FIDELITY CALIFORNIA MUNICIPAL TRUST II, 485BPOS, 1998-04-17

FIDELITY CALIFORNIA MUNICIPAL TRUST II
485BPOS, 1998-04-17

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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. 17 [X]
and
REGISTRATION STATEMENT (No. 811-6397)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 17 [X]
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
Eric D. Roiter, 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, 1998) pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
( ) on ( ) pursuant to paragraph (a)(1) of Rule 485
( ) 75 days after filing pursuant to paragraph (a)(2).
( ) on ( ) pursuant to paragraph (a)(2) 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.
FIDELITY CALIFORNIA MUNICIPAL MONEY MARKET FUND
SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET FUND

CROSS REFERENCE SHEET
FORM N-1A

ITEM NUMBER PROSPECTUS SECTION

<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page

2 a .............................. Expenses

b, c .............................. 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

b .............................. *

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 i............................. Charter

ii............................ *

5 A .............................. Performance

6 a i............................. Charter

ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions

iii.......................... Charter

b ............................. Charter

c .............................. Transaction Details; Exchange Restrictions

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 .............................. Cover Page; Charter

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 ............................ Portfolio Transactions

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 ............................ Contracts with FMR Affiliates

e ............................ *

f ............................ Distribution and Service Plans

g ............................ *

h ............................ Description of the Trusts

i ............................ Contracts with FMR Affiliates

17 a ............................ Portfolio Transactions

b ............................ Portfolio Transactions

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

c ............................ *

20 Distributions and Taxes

21 a, b ............................ Contracts with FMR Affiliates

c ............................ *

22 a, b ............................ Performance

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 each fund's most recent financial report and portfolio
listing, or a copy of the Statement of Additional Information (SAI)
dated April 17, 1998. The SAI has been filed with the Securities and
Exchange Commission (SEC) and is available along with other related
materials on the SEC's Internet Web site (http://www.sec.gov). The SAI
is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, call Fidelity at
1-800-544-8888.
Investments in the money market funds are neither insured nor
guaranteed by the U.S. Government, and there can be no assurance that
the funds will maintain a stable $1.00 share price.
THE MONEY MARKET FUNDS MAY INVEST A SIGNIFICANT PERCENTAGE OF THEIR
ASSETS IN THE SECURITIES OF A SINGLE ISSUER AND THEREFORE MAY BE
RISKIER THAN OTHER TYPES OF MONEY MARKET FUNDS.
Mutual fund shares are not deposits or obligations of, or guaranteed
by, any depository institution. Shares are not insured by the FDIC,
Federal Reserve Board, or any other agency, and are subject to
investment risks, including possible loss of principal amount
invested.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
CMS -pro-0498
701535
Each fund seeks a high level of current income free from federal
income tax and California personal income tax. The funds have
different strategies, however, and carry varying degrees of risk and
yield potential.
FIDELITY'S
CALIFORNIA
MUNICIPAL
FUNDS
FIDELITY CALIFORNIA MUNICIPAL MONEY MARKET FUND
(fund number 097, trading symbol FCFXX)
SPARTAN (registered trademark) CALIFORNIA MUNICIPAL MONEY MARKET
FUND
(fund number 457, trading symbol FSPXX)
SPARTAN (registered trademark) CALIFORNIA MUNICIPAL INCOME FUND
(fund number 091, trading symbol FCTFX)
PROSPECTUS
APRIL 17, 1998(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS

KEY FACTS 2 THE FUNDS AT A GLANCE

3 WHO MAY WANT TO INVEST

4 EXPENSES Each fund's yearly operating
expenses.

6 FINANCIAL HIGHLIGHTS A summary of
each fund's financial data.

9 PERFORMANCE How each fund has done
over time.

THE FUNDS IN DETAIL 10 CHARTER How each fund is organized.

11 INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.

13 BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.

YOUR ACCOUNT 14 DOING BUSINESS WITH FIDELITY

14 TYPES OF ACCOUNTS Different ways to
set up your account.

15 HOW TO BUY SHARES Opening an
account and making additional
investments.

18 HOW TO SELL SHARES Taking money out
and closing your account.

21 INVESTOR SERVICES Services to help you
manage your account.

SHAREHOLDER AND 22 DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES

23 TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.

24 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 man ager. Fidelity
Investments Money Management, Inc. (FIMM), a subsidiary of FMR,
chooses investments for California Municipal Money Market Fund and
Spartan California Municipal Money Market Fund. Beginning January 1,
1999, FIMM will choose investments for Spartan California Municipal
Income.
As with any mutual fund, there is no assurance that a fund will
achieve its goal.
FIDELITY CA MUNI MONEY
GOAL: High current tax-free income for California residents while
maintaining a stable $1.00 share price.
STRATEGY: Invests in high-quality, short-term municipal money market
securities whose interest is free from federal income tax and
California personal income tax.
SIZE: As of February 28, 1998, the fund had over $975 million in
assets.
SPARTAN CA MUNI MONEY
GOAL: High current tax-free income for California residents while
maintaining a stable $1.00 share price.
STRATEGY: Invests in high-quality, short-term municipal money market
securities whose interest is free from federal income tax and
California personal income tax.
SIZE: As of February 28, 1998, the fund had over $1.3 billion in
assets.
SPARTAN CA MUNI INCOME
GOAL: High current tax-free income for California residents.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking to
maximize return must assume
greater risk. Fidelity CA
Municipal Money Market and
Spartan CA Municipal Money
Market are in the MONEY
MARKET category, and Spartan
CA Municipal Income is in the
INCOME category.
(right arrow) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME Seeks
long-term growth and income
by investing in stocks and
bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
STRATEGY: Normally invests in investment-grade municipal securities
whose interest is free from federal income tax and California personal
income tax. Managed to generally react to changes in interest rates
similarly to municipal bonds with maturities between eight and 18
years.
SIZE: As of February 28, 1998, the fund had over $1.2 billion in
assets.
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. The
money market funds are managed to keep their share prices stable at
$1.00. The bond fund, with its broader range of investments, has the
potential for higher yields, but also carries 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, and generally reflect interest rates, market
conditions, and other federal and state political and economic news.
When you sell your shares of the bond fund, they may be worth more or
less than what you paid for them. By themselves, these funds do not
constitute a balanced investment plan.
Non-diversified funds may invest a greater portion of their assets in
securities of individual issuers than diversified funds. As a result,
changes in the market value of a single issuer could cause greater
fluctuations in share value than would occur in a more diversified
fund.

EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy,
sell, or exchange shares of a fund. In addition, you may be charged an
annual account maintenance fee if your account balance falls below
$2,500. See "Transaction Details," page , for an explanation of how
and when these charges apply.

<TABLE>
<CAPTION>
<S> <C>
Sales charge on purchases None
and reinvested distributions

Deferred sales charge on redemptions None

Exchange fee for Spartan CA Municipal Money Market only $5.00

Wire transaction fee for Spartan CA Municipal Money Market only $5.00

Checkwriting fee, per check written for Spartan CA Municipal Money Market only $2.00

Account closeout fee for Spartan CA Municipal Money Market only $5.00

Annual account maintenance fee $12.00
(for accounts under $2,500)

</TABLE>

THE FEES FOR INDIVIDUAL TRANSACTIONS are waived 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. FMR is responsible for the
payment of all other expenses for Spartan California Municipal Money
Market with certain limited exceptions. Each of Fidelity California
Municipal Money Market and Spartan California Municipal Income also
incur 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 "Breakdown of
Expenses" page ).
The following figures are based on historical expenses, adjusted to
reflect current fees, of each fund and are calculated as a
percentage of average net assets of each fund. Each of Fidelity
California Municipal Money Market and Spartan California Municipal
Income has entered into arrangements with its custodian and transfer
agent whereby credits realized as a result of uninvested cash balances
are used to reduce custodian and transfer agent expenses. Including
these reductions, other expenses and total fund operating
expenses presented in the table would have been 0.22% and
0.61% , respectively, for Fidelity California Municipal
Money Market and 0.15%, and 0.5 2 % , respectively, for
Spartan California Municipal Income.
FIDELITY CA MUNI MONEY
Management fee 0.39%

12b-1 fee None

Other expenses 0.23%

Total fund operating expenses 0.62%

SPARTAN CA MUNI MONEY
Management fee 0.50%

12b-1 fee None

Other expenses 0.00%

Total fund operating expenses 0.50%

SPARTAN CA MUNI INCOME
Management fee (after
reimbursement) 0.37%

12b-1 fee None

Other expenses 0.16%

Total fund operating expenses 0.53%
(after reimbursement)

EXAMPLES: Let's say, hypothetically, that each fund's annual return is
5% and that your shareholder transaction expenses and each fund's
annual 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 and, for
Spartan California Municipal Money Market, if you leave your account
open:
FIDELITY CA MUNI MONEY
1 year $ 6

3 years $ 20

5 years $ 35

10 years $ 77

SPARTAN CA MUNI MONEY
Account open Account closed

1 year $ 5 $ 10

3 years $ 16 $ 21

5 years $ 28 $ 33

10 years $ 63 $ 68

SPARTAN CA MUNI INCOME
1 year $ 5

3 years $ 17

5 years $ 30

10 years $ 66

These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
Effective August 15, 1997, FMR has voluntarily agreed to reimburse
Spartan California Municipal Income to the extent that total operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) exceed 0.53% of its average net assets through
December 31, 1999. If this agreement were not in effect, the
management fee and total operating expenses, as a percentage of
average net assets, of the fund would have been 0.39% and 0.55%,
respectively.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow have been audited by Price
Waterhouse LLP, independent accountants. The funds' financial
highlights, financial statements, and reports of the auditor are
included in the funds' Annual Report, and are incorporated by
reference into (are legally a part of) the funds' SAI. Contact
Fidelity for a free copy of an Annual Report or the SAI.
FIDELITY CALIFORNIA MUNICIPAL MONEY MARKET

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios

Years ended February 28 1998 1997 1996F 1995 1994 1993E 1992D 1991D 1990D 1989D

Net asset value, beginning of
period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000

Income from Investment
Operations .030 .029 .032 .026 .020 .019 .035 .047 .054 .052
Net interest income

Less Distributions (.030) (.029) (.032) (.026) (.020) (.019) (.035) (.047) (.054) (.052)
From net interest income

Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000

Total returnB,C 3.07% 2.90% 3.21% 2.60% 1.97% 1.92% 3.59% 4.85% 5.53% 5.36%

Net assets, end of period $ 976 $ 820 $ 733 $ 675 $ 612 $ 568 $ 557 $ 539 $ 624 $ 736
(In millions)

Ratio of expenses to .62% .62% .64% .62% .64% .62%A .63% .61% .60% .53%G
average net assets

Ratio of expenses to average net .61%H .61%H .64% .62% .64% .62%A .63% .61% .60% .53%
assets after expense reductions

Ratio of net interest income to 3.02% 2.86% 3.17% 2.58% 1.95% 2.29%A 3.50% 4.75% 5.42% 5.31%
average net assets

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios

Years ended February 28 1998 1997 1996G 1995 1994 1993F 1992E 1991E 1990D

Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000

Income from Investment Operations .032 .031 .035 .030 .024 .022 .041 .054 .025
Net interest income

Less Distributions (.032) (.031) (.035) (.030) (.024) (.022) (.041) (.054) (.025)
From net interest income

Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000

Total returnB,C 3.26% 3.18% 3.60% 3.00% 2.45% 2.24% 4.15% 5.52% 2.54%

Net assets, end of period (In millions) $ 1,353 $ 1,344 $ 1,307 $ 1,163 $ 1,065 $ 856 $ 918 $ 764 $ 397

Ratio of expenses to average net assets .45%H .35%H .31%H .28%H .21%H .30%A,H .10%H .07%H .00%H

Ratio of expenses to average net .45% .34%I .31% .28% .21% .30%A .10% .07% .00%
assets after expense reductions

Ratio of net interest income 3.21% 3.14% 3.55% 2.96% 2.42% 2.67%A 4.05% 5.33% 5.99%A
to average net 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.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NOVEMBER 27, 1989 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1990.
E YEARS ENDED APRIL 30
F MAY 1, 1992 TO FEBRUARY 28, 1993
G YEAR ENDED FEBRUARY 29
H FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
I FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
SPARTAN CALIFORNIA MUNICIPAL INCOME FUND

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios

Years ended February 28 1998 1997 1996F 1995 1994G 1993E 1992D 1991D 1990D 1989D

Net asset value, $ 11.810 $ 11.720 $ 11.120 $ 12.100 $ 12.430 $ 11.540 $ 11.300 $ 10.940 $ 11.080 $ 10.620
beginning of period

Income from Investment .589 .599 .625 .685 .719 .611 .744 .752 .756 .758
Operations
Net interest income

Net realized and
unrealized .550 .096 .597 (.830) (.060) .890 .240 .360 (.140) .460
gain (loss)

Total from investment 1.139 .695 1.222 (.145) .659 1.501 .984 1.112 .616 1.218
operations

Less Distributions (.589) (.602) (.622) (.685) (.719) (.611) (.744) (.752) (.756) (.758)
From net interest income

From net realized gain -- (.003) -- (.150) (.270) -- -- -- -- --

Total distributions (.589) (.605) (.622) (.835) (.989) (.611) (.744) (.752) (.756) (.758)

Net asset value, end
of period $ 12.360 $ 11.810 $ 11.720 $ 11.120 $ 12.100 $ 12.430 $ 11.540 $ 11.300 $ 10.940 $ 11.080

Total returnB,C 9.89% 6.16% 11.25% (.91)% 5.41% 13.40% 8.94% 10.44% 5.61% 11.85%

Net assets, end of
period $ 1,238 $ 486 $ 498 $ 477 $ 575 $ 587 $ 529 $ 524 $ 514 $ 494
(In millions)

Ratio of expenses to .54%H .57% .58% .56% .57% .60%A .59% .58% .60% .61%
average net assets

Ratio of expenses to
average .53%I .57% .58% .56% .57% .60%A .59% .58% .60% .61%
net assets after expense
reductions

Ratio of net interest
income 4.85% 5.19% 5.44% 6.16% 5.78% 6.17%A 6.52% 6.71% 6.73% 7.05%
to average net assets

Portfolio turnover rate 37%J 17% 37% 29% 44% 32%A 23% 15% 34% 21%

</TABLE>

A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D YEARS ENDED APRIL 30
E MAY 1, 1992 TO FEBRUARY 28, 1993
F YEAR ENDED FEBRUARY 29
G EFFECTIVE MARCH 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION
OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A RESULT, NET INTEREST INCOME PER SHARE MAY
REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX
DIFFERENCES.
H FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
I FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
J THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED
IN THE MERGER.
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 different measures, including a comparative index and a
competitive funds average for the bond fund and a measure of inflation
for the money market funds. Data for the comparative index for Spartan
California Municipal Income is available only from June 30, 1993 to
the present. The chart on page presents calendar year
performance for the bond fund.
If FMR had not reimbursed certain fund expenses during these periods
yields and total returns would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Past 10
February 28, 1998 year years years/Li
fe of
fund

Fidelity CA Muni Money 3.07% 2.75% 3.57%

Spartan CA Muni Money 3.25% 3.10% 3.63%A

Consumer Price Index 1.44% 2.50% 3.39%

Spartan CA Muni Income 9.89% 6.27% 7.82%

Lehman Bros. CA Municipal Bond Index 9.72% n/a n/a

Lipper CA Municipal 9.37% 6.12% 7.69%
Debt Funds Average

CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Past 10
February 28, 1998 year years years/L
ife of
fund

Fidelity CA Muni Money 3.07% 14.52% 41.95%

Spartan CA Muni Money 3.25% 16.48% 34.21%A

Consumer Price Index 1.44% 13.14% 39.57%

Spartan CA Muni Income 9.89% 35.56% 112.27%

Lehman Bros. CA 9.72% n/a n/a
Municipal Bond Index

Lipper CA Municipal 9.37% 34.62% 110.00%
Debt Funds Average

A FROM November 27, 1989 (COMMENCEMENT OF OPERATIONS)
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 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 fund 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.
YEAR-BY-YEAR TOTAL RETURNS
CALENDAR YEARS 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
SPARTAN CA MUNI INCOME 11.78% 9.67% 6.96% 10.16% 8.71% 13.43% -8.88%
19.17% 4.76% 9.81%
LIPPER CA MUNI. DEBT FUND AVG. 10.99% 9.78% 6.50% 11.11% 8.39% 12.62%
- -7.59% 18.32% 3.65% 9.15%
CONSUMER PRICE INDEX 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54%
3.32% 1.70%
PERCENTAGE (%)
ROW: 1, COL: 1, VALUE: 11.78
ROW: 2, COL: 1, VALUE: 9.67
ROW: 3, COL: 1, VALUE: 6.96
ROW: 4, COL: 1, VALUE: 10.16
ROW: 5, COL: 1, VALUE: 8.709999999999999
ROW: 6, COL: 1, VALUE: 13.43
ROW: 7, COL: 1, VALUE: -8.880000000000001
ROW: 8, COL: 1, VALUE: 19.17
ROW: 9, COL: 1, VALUE: 4.76
ROW: 10, COL: 1, VALUE: 9.810000000000001
(LARGE SOLID BOX) SPARTAN CA MUNI
INCOME
LEHMAN BROTHERS CALIFORNIA MUNICIPAL BOND INDEX is a total return
performance benchmark for California investment-grade municipal bonds
with maturities of at least one year.
Unlike the bond fund's returns, the total returns of the comparative
index do not include the effect of any brokerage commissions,
transaction fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper California Municipal Debt
Funds Average for Spartan California Municipal Income. As of February
28, 1998, the average reflected the performance of 102 mutual funds
with similar investment objectives. This average, published by Lipper
Analytical Services, Inc., excludes the effect of sales loads.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL

CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. Fidelity California
Municipal Money Market Fund and Spartan California Municipal Money
Market Fund are non-diversified funds of Fidelity California Municipal
Trust II. Spartan California Municipal Income Fund is a
non-diversified fund 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 periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals
to be voted on. The number of votes you are entitled to is based upon
the dollar value of your investment.
FIDELITY FACTS
FIDELITY OFFERS THE BROADEST
SELECTION OF MUTUAL FUNDS
IN THE WORLD.
(SOLID BULLET) NUMBER OF FIDELITY MUTUAL
FUNDS: OVER 223
(SOLID BULLET) ASSETS IN FIDELITY MUTUAL
FUNDS: OVER $ 568 BILLION
(SOLID BULLET) NUMBER OF SHAREHOLDER
ACCOUNTS: OVER 36 MILLION
(SOLID BULLET) NUMBER OF INVESTMENT
ANALYSTS AND PORTFOLIO
MANAGERS: OVER 265
(CHECKMARK)
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses their investments and
handles their business affairs. FIMM, located in Merrimack, New
Hampshire, has primary responsibility for providing investment
management services for the money market funds. Beginning January 1,
1999, FIMM will have primary responsibility for providing investment
management services for the bond fund.
Jonathan Short is Vice President and manager of Spartan California
Municipal Income, which he has managed since March 1995. He also
manages other Fidelity funds. Since joining Fidelity in 1990, Mr.
Short has worked as an analyst and manager.
Fidelity investment personnel may invest in securities for their own
accounts 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.
UMB Bank, n.a. (UMB) is each fund's transfer agent, and is located at
1010 Grand Avenue, Kansas City, Missouri. UMB employs Fidelity Service
Company, Inc. (FSC) to perform transfer agent servicing functions for
each fund.
FMR Corp. is the ultimate parent company of FMR and FIMM. Members
of the Edward C. Johnson 3d family are the predominant owners of a
class of shares of common stock representing approximately 49% of the
voting power of FMR Corp. Under the Investment Company Act of 1940
(the 1940 Act), control of a company is presumed where one individual
or group of individuals owns more than 25% of the voting stock of that
company; therefore, the Johnson family may be deemed under the 1940
Act to form a controlling group with respect to FMR Corp.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out a fund's transactions, provided that the fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
MONEY MARKET FUNDS IN GENERAL. The yield of a money market fund will
change daily based on changes in interest rates and market conditions.
Money market funds comply with industry-standard requirements for the
quality, maturity, and diversification of their investments, which are
designed to help maintain a stable $1.00 share price. Of course, there
is no guarantee that a money market fund will be able to maintain a
stable $1.00 share price. It is possible that a major change in
interest rates or a default on a money market fund's investments could
cause its share price (and the value of your investment) to change.
FIDELITY'S APPROACH TO MONEY MARKET FUNDS. Money market funds earn
income at current money market rates. In managing money market funds,
FMR stresses preservation of capital, liquidity, and income. The money
market funds will purchase only high-quality securities that FMR
believes present minimal credit risks and will observe maturity
restrictions on securities they buy.
FIDELITY 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, including securities structured so that they are eligible
investments for the fund. FMR normally invests at least 65% of the
fund's total assets in state municipal securities, and normally
invests the fund's assets so that at least 80% of the fund's income
distributions is free from federal income tax.
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 securi ties of all
types, including securities structured so that they are eligible
investments for the fund. FMR normally invests at least 65% of the
fund's total assets in state municipal securities, and normally
invests the fund's assets so that at least 80% of the fund's income
distributions is free from federal income tax.
BOND FUNDS IN GENERAL. The yield and share price of a bond fund change
daily based on changes in interest rates and market conditions, and in
response to other economic, political or financial events. The types
and maturities of the securities a bond fund purchases and the credit
quality of their issuers will impact a bond fund's reaction to these
events.
INTEREST RATE RISK. In general, bond prices rise when interest rates
fall and fall when interest rates rise. Longer-term bonds are usually
more sensitive to interest rate changes. In other words, the longer
the maturity of a bond, the greater the impact a change in interest
rates is likely to have on the bond's price. In addition, short-term
interest rates and long-term interest rates do not necessarily move in
the same amount or in the same direction. A short-term bond tends to
react to changes in short-term interest rates and a long-term bond
tends to react to changes in long-term interest rates.
ISSUER RISK. The price of a bond is affected by the credit quality of
its issuer. Changes in the financial condition of an issuer, changes
in general economic conditions, and changes in specific economic
conditions that affect a particular type of issuer can impact the
credit quality of an issuer. Lower quality bonds generally tend to be
more sensitive to these changes than higher quality bonds.
MUNICIPAL MARKET RISK. Municipal securities are backed by the entity
that issued them and/or other revenue streams. Municipal security
values may be significantly affected by political changes as well as
uncertainties in the municipal market related to taxation or the
rights of municipal securities hold ers. The credit quality of many
municipal securities is enhanced by insurance guaranteeing the timely
payment of interest and repayment of principal. Due to the relatively
small number of municipal insurers, changes in the financial condition
of an individual municipal insurance provider may affect the municipal
market as a whole.
FIDELITY'S APPROACH TO BOND FUNDS. The total return from a bond
includes both income and price gains or losses. In selecting
investments for a bond fund, FMR considers a bond's expected income
together with its potential for price gains or losses. While income is
the most important component of bond returns over time, a bond fund's
emphasis on income does not mean the fund invests only in the
highest-yielding bonds available, or that it can avoid losses of
principal.
FMR focuses on assembling a portfolio of income-producing bonds that
it believes will provide the best balance between risk and return
within the range of eligible investments for the fund. FMR's
evaluation of a potential investment includes an analysis of the
credit quality of the issuer, its structural features, its current
price compared to FMR's estimate of its long-term value, and any
short-term trading opportunities resulting from market inefficiencies.
In structuring a bond fund, FMR allocates assets among different
market sectors (for example, general obligation bonds of a state or
bonds financing a specific project) and different maturities based on
its view of the relative value of each sector or maturity. The
performance of the fund will depend on how successful FMR is in
pursuing this approach.
SPARTAN CALIFORNIA MUNICIPAL INCOME seeks high current income that is
free from federal income tax and California personal income tax by
investing in investment-grade municipal secu rities under normal
conditions. FMR normally invests the fund's assets so that at least
80% of the fund's income distributions is free from both federal and
California personal income taxes.
Although the fund does not maintain an average maturity within a
specified range, FMR seeks to manage the fund so that it generally
reacts to changes in interest rates similarly to municipal bonds with
maturities between eight and 18 years. As of February 28, 1998, the
fund's dollar-weighted average maturity was approximately 14.9 years.

EACH FUND normally invests in municipal securities. FMR may invest all
of each fund's assets in municipal securities issued to finance
private activities. The interest from these securities is a
tax-preference item for purposes of the federal alternative minimum
tax.
Each fund's performance is affected by the economic and political
conditions within the state of California. California suffered a
severe economic recession between 1990-1993, which resulted in
broad-based revenue shortfalls for the State and many local
governments. California's fiscal condition has improved as its economy
has been in a sustained recovery since 1994. During the recession, the
State substantially reduced local assistance, and further reductions
could adversely affect the financial condition of cities, counties and
other government agencies facing constraints in their own revenue
collections. California's long-term credit rating stabilized after
having been reduced in the past several years. California voters in
the past have passed amendments to the California Constitution and
other measures that limit the taxing and spending authority of
California governmental entities, and future voter initiatives could
result in adverse consequences affecting California municipal bonds.
The funds differ primarily with respect to the level of income
provided and the stability of their share price. The money market
funds seek to provide income while maintaining a stable share price.
The bond fund seeks to provide a higher level of income by investing
in a broader range of securities. As a result, the bond fund does not
seek to maintain a stable share price. In addition, since the money
market funds concentrate their investments in California municipal
securities, an investment in the money market funds may be riskier
than an investment in other types of money market funds.
FMR may use various techniques to hedge a portion of the bond fund's
risks, but there is no guarantee that these strategies will work as
intended. When you sell your shares of the bond fund, they may be
worth more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations, and the bond fund does not expect to invest in state
taxable obligations. However, during periods when FMR believes that
California municipals that meet fund standards are not available, the
bond fund may temporarily invest more than 20% of its assets in
obligations that are only federally tax-exempt. 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, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of each fund's limitations and more
detailed information about each fund's investments are contained in
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 unless it believes that they are consistent with a fund's
investment objective and policies and that doing so will help a fund
achieve its goal. Fund holdings and recent investment strategies are
detailed in each fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer generally pays the investor
a fixed, variable, or floating rate of interest, and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes.
In addition, bond prices are also affected by the credit quality of
the issuer. Investment-grade debt securities are medium- and
high-quality securities. Some, however, may possess speculative
characteristics, and may be more sensitive to economic changes and to
changes in the financial condition of issuers.
RESTRICTIONS: Spartan California Municipal Income normally invests in
investment-grade securities, but reserves the right to invest up to 5%
of its assets in below investment-grade securities (sometimes called
"junk bonds"). A security is considered to be investment-grade if it
is rated investment-grade by Moody's Investors Service (Moody's),
Standard & Poor's (S&P), Duff & Phelps Credit Rating Co., or Fitch
IBCA, Inc., or is unrated but judged by FMR to be of equivalent
quality . Spartan California Municipal Income may not invest in
securities judged by FMR to be of equivalent quality to those rated
lower than B by Moody's or S&P.
MONEY MARKET SECURITIES are high-quality, short-term instruments
issued by municipalities, local and state governments, and other
entities. These securities may carry fixed, variable, or floating
interest rates. Money market securities may be structured or may
employ a trust or similar structure 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.
CREDIT AND LIQUIDITY SUPPORT. Issuers may employ various forms of
credit and liquidity enhancement, including letters of credit,
guarantees, puts and demand features, and insurance, provided by
foreign or domestic entities such as banks and other financial
institutions. These arrangements expose a fund to the credit risk of
the entity providing the credit or liquidity support. Changes in the
credit quality of the provider could affect the value of the security
and a fund's share price. In addition, in the case of foreign
providers of credit or liquidity support, extensive public information
about the provider may not be available, and unfavorable political,
economic, or governmental developments could affect its ability to
honor its commitment.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
or private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities.
They may be fully or partially backed by the local government, or by
the credit of a private issuer or the current or anticipated revenues
from specific projects or assets. Because many municipal securities
are issued to finance similar types of projects, especially those
relating to education, health care, housing, transportation, and
utilities, the municipal markets can be affected by conditions in
those sectors. In addition, all municipal securities may be affected
by uncertainties regarding their tax status, legislative changes, or
rights of municipal securities holders. A municipal security may be
owned directly or through a participation interest.
STATE MUNICIPAL SECURITIES include municipal obligations issued by the
state of California or its counties, municipalities, authorities, or
other subdivisions. The ability of issuers to repay their debt can be
affected by many factors that impact the economic vitality of either
the state or a region within the state.
Other state municipal securities include obligations of the U.S.
territories and possessions such as Guam, the Virgin Islands, Puerto
Rico, and their political subdivisions and public corporations. The
economy of Puerto Rico is closely linked to the U.S. economy, and will
be affected by the strength of the U.S. dollar, interest rates, the
price stability of oil imports, and the continued existence of
favorable tax incentives.
ASSET-BACKED SECURITIES include interests in pools of purchase
contracts, financing leases, or sales agreements entered into by
municipalities. The value of these securities depends on many factors,
including changes in interest rates, the availability of information
concerning the pool and its structure, the credit quality of the
underlying assets, the market's perception of the servicer of the
pool, and any credit enhancement provided. In addition, these
securities may 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 direc tion from a benchmark, often making the
security's market value more volatile.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire
land, equipment, or facilities. If the municipality stops making
payments or transfers its obligations to a private entity, the
obligation could lose value or become taxable.
PUT FEATURES entitle the holder to put (sell back) a security to the
issuer or another party. In exchange for this benefit, a fund may
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 a fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk
or increase return. These techniques may increase the volatility of a
fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could
result in a loss if the counterparty to the transaction does not
perform as promised.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined
by FMR, under the supervision of the Board of Trustees, to be
illiquid, which means that they may be difficult to sell promptly at
an acceptable price. The sale of some illiquid securities and some
other securities may be subject to legal restrictions. Difficulty in
selling securities may result in a loss or may be costly to a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading
practices in which payment and delivery for the security take place at
a later date than is customary for that type of security. The market
value of the security could change during this period.
CASH MANAGEMENT. A fund may invest in money market securities and in a
money market fund available only to funds and accounts managed by FMR
or its affiliates, whose goal is to seek a high level of current
income exempt from federal income tax while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
RESTRICTIONS: Spartan California Municipal Income does not
currently intend to invest in a money market fund.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one industry
or type of project. Economic, business, or political changes can
affect all securities of a similar type. A fund that is not
diversified may be more sensitive to changes in the market value of a
single issuer or industry.
RESTRICTIONS: Each fund is considered non-diversified. Generally, to
meet federal tax requirements at the close of each quarter, each fund
does not invest more than 25% of its total assets in any one issuer
and, with respect to 50% of total assets, does not invest more than 5%
of its total assets in any issuer. These limitations do not apply to
U.S. Government securities or to securities of other investment
companies. Each fund may invest more than 25% of its total assets in
tax-free securities that finance similar types of projects.
BORROWING. Each fund may borrow from banks or from other funds advised
by FMR, or through reverse repurchase agreements. If a fund borrows
money, its share price may be subject to greater fluctuation until the
borrowing is paid off. If a fund makes additional investments while
borrowings are outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
Fidelity California Municipal Money Market seeks as high a level of
current income, exempt from federal and California state personal
income tax, as is consistent with the preservation of capital. The
fund will normally invest so that at least 80% of its income
distributions are free from federal income tax.
Spartan California Municipal Money Market seeks as high a level of
current income, exempt from federal income tax and California state
personal income tax, as is consistent with the 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 Municipal Income seeks as high a level of current
income, exempt from federal and California state personal income tax,
available from investing primarily in municipal securities judged by
FMR to be of investment-grade quality. The fund may invest up to
one-third of its assets in lower-quality bonds, but may not purchase
bonds that are judged by FMR to be equivalent quality to those rated
lower than B. The fund will normally invest so that at least 80% of
its income distributions are exempt from federal and California state
personal income taxes. During periods when FMR believes that
California municipals that meet the fund's standard are not available,
the fund may temporarily invest more than 20% of its assets in
obligations that are only federally tax-exempt.
Each fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% 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 the money market funds.
Each of Fidelity California Municipal Money Market and Spartan
California Municipal Income 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 AND OTHER EXPENSES
Each fund's management fee is calculated and paid to FMR every month.
FMR pays all of the other expenses of Spartan California Municipal
Money Market with limited exceptions. The annual management fee rate
for Spartan California Municipal Money Market is 0.50% of its average
net assets. For each of Fidelity California Municipal Money Market and
Spartan California Municipal Income, the fee is calculated by
adding a group fee rate to an individual fund fee rate, multiplying
the result by the fund's monthly average net assets and dividing by
twelve.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.37%, and it
drops as total assets under management increase.
FMR has voluntarily agreed to limit Spartan California Municipal
Income's total operating expenses to an annual rate of 0.53% of
average net assets. This agreement will continue until December 31,
1999.
For February 1998, the group fee rate was 0.1357%. The individual fund
fee rate is 0.25% for Fidelity California Municipal Money Market and
Spartan California Municipal Income.
The total management fee rate for Fidelity California Municipal Money
Market for the fiscal year ended February 28, 1998 was 0.39% of the
fund's average net assets.
Because of a reimbursement arrangement, the total management fee
rate for Spartan California Municipal Income for the fiscal year ended
February 1998 was 0.38% of the fund's average net assets.
FIMM is Fidelity California Municipal Money Market's and Spartan
California Municipal Money Market's sub-adviser and has primary
responsibility for managing their investments. FMR is responsible for
pro viding other management services. FMR pays FIMM 50% of its
management fee (before expense reimbursements) for FIMM's services.
FMR paid FMR Texas Inc. (FMR Texas), the predecessor company to FIMM,
fees equal to 0.19% of Fidelity California Municipal Money Market's
and 0.25% of Spartan California Municipal Money Market's average net
assets for the fiscal year ended February 28, 1998. Beginning January
1, 1999, FIMM will have primary responsibility for managing Spartan
California Municipal Income's investments. FMR will pay FIMM 50% of
its management fee (before expense reimbursements) for FIMM's
services.
While the management fee is a significant component of each of
California Municipal Money Market 's and Spartan California
Municipal Income's annual operating costs, these funds have other
expenses as well.
UMB is the transfer and service agent for each fund. UMB has entered
into sub-agreements with FSC under which FSC performs transfer agency,
dividend disbursing, shareholder servicing, and accounting functions
for the funds. These services include processing shareholder
transactions, valuing each fund's investments, and calculating each
fund's share price and dividends.
Under the terms of the sub-agreements, FSC receives all related fees
paid to UMB by California Municipal Money Market and Spartan
California Municipal Income and by FMR on behalf of Spartan California
Municipal Money Market.
For the fiscal year ended February 1998, transfer agency and pricing
and bookkeeping fees paid (as a percentage of average net assets)
amounted to the following. These amounts are before expense
reductions, if any.
Transfer Agency and
Pricing and Bookkeeping Fees
Paid by Fund

Fidelity California Muni Money 0. 20 %

Spartan California Muni Income 0. 14 %

In the case of Spartan California Municipal Money Market, FMR, not the
fund, pays for these services.
Each of Fidelity California Municipal Money Market and Spartan
California Municipal Income also pays other expenses, such as legal,
audit, and custodian fees; in some instances, proxy solicitation
costs; and the compensation of trustees who are not affiliated with
Fidelity. A broker-dealer may use a portion of the commissions paid by
the bond fund to reduce the fund's custodian or transfer agent fees.
Spartan California Municipal Money Market also pays other expenses,
such as brokerage fees and commissions, interest on borrowings, taxes,
and the compensation of trustees who are not affiliated with Fidelity.
To offset shareholder service costs, FMR or its affiliates also
collect Spartan California Municipal Money Market's $5.00 exchange
fee, $5.00 account closeout fee, $5.00 fee for wire purchases and
redemptions, and the $2.00 checkwriting charge.
Each fund has adopted a DISTRIBUTION AND SERVICE PLAN. Each plan
recognizes that FMR may use its management fee revenues, as well as
its past profits or its resources from any other source, to pay FDC
for expenses incurred in connection with the distribution of fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees of each fund has authorized such
payments.
For the fiscal year ended February 1998, the portfolio turnover rate
for the bond fund was 37 %. This rate varies 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- advant aged retirement plans for individuals investing on
their own or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 80 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend
to purchase individual securities as part of your total investment
portfolio, you may consider investing in a fund through a brokerage
account. You can choose California Municipal Money Market as your core
account for your Fidelity Ultra Service Account(registered trademark)
or FidelityPlusSM brokerage account.
You may purchase or sell shares of the funds through an investment
professional, including a broker, who may charge you a transaction fee
for this service. If you invest through FBSI, another financial
institution, or an investment professional, read their program
materials for any special provisions, additional service features or
fees that may apply to your investment in a fund. Certain features of
the fund, such as the minimum initial or subsequent investment
amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of each fund is the fund's net asset value
per share (NAV). Each money market fund is managed to keep its NAV
stable at $1.00. Each fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
invest ment is received in proper form. Each fund's NAV is
normally calculated each business day at 4:00 p.m. Eastern time.
Each fund 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.
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
for Fidelity CA Municipal Money Market $5,000
for Spartan CA Municipal Money Market $25,000
for Spartan CA Municipal Income** $10,000
TO ADD TO AN ACCOUNT
for Fidelity CA Municipal Money Market $250
Through regular investment plans* $100
for Spartan CA Municipal Money Market $1,000
Through regular investment plans* $500
for Spartan CA Municipal Income** $1,000
Through regular investment plans* $500
MINIMUM BALANCE
for Fidelity CA Municipal Money Market $2,000
for Spartan CA Municipal Money Market $10,000
for Spartan CA Municipal Income** $5,000
*FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
**THESE MINIMUMS DO NOT APPLY TO SHAREHOLDERS WITH EXISTING ACCOUNTS
ON RECORD MARCH 31, 1997.
These minimums may vary for investments through Fidelity Portfolio
Advisory Services. Refer to the program materials for details.

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TO OPEN AN TO ADD TO
ACCOUNT AN
ACCOUNT

PHONE 1-800-544-7777 (PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM (SMALL SOLID BULLET) EXCHANGE FROM
ANOTHER FIDELITY ANOTHER
FUND ACCOUNT WITH FIDELITY FUND
THE SAME ACCOUNT WITH
REGISTRATION, THE SAME
INCLUDING NAME, REGISTRATION,
ADDRESS, AND INCLUDING
TAXPAYER ID NAME,
NUMBER. ADDRESS, AND
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:
UP TO
$100,000.

MAIL (MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) MAKE YOUR
SIGN THE CHECK PAYABLE
APPLICATION. MAKE TO THE COMPLETE
YOUR CHECK NAME OF THE
PAYABLE TO THE FUND. INDICATE
COMPLETE NAME OF YOUR FUND
THE FUND. MAIL TO ACCOUNT NUMBER
THE ADDRESS ON YOUR CHECK
INDICATED ON THE AND MAIL TO THE
APPLICATION. ADDRESS PRINTED
ON YOUR ACCOUNT
STATEMENT.
(SMALL SOLID BULLET) EXCHANGE BY
MAIL: CALL
1-800-544-666
6 FOR
INSTRUCTIONS.

IN PERSON (HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR (SMALL SOLID BULLET) BRING YOUR
APPLICATION AND CHECK TO A
CHECK TO A FIDELITY INVESTOR
FIDELITY INVESTOR CENTER. CALL
CENTER. CALL 1-800-544-97
1-800-544-979 97 FOR THE
7 FOR THE CENTER CENTER NEAREST
NEAREST YOU. YOU.

WIRE (WIRE_GRAPHIC) (SMALL SOLID BULLET) THERE MAY BE A (SMALL SOLID BULLET) THERE MAY BE A
$5.00 FEE FOR $5.00 FEE FOR
EACH WIRE EACH WIRE
PURCHASE. PURCHASE.
(SMALL SOLID BULLET) CALL (SMALL SOLID BULLET) WIRE TO:
1-800-544-777 BANKERS TRUST
7 TO SET UP YOUR COMPANY,
ACCOUNT AND TO BANK ROUTING
ARRANGE A WIRE #021001033,
TRANSACTION. ACCOUNT
(SMALL SOLID BULLET) WIRE WITHIN 24 #00163053.
HOURS TO: SPECIFY THE
BANKERS TRUST COMPLETE NAME
COMPANY, OF THE FUND AND
BANK ROUTING INCLUDE YOUR
#021001033, ACCOUNT
ACCOUNT NUMBER AND
#00163053. YOUR NAME.
SPECIFY THE
COMPLETE NAME
OF THE FUND AND
INCLUDE YOUR NEW
ACCOUNT NUMBER
AND YOUR NAME.

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
1-800-544-66
66 TO ADD IT.

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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118

</TABLE>

HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of each fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form. Each fund's NAV is normally
calculated each business day at 4:00 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
$2,000 worth of shares in the account for Fidelity California
Municipal Money Market, $10,000 worth of shares in the account for
Spartan California Municipal Money Market and $5,000 worth of shares
in the account for Spartan California Municipal Income to keep it
open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of
shares,
(small solid bullet) Your account registration has changed within the
last 30 days,
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address),
(small solid bullet) The check is being made payable to someone other
than the account owner, or
(small solid bullet) The redemption proceeds are being transferred to
a Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, and
(small solid bullet) Any other applicable requirements listed in the
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited
number of checks. Do not, however, try to close out your account by
check.
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ACCOUNT SPECIAL
TYPE REQUIREME
NTS

FOR SPARTAN CA MUNICIPAL MONEY MARKET 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.

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: UP
TO $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
TENANT, INSTRUCTION MUST
SOLE PROPRIETORSHIP, BE SIGNED BY ALL
UGMA, UTMA PERSONS
TRUST REQUIRED TO SIGN
FOR TRANSACTIONS,
EXACTLY AS THEIR
NAMES APPEAR
BUSINESS OR ON THE ACCOUNT.
ORGANIZATION (SMALL SOLID BULLET) THE TRUSTEE MUST
SIGN THE LETTER
INDICATING
CAPACITY AS
TRUSTEE. IF THE
EXECUTOR, TRUSTEE'S NAME IS
ADMINISTRATOR, NOT IN THE
CONSERVATOR, ACCOUNT
GUARDIAN REGISTRATION,
PROVIDE A COPY
OF THE TRUST
DOCUMENT
CERTIFIED WITHIN
THE LAST 60
DAYS.
(SMALL SOLID BULLET) AT LEAST ONE
PERSON
AUTHORIZED BY
CORPORATE
RESOLUTION TO ACT
ON THE ACCOUNT
MUST SIGN THE
LETTER.
(SMALL SOLID BULLET) INCLUDE A
CORPORATE
RESOLUTION WITH
CORPORATE SEAL
OR A SIGNATURE
GUARANTEE.
(SMALL SOLID BULLET) CALL
1-800-544-66
66 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
1-800-544-66
66. MINIMUM
WIRE: $5,000.
(SMALL SOLID BULLET) YOUR WIRE
REDEMPTION
REQUEST MUST BE
RECEIVED IN
PROPER FORM BY
FIDELITY BEFORE
4:00 P.M.
EASTERN TIME FOR
MONEY TO BE
WIRED ON THE
NEXT BUSINESS
DAY.

CHECK (CHECK_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MINIMUM
CHECK: $1,000
EACH FOR
SPARTAN
CALIFORNIA
MUNICIPAL
MONEY MARKET
AND SPARTAN
CALIFORNIA
MUNICIPAL
INCOME AND
$500 FOR
CALIFORNIA
MUNICIPAL
MONEY MARKET
(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

</TABLE>

INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your
account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365
days a year. Whenever you call, you can speak with someone equipped to
provide the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESSSM
1-800-544-5555
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone or in writing. You may pay a $5.00
fee for each exchange out of Spartan California Municipal Money
Market, unless you place your transaction through 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
$100 FOR
FIDELITY MONTHLY OR QUARTERLY (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION ON THE FUND
CA MUNI MONEY APPLICATION.
MARKET. (SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL 1-800-544-6666 FOR AN APPLICATION.
$500 FOR SPARTAN (SMALL SOLID BULLET) TO CHANGE THE AMOUNT OR FREQUENCY OF YOUR INVESTMENT, CALL
CA MUNI MONEY 1-800-544-6666 AT LEAST THREE BUSINESS DAYS PRIOR TO YOUR NEXT
MARKET AND SPARTAN SCHEDULED INVESTMENT DATE.
CA MUNICIPAL
INCOME

</TABLE>

DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUNDA

<TABLE>
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<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 FOR FIDELITY EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE FUND APPLICATION, OR CALL
CA MUNI MONEY 1-800-544-6666 FOR AN AUTHORIZATION FORM.
MARKET. (SMALL SOLID BULLET) CHANGES REQUIRE A NEW AUTHORIZATION FORM.
$500 FOR SPARTAN
CA MUNI MONEY
MARKET AND SPARTAN
CA MUNICIPAL
INCOME

</TABLE>

FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND

<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 for Fidelity Monthly, bimonthly, (small solid bullet) To establish, call 1-800-544-6666 after both accounts are
CA Muni Money quarterly, or annually opened.
Market. (small solid bullet) To change the amount or frequency of your investment, call
$500 for Spartan 1-800-544-6666.
CA Muni Money
Market and Spartan
CA Municipal
Income

</TABLE>

A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THAT FUND MAY NOT BE AN
APPROPRIATE CHOICE 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
fund 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. The bond fund
offers four options, and the money market funds offer three options.
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. (bond fund only) Your capital gain
distributions, if any, will be automatically reinvested, but you will
be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions, if 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 distributed as dividends and taxed
as ordinary income. 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 a statement showing the
tax status of distributions and will report to the IRS the amount
of any taxable 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 that each fund's income dividends are derived from
interest on California state tax-free investments, they will be free
from California state personal income tax. Distributions derived from
obligations that are not California state tax-free obligations, as
well as distributions from short or long-term capital gains, are
subject to California state personal income tax. Corporate taxpayers
should note that each fund's income dividends and other distributions
are not exempt from California state franchise or corporate taxes.
During the fiscal year ended February 28, 1998, 100% of each fund's
income dividends was free from federal income tax and 99.99%, 100%,
and 100% were free from California state taxes for Fidelity California
Municipal Money Market, Spartan California Municipal Money Market, and
Spartan California Municipal Income, respectively. 35.03% of Fidelity
California Municipal Money Market's, 40.49% of Spartan California
Municipal Money Market's, and 4.88% of Spartan California Municipal
Income'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 when a fund has realized but
not yet distributed income or capital gains, you will pay the full
price for the shares and then receive a portion of the price back in
the form of a taxable distribution.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4:00 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.
Each money market fund's assets are valued on the basis of amortized
cost. This method minimizes the effect of changes in a security's
market value and helps each money market fund to maintain a stable
$1.00 share price.
For the bond fund, assets are valued primarily on the basis of
information furnished by a pricing service or market quotations, if
available, or by another method that the Board of Trustees believes
accurately reflects fair value.
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 OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. 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 sus pend the offering of shares for
a period of time.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased
at the next NAV calculated after your investment is received in
proper form. 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 canceled and you could be liable for any losses or fees a fund or
its transfer agent has incurred.
(small solid bullet) Shares begin to earn dividends on the first
business day following the day of purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money
order, U.S. Treasury check, Federal Reserve check, or direct deposit
instead.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements
with FDC may enter confirmed purchase orders on behalf of customers by
phone, with payment to follow no later than the time when a fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper
form. 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 earn dividends through the day of
redemption; however, shares redeemed on a Friday or prior to a holiday
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.
(small solid bullet) If your account is not an Ultra Service Account,
there is a $1.00 charge for each check written under $500.
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 $24.00 per shareholder. It is expected that
accounts will be valued on the second Friday in November of each year.
Accounts opened after September 30 will not be subject to the fee for
that year. The fee, which is payable to the transfer agent, is
designed to offset in part the relatively higher costs of servicing
smaller accounts. This fee will not be deducted from Fidelity
brokerage accounts, retirement accounts (except non-prototype
retirement accounts), accounts using regular investment plans, or if
total assets with Fidelity exceed $30,000. Eligibility for the $30,000
waiver is determined by aggregating Fidelity accounts maintained by
FSC or FBSI which are registered under the same social security number
or which list the same social security number for the custodian of a
Uniform Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $2,000 for Fidelity California
Municipal Money Market, $10,000 for Spartan California Municipal Money
Market, and $5,000 for Spartan California Municipal Income, 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 for Spartan California
Municipal Money Market, 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.
FDC may, at its own expense, provide promotional incentives to
qualified recipients who support the sale of shares of the funds
without reimbursement from the funds. Qualified recipients are
securities dealers who have sold fund shares or others, including
banks and other financial institutions, under special arrangements in
connection with FDC's sales activities. In some instances, these
incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or
expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, each fund reserves the right to
temporarily or permanently terminate the exchange privilege of any
investor who makes more than four exchanges out of the fund per
calendar year. Accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be counted
together for purposes of the four exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest the money effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
(small solid bullet) Your exchanges may be restricted or refused if a
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges
that coincides with a "market timing" strategy may be disruptive to a
fund.
Although the funds will attempt to give you prior notice whenever they
are reasonably able to do so, they may impose these restrictions at
any time. The funds reserve the right to terminate or modify the
exchange privilege in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may
im pose administrative fees of up to 1.00% and trading fees of up to
3.00% of the amount exchanged. Check each fund's prospectus for
details.

This prospectus is printed on recycled paper using soy-based inks.
FIDELITY CALIFORNIA MUNICIPAL MONEY MARKET FUND AND
SPARTAN(registered trademark) CALIFORNIA MUNICIPAL MONEY MARKET
FUND
FUNDS OF FIDELITY CALIFORNIA MUNICIPAL TRUST II
SPARTAN (registered trademark) CALIFORNIA MUNICIPAL INCOME
FUND
A FUND OF FIDELITY CALIFORNIA MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
APRIL 17, 1998
This Statement of Additional Information (SAI) is not a prospectus
but should be read in conjunction with the funds' current Prospectus
(dated April 17, 1998 ). Please retain this document for future
reference. The funds' Annual Report is a separate document supplied
with this SAI. To obtain a free additional copy of the Prospectus or
an Annual Report, please call Fidelity at 1-800-544-8888.
TABLE OF CONTENTS PAGE

Investment Policies and Limitations 30

Special Considerations Regarding California 35

Special Considerations Regarding Puerto Rico 38

Portfolio Transactions 40

Valuation 41

Performance 41

Additional Purchase, Exchange and Redemption Information 49

Distributions and Taxes 49

FMR 50

Trustees and Officers 50

Management Contracts 52

Distribution and Service Plans 57

Contracts with FMR Affiliates 58

Description of the Trusts 58

Financial Statements 59

Appendix 59

INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER
Fidelity Investments Money Management, Inc. (FIMM) (money market
funds)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB)
and Fidelity Service Company, Inc. (FSC)
CMS-ptb-0498 701985
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 v oting
securities" (as defined in the Investment Company Act of 1940 (the
1940 Act)) of the fund. However, except for the fundamental
investment limitations listed below, the investment policies and
limitations described in this SAI are not fundamental and may be
changed without shareholder approval.
INVESTMENT LIMITATIONS OF FIDELITY CALIFORNIA MUNICIPAL MONEY MARKET
FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) 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 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 business
days (not including Sundays and holidays) to the extent necessary to
comply with the 33 1/3% limitation;
(5) 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;
(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.
(11) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the
fund currently intends to comply with certain diversification limits
imposed by Subchapter M.
(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 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 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 engage in repurchase
agreements or make loans, but this limitation does not apply to
purchases of debt securities.
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies and limitations as the fund.
For purposes of limitations (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.
For purposes of limitation (i), Subchapter M generally requires the
fund to invest no more than 25% of its total assets in securities of
any one issuer and to invest at least 50% of its total assets so that
no more than 5% of the fund's total assets are invested in securities
of any one issuer. However, Subchapter M allows unlimited investments
in cash, cash items, government securities (as defined in Subchapter
M) and securities of other investment companies. These tax
requirements are generally applied at the end of each quarter of the
fund's taxable year.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the policies on quality and maturity, see the section entitled
"Quality and Maturity" on page .
INVESTMENT LIMITATIONS OF SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET
FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of 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) In order to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended, the
fund currently intends to comply with certain diversification limits
imposed by Subchapter M.
(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 trea ted as borrowings for purposes of fundamental investment
limitation (2)). 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 engage in repurchase
agreements or make loans, but this limitation does not apply to
purchases of debt securities.
(vii) 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 purposes of limitation (i), Subchapter M generally requires the
fund to invest no more than 25% of its total assets in securities of
any one issuer and to invest at least 50% of its assets so that no
more than 5% of the fund's total assets are invested in securities of
any one issuer. However, Subchapter M allows unlimited investments in
cash, cash items, government securities (as defined in Subchapter M)
and securities of other investment companies. These tax requirements
are generally applied at the end of each quarter of the fund's taxable
year.
With respect to limitation (v), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the policies on quality and maturity, see the section entitled
"Quality and Maturity" on page .
INVESTMENT LIMITATIONS OF SPARTAN CALIFORNIA MUNICIPAL INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a
U.S. territory or possession or a state or local government, or a
political subdivision of any of the foregoing) if, as a result, more
than 25% of the fund's total assets would be invested in securities of
companies whose principal business activities are in the same
industry;
(5) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business;
(6) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(7) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(8) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the
same fundamental investment objective, policies, and limitations as
the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the
fund currently intends to comply with certain diversification limits
imposed by Subchapter M.
(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 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 engage in repurchase
agreements or make loans, but this limitation does not apply to
purchases of debt securities.
(vii) 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 purposes of limitation (i), Subchapter M generally requires the
fund to invest no more than 25% of its total assets in securities of
any one issuer and to invest at least 50% of its total assets so that
no more than 5% of the fund's total assets are invested in securities
of any one issuer. However, Subchapter M allows unlimited investments
in cash, cash items, government securities (as defined in Subchapter
M) and securities of other investment companies. These tax
requirements are generally applied at the end of each quarter of the
fund's taxable year.
With respect to limitation (v), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 10% of its net assets was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the bond fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options
Transactions" on page .
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. FMR may not buy all of these instruments or use all of these
techniques unless it believes that doing so will help the fund achieve
its goal.
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 1940 Act. These
transactions may involve repurchase agreements with cust odian
banks; short-term obligations of, and repurchase agreements with, the
50 largest U.S. banks (measured by deposits); municipal securities;
U.S. Government securities with affiliated financial institutions that
are primary dealers in these securities; short-term currency
transactions; and short-term borrowings. In accordance with exemptive
orders issued by the Securities and Exchange Commission (SEC), the
Board of Trustees has established and periodically reviews procedures
applicable to transactions involving affiliated financial
institutions.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and sold on
a delayed-delivery or when-issued basis. These transactions
involve a commitment to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place
after the customary settlement period for that type of security.
Typically, no interest accrues to the purchaser until the security is
delivered. The bond fund may receive fees or price concessions for
entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the
purchaser assumes the rights and risks of ownership, including the
risks of price and yield fluctuations and the risk that the security
will not be issued as anticipated. Because payment for the securities
is not required until the delivery date, these risks are in addition
to the risks associated with a fund's investments. If a fun d
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, a fund will set aside appropriate liquid assets in a
segregated custodial account to cover the 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, a fund could miss a favorable
price or yield opportunity or suffer a loss.
A fund may renegotiate a delayed delivery transaction and may sell
the underlying securities before delivery, which may result in
capital gains or losses for the fund.
FEDERALLY TAXABLE SECURITIES. Under normal conditions, a
municipal fund does not intend to invest in securities whose interest
is federally taxable. However, from time to time on a temporary basis,
a municipal fund may invest a portion of its assets in fixed-income
securities whose interest is subject to federal income tax.
Should a municipal fund invest in federally taxable securities, it
would purchase securities that, in FMR's judgment, are of high
quality. These would include securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities, obligations of
domestic banks, and repurchase agreements. A municipal bond fund's
standards for high-quality, taxable securiti es 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 (S&P) in
rating corporate obligations within its two highest ratings of A-1 and
A-2.
A municipal money market fund will purchase taxable securities only if
they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption
for interest on municipal securities 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 a
municipal fund's distributions. If such proposals were enacted, the
availability of municipal securities and the value of a municipal
fund's holdings would be affected and the Trustees would reevaluate
the fund's investment objectives and policies.
F UTURES AND OPTIONS. The following paragraphs pertain to
futures and options: Asset Coverage for Futures and Options Positions,
Combined Positions, Correlation of Price Changes, Futures Contracts,
Futures Margin Payments, Limitations on Futures and Options
Transactions, Liquidity of Options and Futures Contracts, OTC Options,
Purchasing Put and Call Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS . The funds
will comply with guidelines established by the SEC with respect to
coverage of options and futures strategies by mutual funds and, if the
guidelines so require, will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held
in a segregated account cannot be sold while the futures or option
strategy is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that segregation of a
large percentage of a fund's assets could impede portfolio management
or the fund's ability to meet redemption requests or other current
obligations.
COMBINED POSITIONS i nvolve purchasing and writing 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, purchasing a put option and writing a
call option on the same underlying instrument would construct a
combined position whose risk and return characterist ics 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, 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. A fund may invest
in options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which the fund typically invests, which involves a risk that the
options or futures position will not track the performance of the
fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match 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.
FUTURES CONTRACT S. In purchasing a futures contract, the
buyer agrees to purchase a specified underlying instrument at a
specified future date. In selling a futures contract, the seller
agrees to sell a specified underlying instrument at a specified future
date. The price at which the purchase and sale will take place is
fixed when the buyer and seller enter into the contract. Som e
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.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The 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, before engaging in any purchases or
sales of futures contracts or options on futures contracts. The fund
intends to comply with Rule 4.5 under the Commodity Exchange Act,
which limits the extent to which the fund can commit assets to initial
margin deposits and option premiums.
In addition, the bond 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 bond fund ' s investments in
futures contracts and options, and the fund's policies regarding
futures contracts and options discussed elsewhere in this SAI, may be
changed as regulatory agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a g iven day. On volatile trading
days when the price fluctuation limit is reached or a trading halt is
imposed, it may be imposs ible 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 purchaser or writer greater flexibility
to tailor an option to its needs, OTC options generally involve
greater credit risk than exchange-trad ed options, which are
guaranteed by the clearing organization of the exchanges where they
are traded.
PURCHASING PUT A ND CALL OPT IONS. By purchasing a put option,
the purchaser 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 purchaser 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 purchaser may terminate
its position in a put option by allowing it to expire or by exercising
the option. If the option is allowed to expire, the purchaser will
lose the entire premium. If the option is exercised, the purchaser
completes the sale of the underlying instrument at the strike price. A
purchaser 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, 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. The writer of a put or call
option takes the opposite side of the transaction from the option's
purchaser. In return for receipt of the premium, the writer 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.
The writer may seek to terminate a position in a put option 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,
however, the writer 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. When
writing an option on a futures contract, a fund will be required to
make margin payments to an FCM as described above for futures
contracts.
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.
Wr iting a call option obligates the writer to sell or deliver the
option's underlying instrument, in return for the strike price ,
upon exercise of the option. The characteristics of writing call
options are similar to those of writing put options, except that
writing calls generally is a profitable strategy if prices remain the
same or fall. Through receipt of the option premium, a call writer
mitigates the effects of a price decline. At the same time, because a
call writer must be prepared to deliver the underlying instrument in
return for the strike price, even if its current value is greater, a
call writer gives up some ability to participate in security price
increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees,
FMR determines the liquidity of 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 funds, FMR may determine some restricted
securities and municipal lease obligations to be illiquid.
For the bond fund, investments currently considered by FMR 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 are
priced at fair value as determined in good faith by a committee
appointed by the Board of Trustees. For the money market funds,
illiquid investments are valued by this method for purposes of
monitoring amortized cost valuation.
INDEXED SECURITIES are instruments 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.
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. Indexed
securities may be more volatile than the underlying instruments.
Indexed securities are also subject to the credit risks associated
with the issuer of the security, and t heir values may decline
substantially if the issuer's creditworthiness deteriorates.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an
exemptive order issued by the SEC, a fund may lend money to, and
borrow money from, other funds advised by FMR or its affiliates;
however, municipal funds currently intend to participate in this
program only as borrowers. A fund will borrow through the program only
when the costs are equal to or lower than the costs of bank loans.
Interfund borrowings normally extend overnight, but can have a maximum
duration of seven days. Loans may be called on one day's notice. A
fund may have to borrow from a bank at a higher interest rate if an
interfund loan is called or not renewed.
INVERSE FLOATERS have variable interest rates that typically
move in the opposite direction from movements in prevailing short-term
interest rate levels - rising when prevailing short-term interest
rates fall, and vice versa. The prices of inverse floaters can be
considerably more volatile than the prices of bonds with comparable
maturities.
LOWER-QUALITY DEBT SECURITIES. Lower-quality debt securities
have poor protection with respect to the payment of interest and
repayment of principal. These securities are often considered to be
speculative and involve greater risk of loss or price changes due to
changes in the issuer's capacity to pay. The market prices of
lower-quality debt securities may fluctuate more than those of
higher-quality debt securities and may decline significantly in
periods of general economic difficulty, which may follow periods of
rising interest rates.
The market for lower-quality debt securities may be thinner and
less active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the Board of
Trustees, including the use of outside pricing services. Judgment
plays a greater role in valuing high-yield debt securities than is the
case for securities for which more external sources for quotations and
last-sale information are available. Adverse publicity and changing
investor perceptions may affect the liquidity of lower-quality debt
securities and the ability of outside pricing services to value
lower-quality debt securities.
A fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to 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.
MONEY MARKET SECURITIES are high-quality, short-term
obligations. Money market securities may be structured or may employ a
trust or other similar structure so that they are eligible investments
for money market funds. For example, put 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 the funds.
MUNICIPAL LEASES and participation interests therein may take the form
of a lease, an installment purchase, or a conditional sale contract
and are issued by state and local governments and authorities to
acquire land or a wide variety of equipment and facilities.
Generally, a fund will not hold these obligations directly as a lessor
of the property, but will purchase a participation interest in a
municipal obligation from a bank or other third party. A participation
interest gives the purchaser a specified, undivided interest in the
obligation in proportion to its purchased interest in the total amount
of the issue.
Municipal leases frequently have risks distinct from those associated
with general obligation or revenue bonds. State constitutions and
statutes set forth requirements that states or municipalities must
meet to incur debt. These may include voter referenda, interest rate
limits, or public sale requirements. Leases, installment purchases, or
conditional sale contracts (which normally provide for title to the
leased asset to pass to the governmental issuer) have evolved as a
means for governmental issuers to acquire property and equipment
without meeting their constitutional and statutory requirements for
the issuance of debt. Many leases and contracts include
"non-appropriation clauses" providing that the governmental issuer has
no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance
limitations.
MUNICIPAL MARKET DISRUPTION RISK. The value of municipal securities
may be affected by uncertainties in the municipal market related to
legislation or litigation involving the taxation of municipal
securities or the rights of municipal securities holders in the event
of a bankruptcy. Municipal bankruptcies are relatively rare, and
certain provisions of the U.S. Bankruptcy Code governing such
bankruptcies are unclear and remain untested. Further, the application
of state law to municipal issuers could produce varying results among
the states or among municipal securities issuers within a state. These
legal uncertainties could affect the municipal securities market
generally, certain specific segments of the market, or the relative
credit quality of particular securities. Any of these effects could
have a significant impact on the prices of some or all of the
municipal securities held by a fund, making it more difficult for a
money market fund to maintain a stable net asset value per share.
MUNICIPAL SECTORS:
ELECTRIC UTILITIES. 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.
HOUSING. Housing revenue bonds are generally issued by a state,
county, city, local housing authority, or other public agency. They
generally are secured by the revenues derived from mortgages purchased
with the proceeds of the bond issue. It is extremely difficult to
predict the supply of available mortgages to be purchased with the
proceeds of an issue or the future cash flow from the underlying
mortgages. Consequently, there are risks that proceeds will exceed
supply, resulting in early retirement of bonds, or that homeowner
repayments will create an irregular cash flow. Many factors may affect
the financing of multi-family housing projects, including acceptable
completion of construction, proper management, occupancy and rent
levels, economic conditions, and changes to current laws and
regulations.
WATER AND SEWER. Water and sewer revenue bonds are often considered to
have relatively secure credit as a result of their issuer's
importance, monopoly status, and generally unimpeded ability to raise
rates. Despite this, lack of water supply due to insufficient rain,
run-off, or snow pack is a concern that has led to past defaults.
Further, public resistance to rate increases, costly environmental
litigation, and Federal environmental mandates are challenges faced by
issuers of water and sewer bonds.
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 other entities. Demand features, standby
commitments, and tender options are types of put features.
QUALITY AND MATURITY (MONEY MARKET FUNDS ONLY).
Pursuant to procedures adopted by the Board of Trustees, the funds
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.
High-quality securities are divided into "first tier" and "second
tier" securities. First tier securities are those deemed to be in
the highest rating category (e.g., Standard & Poor's SP-1), and
second tier securities are those deemed to be in the second highest
rating category (e.g., Standard & Poor's SP-2).
Each 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, each fund may look to an interest rate
reset or demand feature.
REFUNDING CONTRACTS. Se curities may be purchased on a
when-issued basis in connection with the refinancing of an
issuer's outstanding indebtedness. Refunding contracts require the
issuer to sell and a purchaser 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. A purchaser generally
will not be obligated to pay the full purchase price if the issuer
fails to perform under a refunding contract. Instead, refunding
contracts generally provide for payment of liquidated damages to the
issuer (currently 15-20% of the purchase price). A purchaser m ay
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,
a fund will place liquid assets in a segregated custodial account
equal in amount to its obligations under refunding contracts.
REPURCHASE AGREEMENTS. In a repurchase agreement, 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 incre mental amount which is
unrelated to the coupon rate or maturity of the purchased security. As
protection against the risk that the original seller will not fulfill
its obligation, the securities are held in a separate account at a
bank, marked-to-market daily, and maintained at a value at least
equal to the sale price plus the accrued incremental amount. 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),
the funds wil l engage in repurchase agreement transactions with
parties whose creditworthiness has been reviewed and found
satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, 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 funds anticipate holding restricted
securities to maturity or selling them in an exempt transaction.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase
agreement, a fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. While a reverse repurchase
agreement is outstanding, a fund will maintain appropriate liquid
assets in a segregated custodial account to cover its obligation under
the agreement. The funds will enter into reverse repurchase agreements
with parties whose creditworthiness has been reviewed and found
satisfactory by FMR. Such transactions may increase fluctuations in
the market value of fund assets and may be viewed as a form of
leverage.
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. FMR may rely on its evaluation
of the credit of a bank or other entity in determining whether to
purchase a security supported by a letter of credit guarantee, put or
demand feature, insurance or other source of credit or liquidity. In
evaluating the credit of a foreign bank or other foreign entities, FMR
will consider whether adequate public information about the entity is
available and whether the entity may be subject to unfavorable
political or economic developments, currency controls, or other
government restrictions that might affect its ability to honor its
commitment.
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. A fund may acquire standby commitments to e nhance the
liquidity of portfolio securities.
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.
Issuers or financial intermediaries may obtain letters of credit or
other guarantees to support their ability to buy securities on
demand. FMR may rely upon its evaluation of a bank's credit in
determining whether to purchase an instrument supported by a
letter of credit. In evaluating a foreign bank's credit, FMR will
consider whether adequate public information about the bank is
available and whether the bank may be subject to unfavorable political
or economic developments, currency controls, or other governmental
restrictions that might affect the bank's ability to honor its credit
commitment.
Standby commitments are subject to certain risks, including the
ability of issuers of standby commitments to pay for securities at
the time the commitments are exercised; the fact that standby
commitments are not generally marketable; and the possibi lity that
the maturities of the underlying securities may be different from
those of the commitments.
TENDER OPTION BONDS are created by coupling an intermediate- or
long-term, fixed-rate, municipal 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. In selecting tender option
bonds, FMR will consider the creditworthiness of the issuer of the
underlying bond, the custo dian, and the third party provider of
the tender option. In certain instances, a sponsor may terminate a
tender option if, for example, the issuer of the underlying bond
defaults on interest payments.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments
in the interest rate paid on the security. 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 are structured with put
features that permit holders to demand payment of the unpaid principal
balance plus accrued interest from the issuers or certain financial
intermediaries.
In many instances bonds and participation interests have tender
options or demand features that permit the holder to tender (or put)
the bonds to an institution at periodic intervals and to receive the
principal amount thereof. Variable rate instruments structured in this
fashion are considered to be essentially equivalent to other variable
rate securities. The IRS has not ruled whether the interest on these
instruments is tax-exempt. Fixed-rate bonds that are subject to third
party puts and participation interests in such bonds held by a bank in
trust or otherwise may have similar features.
ZERO COUPON BONDS do not make interest payments; instead,
they are sold at a 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 more volatile than other types of
fixed-income securities when interest rates change. In calculating a
fund's dividend, a portion of the difference between a zero coupon
bond's purchase price and its face value is considered income.
SPECIAL CONSIDERATIONS REGARDING 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 a fund. Obligations of the
state or local governments may also be affected by budgetary pressures
affecting the State of California (the State) and economic conditions
in the State. Interest income to a fund could also be adversely
affected. The following discussion highlights only some of the more
significant financial trends and problems, and is based on information
drawn from official statements and prospectuses relating to securities
offerings of the State, its agencies, or instrumentalities, as
available as of the date of this SAI. FMR has not independently
verified any of the information contained in such official statements
and other publicly available documents, but is not aware of any fact
which would render such information inaccurate.
CONSTITUTIONAL LIMITATIONS ON TAXES, OTHER CHANGES AND APPROPRIATIONS
LIMITATION ON PROPERTY 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 local governments and districts are limited by
Article XIIIA of the California Constitution, enacted by the voters in
1978 and commonly known as "Proposition 13." Briefly, Proposition 13
limits to 1% of full cash value the rate of AD VALOREM property taxes
on real property and generally restricts the increase in taxes upon
reassessment of property to 2% per year, except upon new construction
or change of ownership (subject to a number of exemptions). Taxing
entities may, however, raise AD VALOREM taxes above the 1% limit to
pay debt service on voter-approved bonded indebtedness.
Under Article XIIIA, the basic 1% AD VALOREM tax levy is applied
against the assessed value of property as of the owner's date of
acquisition (or as of March 1, 1975 if acquired earlier), subject to
certain adjustments. This system has resulted in widely varying
amounts of tax on similarly situated properties. Several lawsuits were
filed challenging the acquisition-based assessment system of
Proposition 13, but on June 18, 1992, the U.S. Supreme Court announced
a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues
through AD VALOREM property taxes above the 1% limit; it also requires
voters of any government unit to give 2/3 approval to levy any
"special tax." However, court decisions allowed non-voter-approved
levies of "general taxes" which were not dedicated to a specific use.
LIMITATIONS ON OTHER TAXES, FEES AND CHARGES. On November 5, 1996, the
voters of the State approved Proposition 218, called the "Right to
Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to
the State Constitution, which contain a number of provisions affecting
the ability of local agencies to levy and collect both existing and
future taxes, assessments, fees and charges.
Article XIIIC requires that all new or increased local taxes be
submitted to the electorate before they become effective. Taxes for
general governmental purposes require a majority vote and taxes for
specific purposes require a two-thirds vote. Further, any general
purpose tax which was imposed, extended or increased without voter
approval after December 31, 1994, must be approved by a majority vote
within two years.
Article XIIID contains several new provisions making it generally more
difficult for local agencies to levy and maintain "assessments" for
municipal services and programs. Article XIIID also contains several
new provisions affecting "fees" and "charges," defined for purposes of
Article XIIID to mean "any levy other than an ad valorem tax, a
special tax, or an assessment, imposed by a local government upon a
parcel or upon a person as an incident of property ownership,
including a user fee or charge for a property-related service." All
new and existing property-related fees and charges must conform to
requirements prohibiting, among other things, fees and charges which
generate revenues exceeding the funds required to provide the
property-related service or are used for unrelated purposes. There are
new notice, hearing and protest procedures for levying or increasing
property-related fees and charges, and, except for fees or charges for
sewer, water and refuse collection services (or fees for electrical
and gas service, which are not treated as "property-related" for
purposes of Article XIIID), no property-related fee or charge may be
imposed or increased without majority approval by the property owners
subject to the fee or charge or, at the option of the local agency,
two-thirds voter approval by the electorate residing in the affected
area.
In addition to the provisions described above, Article XIIIC removes
limitations on the initiative power in matters of local taxes,
assessments, fees and charges. Consequently, local voters could, by
future initiative, repeal, reduce or prohibit the future imposition or
increase of any local tax, assessment, fee or charge. It is unclear
how this right of local initiative may be used in cases where taxes or
charges have been or will be specifically pledged to secure debt
issues.
The interpretation and application of Proposition 218 will ultimately
be determined by the courts with respect to a number of matters, and
it is not possible at this time to predict with certainty the outcome
of such determinations. Proposition 218 is generally viewed as
restricting the fiscal flexibility of local governments, and for this
reason, some ratings of California cities and counties have been, and
others may be, reduced.
APPROPRIATIONS LIMITS. The State and its local governments are subject
to an annual "appropriations limit" imposed by Article XIIIB of the
California Constitution, enacted by the voters in 1979 and
significantly amended by Propositions 98 and 111 in 1988 and 1990,
respectively. Article XIIIB prohibits the State or any covered local
government from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitation" are authorizations to spend "proceeds of taxes," which
consist of tax revenues and certain other funds, including proceeds
from regulatory licenses, user charges, or other fees to the extent
that such proceeds exceed the cost of providing the product or
service; but " proceeds of taxes" for local governments exclude most
State subventions. No limit is imposed on appropriations of funds
which are not "proceeds of taxes," such as reasonable user charges or
fees and certain other non-tax funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB
appropriations limit are: (1) the debt service cost of bonds issued or
authorized prior to January 1, 1979, or subsequently authorized by the
voters; (2) appropriations arising from certain emergencies declared
by the Governor; (3) appropriations for certain capital outlay
projects; and (4) appropriations by the State of post-1989 increases
in gasoline taxes and vehicle weight fees.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized by Proposition 111 to follow more closely
growth in the State's economy. For the 1990-91 fiscal year, each unit
of government has recalculated its appropriations limit by taking the
actual 1986-87 limit and applying the Proposition 111 annual
adjustments forward to 1990-91. This was expected to raise the limit
in most cases.
Under Proposition 111, "excess" revenues are measured over a two-year
cycle. With respect to local governments, excess revenues must be
returned by a revision of tax rates or fee schedules within the two
subsequent fiscal years. The appropriations limit for a local
government may be overridden by referendum under certain conditions
for up to four years at a time. With respect to the State, 50% of any
excess revenues is to be distributed to K-12 school and community
college districts (collectively, K-14 districts) and the other 50% is
to be refunded to taxpayers.
In the years immediately following enactment, very few California
governmental entities operated near their appropriations limit. In the
mid-to-late 1980's, many entities were at or approaching their limit,
and several successfully obtained voter approval for four-year waivers
of the limit. Since Proposition 111, the appropriations limit has
again ceased to be a practical limit on California governments, but
this condition may change in the future. During 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 1996-97 Budget provided for State appropriations more than $7.0
billion under the limit for fiscal year 1996-97.
OBLIGATIONS OF THE STATE OF CALIFORNIA
As of January 1, 1998, the State had approximately $18.6 billion of
general obligation bonds outstanding (including $986 million of
commercial paper notes which were intended to be refinanced by future
bond sales), and $6.9 billion remained authorized but unissued. In
addition, the State had outstanding lease-purchase obligations,
payable from the State's General Fund, of approximately $6.4 billion,
and $1.4 billion authorized and unissued. State voters approved about
$6.4 billion of new bonds in two elections in 1996. Of the State's
outstanding general obligation debt, approximately 21% is presently
self-liquidating (for which program revenues are anticipated to be
sufficient to reimburse the General Fund for debt service payments).
In fiscal year 1996-97, debt service on general obligation bonds and
lease-purchase debt was approximately 5.0% of General Fund revenues.
The State has paid the principal of and interest on its general
obligation bonds, lease-purchase debt, and short-term obligations when
due.
ECONOMY
The State's economy is the largest among the 50 states and one of the
largest in the world. The State's population grew by 27% in the 1980s
and, at over 32 million, it now represents over 12% of the total U.S.
population. Total personal income in the State, at an estimated $810
billion in 1996, accounts for more than 12% of all personal income in
the nation. Total employment in 1995 was over 14 million, the majority
of which is in the service, trade, and manufacturing sectors.
From mid-1990 to late 1993, the State suffered a recession with the
worst economic, fiscal and budget conditions since the 1930s.
Construction, manufacturing (especially aerospace), and financial
services, among others, were all severely affected, particularly in
Southern California. Job losses were the worst of any post-war
recession. Employment levels stabilized by late 1993 and steady growth
has occurred since the start of 1994; pre-recession job levels were
reached in early 1996. Unemployment, while higher than the national
average, came down significantly from the January 1994 peak of 10%.
Economic indicators show a steady recovery underway in California
since the start of 1994 particularly in export-related industries,
high technology manufacturing and services, construction,
entertainment and tourism. The Asian economic difficulties may have
some dampening effect on the state's economy. Any delay or reversal of
the economic recovery may cause a recurrence of revenue shortfalls for
the State .
RECENT STATE FINANCIAL RESULTS
The principal sources of State General Fund revenues in 1996-97
were the California personal income tax (47% of total revenues), the
sales tax (34%), bank and corporation taxes (12%), and the gross
premium tax on insurance (2%). 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. Because of the
recession starting in 1990-91, the SFEU has not had a significant
positive balance in this decade until the 1996-97 Fiscal Year. It is
projected to be less than one-half of one percent of General Fund
revenues in 1997-98 and 1998-99.
Throughout the 1980s, State spending increased rapidly as the State
population and economy also grew rapidly, including many assistance
programs to local governments, which were constrained by Proposition
13 and other laws. The largest State program is assistance to local
public school districts. In 1988, an initiative (Proposition 98) was
enacted which (subject to suspension by a 2/3 vote of the Legislature
and the Governor) guarantees local school districts and community
college districts a minimum share of State General Fund revenues
(currently about 35%).
Since the start of fiscal year 1990-91 until fiscal year 1995-96, 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. These structural concerns will continue in future years; in
particular, it is anticipated that there will be a need to increase
capital and operating costs of the correctional system in response to
a "Three Strikes" law enacted in 1994 which mandates life imprisonment
for certain felony offenders.
RECENT BUDGETS. As a result of these factors, among others, from the
late 1980s until 1992-93 the State had a period of nearly chronic
budget imbalance, with expenditures exceeding revenues in four out of
six years, and the State accumulated and sustained a budget deficit in
the SFEU approaching $2.8 billion at its peak at June 30, 1993. For
several years, each budget required multibillion dollar actions to
bring projected revenues and expenditures into balance and to close
large "budget gaps" which were identified. The Legislature and
Governor eventually agreed on a number of different steps to produce
Budget Acts in the years 1991-92 to 1994-95, (although not all these
actions were taken in each year):
(small solid bullet) significant cuts in health and welfare program
expenditures;
(small solid bullet) transfers of program responsibilities and some
funding sources from the State to local governments, coupled with some
reduction in mandates on local government;
(small solid bullet) transfer of about $3.6 billion in annual local
property tax revenues from cities, counties, redevelopment agencies
and some other districts to local school districts, thereby reducing
state funding for schools;
(small solid bullet) reduction in growth of support for higher
education programs, coupled with increases in student fees;
(small solid bullet) revenue increases (particularly in the fiscal
year 1991-92 budget), most of which were for a short duration;
(small solid bullet) increased reliance on aid from the federal
government to offset the costs of incarcerating, educating and
providing health and welfare services to undocumented aliens (although
these efforts have produced much less federal aid than the State
Administration had requested); and
(small solid bullet) various one-time adjustment and accounting
changes.
The combination of stringent budget actions cutting State
expenditures, and the turnaround of the economy by late 1993, finally
led to the restoration of positive financial results, with revenues
equaling or exceeding expenditures starting in fiscal year 1992-1993.
As a result, the accumulated budget deficit of about $2.8 billion was
eliminated by June 30, 1997, when the State showed a positive balance
of about $408 million, on a budgetary basis, in the SFEU.
A consequence of the accumulated budget deficits in the early
1990's, together with other factors such as disbursement of funds to
local school districts "borrowed" from future fiscal years and hence
not shown in the annual budget, was to significantly reduce the
State's cash resources available to pay its ongoing obligations. The
State's cash condition became so serious that from late spring 1992
until 1995, the State had to rely on issuance of short term notes
which matured in a subsequent fiscal year to finance its ongoing
deficit, and pay current obligations. For a two-month period in the
summer of 1992, pending adoption of the annual Budget Act, the State
was forced to issue registered warrants (IOUs) to some of its
suppliers, employees and other creditors. The last of these deficit
notes was repaid in April, 1996.
The 1995-96 and 1996-97 Budget Acts reflected significantly
improved financial conditions, as the State's economy recovered and
tax revenues soared above projections. Over the two years, revenues
averaged about $2 billion higher than initially estimated. Most of the
additional revenues were allocated to school funding, as required by
Proposition 98, and to make up shortfalls in federal aid for health
and welfare costs and costs of illegal aliens. The budgets for both
these years showed strong increases in funding for K-14 public
education, including implementation of initiatives to reduce class
sizes for lower elementary grades to not more than 20 pupils. Higher
education funding also increased. Spending for health and welfare
programs was kept in check, as previously-implemented cuts in benefit
levels were retained.
The final results for fiscal year 1996-97 showed General Fund
revenues of $49.2 billion and expenditures of $48.9 billion. The
improved revenues allowed the repayment of the last of the
recession-induced budget deficits; the SFEU had a balance of $408
million on a budgetary basis ($281 million on a cash basis) as of June
30, 1997, the first significant positive balance in the decade. In
1996-97, the State implemented its regular cash flow borrowing program
with the issuance of $3.0 billion of Revenue Anticipation Notes which
matured on June 30, 1997, and did not require any external borrowing
over the end of the fiscal year.
Fiscal Year 1997-98 Budget. With continued strong economic recovery
and surging tax receipts, the State entered the 1997-98 Fiscal Year in
the strongest financial position in the decade. However, in May 1997,
the California Supreme Court ruled that the State had acted illegally
in 1993 and 1994 by using a deferral of payments to the Public
Employees Retirement Fund to help balance earlier budgets. In response
to this court decision, the Governor ordered an immediate repayment to
the Retirement Fund of about $1.235 billion, which was made in late
July, 1997, and substantially "used up" the expected additional
revenues for the fiscal year.
On August 18, 1997, the Governor signed the 1997-98 Budget Act. The
Budget Act assumes General Fund revenues and transfers of $52.5
billion, and contains expenditures of $52.8 billion. As a result, the
budget reserve (SFEU) is reduced to an estimated $112 million at June
30, 1998. The Budget Act also contains $14.4 million of Special Fund
expenditures. Following enactment of the Budget Act, the State plans
to carry out its normal annual cash flow borrowing, totaling $3.0
billion to mature June 30, 1998.
The 1997-98 Budget Act provides another year of rapidly increasing
funding for K-14 public education. Total General Fund support will
reach $5,150 per pupil, more than 20% higher than the recession-period
levels which were in effect as late as fiscal year 1993-94. The $1.75
billion in new funding will be spent on class size reduction and other
initiatives, as well as fully funding growth and cost of living
increases. Support for higher education units in the State also
increased by about 6 percent. Because of the pension payment, most
other State programs were funded at levels consistent with prior
years, and several initiatives had to be dropped. These included
additional assistance to local governments, state employee raises, and
funding of a bond bank.
Part of the 1997-98 Budget Act was completion of State welfare
reform legislation to implement the new federal law passed in 1996.
The new State program, called "CalWORKs," to become effective January
1, 1998, will emphasize programs to bring aid recipients into the
workforce. As required by federal law, new time limits will be placed
on receipt of welfare aid. Grant levels for 1997-98 remain at the
reduced, prior years' levels.
Although, as noted, the 1997-98 Budget Act projects a budget
reserve in the SFEU of $112 million on June 30, 1998, the General Fund
fund balance on that date also reflects $1.25 billion of "loans" which
the General Fund made to local schools in the recession years,
representing cash outlays above the mandatory minimum funding level.
Settlement of litigation over these transactions in July 1996 calls
for repayment of these loans over the period ending in 2001-02, about
equally split between outlays from the General Fund and from schools'
entitlements. the 1997-98 Budget Act contained a $200 million
appropriation from the General Fund toward this settlement.
Updated figures from the Department of Finance, released in early
January, 1998, project both revenues and expenditures will be higher
in 1997-98 than estimated when the Budget Act was passed, reflecting
continued strong economic activity. The Department projects the SFEU
at June 30, 1998 will be approximately $329 million.
PROPOSED 1998-99 FISCAL YEAR BUDGET. The Governor released
his proposed FY 1998-99 Budget on January 9, 1998. It projected
General Fund revenues and transfers of $55.4 billion, an increase of
almost 5% over 1997-98. Revenue losses due to tax cuts enacted in late
1997 were expected to be offset by higher capital gains realizations.
The Governor proposed expenditures of $55.4 billion, also an almost 5%
increase from the prior year. The Governor's Budget proposes
significant additional funding for K-12 schools under Proposition 98,
as well as additional funding for higher education, with a proposed
reduction of college student fees. State and federal funds will be
used in the new CalWORKS welfare program, with projections of a fourth
consecutive year of caseload decline. The Governor has proposed a
large capital expenditure program, focusing on schools and
universities, but also including corrections, environmental and
general government projects. These proposals would require approval of
almost $10 billion of new general obligation bonds over the next six
years. All of the Governor's proposals will be reviewed by the
Legislature as part of the annual budget process.
The State's financial difficulties for the past budget years and
other factors noted above 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.
The ratings on California's long-term general obligation bonds were
reduced in the early 1990's from "AAA" levels which had existed prior
to the recession. In 1996, Fitch and Standard & Poor's raised their
ratings of California's general obligation bonds, which are currently
assigned ratings of "A+" from Standard & Poor's, "A1" from Moody's and
"AA-" from Fitch. There can be no assurance that such ratings will be
maintained in the future. It should be noted that the creditworthiness
of obligations issued by local California issuers may be unrelated to
creditworthiness of obligations issued by the state of California, and
that there is no obligation on the part of the state to make payment
on such local obligations in the event of default.
OBLIGATIONS OF OTHER CALIFORNIA ISSUERS
STATE ASSISTANCE. Property tax revenues received by local
governments declined more than 50% following passage of Proposition
13. Subsequently, the State's Legislature enacted measures to provide
for the redistribution of the State's General Fund surplus to local
agencies; the reallocation of certain State revenues to local
agencies; and the assumption of certain governmental functions by the
State to assist municipal issuers to raise revenues. Total local
assistance from the State's General Fund totaled approximately $36.6
billion in fiscal year 1996-97 (over 70% of General Fund expenditures)
and has been budgeted at $38.8 billion for fiscal year 1997-98,
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 annual property tax revenues to school
districts, representing reversal of the post-Proposition 13 "bailout"
aid.
Legislation enacted in late 1997 provides for the State to take
over financial responsibility for funding trial courts throughout the
State. This is estimated to save counties and cities a total of over
$350 million annually.
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. A number of counties both rural and urban, have
indicated that their budgetary condition is extremely serious. At the
start of fiscal year 1995-96, Los Angeles County ("L.A. County") the
largest county in the State, was forced to impose significant cuts in
services and personnel, particularly in the health care system, in
order to balance its budget. L.A. County's debt was downgraded by
Moody's and S&P in the summer of 1995. Orange County, which recently
emerged from federal bankruptcy protection, has substantially reduced
services and personnel in order to live within much reduced means. 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.
Counties and cities may face further budgetary pressures as a
result of changes in welfare and public assistance programs, which
were enacted in August, 1997 in order to comply with the federal
welfare reform law. Generally, counties play a large role in the new
system, and are given substantial flexibility to develop and
administer programs to bring aid recipients into the workforce.
Counties are also given financial incentives if either at the county
or statewide level, the "Welfare-to-Work" programs exceed minimum
targets; counties are also subject to financial penalties for failure
to meet such targets. Counties remain responsible to provide "general
assistance" for able-bodied indigents who are ineligible for other
welfare programs. The long-term financial impact of the new CalWORKS
system on local governments is still unknown.
ASSESSMENT BONDS. Municipal obligations which are assessment bonds or
Mello-Roos bonds may be adversely affected by a general decline in
real estate values or a slowdown in real estate sales activity. In
many cases, such bonds are secured by land which is undeveloped at the
time of issuance but anticipated to be developed within a few years
after issuance. In the event of such reduction or slowdown, such
development may not occur or may be delayed, thereby increasing the
risk of a default on the bonds. Because the special assessments or
taxes securing these bonds are not the personal liability of the
owners of the property assessed, the lien on the property is the only
security for the bonds. Moreover, in most cases the issuer of these
bonds is not required to make payments on the bonds in the event of
delinquency in the payment of assessments or taxes, except from
amounts, if any, in a reserve fund established for the bonds.
CALIFORNIA LONG-TERM LEASE OBLIGATIONS. Certain State long-term lease
obligations, though typically payable from the General Fund of the
municipality, are subject to "abatement" in the event the facility
being leased is unavailable for beneficial use and occupancy by the
municipality during the term of the lease. Abatement is not a default,
and there may be no remedies available to the holders of the
certificates evidencing the lease obligation in the event abatement
occurs. The most common causes of abatement are failure to complete
construction of the facility before the end of the period during which
lease payments have been capitalized and uninsured casualty losses to
the facility (e.g., due to earthquake). In the event abatement occurs
with respect to a lease obligation, lease payments may be interrupted
(if all available insurance proceeds and reserves are exhausted) and
the certificates may not be paid when due.
Several years ago the Richmond Unified School District (District)
entered into a lease transaction in which certain existing properties
of the District were sold and leased back in order to obtain funds to
cover operating deficits. Following a fiscal crisis in which the
District's finances were taken over by a State receiver (including a
brief period under bankruptcy court protection), the District failed
to make rental payments on this lease, resulting in a lawsuit by the
Trustee for the Certificate of Participation holders. One of the
defenses raised in answer to this lawsuit was the invalidity of the
original lease transaction. The trial court upheld the validity of the
District's lease, and the case has been settled. However, any future
judgment in a similar case against the position taken by the Trustee
may have implications for lease transactions of a similar nature by
other State entities.
OTHER CONSIDERATIONS. The repayment of Industrial Development
Securities secured by real property may be affected by State laws
limiting foreclosure rights of creditors. Health Care and Hospital
Securities may be affected by changes in State regulations governing
cost reimbursements to health care providers under Medi-Cal (the
State's Medicaid program), including risks related to the policy of
awarding exclusive contracts to certain hospitals.
Limitations on AD VALOREM property taxes may particularly affect "tax
allocation" bonds issued by State redevelopment agencies. Such bonds
are secured solely by the increase in assessed valuation of a
redevelopment project area after the start of redevelopment activity.
In the event that assessed values in the redevelopment project decline
(for example, because of a major natural disaster such as an
earthquake), the tax increment revenue may be insufficient to make
principal and interest payments on these bonds. Both Moody's and S&P
suspended ratings on State tax allocation bonds after the enactment of
Articles XIIIA and XIIIB, and only resumed such ratings on a selective
basis.
Proposition 87, approved by State voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing
entity which increased such tax rate to repay that entity's general
obligation indebtedness. As a result, redevelopment agencies (which,
typically, are the issuers of Tax Allocation Securities) no longer
receive an increase in tax increment when taxes on property in the
project area are increased to repay voter-approved bonded
indebtedness.
Substantially all of the State is within an active geologic region
subject to major seismic activity. Any California municipal obligation
held by the fund could be affected by an interruption of revenues
because of damaged facilities or, consequently, income tax deductions
for casualty losses or property tax assessment reductions.
Compensatory financial assistance could be constrained by the
inability of (i) an issuer to have obtained earthquake insurance
coverage at reasonable rates; (ii) an insurer to perform on its
contracts of insurance in the event of widespread losses; or (iii) the
federal or State government to appropriate sufficient funds within
their respective budget limitations.
Because of the complex nature of Articles XIIIA, XIIIB, XIIIC and
XIIID 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 these provisions, or the outcome of any pending litigation
with respect to those provisions on State obligations held by the fund
or on the ability of the State or local governments to pay debt
service on such obligations. Legislation has been or may be introduced
(either in the State Legislature or by initiative) which would modify
existing taxes or other revenue-raising measures or which either would
further limit or, alternatively, would increase the abilities of State
and local governments to impose new taxes or increase existing taxes.
It is not presently possible to predict the extent to which any such
legislation will be enacted, or if enacted, how it would affect
California municipal obligations. It is also not presently possible to
predict the extent of future allocations of State revenues to local
governments or the abilities of State or local governments to pay the
interest on, or repay the principal of, such California municipal
obligations in light of future fiscal circumstances.
SPECIAL CONSIDERATIONS REGARDING PUERTO RICO
The following highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the
Commonwealth or Puerto Rico), and is based on information drawn from
official statements and prospectuses relating to the securities
offerings of Puerto Rico, its agencies and instrumentalities, as
available on the date of this SAI. FMR has not independently verified
any of the information contained in such official statements,
prospectuses, and other publicly available documents, but is not aware
of any fact which would render such information materially inaccurate.
The economy of Puerto Rico is closely linked to that of the United
States. In fiscal 1995, trade with the United States accounted for
approximately 89% of Puerto Rico's exports and approximately 65% of
its imports. In this regard, in fiscal 1995 Puerto Rico experienced a
$4.6 billion positive adjusted merchandise trade balance.
Since fiscal 1985, personal income, both aggregate and per capita, has
increased consistently each fiscal year. In fiscal 1995, aggregate
personal income was $27.0 billion ($26.2 billion in 1992 prices) and
personal per capita income was $7,296 ($7,074 in 1992 prices). Gross
domestic product in fiscal 1992 was $23.7 billion and gross product in
fiscal 1996 was $30.2 billion; ($26.7 billion in 1992 prices). This
represents an increase in gross product of 27.5% from fiscal 1992 to
1996 (12.7% in 1992 prices). For fiscal 1997, an increase in gross
domestic product of 2.7% over fiscal 1996 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
value of the U.S. dollar, the price stability of oil imports, any
increase or decrease in the number of visitors to the island, the
level of exports, the level of federal transfers, and the cost of
borrowing.
Puerto Rico's economy continued to expand throughout the five-year
period from fiscal 1992 through fiscal 1996. Almost every sector of
the economy participated, and record levels of employment were
achieved. Factors behind the continued expansion included
government-sponsored economic development programs, periodic declines
in the exchange value of the U.S. dollar, the level of federal
transfers, 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 16.8% from fiscal 1992 to fiscal
1993. However, by the end of fiscal 1994, the unemployment rate
dropped to 15.9% and as of the end of fiscal 1996, stands at 13.8%.
Despite this downturn, there is a possibility that the unemployment
rate will increase.
Manufacturing is the largest sector in the economy accounting for
$17.7 billion or 41.8% of gross domestic product in fiscal 1995.
Manufacturing has experienced a basic change over the years as a
result of the influx of higher wage, high technology industries such
as the pharmaceutical industry, electronics, computers,
microprocessors, scientific instruments and high technology machinery.
The service sector, which includes finance, insurance, real estate,
wholesale and retail trade, hotels and related services and other
services, ranks second in its contribution to gross domestic product
and is the sector that employs the greatest number of people. In
fiscal 1995, the service sector generated $15.9 billion in gross
domestic product or 37.5% of the total. Employment in this sector grew
from 449,000 in fiscal 1992 to 527,000 in fiscal 1996, a cumulative
increase of 17.6%, which increase was greater than the 11.8%
cumulative growths in employment over the same period, providing 46.7%
of total employment. The government sector of the Commonwealth plays
an important role in the economy of the island. In fiscal year 1995,
the government accounted for $4.5 billion or 10.6% 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 $1.8 billion of gross domestic product in fiscal 1995.
The present administration has developed and is implementing a new
economic development program which is based on the premise that the
private sector should provide the primary impetus for economic
development and growth. This new program, which is referred to as the
New Economic Model, promotes changing the role of the government from
one of being a provider of most basic services to that of a
facilitator for private sector initiatives and encourages private
sector investment by reducing government-imposed regulatory
restraints.
The New Economic Model contemplates the development of initiatives
that will foster private investment in, and private management of,
sectors that are served more efficiently and effectively by the
private enterprise. One of these initiatives has been the adoption of
a new tax code intended to expand the tax base, reduce top personal
and corporate tax rates, and simplify the tax system.
The New Economic Model also seeks to identify and promote areas in
which Puerto Rico can compete more effectively in the global markets.
Tourism has been identified as one such area because of its potential
for job creation and contribution to the gross product. In 1993, a new
Tourism Incentives Act and a Tourism Development Fund were implemented
in order to provide special tax incentives and financing for the
development of new hotel projects and the tourism industry. As a
result of these initiatives, new hotels have been constructed or are
under construction which have increased the number of hotel rooms on
the island from 8,415 in fiscal 1992 to 10,345 in fiscal 1996 and to
12,250 by the end of fiscal 1997.
The New Economic Model also seeks to reduce the size of the
government's direct contribution to gross domestic product. As part of
this goal, the government has transferred certain governmental
operations and sold a number of its assets to private parties. Among
these are: (i) the sale of the assets of the Puerto Rico Maritime
Authority; (ii) the execution of a five-year management agreement for
the operation and management of the Aqueducts and Sewer Authority by a
private company; (iii) the execution by the Aqueducts and Sewer
Authority of a construction and operating agreement with a private
consortium for the design, construction, and operation of an
approximately 75 million gallon per day water pipeline to the San Juan
metropolitan area from the Dos Bocas reservoir in Utuado; and (iv) the
execution by the Electric Power Authority of power purchase contracts
with private power producers under which two cogeneration plants (with
a total capacity of 800 megawatts) will be constructed.
As part of the government's program to facilitate the provision of
private health services, in 1994 a new health insurance program was
started in the Fajardo region to provide qualifying Puerto Rico
residents with comprehensive health insurance coverage. In conjunction
with this program certain public health facilities are being
privatized. The administration's goal is to provide universal health
insurance for such qualifying residents. The total cost of this
program will depend on the number of municipalities included and the
total number of participants. As of June 30, 1996, over 760,000
persons were participating in the program at an annual cost to the
Commonwealth of approximately $296 million.
One of the factors assisting the development of the manufacturing
sector in Puerto Rico has been the federal and Commonwealth tax
incentives available, most notably section 936 of the Internal Revenue
Code of 1986, as amended ("Section 936") and the Commonwealth's
Industrial Incentives Program. 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 during a 10, 15, 20, or 25 year period
depending on location.
For many years, U.S. companies operating in Puerto Rico enjoyed a
special tax credit that was available under Section 936 of the Code.
Originally, the credit provided an effective 100% federal tax
exemption for operating and qualifying investment income from Puerto
Rico sources. Amendments to Section 936 made in 1993 (the "1993
Amendments") instituted two alternative methods for calculating the
tax credit and limited the amount of the credit that a qualifying
company could claim. These limitations are based on a percentage of
qualifying income (the "percentage of income limitation") and on
qualifying expenditures on wages and other wage related benefits (the
"economic activity limitation" or "wage credit limitation"). As a
result of amendments incorporated in the Small Business Job Protection
Act of 1996 enacted by the U.S. Congress and signed into law by
President Clinton on August 20, 1996 (the "1996 Amendments"), the tax
credit is now being phased out over a ten-year period for existing
claimants and is no longer available for corporations that establish
operations in Puerto Rico after October 13, 1995 (including existing
Section 936 Corporations (as defined below) to the extent
substantially new operations are established in Puerto Rico). The 1996
Amendments also moved the credit based on the economic activity
limitation to Section 30A of the Code and phased it out over 10 years.
In addition, the 1996 Amendments eliminated the credit previously
available for income derived from certain qualified investments in
Puerto Rico. The Section 30A Credit and the remaining Section 936
credit are discussed below.
SECTION 30A. The 1996 Amendments added a new Section 30A to the Code.
Section 30A permits a "qualifying domestic corporation" ("QDC") that
meets certain gross income tests (which are similar to the 80% and 75%
gross income tests of Section 936 of the Code discussed below) to
claim a credit (the "Section 30A Credit") against the federal income
tax imposed on taxable income derived from sources outside the United
States from the active conduct of a trade or business in Puerto Rico
or from the sale of substantially all the assets used in such business
("possession income").
A QDC is a U.S. corporation which (i) was actively conducting a trade
or business in Puerto Rico on October 13, 1995, (ii) had a Section 936
election in effect for its taxable year that included October 13,
1995, (iii) does not have in effect an election to use the percentage
limitation of Section 936(a)(4)(B) of the Code, and (iv) does not add
a "substantial new line of business."
The Section 30A Credit is limited to the sum of (i) 60% of qualified
possession wages as defined in the Code, which includes wages up to
85% of the maximum earnings subject to the OASDI portion of Social
Security taxes plus an allowance for fringe benefits of 15% of
qualified possession wages, (ii) a specified percentage of
depreciation deductions ranging between 15% and 65%, based on the
class life of tangible property, and (iii) a portion of Puerto Rico
income taxes paid by the QDC, up to a 9% effective tax rate (but only
if the QDC does not elect the profit-split method for allocating
income from intangible property).
A QDC electing Section 30A of the Code may compute the amount of its
active business income, eligible for the Section 30A Credit, by using
either the cost sharing formula, the profit-split formula, or the
cost-plus formula, under the same rules and guidelines prescribed for
such formulas as provided under Section 936 (see discussion below). To
be eligible for the first two formulas, the QDC must have a
significant presence in Puerto Rico.
In the case of taxable years beginning after December 31, 2001, the
amount of possession income that would qualify for the Section 30A
Credit would be subject to a cap based on the QDC's possession income
for an average adjusted base period ending before October 14, 1995.
Section 30A applies only to taxable years beginning after December 31,
1995 and before January 1, 2006.
SECTION 936. Under Section 936 of the Code, as amended by the 1996
Amendments, and as an alternative to the Section 30A Credit, U.S.
corporations that meet certain requirements and elect its application
("Section 936 Corporations") are entitled to credit against their U.S.
corporate income tax, the portion of such tax attributable to income
derived from the active conduct of a trade or business within Puerto
Rico ("active business income") and from the sale or exchange of
substantially all assets used in the active conduct of such trade or
business. To qualify under Section 936 in any given taxable year, a
corporation must derive for the three-year period immediately
preceding the end of such taxable year, (i) 80% or more of its gross
income from sources within Puerto Rico, and (ii) 75% or more of its
gross income from the active conduct of a trade or business in Puerto
Rico.
Under Section 936, a Section 936 Corporation may elect to compute its
active business income, eligible for the Section 936 credit, under one
of three formulas: (A) a cost-sharing formula, whereby it is allowed
to claim all profits attributable to manufacturing intangibles, and
other functions carried out in Puerto Rico, provided it contributes to
the research and development expenses of its affiliated group or pays
certain royalties; (B) a profit-split formula, whereby it is allowed
to claim 50% of the net income of its affiliated group from the sale
of products manufactured in Puerto Rico; or (C) a cost-plus formula,
whereby it is allowed to claim a reasonable profit on the
manufacturing costs incurred in Puerto Rico. To be eligible for the
first two formulas, the Section 936 Corporation must have a
significant business presence in Puerto Rico for purposes of the
Section 936 rules.
As a result of the 1993 Amendments and the 1996 Amendments, the
Section 936 credit is only available to companies that elect the
percentage of income limitation and is limited in amount to 40% of the
credit allowable prior to the 1993 Amendments, subject to a five-year
phase-in period from 1994 to 1998 during which period the percentage
of the allowable credit is reduced from 60% to 40%.
In the case of taxable years beginning on or after 1998, the
possession income subject to the Section 936 credit will be subject to
a cap based on the Section 936 Corporation's possession income for an
average adjusted base period ending on October 14, 1995. The Section
936 credit is eliminated for taxable years beginning in 2006.
OUTLOOK. It is not possible at this time to determine the long-term
effect on the Puerto Rico economy of the enactment of the 1996
Amendments to Section 936. The Government of Puerto Rico does not
believe there will be short-term or medium-term material adverse
effects on Puerto Rico's economy as a result of the enactment of the
1996 Amendments. The Government of Puerto Rico further believes that
during the phase-out period sufficient time exists to implement
additional incentive programs to safeguard Puerto Rico's competitive
position. Additionally, the Governor intends to propose a new federal
incentive program similar to what is now provided under Section 30A.
Such program would provide U.S. companies a tax credit based on
qualifying wages paid, other wage related expenses such as fringe
benefits, depreciation expenses for certain tangible assets, and
research and development expenses, and would restore the credit
granted to passive income under Section 936 prior to its repeal by the
1996 Amendments. Under the Governor's proposal, the credit granted to
qualifying companies would continue in effect until Puerto Rico shows,
among other things, substantial economic improvements in terms of
certain economic parameters.
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. FMR is also responsible for the placement
of transaction orders for other investment companies and accounts for
which it or its affiliates act as investment adviser. In selecting
broker-dealers, subject to applicable limitations of the federal
securities laws, FMR considers various relevant factors, including,
but not limited to: the size and type of the transaction; the nature
and character of the markets for the security to be purchased or sold;
the execution efficiency, settlement capability, and financial
condition of the broker-dealer firm; the broker-dealer's execution
services rendered on a continuing basis; the reason ableness of any
commissions; and, if applicable, arrangements for payment of fund
expenses.
If FMR grants investment management authority to a sub-adviser (see
the section entitled "Management Contracts"), that sub-adviser is
authorized to place orders for the purchase and sale of portfolios
securities, and will do so in accordance with the policies described
above.
Each fund may execute portfolio transactions with
broker-dealers who provide research and execution services to the fund
or other accounts over which FMR or its affiliates exercise investment
discretion. Such services may include advice concerning the value of
securities; the advisability of investing in, purchasing, or selling
securities; and the availability of securities or the purchasers or
sellers of securities. In addition, such broker-dealers may furnish
analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and performance of
accounts; and effect securities transactions and perform
functions incidental thereto (such as clearance and settlement).
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent on the overall quality of
execution and other services, including research, provided by the
broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of a fund may be useful to FMR in rendering investment
management services to that fund or its other clients, and
conversely, such research provided by broker-dealers who have executed
transaction orders on behalf of other FMR clients may be useful to FMR
in carrying out its obligations to a fund. The receipt of such
research has not reduced FMR's normal independent research activities;
however, it enables FMR to avoid the additional expenses that could be
incurred if FMR tried to develop comparable information through its
own efforts.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commissions paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws, a
fund may pay a broker-dealer 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 a 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
th at fund and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value
on the brokerage and research services provided, or to determine what
portion of the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided
assistance in the distribution of shares of the 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
National Financial Services Corporation (NFSC), an indirect subsidiary
of FMR Corp., if the commissions are fair, reasonable, and comparable
to commissions charged by non-affiliated, qualified brokerage firms
for similar services.
FMR may allocate brokerage transactions to broker-dealers
(including affiliates of FMR) who have entered into arrangements with
FMR under which the broker-dealer allocates a portion of the
commissions paid by a fund toward the reduction of that fund's
expenses. The transaction quality must, however, be comparable to
those of other qualified broker-dealers.
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 NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
The Trustees of each fund periodically review FMR's
performance of its responsibilities in connection with the placement
of portfolio transactions on behalf of the fund and review the
commissions paid by the fund over representative periods of
time to determine if they are reasonable in relation to the benefits
to the fund.
For the fiscal periods ended February 28, 1998 and 1997, the portfolio
turnover rates were 37 % and 17%, respectively for Spartan
California Municipal Income
For the fiscal years ended February 1998, 1997, and 1996, the funds
paid no brokerage commissions.
During the fiscal year ended February 1998, the funds paid no fees to
brokerage firms that provided research services.
The Trustees of each fund have approved procedures in conformity
with Rule 10f-3 under the 1940 Act whereby a fund may purchase
securities that are offered in underwritings in which an affiliate of
FMR participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.
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 or its affiliates ,
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
Fidelity Service Company, Inc. (FSC) normally determines each fund's
net asset value per share (NAV) as of the close of the New York Stock
Exchange (NYSE) (normally 4:00 p.m. Eastern time). The valuation of
portfolio securities is determined as of this time for the purpose of
computing each fund's NAV.
TAX-FREE BOND FUND. Portfolio securities are valued by various
methods. If quotations are not available, fixed-income securities are
usually valued on the basis of information furnished by a pricing
service that uses a valuation matrix which incorporates both
dealer-supplied valuations and electronic data processing techniques.
Use of pricing services has been approved by the Board of Trustees. A
number of pricing services are available, and the fund may use various
pricing services or discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market
quotations, if available.
Securities and other assets for which there is no readily available
market value are valued in good faith by a committee appointed by the
Board of Trustees. The procedures set forth above need not be used to
determine the value of the securities owned by the fund if, in the
opinion of a committee appointed by the Board of Trustees, some other
method would more accurately reflect the fair market value of such
securities.
MONEY MARKET FUNDS. Portfolio securities and other assets are valued
on the basis of amortized cost. This technique involves initially
valuing an instrument at its cost as adjusted for amortization of
premium or accretion of discount rather than its current market value.
The amortized cost value of an instrument may be higher or lower than
the price a fund would receive if it sold the instrument.
Securities of other open-end investment companies are valued at their
respective NAVs.
During periods of declining interest rates, a fund's yield based on
amortized cost valuation may be higher than would result if the fund
used market valuations to determine its NAV. The converse would apply
during periods of rising interest rates.
Valuing each fund's investments on the basis of amortized cost and use
of the term "money market fund" are permitted pursuant to Rule 2a-7
under the 1940 Act. Each fund must adhere to certain conditions under
Rule 2a-7, as summarized in the section entitled "Quality and
Maturity" on page 34.
The Board of Trustees oversees FMR's adherence to the provisions of
Rule 2a-7 and has established procedures designed to stabilize each
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 a 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.
PERFORMANC E
The f unds 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. The
share price of a bond fund, the yield of a fund , 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: (MONEY MARKET FUNDS). To compute the yield
for a money market fund 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. A money market fund also may calculate an effective
yield by compounding the base period return over a one-year period. In
addition to the current yield, a money market fund may quote yields in
advertising based on any historical seven-day period. Yields for the
money market funds are calculated on the same basis as other money
market funds, as required by applicable regulation.
Yield information may be useful in reviewing a fund's performance
and in providing a basis for comparison with other investment
alternatives. However, a 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 a 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 a fund's
current yield. In periods of rising interest rates, the opposite can
be expected to occur.
YIELD CALCULATIONS: (BOND FUND). Yields for the fund are
computed by dividing the fund's interest and income for a given
30-day or one-month period, net of expenses, by the average number of
shares entitled to receive distribu tions 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 yield quotations in
accordance with standardized methods applicable to all stock and bond
funds. In general, interest income is reduced with respect to bonds
trading at a premium over their par value by subtracting a portion of
the premium from income on a daily basis, and is increased with
respect to bonds trading at a discount by adding a portion of the
discount to daily income. Capital gains and losses generally are
excluded from the calculation.
Income calculated for the purposes of calculating the fund's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, the fund's
yield may not equal its distribution rate, the income paid to your
account, or the income reported in the fund's financial
statements.
In calculating the fund's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in
order to reflect the risk premium on that security. This practice will
have the effect of reducing the fund's yield.
Yield information may be useful in reviewing the fund's performance
and in providing a basis for comparison with other investment
alternatives. However, the fund's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest
rates the fund's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates the
fund's yield will tend to be somewhat lower. Also, when interest
rates are falling, the inflow of net new money to the fund from the
continuous sale of its shares will likely be invested in
instruments producing lower yields than the balance of the fund's
holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
The tax-equivalent yield of a municipal fund is the rate
an investor would have to earn from a fully taxable investment before
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 combined federal and state income 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 1998. 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% to 7%. Of course, no assurance can be given that a fund will
achieve any specific tax-exempt yield. While a state municipal fund
invests principally in obligations whose interest is exempt from
federal and state income tax, other income received by the fund may be
taxable. The tables do not take into account local taxes, if any,
payable on fund distributions.
Use the first table to find your approximate effective tax bracket
taking into account federal and state taxes for 1998.
1998 TAX RATES

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Taxable Income* California Combined
State Federal and State
Marginal Rate Effective Rate**

Single Return Joint Return Federal
Marginal Rate

$ - - $ 5,016 $ - - $ 10,032 15.00% 1.00% 15.85%

$ 5,017 - $ 11,888 $ 10,033 - $ 23,776 15.00% 2.00% 16.70%

$ 11,889 - $ 18,761 $ 23,777 - $ 37,522 15.00% 4.00% 18.40%

$ 18,762 - $ 25,350 $ 37,523 - $ 42,350 15.00% 6.00% 20.10%

$ 25,351 - $ 26,045 $ 42,351 - $ 52,090 28.00% 6.00% 32.32%

$ 26,046 - $ 32,916 $ 52,091 - $ 65,832 28.00% 8.00% 33.76%

$ 32,917 - $ 61,400 $ 65,833 - $ 102,300 28.00% 9.30% 34.70%

$ 61,401 - $ 128,100 $ 102,301 - $ 155,950 31.00% 9.30% 37.42%

$ 128,101 - $ 278,450 $ 155,951 - $ 278,450 36.00% 9.30% 41.95%

$ 278,451 - and up $ 278,451 - and up 39.60% 9.30% 45.22%

</TABLE>

* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions,
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may increase a taxpayer's marginal tax rate. An
increase in a shareholder's marginal tax rate would increase that
shareholder's tax-equivalent yield.
Having determined your effective tax bracket, use the following table
to determine the tax-equivalent yield for a given tax-free yield.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If your effective combined federal and state personal tax rate in 1998 is:

15.85% 16.70% 18.40% 20.10% 32.32% 33.76% 34.70% 37.42% 41.95% 45.22%

To match these Your taxable investment would have to earn the following yield:
tax-free yields:

2.00% 2.38% 2.40% 2.45% 2.50% 2.96% 3.02% 3.06% 3.20% 3.45% 3.65%

3.00% 3.57% 3.60% 3.68% 3.75% 4.43% 4.53% 4.59% 4.79% 5.17% 5.48%

4.00% 4.75% 4.80% 4.90% 5.01% 5.91% 6.04% 6.13% 6.39% 6.89% 7.30%

5.00% 5.94% 6.00% 6.13% 6.26% 7.39% 7.55% 7.66% 7.99% 8.61% 9.13%

6.00% 7.13% 7.20% 7.35% 7.51% 8.87% 9.06% 9.19% 9.59% 10.34% 10.95%

7.00% 8.32% 8.40% 8.58% 8.76% 10.34% 10.57% 10.72% 11.19% 12.06% 12.78%

</TABLE>

A 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 a 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 total return of
7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. While average annual total
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
total returns represent averaged figures as opposed to the actual
year-to-year performance of a fund.
In addition to average annual total returns, the fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return. Total returns may be quoted on a before-tax or
after-tax basis. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration, and for Spartan California Municipal Money Market 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.
CALCULATING HISTORICAL FUND RESULTS. The following tables
show performance for each fund including certain fund expenses.
HISTORICAL MONEY MARKET FUND RESULTS. The following tables show each
fund's 7-day yield, tax-equivalent yield, and total return for the
periods ended February 28, 1998. Total return figures for Spartan
California Municipal Money Market include the effect of the $5.00
account closeout fee based on an average size account.
HISTORICAL BOND FUND RESULTS. The following table shows the fund's
yield, tax-equivalent yield, and total return for the period ended
February 28, 1998.
The tax-equivalent yield 's for Fidelity California Municipal Money
Market, Spartan California Municipal Money Market, and Spartan
California Municipal Income are based on a combined effective
federal and state income tax rate of 41.95% and reflects that, as of
February 28, 1998, an estimated 99.99%, 100%, and 100% of each
fund ' s 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> <C>
Average Annual Total Returns Cumulative Total Returns

Seven-Day Tax- One Five Ten One Five Ten
Yield Equivalent Year Years Years Year Years Years
Yield

CA Municipal 2.77% 4.77% 3.07% 2.75% 3.57% 3.07% 14.52% 41.95%
Money Market

</TABLE>

Note: If FMR had not reimbursed certain fund expenses during these
periods the fund's total returns would have been lower.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns

Seven-Day Tax- One Five Life of One Five Life of
Yield Equivalent Year Years Fund Year Years Fund
Yield

Spartan CA 2.91% 5.01% 3.25% 3.10% 3.63%* 3.25% 16.48% 34.21%*
Municipal Money
Market

</TABLE>

* From commencement of operations (November 27, 1989).
Note: If FMR had not reimbursed certain fund expenses during these
periods the fund's total returns would have been lower.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns

Thirty-Day Tax- One Five Ten One Five Ten
Yield Equivalent Year Years Years Year Years Years
Yield

Spartan CA 4.17% 7.18% 9.89% 6.27% 7.82% 9.89% 35.56% 112.27%
Municipal Income

</TABLE>

Note: If FMR had not reimbursed certain fund expenses during these
periods, Spartan CA Municipal Income's yield and tax equivalent yield
would have been 4.14% and 7.13%, respectively, and the fund's total
returns would have been lower.
The following tables show the income and capital elements of each
fund's cumulative total return. The tables compare each fund's return
to the record of the Standard & Poor's 500 Index (S&P 500), the Dow
Jones Industrial Average (DJIA), and the cost of living, as measured
by the Consumer Price Index (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
unmanaged index of common stocks and a narrower set of stocks of major
industrial companies, respectively, over the same period. Because each
fund invests in fixed-income securities, common stocks represent a
different type of investment from the funds. 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
fixed-income investments such as the funds. The S&P 500 and DJIA
returns are based on the prices of unmanaged groups of stocks and,
unlike each fund's returns, do not include the effect of brokerage
commissions or other costs of investing.
The following tables show the growth in value of a hypothetical
$10,000 investment in each fund during the 10-year period ended
February 28, 1998, or life of fund, as applicable, assuming all
distributions were reinvested. The figures below reflect the
fluctuating interest rates and bond prices of the specified periods
and should not be considered representative of the dividend income or
capital gain or loss that could be realized from an investment in a
fund today. Tax consequences of different investments have not been
factored into the figures below.
During the 10-year period ended February 28, 1998, a hypothetical
$10,000 investment in California Municipal Money Market would have
grown to $14,195.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
California Municipal Money Market INDICES

Period Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1998 $ 10,000 $ 4,195 $ 0 $ 14,195 $ 52,255 $ 55,126 $ 13,957

1997 $ 10,000 $ 3,772 $ 0 $ 13,772 $ 38,706 $ 43,612 $ 13,759

1996 $ 10,000 $ 3,385 $ 0 $ 13,385 $ 30,680 $ 34,062 $ 13,353

1995 $ 10,000 $ 2,968 $ 0 $ 12,968 $ 22,776 $ 24,329 $ 13,009

1994 $ 10,000 $ 2,639 $ 0 $ 12,639 $ 21,216 $ 22,621 $ 12,647

1993 $ 10,000 $ 2,395 $ 0 $ 12,395 $ 19,583 $ 19,350 $ 12,336

1992 $ 10,000 $ 2,102 $ 0 $ 12,102 $ 17,694 $ 18,210 $ 11,948

1991 $ 10,000 $ 1,663 $ 0 $ 11,663 $ 15,253 $ 15,558 $ 11,621

1990 $ 10,000 $ 1,102 $ 0 $ 11,102 $ 13,304 $ 13,649 $ 11,034

1989 $ 10,000 $ 500 $ 0 $ 10,500 $ 11,189 $ 11,300 $ 10,483

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in California
Municipal Money Market on March 1, 1988, 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 $14,195. 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 $3,509 for dividends. The fund did not
distribute any capital gains during the period.
During the period from November 27, 1989 (commencement of operations)
to February 28, 1998, a hypothetical $10,000 investment in Spartan
California Municipal Money Market would have grown to $13,421.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Spartan California Municipal Money Market INDICES

Year Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1998 $ 10,000 $ 3,421 $ 0 $ 13,421 $ 38,248 $ 40,061 $ 12,859

1997 $ 10,000 $ 2,998 $ 0 $ 12,998 $ 28,331 $ 31,694 $ 12,677

1996 $ 10,000 $ 2,597 $ 0 $ 12,597 $ 22,456 $ 24,754 $ 12,303

1995 $ 10,000 $ 2,159 $ 0 $ 12,159 $ 16,671 $ 17,680 $ 11,986

1994 $ 10,000 $ 1,804 $ 0 $ 11,804 $ 15,529 $ 16,439 $ 11,652

1993 $ 10,000 $ 1,522 $ 0 $ 11,522 $ 14,334 $ 14,062 $ 11,366

1992 $ 10,000 $ 1,206 $ 0 $ 11,206 $ 12,952 $ 13,234 $ 11,009

1991 $ 10,000 $ 738 $ 0 $ 10,738 $ 11,164 $ 11,306 $ 10,707

1990* $ 10,000 $ 154 $ 0 $ 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 in Spartan
California Municipal Money Market 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 $13,421. 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 $2,947 for dividends.
The fund did not distribute any capital gains during the period. The
figures in the table do not include the effect of the fund's $5.00
account closeout fee.
During the 10-year period ended February 28, 1998, a hypothetical
$10,000 investment in Spartan California Municipal Income would have
grown to $21,227.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Spartan California Municipal Income INDICES

Year Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1998 $ 11,175 $ 9,462 $ 590 $ 21,227 $ 52,255 $ 55,126 $ 13,957

1997 $ 10,678 $ 8,074 $ 564 $ 19,316 $ 38,706 $ 43,612 $ 13,759

1996 $ 10,597 $ 7,044 $ 555 $ 18,196 $ 30,680 $ 34,062 $ 13,353

1995 $ 10,054 $ 5,775 $ 526 $ 16,355 $ 22,776 $ 24,329 $ 13,009

1994 $ 10,940 $ 5,215 $ 351 $ 16,506 $ 21,216 $ 22,621 $ 12,647

1993 $ 11,239 $ 4,419 $ 0 $ 15,658 $ 19,583 $ 19,350 $ 12,336

1992 $ 10,470 $ 3,237 $ 0 $ 13,707 $ 17,694 $ 18,210 $ 11,948

1991 $ 10,199 $ 2,315 $ 0 $ 12,514 $ 15,253 $ 15,558 $ 11,621

1990 $ 10,127 $ 1,491 $ 0 $ 11,618 $ 13,304 $ 13,649 $ 11,034

1989 $ 9,864 $ 713 $ 0 $ 10,577 $ 11,189 $ 11,300 $ 10,483

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Spartan
California Municipal Income on March 1, 1988, 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 $19,371. 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 $6,295 for dividends and $382 for
capital gain distributions.
PERFORMANCE COMPARISONS. 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. Generally, Lipper rankings
are based on total return, assume reinvestment of distributions, do
not take sales charges or trading fees into c onsideration, and
are prepared without regard to tax consequences. Lipper may also rank
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 available 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, a fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity
funds to one another in appropriate categories over specific periods
of time may also be quoted in advertising. The bond fund may
advertise risk ratings, including symbols or numbers, prepared by
independent rating agencies.
A fund's performance may also be compared to that of a benchmark index
representing the universe of securities in which the fund may invest.
The total return of a benchmark index reflects reinvestment of all
dividends and capital gains paid by securities included in the index.
Unlike a fund's returns, however, the index returns do not reflect
brokerage commissions, transaction fees, or other costs of investing
directly in the securities included in the index.
Spartan California Municipal Income may compare its performance
to the Lehman Brothers Municipal Bond Index, a total return
performance benchmark for investment-grade municipal bonds with
maturities of at least one year. In addition, the fund may compare its
performance to that of the Lehman Brothers California Municipal Bond
Index, a total return performance benchmark for California
investment-grade municipal bonds with maturities of at least one year.
Issues included in each index have been issued after December 31, 1990
and have an outstanding par value of at least $50 million. Subsequent
to December 31, 1995, zero coupon bonds and issues subject to the
alternative minimum tax are included in each index.
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 money market fund may compare its performance or the performance of
securities in which it may invest to averages published by IBC
Financial Data, Inc. of Ashland, Massachusetts. These averages assume
reinvestment of distributions. IBC's MONEY FUND REPORT
AVERAGES(trademark)/All Tax-Free, which is reported in IBC's MONEY
FUND REPORT(trademark), covers over 438 tax-free money market funds.
The bond fund may compare and contrast in advertising the
relative advantages of investing in a mutual fund versus an individual
municipal bond. Unl ike municipal bond 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 sales
charges of many municipal bond mutual funds are lower than the
purchase cost of individual municipal bonds, which are generally
subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include other Fidelity funds;
retirement investing; brokerage products and services; model
portfolios or allocations; saving for college or other goals; and
charitable giving. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus(Registered trademark),
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 bond 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 a 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 bond fund may
also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate price movements over specific periods of
time for each bond fund . Each point on the momentum indicator
represents a fund's percentage change in price movements over
that period.
A bond 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, 1998, FMR advised over $ 31 billion in
tax-free fund assets, $ 102 billion in money market fund assets,
$ 428 billion in equity fund assets, $ 75 billion in
international fund assets, and $ 28 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, a 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
1998: New Year's Day, Martin Luther King's Birthday, Presidents' Day,
Good Friday, Memorial Day, Independence Day (observed), 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. In addition, on days when the Federal
Reserve Wire System is closed, federal funds wires cannot be s ent.
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
SEC. 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 each 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 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. 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 securities whose interest FMR believes
is free from federal income tax. Generally, issuers or other parties
have entered into covenants requiring continuing compliance with
federal tax requirements to preserve the tax-free status of interest
payments over the life of the security. If at any time the covenants
are not complied with, or if the IRS otherwise determines that the
issuer did not comply with relevant tax requirements, interest
payments from a security could become federally taxable retroactive to
the date the security was issued. For certain types of structured
securities, the tax status of the pass-through of tax-free income may
also be based on the federal and state tax treatment of the structure.
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
distributions 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 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 distributions is free
from federal income tax. The money market funds 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.
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 the 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 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 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. Each money market fund may distribute
any net realized short-term capital gains once a year or more often as
necessary, to maintain its NAV at $1.00. The money market funds do not
anticipate distributing long-term capital gains.
As of February 28, 199 8 , Spartan California Municipal Income
Fund hereby designates approximately $ 427 ,000 as a capital gain
dividend for the purpose of the dividend-paid deduction.
As of February 28, 1998, Spartan California Municipal Income had a
capital loss carryforward aggregating approximately $2,634,000.
This loss carryforward, of which $82,000 and $2,552,000 will expire on
February 28, 2002 and February 28, 2003, respectively, is available to
offset further capital gains.
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, and intends to comply with
other tax rules applicable to regulated investment companies.
Each fund is treated as a separate entity from the other funds, if
any, of its 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 organized in
1972. The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the Investment Company Act of 1940 (1940 Act), control of a company is
presumed where one individual or group of individuals owns more than
25% of the voting stock of that company. Therefore, through their
ownership of voting common stock and the execution of the
shareholders' voting agreement, members of the Johnson family may be
deemed, under the 1940 Act, to form a controlling group with respect
to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, 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
accounts 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, Members of the Advisory Board, and executive officers of
the trust are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the
last five years. All persons named as Trustees and Members of the
Advisory Board also serve in similar capacities for other funds
advised by FMR. The business address of each Trustee, Member of the
Advisory Board, and officer who is an "interested person" (as defined
in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The
business address of all the other Trustees is Fidelity Investments,
P.O. Box 9235, Boston, Massachusetts 02205-9235. Those Trustees who
are "interested persons" by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (67), 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 Fidelity Investments Money Mana gement, Inc.
(1998), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
J. GARY BURKHEAD (56), Member of the Advisory Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President of Fidelity Personal Investments and Brokerage Group
(1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.
RALPH F. COX (65), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS (66), Trustee. 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),
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.
ROBERT M. GATES (54), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelli gence
Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as
Assistant to the President of the United States and Deputy National
Security Advisor. Mr. Gates is a Director of LucasVarity PLC
(automotive components and diesel engines), Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for International
Policy and of the Endowment Association of the College of Wil liam
and Mary. In addition, he is a member of the National Executive Board
of the Boy Scouts of America.
E. BRADLEY JONES (70), Trustee. Prior to his retirement in 1984, Mr.
Jones was Chairman and Chief Executive Officer of LTV Steel Company.
He is a Director of TRW Inc. (original equipment and replacement
products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK (65), Trustee, is Executive-in-Residence (1995) at
Columbia University Graduate School of Business and a financial
consultant. From 1987 to January 1995, Mr. Kirk was a Professor at
Columbia University Graduate School of Business. Prior to 1987, he was
Chairman of the Financial Accounting Standards Board. Mr. Kirk is a
Director of General Re Corporation (reinsurance), and he previously
served as a Director of Valuation Research Corp. (appraisals and
valuations, 1993-1995). In addition, he serves as Chairman of the
Board of Directors of the National Arts Stabilization Fund, Chairman
of the Board of Trustees of the Greenwich Hospital Association, a
Member of the Public Oversight Board of the American Institute of
Certified Public Accountants' SEC Practice Section (1995), and as a
Public Governor of the National Association of Securities Dealers,
Inc. (1996).
*PETER S. LYNCH (55), Trustee, is Vice Chairman and Director of
FMR. Prior to May 31, 1990, he was a Director of FMR and Executive
Vice President of FMR (a position he held until March 31, 1991); Vice
President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). In addition, he
serves as a Trustee of Boston College, Massachusetts Eye & Ear
Infirmary, Historic Deerfield (1989) and Society for the Preservation
of New England Antiquities, and as an Overseer of the Museum of Fine
Arts of Boston.
WILLIAM O. McCOY (64), Trustee (1997), is the Vice President of
Finance for the University of North Carolina (16-school system, 1995).
Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman
of the Board of BellSouth Corporation (telecommunications, 1984) and
President of BellSouth Enterprises (1986). He is currently a Director
of Liberty Corporation (holding company, 1984), Weeks Corporation of
Atlanta (real estate, 1994), Carolina Power and Light Company
(electric utility, 1996), and the Kenan Transport Co. (1996).
Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member
of the Board of Visitors for the University of North Carolina at
Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988).
GERALD C. McDONOUGH (69), Trustee and Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Mr. McDonough is a Director of York International Corp.
(air conditioning and refrigeration), Commercial Intertech Corp.
(hydraulic systems, building systems, and metal products, 1992), CUNO,
Inc. (liquid and gas filtration products, 1996), and Associated
Estates Realty Corporation (a real estate investment trust, 1993). Mr.
McDonough served as a Director of ACME-Cleveland Corp. (metal working,
telecommunications, and electronic products) from 1987-1996 and
Brush-Wellman Inc. (metal refining) from 1983-1997.
MARVIN L. MANN (64), 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), Imation Corp. (imaging and information storage, 1997), 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.
*ROBERT C. POZEN (51), Trustee (1997) and Senior Vice President, is
also President and a Director of FMR (1997); and President and a
Director of Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research ( U.K.) Inc. (1997), and Fidelity
Management & Research (Far East) Inc. (1997). Previously, Mr. Pozen
served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.
THOMAS R. WILLIAMS (69), 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 ConAgra, Inc. (agricultural products), Georgia Power Company
(electric utility), National Life Insurance Company of Vermont,
American Software, Inc., and AppleSouth, Inc. (restaurants, 1992).
DWIGHT D. CHURCHILL (44), is Vice President of Bond Funds, Group
Leader of the Bond Group, Senior Vice President of FMR (1997), and
Vice President of FIMM (1998). Mr. Churchill joined Fidelity in 1993
as Vice President and Group Leader of Taxable Fixed-Income
Investments.
BOYCE I. GREER (42), is Vice President of Money Market Funds (1997),
Group Leader of the Money Market Group (1997), S enior Vice
President of FMR (1997), and Vice President of FIMM (1998). Mr. Greer
served as the Leader of the Fixed-Income Group for Fidelity Management
Trust Company (1993-1995) and was Vice President and Group Leader of
Municipal Fixed-Income Investments (1996-1997).
FRED L. HENNING, JR. (58), is Vice President of Fidelity's
Fixed-Income Group (1995), Senior Vice President of FMR (1995), and
Senior Vice President of FIMM (1998). Before assuming his current
responsibilities, Mr. Henning was head of Fidelity's Money Market
Division.
DIANE M. MCLAUGHLIN (34), is Vice President of Fidelity California
Municipal Money Market Fund (1997), Spartan California Municipal Money
Market Fund ( 1997), and other funds advised by FMR. Prior to her
current responsibilities, Ms. McLaughlin has served as a senior trader
and managed a variety of funds.
JONATHAN D. SHORT (34), is Vice President of Spartan California
Municipal Income Fund (1997), and other funds advised by FMR. Prior to
his current responsibilities, Mr. Short assisted on Fidelity Municipal
Income Fund and managed a variety of Fidelity funds.
ERIC D. ROITER (49), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981) .
RICHARD A. SILVER (51), Treasurer (1997), is Treasurer of the Fidelity
funds and is an employee of FMR (1997). Before joining FMR, Mr. Silver
served as Executive Vice President, Fund Accounting & Administration
at First Data Investor Services Group, Inc. (1996-1997). Prior to
1996, Mr. Silver was Senior Vice President and Chief Financial Officer
at The Colonial Group, Inc. Mr. Silver also served as Chairman of the
Accounting/Treasurer's Committee of the Investment Company Institute
(1987-1993).
THOMAS D. MAHER (53), Assistant Vic e President, is Assistant
Vice President of Fidelity's Municipal Bond Funds (1996) and of
Fidelity's Money Market Funds and Vice President and Associate General
Counsel of Fidelity Investments Money Management, Inc.
JOHN H. COSTELLO (51), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (52), Assistant Treasurer (1994), is an employee of
FMR (1994). Prior to becoming Assistant Treasurer of the Fidelity
funds, Mr. Rush was Chief Compliance Officer of FMR Corp. (1993-1994)
and Chief Financial Officer of Fidelity Brokerage Services, Inc.
(1990-1993).
THOMAS J. SIMPSON (39), Assistant Treasurer, is Assistant Treasurer of
Fidelity's M unicipal B ond F unds (1996) and of
Fidelity's M oney M arket F unds (1996) and an
employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice
President and Fund Controller of Liberty Investment Services
(1987-1995).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ended February 28, 1998, or
calendar year ended December 31, 1997, as applicable.
COMPENSATION TABLE

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Trustees Aggregate Aggregate Aggregate Total
and Compensation Compensation Compensation Compensation
Members of the Advisory Board from from from from the
California Spartan California Spartan California Fund Complex*,A
Municipal Money Municipal Money Municipal
MarketB MarketB IncomeB

J. Gary Burkhead** $ 0 $ 0 $ 0 $ 0

Ralph F. Cox $ 344 $ 544 $ 320 $ 214,500

Phyllis Burke Davis $ 339 $ 536 $ 317 $ 210,000

Robert M. Gates*** $ 350 $ 553 $ 324 $176,000

Edward C. Johnson 3d** $ 0 $ 0 $ 0 $ 0

E. Bradley Jones $ 342 $ 540 $ 318 $ 211,500

Donald J. Kirk $ 342 $ 540 $ 318 $ 211,500

Peter S. Lynch** $ 0 $ 0 $ 0 $ 0

William O. McCoy**** $ 353 $ 558 $ 326 $ 214,500

Gerald C. McDonough $ 427 $ 674 $ 398 $ 264,500

Marvin L. Mann $ 339 $ 537 $ 314 $ 214,500

Robert C. Pozen** $ 0 $ 0 $ 0 $ 0

Thomas R. Williams $ 344 $ 544 $ 320 $214,500

</TABLE>

* Information is for the calendar year ended December 31, 1997 for
230 funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are compensated
by FMR.
*** Mr. Gates was appointed to the Board of Trustees of California
Municipal Trust effective March 1, 1997. Mr. Gates was elected to the
Board of Trustees of California Municipal Trust II on March 19, 1997.
**** Mr. McCoy was appointed to the Board of Trustees of California
Municipal Trust effective January 1, 1997. Mr. McCoy was elected to
the Board of Trustees of California Municipal Trust II on March 19,
1997.
A Compensation figures include cash, amounts required to be
deferred, and may include amounts deferred at the election of
Trustees. For the calendar year ended December 31, 1997, the Trustees
accrued required deferred compensation from the funds as follows:
Ralph F. Cox, $75,000; Phyllis Burke Davis, $75,000; Robert M. Gates,
$62,500; E. Bradley Jones, $75,000; Donald J. Kirk, $75,000; William
O. McCoy, $75,000; Gerald C. McDonough, $87,500; Marvin L. Mann,
$75,000; and Thomas R. Williams, $75,000. Certain of the
non-interested Trustees elected voluntarily to defer a portion of
their compensation as follows: Ralph F. Cox, $53,699; Marvin L. Mann,
$53,699; and Thomas R. Williams, $62,462.
B Compensation figures include cash.
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under
the Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
As of February 28, 1998, the Trustees, Members of the Advisory Board,
and officers of each fund owned, in the aggregate, less than 1% of
each fund's total outstanding shares.
As of February 28, 1998, the following owned of record or beneficially
5% or more of each fund's outstanding shares:
Spartan California Municipal Money Market: National Financial
Services Corporation, Boston, MA (18.28%).
Sp artan California Municipal Income: National Financial
Services Corporation, Boston, MA (6.88%).
MANAGEMENT CONTRACTS
FMR is manager of Fidelity California Municipal Money Market and
Spartan California Municipal Income pursuant to management contracts
dated April 1, 1997 and March 1, 1994 respectively, which were
approved by shareholders on March 19, 1997 and February 16, 1994,
respectively.
FMR is Spartan California Municipal Money Market's manager pursuant to
a management contract dated April 18, 1994. This April 18, 1994
contract was approved by Fidelity California Municipal Trust II as
sole shareholder on April 18, 1994, pursuant to an Agreement and Plan
of Conversion approved by public shareholders on February 16, 1994.
MANAGEMENT SERVICES. Each fund employs FMR to furnish investment
advisory and other services. Under the terms of 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 the fund in accordance with its investment objective, policies, and
limitations. FMR also provides each fund with all necessary office
facilities and personnel for servicing the 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 securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for each fund; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.
MANAGEMENT-RELATED EXPENSES (CALIFORNIA MUNICIPAL MONEY MARKET AND
SPARTAN CALIFORNIA MUNICIPAL INCOME). In addition to the management
fee payable to FMR and the fees payable to the transfer, dividend
disbursing, and shareholder servicing agent,and pricing and
bookkeeping agent, each fund pays all of its expenses that are not
assumed by those parties. Each fund pays for the typesetting,
printing, and mailing of its proxy materials to shareholders, legal
expenses, and the fees of the custodian, auditor and non-interested
Trustees. Each fund's management contract further provides that the
fund will pay for typesetting, printing, and mailing prospectuses,
statements of additional information, notices, and reports to
shareholders; however, under the terms of each fund's transfer agent
agreement, the transfer agent bears the costs of providing these
services to existing shareholders. Other expenses paid by each fund
include interest, taxes, brokerage commissions, each fund's
proportionate share of insurance premiums and Investment Company
Institute dues, and the costs of registering shares under federal
securities laws and making necessary filings under state securities
laws. Each fund is also liable for such non-recurring expenses as may
arise, including costs of any litigation to which the fund may be a
party, and any obligation it may have to indemnify its officers and
Trustees with respect to litigation.
MANAGEMENT-RELATED EXPENSES (SPARTAN CALIFORNIA MUNICIPAL MONEY
MARKET). Under the terms of its management contract with the fund, FMR
is responsible for payment of all operating expenses of the fund with
certain exceptions. Specific expenses payable by FMR include expenses
for typesetting, printing, and mailing proxy materials to
shareholders, legal expenses, fees of the custodian, auditor and
interested Trustees, the fund's proportionate share of insurance
premiums and Investment Company Institute dues, and the costs of
registering shares under federal securities laws and making necessary
filings under state securities laws. The fund's management contract
further provides that FMR will pay for typesetting, printing, and
mailing prospectuses, statements of additional information, notices,
and reports to shareholders; however, under the terms of the fund's
transfer agent agreement, the transfer agent bears the costs of
providing these services to existing shareholders. FMR also pays all
fees associated with transfer agent, dividend disbursing, and
shareholder services and pricing and bookkeeping services.
FMR pays all other expenses of Spartan California Municipal Money
Market with the following exceptions: fees and expenses of the
non-interested Trustees, interest, taxes, brokerage commissions (if
any), and such nonrecurring expenses as may arise, including costs of
any litigation to which the fund may be a party, and any obligation it
may have to indemnify its officers and Trustees with respect to
litigation.
MANAGEMENT FEES. For the services of FMR under the management
contract, Spartan California Municipal Money Market pays FMR a monthly
management fee at the annual rate of 0.50% of its average net assets
throughout the month.
The management fee paid to FMR by Spartan California Municipal Money
Market is reduced by an amount equal to the fees and expenses paid by
the fund to the non-interested Trustees.
For the services of FMR under the management contract, California
Municipal Money Market and Spartan California Municipal Income each
pays FMR a monthly management fee which has two components: 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.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

0 - $3 billion .3700% $ 0.5 billion .3700%

3 - 6 .3400 25 .2664

6 - 9 .3100 50 .2188

9 - 12 .2800 75 .1986

12 - 15 .2500 100 .1869

15 - 18 .2200 125 .1793

18 - 21 .2000 150 .1736

21 - 24 .1900 175 .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

Prior to April 1, 1997 for California Municipal Money Market and,
prior to March 1, 1994 for Spartan California Municipal Income, 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.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints for average group
assets in excess of $156 billion and under $372 billion as shown in
the schedule below. The revised group fee rate schedule is identical
to the above schedule for average group assets under $156 billion.
On January 1, 1996, FMR voluntarily added new breakpoints to the
revised schedule for average group assets in excess of $372 billion;
for Spartan California Municipal Income, these new breakpoints were
added pending shareholder approval of a management contract reflecting
the revised schedule and additional breakpoints. The revised group fee
rate schedule and its extensions provide for lower management fee
rates as FMR's assets under management increase. For average group
assets in excess of $156 billion, the revised group fee rate schedule
with additional breakpoints voluntarily adopted by FMR is as shown in
the schedule below. California Municipal Money Market's current
management contract reflects the group fee rate schedule above for
average group assets under $156 billion and the group fee rate
schedule below for average group assets in excess of $156 billion.
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

372 - 408 .1200 325 .1514

408 - 444 .1175 350 .1494

444 - 480 .1150 375 .1476

480 - 516 .1125 400 .1459

Over 516 .1100 425 .1443

450 .1427

475 .1413

500 .1399

525 .1385

550 .1372

The group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $583 billion of group net assets - the approximate level for
February 1998 - was .1357%, which is the weighted average of the
respective fee rates for each level of group net assets up to $583
billion.
The individual fund fee rate for California Municipal Money Market and
Spartan California Municipal Income is 0.25%. Based on the average
group net assets of the funds advised by FMR for February 1998, each
fund's annual management fee rate would be calculated as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

California Municipal 0.1357% + 0.25% = 0.3857%
Money Market

Spartan California 0.1357% + 0.25% = 0.3857%
Municipal Income

</TABLE>

One-twelfth of this annual management fee rate, is applied to each
fund's net assets averaged for the most recent month, giving a dollar
amount, which is the fee for that month.
The following table shows the amount of management fees paid by each
fund to FMR for the past three fiscal years, and the amount of credits
reducing management fees for Spartan California Municipal Money
Market.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Fiscal Years Ended Amount of Management Fees
February 28 Credits Reducing Paid to FMR
Management Fees

Spartan California Municipal Money 1998 $ 56,000 $ 6,641,000*
Market

1997 $ 83,000 $ 6,613,000*

1996** $ 159,000 $ 6,117,000*

California Municipal Money Market 1998 N/A $ 3,355,000

1997 N/A $ 2,929,000

1996** N/A $ 2,925,000

Spartan California Municipal Income 1998 N/A $ 3,377,000

1997 N/A $ 1,898,000

1996** N/A $ 1,959,000

</TABLE>

* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
** Fiscal year ended February 29.
F MR may, fro m time to time, voluntarily reimburse all or a
portion of a fund's 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 a fund's total returns and
yield, and repayment of the reimbursement by a fund will lower its
total returns and yield.
During the past three fiscal years, FMR voluntarily agreed, subject to
revision or termination, to reimburse certain of the funds if and to
the extent that the fund's aggregate operating expenses, including
management fees, were in excess of an annual rate of its average net
assets. The table below shows the periods of reimbursement and levels
of expense limitations for the applicable fund; the dollar amount of
management fees incurred under each fund's contract before
reimbursement; and the dollar amount of management fees reimbursed by
FMR under the expense reimbursement for each period.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Periods of Aggregate Fiscal Management Amount of
Expense Limitation Operating Years Fee Management
From To Expense Ended Before Fee
Limitation February 28 Reimbursement Reimbursement

Spartan CA July 1, 1997 July 31, 1997 0.45% 1998 $ 568,000* $ 57,000
Municipal Money
Market

June 1, 1997 June 30, 1997 0.40% $ 542,000* $ 109,000

March 1, 1997 May 31, 1997 0.35% $ 1,687,000* $ 506,000

March 1, 1996 February 28, 0.35% 1997 $ 6,696,000* $ 2,015,000
1997

December 1, February 29, 0.35% 1996** $ 6,275,000* $ 2,246,000
1995 1996

July 1, 1995 November 30, 0.32% $ 2,608,000* $ 939,000
1995

March 1, 1995 June 30, 1995 0.30% $ 2,059,000* $ 824,000

Spartan CA August 15, 1997 *** 0.53% 1998 $ 2,506,000 $ 53,000
Municipal Income

April 1, 1997 August 14, 1997 0.55% $ 714,000 $ 31,000

</TABLE>

* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
** Fiscal year ended February 29.
***Effective August 15, 1997, FMR has voluntarily agreed, through
December 31, 1999, to reimburse Spartan California Municipal Income to
the extent that total operating expenses (excluding interest, taxes,
brokerage commissions, and extraordinary expenses) exceed 0.53% of its
average net assets.
To defray shareholder service costs, FMR or its affiliates also
collect Spartan California Municipal Money Market's $5.00 exchange
fee, $5.00 account closeout fee, $5.00 fee for wire purchases and
redemptions, and $2.00 checkwriting charge. Shareholder transaction
fees and charges collected by FMR are shown in the table below.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Period Ended Exchange Fees Account Wire Fees Checkwriting
February 28 Closeout Fees Charges

Spartan CA Municipal 1998 $5,000 $1,000 $1,000 $9,000
Money Market

1997 $4,000 $1,000 $1,000 $8,000

1996* $7,000 $2,000 $1,000 $12,000

</TABLE>

* Fiscal year ended February 29.
SUB-ADVISER. On behalf of California Municipal Money Market
and Spartan California Municipal Money Market, FMR has entered into a
sub-advisory agreement with FIMM pursuant to which FIMM has primary
responsibility for providing portfolio investment management services
to the funds.
Under the terms of the sub-advisory agreements, FMR pays FIMM fees
equal to 50% of the management fee payable to FMR under its management
contract with each fund. The fees paid to FIMM are not reduced by any
voluntary or mandatory expense reimbursements that may be in effect
from time to time.
Fees paid to FMR Texas Inc. (FMR Texas), the predecessor company to
FIMM, by FMR on behalf of California Municipal Money Market and
Spartan California Municipal Money Market for the past three fiscal
years are shown in the table below.

<TABLE>
<CAPTION>
<S> <C> <C>
Fund Fiscal Year Ended February 28 Fees Paid to FMR Texas

CA Municipal Money Market 1998 $ 1,678,000

1997 $ 1,465,000

1996* $ 1,463,000

Spartan CA Municipal Money Market 1998 $ 3,349,000

1997 $ 3,348,000

1996* $ 3,138,000

</TABLE>

* Fiscal year ended February 29
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
each fund pursuant to Rule 12b-1 under the 1940 Act (the Rule). The
Rule provides in substance that a mutual fund may not engage directly
or indirectly in financing any activity that is primarily intended to
result in the sale of shares of the 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 fund to FMR
is deemed to be indirect financing by the fund of the distribution of
its shares, such payment is authorized by the Plan. Each Plan
specifically recognizes that FMR may use its management fee revenue,
as well as its past profits or its other resources, to pay FDC for
expenses incurred in connection with the distribution of fund shares.
In addition, each Plan provides that FMR, directly or through FDC, may
make payments to third parties, such as banks or broker-dealers, that
engage in the sale of fund shares, or provide shareholder support
services. Currently, the Board of Trustees has authorized such
payments for the funds' shares.
FMR made no payments either directly or through FDC to third parties
for the fiscal year ended 1998.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit each 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 each fund.
To the extent that each Plan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, additional sales of
fund shares may result. Furthermore, certain shareholder support
services may be provided more effectively under the Plans by local
entities with whom shareholders have other relationships.
The Plans for California Municipal Money Market, and Spartan
California Municipal Income were approved by shareholders of each fund
on December 30, 1991, and November 18, 1987, respectively.
The Plan for Spartan California Municipal Money Market was approved by
Fidelity California Municipal Trust II as the then sole shareholder of
the fund on April 18, 1994, 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 other 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 Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
Each fund has entered into a transfer agent agreement with UMB. Under
the terms of the agreements, UMB provides transfer agency, dividend
disbursing, and shareholder services for each fund. UMB in turn has
entered into sub-transfer agent agreements with FSC, an affiliate of
FMR. Under the terms of the sub-agreements, FSC performs all
processing activities associated with providing these services for
each fund and receives all related transfer agency fees paid to UMB.
For providing transfer agency services, FSC receives an account fee
and an asset-based fee each paid monthly with respect to each account
in a fund. For retail accounts and certain institutional accounts,
these fees are based on account size and fund type. For certain
institutional retirement accounts, these fees are based on fund type.
For certain other institutional retirement accounts, these fees are
based on account type (i.e., omnibus or non-omnibus) and, for
non-omnibus accounts, fund type. The account fees are subject to
increase based on postage rate changes.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, UMB receives the pro rata portion of the transfer agency
fees applicable to shareholder accounts in each Fidelity Freedom Fund,
a fund of funds managed by an FMR affiliate, according to the
percentage of the Freedom Fund's assets that is invested in a fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
FSC has entered into a sub-agreement with Fidelity Brokerage Services,
Inc. (FBSI), an affiliate of FMR. Under the terms of this
sub-agreement, FBSI performs certain recordkeeping, communication, and
other services for California Municipal Money Market shareholders
participating in the Fidelity Ultra Service Account program. FBSI
directly charges a monthly administrative fee to each Ultra Service
Account client who chooses certain additional features. This fee is in
addition to the transfer agency fee received by FSC.
Each fund has also entered into a service agent agreement with UMB.
Under the terms of the agreements, UMB provides pricing and
bookkeeping services for each fund. UMB in turn has entered into
sub-service agent agreements with FSC, an affiliate of FMR. Under the
terms of the sub-agreements, FSC performs all processing activities
associated with providing these services, including calculating the
NAV and dividends for each fund and maintaining each fund's portfolio
and general accounting records, and receives all related pricing and
bookkeeping fees paid to UMB.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month. The annual fee rates for pricing and bookkeeping services are
.0400% for fixed-income funds and .0175% for money market funds of the
first $500 million of average net assets and .0200% for fixed-income
funds and .0075% for money market funds of average net assets in
excess of $500 million. The fee, not including reimbursement for
out-of-pocket expenses, is limited to a minimum of $60,000 for Spartan
California Municipal Income and $40,000 for each of California
Municipal Money Market and Spartan California Municipal Money Market
and a maximum of $800,000 per year.
Pricing and bookkeeping fees, including reimbursement for
out-of-pocket expenses, paid by California Municipal Money Market and
Spartan California Municipal Income to FSC for the past three fiscal
years are shown in the table below.
Fund 1998 1997 1996

California Municipal Money Market $ 145,000 $ 128,000 $ 128,000

Spartan California Municipal Income $ 302,000 $ 205,000 $ 210,000

For Spartan California Municipal Money Market, FMR bears the cost of
transfer agency, dividend disbursing, and shareholder services and
pricing and bookkeeping services under the terms of its management
contract with the fund.
Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July 18,
1960. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The distribution agreements call for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at
NAV. 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 Municipal Money Market Fund
and Spartan California Municipal Money Market Fund are funds 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 Municipal Money Market Fund and
Spartan California Municipal Money Market Fund. Fidelity California
Municipal Money Market Fund and Spartan California Municipal Money
Market Fund entered into an agreement to acquire all of the assets of
Fidelity California Municipal Money Market Fund and Spartan California
Municipal Money Market Fund, respectively, series of the trust, on
April 18, 1994 and December 30, 1991, respectively. The Delaware
trust's Trust Instrument permits the Trustees to create additional
funds.
Spartan California Municipal Income Fund is a fund 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
is one fund of the Massachusetts trust: Spartan California Municipal
Income Fund. The Massachusetts trust's Declaration of Trust 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 expenses of their respective
trusts. Expenses with respect to the trusts 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
Boards 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
"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 Massachusetts 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, 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 trust or the fund, as determined by the current value of each
shareholder's investment in the fund or 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 may
also invest all of its assets in another investment company.
CUSTODIAN. UMB Bank, n.a., 1010 Grand Avenue, Kansas City, Missouri,
is custodian of the assets of the funds. The custodian is responsible
for the safekeeping of a fund's assets and the appointment of any
subcustodian banks and clearing agencies. The custodian takes no part
in determining the investment policies of a fund or in deciding which
securities are purchased or sold by a fund. However, a fund may 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
Board of Trustees may, from time to time, conduct transactions with
various banks, including banks serving as custodians for certain funds
advised by FMR. Transactions that have occurred to date include
mortgages and personal and general business loans. In the judgment of
FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund
relationships.
AUDITOR. Price Waterhouse LLP, 160 Federal Street, Boston,
Massachusetts serves as the funds' 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, 1998, and report of the auditor, are
included in the funds' Annual Report, which is a separate report
supplied with this SAI. The funds' financial statements, including the
financial highlights, and report of the auditor are incorporated
herein by reference. For a free additional copy of the funds' Annual
Report, contact Fidelity at 1-800-544-8888.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value
of each investment by the time remaining to its maturity, adding these
calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a
stated final maturity basis, although there are some exceptions to
this rule.
For example, if it is probable that the issuer of an instrument will
take advantage of a maturity-shortening device, such as a call,
refunding, or redemption provision, the date on which the instrument
will probably be called, refunded, or redeemed may be considered to be
its maturity date. When a municipal bond issuer has committed to call
an issue of bonds and has established an independent escrow account
that is sufficient to, and is pledged to, refund that issue, the
number of days to maturity for the prerefunded bond is considered to
be the number of days to the announced call date of the bonds.
The descriptions that follow are examples of eligible ratings for each
fund. 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 RATINGS OF MUNICIPAL
OBLIGATIONS
Moody's ratings for short-term municipal obligations will be
designated Moody's Investment Grade ("MIG"). A two-component rating is
assigned to variable rate demand obligations. The first component
represents an evaluation of the degree of risk associated with
scheduled principal repayment and interest payments and is designated
by a long-term rating, e.g., "Aaa" or "A." The second component
represents an evaluation of the degree of risk associated with the
demand feature and is designated "VMIG."
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.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF MUNICIPAL NOTES
Municipal notes maturing in three years or less will likely receive a
"note" rating symbol. Notes that have a put option or demand feature
are assigned a dual rating. The first rating addresses the likelihood
of repayment of principal and payment of interest due and for
short-term obligations is designated by a note rating symbol. The
second rating addresses only the demand feature, and is designated by
a commercial paper rating symbol, e.g., "A-1" or "A-2."
SP-1 - Strong capacity to pay principal and interest. Issues
determined to possess very strong characteristics are given a plus (+)
designation.
SP-2 - Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term
of the notes.
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF MUNICIPAL
OBLIGATIONS
Moody's ratings for long-term municipal obligations fall within nine
categories. They range from Aaa (highest quality) to C (lowest
quality). Those bonds within the Aa through B categories that Moody's
believes possess the strongest credit attributes within those
categories are designated by the symbol "1."
AAA - Bonds that are 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 edged." 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 that are rated Aa are judged to be of high quality by all
standards. Together with the 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 the Aaa securities.
A - Bonds that are 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 that are 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 that are 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 over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF MUNICIPAL DEBT
Municipal debt issues may be designated by Standard & Poor's as either
investment grade ("AAA" through "BBB") or speculative grade ("BB"
through "D"). While speculative grade debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions. Ratings from
AA through CCC may be modified by the addition of a plus sign (+) or
minus sign (-) to show relative standing within the major rating
categories.
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 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 than debt
in higher rated categories.
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. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
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.
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 Fund for
the fiscal year ended February 28, 1998, are incorporated herein by
reference to the fund's Statement of Additional Information and were
filed on April 15, 1998 for 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 Municipal Money Market Fund for
the fiscal year ended February 28, 1998, are incorporated herein by
reference to the fund's Statement of Additional Information and were
filed on April 15, 1998 for 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)(a) Trust Instrument, dated June 20, 1991, is incorporated herein
by reference to Exhibit 1 of Post-Effective Amendment No. 11.
(b) Supplement to the Trust Instrument of Fidelity California
Municipal Trust II is incorporated herein by reference to Exhibit 1(b)
of Post-Effective Amendment No. 16.
(2) By-laws of the Trust, as amended, are incorporated herein by
reference to Exhibit 2(a) of 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 April 1, 1997, between Fidelity
California Municipal Money Market Fund and Fidelity Management &
Research Company is incorporated herein by reference to Exhibit 5(a)
of Post-Effective Amendment No. 16.
(b) Management Contract, dated April 18, 1994, between Spartan
California Municipal Money Market Portfolio (currently known as
Spartan California Municipal Money Market Fund) and Fidelity
Management & Research Company is incorporated herein by reference to
Exhibit 5(b) of Post-Effective Amendment No. 11.
(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 (currently known
as Fidelity California Municipal Money Market Fund) is incorporated
herein by reference to Exhibit (5)(c) of Post-Effective Amendment No.
11.
(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 (currently known as
Spartan California Municipal Money Market Fund) is incorporated herein
by reference to Exhibit (5)(d) of Post-Effective Amendment No. 11.
(6)(a) General Distribution Agreement, dated December 30, 1991,
between Fidelity California Tax-Free Money Market Portfolio (currently
known as Fidelity California Municipal Money Market Fund) and Fidelity
Distributors Corporation is incorporated herein by reference to
Exhibit (6)(a) of Post-Effective Amendment No. 11.
(b) General Distribution Agreement, dated October 19, 1989, between
Spartan California Municipal Money Market Portfolio (currently known
as Spartan California Municipal Money Market Fund) and Fidelity
Distributors Corporation is incorporated herein by reference to
Exhibit 6(b) of Post-Effective Amendment No. 11.
(c) Amendment to General Distribution Agreement, dated January 1,
1988, between Fidelity California Tax-Free Money Market Portfolio
(currently known as Fidelity California Municipal Money Market Fund)
and Fidelity Distributors Corporation is incorporated herein by
reference to Exhibit 6(c) of Post-Effective Amendment No. 11.
(d) Amendments to the General Distribution Agreement between the
Registrant and Fidelity Distributors Corporation, dated March 14, 1996
and July 15, 1996, are incorporated herein by reference to Exhibit
6(a) of Fidelity Court Street Trust's Post-Effective Amendment No. 61
(File No. 2-58774).
(7) (a) Retirement Plan for Non-Interested Person Trustees, Directors
or General Partners, as amended on November 16, 1995, is incorporated
herein by reference to Exhibit 7(a) of Fidelity Select Portfolio's
(File No. 2-69972) Post-Effective Amendment No. 54.
(b) The Fee Deferral Plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of September 14, 1995 and
amended through November 14, 1996, is incorporated herein by reference
to Exhibit 7(b) of Fidelity Aberdeen Street Trust's (File No.
33-43529) Post-Effective Amendment No. 19.
(8) (a) Custodian Agreement, 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 of Fidelity California
Municipal Trust's Post-Effective Amendment No. 28 (File No. 2-83367).
(8) (b) Appendix A, dated September 18, 1997, to the Custodian
Agreement, dated December 1, 1994, between UMB Bank, n.a. and the
Registrant is incorporated herein by reference to Exhibit 8(b) of
Fidelity Municipal Trust II's Post-Effective Amendment No.17 (File No.
33-43986).
(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) of Fidelity Union Street Trust's
(File No. 2-50318) Post-Effective Amendment No. 87.
(b) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(c) 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) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(d) 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) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(e) Fidelity 403(b)(7) Custodial Account Agreement, as currently in
effect, is incorporated herein by reference to Exhibit 14(e) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(f) National Financial Services Corporation Defined Contribution
Retirement Plan and Trust Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(k) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(g) The CORPORATEplan for Retirement Profit Sharing/401K Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(l) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(h) The CORPORATEplan for Retirement Money Purchase Pension Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(m) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(i) 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(f) of Fidelity
Commonwealth Trust's (File No. 2-52322) Post Effective Amendment No.
57.
(j) Plymouth Investments Defined Contribution Retirement Plan and
Trust Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(o) of Fidelity Commonwealth Trust's (File No.
2-52322) Post Effective Amendment No. 57.
(k) The Fidelity Prototype Defined Benefit Pension Plan and Trust
Basic Plan Document and Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity
Securities Fund's (File No. 2-93601) Post Effective Amendment No. 33.
(l) The Institutional Prototype Plan Basic Plan Document,
Standardized Adoption Agreement, and Non-Standardized Adoption
Agreement, as currently in effect, is incorporated herein by reference
to Exhibit 14(o) of Fidelity Securities Fund's (File No. 2-93601) Post
Effective Amendment No. 33.
(m) The CORPORATEplan for Retirement 100SM Profit Sharing/401(k)
Basic Plan Document, Standardized Adoption Agreement, and
Non-Standardized Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) of Fidelity
Securities Fund's (File No. 2-93601) Post Effective Amendment No. 33.
(n) The Fidelity Investments 401(a) Prototype Plan for Tax-Exempt
Employers Basic Plan Document, Standardized Profit Sharing Plan
Adoption Agreement, Non-Standardized Discretionary Contribution Plan
No. 002 Adoption Agreement, and Non-Standardized Discretionary
Contribution Plan No. 003 Adoption Agreement, as currently in effect,
is incorporated herein by reference to Exhibit 14(g) of Fidelity
Securities Fund's (File No. 2-93601) Post Effective Amendment No. 33.
(o) Fidelity Investments 403(b) Sample Plan Basic Plan Document and
Adoption Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(p) of Fidelity Securities Fund's (File No.
2-93601) Post Effective Amendment No. 33.
(p) Fidelity Defined Contribution Retirement Plan and Trust
Agreement, as currently in effect, is incorporated herein by reference
to Exhibit 14(c) of Fidelity Securities Fund's (File No. 2-93601) Post
Effective Amendment No. 33.
(q) Fidelity SIMPLE-IRAPlan Adoption Agreement, Company Profile Form,
and Plan Document, as currently in effect, is incorporated herein by
reference to Exhibit 14(q) of Fidelity Aberdeen Street Trust's (File
No. 33-43529) Post-Effective Amendment No. 19.
(15)(a) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity California Municipal Money Market Fund (formerly Fidelity
California Tax-Free Money Market Portfolio) is incorporated herein by
reference to Exhibit (15)(a) of Post-Effective Amendment No. 16.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for
Spartan California Municipal Money Market Fund (formerly Spartan
California Municipal Money Market Portfolio) is incorporated herein by
reference to Exhibit 15(b) of Post-Effective Amendment No. 16.
(16) Schedule for the the 7-day yields, tax-equivalent yields, and
total returns for Spartan California Municipal Money Market Portfolio
(currently known as Spartan California Municipal Money Market Fund) on
behalf of the trust is incorporated herein by reference to Exhibit 16
of Post-Effective No. 11.
(17) Financial Data Schedules are filed herein as Exhibit 27.
(18) Not applicable.

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
February 28, 1998
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity California Municipal
Money Market Fund 34,521
Spartan California Municipal
Money Market Fund 8,749
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
Trust Instrument 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
Trust Instrument, 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, Inc.
("Service") is appointed sub-transfer agent, the Transfer Agent agrees
to indemnify Service for Service's losses, claims, damages,
liabilities and expenses (including reasonable counsel fees and
expenses) (losses) to the extent that the Transfer Agent is entitled
to and receives indemnification from the Portfolio 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 (including reasonable
counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other
than the Registrant, including by a shareholder 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 or negligence or reckless disregard of 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
or negligence or reckless disregard of 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)
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 Board of FMR; President and Chief
Executive Officer of FMR Corp.; Chairman of the
Board and Director of FMR, FMR Corp., FIMM, FMR
(U.K.) Inc., and FMR (Far East) Inc.; Chairman of the
Board and Representative Director of Fidelity
Investments Japan Limited; President and Trustee of
funds advised by FMR.

Robert C. Pozen President and Director of FMR; Senior Vice President
and Trustee of funds advised by FMR; President and
Director of FIMM, FMR (U.K.) Inc., and FMR (Far
East) Inc.; Previously, General Counsel, Managing
Director, and Senior Vice President of FMR Corp.

Peter S. Lynch Vice Chairman of the Board and Director of FMR.

Marta Amieva Vice President of FMR.

John H. Carlson Vice President of FMR and of funds advised by FMR.

Dwight D. Churchill Senior Vice President of FMR and Vice President of
Bond Funds advised by FMR.

Barry Coffman Vice President of FMR.

Arieh Coll Vice President of FMR.

Stephen G. Manning Assistant Treasurer of FMR.

William Danoff Senior Vice President of FMR and Vice President of a
fund advised by FMR.

Scott E. DeSano Vice President of FMR.

Penelope Dobkin Vice President of FMR and of a fund advised by FMR.

George C. Domolky Vice President of FMR.

Walter C. Donovan Vice President of FMR.

Bettina Doulton Vice President of FMR and of funds advised by FMR.

Margaret L. Eagle Vice President of FMR and of funds advised by FMR.

William R. Ebsworth Vice President of FMR.

Richard B. Fentin Senior Vice President of FMR and Vice President of a
fund advised by FMR.

Gregory Fraser Vice President of FMR and of a fund advised by FMR.

Jay Freedman Assistant Clerk of FMR; Clerk of FMR Corp., FMR
(U.K.) Inc., and FMR (Far East) Inc.; Secretary of
FIMM.

Robert Gervis Vice President of FMR.

David L. Glancy Vice President of FMR and of a fund advised by FMR.

Kevin E. Grant Vice President of FMR and of funds advised by FMR.

Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.

Boyce I. Greer Senior Vice President of FMR and Vice President of
Money Market Funds advised by FMR.

Bart A. Grenier Vice President of High-Income Funds advised by
FMR;Vice President of FMR.

Robert Haber Vice President of FMR.

Richard C. Habermann Senior Vice President of FMR; Vice President of funds
advised by FMR.

Richard Hazelwood Vice President of FMR.

Fred L. Henning Jr. Senior Vice President of FMR and Vice President of
Fixed-Income funds advised by FMR.

Bruce T. Herring Vice President of FMR.

John R. Hickling Vice President of FMR and of a fund advised by FMR.

Robert F. Hill Vice President of FMR; Director of Technical Research.

Curt Hollingsworth Vice President of FMR and of funds advised by FMR.

Abigail P. Johnson Senior Vice President of FMR and Vice President of
funds advised by FMR; Associate Director and Senior
Vice President of Equity funds advised by FMR.

David B. Jones Vice President of FMR.

Steven Kaye Vice President of FMR and of a fund advised by FMR.

Francis V. Knox Vice President of FMR; Compliance Officer of FMR
(U.K.) Inc.

Robert A. Lawrence Senior Vice President of FMR and Vice President of
Fidelity Real Estate High Income and Fidelity Real
Estate High income II funds advised by FMR; Associate
Director and Senior Vice President of Equity funds
advised by FMR; Previously, Vice President of High
Income funds advised by FMR.

Harris Leviton Vice President of FMR and of a fund advised by FMR.

Bradford E. Lewis Vice President of FMR and of funds advised by FMR.

Mark G. Lohr Vice President of FMR; Treasurer of FMR, FMR (U.K.)
Inc., FMR (Far East) Inc., and FIMM.

Richard R. Mace Jr. Vice President of FMR and of funds advised by FMR.

Charles A. Mangum Vice President of FMR and of a fund advised by FMR.

Kevin McCarey Vice President of FMR and of a fund advised by FMR.

Diane M. McLaughlin Vice President of FMR.

Neal P. Miller Vice President of FMR.

David L. Murphy Vice President of FMR and of funds advised by FMR.

Scott A. Orr Vice President of FMR and of funds advised by FMR.

Jacques Perold Vice President of FMR.

Anne Punzak Vice President of FMR.

Kevin A. Richardson Vice President of FMR.

Eric D. Roiter Senior Vice President and General Counsel of FMR and
Secretary of funds advised by FMR.

Mark S. Rzepczynski Vice President of FMR.

Lee H. Sandwen Vice President of FMR.

Patricia A. Satterthwaite Vice President of FMR and of a fund advised by FMR.

Fergus Shiel Vice President of FMR.

Richard A. Silver Vice President of FMR.

Carol A. Smith-Fachetti Vice President of FMR.

Steven J. Snider Vice President of FMR.

Thomas T. Soviero Vice President of FMR and of a fund advised by FMR.

Richard Spillane Senior Vice President of FMR; Associate Director and
Senior Vice President of Equity funds advised by FMR;
Previously, Senior Vice President and Director of
Operations and Compliance of FMR (U.K.) Inc.

Thomas M. Sprague Vice President of FMR and of funds advised by FMR.

Robert E. Stansky Senior Vice President of FMR and Vice President of a
fund advised by FMR.

Scott D. Stewart Vice President of FMR.

Cynthia L. Strauss Vice President of FMR.

Thomas Sweeney Vice President of FMR and of a fund advised by FMR.

Beth F. Terrana Senior Vice President of FMR and Vice President of a
fund advised by FMR.

Yoko Tilley Vice President of FMR.

Joel C. Tillinghast Vice President of FMR and of a fund advised by FMR.

Robert Tuckett Vice President of FMR.

Jennifer Uhrig Vice President of FMR and of funds advised by FMR.

George A. Vanderheiden Senior Vice President of FMR and Vice President of
funds advised by FMR.

Steven S. Wymer Vice President of FMR and of a fund advised by FMR.

</TABLE>

(2) FIDELITY INVESTMENTS MONEY MANAGEMENT, INC. (FIMM)
Fidelity Investments Money Management, Inc. 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 of the Board and Director of FIMM,
FMR, FMR Corp., FMR (Far East) Inc., and
FMR (U.K.) Inc.; Chairman of the Board of
FMR; President and Chief Executive Officer of
FMR Corp.; Chairman of the Board and
Representative Director of Fidelity Investments
Japan Limited; President and Trustee of funds
advised by FMR.

Robert C. Pozen President and Director of FMR; Senior Vice
President and Trustee of funds advised by FMR;
President and Director of FIMM, FMR (U.K.)
Inc., and FMR (Far East) Inc.; Previously,
General Counsel, Managing Director, and Senior
Vice President of FMR Corp.

Robert H. Auld Vice President of FIMM.

Robert K. Duby Vice President of FIMM and of funds advised by
FMR.

Robert Litterst Vice President of FIMM and of funds advised by
FMR.

Thomas D. Maher Vice President of FIMM and Assistant Vice
President of Money Market funds advised by
FMR.

Scott A. Orr Vice President of FIMM and of funds advised by
FMR.

Burnell R. Stehman Vice President of FIMM and of funds advised by
FMR.

John J. Todd Vice President of FIMM and of funds advised by
FMR.

Mark G. Lohr Treasurer of FIMM, FMR (U.K.) Inc., FMR (Far
East) Inc., and FMR; Previously, Vice President
of FMR.

Stephen G. Manning Assistant Treasurer of FIMM, FMR (U.K.) Inc.,
FMR (Far East) Inc., and FMR; Vice President
and Treasurer of FMR Corp.

Jay Freedman Secretary of FIMM; Clerk of FMR (U.K.) Inc.,
FMR (Far East) Inc., and FMR Corp.; Assistant
Clerk of FMR.

Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for
most funds advised by FMR.
(b)

Name and Principal Positions and Offices Positions and Offices

Business Address* With Underwriter With Registrant

Edward C. Johnson 3d Director Trustee and President

Michael Mlinac Director None

James Curvey Director None

Martha B. Willis President None

Eric D. Roiter Senior Vice President Secretary

Caron Ketchum Treasurer and Controller None

Gary Greenstein Assistant Treasurer None

Jay Freedman Assistant Clerk None

Linda Holland Compliance Officer None

* 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 Company, Inc., 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. 17 to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and Commonwealth of
Massachusetts, on the 13th day of April 1998.
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)

/s/Edward C. Johnson(dagger) President and Trustee April 13, 1998

Edward C. Johnson 3d (Principal Executive Officer)

/s/Richard A. Silver Treasurer April 13, 1998

Richard A. Silver

/s/Robert C. Pozen Trustee April 13, 1998

Robert C. Pozen

/s/Ralph F. Cox* Trustee April 13, 1998

Ralph F. Cox

/s/Phyllis Burke Davis* Trustee April 13, 1998

Phyllis Burke Davis

/s/Robert M. Gates** Trustee April 13, 1998

Robert M. Gates

/s/E. Bradley Jones* Trustee April 13, 1998

E. Bradley Jones

/s/Donald J. Kirk* Trustee April 13, 1998

Donald J. Kirk

/s/Peter S. Lynch* Trustee April 13, 1998

Peter S. Lynch

/s/Marvin L. Mann* Trustee April 13, 1998

Marvin L. Mann

/s/William O. McCoy* Trustee April 13, 1998

William O. McCoy

/s/Gerald C. McDonough* Trustee April 13, 1998

Gerald C. McDonough

/s/Thomas R. Williams* Trustee April 13, 1998

Thomas R. Williams

(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of
attorney dated July 17, 1997 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated December 19, 1996 and filed herewith.
** Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated March 6, 1997 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>
Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional Cash Portfolios
Fidelity Advisor Series III Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series IV Fidelity Investment Trust
Fidelity Advisor Series V Fidelity Magellan Fund
Fidelity Advisor Series VI Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series VII Fidelity Money Market Trust
Fidelity Advisor Series VIII Fidelity Mt. Vernon Street Trust
Fidelity Beacon Street Trust Fidelity Municipal Trust
Fidelity Boston Street Trust Fidelity Municipal Trust II
Fidelity California Municipal Trust Fidelity New York Municipal Trust
Fidelity California Municipal Trust II Fidelity New York Municipal Trust II
Fidelity Capital Trust Fidelity Phillips Street Trust
Fidelity Charles Street Trust Fidelity Puritan Trust
Fidelity Commonwealth Trust Fidelity Revere Street Trust
Fidelity Concord Street Trust Fidelity School Street Trust
Fidelity Congress Street Fund Fidelity Securities Fund
Fidelity Contrafund Fidelity Select Portfolios
Fidelity Corporate Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Court Street Trust Fidelity Summer Street Trust
Fidelity Court Street Trust II Fidelity Trend Fund
Fidelity Covington Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Daily Money Fund Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Union Street Trust II
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Newbury Street Trust
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund Variable Insurance Products Fund III
Fidelity Hastings Street Trust

</TABLE>

in addition to any other investment company for which Fidelity
Management & Research Company or an affiliate acts as investment
adviser and for which the undersigned individual serves as President
and Director, Trustee, or General Partner (collectively, the "Funds"),
hereby constitute and appoint Robert C. Pozen my true and lawful
attorney-in-fact, with full power of substitution, and with full power
to him to sign for me and in my name in the appropriate capacity, all
Registration Statements of the Funds on Form N-1A, Form N-8A, or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A, Form N-8A, 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 on my behalf in connection therewith as said
attorney-in-fact deems necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and the Investment Company
Act of 1940, and all related requirements of the Securities and
Exchange Commission. I hereby ratify and confirm all that said
attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof. This power of attorney is effective for all documents
filed on or after August 1, 1997.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d_ July 17, 1997

Edward C. Johnson 3d

POWER OF ATTORNEY
I, the undersigned Director, Trustee, or General Partner, as the case
may be, of the following investment companies:

<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II

</TABLE>

plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to
sign for me and in my name in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, 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 the 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. This power
of attorney is effective for all documents filed on or after March 1,
1997.
WITNESS my hand on the date set forth below.
/s/Robert M. Gates March 6, 1997

Robert M. Gates

POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the
case may be, of the following investment companies:

</TABLE>

plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Directors, Trustees, or
General Partners (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, our true and lawful attorneys-in-fact,
with full power of substitution, and with full power to each of them,
to sign for us and in our names in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, 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 our names
and behalf in connection therewith as said attorneys-in-fact deems
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the 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. This power
of attorney is effective for all documents filed on or after January
1, 1997.
WITNESS our hands on this nineteenth day of December, 1996.

/s/Edward C. Johnson 3d___________ /s/Peter S. Lynch________________

Edward C. Johnson 3d Peter S. Lynch

/s/J. Gary Burkhead_______________ /s/William O. McCoy______________

J. Gary Burkhead William O. McCoy

/s/Ralph F. Cox __________________ /s/Gerald C. McDonough___________

Ralph F. Cox Gerald C. McDonough

/s/Phyllis Burke Davis_____________ /s/Marvin L. Mann________________

Phyllis Burke Davis Marvin L. Mann

/s/E. Bradley Jones________________ /s/Thomas R. Williams ____________

E. Bradley Jones Thomas R. Williams

/s/Donald J. Kirk __________________

Donald J. Kirk

CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the
Prospectus and Statement of Additional Information in Post-Effective
Amendment No. 17 to the Registration Statement on Form N-1A of
Fidelity California Municipal Trust II: Fidelity California Municipal
Money Market Fund and Spartan California Municipal Money Market Fund,
of our report dated April 3, 1998 on the financial statements and
financial highlights included in the February 28, 1998 Annual Report
to Shareholders of Spartan California Municipal Income Fund (formerly
Fidelity California Municipal Income Fund), Fidelity California
Municipal Money Market Fund and Spartan California Municipal Money
Market Fund.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectus and "Auditor" in the
Statement of Additional Information.
/s/Price Waterhouse LLP
Price
Waterhouse LLP
Boston, Massachusetts
April 13, 1998

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