 may effect any amendment
to the Trust Instrument or effect the adoption of a new trust instrument of
the Trust if it is the surviving or resulting trust in the merger or
consolidation.
FILING OF COPIES, REFERENCES, HEADINGS
Section 11.06. The original or a copy of this Trust Instrument and of
each amendment hereof or Trust Instrument supplemental hereto shall be kept
at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by an officer or
Trustee of the Trust as to whether or not any such amendments or
supplements have been made and as to any matters in connection with the
Trust hereunder, and with the same effect as if it were the original, may
rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or
supplemental Trust Instrument, references to this Trust Instrument, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to
refer to this Trust Instrument as amended or affected by any such
supplemental Trust Instrument. All expressions like "his", "he" and "him",
shall be deemed to include the feminine and neuter, as well as masculine,
genders. Headings are placed herein for convenience of reference only and
in case of any conflict, the text of this Trust Instrument, rather than the
headings, shall control. This Trust Instrument may be executed in any
number of counterparts each of which shall be deemed an original.
APPLICABLE LAW
Section 11.07. The trust set forth in this instrument is made in the
State of Delaware, and the Trust and this Trust Instrument, and the rights
and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act
and the laws of said State; provided, however, that there shall not be
applicable to the Trust, the Trustees or this Trust Instrument (a) the
provisions of Section 3540 of Title 12 of the Delaware Code or (b) any
provisions of the laws (statutory or common) of the State of Delaware
(other than the Delaware Act) pertaining to trusts which relate to or
regulate (i) the filing with any court or governmental body or agency of
trustee accounts or schedules of trustee fees and charges, (ii) affirmative
requirements to post bonds for trustees, officers, agents or employees of a
trust, (iii) the necessity for obtaining court or other governmental
approval concerning the acquisition, holding or disposition of real or
personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and
expenditures to income or principal, (vi) restrictions or limitations on
the permissible nature, amount or concentration of trust investments or
requirements relating to the titling, storage or other manner of holding of
trust assets, or (vii) the establishment of fiduciary or other standards or
responsibilities or limitations on the acts or powers of trustees, which
are inconsistent with the limitations or liabilities or authorities and
powers of the Trustees set forth or referenced in this Trust Instrument.
The Trust shall be of the type commonly called a "business trust", and
without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust under Delaware law. The
Trust specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by trusts
under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
AMENDMENTS
Section 11.08. Except as specifically provided herein, the Trustees may,
without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto
or an amended and restated trust instrument. Shareholders shall have the
right to vote (i) on any amendment which would affect their right to vote
granted in Section 7.01 of Article VII hereof, (ii) on any amendment to
this Section 11.08, (iii) on any amendment as may be required by law or by
the Trust's registration statement filed with the Commission and (iv) on
any amendment submitted to them by the Trustees. Any amendment required or
permitted to be submitted to Shareholders which, as the Trustees determine,
shall affect the Shareholders of one or more Series shall be authorized by
vote of the Shareholders of each Series affected and no vote of
shareholders of a Series not affected shall be required. Notwithstanding
anything else herein, any amendment to Article 10 hereof shall not limit
the rights to indemnification or insurance provided therein with respect to
action or omission of Covered Persons prior to such amendment.
FISCAL YEAR
Section 11.09. The fiscal year of the Trust shall end on a specified date
as set forth in the Bylaws, provided, however, that the Trustees may,
without Shareholder approval, change the fiscal year of the Trust.
USE OF THE WORD "FIDELITY"
Section 11.10. Fidelity Management & Research Company ("FMR") has
consented to, and granted a non-exclusive license for, the use by any
Series or by the Trust of the identifying word "Fidelity" or "Spartan" in
the name of any Series or of the Trust. Such consent is subject to
revocation by FMR in its discretion, if FMR or subsidiary or affiliate
thereof is not employed as the investment adviser of each Series of the
Trust. As between the Trust and FMR, FMR controls the use of the name of
the Trust insofar as such name contains the identifying word "Fidelity" or
"Spartan." FMR may, from time to time, use the identifying word "Fidelity"
or "Spartan" in other connections and for other purposes, including,
without limitation, in the names of other investment companies,
corporations or businesses which it may manage, advise, sponsor or own or
in which it may have a financial interest. FMR may require the Trust or
any Series thereof to cease using the identifying word "Fidelity" or
"Spartan" in the name of the Trust or any Series thereof if the Trust or
any Series thereof ceases to employ FMR or a subsidiary or affiliate
thereof as investment adviser.
PROVISIONS IN CONFLICT WITH LAW
Section 11.11. The provisions of this Trust Instrument are severable, and
if the Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, the regulated investment
company provisions of the Internal Revenue Code or with other applicable
laws and regulations, the conflicting provision shall be deemed never to
have constituted a part of this Trust Instrument; provided, however, that
such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted
prior to such determination. If any provision of this Trust Instrument
shall be held invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provisions in any
other jurisdiction or any other provision of this Trust Instrument in any
jurisdiction.
IN WITNESS WHEREOF, the undersigned, being all of the initial Trustees of
the Trust, have executed this instrument as of this 20th day of June, 1991.
_/s/ Edward C. Johnson 3d___ ______________________
Edward C. Johnson 3d, as Trustee
and not individually.
/s/J. Gary Burkhead_________ ________________________
J. Gary Burkhead, as Trustee
and not individually.
/s/John E. Ferris_____________________________________
John E. Ferris, as Trustee
and not individually.
CERTIFICATE OF TRUST
OF
FIDELITY CALIFORNIA MUNICIPAL TRUST II
1. The name of the trust is:
Fidelity California Municipal Trust II
2. The Fidelity California Municipal Trust II business address of the
registered office of the Trust and of the registered agent of the Trust for
service of process is:
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
3. This certificate shall be effective upon filing.
4. Notice is hereby given that the Trust is a series Trust. The debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular series of the Trust shall be
enforceable against the assets of such series only and not against the
assets of the Trust generally.
This Certificate is executed this 20th day of June, 1991, in Irving Texas,
upon the penalties of perjury and constitutes the oath or affirmation that
the facts stated above are true to the undersigned's belief or knowledge.
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk /s/J. Tylee Wilson
Donald J. Kirk J. Tylee Wilson
/s/Peter S. Lynch /s/Bertram H. Witham
Peter S. Lynch Bertram H. Witham
/s/Edward H. Malone /s/J. Gary Burkhead
Edward H. Malone J. Gary Burkhead
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Exhibit 5(a)
MANAGEMENT CONTRACT
between
FIDELITY CALIFORNIA MUNICIPAL TRUST II:
Fidelity California Tax-Free Money Market Portfolio
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 30th day of December 1991, by and between Fidelity
California Municipal Trust II, a Delaware business trust which may issue
one or more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Fidelity California Tax-Free Money Market Portfolio
(hereinafter called the "Portfolio"), and Fidelity Management & Research
Company, a Massachusetts corporation (hereinafter called the "Adviser").
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio
office space and all necessary office facilities, equipment and personnel
for servicing the investments of the Portfolio; and shall pay the salaries
and fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a Group Fee Rate and Individual Fund
Fee Rate.
(a) Group Fee Rate. The group fee rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the charter of each investment company) determined
as of the close of business on each business day throughout the month. The
group fee rate shall be determined on a cumulative basis pursuant to the
following schedule:
Average Net Assets Annualized Fee Rate (for each level)
0 - $ 3 billion 0.37%
3 - 6 0.34
6 - 9 0.31
9 - 12 0.28
12 - 15 0.25
15 - 18 0.22
18 - 21 0.20
21 - 24 0.19
24 - 30 0.18
30 - 36 0.175
36 - 42 0.17
42 - 48 0.165
48 - 66 0.16
66 - 84 0.155
Over 84 0.15
(b) Individual Fund Fee Rate. The individual fund fee rate shall be .25%
of average daily net assets of the Portfolio.
The sum of the Group fee rate, calculated as described above to the
nearest millionth, and the Individual Fund fee rate shall constitute the
annual management fee rate. One-twelfth of the annual management fee shall
be applied to the average of the net assets of the portfolio (computed in
the manner set forth in the Trust Instrument of the Fund) determined as of
the close of business on each business day throughout the month.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until June 30, 1992
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without payment of any
penalty, by action of its Trustees or Board of Directors, as the case may
be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Trust Instrument and
agrees that the obligations assumed by the Fund pursuant to this Contract
shall be limited in all cases to the Portfolio and its assets, and the
Adviser shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Portfolio or any other Portfolios of
the Fund. In addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Trust Instrument are separate and distinct from those of any and all other
Portfolios.
8. This contract shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
FIDELITY CALIFORNIA MUNICIPAL TRUST II
on behalf of Fidelity California Tax-Free Money Market Portfolio
By /s/ J. GAry Burkhead
SEAL Senior Vice President
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/ J. Gary Burkhead
SEAL President
EXHIBIT 5(b)
MANAGEMENT CONTRACT
between
FIDELITY CALIFORNIA MUNICIPAL TRUST II:
SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
MODIFICATION made this 18th day of April 1994, by and between Fidelity
California Municipal Trust II, a Delaware business trust which may issue
one or more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Spartan California Municipal Money Market Portfolio
(hereinafter called the "Portfolio"), and Fidelity Management & Research
Company, a Massachusetts corporation (hereinafter called the "Adviser").
Required authorization and approval by shareholders and Trustees having
been obtained, the Fund, on behalf of the Portfolio, and the Adviser hereby
consent, pursuant to Paragraph 6 of the existing Management Contract dated
October 19, 1989, to a modification of said Contract in the manner set
forth below. The Modified Management Contract shall when executed by duly
authorized officers of the Fund and the Adviser, take effect on the later
of April 18, 1994 or the first day of the month following approval.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio
office space and all necessary office facilities, equipment and personnel
for servicing the investments of the Portfolio; and shall pay the salaries
and fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser undertakes to pay all expenses involved in the operation
of the Portfolio, except the following, which shall be paid by the
Portfolio: (i) taxes; (ii) the fees and expenses of all Trustees of the
Fund who are not "interested persons" of the Fund or of the Adviser; (iii)
brokerage fees and commissions; (iv) interest expenses with respect to
borrowings by the Portfolio; and (v) such non-recurring and extraordinary
expenses as may arise, including actions, suits or proceedings to which the
Portfolio is or is threatened to be a party and the legal obligation that
the Portfolio may have to indemnify the Fund's Trustees and officers with
respect thereto. It is understood that service charges billed directly to
shareholders of the Portfolio, including charges for exchanges,
redemptions, or other services, shall not be payable by the Adviser, but
may be received and retained by the Adviser or its affiliates.
(d) The Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Adviser, which may include brokers or
dealers affiliated with the Adviser. The Adviser shall use its best
efforts to seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are reasonable
in relation to the benefits received. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Portfolio and/or the other accounts over which the Adviser or its
affiliates exercise investment discretion. The Adviser is authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in good
faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Adviser and its
affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the Fund shall periodically review
the commissions paid by the Portfolio to determine if the commissions paid
over representative periods of time were reasonable in relation to the
benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. For the services and facilities to be furnished hereunder, the Adviser
shall receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, at the annual rate of .50% of
the average daily net assets of the Portfolio (computed in the manner set
forth in the Declaration of Trust or other organizational document of the
Fund) throughout the month; provided that the fee, so computed, shall be
reduced by the compensation, including reimbursement of expenses, paid by
the Portfolio to those Trustees who are not "interested persons" of the
Fund or the Adviser.
In case of initiation or termination of this Contract during any month,
the fee for that month shall be reduced proportionately on the basis of the
number of business days during which it is in effect, and the fee computed
upon the average net assets for the business days it is so in effect for
that month.
4. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
5. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 5, this Contract shall continue in force until May 31, 1994
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 5, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment of
any penalty, by action of its Trustees or Board of Directors, as the case
may be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
6. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Declaration of Trust or other
organizational document of the Fund and agrees that the obligations assumed
by the Fund pursuant to this Contract shall be limited in all cases to the
Portfolio and its assets, and the Adviser shall not seek satisfaction of
any such obligation from the shareholders or any shareholder of the
Portfolio or any other Portfolios of the Fund. In addition, the Adviser
shall not seek satisfaction of any such obligations from the Trustees or
any individual Trustee. The Adviser understands that the rights and
obligations of any Portfolio under the Declaration of Trust or other
organizational document of the Fund are separate and distinct from those of
any and all other Portfolios.
7. This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
FIDELITY CALIFORNIA MUNICIPAL TRUST II
on behalf of Spartan California Municipal Money Market
Portfolio
By /s/ J. Gary Burkhead
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/ J. Gary Burkhead
President
SUB-ADVISORY AGREEMENT
between
FMR TEXAS INC.
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 30th day of December, 1991, by and between FMR Texas
Inc., a Texas corporation with principal offices at 400 East Las Colinas
Boulevard, Irving, Texas (hereinafter called the "Sub-Adviser") and
Fidelity Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Adviser").
WHEREAS the Adviser has entered into a Management Contract with Fidelity
California Municipal Trust II, a Delaware business trust which may issue
one or more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Fidelity California Tax-Free Money Market Portfolio
(hereinafter called the "Portfolio"), pursuant to which the Adviser is to
act as investment manager and adviser to the Portfolio, and
WHEREAS the Sub-Adviser was formed for the purpose of providing investment
management of money market mutual funds, both taxable and tax-exempt,
advising generally with respect to money market instruments, and managing
or providing advice with respect to cash management.
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Adviser and the Sub-Adviser agree as follows:
1. (a) The Sub-Adviser shall, subject to the supervision of the Adviser,
direct the investments of the Portfolio in accordance with the investment
objective, policies and limitations as provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of l940 and rules thereunder, as amended from
time to time (the "l940 Act"), and such other limitations as the Portfolio
may impose by notice in writing to the Adviser or Sub-Adviser. The
Sub-Adviser shall also furnish for the use of the Portfolio office space
and all necessary office facilities, equipment and personnel for servicing
the investments of the Portfolio; and shall pay the salaries and fees of
all personnel of the Sub-Adviser performing services for the Portfolio
relating to research, statistical and investment activities. The
Sub-Adviser is authorized, in its discretion and without prior consultation
with the Portfolio or the Adviser, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Portfolio. The investment policies and all other actions of
the Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) The Sub-Adviser shall also furnish such reports, evaluations,
information or analyses to the Fund and the Adviser as the Fund's Board of
Trustees or the Adviser may request from time to time or as the Sub-Adviser
may deem to be desirable. The Sub-Adviser shall make recommendations to
the Fund's Board of Trustees with respect to Portfolio policies, and shall
carry out such policies as are adopted by the Trustees. The Sub-Adviser
shall, subject to review by the Board of Trustees, furnish such other
services as the Sub-Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement and
which are not otherwise furnished by the Adviser.
(c) The Sub-Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Sub-Adviser, which may include brokers
or dealers affiliated with the Adviser or Sub-Adviser. The Sub-Adviser
shall use its best efforts to seek to execute portfolio transactions at
prices which are advantageous to the Portfolio and at commission rates
which are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction, brokers
or dealers may be selected who also provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act
of l934) to the Portfolio and/or the other accounts over which the
Sub-Adviser, Adviser or their affiliates exercise investment discretion.
The Sub-Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Adviser and its affiliates have with respect
to accounts over which they exercise investment discretion. The Trustees
of the Fund shall periodically review the commissions paid by the Portfolio
to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Portfolio.
2. The Sub-Adviser will be compensated by the Adviser on the following
basis for the services to be furnished hereunder: the Adviser agrees to
pay the Sub-Adviser a monthly fee equal to 50% of the management fee which
the Portfolio is obligated to pay the Adviser under the Portfolio's
Management Contract with the Adviser. Such fee shall not be reduced to
reflect expense reimbursements or fee waivers by the Adviser, if any, in
effect from time to time.
3. It is understood that Trustees, officers, and shareholders of the Fund
are or may be or become interested in the Adviser or the Sub-Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser or the Sub-Adviser are or may be or become
similarly interested in the Fund, and that the Adviser or the Sub-Adviser
may be or become interested in the Fund as a shareholder or otherwise.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Sub-Adviser hereunder or
by the Adviser under the Management Contract with the Portfolio, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund, the Sub-Adviser or the
Adviser; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Fund and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefor;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Adviser, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Fund's Trustees and officers with respect thereto.
5. The Services of the Sub-Adviser to the Adviser are not to be deemed to
be exclusive, the Sub-Adviser being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Adviser's ability to meet all of its
obligations with respect to rendering investment advice hereunder. The
Sub-Adviser shall for all purposes be an independent contractor and not an
agent or employee of the Adviser or the Fund. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Sub-Adviser, the
Sub-Adviser shall not be subject to liability to the Adviser, the Fund or
to any shareholder of the Portfolio for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Agreement shall continue in force until June 30,
1992 and indefinitely thereafter, but only so long as the continuance after
such period shall be specifically approved at least annually by vote of the
Fund's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Adviser, the
Sub-Adviser and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of the Agreement
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to such Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or by vote of a majority of its outstanding voting
securities. This Agreement shall terminate automatically in the event of
its assignment.
7. The Sub-Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Trust Instrument of the Fund and
agrees that any obligations of the Fund or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Adviser shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Adviser seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
8. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING EFFECT TO THE
CHOICE OF LAWS PROVISIONS THEREOF.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
FMR TEXAS INC.
By /s/ Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/ J. Gary Burkhead
President
SUB-ADVISORY AGREEMENT
between
FMR TEXAS INC.
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 18th day of April, 1994, by and between FMR Texas
Inc., a Texas corporation with principal offices at 400 East Las Colinas
Boulevard, Irving, Texas (hereinafter called the "Sub-Adviser") and
Fidelity Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Adviser").
WHEREAS the Adviser has entered into a Management Contract with Fidelity
California Municipal Trust II, a Delaware business trust which may issue
one or more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Spartan California Municipal Money Market Portfolio
(hereinafter called the "Portfolio"), pursuant to which the Adviser is to
act as investment manager and adviser to the Portfolio, and
WHEREAS the Sub-Adviser was formed for the purpose of providing investment
management of money market mutual funds, both taxable and tax-exempt,
advising generally with respect to money market instruments, and managing
or providing advice with respect to cash management.
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Adviser and the Sub-Adviser agree as follows:
1. (a) The Sub-Adviser shall, subject to the supervision of the Adviser,
direct the investments of the Portfolio in accordance with the investment
objective, policies and limitations as provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of l940 and rules thereunder, as amended from
time to time (the "l940 Act"), and such other limitations as the Portfolio
may impose by notice in writing to the Adviser or Sub-Adviser. The
Sub-Adviser shall also furnish for the use of the Portfolio office space
and all necessary office facilities, equipment and personnel for servicing
the investments of the Portfolio; and shall pay the salaries and fees of
all personnel of the Sub-Adviser performing services for the Portfolio
relating to research, statistical and investment activities. The
Sub-Adviser is authorized, in its discretion and without prior consultation
with the Portfolio or the Adviser, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Portfolio. The investment policies and all other actions of
the Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) The Sub-Adviser shall also furnish such reports, evaluations,
information or analyses to the Fund and the Adviser as the Fund's Board of
Trustees or the Adviser may request from time to time or as the Sub-Adviser
may deem to be desirable. The Sub-Adviser shall make recommendations to
the Fund's Board of Trustees with respect to Portfolio policies, and shall
carry out such policies as are adopted by the Trustees. The Sub-Adviser
shall, subject to review by the Board of Trustees, furnish such other
services as the Sub-Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement and
which are not otherwise furnished by the Adviser.
(c) The Sub-Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Sub-Adviser, which may include brokers
or dealers affiliated with the Adviser or Sub-Adviser. The Sub-Adviser
shall use its best efforts to seek to execute portfolio transactions at
prices which are advantageous to the Portfolio and at commission rates
which are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction, brokers
or dealers may be selected who also provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act
of l934) to the Portfolio and/or the other accounts over which the
Sub-Adviser, Adviser or their affiliates exercise investment discretion.
The Sub-Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Adviser and its affiliates have with respect
to accounts over which they exercise investment discretion. The Trustees
of the Fund shall periodically review the commissions paid by the Portfolio
to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Portfolio.
2. The Sub-Adviser will be compensated by the Adviser on the following
basis for the services to be furnished hereunder: the Adviser agrees to
pay the Sub-Adviser a monthly fee equal to 50% of the management fee which
the Portfolio is obligated to pay the Adviser under the Portfolio's
Management Contract with the Adviser. Such fee shall not be reduced to
reflect expense reimbursements or fee waivers by the Adviser, if any, in
effect from time to time.
3. It is understood that Trustees, officers, and shareholders of the Fund
are or may be or become interested in the Adviser or the Sub-Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser or the Sub-Adviser are or may be or become
similarly interested in the Fund, and that the Adviser or the Sub-Adviser
may be or become interested in the Fund as a shareholder or otherwise.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Sub-Adviser hereunder or
by the Adviser under the Management Contract with the Portfolio, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund, the Sub-Adviser or the
Adviser; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Fund and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefor;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Adviser, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Fund's Trustees and officers with respect thereto.
5. The Services of the Sub-Adviser to the Adviser are not to be deemed to
be exclusive, the Sub-Adviser being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Adviser's ability to meet all of its
obligations with respect to rendering investment advice hereunder. The
Sub-Adviser shall for all purposes be an independent contractor and not an
agent or employee of the Adviser or the Fund. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Sub-Adviser, the
Sub-Adviser shall not be subject to liability to the Adviser, the Fund or
to any shareholder of the Portfolio for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Agreement shall continue in force until May 30, 1994
and indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Fund's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Adviser, the
Sub-Adviser and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of the Agreement
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to such Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or by vote of a majority of its outstanding voting
securities. This Agreement shall terminate automatically in the event of
its assignment.
7. The Sub-Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Declaration of Trust or other
organizational document of the Fund and agrees that any obligations of the
Fund or the Portfolio arising in connection with this Agreement shall be
limited in all cases to the Portfolio and its assets, and the Sub-Adviser
shall not seek satisfaction of any such obligation from the shareholders or
any shareholder of the Portfolio. Nor shall the Sub-Adviser seek
satisfaction of any such obligation from the Trustees or any individual
Trustee.
8. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING EFFECT TO THE
CHOICE OF LAWS PROVISIONS THEREOF.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
FMR TEXAS INC.
By /s/ Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/ J. Gary Burkhead
President
Exhibit 6(a)
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY CALIFORNIA MUNICIPAL TRUST II
FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO
and
FIDELITY DISTRIBUTORS CORPORATION
Agreement made this 30th day of December, 1991, between Fidelity
California Municipal Trust II, a Delaware business trust which may issue
one or more series of beneficial interest ("Issuer"), with respect to
shares of Fidelity California Tax-Free Money Market Portfolio, a series of
the Issuer, and Fidelity Distributors Corporation, a Massachusetts
corporation having its principal place of business in Boston, Massachusetts
("Distributors").
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to the Distributor the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: the Distributor (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to the Distributor
shall be nonexclusive in that the Issuer reserves the right to sell its
shares to investors on applications received and accepted by the Issuer.
Further, the Issuer reserves the right to issue shares in connection with
the merger or consolidation, or acquisition by the Issuer through purchase
or otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by the Distributor or the Issuer will be sold at the
public offering price. The public offering price for all accepted
subscriptions will be the net asset value per share, as determined in the
manner described in the Issuer's current Prospectus and/or Statement of
Additional Information, plus a sales charge (if any) described in the
Issuer's current Prospectus and/or Statement of Additional Information.
The Issuer shall in all cases receive the net asset value per share on all
sales. If a sales charge is in effect, the Distributor shall have the
right subject to such rules or regulations of the Securities and Exchange
Commission as may then be in effect pursuant to Section 22 of the
Investment Company Act of 1940 to pay a portion of the sales charge to
dealers who have sold shares of the Issuer. If a fee in connection with
shareholder redemptions is in effect, the Issuer shall collect the fee on
behalf of Distributors and, unless otherwise agreed upon by the Issuer and
Distributors, Distributors shall be entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by the Distributor except such
unconditional orders as may have been placed with the Distributor before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and the Distributor's authority to process orders
for shares on behalf of the Issuer if, in the judgment of the Issuer, it is
in the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
Issuer. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. This does not obligate the Distributor to
register as a broker or dealer under the Blue Sky Laws of any jurisdiction
in which it is not now registered or to maintain its registration in any
jurisdiction in which it is now registered. If a sales charge is in
effect, the Distributor shall have the right to enter into sales agreements
with dealers of its choice for the sale of shares of the Issuer to the
public at the public offering price only and fix in such agreements the
portion of the sales charge which may be retained by dealers, provided that
the Issuer shall approve the form of the dealer agreement and the dealer
discounts set forth therein and shall evidence such approval by filing said
form of dealer agreement and amendments thereto as an exhibit to its
currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - the Distributor is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for the Distributor's use.
This shall not be construed to prevent the Distributor from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through the Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer. However, all sums of
money received by the Distributor as a result of such purchases and sales
or as a result of such participation must, after reimbursement of actual
expenses of the Distributor in connection with such activity, be paid over
by the Distributor for the benefit of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares the Distributor may reasonably be expected to sell. The
Issuer shall make available to the Distributor such number of copies of its
currently effective Prospectus and Statement of Additional Information as
the Distributor may reasonably request. The Issuer shall furnish to the
Distributor copies of all information, financial statements and other
papers which the Distributor may reasonably request for use in connection
with the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer, it
is recognized by the Issuer that FMR may reimburse the Distributor for any
direct expenses incurred in the distribution of shares of the Issuer from
any source available to it, including advisory and service or management
fees paid to it by the Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any shares,
based upon the ground that the registration statement, Prospectus,
Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time
amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make
the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Issuer by or on behalf of the Distributor. In no case (i)
is the indemnity of the Issuer in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any person against
any liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Issuer to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Issuer in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or
such person shall have received notice of service on any designated agent).
However, failure to notify the Issuer of any claim shall not relieve the
Issuer from any liability which it may have to the Distributor or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Issuer shall be
entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any claims,
but if the Issuer elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the Distributor or
person or persons, defendant or defendants in the suit. In the event the
Issuer elects to assume the defense of any suit and retain counsel, the
Distributor, officers or directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of
any additional counsel retained by them. If the Issuer does not elect to
assume the defense of any suit, it will reimburse the Distributor, officers
or directors or controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by
them. The Issuer agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of any of the
shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of the Distributor or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in favor
of the Issuer or any person indemnified to be deemed to protect the Issuer
or any person against any liability to which the Issuer or such person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Issuer or any person indemnified unless the Issuer or person, as the case
may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon
the Issuer or any such person (or after the Issuer or such person shall
have received notice of service on any designated agent). However, failure
to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Issuer or any person against
whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. In the case of any notice to the
Distributor, it shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense of any suit brought
to enforce the claim, but if the Distributor elects to assume the defense,
the defense shall be conducted by counsel chosen by it and satisfactory to
the Issuer, to its officers and Board and to any controlling person or
persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel,
the Issuer or controlling persons, defendant or defendants in the suit,
shall bear the fees and expense of any additional counsel retained by them.
If the Distributor does not elect to assume the defense of any suit, it
will reimburse the Issuer, officers and Board or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Distributor agrees to notify
the Issuer promptly of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1992 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to the Distributor, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - the Distributor is expressly put on notice of
the limitation of shareholder liability as set forth in the Declaration of
Trust or other organizational document of the Issuer and agrees that the
obligations assumed by the Issuer under this contract shall be limited in
all cases to the Issuer and its assets. The Distributor shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Issuer. Nor shall the Distributor seek satisfaction of
any such obligation from the Trustees or any individual Trustee of the
Issuer. The Distributor understands that the rights and obligations of
each series of shares of the Issuer under the Issuer's Declaration of Trust
or other organizational document are separate and distinct from those of
any and all other series.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, and its seal affixed, by one of its officers duly authorized,
and the Distributor has executed this instrument in its name and behalf by
one of its officers duly authorized, as of the day and year first above
written.
FIDELITY CALIFORNIA MUNICIPAL TRUST II
Fidelity California Tax-Free Money Market Portfolio
Attest: /s/Arthur S. Loring
Secretary By /s/ J. Gary Burkhead
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
Attest: /s/Arthur S. Loring
Secretary By /s/ John F. O'Brien
President
Exhibit 6(b)
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY CALIFORNIA MUNICIPAL TRUST
Spartan California Municipal Money Market Portfolio
and
FIDELITY DISTRIBUTORS CORPORATION
Agreement made this 19th day of October, 1989, between Fidelity California
Municipal Trust, a Massachusetts business trust having its principal place
of business in Boston, Massachusetts and which may issue one or more series
of beneficial interest ("Issuer"), with respect to shares of Spartan
California Municipal Money Market Portfolio, a series of the Issuer, and
Fidelity Distributors Corporation, a Massachusetts corporation having its
principal place of business in Boston, Massachusetts ("Distributors").
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to the Distributor the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: the Distributor (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to the Distributor
shall be nonexclusive in that the Issuer reserves the right to sell its
shares to investors on applications received and accepted by the Issuer.
Further, the Issuer reserves the right to issue shares in connection with
the merger or consolidation, or acquisition by the Issuer through purchase
or otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by the Distributor or the Issuer will be sold at the
public offering price. The public offering price for all accepted
subscriptions will be the net asset value per share, as determined in the
manner described in the Issuer's current Prospectus and/or Statement of
Additional Information, plus a sales charge (if any) described in the
Issuer's current Prospectus and/or Statement of Additional Information.
The Issuer shall in all cases receive the net asset value per share on all
sales. If a sales charge is in effect, the Distributor shall have the
right subject to such rules or regulations of the Securities and Exchange
Commission as may then be in effect pursuant to Section 22 of the
Investment Company Act of 1940 to pay a portion of the sales charge to
dealers who have sold shares of the Issuer. If a fee in connection with
shareholder redemptions is in effect, the Issuer shall collect the fee on
behalf of Distributors and, unless otherwise agreed upon by the Issuer and
Distributors, Distributors shall be entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by the Distributor except such
unconditional orders as may have been placed with the Distributor before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and the Distributor's authority to process orders
for shares on behalf of the Issuer if, in the judgment of the Issuer, it is
in the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
Issuer. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. This does not obligate the Distributor to
register as a broker or dealer under the Blue Sky Laws of any jurisdiction
in which it is not now registered or to maintain its registration in any
jurisdiction in which it is now registered. If a sales charge is in
effect, the Distributor shall have the right to enter into sales agreements
with dealers of its choice for the sale of shares of the Issuer to the
public at the public offering price only and fix in such agreements the
portion of the sales charge which may be retained by dealers, provided that
the Issuer shall approve the form of the dealer agreement and the dealer
discounts set forth therein and shall evidence such approval by filing said
form of dealer agreement and amendments thereto as an exhibit to its
currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - the Distributor is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for the Distributor's use.
This shall not be construed to prevent the Distributor from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through the Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares the Distributor may reasonably be expected to sell. The
Issuer shall make available to the Distributor such number of copies of its
currently effective Prospectus and Statement of Additional Information as
the Distributor may reasonably request. The Issuer shall furnish to the
Distributor copies of all information, financial statements and other
papers which the Distributor may reasonably request for use in connection
with the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer, it
is recognized by the Issuer that FMR may reimburse the Distributor for any
direct expenses incurred in the distribution of shares of the Issuer from
any source available to it, including advisory and service or management
fees paid to it by the Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any shares,
based upon the ground that the registration statement, Prospectus,
Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time
amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make
the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Issuer by or on behalf of the Distributor. In no case (i)
is the indemnity of the Issuer in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any person against
any liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Issuer to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Issuer in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or
such person shall have received notice of service on any designated agent).
However, failure to notify the Issuer of any claim shall not relieve the
Issuer from any liability which it may have to the Distributor or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Issuer shall be
entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any claims,
but if the Issuer elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the Distributor or
person or persons, defendant or defendants in the suit. In the event the
Issuer elects to assume the defense of any suit and retain counsel, the
Distributor, officers or directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of
any additional counsel retained by them. If the Issuer does not elect to
assume the defense of any suit, it will reimburse the Distributor, officers
or directors or controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by
them. The Issuer agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of any of the
shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of the Distributor or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in favor
of the Issuer or any person indemnified to be deemed to protect the Issuer
or any person against any liability to which the Issuer or such person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Issuer or any person indemnified unless the Issuer or person, as the case
may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon
the Issuer or any such person (or after the Issuer or such person shall
have received notice of service on any designated agent). However, failure
to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Issuer or any person against
whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. In the case of any notice to the
Distributor, it shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense of any suit brought
to enforce the claim, but if the Distributor elects to assume the defense,
the defense shall be conducted by counsel chosen by it and satisfactory to
the Issuer, to its officers and Board and to any controlling person or
persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel,
the Issuer or controlling persons, defendant or defendants in the suit,
shall bear the fees and expense of any additional counsel retained by them.
If the Distributor does not elect to assume the defense of any suit, it
will reimburse the Issuer, officers and Board or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Distributor agrees to notify
the Issuer promptly of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1990 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to the Distributor, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - the Distributor is expressly put on notice of
the limitation of shareholder liability as set forth in the Declaration of
Trust or other organizational document of the Issuer and agrees that the
obligations assumed by the Issuer under this contract shall be limited in
all cases to the Issuer and its assets. The Distributor shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Issuer. Nor shall the Distributor seek satisfaction of
any such obligation from the Trustees or any individual Trustee of the
Issuer. The Distributor understands that the rights and obligations of
each series of shares of the Issuer under the Issuer's Declaration of Trust
or other organizational document are separate and distinct from those of
any and all other series.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, and its seal affixed, by one of its officers duly authorized,
and the Distributor has executed this instrument in its name and behalf,
and its corporate seal affixed, by one of its officers duly authorized, as
of the day and year first above written.
FIDELITY CALIFORNIA MUNICIPAL TRUST
Spartan California Municipal Money Market Portfolio
Attest: /s/Arthur S. Loring
Secretary By /s/ J. Gary Burkhead
FIDELITY DISTRIBUTORS CORPORATION
Attest: /s/Arthur S. Loring
Secretary By /s/ Roger A. Lawsen
Exhibit 6(c)
AMENDMENT TO GENERAL DISTRIBUTION AGREEMENT
Effective January 1, 1988, Paragraph 8 of the General Distribution
Agreement between each of the funds or portfolios indicated on the attached
Schedule A shall be amended to read in full as follows:
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through the Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer.
Signed on behalf of each of the funds or portfolios identified on Schedule
A.
On Behalf of Each of the Funds or Portfolios:
Attest:/s/ Arthur S. Loring_____________ By:/s/ J. Gary
Burkhead___________________
Arthur S. Loring J. Gary Burkhead
Secretary
FIDELITY
DISTRIBUTORS CORPORATION:
Attest:/s/ Arthur S. Loring_____________ By:/s/ John F. O'Brien
Arthur S. Loring John F. O'Brien
Secretary
SCHEDULE A
California Tax-Free Fund:
High Yield Portfolio
Money Market Portfolio
Insured Portfolio
Fidelity Capital Trust:
Fidelity Capital Appreciation Fund
Fidelity Value Fund
Fidelity Cash Reserves
Fidelity Charles Street Trust:
Fidelity U.S. Government Reserves
Fidelity Stock Index Fund
Fidelity Contrafund
Fidelity Corporate Trust:
ARP (Adjustable-Rate Preferred Portfolio)
APP (Auction Preferred Portfolio)
Fidelity Court Street Trust:
Fidelity High Yield Municipals
Fidelity Connecticut Tax-Free Portfolio
Fidelity New Jersey Tax-Free High Yield Portfolio
Fidelity New Jersey Tax-Free Money Market Portfolio
Fidelity Colorado Tax-Free Portfolio
Fidelity North Carolina Tax-Free Portfolio
Fidelity Virginia Tax-Free Portfolio
Fidelity Georgia Tax-Free Portfolio
Fidelity Maryland Tax-Free Portfolio
Fidelity Missouri Tax-Free Portfolio
Fidelity Daily income Trust
Daily Money Fund:
Money Market Portfolio
U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
Fidelity Devonshire Trust:
Fidelity Equity-Income Fund
Fidelity Real Estate Investment Portfolio
Fidelity Utilities Income Fund
Equity Portfolio: Growth
Equity Portfolio: Income
Fidelity Fund
Fidelity Financial Trust:
Fidelity Convertible Securities
Fidelity Freedom Fund
Financial Reserves Fund
Fidelity Fixed-Income Trust:
Fidelity Flexible Bond Portfolio
Fidelity Short-Term Bond Portfolio
Fidelity Government Securities fund (a limited partnership)
Fidelity Growth Company Fund
Fidelity High Income Fund
Fidelity Income Fund:
Fidelity Ginnie Mae Portfolio
Fidelity Mortgage Securities Portfolio
Income Portfolios:
GNMA Series
Limited Term Series
Short Fixed-Income Series
Short Government Series
Short-Intermediate Fixed-Income Series
Variable Rate Series
Yield Plus Series
Liquid Assets Series
State and Local Asset Management Series:
Government Money Market Portfolio
Government Bond Portfolio
The California Portfolio
Fidelity Institutional Cash Portfolios:
Money Market Portfolio
U.S. Government Portfolio
U.S. Treasury Portfolio
U.S. Treasury Portfolio II
Domestic Money Market Portfolio
Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Institutional Trust
Fidelity U.S. Equity Index Portfolio
Fidelity U.S. Bond Index Portfolio
Fidelity Intermediate Bond Fund
Fidelity Investment Trust:
Fidelity Europe Fund
Fidelity Global Bond Fund
Fidelity International Growth & Income Fund
Fidelity Overseas Fund
Fidelity Pacific Basin Fund
Fidelity Canada Fund
Fidelity United Kingdom Fund
Fidelity Limited Term Municipals
Fidelity Magellan Fund
Fidelity Massachusetts Tax-Free:
Money Market Portfolio
High Yield Portfolio
Fidelity Money Market Trust:
Domestic Money Market Portfolio
U.S. Government Portfolio
U.S. Treasury Portfolio
Fidelity Municipal Trust:
Fidelity Aggressive Tax-Free Portfolio
Fidelity Insured Tax-Free Portfolio
Fidelity Municipal Bond Portfolio
Fidelity Pennsylvania Tax-Free High Yield Portfolio
Fidelity Pennsylvania Tax-Free Money Market Portfolio
Fidelity Ohio Tax-Free Portfolio
Fidelity Michigan Tax-Free Portfolio
Fidelity Minnesota Tax-Free Portfolio
Fidelity Short-Term Tax-Free Portfolio
Fidelity Texas Tax-Free Portfolio
The North Carolina Cash Management Trust:
Cash Portfolio
Term Portfolio
Fidelity New York Tax-Free Fund:
High Yield Portfolio
Insured Portfolio
Money Market Portfolio
Short-Term Portfolio
Fidelity New Jersey Tax-Free Portfolio, L.P.
Plymouth Fund:
Plymouth Aggressive Income Portfolio
Plymouth Government Securities Portfolio
Plymouth Growth Opportunities Portfolio
Plymouth Income & Growth Portfolio
Plymouth Short-Term Bond Portfolio
Plymouth Investment Series:
Plymouth High Income Municipal Portfolio
Plymouth Global Natural Resources Portfolio
Plymouth Securities Trust:
Plymouth Market Access Plus:
Bull Value Portfolio
Plymouth Market Access Plus:
Bear Value Portfolio
Fidelity Puritan Trust:
Fidelity Balanced Fund
Fidelity Puritan Fund
Fidelity Qualified Dividend Fund
Fidelity Securities Fund:
Fidelity Growth & Income Portfolio
Fidelity OTC Portfolio
Fidelity Blue Chip Fund
Fidelity Select Portfolios:
Air Transportation Portfolio
American Gold Portfolio
Automation and Machinery Portfolio
Automotive Portfolio
Biotechnology Portfolio
Broadcast and Media Portfolio
Brokerage and Investment Management Portfolio
Capital Goods Portfolio
Chemicals Portfolio
Computers Portfolio
Defense and Aerospace Portfolio
Electric Utilities Portfolio
Electronics Portfolio
Energy Portfolio
Energy Service Portfolio
Financial Services Portfolio
Food and Agriculture Portfolio
Health Care Portoflio
Health Care Delivery Portfolio (name changed to Medical Delivery
Housing Portfolio Portfolio on 7/10/87)
Industrial Materials Portfolio
Leisure Portfolio
life Insurance Portfolio
Money Market Portfolio
Paper and Forest Products Portfolio
Precious Metals and Minerals Portfolio
Property and Casualty Insurance Portfolio
Regional Banks Portfolio
Restaurant Industry Portfolio
Fidelity Select Portfolios (cont.)
Retailing Portfolio
Savings and Loan Portfolio
Software and Computer Services Portfolio
Technology Portfolio
Telecommunications Portfolio
Transportation Portfolio
Utilities Portfolio
Fidelity Special Situations Fund
Tax-Exempt Portfolios:
Limited Term Series
Short-Term Intermediate Series
Fidelity Tax-Exempt Money Market Trust
Fidelity Trend Fund
Fidelity U.S. Treasury Money Market Fund, L.P.
Variable Insurance Products Fund:
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Money Market Portfolio
Overseas Portfolio
Fidelity U.S. Investments -
Government Securities Fund, L.P.
Bond Fund, L.P.
Zero Coupon Bond Fund;
The 1993 Portfolio
The 1998 Portfolio
The 2003 Portfolio
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the Prospectuses
and Statements of Additional Information in Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A of Fidelity California Municipal
Trust II: Spartan California Municipal Money Market Portfolio and Fidelity
California Tax-Free Money Market Portfolio, of our reports dated March 29,
1995 and March 31, 1995, respectively, on the financial statements and
financial highlights included in the February 28, 1995 Annual Reports to
Shareholders of Spartan California Municipal Money Market Portfolio and
Fidelity California Tax-Free Money Market Portfolio.
We also consent to the incorporation by reference in this Post-Effective
Amendment, of our reports dated March 29, 1995 and March 31, 1995 on the
financial statements and financial highlights included in the Annual
Reports to Shareholders of Fidelity California Municipal Trust: Spartan
California Intermediate Municipal Portfolio, Spartan California Municipal
High Yield Portfolio (March 29, 1995), Fidelity California Tax-Free Insured
Portfolio, and Fidelity California Tax-Free High Yield Portfolio (March 31,
1995).
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectuses and "Auditor" in the Statements
of Additional Information.
/s/PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
April 10, 1995
Exhibit 15(a)
DISTRIBUTION AND SERVICE PLAN
of Fidelity California Municipal Trust II:
Fidelity California Tax-Free Money Market Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") of Fidelity
California Tax-Free Money Market Portfolio (the "Portfolio"), a series of
shares of Fidelity California Municipal Trust II (the "Fund").
2. The Fund has entered into a General Distribution Agreement with respect
to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management & Research
Company (the "Adviser"), under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers for the
Portfolio's shares of beneficial interest ("shares"). Under the agreement,
the Distributor pays the expenses of printing and distributing any
prospectuses, reports and other literature used by the Distributor,
advertising, and other promotional activities in connection with the
offering of shares of the Portfolio for sale to the public. It is
understood that the Adviser may reimburse the Distributor for these
expenses from any source available to it, including management fees paid to
it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
the plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect from the date specified above until May 31, 1992 and from year to
year thereafter, provided, however, that such continuance is subject to
approval annually by a vote of a majority of the Trustees of the Fund,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may be
amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Portfolio to finance any
activity primarily intended to result in the sale of shares of the
Portfolio, to increase materially the amount spent by the Portfolio for
distribution, or any amendment of the Management Contract to increase the
amount to be paid by the Portfolio thereunder shall be effective only upon
approval by a vote of a majority of the outstanding voting securities of
the Portfolio, and (b) any material amendments of this Plan shall be
effective only upon approval in the manner provided in the first sentence
in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Trust Instrument, any obligations assumed by the Portfolio
pursuant to this Plan and any agreements related to this Plan shall be
limited in all cases to the Portfolio and its assets, and shall not
constitute obligations of any other series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit 15(b)
DISTRIBUTION AND SERVICE PLAN
of Fidelity California Municipal Trust II:
Spartan California Municipal Money Market Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") of Spartan
California Municipal Money Market Portfolio (the "Portfolio"), a series of
shares of Fidelity California Municipal Trust II (the "Fund").
2. The Fund has entered into a General Distribution Agreement with respect
to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management & Research
Company (the "Adviser"), under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers for the
Portfolio's shares of beneficial interest ("shares"). Under the agreement,
the Distributor pays the expenses of printing and distributing any
prospectuses, reports and other literature used by the Distributor,
advertising, and other promotional activities in connection with the
offering of shares of the Portfolio for sale to the public. It is
understood that the Adviser may reimburse the Distributor for these
expenses from any source available to it, including management fees paid to
it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
the plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect from the date specified above until May 31, 1994 and from year to
year thereafter, provided, however, that such continuance is subject to
approval annually by a vote of a majority of the Trustees of the Fund,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may be
amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Portfolio to finance any
activity primarily intended to result in the sale of shares of the
Portfolio, to increase materially the amount spent by the Portfolio for
distribution, or any amendment of the Management Contract to increase the
amount to be paid by the Portfolio thereunder shall be effective only upon
approval by a vote of a majority of the outstanding voting securities of
the Portfolio, and (b) any material amendments of this Plan shall be
effective only upon approval in the manner provided in the first sentence
in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Declaration of Trust or other organizational document, any
obligations assumed by the Portfolio pursuant to this Plan and any
agreements related to this Plan shall be limited in all cases to the
Portfolio and its assets, and shall not constitute obligations of any other
series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit 16
SCHEDULE FOR COMPUTATION OF PERFORMANCE CALCULATIONS
CUMULATIVE TOTAL RETURNS and their income and capital components are
described in the Fund's Statement of Additional Information, and are based
on the net asset values, dividends, capital gain distributions and
reinvestment prices of the historical period covered.
AVERAGE ANNUAL RETURNS are calculated according to the following formula:
Average Annual Return = [(1 + Cumulative Return)1/n] - 1
[where n = the number of years in the base period]
The 7-DAY YIELD AND EFFECTIVE YIELD are calculated according to the methods
prescribed in Form N-1A Item 22(a)(i) and (ii).
The 7-DAY YIELD is calculated according to the following formula:
7-Day Yield = (Base Period Return) x (365/7)
The EFFECTIVE YIELD is calculated according to the following formula:
Effective Yield = [(Base Period Return + 1)365/7] - 1
The TAX EQUIVALENT YIELD is calculated by formula as follows:
Tax Equivalent Yield =(yield)/(1-[tax rate])
[where the tax rate is expressed in decimal notation (i.e. 28% = 0.28)]
For any municipal portfolio that invests a portion of its assets in
obligations subject to state taxes, the tax equivalent yield is adjusted to
reflect these investments.
Spartan Cal Muni Money
Name: Spartan California: Money Market (457)
Notes:
Load:
Redemption:
FiscYear: 28-Feb
Reinvest Cum Total
Pay-date X-Date NAV MonthEnd Shares Value
1.00 27-Nov-89 10000.000 10000
1.00 Nov-89 10000.000 10000
1.00 Dec-89 10000.000 10000
1.00 Jan-90 10000.000 10000
1.00 Feb-90 10000.000 10000
1.00 Mar-90 10000.000 10000
1.00 Apr-90 10000.000 10000
1.00 May-90 10000.000 10000
1.00 Jun-90 10000.000 10000
1.00 Jul-90 10000.000 10000
1.00 Aug-90 10000.000 10000
1.00 Sep-90 10000.000 10000
1.00 Oct-90 10000.000 10000
1.00 Nov-90 10000.000 10000
1.00 Dec-90 10000.000 10000
1.00 Jan-91 10000.000 10000
1.00 Feb-91 10000.000 10000
1.00 Mar-91 10000.000 10000
1.00 Apr-91 10000.000 10000
1.00 May-9 110000.000 10000
1.00 Jun-91 10000.000 10000
1.00 Jul-91 10000.000 10000
1.00 Aug-91 10000.000 10000
1.00 Sep-91 10000.000 10000
1.00 Oct-91 10000.000 10000
1.00 Nov-91 10000.000 10000
1.00 Dec-91 10000.000 10000
1.00 Jan-92 10000.000 10000
1.00 Feb-92 10000.000 10000
1.00 Mar-92 10000.000 10000
1.00 Apr-92 10000.000 10000
1.00 May-92 10000.000 10000
1.00 Jun-92 10000.000 10000
1.00 Jul-92 10000.000 10000
1.00 Aug-92 10000.000 10000
1.00 Sep-92 10000.000 10000
1.00 Oct-92 10000.000 10000
1.00 Nov-92 10000.000 10000
1.00 Dec-92 10000.000 10000
1.00 Jan-93 10000.000 10000
1.00 Feb-93 10000.000 10000
1.00 Mar-93 10000.000 10000
1.00 Apr-93 10000.000 10000
1.00 May-93 10000.000 10000
1.00 Jun-93 10000.000 10000
1.00 Jul-93 10000.000 10000
1.00 Aug-93 10000.000 10000
1.00 Sep-93 10000.000 10000
1.00 Oct-93 10000.000 10000
1.00 Nov-93 10000.000 10000
1.00 Dec-93 10000.000 10000
1.00 Jan-94 10000.000 10000
1.00 Feb-94 10000.000 10000
1.00 Mar-94 10000.000 10000
1.00 Apr-94 10000.000 10000
1.00 May-94 10000.000 10000
1.00 Jun-94 10000.000 10000
1.00 Jul-94 10000.000 10000
1.00 Aug-94 10000.000 10000
1.00 Sep-94 10000.000 10000
1.00 Oct-94 10000.000 10000
1.00 Nov-94 10000.000 10000
1.00 Dec-94 10000.000 10000
1.00 Jan-95 10000.000 10000
1.00 Feb-95 10000.000 10000
Value of Value of
Rep Reinvst Reinvst Total
DIV CGLONG CGSHORT NAV Div Cap Gains Value
1.00
0.000591 1.00 6 0 10006
0.005734 1.00 63 0 10063
0.004672 1.00 110 0 10110
0.004324 1.00 154 0 10154
0.005017 1.00 205 0 10205
0.004827 1.00 254 0 10254
0.005105 1.00 307 0 10307
0.004698 1.00 355 0 10355
0.004668 1.00 403 0 10403
0.004756 1.00 453 0 10453
0.004917 1.00 504 0 10504
0.004957 1.00 556 0 10556
0.004388 1.00 603 0 10603
0.005001 1.00 656 0 10656
0.004230 1.00 701 0 10701
0.003461 1.00 738 0 10738
0.003818 1.00 779 0 10779
0.003820 1.00 820 0 10820
0.003873 1.00 862 0 10862
0.003403 1.00 899 0 10899
0.003502 1.00 937 0 10937
0.003944 1.00 980 0 10980
0.004000 1.00 1024 0 11024
0.003707 1.00 1065 0 11065
0.003455 1.00 1103 0 11103
0.003711 1.00 1144 0 11144
0.002963 1.00 1177 0 11177
0.002549 1.00 1206 0 11206
0.002700 1.00 1236 0 11236
0.002962 1.00 1269 0 11269
0.003092 1.00 1304 0 11304
0.002425 1.00 1332 0 11332
0.002100 1.00 1355 0 11355
0.002119 1.00 1379 0 11379
0.002297 1.00 1406 0 11406
0.002152 1.00 1430 0 11430
0.002042 1.00 1453 0 11453
0.002296 1.00 1480 0 11480
0.001950 1.00 1502 0 11502
0.001720 1.00 1522 0 11522
0.001941 1.00 1544 0 11544
0.001989 1.00 1567 0 11567
0.002284 1.00 1594 0 11594
0.001962 1.00 1616 0 11616
0.001952 1.00 1639 0 11639
0.002186 1.00 1665 0 11665
0.002048 1.00 1688 0 11688
0.002130 1.00 1713 0 11713
0.001977 1.00 1736 0 11736
0.002036 1.00 1760 0 11760
0.001909 1.00 1783 0 11783
0.001817 1.00 1804 0 11804
0.001897 1.00 1827 0 11827
0.001954 1.00 1850 0 11850
0.002312 1.00 1877 0 11877
0.002014 1.00 1901 0 11901
0.002100 1.00 1926 0 11926
0.002345 1.00 1954 0 11954
0.002488 1.00 1984 0 11984
0.002532 1.00 2014 0 12014
0.002694 1.00 2046 0 12046
0.003400 1.00 2087 0 12087
0.003017 1.00 2124 0 12124
0.002869 1.00 2159 0 12159
Dividends Cap Gains Cost of
Received Received Reinvst
in Cash in Cash Distrib
60 6
63 0 63
110 0 110
153 0 154
203 0 205
252 0 254
303 0 307
350 0 355
396 0 403
444 0 453
493 0 504
543 0 556
587 0 603
637 0 656
679 0 701
713 0 738
752 0 779
790 0 820
829 0 862
863 0 899
898 0 937
937 0 980
977 0 1024
1014 0 1065
1049 0 1103
1086 0 1144
1115 0 1177
1141 0 1206
1168 0 1236
1198 0 1269
1228 0 1304
1253 0 1332
1274 0 1355
1295 0 1379
1318 0 1406
1339 0 1430
1360 0 1453
1383 0 1480
1402 0 1502
1419 0 1522
1439 0 1544
1459 0 1567
1482 0 1594
1501 0 1616
1521 0 1639
1543 0 1665
1563 0 1688
1584 0 1713
1604 0 1736
1625 0 1760
1644 0 1783
1662 0 1804
1681 0 1827
1700 0 1850
1723 0 1877
1744 0 1901
1765 0 1926
1788 0 1954
1813 0 1984
1838 0 2014
1865 0 2046
1899 0 2087
1929 0 2124
1958 0 2159
SPCAMM #457
DATE DAILY MILRATE YTD MILRATE
01-Mar-94 0.000066 0.000066
02-Mar-94 0.000065 0.000131
03-Mar-94 0.000064 0.000195
04-Mar-94 0.000065 0.000260
05-Mar-94 0.000064 0.000324
06-Mar-94 0.000064 0.000388
07-Mar-94 0.000064 0.000452
08-Mar-94 0.000063 0.000515
09-Mar-94 0.000063 0.000578
10-Mar-94 0.000062 0.000640
11-Mar-94 0.000062 0.000702
12-Mar-94 0.000062 0.000764
13-Mar-94 0.000062 0.000826
14-Mar-94 0.000062 0.000888
15-Mar-94 0.000062 0.000950
16-Mar-94 0.000060 0.001010
17-Mar-94 0.000060 0.001070
18-Mar-94 0.000060 0.001130
19-Mar-94 0.000060 0.001190
20-Mar-94 0.000060 0.001250
21-Mar-94 0.000060 0.001310
22-Mar-94 0.000060 0.001370
23-Mar-94 0.000058 0.001428
24-Mar-94 0.000057 0.001485
25-Mar-94 0.000058 0.001543
26-Mar-94 0.000058 0.001601
27-Mar-94 0.000057 0.001658
28-Mar-94 0.000058 0.001716
29-Mar-94 0.000058 0.001774
30-Mar-94 0.000061 0.001835
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