-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, nsOfP2HJDSFltdyHXPd8TxWQoF4iC4gwtHAyHY2k7689IsSBXXXQi/CDFe12KiMO I6RtO6/vpoIlLLynJFOCow== 0000718891-94-000007.txt : 19940414 0000718891-94-000007.hdr.sgml : 19940414 ACCESSION NUMBER: 0000718891-94-000007 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19940413 EFFECTIVENESS DATE: 19940418 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY CALIFORNIA MUNICIPAL TRUST CENTRAL INDEX KEY: 0000718891 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-83367 FILM NUMBER: 94522529 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 2142816360 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MAILZONE ZZ2 CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: FIDELITY CALIFORNIA TAX FREE FUND DATE OF NAME CHANGE: 19900618 FORMER COMPANY: FORMER CONFORMED NAME: FIDELITY CALIFORNIA TAX EXEMPT MONEY MARKET TRUST DATE OF NAME CHANGE: 19840408 485BPOS 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM N-1A REGISTRATION STATEMENT (No. 2-83367) UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. [ ] Post-Effective Amendment No. 26 [x] and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x] Amendment No. [ ] Fidelity California Municipal Trust (Exact Name of Registrant as Specified in Declaration of Trust) 82 Devonshire St., Boston, MA 02109 (Address Of Principal Executive Offices) (Zip Code) Registrant's Telephone Number (617) 570-7000 Arthur S. Loring, Esq. 82 Devonshire Street Boston, MA 02109 (Name and Address of Agent for Service) It is proposed that this filing will become effective: [ ] Immediately upon filing pursuant to paragraph (b) of Rule 485 [x] On April 18, 1994 pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a) of Rule 485 [ ] On ( ) pursuant to paragraph (a) of Rule 485 Registrant has filed a declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940 and intends to file the notice required by such Rule before April 30, 1994. FIDELITY CALIFORNIA TAX-FREE FUNDS: FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO FIDLEITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO CROSS REFERENCE SHEET FORM N-1A ITEM NUMBER PROSPECTUS SECTION
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 .............................. Performance 4 a i............................. Charter ii........................... The Funds at a Glance; Investment Principles and Risks; Fundamental Investment Policies and Restrictions b .............................. Investment Principles and Risks c .............................. Who May Want to Invest; Investment Principles and Risks 5 a .............................. Charter b i............................. Doing Business with Fidelity; Charter ii........................... Charter iii.......................... Expenses; Breakdown of Expenses c .............................. Charter d .............................. Charter; Breakdown of Expenses e .............................. Charter f .............................. Expenses g .............................. * 5 A .............................. Performance 6 a i............................. Charter ii........................... How to Buy Shares; How to Sell Shares; Exchange Restrictions; Transaction Details iii.......................... Charter b ............................. * c .............................. Exchange Restrictions; Transaction Details d .............................. * e .............................. Doing Business with Fidelity; How to Buy Shares; How to Sell Shares; Investor Services f, g .............................. Dividends, Capital Gains, and Taxes 7 a .............................. Charter; Cover Page b .............................. 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 .............................. *
* Not Applicable CROSS REFERENCE SHEET (CONTINUED) FORM N-1A ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION
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 ii ............................ Trustees and Officers iii ............................ Management Contracts b ............................ Management Contracts c, d ............................ Interest of FMR Affiliates e ............................ Management Contracts f ............................ Distribution and Service Plans g ............................ * h ............................ Description of the Trusts i ............................ Interest of FMR Affiliates 17 a - c ............................ Portfolio Transactions d, e ............................ * 18 a ............................ Description of the Trusts b ............................ * 19 a ............................ Additional Purchase and Redemption Information b ............................ Additional Purchase and Redemption Information; Valuation of Portfolio Securities c ............................ * 20 ............................ Distributions and Taxes 21 a, b ............................ Interest of FMR Affiliates c ............................ * 22 ............................ Performance 23 ............................ Financial Statements
* 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. A Statement of Additional Information dated April 18, 1994 has been filed with the Securities and Exchange Commission, and is incorporated herein by reference (is legally considered a part of this prospectus). The Statement of Additional Information is available free upon request by calling Fidelity at 1-800-544-8888. Investments in the money market fund are neither insured nor guaranteed by the U.S. government, and there can be no assurance that the fund will maintain a stable $1.00 share price. Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, the Federal Reserve Board, or any other agency, and are subject to investment risk, including the possible loss of principal. Each of these funds seeks a high level of current income free from federal income tax and California state personal income tax. The funds have different strategies, however, and carry varying degrees of risk. FIDELITY CALIFORNIA TAX-FREE FUNDS FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO PROSPECTUS APRIL 18, 1994(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109 LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. CFR-pro-494 CONTENTS KEY FACTS THE FUNDS AT A GLANCE WHO MAY WANT TO INVEST EXPENSES Each fund's yearly operating expenses. FINANCIAL HIGHLIGHTS A summary of each fund's financial data. PERFORMANCE How each fund has done over time. THE FUNDS IN DETAIL CHARTER How each fund is organized. INVESTMENT PRINCIPLES AND RISKS Each fund's overall approach to investing. BREAKDOWN OF EXPENSES How operating costs are calculated and what they include. YOUR ACCOUNT DOING BUSINESS WITH FIDELITY TYPES OF ACCOUNTS Different ways to set up your account. HOW TO BUY SHARES Opening an account and making additional investments. HOW TO SELL SHARES Taking money out and closing your account. INVESTOR SERVICES Services to help you manage your account. SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND ACCOUNT POLICIES TAXES TRANSACTION DETAILS Share price calculations and the timing of purchases and redemptions. EXCHANGE RESTRICTIONS <r>KEY FACTS</r> THE FUNDS AT A GLANCE MANAGEMENT: Fidelity Management & Research Company (FMR) is the management arm of Fidelity Investments, which was established in 1946 and is now America's largest mutual fund manager. FMR Texas Inc. (FTX), a subsidiary of FMR, chooses investments for California Tax-Free Money Market. As with any mutual fund, there is no assurance that a fund will achieve its goal. CALIFORNIA MONEY MARKET GOAL: High current tax-free income for California residents while maintaining a stable share price. STRATEGY: Invests in high-quality, short-term securities whose interest is free from federal income tax and California personal income tax. CALIFORNIA INSURED GOAL: High current tax-free income for California residents. STRATEGY: Invests mainly in long-term securities that are covered by insurance guaranteeing the timely payment of principal and interest, and whose interest is free from federal income tax and California personal income tax. CALIFORNIA HIGH YIELD GOAL: High current tax-free income for California residents. STRATEGY: Invests mainly in long-term investment-grade securities whose interest is free from federal income tax and California personal income tax. WHO MAY WANT TO INVEST These non-diversified funds may be appropriate for investors in higher tax brackets who seek high current income that is free from federal and California income taxes. Each fund's level of risk, and potential reward, depend on the quality and maturity of its investments. Lower-quality and longer-term investments typically carry higher risk and yield potential. Insurance, which covers the timely payment of interest and principal, provides a high degree of credit quality. However, its cost lowers the fund's yield. You should consider your tolerance for risk when making an investment decision. The value of the funds' investments and the income they generate will vary from day to day, generally reflecting changes in interest rates, market conditions, and other federal and state political and economic news. By themselves, these funds do not constitute a balanced investment plan. California Tax-Free Money Market is managed to keep its share price stable at $1.00. When you sell your shares of either of the other funds, they may be worth more or less than what you paid for them. EXPENSES SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell shares of a fund. Maximum sales charge on purchases and reinvested dividends None Deferred sales charge on redemptions None Exchange fee None ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each fund pays a management fee to FMR. It also incurs other expenses for services such as maintaining shareholder records and furnishing shareholder statements and financial reports. A fund's expenses are factored into its share price or dividends and are not charged directly to shareholder accounts (see page ). The following are projections based on historical expenses adjusted to reflect current fees , and are calculated as a percentage of average net assets. CALIFORNIA MONEY MARKET Management fee .41 % 12b-1 fee None Other expenses .23 % Total fund operating expenses .64 % CALIFORNIA INSURED Management fee .41 % 12b-1 fee None Other expenses .19 % Total fund operating expenses .60 % CALIFORNIA HIGH YIELD Management fee .41 % 12b-1 fee None Other expenses .16 % Total fund operating expenses .57 % EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5% and that its operating expenses are exactly as just described. For every $1,000 you invested, here's how much you would pay in total expenses if you close your account after the number of years indicated: After 1 After 3 After 5 After 10 year years years years California Money Market $7 $20 $36 $80 California Insured $6 $19 $33 $75 California High Yield $6 $18 $32 $71 These examples illustrate the effect of expenses, but are not meant to suggest actual or expected costs or returns, all of which may vary. FINANCIAL HIGHLIGHTS The tables that follow have been audited by Price Waterhouse, independent accountants. Their unqualified reports are included in the funds' Annual Report. The funds' Annual Report is incorporated by reference into (is legally a part of) the Statement of Additional Information. CALIFORNIA TAX-FREE MONEY MARKET
1.Selected Per-Share Data and Ratios 2.Years 1985C 1986D 1987D 1988D 1989D 1990D 1991D 1992D 1993E 1994 e nded February 28 3.Net asset $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 value, 0 0 0 0 0 0 0 0 0 0 beginning of period 4.Income .046 .048 .038 .042 .052 .054 .047 .035 .019 .020 from Investment Operations Net interest income 5. Dividend (.046) (.048) (.038) (.042) (.052) (.054) (.047) (.035) (.019) (.020) s from net interest income 6.Net asset $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 value, 0 0 0 0 0 0 0 0 0 0 end of period 7.Total 4.48% 4.95% 3.88 % 4.27% 5.36% 5.53% 4.85% 3.59% 1.92% 1.97% r eturnB 8.Net assets, $ 21,91 $ 120,5 $ 413,4 $ 546,5 $ 735,6 $ 623,7 $ 538,7 $ 556,5 $ 568,2 $ 611,7 end of period 5 94 98 53 23 48 91 16 80 65 (000 omitted) 9.Ratio of .30%A .60% .60% .58% .53% .60% .61% .63% .62%A .64% expenses to average net assetsF 10.Ratios of 1.50% .79% .67% .62% .65% .60% .61% .63% .62%A .64% expenses to A average net assets before expense reductions F 11.Ratio of 5.62% 4.92% 3.84% 4.17% 5.31% 5.42% 4.75% 3.50% 2.29% 1.95% net interest A A income to average net assets
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C FROM JULY 7, 1984 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1985 D YEARS ENDED APRIL 30 E MAY 1, 1992 TO FEBRUARY 28, 1993 F DURING THE PERIODS SHOWN, FMR VOLUNTARILY REIMBURSED THE FUND FOR CERTAIN EXPENSES. CALIFORNIA TAX-FREE INSURED 12.Selected Per-Share Data and Ratios
13.Years e nded 1987C 1988D 1989D 1990D 1991D 1992D 1993 E 1994 February 28 14.Net asset $ 10.00 $ 9.280 $ 9.200 $ 9.590 $ 9.370 $ 9.740 $ 10.10 $ 11.030 value, beginning of 0 0 period 15.Income from .373 .611 .610 .618 .605 .603 .492 .589 Investment Operations Net interest income 16. Net realized (.720) (.080) .390 (.220) .370 .360 .930 (.090) and unrealized gain (loss) on investments 17. Total from (.347) .531 1.000 .398 .975 .963 1.422 .499 investment operations 18.Less (. 373 ) (.611) (.610) (.618) (.605) (.603) (.492) (.589) Distributions From net interest income 19. From net -- -- -- -- -- -- -- (.200) realized gain on investments 20. Total (. 373 ) (.611) (.610) (.618) (.605) (.603) (.492) (.789) distributions 21.Net asset $ 9.280 $ 9.200 $ 9.590 $ 9.370 $ 9.740 $ 10.10 $ 11.03 $ 10.740 value, end of 0 0 period 22.Total r eturnB (3.69) 5.97% 11.20% 4.15% 10.67% 10.14% 14.48% 4.59% % 23.Net assets, end $ 35,24 $ 42,84 $ 69,35 $ 87,43 $ 113,7 $ 177,7 $ 274,8 $ 291,76 of period (000 7 7 0 8 11 63 72 0 omitted) 24.Ratio of .45%A .65% .83% .75% .72% .66% .63%A .48% expenses to average net assets F 25.Ratio of 1.12%A .88% .83% .75% .72% .66% .63%A .60% expenses to average net assets before expense reductions F 26.Ratio of net 6.27%A 6.70% 6.54% 6.38% 6.30% 6.06% 5.72%A 5.31% interest income to average net assets 27.Portfolio 28%A 76% 32% 10% 14% 19% 27%A 60% turnover rate
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C FROM SEPTEMBER 18, 1986 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1987 D YEARS ENDED APRIL 30 E MAY 1, 1992 TO FEBRUARY 28, 1993 F DURING THE PERIODS SHOWN, FMR VOLUNTARILY REIMBURSED THE FUND FOR CERTAIN EXPENSES. CALIFORNIA TAX-FREE HIGH YIELD 28.Selected Per-Share Data
29.Years 1985 C 1986 D 1987 D 1988 D 1989 D 1990 D 1991 D 1992 D 1993 E 1994 e nded February 28 30.Net asset $ 10.0 $ 10.4 $ 11.51 $ 10.9 $ 10.6 $ 11.08 $ 10.9 $ 11.30 $ 11.54 $ 12.4 value, 00 30 0 50 20 0 40 0 0 30 beginning of period 31.Income .771 .884 .782 .760 .758 .756 .752 .744 .611 .719 from Investment Operations Net interest income 32. Net .430 1.080 (.510) (.270) .460 (.140) .360 .240 .890 (.060) realized and unrealized gain (loss) on investment s 33. Total 1.201 1.964 .272 .490 1.218 .616 1.112 .984 1.501 .659 from investment operations 34.Less (.771) (.884) (. 782 )(.760) (.758) (.756) (.752) (.744) (.611) (.719) Distributions From net interest income 35. From - -- -- (.050) (.060) -- -- -- -- -- (.270) net realized gain on investments 36. Total . (.771) (.884) ( .832) (.820) (.758) (.756) (.752) (.744) (.611) (.989) distributions 37.Net asset $ 10.4 $ 11.51 $ 10.9 $ 10.6 $ 11.08 $ 10.9 $ 11.30 $ 11.54 $ 12.4 $ 12.1 value, 30 0 50 20 0 40 0 0 30 00 end of period 38.Total 12.52 19.70 2.22% 4.72% 11.85 5.61% 10.44 8.94% 13.40 5.41% r eturnB % % % % % 39.Net $ 30,2 $ 323,6 $ 460,6 $ 399,1 $ 493,9 $ 513,6 $ 523,5 $ 529,4 $ 586,7 $ 575,2 assets, end 35 32 35 86 77 82 90 45 91 89 of period (000 omitted) 40.Ratio of 1.00% .72% .68% .73% .61% .60% .58% .59% .60% A .57% expenses to A average net assets F 41.Ratio of 1.49% .72% .68% .73% .61% .60% .58% .59% .60% A .57% expenses to A average net assets before expense reductions F 42.Ratio of 9.53% 7.75% 6.68% 7.15% 7.05% 6.73% 6.71% 6.52% 6.17% 5.78% net interest A A income to average net assets 43.Portfolio 14% A 16% 46% 52% 21% 34% 15% 23% 32% A 44% turnover rate
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C FROM JULY 7, 1984 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1985 D YEARS ENDED APRIL 30 E MAY 1, 1992 TO FEBRUARY 28, 1993 F DURING THE PERIODS SHOWN, FMR VOLUNTARILY REIMBURSED THE FUND FOR CERTAIN EXPENSES. PERFORMANCE Mutual fund performance can be measured as TOTAL RETURN or YIELD. The total returns and yields that follow are based on historical fund results. Each fund's fiscal year runs from March 1 through February 28. The tables below show each fund's performance over past fiscal years compared to a measure of inflation. The charts on page 10 help you compare the yields of these funds to those of their competitors. AVERAGE ANNUAL TOTAL RETURNS Fiscal periods ended Past 1 Past 5 Life of February 28,1994 year years fund California Money MarketA 1.97% 3.78% 4.22% California InsuredB 4.59% 9.32% 7.59% California High YieldA 5.41% 9.31% 9.72% Consumer Price Index 2.52% 3.82% n/a CUMULATIVE TOTAL RETURNS Fiscal periods ended Past 1 Past 5 Life of February 28, 1994 year years fund California Money MarketA 1.97% 20.38% 49.06% California InsuredB 4.59% 56.12% 72.51% California High YieldA 5.41% 56.05% 144.91% Consumer Price Index 2.52% 20.64% n/a A FROM JULY 7, 1984 B FROM SEPTEMBER 18, 1986 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) EXPLANATION OF TERMS TOTAL RETURN is the change in value of an investment in a fund over a given period, assuming reinvestment of any dividends and capital gains. A CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that, if achieved annually, would have produced the same cumulative total return if performance had been constant over the entire period. Average annual total returns smooth out variations in performance; they are not the same as actual year-by-year results. YIELD refers to the income generated by an investment in a fund over a given period of time, expressed as an annual percentage rate. When a money market fund 's yield assumes that income earned is reinvested, it is called an EFFECTIVE YIELD. A TAX-EQUIVALENT YIELD shows what an investor would have to earn before taxes to equal a tax-free yield. Yields for the bond funds are calculated according to a standard that is required for all stock and bond funds. Because this differs from other accounting methods, the quoted yield may not equal the income actually paid to shareholders. CALIFORNIA TAX-FREE MONEY MARKET 7-day yields Percentage (%) Row: 1, Col: 1, Value: 3.23 Row: 1, Col: 2, Value: 2.69 Row: 2, Col: 1, Value: 3.18 Row: 2, Col: 2, Value: 2.62 Row: 3, Col: 1, Value: 3.55 Row: 3, Col: 2, Value: 2.97 Row: 4, Col: 1, Value: 3.8 Row: 4, Col: 2, Value: 3.07 Row: 5, Col: 1, Value: 3.69 Row: 5, Col: 2, Value: 3.0 Row: 6, Col: 1, Value: 2.83 Row: 6, Col: 2, Value: 2.46 Row: 7, Col: 1, Value: 2.53 Row: 7, Col: 2, Value: 2.14 Row: 8, Col: 1, Value: 2.48 Row: 8, Col: 2, Value: 2.15 Row: 9, Col: 1, Value: 3.03 Row: 9, Col: 2, Value: 2.67 Row: 10, Col: 1, Value: 2.43 Row: 10, Col: 2, Value: 2.13 Row: 11, Col: 1, Value: 2.52 Row: 11, Col: 2, Value: 2.16 Row: 12, Col: 1, Value: 3.21 Row: 12, Col: 2, Value: 2.69 Row: 13, Col: 1, Value: 2.13 Row: 13, Col: 2, Value: 1.81 Row: 14, Col: 1, Value: 2.24 Row: 14, Col: 2, Value: 1.87 Row: 15, Col: 1, Value: 2.49 Row: 15, Col: 2, Value: 1.96 Row: 16, Col: 1, Value: 2.51 Row: 16, Col: 2, Value: 1.98 Row: 17, Col: 1, Value: 2.8 Row: 17, Col: 2, Value: 2.13 Row: 18, Col: 1, Value: 2.33 Row: 18, Col: 2, Value: 1.79 Row: 19, Col: 1, Value: 2.49 Row: 19, Col: 2, Value: 1.86 Row: 20, Col: 1, Value: 2.56 Row: 20, Col: 2, Value: 1.97 Row: 21, Col: 1, Value: 2.71 Row: 21, Col: 2, Value: 2.16 Row: 22, Col: 1, Value: 2.45 Row: 22, Col: 2, Value: 1.95 Row: 23, Col: 1, Value: 2.41 Row: 23, Col: 2, Value: 1.91 Row: 24, Col: 1, Value: 2.69 Row: 24, Col: 2, Value: 2.13 Row: 25, Col: 1, Value: 2.22 Row: 25, Col: 2, Value: 1.71 Row: 26, Col: 1, Value: 2.47 Row: 26, Col: 2, Value: 1.93 California Tax-Free Money Market Competitive funds average 1993 1992 1994 CALIFORNIA TAX-FREE INSURED 30-day yields Percentage (%) Row: 1, Col: 1, Value: nil Row: 1, Col: 2, Value: nil Row: 2, Col: 1, Value: nil Row: 2, Col: 2, Value: nil Row: 3, Col: 1, Value: nil Row: 3, Col: 2, Value: nil Row: 4, Col: 1, Value: nil Row: 4, Col: 2, Value: nil Row: 5, Col: 1, Value: nil Row: 5, Col: 2, Value: nil Row: 6, Col: 1, Value: nil Row: 6, Col: 2, Value: nil Row: 7, Col: 1, Value: nil Row: 7, Col: 2, Value: nil Row: 8, Col: 1, Value: nil Row: 8, Col: 2, Value: nil Row: 9, Col: 1, Value: nil Row: 9, Col: 2, Value: nil Row: 10, Col: 1, Value: nil Row: 10, Col: 2, Value: nil Row: 11, Col: 1, Value: nil Row: 11, Col: 2, Value: nil Row: 12, Col: 1, Value: nil Row: 12, Col: 2, Value: nil Row: 13, Col: 1, Value: 5.649999999999999 Row: 13, Col: 2, Value: 5.78 Row: 14, Col: 1, Value: 5.7 Row: 14, Col: 2, Value: 5.68 Row: 15, Col: 1, Value: 5.8 Row: 15, Col: 2, Value: 5.77 Row: 16, Col: 1, Value: 5.84 Row: 16, Col: 2, Value: 5.819999999999999 Row: 17, Col: 1, Value: 5.83 Row: 17, Col: 2, Value: 5.81 Row: 18, Col: 1, Value: 5.59 Row: 18, Col: 2, Value: 5.38 Row: 19, Col: 1, Value: 5.159999999999999 Row: 19, Col: 2, Value: 5.24 Row: 20, Col: 1, Value: 5.33 Row: 20, Col: 2, Value: 5.35 Row: 21, Col: 1, Value: 5.4 Row: 21, Col: 2, Value: 5.319999999999999 Row: 22, Col: 1, Value: 5.71 Row: 22, Col: 2, Value: 5.56 Row: 23, Col: 1, Value: 5.58 Row: 23, Col: 2, Value: 5.37 Row: 24, Col: 1, Value: 5.38 Row: 24, Col: 2, Value: 5.19 Row: 25, Col: 1, Value: 5.21 Row: 25, Col: 2, Value: 5.23 Row: 26, Col: 1, Value: 4.63 Row: 26, Col: 2, Value: 4.74 Row: 27, Col: 1, Value: 5.04 Row: 27, Col: 2, Value: 4.619999999999999 Row: 28, Col: 1, Value: 5.05 Row: 28, Col: 2, Value: 4.859999999999999 Row: 29, Col: 1, Value: 5.05 Row: 29, Col: 2, Value: 4.85 Row: 30, Col: 1, Value: 5.02 Row: 30, Col: 2, Value: 4.6 Row: 31, Col: 1, Value: 5.109999999999999 Row: 31, Col: 2, Value: 4.64 Row: 32, Col: 1, Value: 4.73 Row: 32, Col: 2, Value: 4.51 Row: 33, Col: 1, Value: 4.64 Row: 33, Col: 2, Value: 4.34 Row: 34, Col: 1, Value: 4.659999999999999 Row: 34, Col: 2, Value: 4.29 Row: 35, Col: 1, Value: 4.87 Row: 35, Col: 2, Value: 4.64 Row: 36, Col: 1, Value: 4.81 Row: 36, Col: 2, Value: 4.5 Row: 37, Col: 1, Value: 4.72 Row: 37, Col: 2, Value: 4.319999999999999 California Tax-Free Insured Competitive funds average 1993 1992 1994 CALIFORNIA TAX-FREE HIGH YIELD 30-day yields Percentage (%) Row: 1, Col: 1, Value: nil Row: 1, Col: 2, Value: nil Row: 2, Col: 1, Value: nil Row: 2, Col: 2, Value: nil Row: 3, Col: 1, Value: nil Row: 3, Col: 2, Value: nil Row: 4, Col: 1, Value: nil Row: 4, Col: 2, Value: nil Row: 5, Col: 1, Value: nil Row: 5, Col: 2, Value: nil Row: 6, Col: 1, Value: nil Row: 6, Col: 2, Value: nil Row: 7, Col: 1, Value: nil Row: 7, Col: 2, Value: nil Row: 8, Col: 1, Value: nil Row: 8, Col: 2, Value: nil Row: 9, Col: 1, Value: nil Row: 9, Col: 2, Value: nil Row: 10, Col: 1, Value: nil Row: 10, Col: 2, Value: nil Row: 11, Col: 1, Value: nil Row: 11, Col: 2, Value: nil Row: 12, Col: 1, Value: nil Row: 12, Col: 2, Value: nil Row: 13, Col: 1, Value: 5.38 Row: 13, Col: 2, Value: 5.83 Row: 14, Col: 1, Value: 5.55 Row: 14, Col: 2, Value: 5.79 Row: 15, Col: 1, Value: 5.609999999999999 Row: 15, Col: 2, Value: 5.88 Row: 16, Col: 1, Value: 5.54 Row: 16, Col: 2, Value: 5.859999999999999 Row: 17, Col: 1, Value: 5.55 Row: 17, Col: 2, Value: 5.79 Row: 18, Col: 1, Value: 5.430000000000001 Row: 18, Col: 2, Value: 5.67 Row: 19, Col: 1, Value: 4.99 Row: 19, Col: 2, Value: 5.39 Row: 20, Col: 1, Value: 5.1 Row: 20, Col: 2, Value: 5.35 Row: 21, Col: 1, Value: 5.109999999999999 Row: 21, Col: 2, Value: 5.430000000000001 Row: 22, Col: 1, Value: 5.42 Row: 22, Col: 2, Value: 5.68 Row: 23, Col: 1, Value: 5.28 Row: 23, Col: 2, Value: 5.58 Row: 24, Col: 1, Value: 5.2 Row: 24, Col: 2, Value: 5.49 Row: 25, Col: 1, Value: 5.149999999999999 Row: 25, Col: 2, Value: 5.39 Row: 26, Col: 1, Value: 4.76 Row: 26, Col: 2, Value: 5.14 Row: 27, Col: 1, Value: 4.77 Row: 27, Col: 2, Value: 4.99 Row: 28, Col: 1, Value: 4.81 Row: 28, Col: 2, Value: 4.99 Row: 29, Col: 1, Value: 4.859999999999999 Row: 29, Col: 2, Value: 4.96 Row: 30, Col: 1, Value: 4.84 Row: 30, Col: 2, Value: 4.91 Row: 31, Col: 1, Value: 5.0 Row: 31, Col: 2, Value: 4.9 Row: 32, Col: 1, Value: 4.930000000000001 Row: 32, Col: 2, Value: 4.78 Row: 33, Col: 1, Value: 4.75 Row: 33, Col: 2, Value: 4.59 Row: 34, Col: 1, Value: 4.75 Row: 34, Col: 2, Value: 4.52 Row: 35, Col: 1, Value: 4.96 Row: 35, Col: 2, Value: 4.659999999999999 Row: 36, Col: 1, Value: 4.88 Row: 36, Col: 2, Value: 4.63 Row: 37, Col: 1, Value: 4.8 Row: 37, Col: 2, Value: 4.5 California Tax-Free High Yield Competitive funds average 1993 1992 1994 THE TOP CHART SHOWS THE 7-DAY EFFECTIVE YIELD S FOR THE FUND AND ITS COMPETITIVE FUNDS AVERAGE AS OF THE LAST TUESDAY OF EACH MONTH FROM JANUARY 1992 THROUGH FEBRUARY 1994. THE BOTTOM CHARTS SHOW THE 30-DAY ANNUALIZED NET YIELDS FOR THE FUNDS AND THEIR COMPETITIVE FUNDS AVERAGE AS OF THE LAST DAY OF EACH MONTH DURING THE SAME PERIOD. YIELDS FOR CALIFORNIA TAX-FREE INSURED WOULD HAVE BEEN LOWER IF FIDELITY HAD NOT REIMBURSED CERTAIN FUND EXPENSES. THE CONSUMER PRICE INDEX is a widely recognized measure of inflation calculated by the U.S. government. THE COMPETITIVE FUNDS AVERAGES for California Tax-Free Money Market are calculated based on the IBC Donoghue's Money Fund Averages(TRADEMARK)/All Tax-Free /State Specifc category, which currently reflects the performance of over 140 mutual funds with similar objectives. These averages are published in the MONEY FUND REPORT(Registered trademark) by IBC USA (Publications), Inc. The competitive funds averages for the bond funds are published by Lipper Analytical Services, Inc. California Tax-Free Insured and California Tax-Free High Yield compare their performance to the Lipper California Insured Funds category and the Lipper California Municipal Funds category, respectively, which currently reflects the performance of over 1 5 and 7 0 mutual funds with similar objectives, respectively. All of these averages assume reinvestment of distributions. 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. <r>THE FUNDS IN DETAIL</r> CHARTER EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money and invests it toward a specified goal. In technical terms, California Tax-Free Money Market is currently a non-diversified fund of Fidelity California Municipal Trust II, and California Tax-Free Insured and California Tax-Free High Yield are currently non-diversified funds of Fidelity California Municipal Trust. Both trusts are open-end management investment companies. Fidelity California Municipal Trust II was organized as a Delaware business trust on June 20, 1991. Fidelity California Municipal Trust was organized as a Massachusetts business trust on April 28, 1983. There is a remote possibility that one fund might become liable for a misstatement in the prospectus about another fund. EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for protecting the interests of shareholders. The trustees are experienced executives who meet throughout the year to oversee the funds' activities, review contractual arrangements with companies that provide services to the funds, and review performance. The majority of trustees are not otherwise affiliated with Fidelity. THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings may be called to elect or remove trustees, change fundamental policies, approve a management contract, or for other purposes. Shareholders not attending these meetings are encouraged to vote by proxy. Fidelity will mail proxy materials in advance, including a voting card and information about the proposals to be voted on. For the money market fund, you are entitled to one vote for each share you own. For the bond funds, the number of votes you are entitled to is based upon the dollar value of your investment. FMR AND ITS AFFILIATES FIDELITY FACTS Fidelity offers the broadest selection of mutual funds in the world. (bullet) Number of Fidelity mutual funds: over 200 (bullet) Assets in Fidelity mutual funds: over $ 225 billion (bullet) Number of shareholder accounts: over 15 million (bullet) Number of investment analysts and portfolio managers: over 200 (checkmark) The funds are managed by FMR, which chooses their investments and handles their business affairs. FTX has primary responsibility for providing investment management services for California Tax-Free Money Market. John (Jack) Haley Jr. is vice president and manager of California Tax-Free Insured and California Tax-Free High Yield, which he has managed since 1986 and 1985, respectively. Mr. Haley also manages Advisor Limited Term Tax-Exempt and Spartan California Municipal High Yield. He joined Fidelity in 1981. Fidelity Distributors Corporation( FDC ) distributes and markets Fidelity's funds and services. Fidelity Service Co. ( FSC ) performs transfer agent servicing functions for the funds. FMR Corp. is the parent company of these organizations. Through ownership of voting common stock, Edward C. Johnson 3d (President and a trustee of the trusts), Johnson family members, and various trusts for the benefit of the Johnson family form a controlling group with respect to FMR Corp. United Missouri Bank, N.A., is each fund's transfer agent, although it employs FSC to perform these functions for the funds. It is located at 1010 Grand Avenue, Kansas City, Missouri. To carry out the funds' transactions, FMR may use its broker-dealer affiliates and other firms that sell fund shares, provided that a fund receives services and commission rates comparable to those of other broker-dealers. INVESTMENT PRINCIPLES AND RISKS CALIFORNIA TAX-FREE MONEY MARKET seeks high current income that is free from federal income tax and California personal income tax while maintaining a stable $1.00 share price by investing in high-quality, short-term municipal securities of all types. As a result, when you sell your shares, they should be worth the same amount as when you bought them. Of course, there is no guarantee that the fund will maintain a stable $1.00 share price. FMR normally invests at least 65% of the fund's total assets in state tax-free securities, and normally invests so that at least 80% of the fund's income distributions are free from federal income tax. The fund follows industry-standard guidelines on the quality and maturity of its investments, which are designed to help maintain a stable $1.00 share price. The fund will purchase only high-quality securities that FMR believes present minimal credit risks and will observe maturity restrictions on securities it buys. It is possible that a major change in interest rates or a default on the fund's investments could cause its share price (and the value of your investment) to change. CALIFORNIA TAX-FREE INSURED seeks high current income that is free from federal income tax and California personal income tax by investing primarily in municipal securities that are covered by insurance guaranteeing the timely payment of interest and principal. It is important to note, however, that the insurance does not guarantee the market value of a security or of the fund's shares. The insurance coverage is either obtained by the bond's issuer or underwriter, or purchased by the fund. FMR reviews the credit of insurance companies. The fund pays premiums for the insurance either directly or indirectly, which increases the credit safety of the fund's investments, but decreases its yield. The insurance feature provides high credit quality to the fund's portfolio, but the fund may also invest in some uninsured securities that are judged by FMR to be of investment-grade quality. The fund normally invests in long-term bonds, generally maintaining a dollar-weighted average maturity of at least 20 years, although it may invest in obligations of any maturity. FMR normally invests so that at least 80% of the fund's income distributions are free from federal and California personal income taxes. CALIFORNIA TAX-FREE HIGH YIELD seeks high current income that is free from federal income tax and California personal income tax by investing primarily in municipal securities judged by FMR to be of investment-grade quality, although it can also invest in lower-quality securities. The fund normally invests in long-term bonds, generally maintaining a dollar-weighted average maturity of at least 15 years, although it may invest in obligations of any maturity. FMR normally invests so that at least 80% of the fund's income distributions are free from federal and California personal income taxes. EACH FUND'S yield and each bond fund's share price change daily based on changes in interest rates, market conditions, other political and economic news, and on the quality and maturity of its investments. In general, bond prices rise when interest rates fall, and vice versa. This effect is usually more pronounced for longer-term securities. Lower-quality securities offer higher yields, but also carry more risk. Each fund's performance is closely tied to the economic and political conditions within the state of California, which has been in a recession since 1990. As a result, tax revenues have decreased and the state has accumulated a significant budget deficit despite cost cutting initiatives. Economic conditions within the state are expected to remain stagnant throughout 1994. If you are subject to the federal alternative minimum tax, you should note that each fund may invest a portion of its assets in municipal securities issued to finance private activities. The interest from these investments is a tax-preference item for purposes of the tax. FMR normally invests each fund's assets according to its investment strategy. The funds do not expect to invest in federally taxable obligations, and the bond funds also do not expect to invest in state taxable obligations. When FMR considers it appropriate for defensive purposes, however, it temporarily may invest substantially in short-term instruments, may hold a substantial amount of uninvested cash, or may invest more than normally permitted in taxable obligations. SECURITIES AND INVESTMENT PRACTICES The following pages contain more detailed information about types of instruments in which a fund may invest, and strategies FMR may employ in pursuit of a fund ' s investment objective. A summary of risks and restrictions associated with these instrument types and investment practices is included as well. Policies and limitations are considered at the time of purchase; the sale of instruments is not required in the event of a subsequent change in circumstances. FMR may not buy all of these instruments or use all of these techniques to the full extent permitted unless it believes that doing so will help the funds achieve their goals. As a shareholder, you will receive financial reports every six months detailing fund holdings and describing recent investment activities. DEBT SECURITIES. Bonds and other debt instruments are used by issuers to borrow money from investors. The issuer pays the investor a fixed or variable rate of interest, and must repay the amount borrowed at maturity. Some debt securities, such as zero coupon bonds, do not pay current interest, but are purchased at a discount from their face values. Debt securities have varying degrees of quality and varying levels of sensitivity to changes in interest rates. Longer-term bonds are generally more sensitive to interest rate changes than short-term bonds. Lower-quality debt securities may have speculative characteristics, and involve greater risk of default or price changes due to changes in the issuer's creditworthiness. The market prices of these securities may fluctuate more than higher-quality securities and may decline significantly in periods of general or regional economic difficulty. The table on page 16 provides a summary of ratings assigned to debt holdings (not including money market instruments) in California Tax-Free High Yield's portfolio. These figures are dollar-weighted averages of month-end portfolio holdings during fiscal 1994, and are presented as a percentage of total investments. These percentages are historical and do not necessarily indicate the fund's current or future debt holdings. CALIFORNIA TAX-FREE HIGH YIELD Fiscal 1994 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S INVESTORS SERVICE, INC. CORPORATION Rating Average A Rating Averag eA INVESTMENT GRADE Highest quality Aaa AAA High quality Aa 61.7 % AA 73.1 % Upper-medium grade A A Medium grade Baa 5.2 % BBB 7.1 % LOWER QUALITY Moderately speculative Ba 0.0 % BB 0.0 % Speculative B 0.0 % B 0.0 % Highly speculative Caa 0.0 % CCC 0.0 % Poor quality Ca 0.0 % CC 0.0 % Lowest quality, no interest C C In default, in arrears -- D 0.0 % 66.9 % 80.2 % A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S OR S&P AMOUNTED TO 11.2 %. THIS MAY INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES. FMR HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER-QUALITY ACCOUNT FOR 3.6% OF THE FUND'S TOTAL INVESTMENTS . REFER TO THE FUND'S STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS. RESTRICTIONS: California Tax-Free Insured does not currently intend to invest more than 35% of its assets in uninsured securities, and does not currently intend to invest in uninsured securities judged by FMR to be of equivalent quality to those rated below Baa by Moody's or BBB by S&P . California Tax-Free High Yield does not currently intend to invest more than one-third of its assets in bonds judged by FMR to be of equivalent quality to those rated Ba or lower by Moody's and BB or lower by S&P, and does not currently intend to invest in bonds of equivalent quality to bonds rated lower than B. The fund does not currently intend to invest in bonds rated below Caa by Moody's or CCC by S&P. MUNICIPAL SECURITIES are issued to raise money for a variety of public purposes, including general financing for state and local governments, or financing for specific projects or public facilities. Municipal securities may be issued in anticipation of future revenues, and may be backed by the full taxing power of a municipality, the revenues from a specific project, or the credit of a private organization. A security's credit may be enhanced by a bank, insurance company, or other financial institution. A fund may own a municipal security directly or through a participation interest. STATE TAX-FREE SECURITIES include municipal obligations issued by the state of California or its counties, municipalities, authorities, or other subdivisions. The ability of issuers to repay their debt can be affected by many factors that impact the economic vitality of either the state or a region within the state. Other state tax-free securities include general obligations of U.S. territories and possessions such as Guam, the Virgin Islands, and Puerto Rico, and their political subdivisions and public corporations. The economy of Puerto Rico is closely linked to the U.S. economy, and will depend on the strength of the U.S. dollar, interest rates, the price stability of oil imports, and the continued existence of favorable tax incentives. Recent legislation reduced these incentives, but it is impossible to predict what impact the changes will have. MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land, equipment, or facilities. If the municipality stops making payments or transfers its obligations to a private entity, the obligation could lose value or become taxable. PRIVATE ENTITIES may be involved in some municipal securities. For example, industrial revenue bonds are backed by private entities, and resource recovery bonds often involve private corporations. The viability of a project or tax incentives could affect the value and credit quality of these securities. ASSET-BACKED SECURITIES may include pools of purchase contracts, financing leases, or sales agreements entered into by municipalities. These securities usually rely on continued payments by a municipality, and may also be subject to prepayment risk. VARIABLE- AND FLOATING-RATE INSTRUMENTS may have interest rates that move in tandem with a benchmark, helping to stabilize their prices. Inverse floaters have interest rates that move in the opposite direction from the benchmark, making the instrument's market value more volatile. PUT FEATURES entitle the holder to put (sell back) an instrument to the issuer or a financial intermediary. In exchange for this benefit, a fund may pay periodic fees or accept a lower interest rate. Demand features, standby commitments, and tender options are types of put features. ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to increase or decrease its exposure to changing security prices, interest rates, or other factors that affect security values. These techniques may involve derivative transactions such as buying and selling options and futures contracts and purchasing indexed securities. FMR can use these practices to adjust the risk and return characteristics of a fund's portfolio of investments. If FMR judges market conditions incorrectly or employs a strategy that does not correlate well with the fund's investments, these techniques could result in a loss, regardless of whether the intent was to reduce risk or increase return. These techniques may increase the volatility of the fund and may involve a small investment of cash relative to the magnitude of the risk assumed. In addition, these techniques could result in a loss if the counterparty to the transaction does not perform as promised. WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in which payment and delivery for the securities take place at a future date. The market value of a security could change during this period, which could affect a fund's yield or the market value of its assets. 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 other securities , including illiquid 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. DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the risks of investing. This may include limiting the amount of money invested in any one issuer or, on a broader scale, in any one industry or type of project. Economic, business, or political changes can affect all securities of a similar type. A fund that is not diversified may be more sensitive to these changes, and also to changes in the market value of a single issuer or industry. RESTRICTIONS: The funds are considered non-diversified. Generally, to meet federal tax requirements at the close of each quarter, a fund does not invest more than 25% of its total assets in any one issuer and, with respect to 50% of total assets, does not invest more than 5% of its total assets in any one issuer. These limitations do not apply to U.S. government securities. A fund may invest more than 25% of its total assets in tax-free securities that finance similar types of projects. California Tax-Free Insured may invest more than 25% of its assets in bonds insured by the same insurance company. BORROWING. A fund may borrow from banks or from other funds advised by FMR, or through reverse repurchase agreements. If a bond fund borrows money, its share price may be subject to greater fluctuation until the borrowing is paid off. If the fund makes additional investments while borrowings are outstanding, this may be considered a form of leverage. RESTRICTIONS: A fund may borrow only for temporary or emergency purposes, but not in an amount exceeding 33% of its total assets. FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS Some of the policies and restrictions discussed on the preceding pages are fundamental, that is, subject to change only by shareholder approval. The following paragraphs restate all those that are fundamental. All policies stated throughout this prospectus, other than those identified in the following paragraphs, can be changed without shareholder approval. CALIFORNIA TAX-FREE MONEY MARKET seeks as high a level of current income, exempt from federal and California state personal income tax, as is consistent with the preservation of capital. The fund will normally invest so that at least 80% of its income distributions are free from federal income tax. CALIFORNIA TAX-FREE INSURED seeks as high a level of current income, exempt from federal and California state personal income tax, available from investing primarily in municipal securities that are covered by insurance guaranteeing the timely payment of principal and interest. FMR will invest the fund's assets primarily in municipal bonds that are (1) insured under an insurance policy obtained by the issuer or underwriter; or (2) insured under an insurance policy purchased by the fund. Insurance will be obtained from recognized insurers. The fund may invest in uninsured municipal obligations judged to be of quality equivalent to the four highest ratings assigned by Moody's and S&P (Baa, BBB, or better). Under normal market conditions, such uninsured obligations may not exceed 35% of the fund's assets. The fund will normally invest so that at least 80% of its income distributions are exempt from federal and California state personal income taxes. During periods when FMR believes that California municipals that meet the fund's standards are not available, the fund may temporarily invest more than 20% of its assets in obligations that are only federally tax-exempt. CALIFORNIA TAX-FREE HIGH YIELD seeks as high a level of current income, exempt from federal and California state personal income tax, available from investing primarily in municipal securities judged by FMR to be of investment-grade quality. The fund may invest up to one-third of its assets in lower-quality bonds, but may not purchase bonds that are judged by FMR to be equivalent quality to those rated lower than B. The fund will normally invest so that at least 80% of its income distributions are exempt from federal and California state personal income taxes. During periods when FMR believes that California municipals that meet the fund's standards are not available, the fund may temporarily invest more than 20% of its assets in obligations that are only federally tax-exempt. EACH FUND may borrow only for temporary or emergency purposes, but not in an amount exceeding 33% of its total assets. BREAKDOWN OF EXPENSES Like all mutual funds, the funds pay fees related to their daily operations. Expenses paid out of a fund's assets are reflected in its share price or dividends; they are neither billed directly to shareholders nor deducted from shareholder accounts. Each fund pays a MANAGEMENT FEE to FMR for managing its investments and business affairs. FMR in turn pays fees to an affiliate who provides assistance with these services for California Tax-Free Money Market. Each fund also pays OTHER EXPENSES, which are explained on page . FMR may, from time to time, agree to reimburse the funds for management fees and other expenses above a specified limit. FMR retains the ability to be repaid by a fund if expenses fall below the specified limit prior to the end of the fiscal year. Reimbursement arrangements, which may be terminated at any time without notice, can decrease a fund's expenses and boost its performance. MANAGEMENT FEE The management fee is calculated and paid to FMR every month. The fee is calculated by adding a group fee rate to an individual fund fee rate, and multiplying the result by the fund's average net assets. The group fee rate is based on the average net assets of all the mutual funds advised by FMR. This rate cannot rise above .37%, and it drops as total assets under management increase. For February 1994, the group fee rate was .1604 %. Each fund's individual fund fee rate is .25%. However, because of a reimbursement arrangement, the total management fee rate for fiscal 1994 was .30 % for California Tax-Free Insured. The total management fee rate for fiscal 1994 was .41% for both California Tax-Free Money Market and California Tax-Free High Yield. FMR HAS A SUB-ADVISORY AGREEMENT with FTX, which has primary responsibility for providing investment management for California Tax-Free Money Market, while FMR retains responsibility for providing other management services. FMR pays FTX 50% of its management fee (before expense reimbursements) for these services. OTHER EXPENSES While the management fee is a significant component of the funds' annual operating costs, the funds have other expenses as well. FSC performs many transaction and accounting functions. These services include processing shareholder transactions, valuing each fund's investments, and handling securities loans. In fiscal 1994, FSC received fees equal to .21 %, .16 %, and .14 %, respectively, of California Tax-Free Money Market's, California Tax-Free Insured 's, and California Tax-Free High Yield's average net assets. The funds also pay other expenses, such as legal, audit, and custodian fees; proxy solicitation costs; and the compensation of trustees who are not affiliated with Fidelity. Each fund has adopted a Distribution and Service Plan. These plans recognize that FMR may use its resources, including management fees, to pay expenses associated with the sale of fund shares. This may include payments to third parties, such as banks or broker-dealers, that provide shareholder support services or engage in the sale of the fund's shares. It is important to note, however, that the funds do not pay FMR any separate fees for this service. For fiscal 1994, the portfolio turnover rates for California Tax-Free Insured and California Tax-Free High Yield were 60 % and 44 %, respectively. These rates vary from year to year. YOUR ACCOUNT DOING BUSINESS WITH FIDELITY Fidelity Investments was established in 1946 to manage one of America's first mutual funds. Today, Fidelity is the largest mutual fund company in the country, and is known as an innovative provider of high-quality financial services to individuals and institutions. In addition to its mutual fund business, the company operates one of America's leading discount brokerage firms, Fidelity Brokerage Services, Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered retirement plans for individuals investing on their own or through their employer. Fidelity is committed to providing investors with practical information to make investment decisions. Based in Boston, Fidelity provides customers with complete service 24 hours a day, 365 days a year, through a network of telephone service centers around the country. To reach Fidelity for general information, call these numbers: (bullet) For mutual funds, 1-800-544-8888 (bullet) For brokerage, 1-800-544-7272 If you would prefer to speak with a representative in person, Fidelity has over 75 walk-in Investor Centers across the country. TYPES OF ACCOUNTS You may set up an account directly in a fund or, if you own or intend to purchase individual securities as part of your total investment portfolio, you may consider investing in a fund through a brokerage account. You can choose California Tax-Free Money Market as your core account for your Fidelity Ultra Service Account(Registered trademark) or FidelityPlusSM brokerage account. If you are investing through FBSI or another financial institution or investment professional, refer to its program materials for any special provisions regarding your investment in the fund. The different ways to set up (register) your account with Fidelity are listed below. WAYS TO SET UP YOUR ACCOUNT INDIVIDUAL OR JOINT TENANT FOR YOUR GENERAL INVESTMENT NEEDS Individual accounts are owned by one person. Joint accounts can have two or more owners (tenants). GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS These custodial accounts provide a way to give money to a child and obtain tax benefits. An individual can give up to $10,000 a year per child without paying federal gift tax. Depending on state laws, you can set up a custodial account under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). TRUST FOR MONEY BEING INVESTED BY A TRUST The trust must be established before an account can be opened. BUSINESS OR ORGANIZATION FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER GROUPS Requires a special application. HOW TO BUY SHARES EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every business day. California Tax-Free Money Market is managed to keep its share price stable at $1.00. Each fund's shares are sold without a sales charge. Shares are purchased at the next share price calculated after your investment is received and accepted. Share price is normally calculated at 4 p.m. Eastern time. IF YOU ARE NEW TO FIDELITY, complete and sign an account application and mail it along with your check. You may also open your account in person or by wire as described on page . If there is no application accompanying this prospectus, call 1-800-544-8888. IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can: (bullet) Mail in an application with a check, or (bullet) Open your account by exchanging from another Fidelity fund. If you buy shares by check or Fidelity Money Line(Registered trademark), and then sell those shares by any method other than by exchange to another Fidelity fund, the payment may be delayed for up to seven business days to ensure that your previous investment has cleared. MINIMUM INVESTMENTS TO OPEN AN ACCOUNT $2,500 For California Tax-Free Money $5,000 TO ADD TO AN ACCOUNT $250 Through automatic investment plans $100 MINIMUM BALANCE $1,000
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another Fidelity fund account Fidelity fund account with the same with the same registration, including registration, including name, address, and name, address, and taxpayer ID number. taxpayer ID number. (bullet) Use Fidelity Money Line to transfer from your bank account. Call before your first use to verify that this service is in place on your account. Maximum Money Line: $50,000.
Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check application. Make your payable to the complete check payable to the name of the fund. complete name of the Indicate your fund fund of your choice. account number on Mail to the address your check and mail to indicated on the the address printed on application. your account statement. (bullet) Exchange by mail: call 1-800-544-6666 for instructions.
In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a and check to a Fidelity Fidelity Investor Center. Investor Center. Call Call 1-800-544-9797 for 1-800-544-9797 for the the center nearest you. center nearest you.
Wire (wire_graphic) (bullet) Call 1-800-544-7777 to (bullet) Wire to: set up your account Bankers Trust and to arrange a wire Company, transaction. Bank Routing (bullet) Wire within 24 hours to: #021001033, Bankers Trust Account #00163053. Company, Specify the complete Bank Routing name of the fund and #021001033, include your account Account #00163053. number and your Specify the complete name. name of the fund and include your new account number and your name.
Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic Account Builder. Sign up for this service when opening your account, or call 1-800-544-6666 to add it.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
HOW TO SELL SHARES You can arrange to take money out of your fund account at any time by selling (redeeming) some or all of your shares. Your shares will be sold at the next share price calculated after your order is received and accepted. Share price is normally calculated at 4 p.m. Eastern time. TO SELL SHARES THROUGH YOUR FIDELITY ULTRA SERVICE OR FIDELITY PLUS ACCOUNT, call 1-800-544-6262 to receive a handbook with instructions. IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000 worth of shares in the account to keep it open. TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign up for these services in advance. CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to protect you and Fidelity from fraud. Your request must be made in writing and include a signature guarantee if any of the following situations apply: (bullet) You wish to redeem more than $100,000 worth of shares, (bullet) Your account registration has changed within the last 30 days, (bullet) The check is being mailed to a different address than the one on your account (record address), (bullet) The check is being made payable to someone other than the account owner, or (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: (bullet) Your name, (bullet) The fund's name, (bullet) Your fund account number, (bullet) The dollar amount or number of shares to be redeemed, and (bullet) Any other applicable requirements listed in the table at right. Unless otherwise instructed, Fidelity will send a check to the record address. Deliver your letter to a Fidelity Investor Center, or mail it to: Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 CHECKWRITING If you have a checkbook for your account, you may write an unlimited number of checks. Do not, however, try to close out your account by check. ACCOUNT TYPE SPECIAL REQUIREMENTS
Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request: $100,000. (bullet) For Money Line transfers to your bank account; minimum: $10; maximum: $100,000. (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 (bullet) The letter of instruction must Tenant, be signed by all persons Sole Proprietorship required to sign for , UGMA, UTMA transactions, exactly as their Trust names appear on the account. (bullet) The trustee must sign the letter indicating capacity as Business or trustee. If the trustee's name Organization is not in the account registration, provide a copy of the trust document certified within the last 60 days. (bullet) At least one person Executor, authorized by corporate Administrator, resolution to act on the Conservator, account must sign the letter. Guardian (bullet) Include a corporate resolution with corporate seal or a signature guarantee. (bullet) Call 1-800-544-6666 for instructions. Wire (wire_graphic) All account types (bullet) You must sign up for the wire feature before using it. To verify that it is in place, call 1-800-544-6666. Minimum wire: $5,000. (bullet) Your wire redemption request must be received by Fidelity before 4 p.m. Eastern time for money to be wired on the next business day.
Check (check_graphic) All account types (bullet) Minimum check: $500. (bullet) All account owners must sign a signature card to receive a checkbook.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
INVESTOR SERVICES Fidelity provides a variety of services to help you manage your account. INFORMATION SERVICES FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days a year. Whenever you call, you can speak with someone equipped to provide the information or service you need. 24-HOUR SERVICE ACCOUNT ASSISTANCE 1-800-544-6666 ACCOUNT BALANCES 1-800-544-7544 ACCOUNT TRANSACTIONS 1-800-544-7777 PRODUCT INFORMATION 1-800-544-8888 QUOTES 1-800-544-8544 RETIREMENT ACCOUNT ASSISTANCE 1-800-544-4774 AUTOMATED SERVICE (checkmark) STATEMENTS AND REPORTS that Fidelity sends to you include the following: (bullet) Confirmation statements (after every transaction, except reinvestments, that affects your account balance or your account registration) (bullet) Account statements (quarterly) (bullet) Financial reports (every six months) To reduce expenses, only one copy of most financial reports will be mailed to your household, even if you have more than one account in the fund. Call 1-800-544-6666 if you need copies of financial reports or historical account information. TRANSACTION SERVICES EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other Fidelity funds by telephone or in writing. Note that exchanges out of a fund are limited to four per calendar year (except for California Tax-Free Money Market), and that they may have tax consequences for you. For details on policies and restrictions governing exchanges, including circumstances under which a shareholder's exchange privilege may be suspended or revoked, see page . SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your account. FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by phone between your bank account and your fund account. Most transfers are complete within three business days of your call. REGULAR INVESTMENT PLANS One easy way to pursue your financial goals is to invest money regularly. Fidelity offers convenient services that let you transfer money into your fund account, or between fund accounts, automatically. While regular investment plans do not guarantee a profit and will not protect you against loss in a declining market, they can be an excellent way to invest for a home, educational expenses, and other long-term financial goals. REGULAR INVESTMENT PLANS FIDELITY AUTOMATIC ACCOUNT BUILDERSM TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND MINIMUM FREQUENCY SETTING UP OR CHANGING $100 Monthly or (bullet) For a new account, complete the quarterly appropriate section on the fund application. (bullet) For existing accounts, call 1-800-544-6666 for an application. (bullet) To change the amount or frequency of your investment, call 1-800-544-6666 at least three business days prior to your next scheduled investment date.
DIRECT DEPOSIT TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
MINIMUM FREQUENCY SETTING UP OR CHANGING $100 Every pay (bullet) Check the appropriate box on the fund period application, or call 1-800-544-6666 for an authorization form. (bullet) Changes require a new authorization form.
FIDELITY AUTOMATIC EXCHANGE SERVICE TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING $100 Monthly, (bullet) To establish, call 1-800-544-6666 after bimonthly, both accounts are opened. quarterly, or (bullet) To change the amount or frequency of annually your investment, call 1-800-544-6666.
A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THOSE FUNDS MAY NOT BE APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK. SHAREHOLDER AND ACCOUNT POLICIES DIVIDENDS, CAPITAL GAINS, AND TAXES Each fund distributes substantially all of its net investment income and capital gains. if any, to shareholders each year. Income dividends are declared daily and paid monthly. Capital gains earned by the bond funds are normally distributed in April and December. DISTRIBUTION OPTIONS When you open an account, specify on your application how you want to receive your distributions. If the option you prefer is not listed on the application, call 1-800-544-6666 for instructions. Each fund offers four options (three for California Tax-Free Money Market): 1. REINVESTMENT OPTION. Your dividend and capital gain distributions, if any, will be automatically reinvested in additional shares of the fund. If you do not indicate a choice on your application, you will be assigned this option. 2. INCOME-EARNED OPTION. Your capital gain distributions, if any, will be automatically reinvested, but you will be sent a check for each dividend distribution. This option is not available for California Tax-Free Money Market. 3. CASH OPTION. You will be sent a check for your dividend and capital gain distributions, if any. 4. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and capital gain distributions, if any, will be automatically invested in another identically registered Fidelity fund. Dividends will be reinvested at the fund's NAV on the last day of the month. Capital gain distributions, if any, will be reinvested at the NAV as of the date the fund deducts the distribution from its NAV. The mailing of distribution checks will begin within seven days. UNDERSTANDING DISTRIBUTIONS As a fund shareholder, you are entitled to your share of the fund's net income and gains on its investments. The fund passes its earnings along to its investors as DISTRIBUTIONS. Each fund earns interest from its investments. These are passed along as DIVIDEND DISTRIBUTIONS. The fund may realize capital gains if it sells securities for a higher price than it paid for them. These are passed along as CAPITAL GAIN DISTRIBUTIONS. Money market funds usually don't make capital gain distributions. (checkmark) TAXES As with any investment, you should consider how an investment in a tax-free fund could affect you. Below are some of the funds' tax implications. TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to shareholders as income dividends. Interest that is federally tax-free remains tax-free when it is distributed. However, gain on the sale of tax-free bonds results in taxable distributions. Short-term capital gains and a portion of the gain on bonds purchased at a discount are taxed as dividends. Long-term capital gain distributions are taxed as long-term capital gains. These distributions are taxable when they are paid, whether you take them in cash or reinvest them. However, distributions declared in December and paid in January are taxable as if they were paid on December 31. Fidelity will send you and the IRS a statement showing the tax status of the distributions paid to you in the previous year. The interest from some municipal securities is subject to the federal alternative minimum tax. A fund may invest so that up to 20% of its income is derived from these securities. The bond funds do not currently intend to purchase these securities. Individuals who are subject to the tax must report this interest on their tax returns. To the extent a fund's income dividends are derived from interest on state tax-free investments, they will be free from California state personal income tax. During fiscal 1994, 100% of each fund's income dividends was free from federal income tax and California s tate personal income taxes. 18.3% of California Tax-Free Money Market's income dividends and 0% of both California Tax-Free Insured's and California Tax-Free High Yield's income dividends were subject to the federal alternative minimum tax. TAXES ON TRANSACTIONS. Your bond fund redemptions - including exchanges to other Fidelity funds - are subject to capital gains tax. A capital gain or loss is the difference between the cost of your shares and the price you receive when you sell them. Whenever you sell shares of a fund, Fidelity will send you a confirmation statement showing how many shares you sold and at what price. You will also receive a consolidated transaction statement every January. However, it is up to you or your tax preparer to determine whether this sale resulted in a capital gain and, if so, the amount of tax to be paid. Be sure to keep your regular account statements; the information they contain will be essential in calculating the amount of your capital gains. "BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital gain distribution from its NAV, you will pay the full price for the shares and then receive a portion of the price back in the form of a taxable distribution. TRANSACTION DETAILS THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE) is open. Fidelity normally calculates each fund's NAV as of the close of business of the NYSE, normally 4 p.m. Eastern time. EACH FUND'S NAV is the value of a single share. The NAV is computed by adding the value of the fund's investments, cash, and other assets, subtracting its liabilities, and then dividing the result by the number of shares outstanding. The money market fund values the securities it owns on the basis of amortized cost. This method minimizes the effect of changes in a security's market value and helps the fund to maintain a stable $1.00 share price. For the bond funds, assets are valued primarily on the basis of market quotations, if available. Since market quotations are often unavailable, assets are usually valued by a method that the Board of Trustees believes accurately reflects fair value. EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE (price to sell one share) are its NAV. WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that your Social Security or taxpayer identification number is correct and that you are not subject to 31% backup withholding for failing to report income to the IRS. If you violate IRS regulations, the IRS can require a fund to withhold 31% of your taxable distributions and redemptions. YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will not be responsible for any losses resulting from unauthorized transactions if it follows reasonable procedures designed to verify the identity of the caller. Fidelity will request personalized security codes or other information, and may also record calls. You should verify the accuracy of your confirmation statements immediately after you receive them. If you do not want the ability to redeem and exchange by telephone, call Fidelity for instructions. IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods of unusual market activity), consider placing your order by mail or by visiting a Fidelity Investor Center. EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of time. Each fund also reserves the right to reject any specific purchase order, including certain purchases by exchange. See "Exchange Restrictions" on page . Purchase orders may be refused if, in FMR's opinion, they would disrupt management of a fund. WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the next offering price calculated after your order is received and accepted. Note the following: (bullet) All of your purchases must be made in U.S. dollars and checks must be drawn on U.S. banks. (bullet) Fidelity does not accept cash. (bullet) When making a purchase with more than one check, each check must have a value of at least $50. (bullet) Each fund reserves the right to limit the number of checks processed at one time. (bullet) If your check does not clear, your purchase will be cancelled and you could be liable for any losses or fees a fund or its transfer agent has incurred. (bullet) You begin to earn dividends as of the first business day following the day of your purchase. TO AVOID THE COLLECTION PERIOD associated with check and Money Line purchases, consider buying shares by bank wire, U.S. Postal money order, U.S. Treasury check, Federal Reserve check, or direct deposit instead. YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge you a fee for this service. If you invest through a broker or other institution, read its program materials for any additional service features or fees that may apply. CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with FDC may enter confirmed purchase orders on behalf of customers by phone, with payment to follow no later than the time when a fund is priced on the following business day. If payment is not received by that time, the financial institution could be held liable for resulting fees or losses. WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the next NAV calculated after your request is received and accepted. Note the following: (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. (bullet) Shares will earn dividends through the date of redemption; however, shares redeemed on a Friday or prior to a holiday will continue to earn dividends until the next business day. (bullet) Fidelity Money Line redemptions generally will be credited to your bank account on the second or third business day after your phone call. (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. (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. (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. IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days' notice to reestablish the minimum balance. If you do not increase your balance, Fidelity reserves the right to close your account and send the proceeds to you. Your shares will be redeemed at the NAV on the day your account is closed. FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing historical account documents, that are beyond the normal scope of its services. FDC may, at its own expense, provide promotional incentives to qualified recipients who support the sale of shares of the funds without reimbursement from the funds. Qualified recipients are securities dealers who have sold fund shares or others, including banks and other financial institutions, under special arrangements in connection with FDC's sales activities. In some instances, these incentives may be offered only to certain institutions whose representatives provide services in connection with the sale or expected sale of significant amounts of shares. EXCHANGE RESTRICTIONS As a shareholder, you have the privilege of exchanging shares of a fund for shares of other Fidelity funds. However, you should note the following: (bullet) The fund you are exchanging into must be registered for sale in your state. (bullet) You may only exchange between accounts that are registered in the same name, address, and taxpayer identification number. (bullet) Before exchanging into a fund, read its prospectus. (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. (bullet) Exchanges may have tax consequences for you. (bullet) Because excessive trading can hurt fund performance and shareholders, California Tax-Free Insured and California Tax-Free High Yield reserve the right to temporarily or permanently terminate the exchange privilege of any investor who makes more than four exchanges out of the fund per calendar year. Accounts under common ownership or control, including accounts with the same taxpayer identification number, will be counted together for purposes of the four exchange limit. (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. (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 coincide with a "market timing" strategy may be disruptive to a fund. Although the funds will attempt to give you prior notice whenever they are reasonably able to do so, they may impose these restrictions at any time. The funds reserve the right to terminate or modify the exchange privilege in the future. OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose administrative fees of up to $7.50 and redemption fees of up to 1.50% on exchanges. Check each fund's prospectus for details. This prospectus is printed on recycled paper using soy-based inks. FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO FUNDS OF FIDELITY CALIFORNIA MUNICIPAL TRUST FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO A FUND OF FIDELITY CALIFORNIA MUNICIPAL TRUST II STATEMENT OF ADDITIONAL INFORMATION APRIL 18, 1994 This Statement is not a prospectus but should be read in conjunction with the funds' current Prospectus (dated April 18, 1994). Please retain this document for future reference. The Annual Report for the fiscal year ended February 28, 1994 is incorporated herein by reference. To obtain an additional copy of the Prospectus or the Annual Report, please call Fidelity Distributors Corporation at 1-800-544-8888. TABLE OF CONTENTS PAGE Investment Policies and Limitations Special Factors Affecting California Special Factors Affecting Puerto Rico Portfolio Transactions Valuation of Portfolio Securities Performance Additional Purchase and Redemption Information Distribution and Taxes FMR Trustees and Officers Management Contracts Distribution and Service Plans Interest of FMR Affiliates Description of the Trusts Financial Statements Appendix INVESTMENT ADVISER Fidelity Management & Research Company (FMR) INVESTMENT SUB-ADVISER (MONEY MARKET FUND ONLY) FMR Texas Inc. (FMR Texas) DISTRIBUTOR Fidelity Distributors Corporation (FDC) TRANSFER AGENT United Missouri Bank, N.A. (United Missouri) and Fidelity Service Co. (FSC) CFR-ptb-494 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 of a "majority of the outstanding voting securities" (as defined in the Investment Company Act of 1940 (the 1940 Act)) of the fund. However, with respect to the money market fund, except for the fundamental investment limitations set forth below, the investment policies and limitations described in this Statement of Additional Information are not fundamental and may be changed without shareholder approval. INVESTMENT LIMITATIONS OF FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO (MONEY MARKET FUND) THE FOLLOWING ARE THE MONEY MARKET FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT: (1) issue senior securities; (2) make short sales of securities (unless it owns or by virtue of its ownership of other securities has the right to obtain securities equivalent in kind and amount to the securities sold); (3) purchase any securities on margin; (4) borrow money, except that the fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not to exceed 33 1/3% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). Any borrowings that come to exceed 33 1/3% of the fund's total assets by reason of a decline in net assets will be reduced within 3 business days to the extent necessary to comply with the 33 1/3% limitation; (5) underwrite any issue of securities, except to the extent that the purchase of municipal bonds in accordance with the fund's investment objective, policies, and limitations, either directly from the issuer, or from an underwriter for an issuer, may be deemed to be underwriting; (6) purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S. territory or possession or a state or local government, or a political subdivision of any of the foregoing) if, as a result, more than 25% of the fund's total assets would be invested in securities of companies whose principal business activities are in the same industry; (7) purchase or sell real estate, but this shall not prevent the fund from investing in municipal bonds or other obligations secured by real estate or interests therein; (8) purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments; (9) lend any security or make any other loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties (but this limitation does not apply to purchases of debt securities or to repurchase agreements); or (10) invest in oil, gas or other mineral exploration or development programs. Investment limitation (4) is construed in conformity with the 1940 Act; and, accordingly, "3 business days" means three days, exclusive of Sundays and holidays. THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL. (i) To meet federal tax requirements for qualification as a "regulated investment company," the fund limits its investments so that at the close of each quarter of its taxable year: (a) with regard to at least 50% of total assets, no more than 5% of total assets are invested in the securities of a single issuer, and (b) no more than 25% of total assets are invested in the securities of a single issuer. Limitations (a) and (b) do not apply to "Government securities" as defined for federal tax purposes. (ii) The fund does not currently intend to sell securities short. (iii) The fund may borrow money only (a) from a bank or from a registered investment company or portfolio for which FMR or an affiliate serves as investment adviser or (b) by engaging in reverse repurchase agreements with any party (reverse repurchase agreements are treated as borrowings for purposes of fundamental investment limitation (4)). The fund will not purchase any security while borrowings representing more than 5% of its total assets are outstanding. The fund will not borrow from other funds advised by FMR or its affiliates if total outstanding borrowings immediately after such borrowing would exceed 15% of the fund's total assets. (iv) The fund does not currently intend to purchase any security if, as a result, more than 10% of its net assets would be invested in securities that are deemed to be illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. (v) The fund does not currently intend to invest more than 25% of its total assets in industrial revenue bonds related to a single industry. (vi) The fund does not currently intend to purchase or sell future contracts or call options. This limitation does not apply to options attached to, or acquired or traded together with, their underlying securities, and does not apply to securities that incorporate features similar to options or futures contracts. (vii) The fund does not currently intend to engage in repurchase agreements or make loans, but this limitation does not apply to purchases of debt securities. (viii) The fund does not currently intend to (a) purchase securities of other investment companies, except in the open market where no commission except the ordinary broker's commission is paid, or (b) purchase or retain securities issued by other open-end investment companies. Limitations (a) and (b) do not apply to securities received as dividends, through offers of exchange, or as a result of a reorganization, consolidation, or merger. For purposes of limitations (6) and (i), FMR identifies the issuer of a security depending on its terms and conditions. In identifying the issuer, FMR will consider the entity or entities responsible for payment of interest and repayment of principal and the source of such payments; the way in which assets and revenues of an issuing political subdivision are separated from those of other political entities; and whether a governmental body is guaranteeing the security. INVESTMENT LIMITATIONS OF FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO (INSURED FUND) THE FOLLOWING ARE THE INSURED FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT: (1) issue senior securities, except as permitted under the Investment Company Act of 1940; (2) borrow money, except that the fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings). Any borrowings that come to exceed this amount will be reduced within three days (not including Sundays and holidays) to the extent necessary to comply with the 33 1/3% limitation; (3) underwrite securities issued by others, except to the extent that the fund may be considered an underwriter within the meaning of the Securities Act of 1933 in the disposition of restricted securities; (4) purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S. territory or possession or a state or local government, or a political subdivision of any of the foregoing) if, as a result, more than 25% of the fund's total assets would be invested in securities of companies whose principal business activities are in the same industry; (5) purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business; (6) purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities); or (7) lend any security or make any other loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties, but this limitation does not apply to purchases of debt securities or to repurchase agreements. (8) The fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objective, policies, and limitations as the fund. THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL. (i) To meet federal tax requirements for qualification as a "regulated investment company," the fund limits its investments so that at the close of each quarter of its taxable year: (a) with regard to at least 50% of total assets, no more than 5% of total assets are invested in the securities of a single issuer, and (b) no more than 25% of total assets are invested in the securities of a single issuer. Limitations (a) and (b) do not apply to "Government securities" as defined for federal tax purposes. (ii) The fund does not currently intend to sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, and provided that transactions in futures contracts and options are not deemed to constitute selling securities short. (iii) The fund does not currently intend to purchase securities on margin, except that the fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin. (iv) The fund may borrow money only (a) from a bank or from a registered investment company or portfolio for which FMR or an affiliate serves as investment adviser or (b) by engaging in reverse repurchase agreements with any party (reverse repurchase agreements are treated as borrowings for purposes of fundamental investment limitation (2)). The fund will not purchase any security while borrowings representing more than 5% of its total assets are outstanding. The fund will not borrow from other funds advised by FMR or its affiliates if total outstanding borrowings immediately after such borrowing would exceed 15% of the fund's total assets. (v) The fund does not currently intend to purchase any security if, as a result, more than 10% of its net assets would be invested in securities that are deemed to be illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. (vi) The fund does not currently intend to invest more than 25% of its total assets in industrial revenue bonds related to a single industry. (vii) The fund does not currently intend to engage in repurchase agreements or make loans, but this limitation does not apply to purchases of debt securities. (viii) The fund does not currently intend to (a) purchase securities of other investment companies, except in the open market where no commission except the ordinary broker's commission is paid, or (b) purchase or retain securities issued by other open-end investment companies. Limitations (a) and (b) do not apply to securities received as dividends, through offers of exchange, or as a result of a reorganization, consolidation, or merger. (ix) The fund does not currently intend to purchase the securities of any issuer (other than securities issued or guaranteed by domestic or foreign governments or political subdivisions thereof) if, as a result, more than 5% of its total assets would be invested in the securities of business enterprises that, including predecessors, have a record of less than three years of continuous operation. (x) The fund does not currently intend to invest in oil, gas, or other mineral exploration or development programs or leases. (xi) The fund does not currently intend to invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objective, policies, and limitations as the fund. For purposes of limitations (4) and (i), FMR identifies the issuer of a security depending on its terms and conditions. In identifying the issuer, FMR will consider the entity or entities responsible for payment of interest and repayment of principal and the source of such payments; the way in which assets and revenues of an issuing political subdivision are separated from those of other political entities; and whether a governmental body is guaranteeing the security. For the insured fund's limitations on futures and options transactions, see the section entitled "Limitations on Futures and Options Transactions" beginning on page 11. INSURANCE FEATURE. Under normal market conditions, the insured fund will invest primarily in municipal bonds that, at the time of purchase, either (1) are insured under fund insurance issued to the fund by an insurer or (2) are insured under an insurance policy obtained by the issuer or underwriter of such municipal bonds at the time of original issuance thereof (issuer insurance). If a municipal bond is already covered by issuer insurance when acquired by the fund, then coverage will not be duplicated by fund insurance; if a municipal bond is not covered by issuer insurance, it may be covered by fund insurance purchased by the fund. The fund may also purchase municipal notes that are insured, although, in general, municipal notes are not presently issued with issuer insurance, and the fund does not generally expect to cover municipal notes under its fund insurance. Accordingly, the fund does not presently expect that any significant portion of the municipal notes it purchases will be covered by insurance. Securities other than municipal bonds and notes purchased by the fund will not be covered by insurance. Based upon the expected composition of the fund, FMR estimates that the annual premiums for fund insurance will range from .10% to .35% of the fund's average net assets. During the fiscal year March 1, 1993 to February 28, 1994, no fund insurance was purchased. Although the insurance feature reduces certain financial risks, the premiums for fund insurance, which are paid from the fund's assets, and the restrictions on investments imposed by fund insurance guidelines, reduce the fund's current yield. Insurance will cover the timely payment of interest and principal on municipal obligations and will be obtained from recognized insurers. In order to be considered as eligible insurance by the fund, such insurance policies must guarantee the timely payment of all principal and interest on the municipal bonds as they become due. However, such insurance may provide that in the event of non-payment of interest or principal when due, with respect to an insured municipal bond, the insurer is not obligated to make such payment until a specified time period (which may be thirty days or more) after it has been notified by the fund that such non-payment has occurred. For these purposes, a payment of principal is due only at final maturity of the municipal bond and not at the time any earlier sinking fund payment is due. The insurance does not guarantee the market value of the municipal bonds or the value of the shares of the fund and, except as described below and in the section entitled "Valuation of Portfolio Securities," has no effect on the price or redemption value of fund shares. Municipal bonds are generally eligible for insurance under fund insurance if, at the time of purchase by the fund, they are identified separately or by category in qualitative guidelines furnished by the fund insurer and are in compliance with the aggregate limitations on amounts set forth in such guidelines. Premium variations are based in part on the rating of the municipal bond being insured at the time the fund purchases the bond. The insurer may prospectively withdraw particular municipal bonds from the classifications of bonds eligible for insurance or change the aggregate amount limitation of each issue or category of eligible municipal bonds, but must continue to insure the full amount of such bonds previously acquired which the insurer has indicated are eligible so long as they remain in the fund. The qualitative guidelines and aggregate amount limitations established by the insurer from time to time will not necessarily be the same as those the fund or FMR would use to govern selection of municipal bonds for the fund's investments. Therefore, from time to time such guidelines and limitations may affect investment decisions. Because coverage under the fund insurance terminates upon sale of a municipal bond from the fund, the insurance does not have any effect on the resale value of such a bond. Therefore, FMR may decide to retain any insured municipal bonds which are in default or, in FMR's view, in significant risk of default, and place a value on the insurance. This value will be equal to the difference between the market value of the defaulted municipal bond and the market value of similar municipal bonds that are not in default. As a result, FMR may be limited in its ability to manage the fund to the extent that it holds defaulted municipal bonds, which will limit its ability in certain circumstances to purchase other municipal bonds. While a defaulted municipal bond is held by the fund, the fund continues to pay the insurance premium thereon but also collects interest payments from the insurer and retains the right to collect the full amount of principal from the insurer when the municipal bond comes due. The fund expects that the market value of a defaulted municipal bond covered by issuer insurance will generally be greater than the market value of an otherwise comparable defaulted municipal bond covered by fund insurance. PRINCIPAL BOND INSURERS. AMBAC Indemnity Corporation (AMBAC Indemnity) is a Wisconsin-domiciled stock insurance corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and licensed to do business in 50 states, the District of Columbia, and the Commonwealth of Puerto Rico, with admitted assets of approximately $1,936,000,000 billion (unaudited) and statutory capital of approximately $1,096,000,000 million (unaudited) as of September 30 , 1993. Statutory capital consists of AMBAC Indemnity's policyholders' surplus and statutory contingency reserve. AMBAC Indemnity is a wholly owned subsidiary of AMBAC Inc., a 100% publicly-held company. Moody's and S&P have both assigned a triple-A claims-paying ability rating to AMBAC Indemnity. Capital Guaranty Insurance Company is a "Aaa/AAA" rated monoline stock insurance company incorporated in the State of Maryland, and is a wholly owned subsidiary of Capital Guaranty Corporation, a Maryland insurance holding company. Capital Guaranty Corporation is a publicly owned company whose shares are traded on the New York Stock Exchange. Capital Guaranty Insurance Company is authorized to provide insurance in 49 states, the District of Columbia and three U.S. territories. Capital Guaranty focuses on insuring municipal securities. Their policies guarantee the timely payment of principal and interest when due for payment on new issue and secondary market issue municipal bond transactions. Capital Guaranty's claims-paying ability is rated "Triple-A" by both Moody's and Standard & Poor's. Therefore, if Capital Guaranty insures and issue with a stand alone rating of less than "Triple-A", such issue would be "upgraded" to "Aaa/AAA" by virtue of Capital Guaranty's insurance. As of September 30, 1993, Capital Guaranty had $13.6 billion in net exposure outstanding. The total statutory policyholders' surplus and contingency reserve of Capital Guaranty was $181,383,432 (unaudited) and the total admitted assets were $270,021,126 (unaudited) as reported to the Insurance Department of the State of Maryland as of September 30, 1993. FGIC Corporation, through its wholly owned subsidiary Financial Guaranty Insurance Company, is a leading insurer of municipal bonds, including new issues and bonds held in unit investment trusts and mutual funds. Municipal bonds insured by Financial Guaranty are rated Aaa/AAA/AAA by Moody's, S&P, and Fitch, respectively. In accordance with statutory accounting principles, Financial Guaranty's capital base as of December 31, 1993 totalled $1.03 billion , comprised of capital and surplus of $ 777 million and a contingency reserve of $253 million. Municipal Bond Investors Assurance Corporation (MBIA) is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company. MBIA Inc. is not obligated to pay debts of, or claims against MBIA. MBIA is a limited liability corporation rather than a several liability association. MBIA is domiciled in the state of New York and licensed to do business in all 50 states, the District of Columbia, and the Commonwealth of Puerto Rico. Moody's rates all bond issues insured by MBIA "Aaa" and short-term loans "MIG-1," both designated to be of the highest quality; S&P rates all new issues insured by MBIA "AAA" Prime Grade. As of September 30 , 1993, MBIA had admitted assets of $ 13 billion (unaudited), total liabilities of $2 billion (unaudited), and total capital and surplus of $951 million (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. INVESTMENT LIMITATIONS OF FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO (HIGH YIELD FUND) THE FOLLOWING ARE THE HIGH YIELD FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT: (1) issue senior securities, except as permitted under the Investment Company Act of 1940; (2) borrow money, except that the fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings). Any borrowings that come to exceed this amount will be reduced within three days (not including Sundays and holidays) to the extent necessary to comply with the 33 1/3% limitation; (3) underwrite securities issued by others, except to the extent that the fund may be considered an underwriter within the meaning of the Securities Act of 1933 in the disposition of restricted securities; (4) purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S. territory or possession or a state or local government, or a political subdivision of any of the foregoing) if, as a result, more than 25% of the fund's total assets would be invested in securities of companies whose principal business activities are in the same industry; (5) purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business; (6) purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities); or (7) lend any security or make any other loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties, but this limitation does not apply to purchases of debt securities or to repurchase agreements. (8) The fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objective, policies, and limitations as the fund. THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL. (i) To meet federal tax requirements for qualification as a "regulated investment company," the fund limits its investments so that at the close of each quarter of its taxable year: (a) with regard to at least 50% of total assets, no more than 5% of total assets are invested in the securities of a single issuer, and (b) no more than 25% of total assets are invested in the securities of a single issuer. Limitations (a) and (b) do not apply to "Government securities" as defined for federal tax purposes. (ii) The fund does not currently intend to sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, and provided that transactions in futures contracts and options are not deemed to constitute selling securities short. (iii) The fund does not currently intend to purchase securities on margin, except that the fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin. (iv) The fund may borrow money only (a) from a bank or from a registered investment company or portfolio for which FMR or an affiliate serves as investment adviser or (b) by engaging in reverse repurchase agreements with any party (reverse repurchase agreements are treated as borrowings for purposes of fundamental investment limitation (2)). The fund will not purchase any security while borrowings representing more than 5% of its total assets are outstanding. The fund will not borrow from other funds advised by FMR or its affiliates if total outstanding borrowings immediately after such borrowing would exceed 15% of the fund's total assets. (v) The fund does not currently intend to purchase any security if, as a result, more than 10% of its net assets would be invested in securities that are deemed to be illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. (vi) The fund does not currently intend to invest more than 25% of its total assets in industrial revenue bonds related to a single industry. (vii) The fund does not currently intend to engage in repurchase agreements or make loans, but this limitation does not apply to purchases of debt securities. (viii) The fund does not currently intend to (a) purchase securities of other investment companies, except in the open market where no commission except the ordinary broker's commission is paid, or (b) purchase or retain securities issued by other open-end investment companies. Limitations (a) and (b) do not apply to securities received as dividends, through offers of exchange, or as a result of a reorganization, consolidation, or merger. (ix) The fund does not currently intend to purchase the securities of any issuer (other than securities issued or guaranteed by domestic or foreign governments or political subdivisions thereof) if, as a result, more than 5% of its total assets would be invested in the securities of business enterprises that, including predecessors, have a record of less than three years of continuous operation. (x) The fund does not currently intend to invest in oil, gas, or other mineral exploration or development programs or leases. (xi) The fund does not currently intend to invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objective, policies, and limitations as the fund. For purposes of limitations (4) and (i), FMR identifies the issuer of a security depending on its terms and conditions. In identifying the issuer, FMR will consider the entity or entities responsible for payment of interest and repayment of principal and the source of such payments; the way in which assets and revenues of an issuing political subdivision are separated from those of other political entities; and whether a governmental body is guaranteeing the security. For the high yield fund's limitations on futures and options transactions, see the section entitled "Limitations on Futures and Options Transactions" beginning on page 11. AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with financial institutions that are, or may be considered to be, "affiliated persons" of the fund under the Investment Company Act of 1940. These transactions may include repurchase agreements with custodian banks; short-term obligations of, and repurchase agreements with the 50 largest U.S. banks (measured by deposits); municipal securities; U.S. government securities with affiliated financial institutions that are primary dealers in these securities; short-term currency transactions; and short-term borrowings. In accordance with exemptive orders issued by the Securities and Exchange Commission, the Board of Trustees has established and periodically reviews procedures applicable to transactions involving affiliated financial institutions. QUALITY AND MATURITY (MONEY MARKET FUND ONLY). Pursuant to procedures adopted by the Board of Trustees, the fund may purchase only high-quality securities that FMR believes present minimal credit risks. To be considered high-quality, a security must be rated in accordance with applicable rules in one of the two highest categories for short-term securities by at least two nationally recognized rating services (or by one, if only one rating service has rated the security) or, if unrated, judged to be of equivalent quality by FMR. The fund must limit its investments to securities with remaining maturities of 397 days or less and must maintain a dollar-weighted average maturity of 90 days or less. DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a delayed-delivery or when-issued basis. These transactions involve a commitment by a fund to purchase or sell specific securities at a predetermined price or yield, with payment and delivery taking place after the customary settlement period for that type of security (and more than seven days in the future). Typically, no interest accrues to the purchaser until the security is delivered. The insured and high yield funds may receive fees for entering into delayed-delivery transactions. When purchasing securities on a delayed-delivery basis, each fund assumes the rights and risks of ownership, including the risk of price and yield fluctuations. Because a fund is not required to pay for securities until the delivery date, these risks are in addition to the risks associated with the fund's other investments. If a fund remains substantially fully invested at a time when delayed-delivery purchases are outstanding, the delayed-delivery purchases may result in a form of leverage. When delayed-delivery purchases are outstanding, the fund will set aside appropriate liquid assets in a segregated custodial account to cover its purchase obligations. When a fund has sold a security on a delayed-delivery basis, the fund does not participate in further gains or losses with respect to the security. If the other party to a delayed-delivery transaction fails to deliver or pay for the securities, the fund could miss a favorable price or yield opportunity, or could suffer a loss. Each fund may renegotiate delayed-delivery transactions after they are entered into, and may sell underlying securities before they are delivered, which may result in capital gains or losses. REFUNDING CONTRACTS. The insured and high yield funds may purchase securities on a when-issued basis in connection with the refinancing of an issuer's outstanding indebtedness. Refunding contracts require the issuer to sell and the fund to buy refunded municipal obligations at a stated price and yield on a settlement date that may be several months or several years in the future. The funds generally will not be obligated to pay the full purchase price if they fail to perform under a refunding contract. Instead, refunding contracts generally provide for payment of liquidated damages to the issuer (currently 15-20% of the purchase price). A fund may secure its obligations under a refunding contract by depositing collateral or a letter of credit equal to the liquidated damages provisions of the refunding contract. When required by SEC guidelines, each fund will place liquid assets in a segregated custodial account equal in amount to its obligations under refunding contracts. INVERSE FLOATERS. The insured and high yield funds may invest in inverse floaters, which are instruments whose interest rates bear an inverse relationship to the interest rate on another security or the value of an index. Changes in the interest rate on the other security or index inversely affect the residual interest rate paid on the inverse floater, with the result that the inverse floater's price will be considerably more volatile than that of a fixed-rate bond. For example, a municipal issuer may decide to issue two variable-rate instruments instead of a single long-term, fixed-rate bond. The interest rate on one instrument reflects short-term interest rates, while the interest rate on the other instrument (the inverse floater) reflects the approximate rate the issuer would have paid on a fixed-rate bond, multiplied by two, minus the interest rate paid on the short-term instrument. Depending on market availability, the two portions may be recombined to form a fixed-rate municipal bond. The market for inverse floaters is relatively new. VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating interest rates and carry rights that permit holders to demand payment of the unpaid principal balance plus accrued interest from the issuers or certain financial intermediaries. Floating rate instruments have interest rates that change whenever there is a change in a designated base rate while variable rate instruments provide for a specified periodic adjustment in the interest rate. These formulas are designed to result in a market value for the instrument that approximates its par value. With respect to the money market fund, a demand instrument with a conditional demand feature must have received both a short-term and a long-term high-quality rating or, if unrated, have been determined to be of comparable quality pursuant to procedures adopted by the Board of Trustees. A demand instrument with an unconditional demand feature may be acquired solely in reliance upon a short-term high-quality rating or, if unrated, upon a finding of comparable short-term quality pursuant to procedures adopted by the Board of Trustees. The funds may invest in fixed-rate bonds that are subject to third party puts and in participation interests in such bonds held in trust or otherwise. These bonds and participation interests have tender options or demand features that permit a fund to tender (or put) the bonds to an institution at periodic intervals and to receive the principal amount thereof. A fund considers variable rate instruments structured in this way (Participating VRDOs) to be essentially equivalent to other VRDOs it purchases. The IRS has not ruled whether the interest on Participating VRDOs is tax-exempt and, accordingly, a fund intends to purchase these instruments based on opinions of bond counsel. The money market fund may invest in variable or floating rate instruments that ultimately mature in more than 397 days, if the fund acquires a right to sell the instruments that meets certain requirements set forth in Rule 2a-7. Variable rate instruments (including instruments subject to a demand feature) that mature in 397 days or less may be deemed to have maturities equal to the period remaining until the next readjustment of the interest rate. Other variable rate instruments with demand features may be deemed to have a maturity equal to the period remaining until the next adjustment of the interest rate or the period remaining until the principal amount can be recovered through demand. A floating rate instrument subject to a demand feature may be deemed to have a maturity equal to the period remaining until the principal amount can be recovered through demand. TENDER OPTION BONDS are created by coupling an intermediate- or long-term, fixed-rate, tax-exempt bond (generally held pursuant to a custodial arrangement) with a tender agreement that gives the holder the option to tender the bond at its face value. As consideration for providing the tender option, the sponsor (usually a bank, broker-dealer, or other financial institution) receives periodic fees equal to the difference between the bond's fixed coupon rate and the rate (determined by a remarketing or similar agent) that would cause the bond, coupled with the tender option, to trade at par on the date of such determination. After payment of the tender option fee, a fund effectively holds a demand obligation that bears interest at the prevailing short-term tax-exempt rate. Subject to applicable regulatory requirements, the money market fund may buy tender option bonds if the agreement gives the fund the right to tender the bond to its sponsor no less frequently than once every 397 days. In selecting tender option bonds for the funds, FMR will consider the creditworthiness of the issuer of the underlying bond, the custodian, and the third party provider of the tender option. In certain instances, a sponsor may terminate a tender option if, for example, the issuer of the underlying bond defaults on interest payments. ZERO COUPON BONDS do not make regular interest payments. Instead, they are sold at a deep discount from their face value and are redeemed at face value when they mature. Because zero coupon bonds do not pay current income, their prices can be very volatile when interest rates change. In calculating its daily dividend, a fund takes into account as income a portion of the difference between a zero coupon bond's purchase price and its face value. STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at an exercise price equal to the amortized cost of the underlying security plus accrued interest, if any, at the time of exercise. Each fund may acquire standby commitments to enhance the liquidity of portfolio securities, but, in the case of the money market fund, only when the issuers of the commitments present minimal risk of default. Ordinarily a fund will not transfer a standby commitment to a third party, although it could sell the underlying municipal security to a third party at any time. A fund may purchase standby commitments separate from or in conjunction with the purchase of securities subject to such commitments. In the latter case, the fund would pay a higher price for the securities acquired, thus reducing their yield to maturity. Standby commitments will not affect the dollar-weighted average maturity of the money market fund or the valuation of the securities underlying the commitments. Issuers or financial intermediaries may obtain letters of credit or other guarantees to support their ability to buy securities on demand. FMR may rely upon its evaluation of a bank's credit in determining whether to support an instrument supported by a letter of credit. In evaluating a foreign bank's credit, FMR will consider whether adequate public information about the bank is available and whether the bank may be subject to unfavorable political or economic developments, currency controls, or other governmental restrictions that might affect the bank's ability to honor its credit commitment. Standby commitments are subject to certain risks, including the ability of issuers of standby commitments to pay for securities at the time the commitments are exercised; the fact that standby commitments are not marketable by the funds; and the possibility that the maturities of the underlying securities may be different from those of the commitments. MUNICIPAL LEASE OBLIGATIONS. Each fund may invest a portion of its assets in municipal leases and participation interests therein. These obligations, which may take the form of a lease, an installment purchase, or a conditional sale contract, are issued by state and local governments and authorities to acquire land and a wide variety of equipment and facilities. Generally, the funds will not hold such obligations directly as a lessor of the property, but will purchase a participation interest in a municipal obligation from a bank or other third party. A participation interest gives a fund a specified, undivided interest in the obligation in proportion to its purchased interest in the total amount of the obligation. Municipal leases frequently have risks distinct from those associated with general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet to incur debt. These may include voter referenda, interest rate limits, or public sale requirements. Leases, installment purchases, or conditional sale contracts (which normally provide for title to the leased asset to pass to the governmental issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting their constitutional and statutory requirements for the issuance of debt. Many leases and contracts include "non-appropriation clauses" providing that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purposes by the appropriate legislative body on a yearly or other periodic basis. Non-appropriation clauses free the issuer from debt issuance limitations. FEDERALLY TAXABLE OBLIGATIONS. The funds do not intend to invest in securities whose interest is federally taxable; however, from time to time, each fund may invest a portion of its assets on a temporary basis in fixed-income obligations whose interest is subject to federal income tax. For example, each fund may invest in obligations whose interest is federally taxable pending the investment or reinvestment in municipal securities of proceeds from the sale of its shares or sales of portfolio securities. Should a fund invest in federally taxable obligations, it would purchase securities that in FMR's judgment are of high quality. These would include obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities; obligations of domestic banks; and repurchase agreements. The insured and high yield funds' standards for high quality, taxable obligations are essentially the same as those described by Moody's Investors Service, Inc. (Moody's) in rating corporate obligations within its two highest ratings of Prime-1 and Prime-2, and those described by Standard & Poor's Corporation (S&P) in rating corporate obligations within its two highest ratings of A-1 and A-2. The money market fund will purchase taxable obligations only if they meet its quality requirements. Proposals to restrict or eliminate the federal income tax exemption for interest on municipal obligations are introduced before Congress from time to time. Proposals also may be introduced before the California legislature that would affect the state tax treatment of the funds' distributions. If such proposals were enacted, the availability of municipal obligations and the value of the funds' holdings would be affected and the Trustees would reevaluate the funds' investment objectives and policies. Each fund anticipates being as fully invested as practicable in municipal securities; however, there may be occasions when, as a result of maturities of portfolio securities, sales of fund shares, or in order to meet redemption requests, a fund may hold cash that is not earning income. In addition, there may be occasions when, in order to raise cash to meet redemptions, a fund may be required to sell securities at a loss. REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a security and simultaneously commits to resell that security to the seller at an agreed-upon price on an agreed-upon date within a number of days from the date of purchase. The resale price reflects the purchase price plus an agreed-upon incremental amount which is unrelated to the coupon rate or maturity of the purchased security. A repurchase agreement is a taxable obligation which involves the obligation of the seller to pay the agreed-upon price, which obligation is in effect secured by the value (at least equal to the amount of the agreed-upon resale price and marked to market daily) of the underlying security. Each fund may engage in repurchase agreements with respect to any security in which it is authorized to invest even if, with respect to the money market fund, the underlying security matures in more than 397 days. While it does not presently appear possible to eliminate all risks from these transactions (particularly the possibility of a decline in the market value of the underlying securities, as well as delays and costs to the fund in connection with bankruptcy proceedings), it is each fund's current policy to limit repurchase agreements to parties whose creditworthiness has been reviewed and found satisfactory by FMR. REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund sells a portfolio instrument to another party, such as a bank or broker-dealer, in return for cash and agrees to repurchase the instrument at a particular price and time. While a reverse repurchase agreement is outstanding, the fund will maintain appropriate liquid assets in a segregated custodial account to cover its obligation under the agreement. A fund will enter into reverse repurchase agreements only with parties whose creditworthiness has been found satisfactory by FMR. Such transactions may increase fluctuations in the market value of a fund's assets and may be viewed as a form of leverage. 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 a fund's rights and obligations relating to the investment). Investments currently considered by the money market fund to be illiquid include restricted securities and municipal lease obligations determined by FMR to be illiquid. Investments currently considered by the insured and high yield funds to be illiquid include over-the-counter options. Also, FMR may determine some restricted securities and municipal lease obligations to be illiquid. However, with respect to over-the-counter options the insured and high yield funds write, 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 valued for purposes of monitoring amortized cost valuation (money market fund) and priced (insured and high yield funds) at fair value as determined in good faith by a committee appointed by the Board of Trustees. If through a change in values, net assets, or other circumstances, a fund were in a position where more than 10% of its net assets were invested in illiquid securities, it would seek to take appropriate steps to protect liquidity. RESTRICTED SECURITIES generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, or in a registered public offering. Where registration is required, a fund may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time the fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, a fund might obtain a less favorable price than prevailed when it decided to seek registration of the security. However, in general, the money market fund anticipates holding restricted securities to maturity or selling them in an exempt transaction. INDEXED SECURITIES. The insured and high yield funds may purchase securities whose prices are indexed to the prices of other securities, securities indices, or other financial indicators. Indexed securities typically, but not always, are debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic. Index securities may have principal payments as well as coupon payments that depend on the performance of one or more interest rates. Their coupon rates or principal payments may change by several percentage points for every 1% interest rate change. One example of indexed securities is inverse floaters. The performance of indexed securities depends to a great extent on the performance of the security or other instrument to which they are indexed, and may also be influenced by interest rate changes. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer's creditworthiness deteriorates. Indexed securities may be more volatile than the underlying instruments. LOWER-RATED MUNICIPAL SECURITIES. The high yield fund may invest a portion of its assets in lower-rated municipal securities as described in the Prospectus. While the market for California municipals is considered to be substantial, adverse publicity and changing investor perceptions may affect the ability of outside pricing services used by the fund to value its portfolio securities, and the fund's ability to dispose of lower-rated bonds. The outside pricing services are monitored by FMR and reported to the Board to to determine whether the services are furnishing prices that accurately reflect fair value. The impact of changing investor perceptions may be especially pronounced in markets where municipal securities are thinly traded. The fund may choose, at its expense or in conjunction with others, to pursue litigation or otherwise exercise its rights as a security holder to seek to protect the interests of security holders if it determines this to be in the best interest of the fund's shareholders. INTERFUND BORROWING PROGRAM. Each fund has received permission from the SEC to lend money to and borrow money from other funds advised by FMR or its affiliates, but will participate in the interfund borrowing program only as a borrower. Interfund loans normally will extend overnight, but can have a maximum duration of seven days. A fund will borrow through the program only when the costs are equal to or lower than the costs of bank loans. Loans may be called on one day's notice, and the fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not renewed. ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been experiencing, or may experience in the future, problems, including (a) the effects of inflation upon construction and operating costs, (b) the availability and cost of fuel, (c) the availability and cost of capital, (d) the effects of conservation on energy demand, (e) the effects of rapidly changing environmental, safety, and licensing requirements, and other federal, state, and local regulations, (f) timely and sufficient rate increases, (g) opposition to nuclear power, and (h) increased competition. HEALTH CARE INDUSTRY. The health care industry is subject to regulatory action by a number of private and governmental agencies, including federal, state, and local governmental agencies. A major source of revenues for the health care industry is payments from the Medicare and Medicaid programs. As a result, the industry is sensitive to legislative changes and reductions in governmental spending for such programs. Numerous other factors may affect the industry, such as general and local economic conditions; demand for services; expenses (including malpractice insurance premiums); and competition among health care providers. In the future, the following elements may adversely affect health care facility operations: adoption of legislation proposing a national health insurance program; medical and technological advances which dramatically alter the need for health services or the way in which such services are delivered; and efforts by employers, insurers, and governmental agencies to reduce the costs of health insurance and healthcare services. HOUSING. Housing revenue bonds are generally issued by a state, county, city, local housing authority, or other public agency. They are secured by the revenues derived from mortgages purchased with the proceeds from the bond issue. It is extremely difficult to predict the supply of available mortgages to be purchased with the proceeds of an issue or the future cash flow from the underlying mortgages. Consequently, there are risks that proceeds will exceed supply, resulting in early retirement of bonds, or that the homeowner repayments will create an irregular cash flow. Many factors may affect the financing of multi-family housing projects, including acceptable completion of construction, proper management, occupancy and rent levels, economic conditions, and changes to current laws and regulations. INVESTMENT POLICIES FOR INSURED AND HIGH YIELD FUNDS ONLY LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund has filed a notice of eligibility for exclusion from the definition of the term "commodity pool operator" with the Commodity Futures Trading Commission (CFTC) and the National Futures Association, which regulate trading in the futures markets. The funds intend to comply with Rule 4.5 under the Commodity Exchange Act, which limits the extent to which the funds can commit assets to initial margin deposits and option premiums. In addition, each fund will not: (a) sell futures contracts, purchase put options, or write call options if, as a result, more than 25% of the fund's total assets would be hedged with futures and options under normal conditions; (b) purchase futures contracts or write put options if, as a result, the fund's total obligations upon settlement or exercise of purchased futures contracts and written put options would exceed 25% of its total assets; or (c) purchase call options if, as a result, the current value of option premiums for call options purchased by the fund would exceed 5% of the fund's total assets. These limitations do not apply to options attached to or acquired or traded together with their underlying securities, and do not apply to securities that incorporate features similar to options. The above limitations on the funds' investments in futures contracts and options, and the funds' policies regarding futures contracts and options discussed elsewhere in this Statement of Additional Information, are not fundamental policies and may be changed as regulatory agencies permit. FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to purchase a specified underlying instrument at a specified future date. When a fund sells a futures contract, it agrees to sell the underlying instrument at a specified future date. The price at which the purchase and sale will take place is fixed when the fund enters into the contract. Some currently available futures contracts are based on specific securities, such as U.S. Treasury bonds or notes, and some are based on indices of securities prices, such as the Bond Buyer Municipal Bond Index. Futures can be held until their delivery dates, or can be closed out before then if a liquid secondary market is available. The value of a futures contract tends to increase and decrease in tandem with the value of its underlying instrument. Therefore, purchasing futures contracts will tend to increase a fund's exposure to positive and negative price fluctuations in the underlying instrument, much as if it had purchased the underlying instrument directly. When a fund sells a futures contract, by contrast, the value of its futures position will tend to move in a direction contrary to the market. Selling futures contracts, therefore, will tend to offset both positive and negative market price changes, much as if the underlying instrument had been sold. FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is not required to deliver or pay for the underlying instrument unless the contract is held until the delivery date. However, both the purchaser and seller are required to deposit "initial margin" with a futures broker, known as a futures commission merchant (FCM), when the contract is entered into. Initial margin deposits are typically equal to a percentage of the contract's value. If the value of either party's position declines, that party will be required to make additional "variation margin" payments to settle the change in value on a daily basis. The party that has a gain may be entitled to receive all or a portion of this amount. Initial and variation margin payments do not constitute purchasing securities on margin for purposes of a fund's investment limitations. In the event of the bankruptcy of an FCM that holds margin on behalf of a fund, the fund may be entitled to return of margin owed to it only in proportion to the amount received by the FCM's other customers, potentially resulting in losses to the fund. PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the fund pays the current market price for the option (known as the option premium). Options have various types of underlying instruments, including specific securities, indices of securities prices, and futures contracts. The fund may terminate its position in a put option it has purchased by allowing it to expire or by exercising the option. If the option is allowed to expire, the fund will lose the entire premium it paid. If the fund exercises the option, it completes the sale of the underlying instrument at the strike price. A fund may also terminate a put option position by closing it out in the secondary market at its current price, if a liquid secondary market exists. The buyer of a typical put option can expect to realize a gain if security prices fall substantially. However, if the underlying instrument's price does not fall enough to offset the cost of purchasing the option, a put buyer can expect to suffer a loss (limited to the amount of the premium paid, plus related transaction costs). The features of call options are essentially the same as those of put options, except that the purchaser of a call option obtains the right to purchase, rather than sell, the underlying instrument at the option's strike price. A call buyer typically attempts to participate in potential price increases of the underlying instrument with risk limited to the cost of the option if security prices fall. At the same time, the buyer can expect to suffer a loss if security prices do not rise sufficiently to offset the cost of the option. WRITING PUT AND CALL OPTIONS. When a fund writes a put option, it takes the opposite side of the transaction from the option's purchaser. In return for receipt of the premium, the fund assumes the obligation to pay the strike price for the option's underlying instrument if the other party to the option chooses to exercise it. When writing an option on a futures contract, the fund will be required to make margin payments to an FCM as described above for futures contracts. A fund may seek to terminate its position in a put option it writes before exercise by closing out the option in the secondary market at its current price. If the secondary market is not liquid for a put option the fund has written, however, the fund must continue to be prepared to pay the strike price while the option is outstanding, regardless of price changes, and must continue to set aside assets to cover its position. If security prices rise, a put writer generally would expect to profit, although its gain would be limited to the amount of the premium it received. If security prices remain the same over time, it is likely that the writer will also profit, because it should be able to close out the option at a lower price. If security prices fall, the put writer would expect to suffer a loss. This loss should be less than the loss from purchasing the underlying instrument directly, however, because the premium received for writing the option should mitigate the effects of the decline. Writing a call option obligates a fund to sell or deliver the option's underlying instrument, in return for the strike price, upon exercise of the option. The characteristics of writing call options are similar to those of writing put options, except that writing calls generally is a profitable strategy if prices remain the same or fall. Through receipt of the option premium, a call writer mitigates the effects of a price decline. At the same time, because a call writer must be prepared to deliver the underlying instrument in return for the strike price, even if its current value is greater, a call writer gives up some ability to participate in security price increases. COMBINED POSITIONS. A fund may purchase and write options in combination with each other, or in combination with futures or forward contracts, to adjust the risk and return characteristics of the overall position. For example, a fund may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out. CORRELATION OF PRICE CHANGES. Because there are a limited number of types of exchange-traded options and futures contracts, it is likely that the standardized contracts available will not match a fund's current or anticipated investments exactly. The funds may invest in options and futures contracts based on securities with different issuers, maturities, or other characteristics from the securities in which they typically invest, which involves a risk that the options or futures position will not track the performance of a fund's other investments. Options and futures prices can also diverge from the prices of their underlying instruments, even if the underlying instruments match a fund's investments well. Options and futures prices are affected by such factors as current and anticipated short-term interest rates, changes in volatility of the underlying instrument, and the time remaining until expiration of the contract, which may not affect security prices the same way. Imperfect correlation may also result from differing levels of demand in the options and futures markets and the securities markets, from structural differences in how options and futures and securities are traded, or from imposition of daily price fluctuation limits or trading halts. A fund may purchase or sell options and futures contracts with a greater or lesser value than the securities it wishes to hedge or intends to purchase in order to attempt to compensate for differences in volatility between the contract and the securities, although this may not be successful in all cases. If price changes in a fund's options or futures positions are poorly correlated with its other investments, the positions may fail to produce anticipated gains or result in losses that are not offset by gains in other investments. LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid secondary market will exist for any particular options or futures contract at any particular time. Options may have relatively low trading volume and liquidity if their strike prices are not close to the underlying instrument's current price. In addition, exchanges may establish daily price fluctuation limits for options and futures contracts, and may halt trading if a contract's price moves upward or downward more than the limit in a given day. On volatile trading days when the price fluctuation limit is reached or a trading halt is imposed, it may be impossible for a fund to enter into new positions or close out existing positions. If the secondary market for a contract is not liquid because of price fluctuation limits or otherwise, it could prevent prompt liquidation of unfavorable positions, and potentially could require a fund to continue to hold a position until delivery or expiration regardless of changes in its value. As a result, a fund's access to other assets held to cover its options or futures positions could also be impaired. OTC OPTIONS. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size and strike price, the terms of over-the-counter options (options not traded on exchanges) generally are established through negotiation with the other party to the option contract. While this type of arrangement allows the fund greater flexibility to tailor an option to their needs, OTC options generally involve greater credit risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded. ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will comply with guidelines established by the Securities and Exchange Commission with respect to coverage of options and futures strategies by mutual funds, and if the guidelines so require will set aside appropriate liquid assets in a segregated custodial account in the amount prescribed. Securities held in a segregated account cannot be sold while the futures or option strategy is outstanding, unless they are replaced with other suitable assets. As a result, there is a possibility that segregation of a large percentage of a fund's assets could impede portfolio management or the fund's ability to meet redemption requests or other current obligations. SPECIAL FACTORS AFFECTING CALIFORNIA Certain California constitutional amendments, legislative measures, executive orders, administrative regulations, and voter initiatives, as discussed below, could adversely affect the market values and marketability of, or result in default of, existing obligations, including obligations that may be held by the funds. Obligations of the state or local governments may also be affected by budgetary pressures affecting the State and economic conditions in the State. Interest income to a fund could also be adversely affected. The following highlights only some of the more significant financial trends and problems, and is based on information drawn from official statements and prospectuses relating to securities offerings of the State of California, its agencies, or instrumentalities, as available on the date of this Statement of Additional Information. FMR has not independently verified any of the information contained in such official statements and other publicly available documents, but is not aware of any fact which would render such information inaccurate. CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS LIMITATION ON TAXES. Certain obligations held by the funds may be obligations of issuers that rely in whole or in part, directly or indirectly, on ad valorem property taxes as a source of revenue. The taxing powers of California local governments and districts are limited by Article XIIIA of the California Constitution, enacted by the voters in 1978 and commonly known as "Proposition 13." Briefly, XIIIA limits to 1% of full cash value the rate of ad valorem property taxes on real property and generally restricts the reassessment of property to 2% per year, except upon new construction or change of ownership (subject to a number of exemptions). Taxing entities may, however, raise ad valorem taxes above the 1% limit to pay debt service on voter-approved bonded indebtedness. Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the assessed value of property as of the owner's date of acquisition (or as of March 1, 1975 if acquired earlier), subject to certain adjustments. This system has resulted in widely varying amounts of tax on similarly situated properties. Several lawsuits were filed challenging the acquisition-based assessment system of Proposition 13, but on June 18, 1992, the U.S. Supreme Court announced a decision upholding Proposition 13. Article XIIIA prohibits local governments from raising revenues through ad valorem property taxes above the 1% limit; it also requires voters of any government unit to give 2/3 approval to levy any "special tax." However, court decisions allowed non-voter-approved levy of "general taxes" which were not dedicated to a specific use. In response to these decisions, the voters of the State in 1986 adopted an initiative statute which imposed significant new limits on the ability of local entities to raise or levy general taxes, except by receiving majority local voter approval. Significant elements of this initiative, "Proposition 62," have been overturned in recent court cases, but efforts may continue to further restrict the ability of local government agencies to levy or raise taxes. APPROPRIATIONS LIMITS. The State and its local governments are subject to an annual "appropriations limit" imposed by Article XIIIB of the California Constitution, enacted by the voters in 1979 and significantly amended by Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB prohibits the State or any covered local government from spending "appropriations subject to limitation" in excess of the appropriations limit imposed. "Appropriations subject to limitation" are authorizations to spend "proceeds of taxes," which consists of tax revenues and certain other funds, including proceeds from regulatory licenses, user charges, or other fees to the extent that such proceeds exceed the cost of providing the product or service; but "proceeds of taxes" for local governments excludes most State subventions. No limit is imposed on appropriations of funds which are not "proceeds of taxes," such as reasonable user charges or fees and certain other non-tax funds, including bond proceeds. Among the expenditures not included in the Article XIIIB appropriations limit are: (1) the debt service cost of bonds issued or authorized prior to January 1, 1979, or subsequently authorized by the voters; (2) appropriations arising from certain emergencies declared by the Governor; (3) appropriations for certain capital outlay projects; and (4) appropriations by the State of post-1989 increases in gasoline taxes and vehicle weight fees. The appropriations limit for each year is adjusted annually to reflect changes in cost of living and population, and any transfers of service responsibilities between government units. The definitions for such adjustments were liberalized by Proposition 111 to more closely follow growth in the State's economy. For the 1990-91 fiscal year, each unit of government has recalculated its appropriations limit by taking the actual 1986-87 limit and applying the Proposition 111 annual adjustments forward to 1990-91. This was expected to raise the limit in most cases. Under Proposition 111, "excess" revenues are measured over a two-year cycle. With respect to local governments, excess revenues must be returned by a revision of tax rates or fee schedules within the two subsequent fiscal years. The appropriations limit for a local government may be overridden by referendum under certain conditions for up to four years at a time. With respect to the State, 50% of any excess revenues is to be distributed to K-12 school and community college districts (collectively, K-14 districts) and the other 50% is to be refunded to taxpayers. In the years immediately following enactment, very few California governmental entities operated near their appropriations limit. I n the mid-to-late 1980's, many entities were at or approaching their limit , and several successfully obtained voter approval for 4-year waivers of the limit . Since Proposition 111, the appropriations limit has again ceased to be a practical limit on California governments, but this condition may change in the future. During FY 1986-87, State receipts from proceeds of taxes exceeded its appropriations limit by $1.138 billion, which was returned to taxpayers. Since that time, appropriations subject to limitation were under the State limit. The 199 4 -9 5 Governor's Budget proposal estimates State appropriations will be more than $ 3.7 billion under the limit for FY 199 3 -9 4 and over $ 5.4 billion under the limit for FY 199 4 -9 5 . OBLIGATIONS OF THE STATE OF CALIFORNIA As of March 1, 199 4 , the State had approximately $ 17.5 billion of general obligation bonds outstanding, and $ 6.3 billion remained authorized but unissued. In addition, at June 30, 199 3 , the State had lease-purchase obligations, payable from the State's General Fund, of approximately $ 4.0 billion. Of the State's outstanding general obligation debt, approximately 28% is presently self-liquidating (for which program revenues are anticipated to be sufficient to reimburse the General Fund for debt service payments). In FY 199 2 -9 3 , debt service on general obligation bonds and lease-purchase debt was approximately 4.1 % of General Fund revenues. The State has paid the principal of and interest on its general obligation bonds, lease-purchase debt, and short-term obligations when due. ECONOMY California's economy is the largest among the 50 states and one of the largest in the world. The State's population grew by 27% in the 1980s and, at over 31 million, it now represents 12.3% of the total United States population. Total personal income in the State, at an estimated $640 billion in 1992, accounts for about 13% of all personal income in the nation. Total employment is almost 14 million, the majority of which is in the service, trade, and manufacturing sectors. Reports by the State Department of Finance and the Commission on State Finance confirm that the State's economy is suffering the worst recession since the 1930's, with prospects for recovery slower than for the nation as a whole. The State lost over 800,000 jobs since the start of the recession, in mid-1990, and is expected to lose more jobs in 1994 before a turnaround occurs . The largest job losses have been in Southern California, led by declines in the aerospace and construction industries. Weakness statewide occurred in manufacturing, construction, services and trade and will be hurt in the next few years by continued cuts in federal defense spending and base closures . Unemployment is expected to remain well above the national average in 1994 . The State's economy is only expected to slowly pull out of the recession starting in 1994 or early 1995 . Delay in recovery will exacerbate shortfalls in State revenues. RECENT STATE FINANCIAL RESULTS The principal sources of State General Fund revenues in 199 2 -9 3 were the California personal income tax (4 4 % of total revenues), the sales tax (3 8 %), bank and corporation taxes (1 2 %), and the gross premium tax on insurance (3%). The State maintains a Special Fund for Economic Uncertainties (the SFEU), derived from General Fund revenues, as a reserve to meet cash needs of the General Fund, but which is required to be replenished as soon as sufficient revenues are available. Year-end balances in the SFEU are included for financial reporting purposes in the General Fund balance. In recent years (but not in the past two years, as the recession has cut revenues) , the State has budgeted to maintain the Economic Uncertainties Fund at around 3% of General Fund expenditures. Throughout the 1980s, State spending increased rapidly as the State population and economy also grew rapidly, including many assistance programs to local governments, which were constrained by Proposition 13 and other laws. The largest State program is assistance to local public school districts. In 1988, an initiative (Proposition 98) was enacted which (subject to suspension by a 2/3 vote of the Legislature and the Governor) guarantees local school districts and community college districts a minimum share of State General Fund revenues (currently about 3 4 %). Since the start of the 1990-91 Fiscal Year, the State has faced adverse economic, fiscal, and budget conditions. The economic recession seriously affected State tax revenues. It also caused increased expenditures for health and welfare programs. The State is also facing a structural imbalance in its budget with the largest programs supported by the General Fund (education, health, welfare and corrections) growing at rates significantly higher than the growth rates for the principal revenue sources of the General Fund. As a result, the State entered a period of budget imbalance, with expenditures exceeding revenues for four of the five completed fiscal years through 1991-92. As the State fell into a deep recession in the summer of 1990, the State budget fell sharply out of balance in the 1990-91 and 1991-92 fiscal years, despite significant expenditure cuts and tax increases. The State had accumulated a $2.8 billion budget deficit by June 30, 1992. This deficit also severely reduced the State's cash resources, so that it had to rely on external borrowing in the short-term markets to meet its cash needs. With the failure to enact a budget by July 1, 1992, the State had no legal authority to pay many of its vendors until the budget was passed; nevertheless, certain obligations (such as debt service, school apportionments, welfare payments, and employee salaries) were payable because of continuing or special appropriations, or court orders. However, the State Controller did not have enough cash to pay as they came due all of these ongoing obligations, as well as valid obligations incurred in the prior fiscal year. Starting on July 1, 1992, the Controller was required to issue approximately $3.8 billion of "registered warrants" in lieu of normal warrants backed by cash to pay many State obligations (the first time this had occurred since the 1930's). Available cash was used to pay constitutionally mandated and priority obligations. All the registered warrants were called for redemption by September 4, 1992 following enactment of the 1992-93 Budget Act and issuance by the State of its normal cash flow borrowings. The 1992-93 Budget Act, when finally adopted, was projected to eliminate the State's accumulated deficit, with additional expenditure cuts and a $1.3 billion transfer of State education funding costs to local governments by shifting local property taxes to school districts. However, as the recession continued longer and deeper than expected, revenues once again were far below projections, and only reached a level just equal to the amount of expenditures. Thus, the State continued to carry its $2.8 billion budget deficit at June 30, 1993. The 1993-94 Budget Act was similar to the prior year, in reliance on expenditure cuts and an additional $2.6 billion transfer of costs to local government, particularly counties. A major feature of the budget was a two-year plan to eliminate the accumulated deficit by borrowing into the 1994-95 fiscal year. With the recession still continuing longer than expected, the 1994-95 Governor's Budget now projects in the 1993-94 Fiscal Year, the General Fund will have $900 million less revenue and $800 million higher expenditures than budgeted. As a result, revenues will only exceed expenditures by about $400 million. If this projection is met, it will be the first operating surplus in four years; however, some budget analysts outside the Department of Finance project revenues in the balance of 1993-94 will not even meet the revised lower projection. In addition, the General Fund may have some unplanned costs for relief related to the January 17, 1994 Northridge earthquake. The State has implemented its short-term borrowing as part of the deficit elimination plan, and has also borrowed additional sums to cover cash flow shortfalls in the spring of 1994, for a total of $3.2 billion, coming due in July and December 1994. Repayment of these short-term notes will require additional borrowing, as the State's cash position continues to be adversely affected. The Governor's 1994-95 Budget proposal recognizes the need to bridge a gap of around $5 billion by June 30, 1995. Over $3.1 billion of this amount is being requested from the federal government as increased aid, particularly for costs associated with incarcerating, educating, and providing health and welfare services to undocumented immigrants. However, President Clinton has not included these costs in his proposed Fiscal 1995 Budget. The rest of the budget gap is proposed to be closed with expenditure cuts and projected $600 million of new revenue assuming the State wins a tax case presently pending in U.S. Supreme Court. Thus, the State will once again face significant uncertainties and very difficult choices in the 1994-95 budget, as tax increases are unlikely and many cuts and budget adjustments have been made in the past three years. The State's severe financial difficulties for the past, the current and upcoming budget years will result in continued pressure upon almost all local governments, especially those which depend on State aid, such as school districts and counties. While the Governor has noted that part of the "budget gap" was cyclical, a result of economic slowdown which has reduced growth of revenues in the fiscal years, but a significant part is structural, with demands for State services and caseloads in major areas of the budget, such as corrections, welfare indigent health care, and public schools, growing at a faster rate than the State economy and State revenues. While recent budgets included both permanent tax increases and actions to reduce costs of state government over the longer term, the Governor and other analysts have noted that structural imbalances still exist, and there can be no assurance that the State will not face budget gaps in the future. State general obligation bonds are currently rated "Aa" by Moody's, "AA" by Fitch, and " A+ " by S&P. There can be no assurance that such ratings will be maintained in the future. All three of these ratings were reduced from "AAA" levels since late 1991. OBLIGATIONS OF OTHER ISSUERS STATE ASSISTANCE. Property tax revenues received by local governments declined more than 50% following passage of Proposition 13. Subsequently, the California Legislature enacted measures to provide for the redistribution of the State's General Fund surplus to local agencies; the reallocation of certain State revenues to local agencies; and the assumption of certain governmental functions by the State to assist municipal issuers to raise revenues. Total local assistance from the State's General Fund totaled approximately $31.2 billion in FY 1992-93 (about 75% of General Fund expenditures) and has been budgeted at $29 billion for FY 1993-94 , 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 Act s caused local governments to transfer $ 3.8 billion of property tax revenues to school districts, representing reversal of the post-Proposition 13 "bailout" aid. To the extent the State should be constrained by its Article XIIIB appropriations limit, or its obligation to conform to Proposition 98, or other considerations, the absolute level, or the rate of growth, of State assistance to local governments may continue to be reduced. Any such reductions in State aid could compound the serious fiscal constraints already experienced by many local governments, particularly counties. At least one rural county (Butte) publicly announced that it might enter bankruptcy proceedings in August 1990, although such plans were put off after the Governor approved legislation to provide additional funds for the county. Other counties have also indicated that their budgetary condition is extremely grave. A school district (Richmond Unified) filed for protection under bankruptcy laws several years ago , but the petition was later dismissed; other school districts have indicated financial stress, although none has threatened bankruptcy. ASSESSMENT BONDS. Municipal obligations which are assessment bonds or Mello-Roos bonds may be adversely affected by a general decline in real estate values or a slowdown in real estate sales activity. In many cases, such bonds are secured by land which is undeveloped at the time of issuance but anticipated to be developed within a few years after issuance. In the event of such reduction or slowdown, such development may not occur or may be delayed, thereby increasing the risk of a default on the bonds. Because the special assessments or taxes securing these bonds are not the personal liability of the owners of the property assessed, the lien on the property is the only security for the bonds. Moreover, in most cases the issuer of these bonds is not required to make payments on the bonds in the event of delinquency in the payment of assessments or taxes, except from amounts, if any, in a reserve fund established for the bonds. CALIFORNIA LONG-TERM LEASE OBLIGATIONS. Certain California long-term lease obligations, though typically payable from the general fund of the municipality, are subject to "abatement" in the event the facility being leased is unavailable for beneficial use and occupancy by the municipality during the term of the lease. Abatement is not a default, and there may be no remedies available to the holders of the certificates evidencing the lease obligation in the event abatement occurs. The most common causes of abatement are failure to complete construction of the facility before the end of the period during which lease payments have been capitalized and uninsured casualty losses to the facility (e.g., due to earthquake). In the event abatement occurs with respect to a lease obligation, lease payments may be interrupted (if all available insurance proceeds and reserves are exhausted) and the certificates may not be paid when due. Several years ago the Richmond Unified School District ("District") entered into a lease transaction in which certain existing properties of the District were sold and leased back in order to obtain funds to cover operating deficits. Following a fiscal crisis in which the District's finances were taken over by a State receiver (including a brief period under bankruptcy court protection), the District failed to make rental payments on this lease, resulting in a lawsuit by the Trustee for the Certificate of Participation holders . One of the defenses raised in answer to this lawsuit was the invalidity of the original lease transaction. The trial court upheld the validity of the District's lease , and the case has been settled. However, any future judgment in a similar case against the position taken by the Trustee may have implications for lease transactions of a similar nature by other California entities. OTHER CONSIDERATIONS. The repayment of Industrial Development Securities secured by real property may be affected by California laws limiting foreclosure rights of creditors. Health Care and Hospital Securities may be affected by changes in State regulations governing cost reimbursements to health care providers under Medi-Cal (the State's Medicaid program), including risks related to the policy of awarding exclusive contracts to certain hospitals. Limitations on ad valorem property taxes may particularly affect "tax allocation" bonds issued by California redevelopment agencies. Such bonds are secured solely by the increase in assessed valuation of a redevelopment project area after the start of redevelopment activity. In the event that assessed values in the redevelopment project decline (for example, because of major natural disaster such as an earthquake), the tax increment revenue may be insufficient to make principal and interest payments on these bonds. Both Moody's and S&P suspended ratings on California tax allocation bonds after the enactment of Articles XIIIA and XIIIB, and only resumed such ratings on a selective basis. Proposition 87, approved by California voters in 1988, requires that all revenues produced by a tax rate increase go directly to the taxing entity which increased such tax rate to repay that entity's general obligation indebtedness. As a result, redevelopment agencies (which, typically, are the Issuers of Tax Allocation Securities) no longer receive an increase in tax increment when taxes on property in the project area are increased to repay voter-approved bonded indebtedness. Substantially all of California is within an active geologic region subject to major seismic activity. Any California Municipal Obligation in the funds could be affected by an interruption of revenues because of damaged facilities or, consequently, income tax deductions for casualty losses or property tax assessment reductions. Compensatory financial assistance could be constrained by the inability of (i) an issuer to have obtained earthquake insurance coverage at reasonable rates; (ii) an insurer to perform on its contracts of insurance in the event of widespread losses; or (iii) the federal or State government to appropriate sufficient funds within their respective budget limitations. On January 17, 1994 , a major earthquake with an estimated magnitude of 6.8 on the Richter scale struck the Los Angeles area, causing significant property damage to public and private facilities, presently estimated at $15-20 billion. While over $9.5 billion of federal aid, and a projected $1.9 billion of State aid, plus insurance proceeds, will reimburse much of that loss, there will be some ultimate loss of wealth and income in the region, in addition to costs of the disruption caused by the event. These uninsured losses are estimated to have only a small effect on the overall state economy, with a drop of up to 0.5 percent in personal income growth. Short-term economic projections are generally neutral, as the infusion of aid will restore billions of dollars to the local economy within a few months. Although the earthquake will hinder recovery from the recession in Southern California, already hard-hit, its long-term impact is not expected to be material in the context of the overall wealth of the region. Almost five years after the event, there are few remaining effects of the 1989 Loma Prieta earthquake in Northern California (which, however, has caused less severe damage than the Northridge earthquake). Because of the complex nature of Articles XIIIA and XIIIB of the California Constitution (described briefly above), the ambiguities and possible inconsistencies in their terms, and the impossibility of predicting future appropriations or changes in population and the cost of living, and the probability of continuing legal challenges, it is not currently possible to determine fully the impact of Article XIIIA or Article XIIIB, or the outcome of any pending litigation with respect to those provisions on California obligations in the funds or on the ability of the State or local governments to pay debt service on such obligations. Legislation has been or may be introduced (either in the Legislature or by initiative) which would modify existing taxes or other revenue-raising measures or which either would further limit or, alternatively, would increase the abilities of state and local governments to impose new taxes or increase existing taxes. It is not presently possible to predict the extent to which any such legislation will be enacted, or if enacted, how it would affect California municipal obligations. It is also not presently possible to predict the extent of future allocations of state revenues to local governments or the abilities of state or local governments to pay the interest on, or repay the principal of, such California municipal obligations in light of future fiscal circumstances. SPECIAL FACTORS AFFECTING PUERTO RICO The following only highlights some of the more significant financial trends and problems affecting the Commonwealth of Puerto Rico (the "Commonwealth" or "Puerto Rico"), and is based on information drawn from official statements and prospectuses relating to the securities offerings of Puerto Rico, its agencies and instrumentalities, as available on the date of this Statement of Additional Information. FMR has not independently verified any of the information contained in such official statements, prospectuses and other publicly available documents, but is not aware of any fact which would render such information materially inaccurate. The economy of Puerto Rico is closely linked with that of the United States, and in fiscal 1992 trade with the United States accounted for approximately 88% of Puerto Rico's exports and approximately 68% of its imports. In this regard, in fiscal 1992 Puerto Rico experienced a $2,940,300,000 positive adjusted merchandise trade balance. Since fiscal 1987 personal income, both aggregate and per capita, have increased consistently each fiscal year. In fiscal 1992 aggregate personal income was $22.7 billion and personal per capita income was $6,360. Gross domestic product in fiscal 1989, 1990, 1991 and 1992 was $19,954,000, $21,619,000, 22,857,000, and $23,620,000 respectively. For fiscal 1993, an increase in gross domestic product of 2.9% over fiscal 1992 is forecasted. However, actual growth in the Puerto Rico economy will depend on several factors including the condition of the U.S. economy, the exchange rate for the U.S. dollar, the price stability of oil imports, and interest rates. Due to these factors there is no assurance that the economy of Puerto Rico will continue to grow. Puerto Rico has made marked improvements in fighting unemployment. Unemployment is at a low level compared to that of the late 1970s, but it still remains significantly above the United States average. Despite long term improvements the unemployment rate rose from 15.2% to 16.5% from fiscal 1991 to fiscal 1992. At the end of the third quarter of fiscal 1993 the unemployment rate in Puerto Rico stood at 17.3%. There is a possibility that the unemployment rate will continue to increase. The economy of Puerto Rico has undergone a transformation in the later half of this century from one centered around agriculture, to one dominated by the manufacturing and service industries. Manufacturing is the cornerstone of Puerto Rico's economy, accounting for $13.2 billion or 38.7% of gross domestic product in 1992. However, manufacturing has experienced a basic change over the years as a result of the influx of higher wage, high technology industries such as the pharmaceutical industry, electronics, computers, micro-processors, scientific instruments and high technology machinery. The service sector, which includes wholesale and retail trade, finance and real estate, ranks second in its contribution to gross domestic product and is the sector that employs the greatest number of people. In fiscal 1992, the service sector generated $13.0 billion in gross domestic product or 38.3% of the total and employed over 449,000 workers providing 46% of total employment. The government sector and tourism also contribute to the island economy each accounting for $3.7 billion and $1.5 billion in fiscal 1992, respectively. Much of the development of the manufacturing sector of the economy of Puerto Rico is attributable to federal and Commonwealth tax incentives, most notably section 936 of the Internal Revenue Code of 1986, as amended ("Section 936") and the Commonwealth's Industrial Incentives Program. Section 936 currently grants U.S. corporations that meet certain criteria and elect its application a credit against their U.S. corporate income tax on the portion of the tax attributable to (i) income derived from the active conduct of a trade or business in Puerto Rico ("active income"), or from the sale or exchange of substantially all the assets used in the active conduct of such trade or business, and (ii) qualified possession source investment income ("passive income"). The Industrial Incentives Program, through the 1987 Industrial Incentives Act, grants corporations engaged in certain qualified activities a fixed 90% exemption from Commonwealth income and property taxes and a 60% exemption from municipal license taxes. On August 16, 1993, President Clinton signed a bill amending Section 936. Under the amendments, U.S. corporations with operations in Puerto Rico can elect to receive a federal income tax credit equal to: 40% of the credit currently available, phased in over a five year period, starting at 60% of the current credit, or a credit based on investment and wages. The investment and wage credit would equal the sum of (i) 60% of qualified compensation to employees, (ii) a specified percentage of depreciation deductions with respect to tangible property located in Puerto Rico, and (iii) a portion of income taxed paid to Puerto Rico, up to a 9% effective tax rate, subject to certain requirements. It is not possible to determine at this time whether the reductions in tax incentives for operations in Puerto Rico will have a significant impact on the economy of Puerto Rico or the time period in which such impact would arise. PORTFOLIO TRANSACTIONS All orders for the purchase or sale of portfolio securities are placed on behalf of the funds by FMR (either directly or through affiliated sub-advisers) pursuant to authority contained in the management contracts. FMR is also responsible for the placement of transaction orders for other investment companies and accounts for which it or its affiliates act as investment adviser. Securities purchased and sold by the money market fund generally will be traded on a net basis (i.e., without commission). In selecting broker-dealers, subject to applicable limitations of the federal securities laws, FMR will consider various relevant factors, including, but not limited to, the size and type of the transaction; the nature and character of the markets for the security to be purchased or sold; the execution efficiency, settlement capability, and financial condition of the broker-dealer firm; the broker-dealer's execution services rendered on a continuing basis; and the reasonableness of any commissions. The funds may execute portfolio transactions with broker-dealers who provide research and execution services to the funds or other accounts over which FMR or its affiliates exercise investment discretion. Such services may include advice concerning the value of securities; the advisability of investing in, purchasing, or selling securities; the availability of securities or the purchasers or sellers of securities; furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and performance of accounts; and effecting securities transactions and performing functions incidental thereto (such as clearance and settlement). FMR maintains a listing of broker-dealers who provide such services on a regular basis. However, since many transactions on behalf of the money market fund are placed with broker-dealers (including broker-dealers on the list) without regard to the furnishing of such services, it is not possible to estimate the proportion of such transactions directed to such broker-dealers solely because such services were provided. The selection of such broker-dealers is generally made by FMR (to the extent possible consistent with execution considerations) based upon the quality of research and execution services provided. The receipt of research from broker-dealers that execute transactions on behalf of the funds may be useful to FMR in rendering investment management services to the funds or its other clients, and, conversely, such research provided by broker-dealers who have executed transaction orders on behalf of other FMR clients may be useful to FMR in carrying out its obligations to the funds. The receipt of such research has not reduced FMR's normal independent research activities; however, it enables FMR to avoid the additional expenses that could be incurred if FMR tried to develop comparable information through its own efforts. Subject to applicable limitations of the federal securities laws, broker-dealers may receive commissions for agency transactions that are in excess of the amount of commissions charged by other broker-dealers in recognition of their research and execution services. In order to cause 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 the funds and its other clients. In reaching this determination, FMR will not attempt to place a specific dollar value on the brokerage and research services provided, or to determine what portion of the compensation should be related to those services. FMR is authorized to use research services provided by and to place portfolio transactions with brokerage firms that have provided assistance in the distribution of shares of the funds or shares of other Fidelity funds, to the extent permitted by law. FMR may use research services provided by and place agency transactions with Fidelity Brokerage Services, Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair, reasonable, and comparable to commissions charged by non-affiliated, qualified brokerage firms for similar services. Section 11(a) of the Securities Exchange Act of 1934 prohibits members of national securities exchanges from executing exchange transactions for accounts which they or their affiliates manage, except if certain requirements are satisfied. Pursuant to such regulations, the Board of Trustees has authorized FBSI to execute fund portfolio transactions on national securities exchanges in accordance with approved procedures and applicable SEC rules. For fiscal periods March 1, 1993 to February 28, 1994 and May 1, 1992 to February 28, 1993 and the fiscal year ended April 30, 1992, the funds paid no brokerage commissions. The Trustees periodically review FMR's performance of its responsibilities in connection with the placement of portfolio transactions on behalf of each fund and review the commissions paid by each fund over representative periods of time to determine if they are reasonable in relation to the benefits to each fund. For fiscal 1994 and 1993, the insured and high yield funds' turnover rates were 44 % and 27% (annualized) and 60 % and 32% (annualized), respectively. 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 the funds are substantially the same as those of other funds managed by FMR, investment decisions for each fund are made independently from those of other funds managed by FMR or accounts managed by FMR affiliates. It sometimes happens that the same security is held in the portfolio of more than one of these funds or accounts. Simultaneous transactions are inevitable when several funds are managed by the same investment adviser, particularly when the same security is suitable for the investment objective of more than one fund. 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 a formula considered by the officers of the funds involved to be equitable to each fund. In some cases, this system could have a detrimental effect on the price or value of the security as far as the funds are 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 Board of Trustees that the desirability of retaining FMR as investment adviser to the funds outweighs any disadvantages that may be said to exist from exposure to simultaneous transactions. VALUATION OF PORTFOLIO SECURITIES INSURED AND HIGH YIELD FUNDS. Valuations of portfolio securities furnished by the pricing service employed by the insured and high yield funds are based upon a computerized matrix system or appraisals by the pricing service, in each case in reliance upon information concerning market transactions and quotations from recognized municipal securities dealers. The methods used by the pricing service and the quality of valuations so established are reviewed by officers of the funds and FSC under the general supervision of the Board of Trustees. There are a number of pricing services available, and the Trustees, or officers acting on behalf of the Trustees, on the basis of on-going evaluation of these services, may use other pricing services or discontinue the use of any pricing service in whole or in part. MONEY MARKET FUND. The fund values its investments on the basis of amortized cost. This technique involves valuing an instrument at its cost as adjusted for amortization of premium or accretion of discount rather than its value based on current market quotations or appropriate substitutes which reflect current market conditions. The amortized cost value of an instrument may be higher or lower than the price the money market fund would receive if it sold the instrument. Valuing the fund's instruments on the basis of amortized cost and use of the term "money market fund" are permitted by Rule 2a-7 under the 1940 Act. The money market fund must adhere to certain conditions under Rule 2a-7 . The Board of Trustees of the money market fund oversees FMR's adherence to SEC rules concerning money market funds, and has established procedures designed to stabilize the fund's NAV at $1.00. At such intervals as they deem appropriate, the Trustees consider the extent to which NAV calculated by using market valuations would deviate from $1.00 per share. If the Trustees believe that a deviation from the fund's amortized cost per share may result in material dilution or other unfair results to shareholders, the Trustees have agreed to take such corrective action, if any, as they deem appropriate to eliminate or reduce, to the extent reasonably practicable, the dilution or unfair results. Such corrective action could include selling portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; withholding dividends; redeeming shares in kind; establishing NAV by using available market quotations; and such other measures as the Trustees may deem appropriate. During periods of declining interest rates, the money market fund's yield based on amortized cost may be higher than the yield based on market valuations. Under these circumstances, a shareholder in the money market fund would be able to obtain a somewhat higher yield than would result if the money market fund utilized market valuations to determine its NAV. The converse would apply in a period of rising interest rates. PERFORMANCE The funds may quote performance in various ways. All performance information supplied by the funds in advertising is historical and is not intended to indicate future returns. The insured and high yield funds' share price, and all of the funds' yields and total returns fluctuate in response to market conditions and other factors. The value of the insured and high yield funds' shares when redeemed may be more or less than their original cost. YIELD CALCULATIONS. To compute the MONEY MARKET FUND'S yield for a period, the net change in value of a hypothetical account containing one share (exclusive of capital gains) reflects the value of additional shares purchased with dividends from the one original share and dividends declared on both the original share and any additional shares. The net change is then divided by the value of the account at the beginning of the period to obtain a base period return. This base period return is annualized to obtain a current annualized yield. The money market fund also may calculate a compound effective yield by compounding the base period return over a one-year period. In addition to the current yield, the money market fund may quote yields in advertising based on any historical seven-day period. For the INSURED AND HIGH YIELD FUND, yields used in advertising are computed by dividing a fund's interest income for a given 30-day or one-month period, net of expenses, by the average number of shares entitled to receive dividends during the period, dividing this figure by the fund's net asset value per share at the end of the period, and annualizing the result (assuming compounding of income) in order to arrive at an annual percentage rate. Income is calculated for purposes of the insured and high yield funds' 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 insured and high yield funds' yields differs from income as determined for other accounting purposes. Because of the different accounting methods used, and because of the compounding of income assumed in yield calculations, a 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. A fund's tax-equivalent yield is the rate an investor would have to earn from a fully taxable investment after taxes to equal the fund's tax-free yield. Tax-equivalent yields are calculated by dividing a fund's yield by the result of one minus a stated federal or combined federal and state tax rate. (If only a portion of the fund's yield is tax-exempt, only that portion is adjusted in the calculation.) The following tables show the effect of a shareholder's tax status on the effective yield under federal and state income tax laws for 1994. They show the approximate yield a taxable security must provide at various income brackets to produce after-tax yields equivalent to those of tax-exempt obligations yielding from 2.0% to 7.0%. Of course, no assurance can be given that the funds will achieve any specific tax-exempt yield. While each fund invests principally in obligations whose interest is exempt from federal and state income tax, other income received by the funds may be taxable. The funds do not take into account local taxes, if any, payable on fund distributions. 1994 TAX RATES AND TAX EQUIVALENT YIELDS Combined California Single Return Joint Return Federal and Federal Effective Taxable Income* Taxable Income* Tax Bracket Tax Bracket $ 22,751 - 24,228 $ 38,001 - 48,456 28.% 32.32% 24,229 - 30,620 48,457 - 61,240 28 33.76 30,621 - 55,100 61,241 - 91,850 28 34.70 55,101 - 106,190 91,851 - 140,000 31 37.42 106,191 - 115,000 -- - -- 31 37.90 -- - -- 140,001 - 212,380 36 41.95 115,001 - 212,380 212,381 - 250,000 36 42.40 212,381 - 250,000 -- - -- 36 43.04 -- - -- 250,001 - 424,760 39.6 45.64 250,001 + 424,761 + 39.6 46.24 *Net taxable income after all exemptions, adjustments, and deductions. These are based on rates currently applicable in 1994 and assume one exemption for single filers and two exemptions for married couples files jointly. Having determined your effective tax bracket above, use the following table to determine the tax-equivalent yield for a given tax-free yield. If your effective combined federal and state personal tax rate in 1994 is:
32.32% 33.76% 34.70% 37.42% 37.90% 41.95% 42.40% 43.04% 45.64% 46.24%
Then your tax-equivalent yield is: Tax-Free Yield
2% 2.96% 3.02% 3.06% 3.20% 3.22% 3.45% 3.47% 3.51% 3.68% 3.72% 3% 4.43% 4.53% 4.59% 4.79% 4.83% 5.17% 5.21% 5.27% 5.52% 5.58% 4% 5.91% 6.04% 6.13% 6.39% 6.44% 6.89% 6.94% 7.02% 7.36% 7.44% 5% 7.39% 7.55% 7.66% 7.99% 8.05% 8.61% 8.68% 8.78% 9.20% 9.30% 6% 8.87% 9.06% 9.19% 9.59% 9.66% 10.34% 10.42% 10.53% 11.04% 11.16% 7% 10.34% 10.57% 10.72% 11.19% 11.27% 12.06% 12.15% 12.29% 12.88% 13.02% 8% 11.82% 12.08% 12.25% 12.78% 12.88% 13.78% 13.89% 14.04% 14.72% 14.88%
The fund may invest a portion of its assets in obligations that are subject to state or federal income taxes. When the fund invests in these obligations, its tax-equivalent yields will be lower. In the table above, tax-equivalent yields are calculated assuming investments are 100% federally and state tax-free. The California income tax rates are those in effect for 1993 , which will be the same in 1994 except that California law requires that the brackets be adjusted annually for inflation using 100% of the California Consumer Price Index through June of the tax year. As of the date of this Statement of Additional Information, the California Franchise Tax Board had not published the 1994 inflation adjusted tax brackets. Each fund may invest a portion of its assets in obligations that are subject to state or federal income taxes. When a fund invests in these obligations, its tax-equivalent yields will be lower. In the table above, tax-equivalent yields are calculated assuming investments are 100% federally and state tax-free. Yield information may be useful in reviewing the funds' performance and in providing a basis for comparison with other investment alternatives. However, each fund's yield fluctuates, unlike investments that pay a fixed interest rate over a stated period of time. When comparing investment alternatives, investors should also note the quality and maturity of the portfolio securities of the respective investment companies they have chosen to consider. Investors should recognize that in periods of declining interest rates the fund's yields 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 the fund's current yields. In periods of rising interest rates, the opposite can be expected to occur. TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all aspects of a fund's returns, including the effect of reinvesting dividends and capital gain distributions (if any), and any change in the fund's net asset value per share (NAV) over the period. Average annual total returns are calculated by determining the growth or decline in value of a hypothetical historical investment in a fund over a stated period, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. For example, a cumulative total return of 100% over ten years would produce an average annual return of 7.18%, which is the steady annual rate that would equal 100% growth on a compounded basis in ten years. While average annual returns are a convenient means of comparing investment alternatives, investors should realize that a fund's performance is not constant over time, but changes from year to year, and that average annual total returns represent averaged figures as opposed to the actual year-to-year performance of the fund. In addition to average annual returns, a fund may quote unaveraged or cumulative total returns reflecting the simple change in value of an investment over a stated period. Average annual and cumulative total returns may be quoted as a percentage or as a dollar amount, and may be calculated for a single investment, a series of investments, or a series of redemptions, over any time period. Total returns may be broken down into their components of income and capital (including capital gains and changes in share price) in order to illustrate the relationship of these factors and their contributions to total return. An example of this type of illustration is given below. Total returns, yields, and other performance information may be quoted numerically or in a table, graph, or similar illustration. NET ASSET VALUE. Charts and graphs using the insured or high yield funds' net asset values, adjusted net asset values, and benchmark indices may be used to exhibit performance. An adjusted NAV includes any distributions paid by a fund and reflects all elements of its return. Unless otherwise indicated, a fund's adjusted NAVs are not adjusted for sales charges, if any. HISTORICAL FUND RESULTS. The following charts show the funds' yields, tax-equivalent yields, and total returns for periods ended February 28, 1994: MONEY MARKET FUND Tax Equivalent Average Cumulative 7-day Yield 7-day Yield Annual Total Returns Total Returns One Five Life One Five Life Year Years(dagger) of Fund*(dagger) Year Years(dagger) of Fund*(dagger) 1.91% 3.35% 1.97% 3.78% 4.22% 1.97% 20.38% 49.06% (dagger) If FMR had not reimbursed certain fund expenses during the periods, the funds' total returns would have been lower. * From July 7, 1984 (commencement of operations). INSURED FUND Tax Equivalent Average Cumulative 30-day Yield 30-day Yield Annual Total Returns (dagger) Total Returns (dagger) One Five Life One Five Life Year Years of Fund* Year Years of Fund* 4.90% 8.60% 4.59% 9.32% 7.59% 4.59% 56.12% 72.51% * From September 18, 1986 (commencement of operations). (dagger) If FMR had not reimbursed certain fund expenses during the periods, the funds' total returns would have been lower. HIGH YIELD FUND Tax Equivalent Average Cumulative 30-day Yield 30-day Yield Annual Total Returns Total Returns One Five Life One Five Life Year Years of Fund* Year Years of Fund* 4.99% 8.76% 5.41% 9.31% 9.72% 5.41% 56.05% 144.91% * From July 7, 1984 (commencement of operations). The tax-equivalent yields are based on the highest 1994 combined federal and state income tax bracket of 46.24 %, and reflect that none of the funds' investments on February 28, 1994 were subject to state taxes. During the periods quoted, interest rates and bond prices fluctuated widely; thus the tables should not be considered representative of the dividend income or capital gain or loss that could be realized from investment in the funds today. MONEY MARKET FUND. During the period from July 7, 1984 (commencement of operations) to February 28, 1994, a hypothetical investment of $10,000 in the money market fund would have grown to $14,906 assuming all distributions were reinvested. MONEY MARKET FUND INDICES
Value of Value of Value of Period Initial Reinvested Reinvested Cost Ended $10,000 Dividend Capital Gain Total of February 28 Investment Distributions Distributions Value S&P DJIA Living** 500
1994 $9,980 $4,926 $0 $14,906 $42,790 $47,853 $14,147 1993 $9,980 $4,638 $0 $14,618 $39,500 $40,941 $13,799 1992 $9,980 $4,293 $0 $14,273 $35,691 $38,529 $13,365 1991 $9,980 $3,775 $0 $13,755 $30,767 $32,917 $12,999 1990 $9,980 $3,113 $0 $13,093 $26,835 $28,878 $12,343 1989 $9,980 $2,403 $0 $12,383 $22,568 $23,908 $11,726 1988 $9,980 $1,814 $0 $11,794 $20,171 $21,158 $11,186 1987 $9,980 $1,336 $0 $11,316 $20,724 $22,007 $10,762 1986 $9,980 $ 904 $0 $10,884 $16,001 $16,334 $10,540 1985(dagger) $9,990 $ 378 $0 $10,368 $12,261 $11,756 $10,222 (dagger) From July 7, 1984 (commencement of operations). ** From month-end closest to initial investment date. EXPLANATORY NOTES: With an initial investment of $10,000 made on July 7, 1984, 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 for the period covered (their cash value at the time they were reinvested), amounted to $14,886 . If distributions had not been reinvested, the amount of distributions earned from the fund over time would have been smaller, and the cash payments (dividends) for the period would have amounted to $3,975 . The fund did not distribute any capital gain distributions during this period and does not anticipate that it will in the future. If FMR had not reimbursed certain fund expenses during the periods shown, the fund's returns would have been lower. INSURED FUND. During the period from September 18, 1986 (commencement of operations) to February 28, 1994, a hypothetical investment of $10,000 in the insured fund would have grown to $17,251 assuming all distributions were reinvested. INSURED FUND INDICES
Value of Value of Value of Period Initial Reinvested Reinvested Cost Ended $10,000 Dividend Capital Gain Total of February 28 Investment Distributions Distributions Value S&P DJIA Living** 500
1994 $10,740 $6,203 $307 $17,251 $25,707 $27,748 $13,312 1993 $11,030 $5,464 $0 $16,494 $23,730 $23,740 $12,985 1992 $10,090 $4,159 $0 $14,249 $21,442 $22,342 $12,577 1991 $9,710 $3,198 $0 $12,908 $18,483 $19,087 $12,232 1990 $9,640 $2,389 $0 $12,029 $16,121 $16,745 $11,615 1989 $9,440 $1,609 $0 $11,049 $13,558 $13,863 $11,034 1988 $9,640 $ 935 $0 $10,575 $12,118 $12,269 $10,526 1987(dagger) $10,320 $ 274 $0 $10,594 $12,450 $12,761 $10,127 (dagger) From September 18, 1986 (commencement of operations). ** From month-end closest to initial investment date. EXPLANATORY NOTES: With an initial investment of $10,000 made on September 18, 1986, the net amount invested in fund shares was $10,000. The cost of the initial investment ($10,000), together with the aggregate cost of reinvested dividends for the period covered (their cash value at the time they were reinvested), amounted to $16,036 . If distributions had not been reinvested, the amount of distributions earned from the fund over time would have been smaller, and the cash payments for the period would have come to $4,501 for income dividends and $200 for capital gain distributions. If FMR had not reimbursed certain fund expenses during the periods shown above, the fund's returns would have been lower. HIGH YIELD FUND. During the period from July 7, 1984 (commencement of operations) to February 28, 1994, a hypothetical investment of $10,000 in the high yield fund would have grown to $24,491 assuming all distributions were reinvested. HIGH YIELD FUND INDICES
Value of Value of Value of Period Initial Reinvested Reinvested Cost Ended $10,000 Dividend Capital Gain Total of February 28 Investment Distributions Distributions Value S&P DJIA Living** 500
1994 $12,100 $11,722 $670 $24,491 $42,790 $47,853 $14,147 1993 $12,430 $10,651 $153 $23,234 $39,500 $40,941 $13,799 1992 $11,580 $ 8,617 $142 $20,339 $35,691 $38,529 $13,365 1991 $11,280 $ 7,150 $139 $18,568 $30,767 $32,917 $12,999 1990 $11,200 $ 5,901 $138 $17,239 $26,835 $22,878 $12,343 1989 $10,910 $ 4,650 $134 $15,694 $22,568 $23,908 $11,726 1988 $11,060 $ 3,642 $136 $14,838 $20,171 $21,158 $11,186 1987 $12,080 $ 2,872 $ 64 $15,016 $20,724 $22,007 $10,762 1986 $11,540 $ 1,807 $ 0 $13,347 $16,001 $16,334 $10,540 1985 $10,210 $ 636 $ 0 $10,846 $12,261 $11,756 $10,222 (dagger) From July 7, 1984 (commencement of operations). ** From month-end closest to initial investment date. EXPLANATORY NOTES: With an initial investment of $10,000 made on July 7, 1984, the net amount invested in fund shares was $10,000. The cost of the initial investment ($10,000), together with the aggregate cost of reinvested dividends and capital gain distributions for the period covered (their cash value at the time they were reinvested), amounted to $21,568 . If distributions had not been reinvested, the amount of distributions earned from the fund over time would have been smaller, and the cash payments for the period would have come to $7,537 for income dividends and $380 for capital gain distributions. A fund's performance may be compared to the performance of other mutual funds in general, or to the performance of particular types of mutual funds. These comparisons may be expressed as mutual fund rankings prepared by Lipper Analytical Services, Inc. (Lipper), an independent service located in Summit, New Jersey that monitors the performance of mutual funds. Lipper generally ranks funds on the basis of total return, assuming reinvestment of distributions, but does not take sales charges or redemption fees into consideration, and is prepared without regard to tax consequences. Lipper may also rank funds based on yield. In addition to the mutual fund rankings, a fund's performance may be compared to mutual fund performance indices prepared by Lipper. From time to time, a fund's performance may also be compared to other mutual funds tracked by financial or business publications and periodicals. For example, the fund may quote Morningstar, Inc. in its advertising materials. Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the basis of risk-adjusted performance. Rankings that compare the performance of Fidelity funds to one another in appropriate categories over specific periods of time may also be quoted in advertising. A fund may be compared in advertising to Certificates of Deposit (CDs) or other investments issued by banks. Mutual funds differ from bank investments in several respects. For example, a fund may offer greater liquidity or higher potential returns than CDs, and a fund does not guarantee your principal or your return. Fidelity may provide information designed to help individuals understand their investment goals and explore various financial strategies. For example, Fidelity's FundMatchsm Program includes a workbook describing general principles of investing, such as asset allocation, diversification, risk tolerance, and goal setting; a questionnaire designed to help create a personal financial profile; and an action plan offering investment alternatives. Materials may also include discussions of Fidelity's three asset allocation funds and other Fidelity funds, products, and services. Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical returns of the capital markets in the United States, including common stocks, small capitalization stocks, long-term corporate bonds, intermediate-term government bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation (based on the CPI), and combinations of various capital markets. The performance of these capital markets is based on the returns of different indices. Fidelity funds may use the performance of these capital markets in order to demonstrate general risk-versus-reward investment scenarios. Performance comparisons may also include the value of a hypothetical investment in any of these capital markets. The risks associated with the security types in any capital market may or may not correspond directly to those of the funds. Ibbotson calculates total returns in the same method as the funds. The funds may also compare performance to that of other compilations or indices that may be developed and made available in the future. A fund may compare its performance or the performance of securities in which it may invest to averages published by IBC USA (Publications), Inc. of Ashland, Massachusetts. These averages assume reinvestment of distributions. The IBC/Donoghue's MONEY FUND AVERAGES(TRADEMARK)/All Tax-Free, which is reported in the MONEY FUND REPORT(REGISTERED TRADEMARK), covers over 335 tax-free money market funds. The Bond Fund Report AverageS(TRADEMARK)/All Tax-Free, which is reported in the BOND FUND REPORT(REGISTERED TRADEMARK), covers over 355 tax-free bond funds. When evaluating comparisons to money market funds, investors should consider the relevant differences in investment objectives and policies. Specifically, money market funds invest in short-term, high-quality instruments and seek to maintain a stable $1.00 share price. The insured and high yield funds, however, invest in longer-term instruments and their share prices change daily in response to a variety of factors. The insured and high yield funds may compare and contrast in advertising the relative advantages of investing in a mutual fund versus an individual municipal bond. Unlike tax-free mutual funds, individual municipal bonds offer a stated rate of interest and, if held to maturity, repayment of principal. Although some individual municipal bonds might offer a higher return, they do not offer the reduced risk of a mutual fund that invests in many different securities. The initial investment requirements and sales charges of many tax-free mutual funds are lower than the purchase cost of individual municipal bonds, which are generally issued in $5,000 denominations and are subject to direct brokerage costs. In advertising materials, Fidelity may reference or discuss its products and services, which may include: other Fidelity funds; retirement investing; brokerage products and services; the effects of periodic investment plans and dollar cost averaging; saving for college; charitable giving; and the Fidelity credit card. In addition, Fidelity may quote financial or business publications and periodicals, including model portfolios or allocations, as they relate to fund management, investment philosophy, and investment techniques. Fidelity may also reprint, and use as advertising and sales literature, articles from Fidelity Focus, a quarterly magazine provided free of charge to Fidelity fund shareholders. A fund may present its fund number, Quotron(TRADEMARK) number, and CUSIP number, and discuss or quote its current portfolio manager. Thee insured and high yield funds 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, 1994 FMR advised 41 tax-free funds or portfolios with a total value of over $30 billion. According to the Investment Company Institute, over the past ten years, assets in tax-exempt money market funds increased from $23.8 billion in 1984 to approximately $94.8 billion at the end of 1992. The money market fund may reference the growth and variety of money market mutual funds and the adviser's innovation and participation in the industry. 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 1993: Washington's Birthday (observed), Good Friday, Memorial Day (observed), Independence Day (observed), Labor Day, Thanksgiving Day, and Christmas Day (observed). Although FMR expects the same holiday schedule, with the addition of New Years Day, to be observed in the future, the NYSE may modify its holiday schedule at any time. FSC normally determines each fund's NAVs as of the close of the NYSE (normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier if trading on the NYSE is restricted or as permitted by the SEC. To the extent that fund 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. 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 by the SEC, or the fund to be acquired suspends the sale of its shares because it is unable to invest amounts effectively in accordance with its investment objective and policies. In the Prospectus, 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. DISTRIBUTION AND TAXES DISTRIBUTIONS. If you request to have distributions mailed to you and the U.S. Postal Service cannot deliver your checks, or if your checks remain uncashed for six months, Fidelity may reinvest your distributions at the then-current NAV. All subsequent distributions will then be reinvested until you provide Fidelity with alternate instructions. DIVIDENDS. To the extent that each fund's income is derived from federally tax-exempt interest, the daily dividends declared by each fund are also federally tax-exempt. The funds will send each shareholder a notice in January describing the tax status of dividends and capital gain distributions (if any) for the prior year. Shareholders are required to report tax-exempt income on their federal tax returns. Shareholders who earn other income such as social security benefits, may be subject to federal income tax on up to one half of such benefits to the extent that their income, including tax-exempt income, exceeds certain base amounts. The funds purchase municipal obligations based on opinions of bond counsel regarding the federal income tax status of the obligations. These opinions generally will be based upon covenants by the issuers regarding continuing compliance with federal tax requirements. If the issuer of an obligation fails to comply with its covenants at any time, interest on the obligation could become federally taxable retroactive to the date the obligation was issued. As a result of the Tax Reform Act of 1986, interest on certain "private activity" securities (referred to as "qualified bonds" in the Internal Revenue Code) is subject to the federal alternative minimum tax (AMT), although the interest continues to be excludable from gross income for other purposes. Interest from private activity securities will be considered tax-exempt for purposes of the funds' policies of investing so that at least 80% of their income is free from federal income tax. Interest from private activity securities is a tax preference item for the purposes of determining whether a taxpayer is subject to the AMT and the amount of AMT tax to be paid, if any. Private activity securities issued after August 7, 1986 to benefit a private or industrial user or to finance a private facility are affected by this rule. It is the current position of the Staff of the Securities and Exchange Commission that a fund which uses the word "tax-free" in its name may not derive more than 20% of its income from municipal obligations that pay interest that is a preference item for purposes of the AMT. Under this position, at least 80% of each fund's income distributions would have to be exempt from the AMT as well as federal taxes. Corporate investors should note that an adjustment for purposes of the corporate AMT is 75% of the amount by which, adjusted current earnings (which includes tax-exempt interest) exceeds the alternative minimum taxable income of the corporation. If a shareholder receives an exempt-interest dividend and sells shares at a loss after holding them for a period of six months or less, the loss will be disallowed to the extent of the amount of exempt-interest dividend. CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the insured and high yield funds on the sale of securities and distributed to shareholders are federally taxable as long-term capital gains, regardless of the length of time that shareholders have held their shares. If a shareholder receives a long-term capital gain distribution on shares of a fund and such shares are held six months or less and are sold at a loss, the portion of the loss equal to the amount of the long-term capital gain distribution will be considered a long-term loss for tax purposes. A portion of the gain on bonds purchased at a discount after April 30, 1993 and short-term capital gains distributed by the funds are federally taxable to shareholders as dividends, not as capital gains. Distributions from short-term capital gains do not qualify for the dividends-received deduction. Dividend distributions resulting from a recharacterization of gain from the sale of bonds purchased at a discount after April 30, 1993 are not considered income for purposes of the funds' policy investing so that at least 80% of their income is free from federal income tax. The money market fund may distribute any net realized short-term capital gains once a year or more often as necessary to maintain its net asset value at $1.00 a share. TAX STATUS OF THE FUNDS. Each fund has qualified and intends to continue 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 all of its net investment income and net realized capital gains (if any) within each calendar year as well as on a fiscal year basis. Each fund intends to comply with other tax rules applicable to regulated investment companies, including a requirement that capital gains from the sale of securities held less than three months constitute less than 30% of the fund's gross income for each fiscal year. Gains from some futures contracts and options are included in this 30% calculation, which may limit the insured and high yield funds' investments in such instruments. Fidelity California Municipal Trust treats each of its funds (including the insured and high yield funds) as a separate entity for tax purposes. Fidelity California Municipal Trust II treats the money market fund as a separate entity for tax purposes. As of February 28, 1994, the money market fund had approximately $105,800 in aggregate capital loss carryovers available until February 28, 2000 to offset future capital gains. To the extent that capital loss carryovers are used to offset any future capital gains, it is unlikely that the gains so offset will be distributed to shareholders, since any such distributions may be taxable to shareholders as ordinary income. CALIFORNIA TAX MATTERS. As long as 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 which are exempt from California personal income tax are excludable from gross income. For a fund to qualify to pay exempt-interest dividends under California law, at least 50 percent of the value of its assets must consist of such obligations at the close of each quarter of its fiscal year. For purposes of California personal income taxation, distributions to individual shareholders derived from interest on other types of obligations and short-term capital gains will be taxed as dividends, and long-term capital gain distributions will be taxed as long-term capital gains. California has an alternative minimum tax similar to the federal AMT described above. However, the California AMT does not include interest from private activity municipal obligations as an item of tax preference. Interest on indebtedness incurred or continued by a shareholder in connection with the purchase of shares of a fund will not be deductible for California personal income tax purposes. FUTURES AND OPTIONS TRANSACTIONS (insured and high yield funds). A special "marked-to-market" system governs the taxation of "section 1256 contracts." These contracts generally include options on debt securities, futures contracts, and options on interest rate futures contracts. The insured and high yield funds may invest in section 1256 contracts. In general, gain or loss on section 1256 contracts will be taken into account for tax purposes when actually realized (by a closing transaction, by exercise, by taking delivery, or by other termination). In addition, any section 1256 contracts held at the end of a taxable year will be treated as sold at fair market value (marked-to-market) and the resulting gain or loss will be recognized for tax purposes. Provided that a section 1256 contract is not part of a "mixed" straddle which a fund elects to exclude from the "marked-to-market" rules, both the realized and the unrealized taxable year-end gain or loss positions (including premiums on options that expire) will be treated as 60% long-term and 40% short-term capital gain or loss, regardless of the period of time a particular position is actually held by the fund. OTHER TAX INFORMATION. The information above is only a summary of some of the tax consequences generally affecting the funds and their shareholders, and no attempt has been made to discuss individual tax consequences. Investors should consult their tax advisers to determine whether the funds are suitable to their particular tax situations. FMR FMR is a wholly owned subsidiary of FMR Corp., a parent company organized in 1972. At present, the principal operating activities of FMR Corp. are those conducted by three of its divisions as follows: FSC, which is the transfer and shareholder servicing agent for certain of the funds advised by FMR; Fidelity Investments Institutional Operations Company, which performs shareholder servicing functions for certain institutional customers; and Fidelity Investments Retail Marketing Company, which provides marketing services to various companies within the Fidelity organization. Several affiliates of FMR are also engaged in the investment advisory business. Fidelity Management Trust Company provides trustee, investment advisory, and administrative services to retirement plans and corporate employee benefit accounts. Fidelity Management & Research (U.K.) Inc. (FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far East), both wholly owned subsidiaries of FMR formed in 1986, supply investment research, and may supply portfolio management services to FMR in connection with certain funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR Far East research and visit thousands of domestic and foreign companies each year. FMR Texas Inc., a wholly owned subsidiary of FMR formed in 1989, supplies portfolio management and research services in connection with certain money market funds advised by FMR. TRUSTEES AND OFFICERS The Trustees and executive officers of the trusts are listed below. Except as indicated, each individual has held the office shown or other offices in the same company for the last five years. Trustees and officers elected or appointed to Fidelity California Municipal Trust II prior to the money market fund's conversion from a series of Fidelity California Municipal Trust served Fidelity California Municipal Trust in identical capacities. All persons named as Trustees also serve in similar capacities for other funds advised by FMR. Unless otherwise noted, the business address of each Trustee and officer is 82 Devonshire Street, Boston, MA 02109, which is also the address of FMR. Those Trustees who are "interested persons" (as defined in the 1940 Act) by virtue of their affiliation with either trust or with FMR are indicated by an asterisk (*). *EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive Officer and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of FMR Texas Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc. *J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR; and President and a Director of FMR Texas Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc. RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a consultant to Western Mining Corporation (1994). Prior to February 1994, he was president of Greenhill Petroleum Corporation (petroleum exploration and production, 1990). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of Bonneville Pacific Corporation (independent power, 1989), Sanifill Corporation (non-hazardous waste, 1993), and CH2M Hill Companies (engineering). In addition, he served on the Board of Directors of the Norton Company (manufacturer of industrial devices, 1983-1990) and continues to serve on the Board of Directors of the Texas State Chamber of Commerce, and is a member of advisory boards of Texas A&M University and the University of Texas at Austin. PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992). Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice President of Corporate Affairs of Avon Products, Inc. She is currently a Director of BellSouth Corporation (telecommunications), Eaton Corporation (manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990), and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and Nabisco Brands, Inc. In addition, she serves as a Director of the New York City Chapter of the National Multiple Sclerosis Society, and is a member of the Advisory Council of the International Executive Service Corps. and the President's Advisory Council of The University of Vermont School of Business Administration. RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a Director of the Norton Company (manufacturer of industrial devices). He is currently a Director of Mechanics Bank and a Trustee of College of the Holy Cross and Old Sturbridge Village, Inc. E. BRADLEY JONES, 3881-2 Lander Road. Chagrin Falls, OH, Trustee (1990). Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive Officer of LTV Steel Company. Prior to May 1990, he was Director of National City Corporation (a bank holding company) and National City Bank of Cleveland. He is a Director of TRW Inc. (original equipment and replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries, Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham Steel Corporation (1988), Hyster-Yale Materials Handling, Inc. (1989), and RPM, Inc. (manufacturer of chemical products, 1990). In addition, he serves as a Trustee of First Union Real Estate Investments; Chairman of the Board of Trustees and a member of the Executive Committee of the Cleveland Clinic Foundation, a Trustee and a member of the Executive Committee of University School (Cleveland), and a Trustee of Cleveland Clinic Florida. DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT, Trustee, is a Professor at Columbia University Graduate School of Business and a financial consultant. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Mr. Kirk is a Director of General Re Corporation (reinsurance), and Valuation Research Corp. (appraisal and valuations, 1993). In addition, he serves as Vice Chairman of the Board of Directors of The National Arts Stabilization Fund and Vice Chairman of the Board of Trustees of the Greenwich Hospital Association. *PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to his retirement on May 31, 1990, he was a Director of FMR (1989) and Executive Vice President of FMR (a position he held until March 31, 1991); Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services (1991 - 1992). He is a Director of W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation (engineering and construction). 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 (1990). GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is Chairman of G.M. Management Group (strategic advisory services). Prior to his retirement in July 1988, he was Chairman and Chief Executive Officer of Leaseway Transportation Corp. (physical distribution services). Mr. McDonough is a Director of ACME-Cleveland Corp. (metal working, telecommunications and electronic products), Brush-Wellman Inc. (metal refining), and York International Corp. (air conditioning and refrigeration, 1989), Commercial Intertech Corp. (water treatment equipment, 1992), and Associated Estates Realty Corporation (a real estate investment trust, 1993). EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior to his retirement in 1985, Mr. Malone was Chairman, General Electric Investment Corporation and a Vice President of General Electric Company. He is a Director of Allegheny Power Systems, Inc. (electric utility), General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). He is also a Trustee of Rensselaer Polytechnic Institute and of Corporate Property Investors and a member of the Advisory Boards of Butler Capital Corporation Funds and Warburg, Pincus Partnership Funds. MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is Chairman of the Board, President, and Chief Executive Officer of Lexmark International, Inc. (office machines, 1991). Prior to 1991, he held the positions of Vice President of International Business Machines Corporation ("IBM") and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals, 1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In addition, he serves as the Campaign Vice Chairman of the Tri-State United Way (1993) and is a member of the University of Alabama President's Cabinet (1990). THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA, Trustee, is President of The Wales Group, Inc. (management and financial advisory services). Prior to retiring in 1987, Mr. Williams served as Chairman of the Board of First Wachovia Corporation (bank holding company), and Chairman and Chief Executive Officer of The First National Bank of Atlanta and First Atlanta Corporation (bank holding company). He is currently a Director of BellSouth Corporation (telecommunications), ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc. (computer software), Georgia Power Company (electric utility), Gerber Alley & Associates, Inc. (computer software), National Life Insurance Company of Vermont, American Software, Inc. (1989), and AppleSouth, Inc. (restaurants, 1992). GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the Fidelity funds, Mr. French was Senior Vice President, Fund Accounting - Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior Vice President, Chief Financial and Operations Officer - Huntington Advisers, Inc. (1985-1990). ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and Clerk of FDC. THOMAS D. MAHER, Assistant Vice President (1990), is Assistant Vice President of Fidelity's money market funds and Vice President of FMR Texas, Inc. (1990). JOHN F. HALEY Jr., is a Vice President of Fidelity Management Trust Company, the insured and high yield funds ( 1987 ) and other funds advised by FMR and an employee of FMR. DEBORAH F. WATSON, is a Vice President of the money market fund (1992) and other funds advised by FMR and an employee of FMR. Under a retirement program that became effective on November 1, 1989, Trustees, upon reaching age 72, becomes eligible to participate in a defined benefit retirement program under which they receive payments during their lifetime from the funds, based on their basic trustee fees and length of service. Currently, Messrs. Robert L. Johnson, William R. Spaulding, Bertram H. Witham, and David L. Yunich participate in the program. As of February 28, 1994, the Trustees and officers of each fund owned, in the aggregate, less than 1% of the outstanding shares of each fund. MANAGEMENT CONTRACTS Each fund employs FMR to furnish investment advisory and other services. Under its management contract with each fund, FMR acts as investment adviser and, subject to the supervision of the Board of Trustees, directs the investments of the fund in accordance with its investment objective, policies, and limitations. FMR also provides the funds with all necessary office facilities and personnel for servicing the funds' investments, and compensates all officers of the trust, all Trustees who are "interested persons" of the trust or of FMR, and all personnel of the trust or FMR performing services relating to research, statistical, and investment activities. In addition, FMR or its affiliates, subject to the supervision of the Board of Trustees, provide the management and administrative services necessary for the operation of each fund. These services include providing facilities for maintaining the fund's organization; supervising relations with custodians, transfer and pricing agents, accountants, underwriters, and other persons dealing with the fund; preparing all general shareholder communications and conducting shareholder relations; maintaining the funds' records and the registration of the fund's shares under federal and state law; developing management and shareholder services for the funds; and furnishing reports, evaluations, and analyses on a variety of subjects to the Board of Trustees. In addition to the management fee payable to FMR and the fees payable to United Missouri, each fund pays all of its expenses, without limitation, that are not assumed by those parties. The fund pays for typesetting, printing, and mailing of proxy material to shareholders, legal expenses, and the fees of the custodian, auditor, and non-interested Trustees. Although the fund's management contract provides that the fund will pay for typesetting, printing, and mailing prospectuses, statements of additional information, notices and reports to existing shareholders, United Missouri entered into a revised sub-transfer agent agreement with FSC, pursuant to which FSC bears the cost of providing these services to existing shareholders. Other expenses paid by each fund include interest, taxes, brokerage commissions, the fund's proportionate share of insurance premiums and Investment Company Institute dues, and the costs of registering shares under federal and state securities laws. Each fund is also liable for such nonrecurring expenses as may arise, including costs of any litigation to which a fund may be the party, and any obligation it may have to indemnify the trusts' officers and Trustees with respect to litigation. FMR is the manager of the insured and high yield funds pursuant to management contracts dated March 1, 1994, which were approved by shareholders on February 16, 1994, and is the manager of the money market fund pursuant to a management contract dated December 30, 1991. The December 30, 1991 contract was approved by Fidelity California Municipal Trust as sole shareholder of the money market fund on December 30, 1991, pursuant to an Agreement and Plan of Conversion approved by public shareholders of the money market fund on October 23, 1991. (The terms of the money market fund's current contract with FMR duplicate those of its previous contract, which was dated November 1, 1989.) For the services of FMR under the contracts, each fund pays FMR a monthly management fee composed of the sum of two elements: a group fee rate and an individual fund fee rate. The group fee rate is based on the monthly average net assets of all of the registered investment companies with which FMR has management contracts and is calculated on a cumulative basis pursuant to the graduated fee rate schedule shown on the left of the following table. On the right, the effective fee rate schedules show the results of cumulatively applying the annualized rates at varying asset levels. For example, the effective annual fee rate at $250.3 billion of group net assets - their approximate level for February 1994 - was . 1604 %, which is the weighted average of the respective fee rates for each level of group net assets up to that level. GROUP FEE RATE SCHEDULE* EFFECTIVE ANNUAL FEE RATES Average Group Annualized Group Net Effective Annual Fee Assets Rate Assets Rate 0 - $ 3 billion .3700% $ 0.5 billion .3700% 3 - 6 .3400 25 .2664 6 - 9 .3100 50 .2188 9 - 12 .2800 75 .1986 12 - 15 .2500 100 .1869 15 - 18 .2200 125 .1793 18 - 21 .2000 150 .1736 21 - 24 .1900 175 .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 174 - 228 .1400 228 - 282 .1375 282 - 336 .1350 Over 336 .1325 * The rates shown for average group assets in excess of $174 billion were adopted by FMR on a voluntary basis on November 1, 1993 pending shareholder approval of a new management contract reflecting the extended schedule. The extended schedule provides for lower management fees as total assets under management increase. On February 16, 1994, shareholders of the insured and high yield funds approved a new management contract which reflects the extended schedule. The money market fund will present a new management contract reflecting the extended schedule to shareholders at its next meeting. Each fund's individual fund fee rate is .25%. Based on the average net assets of funds advised by FMR for February 1994, the annual management fee rate for each fund would be calculated as follows: Individual Fund Management Group Fee Rate Fee Rate Fee Rate .1604% + .25% = .4104 % One-twelfth (1/12) of this annual management fee rate is then applied to each fund's average net assets for the current month, resulting in a dollar amount which is the fee for that month. The schedule shown above (minus the breakpoints added November 1, 1993) was voluntarily adopted by FMR on January 1, 1992 until shareholders could meet to approve the amended management contract. Prior to January 1, 1992, each fund's group fee rate was based on a schedule with breakpoints ending at .150% for average group assets in excess of $84 billion. FMR had voluntarily adopted the shorter schedule on August 1, 1988. FMR may, from time to time, voluntarily reimburse all or a portion of the funds' operating expenses (exclusive of interest, taxes, brokerage commissions, and extraordinary expenses). Effective March 10, 1993, FMR voluntarily agreed to temporarily limit the total expenses of the insured fund to an annual rate of .35% of the fund's average net assets. The following table outlines expense limitations (as a percentage of a fund's average net assets) in effect from March 10, 1993 to October 1, 1993 for the insured fund. From To Expense Limitation March 10, 1993 July 31, 1993 .35% August 1, 1993 August 31, 1993 .45% September 1, 1993 September 30, 1993 .55% Management fees paid to FMR are indicated in the following table for the periods shown. MANAGEMENT FEES Fiscal Year Fiscal Period Fiscal Year March 1, 1993 to May 1, 1992 to Ended February 28, 1994 February 28, 1993 April 30, 1992 Money Market Fund $2,236,908 $1,921,573 $2,358,914 Insured Fund $ 888,113* $ 748,875 $ 622,304 High Yield Fund $2,434,987 $1,905,430 $2,270,343 * Net of reimbursement. If FMR had not voluntarily limited the total expenses of the insured fund, management fees paid to FMR for fiscal 1994 would have amounted to $1,240,128. To comply with the California Code of Regulations, FMR will reimburse each fund if and to the extent that a fund's aggregate annual operating expenses exceed specified percentages of its average net assets. The applicable percentages for each fund are 2 1/2% of the first $30 million, 2% of the next $70 million, and 1 1/2% of average net assets in excess of $100 million. When calculating the funds' expenses for purposes of this regulation, a fund may exclude interest, taxes, brokerage commissions, and extraordinary expenses, as well as a portion of its distribution plan expenses. SUB-ADVISER. With respect to the money market fund, FMR has entered into a sub-advisory agreement with FMR Texas pursuant to which FMR Texas has primary responsibility for providing portfolio investment management services to the fund. Under the sub-advisory agreement, FMR pays FMR Texas a fee equal to 50% of the management fee payable to FMR under its current management contract with the fund. The fees paid to FMR Texas are not reduced by any voluntary or mandatory expense reimbursements that may be in effect from time to time. For the fiscal periods March 1, 1993 to February 28, 1994 and May 1, 1992 to February 28, 1994 and the fiscal year ended April 30, 1992, FMR paid FMR Texas total fees of $ 1,102,480 , $897,622, and $1,123,880, respectively, pursuant to the sub-advisory agreement. DISTRIBUTION AND SERVICE PLANS Each fund has adopted a distribution and service plan (the plan) under Rule 12b-1 of the Investment Company Act of 1940 (the Rule). The Rule provides in substance that a mutual fund may not engage directly or indirectly in financing any activity that is primarily intended to result in the sale of shares of the fund except pursuant to a plan adopted by the fund under the Rule. The Board of Trustees has adopted the plan to allow the fund and FMR to incur certain expenses that might be considered to constitute indirect payment by the fund of distribution expenses. Under the plans, if the payment by the fund to FMR of management fees should be deemed to be indirect financing by the fund of the distribution of its shares, such payment is authorized by the plan. The plans specifically recognize that FMR, either directly or through FDC, may use its management fee revenues, past profits, or other resources, without limitation, to pay promotional and administrative expenses in connection with the offer and sale of shares of the funds. In addition, the plans provide that FMR may use its resources, including its management fee revenues, to make payments to third parties that provide assistance in selling the funds' shares, or to third parties, including banks, that render shareholder support services. For fiscal 1994 payments to third parties amounted to $31,948, $4,748, and $3,519 for the money market, insured, and high yield funds, respectively. Each fund's plan has been approved by the Trustees. As required by the Rule, the Trustees carefully considered all pertinent factors relating to implementation of the plan prior to their approval, and have determined that there is a reasonable likelihood that the plans will benefit the funds and their shareholders. In particular, the Trustees noted that the plans do not authorize payments by the funds other than those made to FMR under its management contracts with the funds. To the extent that the plans give FMR and FDC greater flexibility in connection with the distribution of shares of the funds, additional sales of the funds' shares may result. Additionally, certain shareholder support services may be provided more effectively under the plans by local entities with whom shareholders have other relationships. The insured and high yield funds' plans were approved by shareholders on November 18, 1987 and December 30, 1985, respectively. The plan for the money market fund was approved by Fidelity California Municipal Trust on December 30, 1991, as the then sole shareholder of the money market fund, pursuant to an Agreement and Plan of Conversion approved by public shareholders of the money market fund on October 23, 1991. 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, and 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. The funds may execute portfolio transactions with and purchase securities issued by depository institutions that receive payments under the plans. No preference will be shown in the selection of investments for the instruments of such depository institutions. 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. INTEREST OF FMR AFFILIATES United Missouri, is each fund's custodian and transfer agent. United Missouri has entered into sub-contracts with FSC, an affiliate of FMR, under the terms of which FSC performs the processing activities associated with providing transfer agent and shareholder servicing functions for each fund. Under the sub-contract, FSC bears the expense of typesetting, printing, and mailing, prospectuses, statements of additional information, and all other reports, notices, and statements to shareholders, except proxy statements. FSC also pays all out-of-pocket expenses associated with transfer agent services. United Missouri pays FSC an annual fee of $14.04 (money market fund) and $26.03 (insured and high yield funds) per regular account with a balance of $5,000 or more, $10.21 (money market fund) and $15.31 (insured and high yield funds) per regular account with a balance of less than $5,000, and a supplemental activity charge of $2.25 for standard order transactions and $6.11 for monetary transactions. The account fee and monetary transaction charge for accounts set up as Core Accounts in the Fidelity Ultra Service Account program are $12.61 and $.76, respectively. These fees and charges are subject to annual cost escalation based on postal rate changes and changes in wage and price levels as measured by the National Consumer Price Index for Urban Areas. With respect to institutional client master accounts, United Missouri pays FSC per account fees of $95 and monetary transactions charges of $20 and $17.50, respectively, depending on the nature of services provided. Prior to November 15, 1991 for the money market fund and November 8, 1991 for the insured and high yield funds, Shawmut Bank N.A. (Shawmut) served as the fund's custodian and transfer agent and also sub-contracted FSC to perform the processing activities associated with providing transfer agent and shareholder servicing functions for the funds. Beginning June 1, 1989, FSC was compensated by Shawmut on the same basis as it is currently compensated by United Missouri (although fee rates and charges were adjusted periodically to reflect postal rate changes and changes in wage and price levels as measured by the National Consumer Price Index for Urban Areas). Transfer agent fees paid to FSC for the fiscal periods shown below are indicated in the following table. TRANSFER AGENT FEES Fiscal Year Fiscal Period March 1, 1993 to May 1, 1992 to Fiscal Year Ended February 28, 1994 February 28, 1994 April 30, 1992 Money Market Fund $1,016,834 $706,501 $809,728 Insured Fund $346,638 $206,003 $163,753 High Yield Fund $558,014 $448,116 $521,467 United Missouri has an additional sub-contract with FSC, pursuant to which FSC performs the calculations necessary to determine each fund's net asset value per share and dividends and maintains each fund's accounting records. The annual fee rates for these pricing and bookkeeping services are based on the fund's average net assets and are as follows: $0-$500M Greater Than $500M Minimum Per Year Maximum Per Year Money Market Fund .0175% .0075% $20,000 $750,000 Insured and High Yield Funds .04 .02 45,000 750,000 Prior to November 14, 1991 for the money market fund and November 7, 1991 for the insured and high yield funds, Shawmut sub-contracted with FSC for pricing and bookkeeping services. Beginning July 1, 1991, FSC was compensated for these services by Shawmut on the same basis as it is currently compensated by United Missouri. Prior to July 1, 1991, the annual fee paid to FSC for pricing and bookkeeping services was based on two schedules, one pertaining to a fund's average net assets, and one pertaining to the type and number of transactions the fund made. Pricing and bookkeeping fees, including reimbursement for out of pocket expenses, paid to FSC for the fiscal periods shown are indicated in the table below. PRICING AND BOOKKEEPING FEES Fiscal Year Fiscal Period March 1, 1993 to May 1, 1992 to Fiscal Year Ended February 28, 1994 February 28, 1994 April 30, 1992 Money Market Fund $107,448 $ 94,157 $127,604 Insured Fund $134,786 $ 86,888 $ 83,746 High Yield Fund $243,183 $206,909 $244,179 All fee amounts shown include out-of-pocket expenses, if any. The transfer agent fees and charges and pricing and bookkeeping fees described above are paid to FSC by United Missouri, which is entitled to reimbursement from the funds for these expenses. FSC has entered into an agreement with Fidelity Brokerage Services, Inc. (FBSI), a subsidiary of FMR Corp., pursuant to which FBSI performs certain recordkeeping, communication, and other services for money market fund shareholders participating in the Fidelity Ultra Service Account program. FBSI directly charges each Ultra Service Account an administrative fee at a rate of $5.00 per month for these services, which is in addition to the transfer agency fee received by FSC. Administrative fees paid to FBSI by money market fund shareholders participating in the Fidelity Ultra Service Account program amounted to approximately $148,453 for fiscal 1994. Each fund has a distribution agreement with FDC, a Massachusetts corporation organized July 18, 1960. FDC is a broker-dealer registered under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. The distribution agreement calls for FDC to use all reasonable efforts, consistent with its other business, to secure purchasers for shares of each fund, which are continuously offered at net asset value. Promotional and administrative expenses in connection with the offer and sale of shares are paid by FMR. DESCRIPTION OF THE TRUSTS TRUSTS' ORGANIZATION. Fidelity California Municipal Trust (the Massachusetts trust) is an open-end management investment company organized as a Massachusetts business trust on April 28, 1983. On February 27, 1984 the trust's name was changed from Fidelity California Tax-Exempt Money Market Trust to Fidelity California Tax-Free Fund and on November 1, 1989 its name was changed to Fidelity California Municipal Trust. Currently, there are four funds of the Massachusetts trust: Fidelity California Tax-Free Insured Portfolio, Fidelity California Tax-Free High Yield Portfolio, Spartan California Intermediate Municipal Portfolio, and Spartan California Municipal High Yield Portfolio. The Massachusetts trust's Declaration of Trust permits the Trustees to create additional funds. Fidelity California Municipal Trust II (the Delaware trust) is an open-end management investment company organized as a Delaware Business trust on June 20, 1991. Currently, there two funds of the Delaware trust: Fidelity California Tax-Free Money Market Fund and Spartan California Municipal Money Market Portfolio. Fidelity California Tax-Free Money Market Fund and Spartan California Municipal Money Market Portfolio entered into agreements to acquire all of the assets of the Fidelity California Tax-Free Money Market Portfolio and Spartan California Municipal Money Market Portfolio, series of the Fidelity California Municipal Trust, on December 30, 1991 and April 18, 1994, respectively. The Delaware trust's Trust Instrument permits the Trustees to create additional funds. In the event that FMR ceases to be investment adviser to a trust or any of its funds, the right of the trust or the fund to use the identifying names "Fidelity" and "Spartan" may be withdrawn. There is a remote possibility that one fund might become liable for any misstatement in its prospectus or statement of additional information about another fund. The assets of each trust received for the issue or sale of shares of each of its funds and all income, earnings, profits and proceeds thereof, subject only to the rights of creditors, are especially allocated to such fund, and constitute the underlying assets of such fund. The underlying assets of each fund are segregated on the books of account, and are to be charged with the liabilities with respect to such fund and with a share of the general liabilities of their respective trusts. Expenses with respect to each trust are to be allocated in proportion to the asset value of their respective funds, except where allocations of direct expense can otherwise be fairly made. The officers of the trusts, subject to the general supervision of the Board of Trustees, have the power to determine which expenses are allocable to a given fund, or which are general or allocable to all of the funds of a certain trust. In the event of the dissolution or liquidation of a trust, shareholders of each fund of that trust are entitled to receive as a class the underlying assets of such fund available for distribution. SHAREHOLDER AND TRUSTEE LIABILITY - MASSACHUSETTS TRUST. The Massachusetts trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust may, under certain circumstances, be held personally liable for the obligations of the trust. The Declaration of Trust provides that the Massachusetts Trust shall not have any claim against shareholders except for the payment of the purchase price of shares and requires that each agreement, obligation, or instrument entered into or executed by the trust or its Trustees shall include a provision limiting the obligations created thereby to the Massachusetts Trust and its assets. The Declaration of Trust provides for indemnification out of each fund's property of any shareholders held personally liable for the obligations of the fund. The Declaration of Trust also provides that each fund shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the fund and satisfy any judgment thereon. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the fund itself would be unable to meet its obligations. FMR believes that, in view of the above, the risk of personal liability to shareholders is remote. The Declaration of Trust further provides that the Trustees, if they have exercised reasonable care, will not be liable for any neglect or wrongdoing, but nothing in the Declaration of Trust protects Trustees against any liability to which they would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of their office. SHAREHOLDER AND TRUSTEE LIABILITY - DELAWARE TRUST. The Delaware Trust is a business trust organized under Delaware law. Delaware law provides that shareholders shall be entitled to the same limitations of personal liability extended to stockholders of private corporations for profit. The courts of some states, however, may decline to apply Delaware law on this point. The Trust Instrument contains an express disclaimer of shareholder liability for the debts, liabilities, obligations, and expenses of the Delaware Trust and requires that a disclaimer be given in each contract entered into or executed by the Delaware Trust or its Trustees. The Trust Instrument provides for indemnification out of each fund's property of any shareholder or former shareholder held personally liable for the obligations of the fund. The Trust Instrument also provides that each fund shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the fund and satisfy any judgment thereon. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which Delaware law does not apply, no contractual limitation of liability was in effect, and the fund is unable to meet its obligations. FMR believes that, in view of the above, the risk of personal liability to shareholders is extremely remote. The Trust Instrument further provides that the Trustees shall not be personally liable to any person other than the Delaware Trust or its shareholders; moreover, the Trustees shall not be liable for any conduct whatsoever, provided that Trustees are not protected against any liability to which they would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of their office. VOTING RIGHTS - BOTH TRUSTS. Each fund's capital consists of shares of beneficial interest. As a shareholder of the Massachusetts trust, you receive one vote for each dollar value of net asset value per share you own. The shares have no preemptive or conversion rights; voting and dividend rights, the right of redemption, and the privilege of exchange are described in the Prospectus. Shares are fully paid and nonassessable, except as set forth under the respective "Shareholder and Trustee Liability" headings above. Shareholders representing 10% or more of a trust or one of its funds may, as set forth in the Declaration of Trust or Trust Instrument, call meetings of the trust or fund for any purpose related to the trust or fund, as the case may be, including, in the case of a meeting of an entire trust, the purpose on voting on removal of one or more Trustees. A trust or any fund may be terminated upon the sale of its assets to (or, in the case of the Delaware Trust and its funds, merger with) another open-end management investment company or series thereof, or upon liquidation and distribution of its assets. Generally such terminations must be approved by vote of the holders of a majority of the outstanding shares of the trust or the fund (for the Delaware Trust), or by a vote of the holders of a majority of the trust or fund, as determined by the current value of each shareholder's investment in the trust or fund (for the Massachusetts Trust); however, the Trustees of the Delaware Trust may, without prior shareholder approval, change the form of the organization of the Delaware Trust by merger, consolidation, or incorporation. If not so terminated or reorganized, the trusts and their funds will continue indefinitely. Under the Trust Instrument, the Trustees may, without shareholder vote, cause the Delaware Trust to merge or consolidate into one or more trusts, partnerships, or corporations, so long as the surviving entity is an open-end management investment company that will succeed to or assume the Delaware Trust registration statement, or cause the Delaware Trust to be incorporated under Delaware law. Each fund of both trusts may also invest all of its assets in another investment company. CUSTODIAN. United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City, Missouri 64106, is custodian of the assets of the funds. The custodian is responsible for the safekeeping of the funds' assets and the appointment of subcustodian banks and clearing agencies. The custodian takes no part in determining the investment policies of the funds or in deciding which securities are purchased or sold by the funds. The funds may, however, invest in obligations of the custodian and may purchase securities from or sell securities to the custodian. FMR, its officers and directors, its affiliated companies, and each trust's Trustees may from time to time have transactions with various banks, including banks serving as custodian for certain of the funds advised by FMR. Transactions that have occurred to date include mortgages and personal and general business loans. In the judgment of FMR, the terms and conditions of those transactions were not influenced by existing or potential custodial or other fund relationships. AUDITOR. Price Waterhouse, 160 Federal Street, Boston, Massachusetts serves as each trust's independent accountant. The auditor examines financial statements for the funds and provides other audit, tax, and related services. FINANCIAL STATEMENTS The funds' Annual Report for the fiscal period ended February 28, 1994 is a separate report supplied with this Statement of Additional Information and is incorporated herein by reference. APPENDIX DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of each investment by the number of days remaining to its maturity, adding these calculations, and then dividing the total by the value of the fund's portfolio. An obligation's maturity is typically determined on a stated final maturity basis, although there are some exceptions to this rule. For example, if it is probable that the issuer of an instrument will take advantage of a maturity-shortening device, such as a call, refunding, or redemption provision, the date on which the instrument will probably be called, refunded, or redeemed may be considered to be its maturity date. When a municipal bond issuer has committed to call an issue of bonds and has established an independent escrow account that is sufficient to, and is pledged to, refund that issue, the number of days to maturity for the prerefunded bond is considered to be the number of days to the announced call date of the bonds. The descriptions that follow are examples of eligible ratings for the insured and high yield funds. The funds may, however, consider ratings for other types of investments and the ratings assigned by other ratings organizations when determining the eligibility of a particular investment. The descriptions that follow are examples of eligible ratings for the insured and high yield funds. The funds may, however, consider the ratings for other types of investments and the ratings assigned by other rating organizations when determining the eligibility of a particular investment. DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND MUNICIPAL NOTES: Moody's ratings for state and municipal and other short-term obligations will be designated Moody's Investment Grade (MIG, or VMIG for variable rate obligations). This distinction is in recognition of the difference between short-term credit risk and long-term credit risk. Factors affecting the liquidity of the borrower and short-term cyclical elements are critical in short-term ratings, while other factors of major importance in bond risk, long-term secular trends for example, may be less important in the short run. Symbols used will be as follows: MIG-1/VMIG-1 - This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group. MIG-3/VMIG-3 - This designation denotes favorable quality, with all security elements accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. MIG-4/VMIG-4 - This designation denotes adequate quality protection commonly regarded as required of an investment security is present and, although not distinctly or predominantly speculative, there is specific risk. DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND MUNICIPAL NOTES: SP-1 - Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. SP-2 - Satisfactory capacity to pay principal and interest. SP-3 - Speculative capacity to pay principal and interest. DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS: AAA - Bonds rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. AA - Bonds rated Aa are judged to be of high quality by all standards. Together with Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long term risks appear somewhat larger than in Aaa securities. A - Bonds rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. BAA - Bonds rated Baa are considered as medium grade obligations, i.e, they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. BA - Bonds rated Ba are judged to have speculative elements. Their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times in the future. Uncertainty of position characterizes bonds in this class. B - Bonds rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments of or maintenance of other terms of the contract over any long period of time may be small. CAA - Bonds rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes possess the strongest investment attributes are designated by the symbols Aa1, A1, Baa1, Ba1, and B1. DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS: AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's to a debt obligation. Capacity to pay interest and repay principal is extremely strong. AA - Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest-rated debt issues only in small degree. A - Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions. BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories. BB - Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. B - Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. CCC - Debt rated CCC has a currently identifiable vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The ratings from AA to CCC may be modified by the addition of a plus or minus to show relative standing within the major rating categories. SPARTAN CALIFORNIA MUNICIPAL FUNDS: SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO CROSS REFERENCE SHEET FORM N-1A ITEM NUMBER PROSPECTUS SECTION
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 .............................. Performance 4 a i............................. Charter ii........................... The Funds at a Glance; Investment Principles and Risks; Fundamental Investment Policies and Restrictions b .............................. Investment Principles and Risks c .............................. Who May Want to Invest; Investment Principles and Risks 5 a .............................. Charter b i............................. Doing Business with Fidelity; Charter ii........................... Charter iii.......................... Expenses; Breakdown of Expenses c .............................. Charter d .............................. Charter; Breakdown of Expenses e .............................. Charter f .............................. Expenses g .............................. * 5 A .............................. Performance 6 a i............................. Charter ii........................... How to Buy Shares; How to Sell Shares; Transaction Details; Exchange Restrictions iii.......................... Charter b ............................. * c .............................. Exchange Restrictions; Transaction Details d .............................. * e .............................. Doing Business with Fidelity; How to Buy Shares; How to Sell Shares; Investor Services f, g .............................. Dividends, Capital Gains, and Taxes 7 a .............................. Charter; Cover Page b .............................. 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 .............................. *
* Not Applicable CROSS REFERENCE SHEET (CONTINUED) FORM N-1A ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
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 ii ............................ Trustees and Officers iii ............................ Management Contracts b ............................ Management Contracts c, d ............................ Interest of FMR Affiliates e ............................ Management Contracts f ............................ Distribution and Service Plans g ............................ * h ............................ Description of the Trusts i ............................ Interest of FMR Affiliates 17 a - c ............................ Portfolio Transactions d, e ............................ * 18 a ............................ Description of the Trusts b ............................ * 19 a ............................ Additional Purchase and Redemption Information b ............................ Additional Purchase and Redemption Information; Valuation of Portfolio Securities c ............................ * 20 ............................. Distributions and Taxes 21 a, b ............................ Interest of FMR Affiliates c ............................ * 22 ............................ Performance 23 ............................ Financial Statements
* 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. A Statement of Additional Information dated April 18, 1994 has been filed with the Securities and Exchange Commission, and is incorporated herein by reference (is legally considered a part of this prospectus). The Statement of Additional Information is available free upon request by calling Fidelity at 1-800-544-8888. Investments in the money market fund are neither insured nor guaranteed by the U.S. government, and there can be no assurance that the fund will maintain a stable $1.00 share price. Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, the Federal Reserve Board, or any other agency, and are subject to investment risk, including the possible loss of principal. Each of these funds seeks a high level of current income free from federal income tax and California state personal income tax. The funds have different strategies, however, and carry varying degrees of risk. SPARTAN(Registered trademark) CALIFORNIA MUNICIPAL FUNDS SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO PROSPECTUS APRIL 18, 1994(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109 LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SCR-pro-494 CONTENTS KEY FACTS 3 THE FUNDS AT A GLANCE 3 WHO MAY WANT TO INVEST EXPENSES The fund's yearly operating expenses FINANCIAL HIGHLIGHTS A summary of each fund's financial data. PERFORMANCE How each fund has done over time. THE FUNDS IN DETAIL CHARTER How each fund is organized. INVESTMENT PRINCIPLES AND RISKS Each fund's overall approach to investing. BREAKDOWN OF EXPENSES How operating costs are calculated and what they include. YOUR ACCOUNT DOING BUSINESS WITH FIDELITY TYPES OF ACCOUNTS Different ways to set up your account. HOW TO BUY SHARES Opening an account and making additional investments. HOW TO SELL SHARES Taking money out and closing your account. INVESTOR SERVICES Services to help you manage your account. SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND ACCOUNT POLICIES TAXES TRANSACTION DETAILS Share price calculations and the timing of purchases and redemptions. EXCHANGE RESTRICTIONS KEY FACTS THE FUNDS AT A GLANCE MANAGEMENT: Fidelity Management & Research Company (FMR) is the management arm of Fidelity Investments, which was established in 1946 and is now America's largest mutual fund manager. FMR Texas Inc. (FTX), a subsidiary of FMR, chooses investments for Spartan California Municipal Money Market. As with any mutual fund, there is no assurance that a fund will achieve its goal. SPARTAN CA MONEY MARKET GOAL: High current tax-free income for California residents while maintaining a stable share price. STRATEGY: Invests in high-quality, short-term securities whose interest is free from federal income tax and California personal income tax. SPARTAN CA INTERMEDIATE GOAL: High current tax-free income for California residents. STRATEGY: Invests mainly in investment-grade securities whose interest is free from federal income tax and California personal income tax, while maintaining an average maturity of three to 10 years. SPARTAN CA HIGH YIELD GOAL: High current tax-free income for California residents. STRATEGY: Invests mainly in long-term, investment-grade securities whose interest is free from federal income tax and California personal income tax. WHO MAY WANT TO INVEST These non-diversified funds may be appropriate for investors in higher tax brackets who seek high current income that is free from federal and California income taxes. Each fund's level of risk, and potential reward, depends on the quality and maturity of its investments. Lower-quality and longer-term investments typically carry higher risk and yield potential. You should consider your tolerance for risk when making an investment decision. The value of the funds' investments and the income they generate will vary from day to day, generally reflecting changes in interest rates, market conditions, and other federal and state political and economic news. By themselves, these funds do not constitute a balanced investment plan. Spartan California Municipal Money Market is managed to keep its share price stable at $1.00. When you sell your shares of either of the other funds, they may be worth more or less than what you paid for them. The Spartan family of funds is designed for cost-conscious investors looking for higher yields through lower costs. The Spartan Approach(Registered trademark) requires investors to make high minimum investments and, in some cases, to pay for individual transactions. EXPENSES SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell shares of a fund. See page for more information. Maximum sales charge on purchases and reinvested dividends None Deferred sales charge on redemptions None Redemption fee (on shares held less than 180 days) for Spartan CA Money Market None for Spartan CA Intermediate None for Spartan CA High Yield .50% Exchange and wire transaction fees $5.00 Checkwriting fee, per check written (available for Spartan C A Money Market and Spartan C A Intermediate) $2.00 Account closeout fee $5.00 THESE FEES ARE WAIVED (except for the redemption fee) if your account balance at the time of the transaction is $50,000 or more. ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each fund pays a management fee to FMR. Expenses are factored into each fund's share price or dividends and are not charged directly to shareholder accounts (see page ). The following are projections based on historical expenses, and are calculated as a percentage of average net assets. SPARTAN CA MONEY MARKET Management fee (after reimbursement) .25 % 12b-1 fee None Other expenses .00 % Total fund operating expenses .25 % SPARTAN CA INTERMEDIATE Management fee (after reimbursement) .00 % 12b-1 fee None Other expenses .00 % Total fund operating expenses .00 % SPARTAN CA HIGH YIELD Management fee .55 % 12b-1 fee None Other expenses .00 % Total fund operating expenses .55 % EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5% and that its operating expenses are exactly as just described. For every $1,000 you invested, here's how much you would pay in total expenses after the number of years indicated, first assuming that you leave your account open, and then assuming that you close your account at the end of the period: SPARTAN CA MONEY MARKET Account open Account closed After 1 year $ 3 $ 8 After 3 years $ 8 $ 13 After 5 years $ 14 $ 19 After 10 years $ 32 $ 37 SPARTAN CA INTERMEDIATE Account open Account closed After 1 year $ 0 $ 5 After 3 years $ 0 $ 5 After 5 years $ 0 $ 5 After 10 years $ 0 $ 5 SPARTAN CA HIGH YIELD Account open Account closed After 1 year $ 6 $ 11 After 3 years $ 18 $ 23 After 5 years $ 31 $ 36 After 10 years $ 69 $ 74 These examples illustrate the effect of expenses, but are not meant to suggest actual or expected costs or returns, all of which may vary. FMR has voluntarily agreed to temporarily limit Spartan California Municipal Money Market's operating expenses to .2 5 % of its average net assets, and Spartan California Intermediate Municipal's operating expenses to .00% of its average net assets. If these agreements were not in effect, the management fee, other expenses, and total operating expenses would be .50%, .00%, and .50%, respectively, for Spartan California Municipal Money and .55%, .00%, and .55%, respectively, for Spartan California Intermediate Municipal. Expenses eligible for reimbursement do not include interest, taxes, brokerage commissions, or extraordinary expenses. FINANCIAL HIGHLIGHTS The tables that follow have been audited by Price Waterhouse, independent accountants. Their unqualified reports are included in each fund's Annual Report. Each fund's Annual Report is incorporated by reference into (is legally a part of) the Statement of Additional Information. SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET
1.Selected Per-Share Data and Ratios 2.Years ended February 28 1990C 1991D 1992D 1993E 1994 3.Net asset value, beginning of $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 period 4.Income from Investment .025 .054 .041 .022 .024 Operations Net interest income 5. Dividends from net interest (.025) (.054) (.041) (.022) (.024) income 6.Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 7.Total return B 2.54% 5.52 4.15 2.24% 2.45 % % % 8.Net assets, end of period (000 $ 396,652 $ 763,95 $ 917,64 $ 855,590 $ 1,064,6 omitted) 9 0 03 9.Ratio of expenses to average net -- .07 .10 .30% .21 assets F % % A % 10.Ratio of expenses to average net .50% .50 .50 .50% .50 assets A % % A % before expense reductions F 11.Ratio of net interest income to 5.99% 5.33 4.05 2.67% 2.42 average net assets A % % A %
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C FROM NOVEMBER 27, 1989 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1990 D YEARS ENDED APRIL 30 E MAY 1, 1992 TO FEBRUARY 28, 1993 F DURING THE PERIODS SHOWN, FMR VOLUNTARILY REIMBURSED THE FUND FOR CERTAIN EXPENSES. SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL
12.Selected Per-Share Data and Ratios 13.Period ended February 28 1994C 14.Net asset value, beginning of period $ 10.000 15.Income from Investment Operations .070 Net interest income 16. Net realized and unrealized gain (loss) on investments (.240) 17. Total from investment operations (.170) 18.Less Distributions (.070) From net interest income 19.Net asset value, end of period $ 9.760 20.Total return B (1.71) % 21.Net assets, end of period (000 omitted) $ 22,713 22.Ratio of expenses to average net assetsD -- 23.Ratio of expenses to average net assets before expense reductionsD .55% A 24.Ratio of net interest income to average net assets 4.66% A 25.Portfolio turnover rate --
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C FROM DECEMBER 30, 1993 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1994 D DURING THE PERIOD SHOWN, FMR VOLUNTARILY REIMBURSED THE FUND FOR CERTAIN EXPENSES. SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO
26.Selected Per-Share Data and Ratios 27.Years ended February 28 1990C 1991D 1992D 1993E 1994 28.Net asset value, beginning of $ 10.000 $ 9.760 $ 10.240 $ 10.540 $ 11.330 period 29.Income from Investment .301 .706 .663 .543 .631 Operations Net interest income 30. Net realized and unrealized gain (.249) .472 .297 .858 (.012) (loss) on investments 31. Total from investment .052 1.178 .960 1.401 .619 operations 32.Less Distributions (.301) (.706) (.663) (.543) (.631) From net interest income 33. From net realized gain on -- -- -- (.070) (.330) investments 34. Distributions in excess of net -- -- -- -- (.060) realized gain 35. Total distributions (.301) (.706) (.663) (.613) (1.021) 36. Redemption fees added to paid .009 .008 .003 .002 .002 in capital 37.Net asset value, end of period $ 9.760 $ 10.240 $ 10.540 $ 11.330 $ 10.930 38.Total return B .59% 12.52 9.66 13.76% 5.63 % % % 39.Net assets, end of period(000 $ 107,409 $ 281,72 $ 479,13 $ 573,871 $ 566,61 omitted) 5 7 3 40.Ratio of expenses to average net -- .19 .36 .40% .52 assets F % % A % 41.Ratio of expenses to average net .55% .55 .55 .55% .55 assets A % % A % before expense reductions F 42.Ratio of net interest income to 7.42% 7.02 6.36 6.07% 5.58 average net assets A % % A % 43.Portfolio turnover rate 5% 15 13 26% 54 A % % A %
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C FROM NOVEMBER 27, 1989 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1990 D YEARS ENDED APRIL 30 E MAY 1, 1992 TO FEBRUARY 28, 1993 F DURING THE PERIODS SHOWN, FMR VOLUNTARILY REIMBURSED THE FUND FOR CERTAIN EXPENSES. PERFORMANCE Mutual fund performance can be measured as TOTAL RETURN or YIELD. The total returns and yields that follow are based on historical fund results and do not reflect the effect of any transaction fees you may have paid. The figures would be lower if fees were taken into account. Each fund's fiscal year runs from March 1 through February 28. The tables below show each fund's performance over past fiscal years compared to a measure of inflation. The charts on page 10 help you compare the yields of these funds to those of their competitors. AVERAGE ANNUAL TOTAL RETURNS Fi scal periods ended Past 1 Life of February 28, 1994 year Fund Spartan CA Money Market 2.45% 3.97% A Spartan CA Intermediate n/a n/a Spartan CA High Yield 5.63% 9.84% A Consumer Price Index 2.52% n/a CUMULATIVE TOTAL RETURNS F iscal periods ended Past 1 Life of February 28, 1994 year Fund Spartan CA Money Market 2.45% 18.04% A Spartan CA Intermediate n/a -1.71%B Spartan CA High Yield 5.63% 49.14% A Consumer Price Index 2.52% n/a A FROM NOVEMBER 27, 1989 B FROM DECEMBER 30, 1993 EXPLANATION OF TERMS TOTAL RETURN is the change in value of an investment in a fund over a given period, assuming reinvestment of any dividends and capital gains. A CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that, if achieved annually, would have produced the same cumulative total return if performance had been constant over the entire period. Average annual total returns smooth out variations in performance; they are not the same as actual year-by-year results. Average annual total returns covering periods of less than one year assume that performance will remain constant for the rest of the year. YIELD refers to the income generated by an investment in a fund over a given period of time, expressed as an annual percentage rate. When a money market fund yield assumes that income earned is reinvested, it is called an EFFECTIVE YIELD. A TAX-EQUIVALENT YIELD shows what an investor would have to earn before taxes to equal a tax-free yield. Yields for the bond funds are calculated according to a standard that is required for all stock and bond funds. Because this differs from other accounting methods, the quoted yield may not equal the income actually paid to shareholders. THE CONSUMER PRICE INDEX is a widely recognized measure of inflation calculated by the U.S. government. THE COMPETITIVE FUNDS AVERAGES for Spartan California Municipal Money Market are calculated based on the IBC/Donoghue's MONEY FUND AVERAGES(TRADEMARK)/All Tax-Free /State Specific category, which currently reflects the performance of over 140 mutual funds with similar objectives. These averages are published in the MONEY FUND REPORT(Registered trademark) by IBC USA (Publications), Inc. The competitive funds averages for the bond funds are published by Lipper Analytical Services, Inc. Spartan California Municipal High Yield compares its performance to the Lipper California Municipal Debt Fund Average, which currently reflects the performance of over 70 mutual funds with similar objectives. T hese average s assume reinvestment of distributions. SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET 7-day yields Percentage (%) Row: 1, Col: 1, Value: 3.23 Row: 1, Col: 2, Value: 2.69 Row: 2, Col: 1, Value: 3.18 Row: 2, Col: 2, Value: 2.62 Row: 3, Col: 1, Value: 3.55 Row: 3, Col: 2, Value: 2.97 Row: 4, Col: 1, Value: 3.8 Row: 4, Col: 2, Value: 3.07 Row: 5, Col: 1, Value: 3.69 Row: 5, Col: 2, Value: 3.0 Row: 6, Col: 1, Value: 2.83 Row: 6, Col: 2, Value: 2.46 Row: 7, Col: 1, Value: 2.53 Row: 7, Col: 2, Value: 2.14 Row: 8, Col: 1, Value: 2.48 Row: 8, Col: 2, Value: 2.15 Row: 9, Col: 1, Value: 3.03 Row: 9, Col: 2, Value: 2.67 Row: 10, Col: 1, Value: 2.43 Row: 10, Col: 2, Value: 2.13 Row: 11, Col: 1, Value: 2.52 Row: 11, Col: 2, Value: 2.16 Row: 12, Col: 1, Value: 3.21 Row: 12, Col: 2, Value: 2.69 Row: 13, Col: 1, Value: 2.13 Row: 13, Col: 2, Value: 1.81 Row: 14, Col: 1, Value: 2.24 Row: 14, Col: 2, Value: 1.87 Row: 15, Col: 1, Value: 2.49 Row: 15, Col: 2, Value: 1.96 Row: 16, Col: 1, Value: 2.51 Row: 16, Col: 2, Value: 1.98 Row: 17, Col: 1, Value: 2.8 Row: 17, Col: 2, Value: 2.13 Row: 18, Col: 1, Value: 2.33 Row: 18, Col: 2, Value: 1.79 Row: 19, Col: 1, Value: 2.49 Row: 19, Col: 2, Value: 1.86 Row: 20, Col: 1, Value: 2.56 Row: 20, Col: 2, Value: 1.97 Row: 21, Col: 1, Value: 2.71 Row: 21, Col: 2, Value: 2.16 Row: 22, Col: 1, Value: 2.45 Row: 22, Col: 2, Value: 1.95 Row: 23, Col: 1, Value: 2.41 Row: 23, Col: 2, Value: 1.91 Row: 24, Col: 1, Value: 2.69 Row: 24, Col: 2, Value: 2.13 Row: 25, Col: 1, Value: 2.22 Row: 25, Col: 2, Value: 1.71 Row: 26, Col: 1, Value: 2.47 Row: 26, Col: 2, Value: 1.93 Spartan CA Money Market Competitive funds average 1993 1992 1994 SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD 30-day yields Percentage (%) Row: 1, Col: 1, Value: nil Row: 1, Col: 2, Value: nil Row: 2, Col: 1, Value: nil Row: 2, Col: 2, Value: nil Row: 3, Col: 1, Value: nil Row: 3, Col: 2, Value: nil Row: 4, Col: 1, Value: nil Row: 4, Col: 2, Value: nil Row: 5, Col: 1, Value: nil Row: 5, Col: 2, Value: nil Row: 6, Col: 1, Value: nil Row: 6, Col: 2, Value: nil Row: 7, Col: 1, Value: nil Row: 7, Col: 2, Value: nil Row: 8, Col: 1, Value: nil Row: 8, Col: 2, Value: nil Row: 9, Col: 1, Value: nil Row: 9, Col: 2, Value: nil Row: 10, Col: 1, Value: nil Row: 10, Col: 2, Value: nil Row: 11, Col: 1, Value: nil Row: 11, Col: 2, Value: nil Row: 12, Col: 1, Value: nil Row: 12, Col: 2, Value: nil Row: 13, Col: 1, Value: 6.119999999999999 Row: 13, Col: 2, Value: 5.83 Row: 14, Col: 1, Value: 6.25 Row: 14, Col: 2, Value: 5.79 Row: 15, Col: 1, Value: 6.27 Row: 15, Col: 2, Value: 5.88 Row: 16, Col: 1, Value: 6.23 Row: 16, Col: 2, Value: 5.859999999999999 Row: 17, Col: 1, Value: 6.19 Row: 17, Col: 2, Value: 5.79 Row: 18, Col: 1, Value: 6.02 Row: 18, Col: 2, Value: 5.67 Row: 19, Col: 1, Value: 5.57 Row: 19, Col: 2, Value: 5.39 Row: 20, Col: 1, Value: 5.77 Row: 20, Col: 2, Value: 5.35 Row: 21, Col: 1, Value: 5.87 Row: 21, Col: 2, Value: 5.430000000000001 Row: 22, Col: 1, Value: 6.18 Row: 22, Col: 2, Value: 5.68 Row: 23, Col: 1, Value: 6.109999999999999 Row: 23, Col: 2, Value: 5.58 Row: 24, Col: 1, Value: 5.970000000000001 Row: 24, Col: 2, Value: 5.49 Row: 25, Col: 1, Value: 5.84 Row: 25, Col: 2, Value: 5.39 Row: 26, Col: 1, Value: 5.42 Row: 26, Col: 2, Value: 5.14 Row: 27, Col: 1, Value: 5.319999999999999 Row: 27, Col: 2, Value: 4.99 Row: 28, Col: 1, Value: 5.33 Row: 28, Col: 2, Value: 4.99 Row: 29, Col: 1, Value: 5.37 Row: 29, Col: 2, Value: 4.96 Row: 30, Col: 1, Value: 5.159999999999999 Row: 30, Col: 2, Value: 4.91 Row: 31, Col: 1, Value: 5.31 Row: 31, Col: 2, Value: 4.9 Row: 32, Col: 1, Value: 5.09 Row: 32, Col: 2, Value: 4.78 Row: 33, Col: 1, Value: 4.94 Row: 33, Col: 2, Value: 4.59 Row: 34, Col: 1, Value: 4.92 Row: 34, Col: 2, Value: 4.52 Row: 35, Col: 1, Value: 5.14 Row: 35, Col: 2, Value: 4.659999999999999 Row: 36, Col: 1, Value: 5.09 Row: 36, Col: 2, Value: 4.63 Row: 37, Col: 1, Value: 5.03 Row: 37, Col: 2, Value: 4.5 Spartan CA High Yield Competitive funds average 1993 1992 1994 THE TOP CHART SHOWS THE 7-DAY EFFECTIVE YIELD FOR THE FUND AND ITS COMPETITIVE FUNDS AVERAGE AS OF THE LAST TUESDAY OF EACH MONTH FROM JANUARY 1992 THROUGH FEBRUARY 1994. THE BOTTOM CHART SHOWS THE 30-DAY ANNUALIZED NET YIELDS FOR THE FUND AND ITS COMPETITIVE FUND S AVERAGE AS OF THE LAST DAY OF EACH MONTH DURING THE SAME PERIOD. YIELDS FOR EACH FUND WOULD HAVE BEEN LOWER IF FIDELITY HAD NOT REIMBURSED CERTAIN FUND EXPENSES. SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL IS NOT INCLUDED BECAUSE IT HAS NOT COMPLETED ONE FULL CALENDAR YEAR OF OPERATIONS. The funds' recent strategies, performance, and holdings are detailed twice a year in financial reports, which are sent to all shareholders. For current performance or a free annual report, call 1-800-544-8888. TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF FUTURE PERFORMANCE. THE FUNDS IN DETAIL CHARTER EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money and invests it toward a specified goal. In technical terms, Spartan California Municipal Money Market is currently a non-diversified fund of Fidelity California Municipal Trust II, and Spartan California Intermediate Municipal and Spartan California Municipal High Yield are currently non-diversified funds of Fidelity California Municipal Trust. Both trusts are open-end management investment companies. Fidelity California Municipal Trust II was organized as a Delaware business trust on June 20, 1991. Fidelity California Municipal Trust was organized as a Massachusetts business trust on April 28, 1983. There is a remote possibility that one fund might become liable for a misstatement in the prospectus about another fund. EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for protecting the interests of shareholders. The trustees are experienced executives who meet throughout the year to oversee the funds' activities, review contractual arrangements with companies that provide services to the funds, and review performance. The majority of trustees are not otherwise affiliated with Fidelity. THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings may be called to elect or remove trustees, change fundamental policies, approve a management contract, or for other purposes. Shareholders not attending these meetings are encouraged to vote by proxy. Fidelity will mail proxy materials in advance, including a voting card and information about the proposals to be voted on. For the money market fund, you are entitled to one vote for each share you own. For the bond funds, the number of votes you are entitled to is based upon the dollar value of your investment. FMR AND ITS AFFILIATES FIDELITY FACTS Fidelity offers the broadest selection of mutual funds in the world. (bullet) Number of Fidelity mutual funds: over 200 (bullet) Assets in Fidelity mutual funds: over $ 225 billion (bullet) Number of shareholder accounts: over 15 million (bullet) Number of investment analysts and portfolio managers: over 200 (checkmark) The funds are managed by FMR, which chooses their investments and handles their business affairs. FTX has primary responsibility for providing investment management services for Spartan California Municipal Money Market. John (Jack) Haley, Jr. is manager of Spartan California Municipal High Yield, which he has managed since December 1989. Mr. Haley is also manager of California Tax-Free Insured, California Tax-Free High Yield, and Advisor Limited Term Tax-Exempt. He joined Fidelity in 1981. David Murphy is manager of Spartan California Intermediate Municipal, which he has managed since December 1993. Mr. Murphy also manages Limited Term Municipals, New York Tax-Free Insured, Spartan Intermediate Municipal, Spartan New Jersey Municipal High Yield, Spartan New York Intermediate Municipal, and Spartan Short-Intermediate Municipal. Before joining Fidelity in 1989, he managed municipal bond funds at Scudder, Stevens & Clark. Fidelity Distributors Corporation(FDC) distributes and markets Fidelity's funds and services. Fidelity Service Co. (FSC) performs transfer agent servicing functions for the funds. FMR Corp. is the parent company of these organizations. Through ownership of voting common stock, Edward C. Johnson 3d (President and a trustee of the trusts), Johnson family members, and various trusts for the benefit of the Johnson family form a controlling group with respect to FMR Corp. United Missouri Bank, N.A., is each fund's transfer agent, although it employs FSC to perform these functions for the funds. It is located at 1010 Grand Avenue, Kansas City, Missouri. To carry out the funds' transactions, FMR may use its broker-dealer affiliates and other firms that sell fund shares, provided that a fund receives services and commission rates comparable to those of other broker-dealers. INVESTMENT PRINCIPLES AND RISKS SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET seeks high current income that is free from federal income tax and California personal income tax while maintaining a stable $1.00 share price by investing in high-quality, short-term municipal securities of all types. As a result, when you sell your shares, they should be worth the same amount as when you bought them. Of course, there is no guarantee that the fund will maintain a stable $1.00 share price. FMR normally invests at least 65% of the fund's total assets in state tax-free securities, and normally invests so that at least 80% of the fund's income distributions are free from federal income tax. The fund follows industry-standard guidelines on the quality and maturity of its investments, which are designed to help maintain a stable $1.00 share price. The fund will purchase only high-quality securities that FMR believes present minimal credit risks and will observe maturity restrictions on securities it buys. It is possible that a major change in interest rates or a default on the fund's investments could cause its share price (and the value of your investment) to change. SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL seeks high current income that is free from federal income tax and California personal income tax by investing mainly in high-quality and upper-medium-grade-quality municipal securities , although it can also invest in some lower-quality securities. The fund normally maintains a dollar-weighted average maturity of three to 10 years. FMR normally invests at least 65% of the fund's total assets in state tax-free securities, and normally invests at least 80% of the fund's assets in municipal securities whose interest is free from federal income tax. SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD seeks high current income that is free from federal income tax and California personal income tax by investing primarily in municipal securities judged by FMR to be of investment-grade quality, although it can also invest in some lower-quality securities. The fund normally invests in long-term bonds, generally maintaining a dollar-weighted average maturity of at least 15 years, although it may invest in obligations of any maturity. FMR normally invests so that at least 80% of the fund's income distributions are free from federal and California personal income tax. EACH FUND'S yield and each bond fund's share price change daily based on changes in interest rates, market conditions, other political and economic news, and on the quality and maturity of its investments. In general, bond prices rise when interest rates fall, and vice versa. This effect is usually more pronounced for longer-term securities. Lower-quality securities offer higher yields, but also carry more risk. Each fund's performance is closely tied to the economic and political conditions within the state of California, which has been in a recession since 1990. As a result, tax revenues have decreased and the state has accumulated a significant budget deficit despite cost cutting initiatives. Economic conditions within the state are expected to remain stagnant throughout 1994. If you are subject to the federal alternative minimum tax, you should note that each fund may invest all of its assets in municipal securities issued to finance private activities. The interest from these investments is a tax-preference item for purposes of the tax. FMR normally invests each fund's assets according to its investment strategy. The funds do not expect to invest in federally taxable obligations, and the bond funds also do not expect to invest in state taxable obligations. When FMR considers it appropriate for defensive purposes, however, it temporarily may invest substantially in short-term instruments, may hold a substantial amount of uninvested cash, or may invest more than normally permitted in taxable obligations. SECURITIES AND INVESTMENT PRACTICES The following pages contain more detailed information about types of instruments in which a fund may invest, and strategies FMR may employ in pursuit of a fund's investment objective. A summary of risks and restrictions associated with these instrument types and investment practices is included as well. Policies and limitations are considered at the time of purchase; the sale of instruments is not required in the event of a subsequent change in circumstances. FMR may not buy all of these instruments or use all of these techniques to the full extent permitted unless it believes that doing so will help the funds achieve their goals. As a shareholder, you will receive financial reports every six months detailing fund holdings and describing recent investment activities. DEBT SECURITIES. Bonds and other debt instruments are used by issuers to borrow money from investors. The issuer pays the investor a fixed or variable rate of interest, and must repay the amount borrowed at maturity. Some debt securities, such as zero coupon bonds, do not pay current interest, but are purchased at a discount from their face values. Debt securities have varying degrees of quality and varying levels of sensitivity to changes in interest rates. Longer-term bonds are generally more sensitive to interest rate changes than short-term bonds. Lower-quality debt securities may have speculative characteristics, and involve greater risk of default or price changes due to changes in the issuer's creditworthiness. The market prices of these securities may fluctuate more than higher-quality securities and may decline significantly in periods of general or regional economic difficulty. The table on page 15 provides a summary of ratings assigned to debt holdings (not including money market instruments) in Spartan California Municipal High Yield's portfolio. These figures are dollar-weighted averages of month-end portfolio holdings during fiscal 1994, and are presented as a percentage of total investments. These percentages are historical and do not necessarily indicate the fund's current or future debt holdings. SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD FISCAL 1994 DEBT HOLDINGS, BY RATING MOODY'S STANDARD & POOR'S INVESTORS SERVICE, INC. CORPORATION Rating Average A Rating Averag eA INVESTMENT GRADE Highest quality Aaa AAA High quality Aa 58.9 % AA 72.4 % Upper-medium grade A A Medium grade Baa 6.8 % BBB 8.0 % LOWER QUALITY Moderately speculative Ba 0.0 % BB 0.0 % Speculative B 0.0 % B 0.0 % Highly speculative Caa 0.0 % CCC 0.0 % Poor quality Ca 0.0 % CC 0.0 % Lowest quality, no interest C C In default, in arrears -- D 0.0 % 65.7 % 80.4 % A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S OR S&P AMOUNTED TO 9.5 %. THIS MAY INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES. FMR HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER-QUALITY ACCOUNT FOR 2.7% OF THE FUND'S TOTAL INVESTMENTS. REFER TO THE FUND'S STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS. RESTRICTIONS: Spartan California Intermediate Municipal does not currently intend to invest more than 40% of its total assets in securities rated below A by Moody's or S&P, and unrated securities judged by FMR to be of equivalent quality. The fund does not currently intend to invest more than 5% of its assets in securities rated Ba/BB or lower, and unrated securities of equivalent quality. Spartan California Municipal High Yield does not currently intend to invest more than one-third of its assets in bonds judged by FMR to be of equivalent quality to those rated Ba or lower by Moody's and BB or lower by S&P, and does not currently intend to invest in bonds of equivalent quality to bonds rated lower than B. The fund does not currently intend to invest in bonds rated below Caa by Moody's or CCC by S&P. MUNICIPAL SECURITIES are issued to raise money for a variety of public purposes, including general financing for state and local governments, or financing for specific projects or public facilities. Municipal securities may be issued in anticipation of future revenues, and may be backed by the full taxing power of a municipality, the revenues from a specific project, or the credit of a private organization. A security's credit may be enhanced by a bank, insurance company, or other financial institution. A fund may own a municipal security directly or through a participation interest. STATE TAX-FREE SECURITIES include municipal obligations issued by the state of California or its counties, municipalities, authorities, or other subdivisions. The ability of issuers to repay their debt can be affected by many factors that impact the economic vitality of either the state or a region within the state. Other state tax-free securities include general obligations of U.S. territories and possessions such as Guam, the Virgin Islands, and Puerto Rico, and their political subdivisions and public corporations. The economy of Puerto Rico is closely linked to the U.S. economy, and will depend on the strength of the U.S. dollar, interest rates, the price stability of oil imports, and the continued existence of favorable tax incentives. Recent legislation reduced these incentives, but it is impossible to predict what impact the changes will have. MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land, equipment, or facilities. If the municipality stops making payments or transfers its obligations to a private entity, the obligation could lose value or become taxable. PRIVATE ENTITIES may be involved in some municipal securities. For example, industrial revenue bonds are backed by private entities, and resource recovery bonds often involve private corporations. The viability of a project or tax incentives could affect the value and credit quality of these securities. ASSET-BACKED SECURITIES may include pools of purchase contracts, financing leases, or sales agreements entered into by municipalities. These securities usually rely on continued payments by a municipality, and may also be subject to prepayment risk. VARIABLE- AND FLOATING-RATE INSTRUMENTS may have interest rates that move in tandem with a benchmark, helping to stabilize their prices. Inverse floaters have interest rates that move in the opposite direction from the benchmark, making the instrument's market value more volatile. PUT FEATURES entitle the holder to put (sell back) an instrument to the issuer or a financial intermediary. In exchange for this benefit, a fund may pay periodic fees or accept a lower interest rate. Demand features, standby commitments, and tender options are types of put features. ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to increase or decrease its exposure to changing security prices, interest rates, or other factors that affect security values. These techniques may involve derivative transactions such as buying and selling options and futures contracts and purchasing indexed securities. FMR can use these practices to adjust the risk and return characteristics of a fund's portfolio of investments. If FMR judges market conditions incorrectly or employs a strategy that does not correlate well with the fund's investments, these techniques could result in a loss, regardless of whether the intent was to reduce risk or increase return. These techniques may increase the volatility of the fund and may involve a small investment of cash relative to the magnitude of the risk assumed. In addition, these techniques could result in a loss if the counterparty to the transaction does not perform as promised. WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in which payment and delivery for the securities take place at a future date. The market value of a security could change during this period, which could affect a fund's yield or the market value of its assets. 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 other securities , including illiquid 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. DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the risks of investing. This may include limiting the amount of money invested in any one issuer or, on a broader scale, in any one industry or type of project. Economic, business, or political changes can affect all securities of a similar type. A fund that is not diversified may be more sensitive to these changes, and also to changes in the market value of a single issuer or industry. RESTRICTIONS: The funds are considered non-diversified. Generally, to meet federal tax requirements at the close of each quarter, a fund does not invest more than 25% of its total assets in any one issuer and, with respect to 50% of total assets, does not invest more than 5% of its total assets in any one issuer. These limitations do not apply to U.S. government securities. A fund may invest more than 25% of its total assets in tax-free securities that finance similar types of projects. BORROWING. A fund may borrow from banks or from other funds advised by FMR, or through reverse repurchase agreements. If a bond fund borrows money, its share price may be subject to greater fluctuation until the borrowing is paid off. If the fund makes additional investments while borrowings are outstanding, this may be considered a form of leverage. RESTRICTIONS: A fund may borrow only for temporary or emergency purposes, but not in an amount exceeding 33% of its total assets. FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS Some of the policies and restrictions discussed on the preceding pages are fundamental, that is, subject to change only by shareholder approval. The following paragraphs restate all those that are fundamental. All policies stated throughout this prospectus, other than those identified in the following paragraphs, can be changed without shareholder approval. SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET seeks as high a level of current income, exempt from federal income tax and California state personal income tax, as is consistent with preservation of capital by investing in high-quality, short-term California municipal obligations. The fund will normally invest so that at least 80% of its income distributions are exempt from federal income tax. SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL seeks a high level of current income, exempt from federal income tax and California state personal income tax. The fund will normally invest at least 80% of its assets in municipal securities whose interest is free from federal income tax. SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD seeks the highest level of current income, exempt from federal income tax and California state personal income tax, available from California municipal bonds. The fund will normally invest so that at least 80% of its income distributions are exempt from federal and California state personal income taxes. EACH FUND may borrow only for temporary or emergency purposes, but not in an amount exceeding 33% of its total assets. BREAKDOWN OF EXPENSES Like all mutual funds, the funds pay fees related to their daily operations. Expenses paid out of a fund's assets are reflected in its share price or dividends; they are neither billed directly to shareholders nor deducted from shareholder accounts. Each fund pays a MANAGEMENT FEE to FMR for managing its investments and business affairs. FMR in turn pays fees to an affiliate who provides assistance with these services for Spartan California Municipal Money Market. FMR may, from time to time, agree to reimburse the funds for management fees above a specified limit. FMR retains the ability to be repaid by a fund if expenses fall below the specified limit prior to the end of the fiscal year. Reimbursement arrangements, which may be terminated at any time without notice, can decrease a fund's expenses and boost its performance. MANAGEMENT FEE The management fee is calculated and paid to FMR every month. Each fund pays a management fee at a fixed annual rate of its average net assets: .50% for Spartan California Municipal Money Market and .55% for Spartan California Intermediate Municipal and Spartan California Municipal High Yield. The total management fee rate for Spartan California Municipal Money Market , Spartan California Intermediate Municipal , and Spartan California Municipal High Yield for fiscal 1994, after reimbursement, was . 21 % and . 00 %, and .52%, respectively. FMR HAS A SUB-ADVISORY AGREEMENT with FTX, which has primary responsibility for providing investment management for Spartan California Municipal Money Market, while FMR retains responsibility for providing other management services. FMR pays FTX 50% of its management fee (before expense reimbursements) for these services. FSC performs many transaction and accounting functions for the funds. These services include processing shareholder transactions and calculating each fund's share price. FMR, and not the funds, pays for these services. To offset shareholder service costs, FMR or its affiliates also collect the funds' $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for wire purchases and redemptions, and, for Spartan California Municipal Money Market and Spartan California Intermediate Municipal, the $2.00 checkwriting charge. For fiscal 1994, these fees amounted to $ 15,035 , $ 2,506 , $ 1,970 , and $ 14,645 , respectively , for Spartan California Municipal Money Market; $ 85 , $ 10 , $ 0 , and $ 0 , respectively , for Spartan California Intermediate Municipal; and, $ 9,400 , $ 1,520 , and $ 805 , respectively , for Spartan California Municipal High Yield. Each fund has adopted a Distribution and Service Plan. These plans recognize that FMR may use its resources, including management fees, to pay expenses associated with the sale of fund shares. This may include payments to third parties, such as banks or broker-dealers, that provide shareholder support services or engage in the sale of the funds' shares. It is important to note, however, that the funds do not pay FMR any separate fees for this service. For fiscal 1994, the portfolio turnover rates for Spartan California Intermediate Municipal and Spartan California Municipal High Yield were 0 % and 54 %, respectively. These rates vary from year to year. YOUR ACCOUNT DOING BUSINESS WITH FIDELITY Fidelity Investments was established in 1946 to manage one of America's first mutual funds. Today, Fidelity is the largest mutual fund company in the country, and is known as an innovative provider of high-quality financial services to individuals and institutions. In addition to its mutual fund business, the company operates one of America's leading discount brokerage firms, Fidelity Brokerage Services, Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered retirement plans for individuals investing on their own or through their employer. Fidelity is committed to providing investors with practical information to make investment decisions. Based in Boston, Fidelity provides customers with complete service 24 hours a day, 365 days a year, through a network of telephone service centers around the country. To reach Fidelity for general information, call these numbers: (bullet) For mutual funds, 1-800-544-8888 (bullet) For brokerage, 1-800-544-7272 If you would prefer to speak with a representative in person, Fidelity has over 75 walk-in Investor Centers across the country. TYPES OF ACCOUNTS You may set up an account directly in a fund or, if you own or intend to purchase individual securities as part of your total investment portfolio, you may consider investing in a fund through a brokerage account. If you are investing through FBSI or another financial institution or investment professional, refer to its program materials for any special provisions regarding your investment in the fund. The different ways to set up (register) your account with Fidelity are listed below. WAYS TO SET UP YOUR ACCOUNT INDIVIDUAL OR JOINT TENANT FOR YOUR GENERAL INVESTMENT NEEDS Individual accounts are owned by one person. Joint accounts can have two or more owners (tenants). GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS These custodial accounts provide a way to give money to a child and obtain tax benefits. An individual can give up to $10,000 a year per child without paying federal gift tax. Depending on state laws, you can set up a custodial account under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). TRUST FOR MONEY BEING INVESTED BY A TRUST The trust must be established before an account can be opened. BUSINESS OR ORGANIZATION FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER GROUPS Requires a special application. HOW TO BUY SHARES EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every business day. Spartan California Municipal Money Market is managed to keep its share price stable at $1.00. Each fund's shares are sold without a sales charge. Shares are purchased at the next share price calculated after your investment is received and accepted. Share price is normally calculated at 4 p.m. Eastern time. IF YOU ARE NEW TO FIDELITY, complete and sign an account application and mail it along with your check. You may also open your account in person or by wire as described on page . If there is no application accompanying this prospectus, call 1-800-544-8888. IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can: (bullet) Mail in an application with a check, or (bullet) Open your account by exchanging from another Fidelity fund. If you buy shares by check or Fidelity Money Line(Registered trademark), and then sell those shares by any method other than by exchange to another Fidelity fund, the payment may be delayed for up to seven business days to ensure that your previous investment has cleared. MINIMUM INVESTMENTS TO OPEN AN ACCOUNT $10,000 For Spartan CA Money Market $25,000 TO ADD TO AN ACCOUNT $1,000 Through automatic investment plans $500 MINIMUM BALANCE $5,000 For Spartan CA Money Market $10,000 UNDERSTANDING THE SPARTAN APPROACH(Registered trademark) Fidelity's Spartan Approach is based on the principle that lower fund expenses can increase returns. The Spartan funds keep expenses low in two ways. First, higher investment minimums reduce the effect of a fund's fixed costs, many of which are paid on a per-account basis. Second, unlike most mutual funds that include transaction costs as part of overall fund expenses, Spartan shareholders pay directly for the transactions they make. (checkmark)
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another Fidelity fund account Fidelity fund account with the same with the same registration, including registration, including name, address, and name, address, and taxpayer ID number. taxpayer ID number. (bullet) Use Fidelity Money Line to transfer from your bank account. Call before your first use to verify that this service is in place on your account. Maximum Money Line: $50,000.
Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check application. Make your payable to the complete check payable to the name of the fund. complete name of the Indicate your fund fund of your choice. account number on Mail to the address your check and mail to indicated on the the address printed on application. your account statement. (bullet) Exchange by mail: call 1-800-544-6666 for instructions.
In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a and check to a Fidelity Fidelity Investor Center. Investor Center. Call Call 1-800-544-9797 for 1-800-544-9797 for the the center nearest you. center nearest you.
Wire (wire_graphic) (bullet) There may be a $5.00 (bullet) There may be a $5.00 fee for each wire fee for each wire purchase. purchase. (bullet) Call 1-800-544-7777 to (bullet) Wire to: set up your account Bankers Trust and to arrange a wire Company, transaction. Bank Routing (bullet) Wire within 24 hours to: #021001033, Bankers Trust Account #00163053. Company, Specify the complete Bank Routing name of the fund and #021001033, include your account Account #00163053. number and your Specify the complete name. name of the fund and include your new account number and your name.
Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic Account Builder. Sign up for this service when opening your account, or call 1-800-544-6666 to add it.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
HOW TO SELL SHARES You can arrange to take money out of your fund account at any time by selling (redeeming) some or all of your shares. Your shares will be sold at the next share price calculated after your order is received and accepted. Share price is normally calculated at 4 p.m. Eastern time. IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000 worth of shares in the account ($10,000 for Spartan California Municipal Money Market) 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: (bullet) You wish to redeem more than $100,000 worth of shares, (bullet) Your account registration has changed within the last 30 days, (bullet) The check is being mailed to a different address than the one on your account (record address), (bullet) The check is being made payable to someone other than the account owner, or (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: (bullet) Your name, (bullet) The fund's name, (bullet) Your fund account number, (bullet) The dollar amount or number of shares to be redeemed, and (bullet) Any other applicable requirements listed in the table at right. Unless otherwise instructed, Fidelity will send a check to the record address. Deliver your letter to a Fidelity Investor Center, or mail it to: Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 CHECKWRITING If you have a checkbook for your account in Spartan California Municipal Money Market or Spartan California Intermediate Municipal, you may write an unlimited number of checks. Do not, however, try to close out your account by check. ACCOUNT TYPE SPECIAL REQUIREMENTS
IF YOU SELL SHARES OF SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD AFTER HOLDING THEM LESS THAN 180 DAYS, THE FUND WILL DEDUCT A REDEMPTION FEE EQUAL TO .50% OF THE VALUE OF THOSE SHARES. IF YOUR ACCOUNT BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR INDIVIDUAL REDEMPTION TRANSACTIONS: $2.00 FOR EACH CHECK YOU WRITE AND $5.00 FOR EACH EXCHANGE, BANK WIRE, AND ACCOUNT CLOSEOUT.
Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request: $100,000. (bullet) For Money Line transfers to your bank account; minimum: $10; maximum: $100,000. (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 (bullet) The letter of instruction must Tenant, be signed by all persons Sole Proprietorship required to sign for , UGMA, UTMA transactions, exactly as their Trust names appear on the account. (bullet) The trustee must sign the letter indicating capacity as Business or trustee. If the trustee's name Organization is not in the account registration, provide a copy of the trust document certified within the last 60 days. (bullet) At least one person Executor, authorized by corporate Administrator, resolution to act on the Conservator, account must sign the letter. Guardian (bullet) Include a corporate resolution with corporate seal or a signature guarantee. (bullet) Call 1-800-544-6666 for instructions. Wire (wire_graphic) All account types (bullet) You must sign up for the wire feature before using it. To verify that it is in place, call 1-800-544-6666. Minimum wire: $5,000. (bullet) Your wire redemption request must be received by Fidelity before 4 p.m. Eastern time for money to be wired on the next business day.
Check (check_graphic) All account types (bullet) Minimum check: $1,000. (bullet) All account owners must sign a signature card to receive a checkbook.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
INVESTOR SERVICES Fidelity provides a variety of services to help you manage your account. INFORMATION SERVICES FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days a year. Whenever you call, you can speak with someone equipped to provide the information or service you need. 24-HOUR SERVICE ACCOUNT ASSISTANCE 1-800-544-6666 ACCOUNT BALANCES 1-800-544-7544 ACCOUNT TRANSACTIONS 1-800-544-7777 PRODUCT INFORMATION 1-800-544-8888 QUOTES 1-800-544-8544 RETIREMENT ACCOUNT ASSISTANCE 1-800-544-4774 AUTOMATED SERVICE (checkmark) STATEMENTS AND REPORTS that Fidelity sends to you include the following: (bullet) Confirmation statements (after every transaction, except reinvestments, that affects your account balance or your account registration) (bullet) Account statements (quarterly) (bullet) Financial reports (every six months) To reduce expenses, only one copy of most financial reports will be mailed to your household, even if you have more than one account in the fund. Call 1-800-544-6666 if you need copies of financial reports or historical account information. TRANSACTION SERVICES EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other Fidelity funds by telephone or in writing. There may be a $5.00 fee for each exchange out of the funds. 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 MINIMUM FREQUENCY SETTING UP OR CHANGING $500 Monthly or (bullet) For a new account, complete the quarterly appropriate section on the fund application. (bullet) For existing accounts, call 1-800-544-6666 for an application. (bullet) To change the amount or frequency of your investment, call 1-800-544-6666 at least three business days prior to your next scheduled investment date.
DIRECT DEPOSIT TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
MINIMUM FREQUENCY SETTING UP OR CHANGING $500 Every pay (bullet) Check the appropriate box on the fund period application, or call 1-800-544-6666 for an authorization form. (bullet) Changes require a new authorization form.
FIDELITY AUTOMATIC EXCHANGE SERVICE TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING $500 Monthly, (bullet) To establish, call 1-800-544-6666 after bimonthly, both accounts are opened. quarterly, or (bullet) To change the amount or frequency of annually your investment, call 1-800-544-6666.
A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THOSE FUNDS MAY NOT BE APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK. SHAREHOLDER AND ACCOUNT POLICIES DIVIDENDS, CAPITAL GAINS, AND TAXES Each fund distributes substantially all of its net investment income and capital gains , if any, to shareholders each year. Income dividends are declared daily and paid monthly. Capital gains earned by the bond funds are normally distributed in April and December. DISTRIBUTION OPTIONS When you open an account, specify on your application how you want to receive your distributions. If the option you prefer is not listed on the application, call 1-800-544-6666 for instructions. Each fund offers four options (three for Spartan California Municipal Money Market): 1. REINVESTMENT OPTION. Your dividend and capital gain distributions, if any, will be automatically reinvested in additional shares of the fund. If you do not indicate a choice on your application, you will be assigned this option. 2. INCOME-EARNED OPTION. Your capital gain distributions, if any, will be automatically reinvested, but you will be sent a check for each dividend distribution. This option is not available for Spartan California Municipal Money Market. 3. CASH OPTION. You will be sent a check for your dividend and capital gain distributions, if any. 4. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and capital gain distributions, if any, will be automatically invested in another identically registered Fidelity fund. Dividends will be reinvested at the fund's NAV on the last day of the month. Capital gain distributions, if any, will be reinvested at the NAV as of the date the fund deducts the distribution from its NAV. The mailing of distribution checks will begin within seven days. UNDERSTANDING DISTRIBUTIONS As a fund shareholder, you are entitled to your share of the fund's net income and gains on its investments. The fund passes its earnings along to its investors as DISTRIBUTIONS. Each fund earns interest from its investments. These are passed along as DIVIDEND DISTRIBUTIONS. The fund may realize capital gains if it sells securities for a higher price than it paid for them. These are passed along as CAPITAL GAIN DISTRIBUTIONS. Money market funds usually don't make capital gain distributions. (checkmark) TAXES As with any investment, you should consider how an investment in a tax-free fund could affect you. Below are some of the funds' tax implications. TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to shareholders as income dividends. Interest that is federally tax-free remains tax-free when it is distributed. However, gain on the sale of tax-free bonds results in taxable distributions. Short-term capital gains and a portion of the gain on bonds purchased at a discount are taxed as dividends. Long-term capital gain distributions are taxed as long-term capital gains. These distributions are taxable when they are paid, whether you take them in cash or reinvest them. However, distributions declared in December and paid in January are taxable as if they were paid on December 31. Fidelity will send you and the IRS a statement showing the tax status of the distributions paid to you in the previous year. The interest from some municipal securities is subject to the federal alternative minimum tax. Each fund may invest up to 100% of its assets in these securities. Individuals who are subject to the tax must report this interest on their tax returns. To the extent a fund's income dividends are derived from interest on state tax-free investments, they will be free from California state personal income tax. During fiscal 1994, 100 % of each fund's income dividends were free from federal income tax, and from California state personal income taxes. 42.8% of Spartan California Municipal Money Market's, 5.1 % of Spartan California Intermediate Municipal's, and 9.8 % of Spartan California Municipal High Yield's income dividends were subject to the federal alternative minimum tax. TAXES ON TRANSACTIONS. Your bond fund redemptions - including exchanges to other Fidelity funds - are subject to capital gains tax. A capital gain or loss is the difference between the cost of your shares and the price you receive when you sell them. Whenever you sell shares of a fund, Fidelity will send you a confirmation statement showing how many shares you sold and at what price. You will also receive a consolidated transaction statement every January. However, it is up to you or your tax preparer to determine whether this sale resulted in a capital gain and, if so, the amount of tax to be paid. Be sure to keep your regular account statements; the information they contain will be essential in calculating the amount of your capital gains. "BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital gain distribution from its NAV, you will pay the full price for the shares and then receive a portion of the price back in the form of a taxable distribution. TRANSACTION DETAILS THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE) is open. Fidelity normally calculates each fund's NAV and offering price as of the close of business of the NYSE, normally 4 p.m. Eastern time. EACH FUND'S NAV is the value of a single share. The NAV is computed by adding the value of the fund's investments, cash, and other assets, subtracting its liabilities, and then dividing the result by the number of shares outstanding. The money market fund values the securities it owns on the basis of amortized cost. This method minimizes the effect of changes in a security's market value and helps the fund to maintain a stable $1.00 share price. For the bond funds, assets are valued primarily on the basis of market quotations, if available. Since market quotations are often unavailable, assets are usually valued by a method that the Board of Trustees believes accurately reflects fair value. THE OFFERING PRICE (price to buy one share) and REDEMPTION PRICE (price to sell one share) is the fund's NAV. WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that your Social Security or taxpayer identification number is correct and that you are not subject to 31% backup withholding for failing to report income to the IRS. If you violate IRS regulations, the IRS can require a fund to withhold 31% of your taxable distributions and redemptions. YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will not be responsible for any losses resulting from unauthorized transactions if it follows reasonable procedures designed to verify the identity of the caller . Fidelity will request personalized security codes or other information, and may also record calls. You should verify the accuracy of your confirmation statements immediately after you receive them. If you do not want the ability to redeem and exchange by telephone, call Fidelity for instructions. IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods of unusual market activity), consider placing your order by mail or by visiting a Fidelity Investor Center. EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of time. Each fund also reserves the right to reject any specific purchase order, including certain purchases by exchange. See "Exchange Restrictions" on page . Purchase orders may be refused if, in FMR's opinion, they are of a size that would disrupt management of a fund. WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the next offering price calculated after your order is received and accepted. Note the following: (bullet) All of your purchases must be made in U.S. dollars and checks must be drawn on U.S. banks. (bullet) Fidelity does not accept cash. (bullet) When making a purchase with more than one check, each check must have a value of at least $50. (bullet) Each fund reserves the right to limit the number of checks processed at one time. (bullet) If your check does not clear, your purchase will be cancelled and you could be liable for any losses or fees a fund or its transfer agent has incurred. (bullet) Spartan California Municipal Money Market and Spartan California Intermediate Municipal reserve the right to limit all accounts maintained or controlled by any one person to a maximum total balance of $2 million. (bullet) You begin to earn dividends as of the first business day following the day of your purchase. TO AVOID THE COLLECTION PERIOD associated with check and Money Line purchases, consider buying shares by bank wire, U.S. Postal money order, U.S. Treasury check, Federal Reserve check, or direct deposit instead. YOU MAY BUY SHARES OF THE FUNDS (AT THE OFFERING PRICE) OR SELL THEM THROUGH A BROKER, who may charge you a fee for this service. If you invest through a broker or other institution, read its program materials for any additional service features or fees that may apply. CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with FDC may enter confirmed purchase orders on behalf of customers by phone, with payment to follow no later than the time when a fund is priced on the following business day. If payment is not received by that time, the financial institution could be held liable for resulting fees or losses. WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the next NAV calculated after your request is received and accepted. Note the following: (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. (bullet) Shares will earn dividends through the date of redemption; however, shares redeemed on a Friday or prior to a holiday will continue to earn dividends until the next business day. (bullet) Fidelity Money Line redemptions generally will be credited to your bank account on the second or third business day after your phone call. (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. (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. (bullet) If you sell shares by writing a check and the amount of the check is greater than the value of your account, your check will be returned to you and you may be subject to additional charges. THE REDEMPTION FEE for Spartan California Municipal High Yield, if applicable, will be deducted from the amount of your redemption. This fee is paid to the fund rather than FMR, and it does not apply to shares that were acquired through reinvestment of distributions. If shares you are redeeming were not all held for the same length of time, those shares you held longest will be redeemed first for purposes of determining whether the fee applies. THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at the time of the transaction is $50,000 or more. Otherwise, you should note the following: (bullet) The $2.00 checkwriting charge will be deducted from your account. (bullet) The $5.00 exchange fee will be deducted from the amount of your exchange. (bullet) The $5.00 wire fee will be deducted from the amount of your wire. (bullet) The $5.00 account closeout fee does not apply to exchanges or wires, but it will apply to checkwriting. IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000 ($10,000 for Spartan California Municipal Money Market), you will be given 30 days' notice to reestablish the minimum balance. If you do not increase your balance, Fidelity reserves the right to close your account and send the proceeds to you. Your shares will be redeemed at the NAV on the day your account is closed and the $5.00 account closeout fee will be charged. FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing historical account documents, that are beyond the normal scope of its services. EXCHANGE RESTRICTIONS As a shareholder, you have the privilege of exchanging shares of a fund for shares of other Fidelity funds. However, you should note the following: (bullet) The fund you are exchanging into must be registered for sale in your state. (bullet) You may only exchange between accounts that are registered in the same name, address, and taxpayer identification number. (bullet) Before exchanging into a fund, read its prospectus. (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. (bullet) Exchanges may have tax consequences for you. (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. (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. (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 coincide with a "market timing" strategy may be disruptive to a fund. Although the funds will attempt to give you prior notice whenever they are reasonably able to do so, they may impose these restrictions at any time. The funds reserve the right to terminate or modify the exchange privilege in the future. OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose administrative fees of up to $7.50 and redemption fees of up to 1.50% on exchanges. Check each fund's prospectus for details. This prospectus is printed on recycled paper using soy-based inks. SPARTAN(REGISTERED TRADEMARK) CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO A FUND OF FIDELITY CALIFORNIA MUNICIPAL TRUST II SPARTAN(REGISTERED TRADEMARK) CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO SPARTAN(REGISTERED TRADEMARK) CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO FUNDS OF FIDELITY CALIFORNIA MUNICIPAL TRUST STATEMENT OF ADDITIONAL INFORMATION APRIL 18, 1994 This Statement is not a prospectus but should be read in conjunction with the funds' current Prospectus (dated April 18, 1994). Please retain this document for future reference. The Annual Report for the fiscal period ended February 28, 1994 is incorporated herein by reference. To obtain an additional copy of the Prospectus or the Annual Report, please call Fidelity Distributors Corporation at 1-800-544-8888. TABLE OF CONTENTS PAGE Investment Policies and Limitations Special Factors Affecting California Special Factors Affecting Puerto Rico Portfolio Transactions Valuation of Portfolio Securities Performance Additional Purchase and Redemption Information Distributions and Taxes FMR Trustees and Officers Management Contracts Distribution and Service Plans Interest of FMR Affiliates Description of the Trusts Financial Statements Appendix INVESTMENT ADVISER Fidelity Management & Research Company (FMR) INVESTMENT SUB-ADVISER (MONEY MARKET FUND ONLY) FMR Texas Inc. (FMR Texas) DISTRIBUTOR Fidelity Distributors Corporation (FDC) TRANSFER AGENT United Missouri Bank, N.A. (United Missouri) and Fidelity Service Co. (FSC) SCR-ptb-494 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 of a "majority of the outstanding voting securities" (as defined in the Investment Company Act of 1940 (the 1940 Act)) of the fund. However, except for the fundamental investment limitations set forth below, the investment policies and limitations described in this Statement of Additional Information are not fundamental and may be changed without shareholder approval. INVESTMENT LIMITATIONS OF SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO (MONEY MARKET FUND) THE FOLLOWING ARE THE MONEY MARKET FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT: (1) issue bonds or any other class of securities preferred over shares of the fund in respect of the fund's assets or earnings, provided that Fidelity California Municipal Trust may issue additional series of shares in accordance with its Declaration of Trust; (2) borrow money, except that the fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). Any borrowings that come to exceed this amount will be reduced within three days (not including Sundays and holidays) to the extent necessary to comply with the 33 1/3% limitation; (3) underwrite securities issued by others (except to the extent that the fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in the disposition of restricted securities); (4) purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S. territory or possession or a state or local government, or a political subdivision of any of the foregoing) if, as a result, more than 25% of the fund's total assets would be invested in securities of companies whose principal business activities are in the same industry; (5) purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business); (6) purchase or sell physical commodities unless acquired as a result of ownership of securities; or (7) lend any security or make any other loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties, but this limitation does not apply to purchases of debt securities or to repurchase agreements. (8) The fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objective, policies, and limitations as the fund. THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL. (i) To meet federal tax requirements for qualification as a "regulated investment company," the fund limits its investments so that at the close of each quarter of its taxable year: (a) with regard to at least 50% of total assets, no more than 5% of total assets are invested in the securities of a single issuer, and (b) no more than 25% of total assets are invested in the securities of a single issuer. Limitations (a) and (b) do not apply to "Government securities" as defined for federal tax purposes. (ii) The fund does not currently intend to sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, and provided that transactions in futures contracts and options are not deemed to constitute selling securities short. (iii) The fund does not currently intend to purchase securities on margin, except that the fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin. (iv) The fund may borrow money only (a) from a bank or from a registered investment company or portfolio for which FMR or an affiliate serves as investment adviser or (b) by engaging in reverse repurchase agreements with any party (reverse repurchase agreements are treated as borrowings for purposes of fundamental investment limitation (2)). The fund will not purchase any security while borrowings representing more than 5% of its total assets are outstanding. The fund will not borrow from other funds advised by FMR or its affiliates if total outstanding borrowings immediately after such borrowing would exceed 15% of the fund's total assets. (v) The fund does not currently intend to purchase any security if, as a result, more than 10% of its net assets would be invested in securities that are deemed to be illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. (vi) The fund does not currently intend to invest more than 25% of its total assets in industrial revenue bonds related to a single industry. (vii) The fund does not currently intend to purchase or sell futures contracts or call options. This limitation does not apply to options attached to, acquired or traded together with, their underlying securities, and does not apply to securities that incorporate features similar to options or futures contracts. (viii) The fund does not currently intend to engage in repurchase agreements or make loans, but this limitation does not apply to purchases of debt securities. (ix) The fund does not currently intend to (a) purchase securities of other investment companies, except in the open market where no commission except the ordinary broker's commission is paid, or (b) purchase or retain securities issued by other open-end investment companies. Limitations (a) and (b) do not apply to securities received as dividends, through offers of exchange, or as a result of a reorganization, consolidation, or merger. (x) The fund does not currently intend to invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objective, policies, and limitations as the fund. For purposes of limitations (4) and (i), FMR identifies the issuer of a security depending on its terms and conditions. In identifying the issuer, FMR will consider the entity or entities responsible for payment of interest and repayment of principal and the source of such payments; the way in which assets and revenues of an issuing political subdivision are separated from those of other political entities; and whether a governmental body is guaranteeing the security. INVESTMENT LIMITATIONS OF SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO (INTERMEDIATE FUND) THE FOLLOWING ARE THE INTERMEDIATE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT: (1) issue senior securities, except as permitted under the Investment Company Act of 1940; (2) borrow money, except that the fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings). Any borrowings that come to exceed this amount will be reduced within three days (not including Sundays and holidays) to the extent necessary to comply with the 33 1/3% limitation; (3) underwrite securities issued by others, except to the extent that the fund may be considered an underwriter within the meaning of the Securities Act of 1933 in the disposition of restricted securities; (4) purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S. territory or possession or a state or local government, or a political subdivision of any of the foregoing) if, as a result, more than 25% of the fund's total assets would be invested in securities of companies whose principal business activities are in the same industry; (5) purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business); (6) purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities); or (7) lend any security or make any other loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties, but this limitation does not apply to purchases of debt securities or to repurchase agreements. (8) The fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies, and limitations as the fund. THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL. (i) To meet federal tax requirements for qualification as a "regulated investment company," the fund limits its investments so that at the close of each quarter of its taxable year: (a) with regard to at least 50% of total assets, no more than 5% of total assets are invested in the securities of a single issuer, and (b) no more than 25% of total assets are invested in the securities of a single issuer. Limitations (a) and (b) do not apply to "government securities" as defined for federal tax purposes. (ii) The fund does not currently intend to sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, and provided that transactions in futures contracts and options are not deemed to constitute selling securities short. (iii) The fund does not currently intend to purchase securities on margin, except that the fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin. (iv) The fund may borrow money only (a) from a bank or from a registered investment company or portfolio for which FMR or an affiliate serves as investment adviser or (b) by engaging in reverse repurchase agreements with any party (reverse repurchase agreements are treated as borrowings for purposes of fundamental investment limitation (2)). The fund will not purchase any security while borrowings representing more than 5% of its total assets are outstanding. The fund will not borrow from other funds advised by FMR or its affiliates if total outstanding borrowings immediately after such borrowing would exceed 15% of the fund's total assets. (v) The fund does not currently intend to purchase any security if, as a result, more than 10% of its net assets would be invested in securities that are deemed to be illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. (vi) The fund does not currently intend to invest more than 25% of its total assets in industrial revenue bonds related to a single industry. (vii) The fund does not currently intend to engage in repurchase agreements or make loans, but this limitation does not apply to purchases of debt securities. (viii) The fund does not currently intend to (a) purchase securities of other investment companies, except in the open market where no commission except the ordinary broker's commission is paid, or (b) purchase or retain securities issued by other open-end investment companies. Limitations (a) and (b) do not apply to securities received as dividends, through offers of exchange, or as a result of a reorganization, consolidation, or merger. (ix) The fund does not currently intend to invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies, and limitations as the fund. For purposes of limitations (4) and (i), FMR identifies the issuer of a security depending on its terms and conditions. In identifying the issuer, FMR will consider the entity or entities responsible for payment of interest and repayment of principal and the source of such payments; the way in which assets and revenues of an issuing political subdivision are separated from those of other political entities; and whether a governmental body is guaranteeing the security. For the intermediate fund's limitations on futures and options transactions, see the section entitled "Limitations on Futures and Options Transactions" beginning on page . INVESTMENT LIMITATIONS OF SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO (HIGH YIELD FUND) THE FOLLOWING ARE THE HIGH YIELD FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT: (1) issue bonds or any other class of securities preferred over shares of the fund in respect of the fund's assets or earnings, provided that Fidelity California Municipal Trust may issue additional series of shares in accordance with its Declaration of Trust; (2) borrow money, except that the fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). Any borrowings that come to exceed this amount will be reduced within three days (not including Sundays and holidays) to the extent necessary to comply with the 33 1/3% limitation; (3) underwrite securities issued by others (except to the extent that the fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in the disposition of restricted securities); (4) purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S. territory or possession or a state or local government, or a political subdivision of any of the foregoing) if, as a result, more than 25% of the fund's total assets would be invested in securities of companies whose principal business activities are in the same industry; (5) purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business); (6) purchase or sell physical commodities unless acquired as a result of ownership of securities (but this shall not prevent the fund from purchasing and selling futures contracts); or (7) lend any security or make any other loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties, but this limitation does not apply to purchases of debt securities or to repurchase agreements. (8) The fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objective, policies, and limitations as the fund. THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL. (i) To meet federal tax requirements for qualification as a "regulated investment company," the fund limits its investments so that at the close of each quarter of its taxable year: (a) with regard to at least 50% of total assets, no more than 5% of total assets are invested in the securities of a single issuer, and (b) no more than 25% of total assets are invested in the securities of a single issuer. Limitations (a) and (b) do not apply to "Government securities" as defined for federal tax purposes. (ii) The fund does not currently intend to sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, and provided that transactions in futures contracts and options are not deemed to constitute selling securities short. (iii) The fund does not currently intend to purchase securities on margin, except that the fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin. (iv) The fund may borrow money only (a) from a bank or from a registered investment company or fund for which FMR or an affiliate serves as investment adviser or (b) by engaging in reverse repurchase agreements with any party (reverse repurchase agreements are treated as borrowings for purposes of fundamental investment limitation (2)). The fund will not purchase any security while borrowings representing more than 5% of its total assets are outstanding. The fund will not borrow from other funds advised by FMR or its affiliates if total outstanding borrowings immediately after such borrowing would exceed 15% of the fund's total assets. (v) The fund does not currently intend to purchase any security if, as a result, more than 10% of its net assets would be invested in securities that are deemed to be illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. (vi) The fund does not currently intend to invest more than 25% of its total assets in industrial revenue bonds related to a single industry. (vii) The fund does not currently intend to engage in repurchase agreements or make loans, but this limitation does not apply to purchases of debt securities. (viii) The fund does not currently intend to (a) purchase securities of other investment companies, except in the open market where no commission except ordinary broker's commission is paid, or (b) purchase or retain securities issued by other open-end investment companies. Limitations (a) and (b) do not apply to securities received as dividends, through offers of exchange, or as a result of a reorganization, consolidation, or merger. (ix) The fund does not currently intend to invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objective, policies, and limitations as the fund. For purposes of limitations (4) and (i), FMR identifies the issuer of a security depending on its terms and conditions. In identifying the issuer, FMR will consider the entity or entities responsible for payment of interest and repayment of principal and the source of such payments; the way in which assets and revenues of an issuing political subdivision are separated from those of other political entities; and whether a governmental body is guaranteeing the security. For the high yield fund's limitations on futures and options transactions, see the section entitled "Limitations on Futures and Options Transactions" beginning on page . AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with financial institutions that are, or may be considered to be, "affiliated persons" of the fund under the Investment Company Act of 1940. These transactions may include repurchase agreements with custodian banks; short-term obligations of, and repurchase agreements with the 50 largest U.S. banks (measured by deposits); municipal securities; U.S. government securities with affiliated financial institutions that are primary dealers in these securities; short-term currency transactions; and short-term borrowings. In accordance with exemptive orders issued by the Securities and Exchange Commission, the Board of Trustees has established and periodically reviews procedures applicable to transactions involving affiliated financial institutions. QUALITY AND MATURITY (MONEY MARKET FUND ONLY). Pursuant to procedures adopted by the Board of Trustees, the fund may purchase only high-quality securities that FMR believes present minimal credit risks. To be considered high-quality, a security must be rated in accordance with applicable rules in one of the two highest categories for short-term securities by at least two nationally recognized rating services (or by one, if only one rating service has rated the security) or, if unrated, judged to be of equivalent quality by FMR. The fund must limit its investments to securities with remaining maturities of 397 days or less and must maintain a dollar-weighted average maturity of 90 days or less. DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a delayed-delivery or when-issued basis. These transactions involve a commitment by a fund to purchase or sell specific securities at a predetermined price or yield, with payment and delivery taking place after the customary settlement period for that type of security (and more than seven days in the future). Typically, no interest accrues to the purchaser until the security is delivered. The insured and high yield funds may receive fees for entering into delayed-delivery transactions. When purchasing securities on a delayed-delivery basis, each fund assumes the rights and risks of ownership, including the risk of price and yield fluctuations. Because a fund is not required to pay for securities until the delivery date, these risks are in addition to the risks associated with the fund's other investments. If a fund remains substantially fully invested at a time when delayed-delivery purchases are outstanding, the delayed-delivery purchases may result in a form of leverage. When delayed-delivery purchases are outstanding, the fund will set aside appropriate liquid assets in a segregated custodial account to cover its purchase obligations. When a fund has sold a security on a delayed-delivery basis, the fund does not participate in further gains or losses with respect to the security. If the other party to a delayed-delivery transaction fails to deliver or pay for the securities, the fund could miss a favorable price or yield opportunity, or could suffer a loss. Each fund may renegotiate delayed-delivery transactions after they are entered into, and may sell underlying securities before they are delivered, which may result in capital gains or losses. REFUNDING CONTRACTS. The insured and high yield funds may purchase securities on a when-issued basis in connection with the refinancing of an issuer's outstanding indebtedness. Refunding contracts require the issuer to sell and the fund to buy refunded municipal obligations at a stated price and yield on a settlement date that may be several months or several years in the future. The funds generally will not be obligated to pay the full purchase price if they fail to perform under a refunding contract. Instead, refunding contracts generally provide for payment of liquidated damages to the issuer (currently 15-20% of the purchase price). A fund may secure its obligations under a refunding contract by depositing collateral or a letter of credit equal to the liquidated damages provisions of the refunding contract. When required by SEC guidelines, each fund will place liquid assets in a segregated custodial account equal in amount to its obligations under refunding contracts. INVERSE FLOATERS. The insured and high yield funds may invest in inverse floaters, which are instruments whose interest rates bear an inverse relationship to the interest rate on another security or the value of an index. Changes in the interest rate on the other security or index inversely affect the residual interest rate paid on the inverse floater, with the result that the inverse floater's price will be considerably more volatile than that of a fixed-rate bond. For example, a municipal issuer may decide to issue two variable-rate instruments instead of a single long-term, fixed-rate bond. The interest rate on one instrument reflects short-term interest rates, while the interest rate on the other instrument (the inverse floater) reflects the approximate rate the issuer would have paid on a fixed-rate bond, multiplied by two, minus the interest rate paid on the short-term instrument. Depending on market availability, the two portions may be recombined to form a fixed-rate municipal bond. The market for inverse floaters is relatively new. VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating interest rates and carry rights that permit holders to demand payment of the unpaid principal balance plus accrued interest from the issuers or certain financial intermediaries. Floating rate instruments have interest rates that change whenever there is a change in a designated base rate while variable rate instruments provide for a specified periodic adjustment in the interest rate. These formulas are designed to result in a market value for the instrument that approximates its par value. With respect to the money market fund, a demand instrument with a conditional demand feature must have received both a short-term and a long-term high-quality rating or, if unrated, have been determined to be of comparable quality pursuant to procedures adopted by the Board of Trustees. A demand instrument with an unconditional demand feature may be acquired solely in reliance upon a short-term high-quality rating or, if unrated, upon a finding of comparable short-term quality pursuant to procedures adopted by the Board of Trustees. The funds may invest in fixed-rate bonds that are subject to third party puts and in participation interests in such bonds held in trust or otherwise. These bonds and participation interests have tender options or demand features that permit a fund to tender (or put) the bonds to an institution at periodic intervals and to receive the principal amount thereof. A fund considers variable rate instruments structured in this way (Participating VRDOs) to be essentially equivalent to other VRDOs it purchases. The IRS has not ruled whether the interest on Participating VRDOs is tax-exempt and, accordingly, a fund intends to purchase these instruments based on opinions of bond counsel. The money market fund may invest in variable or floating rate instruments that ultimately mature in more than 397 days, if the fund acquires a right to sell the instruments that meets certain requirements set forth in Rule 2a-7. Variable rate instruments (including instruments subject to a demand feature) that mature in 397 days or less may be deemed to have maturities equal to the period remaining until the next readjustment of the interest rate. Other variable rate instruments with demand features may be deemed to have a maturity equal to the period remaining until the next adjustment of the interest rate or the period remaining until the principal amount can be recovered through demand. A floating rate instrument subject to a demand feature may be deemed to have a maturity equal to the period remaining until the principal amount can be recovered through demand. TENDER OPTION BONDS are created by coupling an intermediate- or long-term, fixed-rate, tax-exempt bond (generally held pursuant to a custodial arrangement) with a tender agreement that gives the holder the option to tender the bond at its face value. As consideration for providing the tender option, the sponsor (usually a bank, broker-dealer, or other financial institution) receives periodic fees equal to the difference between the bond's fixed coupon rate and the rate (determined by a remarketing or similar agent) that would cause the bond, coupled with the tender option, to trade at par on the date of such determination. After payment of the tender option fee, a fund effectively holds a demand obligation that bears interest at the prevailing short-term tax-exempt rate. Subject to applicable regulatory requirements, the money market fund may buy tender option bonds if the agreement gives the fund the right to tender the bond to its sponsor no less frequently than once every 397 days. In selecting tender option bonds for the funds, FMR will consider the creditworthiness of the issuer of the underlying bond, the custodian, and the third party provider of the tender option. In certain instances, a sponsor may terminate a tender option if, for example, the issuer of the underlying bond defaults on interest payments. ZERO COUPON BONDS do not make regular interest payments. Instead, they are sold at a deep discount from their face value and are redeemed at face value when they mature. Because zero coupon bonds do not pay current income, their prices can be very volatile when interest rates change. In calculating its daily dividend, a fund takes into account as income a portion of the difference between a zero coupon bond's purchase price and its face value. STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at an exercise price equal to the amortized cost of the underlying security plus accrued interest, if any, at the time of exercise. Each fund may acquire standby commitments to enhance the liquidity of portfolio securities, but, in the case of the money market fund, only when the issuers of the commitments present minimal risk of default. Ordinarily a fund will not transfer a standby commitment to a third party, although it could sell the underlying municipal security to a third party at any time. A fund may purchase standby commitments separate from or in conjunction with the purchase of securities subject to such commitments. In the latter case, the fund would pay a higher price for the securities acquired, thus reducing their yield to maturity. Standby commitments will not affect the dollar-weighted average maturity of the money market fund or the valuation of the securities underlying the commitments. Issuers or financial intermediaries may obtain letters of credit or other guarantees to support their ability to buy securities on demand. FMR may rely upon its evaluation of a bank's credit in determining whether to support an instrument supported by a letter of credit. In evaluating a foreign bank's credit, FMR will consider whether adequate public information about the bank is available and whether the bank may be subject to unfavorable political or economic developments, currency controls, or other governmental restrictions that might affect the bank's ability to honor its credit commitment. Standby commitments are subject to certain risks, including the ability of issuers of standby commitments to pay for securities at the time the commitments are exercised; the fact that standby commitments are not marketable by the funds; and the possibility that the maturities of the underlying securities may be different from those of the commitments. MUNICIPAL LEASE OBLIGATIONS. Each fund may invest a portion of its assets in municipal leases and participation interests therein. These obligations, which may take the form of a lease, an installment purchase, or a conditional sale contract, are issued by state and local governments and authorities to acquire land and a wide variety of equipment and facilities. Generally, the funds will not hold such obligations directly as a lessor of the property, but will purchase a participation interest in a municipal obligation from a bank or other third party. A participation interest gives a fund a specified, undivided interest in the obligation in proportion to its purchased interest in the total amount of the obligation. Municipal leases frequently have risks distinct from those associated with general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet to incur debt. These may include voter referenda, interest rate limits, or public sale requirements. Leases, installment purchases, or conditional sale contracts (which normally provide for title to the leased asset to pass to the governmental issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting their constitutional and statutory requirements for the issuance of debt. Many leases and contracts include "non-appropriation clauses" providing that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purposes by the appropriate legislative body on a yearly or other periodic basis. Non-appropriation clauses free the issuer from debt issuance limitations. FEDERALLY TAXABLE OBLIGATIONS. The funds do not intend to invest in securities whose interest is federally taxable; however, from time to time, each fund may invest a portion of its assets on a temporary basis in fixed-income obligations whose interest is subject to federal income tax. For example, each fund may invest in obligations whose interest is federally taxable pending the investment or reinvestment in municipal securities of proceeds from the sale of its shares or sales of portfolio securities. Should a fund invest in federally taxable obligations, it would purchase securities that in FMR's judgment are of high quality. These would include obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities; obligations of domestic banks; and repurchase agreements. The insured and high yield funds' standards for high quality, taxable obligations are essentially the same as those described by Moody's Investors Service, Inc. (Moody's) in rating corporate obligations within its two highest ratings of Prime-1 and Prime-2, and those described by Standard & Poor's Corporation (S&P) in rating corporate obligations within its two highest ratings of A-1 and A-2. The money market fund will purchase taxable obligations only if they meet its quality requirements. Proposals to restrict or eliminate the federal income tax exemption for interest on municipal obligations are introduced before Congress from time to time. Proposals also may be introduced before the California legislature that would affect the state tax treatment of the funds' distributions. If such proposals were enacted, the availability of municipal obligations and the value of the funds' holdings would be affected and the Trustees would reevaluate the funds' investment objectives and policies. Each fund anticipates being as fully invested as practicable in municipal securities; however, there may be occasions when, as a result of maturities of portfolio securities, sales of fund shares, or in order to meet redemption requests, a fund may hold cash that is not earning income. In addition, there may be occasions when, in order to raise cash to meet redemptions, a fund may be required to sell securities at a loss. REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a security and simultaneously commits to resell that security to the seller at an agreed-upon price on an agreed-upon date within a number of days from the date of purchase. The resale price reflects the purchase price plus an agreed-upon incremental amount which is unrelated to the coupon rate or maturity of the purchased security. A repurchase agreement is a taxable obligation which involves the obligation of the seller to pay the agreed-upon price, which obligation is in effect secured by the value (at least equal to the amount of the agreed-upon resale price and marked to market daily) of the underlying security. Each fund may engage in repurchase agreements with respect to any security in which it is authorized to invest even if, with respect to the money market fund, the underlying security matures in more than 397 days. While it does not presently appear possible to eliminate all risks from these transactions (particularly the possibility of a decline in the market value of the underlying securities, as well as delays and costs to the fund in connection with bankruptcy proceedings), it is each fund's current policy to limit repurchase agreements to parties whose creditworthiness has been reviewed and found satisfactory by FMR. REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund sells a portfolio instrument to another party, such as a bank or broker-dealer, in return for cash and agrees to repurchase the instrument at a particular price and time. While a reverse repurchase agreement is outstanding, the fund will maintain appropriate liquid assets in a segregated custodial account to cover its obligation under the agreement. A fund will enter into reverse repurchase agreements only with parties whose creditworthiness has been found satisfactory by FMR. Such transactions may increase fluctuations in the market value of a fund's assets and may be viewed as a form of leverage. 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 a fund's rights and obligations relating to the investment). Investments currently considered by the money market fund to be illiquid include restricted securities and municipal lease obligations determined by FMR to be illiquid. Investments currently considered by the insured and high yield funds to be illiquid include over-the-counter options. Also, FMR may determine some restricted securities and municipal lease obligations to be illiquid. However, with respect to over-the-counter options the insured and high yield funds write, 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 valued for purposes of monitoring amortized cost valuation (money market fund) or priced (insured and high yield funds) at fair value as determined in good faith by a committee appointed by the Board of Trustees. If through a change in values, net assets, or other circumstances, a fund were in a position where more than 10% of its net assets were invested in illiquid securities, it would seek to take appropriate steps to protect liquidity. RESTRICTED SECURITIES generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, or in a registered public offering. Where registration is required, a fund may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time the fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, a fund might obtain a less favorable price than prevailed when it decided to seek registration of the security. However, in general, the money market fund anticipates holding restricted securities to maturity or selling them in an exempt transaction. INDEXED SECURITIES. The intermediate and high yield funds may purchase securities whose prices are indexed to the prices of other securities, securities indices, or other financial indicators. Indexed securities typically, but not always, are debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic. Index securities have principal payments as well as coupon payments that depend on the performance of one or more interest rates. Their coupon rates or principal payments may change by several percentage points for every 1% interest rate change. One example of indexed securities is inverse floaters. The performance of indexed securities depends to a great extent on the performance of the security or other instrument to which they are indexed, and may also be influenced by interest rate changes. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer's creditworthiness deteriorates. Indexed securities may be more volatile than the underlying instruments. LOWER-RATED MUNICIPAL SECURITIES. The intermediate and high yield funds may invest a portion of their assets in lower-rated municipal securities as described in the Prospectus. While the market for California municipals is considered to be substantial, adverse publicity and changing investor perceptions may affect the ability of outside pricing services used by the fund to value its portfolio securities, and the fund's ability to dispose of lower-rated bonds. The outside pricing services are monitored by FMR and reported to the Board to determine whether the services are furnishing prices that accurately reflect fair value. The impact of changing investor perceptions may be especially pronounced in markets where municipal securities are thinly traded. A fund may choose, at its expense or in conjunction with others, to pursue litigation or otherwise exercise its rights as a security holder to seek to protect the interests of security holders if it determines this to be in the best interest of the fund's shareholders. INTERFUND BORROWING PROGRAM. Each fund has received permission from the SEC to lend money to and borrow money from other funds advised by FMR or its affiliates, but will participate in the interfund borrowing program only as a borrower. Interfund loans normally will extend overnight, but can have a maximum duration of seven days. A fund will borrow through the program only when the costs are equal to or lower than the costs of bank loans. Loans may be called on one day's notice, and the fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not renewed. ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been experiencing, or may experience in the future, problems, including (a) the effects of inflation upon construction and operating costs, (b) the availability and cost of fuel, (c) the availability and cost of capital, (d) the effects of conservation on energy demand, (e) the effects of rapidly changing environmental, safety, and licensing requirements, and other federal, state, and local regulations, (f) timely and sufficient rate increases, (g) opposition to nuclear power, and (h) increased competition. HEALTH CARE INDUSTRY. The health care industry is subject to regulatory action by a number of private and governmental agencies, including federal, state, and local governmental agencies. A major source of revenues for the health care industry is payments from the Medicare and Medicaid programs. As a result, the industry is sensitive to legislative changes and reductions in governmental spending for such programs. Numerous other factors may affect the industry, such as general and local economic conditions; demand for services; expenses (including malpractice insurance premiums); and competition among health care providers. In the future, the following elements may adversely affect health care facility operations: adoption of legislation proposing a national health insurance program; medical and technological advances which dramatically alter the need for health services or the way in which such services are delivered; and efforts by employers, insurers, and governmental agencies to reduce the costs of health insurance and healthcare services. HOUSING. Housing revenue bonds are generally issued by a state, county, city, local housing authority, or other public agency. They are secured by the revenues derived from mortgages purchased with the proceeds from the bond issue. It is extremely difficult to predict the supply of available mortgages to be purchased with the proceeds of an issue or the future cash flow from the underlying mortgages. Consequently, there are risks that proceeds will exceed supply, resulting in early retirement of bonds, or that the homeowner repayments will create an irregular cash flow. Many factors may affect the financing of multi-family housing projects, including acceptable completion of construction, proper management, occupancy and rent levels, economic conditions, and changes to current laws and regulations. INVESTMENT POLICIES FOR INTERMEDIATE AND HIGH YIELD FUNDS ONLY LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund has filed a notice of eligibility for exclusion from the definition of the term "commodity pool operator" with the Commodity Futures Trading Commission (CFTC) and the National Futures Association, which regulate trading in the futures markets. The funds intend to comply with Rule 4.5 unde r the Commodity Exchange Act, which limits the extent to which the funds can commit assets to initial margin deposits and option premiums. In addition, each fund will not: (a) sell futures contracts, purchase put options, or write call options if, as a result, more than 25% of the fund's total assets would be hedged with futures and options under normal conditions; (b) purchase futures contracts or write put options if, as a result, the fund's total obligations upon settlement or exercise of purchased futures contracts and written put options would exceed 25% of its total assets; or (c) purchase call options if, as a result, the current value of option premiums for call options purchased by the fund would exceed 5% of the fund's total assets. These limitations do not apply to options attached to or acquired or traded together with their underlying securities, and do not apply to securities that incorporate features similar to options. The above limitations on the funds' investments in futures contracts and options, and the funds' policies regarding futures contracts and options discussed elsewhere in this Statement of Additional Information, are not fundamental policies and may be changed as regulatory agencies permit. FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to purchase a specified underlying instrument at a specified future date. When a fund sells a futures contract, it agrees to sell the underlying instrument at a specified future date. The price at which the purchase and sale will take place is fixed when the fund enters into the contract. Some currently available futures contracts are based on specific securities, such as U.S. Treasury bonds or notes, and some are based on indices of securities prices, such as the Bond Buyer Municipal Bond Index. Futures can be held until their delivery dates, or can be closed out before then if a liquid secondary market is available. The value of a futures contract tends to increase and decrease in tandem with the value of its underlying instrument. Therefore, purchasing futures contracts will tend to increase a fund's exposure to positive and negative price fluctuations in the underlying instrument, much as if it had purchased the underlying instrument directly. When a fund sells a futures contract, by contrast, the value of its futures position will tend to move in a direction contrary to the market. Selling futures contracts, therefore, will tend to offset both positive and negative market price changes, much as if the underlying instrument had been sold. FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is not required to deliver or pay for the underlying instrument unless the contract is held until the delivery date. However, both the purchaser and seller are required to deposit "initial margin" with a futures broker, known as a futures commission merchant (FCM), when the contract is entered into. Initial margin deposits are typically equal to a percentage of the contract's value. If the value of either party's position declines, that party will be required to make additional "variation margin" payments to settle the change in value on a daily basis. The party that has a gain may be entitled to receive all or a portion of this amount. Initial and variation margin payments do not constitute purchasing securities on margin for purposes of a fund's investment limitations. In the event of the bankruptcy of an FCM that holds margin on behalf of a fund, the fund may be entitled to return of margin owed to it only in proportion to the amount received by the FCM's other customers, potentially resulting in losses to the fund. PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the fund pays the current market price for the option (known as the option premium). Options have various types of underlying instruments, including specific securities, indices of securities prices, and futures contracts. The fund may terminate its position in a put option it has purchased by allowing it to expire or by exercising the option. If the option is allowed to expire, the fund will lose the entire premium it paid. If the fund exercises the option, it completes the sale of the underlying instrument at the strike price. A fund may also terminate a put option position by closing it out in the secondary market at its current price, if a liquid secondary market exists. The buyer of a typical put option can expect to realize a gain if security prices fall substantially. However, if the underlying instrument's price does not fall enough to offset the cost of purchasing the option, a put buyer can expect to suffer a loss (limited to the amount of the premium paid, plus related transaction costs). The features of call options are essentially the same as those of put options, except that the purchaser of a call option obtains the right to purchase, rather than sell, the underlying instrument at the option's strike price. A call buyer typically attempts to participate in potential price increases of the underlying instrument with risk limited to the cost of the option if security prices fall. At the same time, the buyer can expect to suffer a loss if security prices do not rise sufficiently to offset the cost of the option. WRITING PUT AND CALL OPTIONS. When a fund writes a put option, it takes the opposite side of the transaction from the option's purchaser. In return for receipt of the premium, the fund assumes the obligation to pay the strike price for the option's underlying instrument if the other party to the option chooses to exercise it. When writing an option on a futures contract, the fund will be required to make margin payments to an FCM as described above for futures contracts. A fund may seek to terminate its position in a put option it writes before exercise by closing out the option in the secondary market at its current price. If the secondary market is not liquid for a put option the fund has written, however, the fund must continue to be prepared to pay the strike price while the option is outstanding, regardless of price changes, and must continue to set aside assets to cover its position. If security prices rise, a put writer generally would expect to profit, although its gain would be limited to the amount of the premium it received. If security prices remain the same over time, it is likely that the writer will also profit, because it should be able to close out the option at a lower price. If security prices fall, the put writer would expect to suffer a loss. This loss should be less than the loss from purchasing the underlying instrument directly, however, because the premium received for writing the option should mitigate the effects of the decline. Writing a call option obligates a fund to sell or deliver the option's underlying instrument, in return for the strike price, upon exercise of the option. The characteristics of writing call options are similar to those of writing put options, except that writing calls generally is a profitable strategy if prices remain the same or fall. Through receipt of the option premium, a call writer mitigates the effects of a price decline. At the same time, because a call writer must be prepared to deliver the underlying instrument in return for the strike price, even if its current value is greater, a call writer gives up some ability to participate in security price increases. COMBINED POSITIONS. A fund may purchase and write options in combination with each other, or in combination with futures or forward contracts, to adjust the risk and return characteristics of the overall position. For example, a fund may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out. CORRELATION OF PRICE CHANGES. Because there are a limited number of types of exchange-traded options and futures contracts, it is likely that the standardized contracts available will not match a fund's current or anticipated investments exactly. The funds may invest in options and futures contracts based on securities with different issuers, maturities, or other characteristics from the securities in which they typically invest, which involves a risk that the options or futures position will not track the performance of a fund's other investments. Options and futures prices can also diverge from the prices of their underlying instruments, even if the underlying instruments match a fund's investments well. Options and futures prices are affected by such factors as current and anticipated short-term interest rates, changes in volatility of the underlying instrument, and the time remaining until expiration of the contract, which may not affect security prices the same way. Imperfect correlation may also result from differing levels of demand in the options and futures markets and the securities markets, from structural differences in how options and futures and securities are traded, or from imposition of daily price fluctuation limits or trading halts. A fund may purchase or sell options and futures contracts with a greater or lesser value than the securities it wishes to hedge or intends to purchase in order to attempt to compensate for differences in volatility between the contract and the securities, although this may not be successful in all cases. If price changes in a fund's options or futures positions are poorly correlated with its other investments, the positions may fail to produce anticipated gains or result in losses that are not offset by gains in other investments. LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid secondary market will exist for any particular options or futures contract at any particular time. Options may have relatively low trading volume and liquidity if their strike prices are not close to the underlying instrument's current price. In addition, exchanges may establish daily price fluctuation limits for options and futures contracts, and may halt trading if a contract's price moves upward or downward more than the limit in a given day. On volatile trading days when the price fluctuation limit is reached or a trading halt is imposed, it may be impossible for a fund to enter into new positions or close out existing positions. If the secondary market for a contract is not liquid because of price fluctuation limits or otherwise, it could prevent prompt liquidation of unfavorable positions, and potentially could require a fund to continue to hold a position until delivery or expiration regardless of changes in its value. As a result, a fund's access to other assets held to cover its options or futures positions could also be impaired. OTC OPTIONS. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size and strike price, the terms of over-the-counter options (options not traded on exchanges) generally are established through negotiation with the other party to the option contract. While this type of arrangement allows the fund greater flexibility to tailor an option to their needs, OTC options generally involve greater credit risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded. ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will comply with guidelines established by the Securities and Exchange Commission with respect to coverage of options and futures strategies by mutual funds, and if the guidelines so require will set aside appropriate liquid assets in a segregated custodial account in the amount prescribed. Securities held in a segregated account cannot be sold while the futures or option strategy is outstanding, unless they are replaced with other suitable assets. As a result, there is a possibility that segregation of a large percentage of a fund's assets could impede portfolio management or the fund's ability to meet redemption requests or other current obligations. SPECIAL FACTORS AFFECTING CALIFORNIA Certain California constitutional amendments, legislative measures, executive orders, administrative regulations, and voter initiatives, as discussed below, could adversely affect the market values and marketability of, or result in default of, existing obligations, including obligations that may be held by the funds. Obligations of the state or local governments may also be affected by budgetary pressures affecting the State and economic conditions in the State. Interest income to a fund could also be adversely affected. The following highlights only some of the more significant financial trends and problems, and is based on information drawn from official statements and prospectuses relating to securities offerings of the State of California, its agencies, or instrumentalities, as available on the date of this Statement of Additional Information. FMR has not independently verified any of the information contained in such official statements and other publicly available documents, but is not aware of any fact which would render such information inaccurate. CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS LIMITATION ON TAXES. Certain obligations held by the funds may be obligations of issuers that rely in whole or in part, directly or indirectly, on ad valorem property taxes as a source of revenue. The taxing powers of California local governments and districts are limited by Article XIIIA of the California Constitution, enacted by the voters in 1978 and commonly known as "Proposition 13." Briefly, XIIIA limits to 1% of full cash value the rate of ad valorem property taxes on real property and generally restricts the reassessment of property to 2% per year, except upon new construction or change of ownership (subject to a number of exemptions). Taxing entities may, however, raise ad valorem taxes above the 1% limit to pay debt service on voter-approved bonded indebtedness. Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the assessed value of property as of the owner's date of acquisition (or as of March 1, 1975 if acquired earlier), subject to certain adjustments. This system has resulted in widely varying amounts of tax on similarly situated properties. Several lawsuits were filed challenging the acquisition-based assessment system of Proposition 13, but on June 18, 1992, the U.S. Supreme Court announced a decision upholding Proposition 13. Article XIIIA prohibits local governments from raising revenues through ad valorem property taxes above the 1% limit; it also requires voters of any government unit to give 2/3 approval to levy any "special tax." However, court decisions allowed non-voter-approved levy of "general taxes" which were not dedicated to a specific use. In response to these decisions, the voters of the State in 1986 adopted an initiative statute which imposed significant new limits on the ability of local entities to raise or levy general taxes, except by receiving majority local voter approval. Significant elements of this initiative, "Proposition 62," have been overturned in recent court cases, but efforts may continue to further restrict the ability of local government agencies to levy or raise taxes. APPROPRIATIONS LIMITS. The State and its local governments are subject to an annual "appropriations limit" imposed by Article XIIIB of the California Constitution, enacted by the voters in 1979 and significantly amended by Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB prohibits the State or any covered local government from spending "appropriations subject to limitation" in excess of the appropriations limit imposed. "Appropriations subject to limitation" are authorizations to spend "proceeds of taxes," which consists of tax revenues and certain other funds, including proceeds from regulatory licenses, user charges, or other fees to the extent that such proceeds exceed the cost of providing the product or service; but "proceeds of taxes" for local governments excludes most State subventions. No limit is imposed on appropriations of funds which are not "proceeds of taxes," such as reasonable user charges or fees and certain other non-tax funds, including bond proceeds. Among the expenditures not included in the Article XIIIB appropriations limit are: (1) the debt service cost of bonds issued or authorized prior to January 1, 1979, or subsequently authorized by the voters; (2) appropriations arising from certain emergencies declared by the Governor; (3) appropriations for certain capital outlay projects; and (4) appropriations by the State of post-1989 increases in gasoline taxes and vehicle weight fees. The appropriations limit for each year is adjusted annually to reflect changes in cost of living and population, and any transfers of service responsibilities between government units. The definitions for such adjustments were liberalized by Proposition 111 to more closely follow growth in the State's economy. For the 1990-91 fiscal year, each unit of government has recalculated its appropriations limit by taking the actual 1986-87 limit and applying the Proposition 111 annual adjustments forward to 1990-91. This was expected to raise the limit in most cases. Under Proposition 111, "excess" revenues are measured over a two-year cycle. With respect to local governments, excess revenues must be returned by a revision of tax rates or fee schedules within the two subsequent fiscal years. The appropriations limit for a local government may be overridden by referendum under certain conditions for up to four years at a time. With respect to the State, 50% of any excess revenues is to be distributed to K-12 school and community college districts (collectively, K-14 districts) and the other 50% is to be refunded to taxpayers. In the years immediately following enactment, very few California governmental entities operated near their appropriations limit. I n the mid-to-late 1980's, many entities were at or approaching their limit , and several successfully obtained voter approval for 4-year waivers of the limit . Since Proposition 111, the appropriations limit has again ceased to be a practical limit on California governments, but this condition may change in the future. During FY 1986-87, State receipts from proceeds of taxes exceeded its appropriations limit by $1.138 billion, which was returned to taxpayers. Since that time, appropriations subject to limitation were under the State limit. The 199 4 -9 5 Governor's Budget proposal estimates State appropriations will be more than $ 3.7 billion under the limit for FY 199 3 -9 4 and over $ 5.4 billion under the limit for FY 199 4 -9 5 . OBLIGATIONS OF THE STATE OF CALIFORNIA As of March 1, 199 4 , the State had approximately $17.5 billion of general obligation bonds outstanding, and $ 6.3 billion remained authorized but unissued. In addition, at June 30, 199 3 , the State had lease-purchase obligations, payable from the State's General Fund, of approximately $ 4.0 billion. Of the State's outstanding general obligation debt, approximately 28% is presently self-liquidating (for which program revenues are anticipated to be sufficient to reimburse the General Fund for debt service payments). In FY 199 2 -9 3 , debt service on general obligation bonds and lease-purchase debt was approximately 4.1 % of General Fund revenues. The State has paid the principal of and interest on its general obligation bonds, lease-purchase debt, and short-term obligations when due. ECONOMY California's economy is the largest among the 50 states and one of the largest in the world. The State's population grew by 27% in the 1980s and, at over 31 million, it now represents 12.3% of the total United States population. Total personal income in the State, at an estimated $640 billion in 1992, accounts for about 13% of all personal income in the nation. Total employment is almost 14 million, the majority of which is in the service, trade, and manufacturing sectors. Reports by the State Department of Finance and the Commission on State Finance confirm that the State's economy is suffering the worst recession since the 1930's, with prospects for recovery slower than for the nation as a whole. The State lost over 800,000 jobs since the start of the recession, in mid-1990, and is expected to lose more jobs in 1994 before a turnaround occurs . The largest job losses have been in Southern California, led by declines in the aerospace and construction industries. Weakness statewide occurred in manufacturing, construction, services and trade and will be hurt in the next few years by continued cuts in federal defense spending and base closures . Unemployment is expected to remain well above the national average in 1994 . The State's economy is only expected to slowly pull out of the recession starting in 1994 or early 1995 . Delay in recovery will exacerbate shortfalls in State revenues. RECENT STATE FINANCIAL RESULTS The principal sources of State General Fund revenues in 199 2 -9 3 were the California personal income tax (4 4 % of total revenues), the sales tax (3 8 %), bank and corporation taxes (1 2 %), and the gross premium tax on insurance (3%). The State maintains a Special Fund for Economic Uncertainties (the SFEU), derived from General Fund revenues, as a reserve to meet cash needs of the General Fund, but which is required to be replenished as soon as sufficient revenues are available. Year-end balances in the SFEU are included for financial reporting purposes in the General Fund balance. In recent years (but not in the past two years, as the recession has cut revenues) , the State has budgeted to maintain the Economic Uncertainties Fund at around 3% of General Fund expenditures. Throughout the 1980s, State spending increased rapidly as the State population and economy also grew rapidly, including many assistance programs to local governments, which were constrained by Proposition 13 and other laws. The largest State program is assistance to local public school districts. In 1988, an initiative (Proposition 98) was enacted which (subject to suspension by a 2/3 vote of the Legislature and the Governor) guarantees local school districts and community college districts a minimum share of State General Fund revenues (currently about 3 4 %). Since the start of the 1990-91 Fiscal Year, the State has faced adverse economic, fiscal, and budget conditions. The economic recession seriously affected State tax revenues. It also caused increased expenditures for health and welfare programs. The State is also facing a structural imbalance in its budget with the largest programs supported by the General Fund (education, health, welfare and corrections) growing at rates significantly higher than the growth rates for the principal revenue sources of the General Fund. As a result, the State entered a period of budget imbalance, with expenditures exceeding revenues for four of the five completed fiscal years through 1991-92. As the State fell into a deep recession in the summer of 1990, the State budget fell sharply out of balance in the 1990-91 and 1991-92 fiscal years, despite significant expenditure cuts and tax increases. The State had accumulated a $2.8 billion budget deficit by June 30, 1992. This deficit also severely reduced the State's cash resources, so that it had to rely on external borrowing in the short-term markets to meet its cash needs. With the failure to enact a budget by July 1, 1992, the State had no legal authority to pay many of its vendors until the budget was passed; nevertheless, certain obligations (such as debt service, school apportionments, welfare payments, and employee salaries) were payable because of continuing or special appropriations, or court orders. However, the State Controller did not have enough cash to pay as they came due all of these ongoing obligations, as well as valid obligations incurred in the prior fiscal year. Starting on July 1, 1992, the Controller was required to issue approximately $3.8 billion of "registered warrants" in lieu of normal warrants backed by cash to pay many State obligations (the first time this had occurred since the 1930's). Available cash was used to pay constitutionally mandated and priority obligations. All the registered warrants were called for redemption by September 4, 1992 following enactment of the 1992-93 Budget Act and issuance by the State of its normal cash flow borrowings. The 1992-93 Budget Act, when finally adopted, was projected to eliminate the State's accumulated deficit, with additional expenditure cuts and a $1.3 billion transfer of State education funding costs to local governments by shifting local property taxes to school districts. However, as the recession continued longer and deeper than expected, revenues once again were far below projections, and only reached a level just equal to the amount of expenditures. Thus, the State continued to carry its $2.8 billion budget deficit at June 30, 1993. The 1993-94 Budget Act was similar to the prior year, in reliance on expenditure cuts and an additional $2.6 billion transfer of costs to local government, particularly counties. A major feature of the budget was a two-year plan to eliminate the accumulated deficit by borrowing into the 1994-95 fiscal year. With the recession still continuing longer than expected, the 1994-95 Governor's Budget now projects in the 1993-94 Fiscal Year, the General Fund will have $900 million less revenue and $800 million higher expenditures than budgeted. As a result, revenues will only exceed expenditures by about $400 million. If this projection is met, it will be the first operating surplus in four years; however, some budget analysts outside the Department of Finance project revenues in the balance of 1993-94 will not even meet the revised lower projection. In addition, the General Fund may have some unplanned costs for relief related to the January 17, 1994 Northridge earthquake. The State has implemented its short-term borrowing as part of the deficit elimination plan, and has also borrowed additional sums to cover cash flow shortfalls in the spring of 1994, for a total of $3.2 billion, coming due in July and December 1994. Repayment of these short-term notes will require additional borrowing, as the State's cash position continues to be adversely affected. The Governor's 1994-95 Budget proposal recognizes the need to bridge a gap of around $5 billion by June 30, 1995. Over $3.1 billion of this amount is being requested from the federal government as increased aid, particularly for costs associated with incarcerating, educating, and providing health and welfare services to undocumented immigrants. However, President Clinton has not included these costs in his proposed Fiscal 1995 Budget. The rest of the budget gap is proposed to be closed with expenditure cuts and projected $600 million of new revenue assuming the State wins a tax case presently pending in U.S. Supreme Court. Thus, the State will once again face significant uncertainties and very difficult choices in the 1994-95 budget, as tax increases are unlikely and many cuts and budget adjustments have been made in the past three years. The State's severe financial difficulties for the past, the current and upcoming budget years will result in continued pressure upon almost all local governments, especially those which depend on State aid, such as school districts and counties. While the Governor has noted that part of the "budget gap" was cyclical, a result of economic slowdown which has reduced growth of revenues in the fiscal years, but a significant part is structural, with demands for State services and caseloads in major areas of the budget, such as corrections, welfare indigent health care, and public schools, growing at a faster rate than the State economy and State revenues. While recent budgets included both permanent tax increases and actions to reduce costs of state government over the longer term, the Governor and other analysts have noted that structural imbalances still exist, and there can be no assurance that the State will not face budget gaps in the future. State general obligation bonds are currently rated "Aa" by Moody's, "AA" by Fitch, and " A+ " by S&P. There can be no assurance that such ratings will be maintained in the future. All three of these ratings were reduced from "AAA" levels since late 1991. OBLIGATIONS OF OTHER ISSUERS STATE ASSISTANCE. Property tax revenues received by local governments declined more than 50% following passage of Proposition 13. Subsequently, the California Legislature enacted measures to provide for the redistribution of the State's General Fund surplus to local agencies; the reallocation of certain State revenues to local agencies; and the assumption of certain governmental functions by the State to assist municipal issuers to raise revenues. Total local assistance from the State's General Fund totaled approximately $31.2 billion in FY 1992-93 (about 75% of General Fund expenditures) and has been budgeted at $29.0 billion for FY 1993-94, 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 Act s caused local governments to transfer $ 3.8 billion of property tax revenues to school districts, representing reversal of the post-Proposition 13 "bailout" aid. To the extent the State should be constrained by its Article XIIIB appropriations limit, or its obligation to conform to Proposition 98, or other considerations, the absolute level, or the rate of growth, of State assistance to local governments may continue to be reduced. Any such reductions in State aid could compound the serious fiscal constraints already experienced by many local governments, particularly counties. At least one rural county (Butte) publicly announced that it might enter bankruptcy proceedings in August 1990, although such plans were put off after the Governor approved legislation to provide additional funds for the county. Other counties have also indicated that their budgetary condition is extremely grave. A school district (Richmond Unified) filed for protection under bankruptcy laws several years ago , but the petition was later dismissed; other school districts have indicated financial stress, although none has threatened bankruptcy. ASSESSMENT BONDS. Municipal obligations which are assessment bonds or Mello-Roos bonds may be adversely affected by a general decline in real estate values or a slowdown in real estate sales activity. In many cases, such bonds are secured by land which is undeveloped at the time of issuance but anticipated to be developed within a few years after issuance. In the event of such reduction or slowdown, such development may not occur or may be delayed, thereby increasing the risk of a default on the bonds. Because the special assessments or taxes securing these bonds are not the personal liability of the owners of the property assessed, the lien on the property is the only security for the bonds. Moreover, in most cases the issuer of these bonds is not required to make payments on the bonds in the event of delinquency in the payment of assessments or taxes, except from amounts, if any, in a reserve fund established for the bonds. CALIFORNIA LONG-TERM LEASE OBLIGATIONS. Certain California long-term lease obligations, though typically payable from the general fund of the municipality, are subject to "abatement" in the event the facility being leased is unavailable for beneficial use and occupancy by the municipality during the term of the lease. Abatement is not a default, and there may be no remedies available to the holders of the certificates evidencing the lease obligation in the event abatement occurs. The most common causes of abatement are failure to complete construction of the facility before the end of the period during which lease payments have been capitalized and uninsured casualty losses to the facility (e.g., due to earthquake). In the event abatement occurs with respect to a lease obligation, lease payments may be interrupted (if all available insurance proceeds and reserves are exhausted) and the certificates may not be paid when due. Several years ago the Richmond Unified School District ("District") entered into a lease transaction in which certain existing properties of the District were sold and leased back in order to obtain funds to cover operating deficits. Following a fiscal crisis in which the District's finances were taken over by a State receiver (including a brief period under bankruptcy court protection), the District failed to make rental payments on this lease, resulting in a lawsuit by the Trustee for the Certificate of Participation holders . One of the defenses raised in answer to this lawsuit was the invalidity of the original lease transaction. The trial court upheld the validity of the District's lease , and the case has been settled. However, any future judgment in a similar case against the position taken by the Trustee may have implications for lease transactions of a similar nature by other California entities. OTHER CONSIDERATIONS. The repayment of Industrial Development Securities secured by real property may be affected by California laws limiting foreclosure rights of creditors. Health Care and Hospital Securities may be affected by changes in State regulations governing cost reimbursements to health care providers under Medi-Cal (the State's Medicaid program), including risks related to the policy of awarding exclusive contracts to certain hospitals. Limitations on ad valorem property taxes may particularly affect "tax allocation" bonds issued by California redevelopment agencies. Such bonds are secured solely by the increase in assessed valuation of a redevelopment project area after the start of redevelopment activity. In the event that assessed values in the redevelopment project decline (for example, because of major natural disaster such as an earthquake), the tax increment revenue may be insufficient to make principal and interest payments on these bonds. Both Moody's and S&P suspended ratings on California tax allocation bonds after the enactment of Articles XIIIA and XIIIB, and only resumed such ratings on a selective basis. Proposition 87, approved by California voters in 1988, requires that all revenues produced by a tax rate increase go directly to the taxing entity which increased such tax rate to repay that entity's general obligation indebtedness. As a result, redevelopment agencies (which, typically, are the Issuers of Tax Allocation Securities) no longer receive an increase in tax increment when taxes on property in the project area are increased to repay voter-approved bonded indebtedness. Substantially all of California is within an active geologic region subject to major seismic activity. Any California municipal obligation in the funds could be affected by an interruption of revenues because of damaged facilities or, consequently, income tax deductions for casualty losses or property tax assessment reductions. Compensatory financial assistance could be constrained by the inability of (i) an issuer to have obtained earthquake insurance coverage at reasonable rates; (ii) an insurer to perform on its contracts of insurance in the event of widespread losses; or (iii) the federal or State government to appropriate sufficient funds within their respective budget limitations. On January 17, 1994 , a major earthquake with an estimated magnitude of 6.8 on the Richter scale struck the Los Angeles area, causing significant property damage to public and private facilities, presently estimated at $15-20 billion. While over $9.5 billion of federal aid, and a projected $1.9 billion of State aid, plus insurance proceeds, will reimburse much of that loss, there will be some ultimate loss of wealth and income in the region, in addition to costs of the disruption caused by the event. These uninsured losses are estimated to have only a small effect on the overall state economy, with a drop of up to 0.5 percent in personal income growth. Short-term economic projections are generally neutral, as the infusion of aid will restore billions of dollars to the local economy within a few months. Although the earthquake will hinder recovery from the recession in Southern California, already hard-hit, its long-term impact is not expected to be material in the context of the overall wealth of the region. Almost five years after the event, there are few remaining effects of the 1989 Loma Prieta earthquake in Northern California (which, however, has caused less severe damage than the Northridge earthquake). Because of the complex nature of Articles XIIIA and XIIIB of the California Constitution (described briefly above), the ambiguities and possible inconsistencies in their terms, and the impossibility of predicting future appropriations or changes in population and the cost of living, and the probability of continuing legal challenges, it is not currently possible to determine fully the impact of Article XIIIA or Article XIIIB, or the outcome of any pending litigation with respect to those provisions on California obligations in the funds or on the ability of the State or local governments to pay debt service on such obligations. Legislation has been or may be introduced (either in the Legislature or by initiative) which would modify existing taxes or other revenue-raising measures or which either would further limit or, alternatively, would increase the abilities of state and local governments to impose new taxes or increase existing taxes. It is not presently possible to predict the extent to which any such legislation will be enacted, or if enacted, how it would affect California municipal obligations. It is also not presently possible to predict the extent of future allocations of state revenues to local governments or the abilities of state or local governments to pay the interest on, or repay the principal of, such California municipal obligations in light of future fiscal circumstances. SPECIAL FACTORS AFFECTING PUERTO RICO The following only highlights some of the more significant financial trends and problems affecting the Commonwealth of Puerto Rico (the "Commonwealth" or "Puerto Rico"), and is based on information drawn from official statements and prospectuses relating to the securities offerings of Puerto Rico, its agencies and instrumentalities, as available on the date of this Statement of Additional Information. FMR has not independently verified any of the information contained in such official statements, prospectuses and other publicly available documents, but is not aware of any fact which would render such information materially inaccurate. The economy of Puerto Rico is closely linked with that of the United States, and in fiscal 1992 trade with the United States accounted for approximately 88% of Puerto Rico's exports and approximately 68% of its imports. In this regard, in fiscal 1992 Puerto Rico experienced a $2,940,300,000 positive adjusted merchandise trade balance. Since fiscal 1987 personal income, both aggregate and per capita, have increased consistently each fiscal year. In fiscal 1992 aggregate personal income was $22.7 billion and personal per capita income was $6,360. Gross domestic product in fiscal 1989, 1990, 1991 and 1992 was $19,954,000, $21,619,000, 22,857,000, and $23,620,000, respectively. For fiscal 1993, an increase in gross domestic product of 2.9% over fiscal 1992 is forecasted. However, actual growth in the Puerto Rico economy will depend on several factors including the condition of the U.S. economy, the exchange rate for the U.S. dollar, the price stability of oil imports, and interest rates. Due to these factors there is no assurance that the economy of Puerto Rico will continue to grow. Puerto Rico has made marked improvements in fighting unemployment. Unemployment is at a low level compared to that of the late 1970s, but it still remains significantly above the United States average. Despite long term improvements the unemployment rate rose from 15.2% to 16.5% from fiscal 1991 to fiscal 1992. At the end of the third quarter of fiscal 1993 the unemployment rate in Puerto Rico stood at 17.3%. There is a possibility that the unemployment rate will continue to increase. The economy of Puerto Rico has undergone a transformation in the later half of this century from one centered around agriculture, to one dominated by the manufacturing and service industries. Manufacturing is the cornerstone of Puerto Rico's economy, accounting for $13.2 billion or 38.7% of gross domestic product in 1992. However, manufacturing has experienced a basic change over the years as a result of the influx of higher wage, high technology industries such as the pharmaceutical industry, electronics, computers, micro-processors, scientific instruments and high technology machinery. The service sector, which includes wholesale and retail trade, finance and real estate, ranks second in its contribution to gross domestic product and is the sector that employs the greatest number of people. In fiscal 1992, the service sector generated $13.0 billion in gross domestic product or 38.3% of the total and employed over 449,000 workers providing 46% of total employment. The government sector and tourism also contribute to the island economy each accounting for $3.7 billion and $1.5 billion in fiscal 1992, respectively. Much of the development of the manufacturing sector of the economy of Puerto Rico is attributable to federal and Commonwealth tax incentives, most notably section 936 of the Internal Revenue Code of 1986, as amended ("Section 936") and the Commonwealth's Industrial Incentives Program. Section 936 currently grants U.S. corporations that meet certain criteria and elect its application a credit against their U.S. corporate income tax on the portion of the tax attributable to (i) income derived from the active conduct of a trade or business in Puerto Rico ("active income"), or from the sale or exchange of substantially all the assets used in the active conduct of such trade or business, and (ii) qualified possession source investment income ("passive income"). The Industrial Incentives Program, through the 1987 Industrial Incentives Act, grants corporations engaged in certain qualified activities a fixed 90% exemption from Commonwealth income and property taxes and a 60% exemption from municipal license taxes. On August 16, 1993, President Clinton signed a bill amending Section 936. Under the amendments, U.S. corporations with operations in Puerto Rico can elect to receive a federal income tax credit equal to: 40% of the credit currently available, phased in over a five year period, starting at 60% of the current credit, or a credit based on investment and wages. The investment and wage credit would equal the sum of (i) 60% of qualified compensation to employees, (ii) a specified percentage of depreciation deductions with respect to tangible property located in Puerto Rico, and (iii) a portion of income taxed paid to Puerto Rico, up to a 9% effective tax rate, subject to certain requirements. It is not possible to determine at this time whether the reductions in tax incentives for operations in Puerto Rico will have a significant impact on the economy of Puerto Rico or the time period in which such impact would arise. PORTFOLIO TRANSACTIONS All orders for the purchase or sale of portfolio securities are placed on behalf of the funds by FMR (either directly or through affiliated sub-advisers) pursuant to authority contained in the management contracts. FMR is also responsible for the placement of transaction orders for other investment companies and accounts for which it or its affiliates act as investment adviser. Securities purchased and sold by the money market fund generally will be traded on a net basis (i.e., without commission). In selecting broker-dealers, subject to applicable limitations of the federal securities laws, FMR will consider various relevant factors, including, but not limited to, the size and type of the transaction; the nature and character of the markets for the security to be purchased or sold; the execution efficiency, settlement capability, and financial condition of the broker-dealer firm; the broker-dealer's execution services rendered on a continuing basis; and the reasonableness of any commissions. The funds may execute portfolio transactions with broker-dealers who provide research and execution services to the funds or other accounts over which FMR or its affiliates exercise investment discretion. Such services may include advice concerning the value of securities; the advisability of investing in, purchasing, or selling securities; the availability of securities or the purchasers or sellers of securities; furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and performance of accounts; and effecting securities transactions and performing functions incidental thereto (such as clearance and settlement). FMR maintains a listing of broker-dealers who provide such services on a regular basis. However, as many transactions on behalf of the money market fund are placed with broker-dealers (including broker-dealers on the list) without regard to the furnishing of such services, it is not possible to estimate the proportion of such transactions directed to such broker-dealers solely because such services were provided. The selection of such broker-dealers is generally made by FMR (to the extent possible consistent with execution considerations) based upon the quality of research and execution services provided. The receipt of research from broker-dealers that execute transactions on behalf of the funds may be useful to FMR in rendering investment management services to the funds or its other clients, and, conversely, such research provided by broker-dealers who have executed transaction orders on behalf of other FMR clients may be useful to FMR in carrying out its obligations to the funds. The receipt of such research has not reduced FMR's normal independent research activities; however, it enables FMR to avoid the additional expenses that could be incurred if FMR tried to develop comparable information through its own efforts. Subject to applicable limitations of the federal securities laws, broker-dealers may receive commissions for agency transactions that are in excess of the amount of commissions charged by other broker-dealers in recognition of their research and execution services. In order to cause 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 the funds and its other clients. In reaching this determination, FMR will not attempt to place a specific dollar value on the brokerage and research services provided, or to determine what portion of the compensation should be related to those services. FMR is authorized to use research services provided by and to place portfolio transactions with brokerage firms that have provided assistance in the distribution of shares of the funds or shares of other Fidelity funds to the extent permitted by law. FMR may use research services provided by and place agency transactions with Fidelity Brokerage Services, Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair, reasonable, and comparable to commissions charged by non-affiliated, qualified brokerage firms for similar services. Section 11(a) of the Securities Exchange Act of 1934 prohibits members of national securities exchanges from executing exchange transactions for accounts which they or their affiliates manage, except if certain requirements are satisfied. Pursuant to such requirements, the Board of Trustees has authorized FBSI to execute fund portfolio transactions on national securities exchanges in accordance with approved procedures and applicable SEC rules. For fiscal periods March 1, 1993 to February 28, 1994 and May 1, 1992 to February 28, 1993 and the fiscal year ended April 30, 1992, the money market and high yield funds paid no brokerage commissions. For fiscal period December 30, 1993 (commencement of operations) to February 28, 1994, the intermediate fund paid no brokerage commissions. The Trustees periodically review FMR's performance of its responsibilities in connection with the placement of portfolio transactions on behalf of each fund and review the commissions paid by each fund over representative periods of time to determine if they are reasonable in relation to the benefits to each fund. For the fiscal periods March 1, 1993 to February 28, 1994 and May 1, 1992 to February 28, 1993, the high yield fund's turnover rates were 54 % and 26% (annualized), respectively. For the fiscal period December 30, 1993 (commencement of operations) to February 28, 1994, the intermediate fund's turnover rate was 0 % (annualized). 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 the funds are substantially the same as those of other funds managed by FMR, investment decisions for each fund are made independently from those of other funds managed by FMR or accounts managed by FMR affiliates. It sometimes happens that the same security is held in the portfolio of more than one of these funds or accounts. Simultaneous transactions are inevitable when several funds are managed by the same investment adviser, particularly when the same security is suitable for the investment objective of more than one fund. 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 a formula considered by the officers of the funds involved to be equitable to each fund. In some cases, this system could have a detrimental effect on the price or value of the security as far as the funds are 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 Board of Trustees that the desirability of retaining FMR as investment adviser to the funds outweighs any disadvantages that may be said to exist from exposure to simultaneous transactions. VALUATION OF PORTFOLIO SECURITIES INTERMEDIATE AND HIGH YIELD FUNDS. Valuations of portfolio securities furnished by the pricing service employed by the funds are based upon a computerized matrix system or appraisals by the pricing service, in each case in reliance upon information concerning market transactions and quotations from recognized municipal securities dealers. The methods used by the pricing service and the quality of valuations so established are reviewed by officers of the fund and FSC under the general supervision of the Board of Trustees. There are a number of pricing services available, and the Trustees, or officers acting on behalf of the Trustees, on the basis of on-going evaluation of these services, may use other pricing services or discontinue the use of any pricing service in whole or in part. MONEY MARKET FUND. The money market fund values its investments on the basis of amortized cost. This technique involves valuing an instrument at its cost as adjusted for amortization of premium or accretion of discount rather than its value based on current market quotations or appropriate substitutes which reflect current market conditions. The amortized cost value of an instrument may be higher or lower than the price the fund would receive if it sold the instrument. Valuing the money market fund's instruments on the basis of amortized cost and use of the term "money market fund" are permitted by Rule 2a-7 under the 1940 Act. The fund must adhere to certain conditions under Rule 2a-7 . The Board of Trustees oversees FMR's adherence to SEC rules concerning money market funds, and has established procedures designed to stabilize the fund's NAV at $1.00. At such intervals as they deem appropriate, the Trustees consider the extent to which NAV calculated by using market valuations would deviate from $1.00 per share. If the Trustees believe that a deviation from the fund's amortized cost per share may result in material dilution or other unfair results to shareholders, the Trustees have agreed to take such corrective action, if any, as they deem appropriate to eliminate or reduce, to the extent reasonably practicable, the dilution or unfair results. Such corrective action could include selling portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; withholding dividends; redeeming shares in kind; establishing NAV by using available market quotations; and such other measures as the Trustees may deem appropriate. During periods of declining interest rates, the money market fund's yield based on amortized cost may be higher than the yield based on market valuations. Under these circumstances, a shareholder in the fund would be able to obtain a somewhat higher yield than would result if the fund utilized market valuations to determine its NAV. The converse would apply in a period of rising interest rates. PERFORMANCE The funds may quote performance in various ways. All performance information supplied by the funds in advertising is historical and is not intended to indicate future returns. The intermediate and high yield funds' share price, and all of the funds' yields and total returns fluctuate in response to market conditions and other factors. The value of the intermediate and high yield funds' shares when redeemed may be more or less than their original cost. YIELD CALCULATIONS. To compute the MONEY MARKET FUND'S yield for a period, the net change in value of a hypothetical account containing one share (exclusive of capital gains) reflects the value of additional shares purchased with dividends from the one original share and dividends declared on both the original share and any additional shares. The net change is then divided by the value of the account at the beginning of the period to obtain a base period return. This base period return is annualized to obtain a current annualized yield. The money market fund also may calculate a compound effective yield by compounding the base period return over a one-year period. In addition to the current yield, the money market fund may quote yields in advertising based on any historical seven-day period. For the INTERMEDIATE AND HIGH YIELD FUNDS , yields used in advertising are computed by dividing a fund's interest income for a given 30-day or one-month period, net of expenses, by the average number of shares entitled to receive dividends during the period, dividing this figure by the fund's net asset value per share at the end of the period, and annualizing the result (assuming compounding of income) in order to arrive at an annual percentage rate. Yields do not reflect the high yield fund's .50% redemption fee, which applies to shares held less than 180 days. Income is calculated for purposes of the intermediate and high yield funds' 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 intermediate and high yield funds' yields differs from income as determined for other accounting purposes. Because of the different accounting methods used, and because of the compounding of income assumed in yield calculations, a 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. A fund's tax-equivalent yield is the rate an investor would have to earn from a fully taxable investment after taxes to equal the fund's tax-free yield. Tax-equivalent yields are calculated by dividing a fund's yield by the result of one minus a stated federal or combined federal and state tax rate. (If only a portion of the fund's yield is tax-exempt, only that portion is adjusted in the calculation.) The following tables show the effect of a shareholder's tax status on the effective yield under federal and state income tax laws for 1994. They show the approximate yield a taxable security must provide at various income brackets to produce after-tax yields equivalent to those of tax-exempt obligations yielding from 2.0% to 7.0%. Of course, no assurance can be given that the funds will achieve any specific tax-exempt yield. While each fund invests principally in obligations whose interest is exempt from federal and state income tax, other income received by the funds may be taxable. The funds do not take into account local taxes, if any, payable on fund distributions. 1994 TAX RATES AND TAX EQUIVALENT YIELDS Combined California Single Return Joint Return Federal and Federal Effective Taxable Income* Taxable Income* Tax Bracket Tax Bracket $ 22,751 - 24,228 $ 38,001 - 48,456 28.% 32.32% 24,229 - 30,620 48,457 - 61,240 28 33.76 30,621 - 55,100 61,241 - 91,850 28 34.70 55,101 - 106,190 91,851 - 140,000 31 37.42 106,191 - 115,000 -- - -- 31 37.90 -- - -- 140,001 - 212,380 36 41.95 115,001 - 212,380 212,381 - 250,000 36 42.40 212,381 - 250,000 -- - -- 36 43.04 -- - -- 250,001 - 424,760 39.6 45.64 250,001 + 424,761 + 39.6 46.24 *Net taxable income after all exemptions, adjustments, and deductions. These are based on rates currently applicable in 1994 and assume one exemption for single filers and two exemptions for married couples files jointly. Having determined your effective tax bracket above, use the following table to determine the tax-equivalent yield for a given tax-free yield. If your effective combined federal and state personal tax rate in 1994 is:
32.32% 33.76% 34.70% 37.42% 37.90% 41.95% 42.40% 43.04% 45.64% 46.24%
Then your tax-equivalent yield is: Tax-Free Yield
2% 2.96% 3.02% 3.06% 3.20% 3.22% 3.45% 3.47% 3.51% 3.68% 3.72% 3% 4.43% 4.53% 4.59% 4.79% 4.83% 5.17% 5.21% 5.27% 5.52% 5.58% 4% 5.91% 6.04% 6.13% 6.39% 6.44% 6.89% 6.94% 7.02% 7.36% 7.44% 5% 7.39% 7.55% 7.66% 7.99% 8.05% 8.61% 8.68% 8.78% 9.20% 9.30% 6% 8.87% 9.06% 9.19% 9.59% 9.66% 10.34% 10.42% 10.53% 11.04% 11.16% 7% 10.34% 10.57% 10.72% 11.19% 11.27% 12.06% 12.15% 12.29% 12.88% 13.02% 8% 11.82% 12.08% 12.25% 12.78% 12.88% 13.78% 13.89% 14.04% 14.72% 14.88%
The fund may invest a portion of its assets in obligations that are subject to state or federal income taxes. When the fund invests in these obligations, its tax-equivalent yields will be lower. In the table above, tax-equivalent yields are calculated assuming investments are 100% federally and state tax-free. The California income tax rates are those in effect for 1993 , which will be the same in 1994 except that California law requires that the brackets be adjusted annually for inflation using 100% of the California Consumer Price Index through June of the tax year. As of the date of this Statement of Additional Information, the California Franchise Tax Board had not published the 1994 inflation adjusted tax brackets. Each fund may invest a portion of its assets in obligations that are subject to state or federal income taxes. When a fund invests in these obligations, its tax-equivalent yields will be lower. In the table above, tax-equivalent yields are calculated assuming investments are 100% federally and state tax-free. Yield information may be useful in reviewing the funds' performance and in providing a basis for comparison with other investment alternatives. However, each fund's yield fluctuates, unlike investments that pay a fixed interest rate over a stated period of time. When comparing investment alternatives, investors should also note the quality and maturity of the portfolio securities of the respective investment companies they have chosen to consider. Investors should recognize that in periods of declining interest rates the intermediate and high yield funds' yields 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 the fund's current yields. In periods of rising interest rates, the opposite can be expected to occur. TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all aspects of a fund's returns, including the effect of reinvesting dividends and capital gain distributions (if any), and any change in the fund's net asset value per share (NAV) over the period. Average annual total returns are calculated by determining the growth or decline in value of a hypothetical historical investment in a fund over a stated period, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. For example, a cumulative total return of 100% over ten years would produce an average annual return of 7.18%, which is the steady annual rate that would equal 100% growth on a compounded basis in ten years. While average annual returns are a convenient means of comparing investment alternatives, investors should realize that a fund's performance is not constant over time, but changes from year to year, and that average annual total returns represent averaged figures as opposed to the actual year-to-year performance of the fund. In addition to average annual returns, a fund may quote unaveraged or cumulative total returns reflecting the simple change in value of an investment over a stated period. Average annual and cumulative total returns may be quoted as a percentage or as a dollar amount, and may be calculated for a single investment, a series of investments, or a series of redemptions, over any time period. Total returns may be broken down into their components of income and capital (including capital gains and changes in share price) in order to illustrate the relationship of these factors and their contributions to total return. An example of this type of illustration is given below. Total returns, yields, and other performance information may be quoted numerically or in a table, graph, or similar illustration, and may omit or include the effects of each fund's $5.00 account closeout fee and, with respect to the high yield fund, the .50% redemption fee, or other charges for special transactions or services. Omitting fees and charges will cause the funds' total return figures to be higher. NET ASSET VALUE. Charts and graphs using the intermediate or high yield funds' net asset values, adjusted net asset values, and benchmark indices may be used to exhibit performance. An adjusted NAV includes any distributions paid by a fund and reflects all elements of its return. Unless otherwise indicated, a fund's adjusted NAVs are not adjusted for sales charges, if any. HISTORICAL FUND RESULTS. The following charts show the funds' yields, tax-equivalent yields, and total returns for periods ended February 28, 1994 , and for each fund, include the effect of the $5.00 account closeout fee : MONEY MARKET FUND Tax Equivalent Average Cumulative 7-day Yield 7-day Yield Annual Total Returns Total Returns One Life One Life Year (dagger) of Fund (dagger)* Year (dagger) of Fund (dagger)* 2.44% (dagger) 4.28% (dagger) 2.45% 3.97% 2.45% 18.04% (dagger) If FMR had not reimbursed certain fund expenses during the period, the yield and tax-equivalent yield would have been 2.14% and 3.76%, respectively, and total returns would have been lower. * From November 27, 1989 (commencement of operations). INTERMEDIATE FUND Tax Equivalent Average Cumulative 30-day Yield 30-day Yield Annual Total Returns Total Returns One Life One Life Year (dagger)* of Fund (dagger)* Year (dagger)* of Fund (dagger)* 4.83% (dagger) 8.48% (dagger) N/A N/A N/A -1.72% (dagger) If FMR had not reimbursed certain fund expenses during the period, the yield and tax-equivalent yield would have been 4.28 % and 7.51 %, respectively, and total returns would have been lower. * From December 30, 1993 (commencement of operations). HIGH YIELD FUND Tax Equivalent Average Cumulative 30-day Yield 30-day Yield Annual Total Returns Total Returns One Life One Life Year (dagger) of Fund (dagger)* Year (dagger) of Fund (dagger)* 5.26% 9.23% 5.62% 9.84% 5.62% 49.13% (dagger) The high yield fund's total returns do not include the effect of the fund's .50% redemption fee applicable to shares held less than 180 days. If FMR had not reimbursed certain fund expenses during the period, total returns would have been lower. * From November 27, 1989 (commencement of operations). The tax-equivalent yields are based on the highest 1994 combined federal and state income tax bracket of 43.04 %, and reflect that none of the funds' investments on February 28, 1994 were subject to state taxes. MONEY MARKET FUND. During the period from November 27, 1989 (commencement of operations) to February 28, 1994, a hypothetical $10,000 investment in the money market fund would have grown to $11,804 , assuming all distributions were reinvested. This was a period of widely fluctuating interest rates and should not be considered representative of the dividend income or capital gain or loss that could be realized from an investment in the fund today. SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO INDICES
Value of Value of Value of Period Initial Reinvested Reinvested Cost Ended $10,000 Dividend Capital Gain Total of February 28 Investment Distributions Distributions Value S&P DJIA Living** 500
1994 $10,000 $1,804 $0 $11,804 $15,528 $16,43 $ 11,652 6 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
* From November 27, 1989 (commencement of operations). ** From month-end closest to initial investment date. EXPLANATORY NOTES: With an initial investment of $10,000 made on November 27, 1989, the net amount invested in fund shares was $10,000. The cost of the initial investment ($10,000), together with the aggregate cost of reinvested dividends for the period covered (their cash value at the time they were reinvested), amounted to $11,804 . If the distributions had not been reinvested, the amount of distributions earned from the fund over time would have been smaller, and cash payments (dividends) for the period would have amounted to $1,662 . The fund did not distribute any capital gains during the period. If FMR had not reimbursed certain fund expenses, the fund's total returns would have been lower. The figures in the table do not include the effect of the fund's $5.00 account closeout fee. INTERMEDIATE FUND. During the period from December 30, 1993 (commencement of operations) to February 28, 1994, a hypothetical investment of $10,000 in the intermediate fund would have grown to $9,829 assuming all distributions were reinvested. SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO INDICES
Value of Value of Value of Period Initial Reinvested Reinvested Cost Ended $10,000 Dividend Capital Gain Total of February 28 Investment Distributions Distributions Value S& DJIA Living** P 500 1994 $9,760 $69 $0 $9,829 $9,972 $10,14 $ 10,062 5
(dagger) From December 30, 1993 (commencement of operations). ** From month-end closest to initial investment date. EXPLANATORY NOTES: With an initial investment of $10,000 made on December 30, 1993, the net amount invested in fund shares was $10,000. The cost of the initial investment ($10,000), together with the aggregate cost of reinvested dividends for the period covered (their cash value at the time they were reinvested), amounted to $10,070 . If distributions had not been reinvested, the amount of distributions earned from the fund over time would have been smaller, and the cash payments (dividends) for the period would have come to $ 70 . There were no capital gain distributions during this period. If FMR had not reimbursed certain fund expenses during the periods shown above, the fund's returns would have been lower. The figures in the table do not include the effect of the fund's $5 account closeout fee. HIGH YIELD FUND. During the period from November 27, 1989 (commencement of operations) to February 28, 1994, a hypothetical $10,000 investment in the high yield fund would have grown to $14,914 , assuming all distributions were reinvested. This was a period of widely fluctuating interest rates and bond prices and should not be considered representative of the dividend income or capital gain or loss that could be realized from an investment in the fund today. SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO INDICES
Value of Value of Value of Period Initial Reinvested Reinvested Cost Ended $10,000 Dividend Capital Gain Total of February 28 Investment Distributions Distributions Value S& DJIA Living** P 500 1994 $10,930 $3,398 $586 $14,914 $15,528 $16,43 $ 11,652 6 1993 11,330 2,699 90 14,120 14,334 14,062 11,366 1992 10,530 1,742 0 12,272 12,952 13,234 11,009 1991 10,180 949 0 11,129 11,164 11,306 10,707 1990* 9, 990 182 0 10,172 9,738 9,919 10,167
* From November 27, 1989 (commencement of operations). ** From month-end closest to initial investment date. EXPLANATORY NOTES: With an initial investment of $10,000 made on November 27, 1989, the net amount invested in fund shares was $10,000. The cost of the initial investment ($10,000), together with the aggregate cost of reinvested distributions for the period covered (their cash value at the time they were reinvested), amounted to $13,873 . If the 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 $2,844 for dividends and $460 for capital gains. If FMR had not reimbursed certain fund expenses, the fund's total returns would have been lower. The figures in the table do not include the effect of the fund's $5 account closeout fee or the .50% redemption fee applicable to shares held less than 180 days. From time to time, a fund's performance may also be compared to other mutual funds tracked by financial or business publications and periodicals. For example, the fund may quote Morningstar, Inc. in its advertising materials. Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the basis of risk-adjusted performance. Rankings that compare the performance of Fidelity funds to one another in appropriate categories over specific periods of time may also be quoted in advertising. A fund may be compared in advertising to Certificates of Deposit (CDs) or other investments issued by banks. Mutual funds differ from bank investments in several respects. For example, a fund may offer greater liquidity or higher potential returns than CDs, and the fund does not guarantee your principal or your return. Fidelity may provide information designed to help individuals understand their investment goals and explore various financial strategies. For example, Fidelity's FundMatchsm Program includes a workbook describing general principles of investing, such as asset allocation, diversification, risk tolerance, and goal setting; a questionnaire designed to help create a personal financial profile; and an action plan offering investment alternatives. Materials may also include discussions of Fidelity's three asset allocation funds and other Fidelity funds, products, and services. Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical returns of the capital markets in the United States, including common stocks, small capitalization stocks, long-term corporate bonds, intermediate-term government bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation (based on the CPI), and combinations of various capital markets. The performance of these capital markets is based on the returns of different indices. Fidelity funds may use the performance of these capital markets in order to demonstrate general risk-versus-reward investment scenarios. Performance comparisons may also include the value of a hypothetical investment in any of these capital markets. The risks associated with the security types in any capital market may or may not correspond directly to those of the funds. Ibbotson calculates total returns in the same method as the funds. The funds may also compare performance to that of other compilations or indices that may be developed and made available in the future. A fund may compare its performance or the performance of securities in which it may invest to averages published by IBC USA (Publications), Inc. of Ashland, Massachusetts. These averages assume reinvestment of distributions. The IBC/Donoghue's MONEY FUND AVERAGES(TRADEMARK)/All Tax-Free, which is reported in the MONEY FUND REPORT(REGISTERED TRADEMARK), covers over 335 tax-free money market funds. The Bond Fund Report AverageS(TRADEMARK)/All Tax-Free, which is reported in the BOND FUND REPORT(REGISTERED TRADEMARK), covers over 355 tax-free bond funds. When evaluating comparisons to money market funds, investors should consider the relevant differences in investment objectives and policies. Specifically, money market funds invest in short-term, high-quality instruments and seek to maintain a stable $1.00 share price. The intermediate and high yield funds, however, invest in longer-term instruments and their share prices change daily in response to a variety of factors. The intermediate and high yield funds may compare and contrast in advertising the relative advantages of investing in a mutual fund versus an individual municipal bond. Unlike tax-free mutual funds, individual municipal bonds offer a stated rate of interest and, if held to maturity, repayment of principal. Although some individual municipal bonds might offer a higher return, they do not offer the reduced risk of a mutual fund that invests in many different securities. The initial investment requirements and sales charges of many tax-free mutual funds are lower than the purchase cost of individual municipal bonds, which are generally issued in $5,000 denominations and are subject to direct brokerage costs. In advertising materials, Fidelity may reference or discuss its products and services, which may include: other Fidelity funds; retirement investing; brokerage products and services; the effects of periodic investment plans and dollar cost averaging; saving for college; charitable giving; and the Fidelity credit card. In addition, Fidelity may quote financial or business publications and periodicals, including model portfolios or allocations, as they relate to fund management, investment philosophy, and investment techniques. Fidelity may also reprint, and use as advertising and sales literature, articles from Fidelity Focus, a quarterly magazine provided free of charge to Fidelity fund shareholders. A fund may present its fund number, Quotron(TRADEMARK) number, and CUSIP number, and discuss or quote its current portfolio manager. The intermediate and high yield funds 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, 1994 FMR advised 41 tax-free funds or portfolios with a total value of over $30 billion. According to the Investment Company Institute, over the past ten years, assets in tax-exempt money market funds increased from $23.8 billion in 1984 to approximately $94.8 billion at the end of 1992. The money market fund may reference the growth and variety of money market mutual funds and the adviser's innovation and participation in the industry. 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 1994: Washington's Birthday (observed), Good Friday, Memorial Day (observed), Independence Day (observed), Labor Day, Thanksgiving Day, and Christmas Day (observed). Although FMR expects the same holiday schedule, with the addition of New Years Day, to be observed in the future, the NYSE may modify its holiday schedule at any time. FSC normally determines each fund's NAV as of the close of the NYSE (normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier if trading on the NYSE is restricted or as permitted by the 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. 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 by the SEC, or the fund to be acquired suspends the sale of its shares because it is unable to invest amounts effectively in accordance with its investment objective and policies. In the Prospectus, 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 derived from federally tax-exempt interest, the daily dividends declared by each fund are also federally tax-exempt. The funds will send each shareholder a notice in January describing the tax status of dividends and capital gain distributions (if any) for the prior year. Shareholders are required to report tax-exempt income on their federal tax returns. Shareholders who earn other income, such as social security benefits, may be subject to federal income tax on up to one half of such benefits to the extent that their income, including tax-exempt income, exceeds certain base amounts. The funds purchase municipal obligations based on opinions of bond counsel regarding the federal income tax status of the obligations. These opinions generally will be based upon covenants by the issuers regarding continuing compliance with federal tax requirements. If the issuer of an obligation fails to comply with its covenants at any time, interest on the obligation could become federally taxable retroactive to the date the obligation was issued. As a result of the Tax Reform Act of 1986, interest on certain "private activity" securities (referred to as "qualified bonds" in the Internal Revenue Code) is subject to the federal alternative minimum tax (AMT), although the interest continues to be excludable from gross income for other purposes. Interest from private activity securities will be considered tax-exempt for purposes of the money market and high yield funds' policies of investing so that at least 80% of their income distributions are free from federal income tax. Interest from private activity securities will be considered tax-exempt for purposes of the intermediate fund's policies of investing so that at least 80% of its assets are in municipal securities whose interest 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 tax to be paid, if any. Private activity securities issued after August 7, 1986 to benefit a private or industrial user or to finance a private facility are affected by this rule. Corporate investors should note that an adjustment for purposes of the corporate AMT is 75% of the amount by which adjusted current earnings (which includes tax-exempt interest) exceeds alternative minimum taxable income of the corporation. If a shareholder receives an exempt-interest dividend and sells shares at a loss after holding them for a period of six months or less, the loss will be disallowed to the extent of the amount of exempt-interest dividend. CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the intermediate and high yield funds on the sale of securities and distributed to shareholders are federally taxable as long-term capital gains, regardless of the length of time that shareholders have held their shares. If a shareholder receives a long-term capital gain distribution on shares of the fund and such shares are held six months or less and are sold at a loss, the portion of the loss equal to the amount of the long-term capital gain distribution will be considered a long-term loss for tax purposes. A portion of the gain on bonds purchased at a discount after April 30, 1993 and short-term capital gains distributed by the funds are federally taxable to shareholders as dividends, not as capital gains. Distributions from short-term capital gains do not qualify for the dividends-received deduction. Dividend distributions resulting from a recharacterization of gain from the sale of bonds purchased at a discount after April 30, 1993 are not considered income for purposes of the money market and high yield funds' policies of investing so that at least 80% of their income distributions are free from federal income tax or the intermediate fund's policies of investing so that at least 80% of its assets are in municipal securities whose interest is free from federal income tax . The money market fund may distribute any net realized short-term capital gains once a year or more often as necessary to maintain its net asset value at $1.00 a share. TAX STATUS OF THE FUNDS. Each fund has qualified and intends to continue 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 all of its net investment income and net realized capital gains (if any) within each calendar year as well as on a fiscal year basis. Each fund intends to comply with other tax rules applicable to regulated investment companies, including a requirement that capital gains from the sale of securities held less than three months constitute less than 30% of the fund's gross income for each fiscal year. Gains from some futures contracts and options are included in this 30% calculation, which may limit the intermediate and high yield funds' investments in such instruments. Each fund is treated as a separate entity from the other funds of Fidelity California Municipal Trust and Fidelity California Municipal Trust II for tax purposes. As of February 28, 1994, the money market fund had approximate ly $29,000 in aggregate capital loss carryover available until February 28, 2001 to offset future capital gain s. To the extent that capital loss carryovers are used to offset any future capital gains, it is unlikely that the gains so offset will be distributed to shareholders, since any such distributions may be taxable to shareholders as ordinary income. CALIFORNIA TAX MATTERS. As long as a fund continues to qualify as a regulated investment company under the federal Internal Revenue Code, it will not incur 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 which are exempt from California personal income tax are excludable from gross income. For a fund to qualify to pay exempt-interest dividends under California law, at least 50 percent of the value of its assets must consist of such obligations at the close of each quarter of its fiscal year. For purposes of California personal income taxation, distributions to individual shareholders derived from interest on other types of obligations and short-term capital gains will be taxed as dividends, and long-term capital gain distributions will be taxed as long-term capital gains. California has an alternative minimum tax similar to the federal AMT described above. However, the California AMT does not include interest from private activity municipal obligations as an item of tax preference. Interest on indebtedness incurred or continued by a shareholder in connection with the purchase of shares of a fund will not be deductible for California personal income tax purposes. FUTURES AND OPTIONS TRANSACTIONS (intermediate and high yield funds). A special "marked-to-market" system governs the taxation of "section 1256 contracts." These contracts generally include options on debt securities, futures contracts, and options on interest rate futures contracts. The intermediate and high yield funds may invest in section 1256 contracts. In general, gain or loss on section 1256 contracts will be taken into account for tax purposes when actually realized (by a closing transaction, by exercise, by taking delivery, or by other termination). In addition, any section 1256 contracts held at the end of a taxable year will be treated as sold at fair market value (marked-to-market) and the resulting gain or loss will be recognized for tax purposes. Provided that a section 1256 contract is not part of a "mixed" straddle which the fund elects to exclude from the "marked-to-market" rules, both the realized and the unrealized taxable year-end gain or loss positions (including premiums on options that expire) will be treated as 60% long-term and 40% short-term capital gain or loss, regardless of the period of time a particular position is actually held by the fund. OTHER TAX INFORMATION. The information above is only a summary of some of the tax consequences generally affecting the funds and their shareholders, and no attempt has been made to discuss individual tax consequences. Investors should consult their tax advisers to determine whether the funds are suitable to their particular tax situations. FMR FMR is a wholly owned subsidiary of FMR Corp., a parent company organized in 1972. At present, the principal operating activities of FMR Corp. are those conducted by three of its divisions as follows: FSC, which is the transfer and shareholder servicing agent for certain of the funds advised by FMR; Fidelity Investments Institutional Operations Company, which performs shareholder servicing functions for certain institutional customers; and Fidelity Investments Retail Marketing Company, which provides marketing services to various companies within the Fidelity organization. Several affiliates of FMR are also engaged in the investment advisory business. Fidelity Management Trust Company provides trustee, investment advisory, and administrative services to retirement plans and corporate employee benefit accounts. Fidelity Management & Research (U.K.) Inc. (FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far East), both wholly owned subsidiaries of FMR formed in 1986, supply investment research, and may supply portfolio management services, to FMR in connection with certain funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR Far East research and visit thousands of domestic and foreign companies each year. FMR Texas, a wholly owned subsidiary of FMR formed in 1989, supplies portfolio management and research services in connection with certain money market funds advised by FMR. TRUSTEES AND OFFICERS The Trustees and executive officers of each t rust are listed below. Except as indicated, each individual has held the office shown or other offices in the same company for the last five years. Trustees and officers elected or appointed to the Fidelity California Municipal Trust II prior to the money market fund's conversion from a series of Fidelity California Municipal Trust served Fidelity California Municipal Trust in identical capacities. All persons named as Trustees also serve in similar capacities for other funds advised by FMR. Unless otherwise noted, the business address of each Trustee and officer is 82 Devonshire Street, Boston, Massachusetts 02109, which is also the address of FMR. Those Trustees who are "interested persons" (as defined in the 1940 Act) by virtue of their affiliation with either trust or FMR, are indicated by an asterisk (*). *EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive Officer and a Director of FMR Corp.; Chairman of the Board and of the Executive Committee of FMR; a Director of FMR, Chairman and a Director of FMR Texas Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc. *J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR; and President and a Director of FMR Texas Inc. (1989), Fidelity Management & Research (U.K.) Inc. and Fidelity Management & Research (Far East) Inc. RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a consultant to Western Mining Corporation (1994). Prior to February 1994, he was president of Greenhill Petroleum Corporation (petroleum exploration and production, 1990). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of Bonneville Pacific Corporation (independent power, 1989), Sanifill Corporation (non-hazardous waste, 1993), and CH2M Hill Companies (engineering). In addition, he served on the Board of Directors of the Norton Company (manufacturer of industrial devices, 1983-1990) and continues to serve on the Board of Directors of the Texas State Chamber of Commerce, and is a member of advisory boards of Texas A&M University and the University of Texas at Austin. PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992). Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice President of Corporate Affairs of Avon Products, Inc. She is currently a Director of BellSouth Corporation (telecommunications), Eaton Corporation (manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990), and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and Nabisco Brands, Inc. In addition, she serves as a Director of the New York City Chapter of the National Multiple Sclerosis Society, and is a member of the Advisory Council of the International Executive Service Corps. and the President's Advisory Council of The University of Vermont School of Business Administration. RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a Director of the Norton Company (manufacturer of industrial devices). He is currently a Director of Mechanics Bank and a Trustee of College of the Holy Cross and Old Sturbridge Village, Inc. E. BRADLEY JONES, 3881-2 Lander Road. Chagrin Falls, OH, Trustee (1990). Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive Officer of LTV Steel Company. Prior to May 1990, he was Director of National City Corporation (a bank holding company) and National City Bank of Cleveland. He is a Director of TRW Inc. (original equipment and replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries, Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham Steel Corporation (1988), Hyster-Yale Materials Handling, Inc. (1989), and RPM, Inc. (manufacturer of chemical products, 1990). In addition, he serves as a Trustee of First Union Real Estate Investments; Chairman of the Board of Trustees and a member of the Executive Committee of the Cleveland Clinic Foundation, a Trustee and a member of the Executive Committee of University School (Cleveland), and a Trustee of Cleveland Clinic Florida. DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT, Trustee, is a Professor at Columbia University Graduate School of Business and a financial consultant. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Mr. Kirk is a Director of General Re Corporation (reinsurance), and Valuation Research Corp. (appraisal and valuations, 1993). In addition, he serves as Vice Chairman of the Board of Directors of The National Arts Stabilization Fund and Vice Chairman of the Board of Trustees of the Greenwich Hospital Association. *PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to his retirement on May 31, 1990, he was a Director of FMR (1989) and Executive Vice President of FMR (a position he held until March 31, 1991); Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services (1991 - 1992). He is a Director of W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation (engineering and construction). 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 (1990). GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is Chairman of G.M. Management Group (strategic advisory services). Prior to his retirement in July 1988, he was Chairman and Chief Executive Officer of Leaseway Transportation Corp. (physical distribution services). Mr. McDonough is a Director of ACME-Cleveland Corp. (metal working, telecommunications and electronic products), Brush-Wellman Inc. (metal refining), and York International Corp. (air conditioning and refrigeration, 1989), Commercial Intertech Corp. (water treatment equipment, 1992), and Associated Estates Realty Corporation (a real estate investment trust, 1993). EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior to his retirement in 1985, Mr. Malone was Chairman, General Electric Investment Corporation and a Vice President of General Electric Company. He is a Director of Allegheny Power Systems, Inc. (electric utility), General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). He is also a Trustee of Rensselaer Polytechnic Institute and of Corporate Property Investors and a member of the Advisory Boards of Butler Capital Corporation Funds and Warburg, Pincus Partnership Funds. MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is Chairman of the Board, President, and Chief Executive Officer of Lexmark International, Inc. (office machines, 1991). Prior to 1991, he held the positions of Vice President of International Business Machines Corporation ("IBM") and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals, 1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In addition, he serves as the Campaign Vice Chairman of the Tri-State United Way (1993) and is a member of the University of Alabama President's Cabinet (1990). THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA, Trustee, is President of The Wales Group, Inc. (management and financial advisory services). Prior to retiring in 1987, Mr. Williams served as Chairman of the Board of First Wachovia Corporation (bank holding company), and Chairman and Chief Executive Officer of The First National Bank of Atlanta and First Atlanta Corporation (bank holding company). He is currently a Director of BellSouth Corporation (telecommunications), ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc. (computer software), Georgia Power Company (electric utility), Gerber Alley & Associates, Inc. (computer software, 1987), National Life Insurance Company of Vermont, American Software, Inc. (1989), and AppleSouth, Inc. (restaurants, 1992). GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the Fidelity funds, Mr. French was Senior Vice President, Fund Accounting - Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior Vice President, Chief Financial and Operations Officer - Huntington Advisers, Inc. (1985-1990). ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel of FMR, Vice President - Legal of FMR Corp., and Vice President and Clerk of FDC. THOMAS D. MAHER, Assistant Vice President (1990), is Assistant Vice President of Fidelity's money market funds and Vice President of FMR Texas, Inc. (1990). DEBORAH F. WATSON, is a Vice President of the money market fund (1992) and other funds advised by FMR and an employee of FMR. Under a retirement program that became effective on November 1, 1989, Trustees, upon reaching age 72, become eligible to participate in a defined benefit retirement program under which they receive payments during their lifetime from the funds, based on their basic trustee fees and length of service. Currently, Messrs. Robert L. Johnson, William R. Spaulding, Bertram H. Witham, and David L. Yunich participate in the program. As of February 28, 1994, the Trustees and officers owned in the aggregate, less than 1 % of the outstanding shares of each fund. Also, as of that date, William Ward Bock, 2111 Calle Guaymas, La Jolle, CA, was known by the fund to own of record or beneficially approximately 6.49% of Spartan California Intermediate Municipal Portfolio. MANAGEMENT CONTRACTS Each fund employs FMR to furnish investment advisory and other services. Under its management contract with each fund, FMR acts as investment adviser and, subject to the supervision of the Board of Trustees, directs the investments of the fund in accordance with its investment objective, policies, and limitations. FMR also provides the funds with all necessary office facilities and personnel for servicing the funds' investments, and compensates all officers of the trust, all Trustees who are "interested persons" of the trust or of FMR, and all personnel of the trust or FMR performing services relating to research, statistical, and investment activities. In addition, FMR or its affiliates, subject to the supervision of the Board of Trustees, provide the management and administrative services necessary for the operation of each fund. These services include providing facilities for maintaining the fund's organization; supervising relations with custodians, transfer and pricing agents, accountants, underwriters, and other persons dealing with the fund; preparing all general shareholder communications and conducting shareholder relations; maintaining the fund's records and the registration of the fund's shares under federal and state law; developing management and shareholder services for the fund; and furnishing reports, evaluations, and analyses on a variety of subjects to the Board of Trustees. FMR is responsible for the payment of all expenses of the funds with certain exceptions. Specific expenses payable by FMR include, without limitation, the fees and expenses of registering and qualifying the funds and their shares for distribution under federal and state securities laws; expenses of typesetting for printing the Prospectus and Statement of Additional Information; custodian charges; audit and legal expenses; insurance expense; association membership dues; and the expenses of mailing reports to shareholders, shareholder meetings, and proxy solicitations. FMR also provides for transfer agent and dividend disbursing services and portfolio and general accounting record maintenance through FSC. FMR pays all other expenses of each fund with the following exceptions: fees and expenses of all Trustees who are not "interested persons" of the trust or FMR (the non-interested Trustees); interest on borrowings; taxes; brokerage commissions (if any); and such nonrecurring expenses as may arise, including costs of any litigation to which the funds may be a party, and any obligation they may have to indemnify the officers and Trustees with respect to litigation. FMR is the high yield fund's manager pursuant to a management contract dated October 19, 1989, which was approved by shareholders on October 3, 1990, and is the manager of the money market fund pursuant to a management contract dated April 18, 1994. The April 18, 1994 contract was approved by Fidelity California Municipal Trust as sole shareholder of the money market fund on April 18, 1994, pursuant to an Agreement and Plan of Conversion approved by public shareholders of the money market fund on February 16, 1994. (The terms of the money market fund's current contract with FMR duplicate those of its previous contract, which was dated October 19, 1989.) FMR is the intermediate fund's manager pursuant to a management contract dated December 17, 1993, which was approved by FMR as sole shareholder of the fund on December 20, 1993. For the services of FMR under the contracts, the money market fund, the intermediate fund, and the high yield fund pay FMR a monthly management fee at the annual rate of .50%, .55%, and .55%, respectively, of average net assets throughout the month. FMR reduces its fee by an amount equal to the fees and expenses of the non-interested Trustees. FMR may, from time to time, voluntarily reimburse all or a portion of a fund's operating expenses (exclusive of interest, taxes, brokerage commissions, and extraordinary expenses). The following tables outline expense limitations (as a percentage of the funds' average net assets) in effect from the money market and high yield funds' commencement of operations (November 27, 1989) and the intermediate fund's commencement of operations (December 30, 1993) to the date of this Statement of Additional Information. The tables also show the amount of management fees incurred under each contract and the amounts reimbursed by FMR for each fiscal period from commencement of operations to the date of this Statement of Additional Information. MONEY MARKET FUND: From To Expense Limitation November 27, 1989 August 31, 1990 0% September 1, 1990 October 31, 1990 .05% November 1, 1990 July 11, 1991 .10% July 12, 1991 September 18, 1991 0% September 19, 1991 October 31, 1991 .05% November 1, 1991 November 30, 1991 .10% December 1, 1991 April 30, 1992 .15% May 1, 1992 May 31, 1992 .20% June 1, 1992 July 31, 1992 .25% August 1, 1992 August 31, 1992 .30% September 1, 1992 October 31, 1992 .33% November 1, 1992 April 30, 1993 .35% May 1, 1993 August 31, 1993 .15% September 1, 1993 February 28, 1994 .20% March 1, 1994 -- .25% Management Fees Amount of Period* Before Reimbursement Reimbursements 1994 $4,714,027 $2,767,561 1993 $3,699,983 $1,439,000 1992 $4,201,297 $3,370,581 * 1992 figures are for the fiscal year ended April 30. The 1993 fiscal period was from May 1, 1992 to February 28, 1993. The 1994 figures are for March 1, 1993 to February 28, 1994. INTERMEDIATE FUND: From To Expense Limitation December 30, 1993 -- 0% Management Fees Amount of Period* Before Reimbursement Reimbursements 1994 $7,123 $7,123 * 1994 figures are from December 30, 1993 (commencement of operations). HIGH YIELD FUND: From To Expense Limitation November 27, 1989 July 31, 1990 0% August 1, 1990 September 30, 1990 .10% October 1, 1990 January 31, 1991 .20% February 1, 1991 February 28, 1991 .30% March 1, 1991 March 31, 1992 .35% April 1, 1992 March 10, 1993 .40% March 11, 1993 May 31, 1993 .45% June 1, 1993 July 31, 1993 .50% Management Fees Amount of Period* Before Reimbursement Reimbursements 1994 $ 3,287,940 $202,856 1993 $2,353,081 $642,664 1992 $2,175,298 $772,525 * 1992 figures are for the fiscal year ended April 30. The 1993 fiscal period was from May 1, 1992 to February 28, 1993. The 1994 figures are for March 1, 1993 to February 28, 1994. If FMR were not temporarily reimbursing these expenses, the money market and intermediate funds' yields would be lower and their total operating expenses would be .50% and .55%, respectively, of each fund's average net assets. To defray shareholder service costs, FMR or its affiliates also collect the funds' $5.00 exchange fees, $5.00 account closeout fees, $5.00 fees for wire purchases and redemptions, and the money market and intermediate funds' $2.00 checkwriting charge. Shareholder transaction fees and charges collected for the fiscal periods ended February 28, 1994 and 1993 and fiscal 1992 are indicated in the tables below. MONEY MARKET FUND: Exchange Fees Account Closeout Fees Wire Fees Checkwriting Charge 1994 $15,035 $2,506 $1,970 $14,645 1993 $27,185 $2,589 $5,400 $26,557 1992 $33,135 $2,415 $7,650 $35,468 INTERMEDIATE FUND: Exchange Fees Account Closeout Fees Wire Fees Checkwriting Charge 1994* $85 $10 $0 $0 * From December 30, 1993 (commencement of operations). HIGH YIELD FUND: Exchange Fees Account Closeout Fees Wire Fees 1994 $9,400 $1,520 $805 1993 $10,705 $1,280 $1,670 1992 $11,965 $1,194 $1,900 SUB-ADVISER. With respect to the money market fund, FMR has entered into a sub-advisory agreement with FMR Texas pursuant to which FMR Texas has primary responsibility for providing portfolio investment management services to the fund. Under the sub-advisory agreement, FMR pays FMR Texas a fee equal to 50% of the management fee payable to FMR under its current management contract with the fund. The fees paid to FMR Texas are not reduced by any voluntary or mandatory expense reimbursements that may be in effect from time to time. For the fiscal periods March 1, 1993 to February 28, 1994 and May 1, 1992 to February 28, 1993 and the fiscal year May 1, 1991 to April 30, 1992, FMR paid FMR Texas fees of $ 2,357,014 , $1,849,992, and $2,100,648, respectively, under the sub-advisory agreement. DISTRIBUTION AND SERVICE PLANS Each fund has adopted a distribution and service plan (the plan) under Rule 12b-1 of the Investment Company Act of 1940 (the Rule). The Rule provides in substance that a mutual fund may not engage directly or indirectly in financing any activity that is primarily intended to result in the sale of shares of the fund except pursuant to a plan adopted by the fund under the Rule. The Board of Trustees has adopted the plan to allow the fund and FMR to incur certain expenses that might be considered to constitute indirect payment by the fund of distribution expenses. Under the plans, if the payment by the fund to FMR of management fees should be deemed to be indirect financing by the fund of the distribution of its shares, such payment is authorized by the plan. The plans specifically recognize that FMR, either directly or through FDC, may use its management fee revenues, past profits, or other resources, without limitation, to pay promotional and administrative expenses in connection with the offer and sale of shares of the funds. In addition, the plans provide that FMR may use its resources, including its management fee revenues, to make payments to third parties that provide assistance in selling the funds' shares, or to third parties, including banks, that render shareholder support services. The Trustees have not authorized third party payments to date. Each fund's plan has been approved by the Trustees. As required by the Rule, the Trustees carefully considered all pertinent factors relating to implementation of the plan prior to their approval, and have determined that there is a reasonable likelihood that the plans will benefit the funds and their shareholders. In particular, the Trustees noted that the plans do not authorize payments by the funds other than those made to FMR under its management contracts with the funds. To the extent that the plans give FMR and FDC greater flexibility in connection with the distribution of shares of the funds, additional sales of the funds' shares may result. Additionally, certain shareholder support services may be provided more effectively under the plans by local entities with whom shareholders have other relationships. The plan for the money market fund was approved by Fidelity California Municipal Trust on April 18, 1994, as the then sole shareholder of the money market fund, pursuant to an Agreement and Plan of Conversion approved by public shareholders of the money market fund on February 16, 1993. The high yield fund's plan was approved by shareholders on October 3, 1990. The intermediate fund's plan was approved by FMR as the sole shareholder of the fund on December 20, 1993. 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, and 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. The funds may execute portfolio transactions with and purchase securities issued by depository institutions that receive payments under the Plans. No preference will be shown in the selection of investments for the instruments of such depository institutions. 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. INTEREST OF FMR AFFILIATES United Missouri is each fund's custodian and transfer agent. United Missouri has entered into sub-contracts with FSC, an affiliate of FMR, under the terms of which FSC performs the processing activities associated with providing transfer agent and shareholder servicing functions for each fund. United Missouri has additional sub-contracts with FSC pursuant to which FSC performs the calculations necessary to determine each fund's net asset value per share and dividends and maintains the funds' accounting records. United Missouri is entitled to reimbursement for fees paid to FSC from FMR, who must bear these costs pursuant to its management contract with each fund. Each fund has a distribution agreement with FDC, a Massachusetts corporation organized on July 18, 1960. FDC is a broker-dealer registered under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. The distribution agreement calls for FDC to use all reasonable efforts, consistent with its other business, to secure purchasers for shares of each fund, which are continuously offered at net asset value. Promotional and administrative expenses in connection with the offer and sale of shares are paid by FMR. DESCRIPTION OF THE TRUSTS TRUSTS' ORGANIZATION. Fidelity California Municipal Trust (the Massachusetts trust) is an open-end management investment company organized as a Massachusetts business trust on April 28, 1983. On February 27, 1984 the trust's name was changed from Fidelity California Tax-Exempt Money Market Trust to Fidelity California Tax-Free Fund and on November 1, 1989 its name was changed to Fidelity California Municipal Trust. Currently, there are four funds of the Massachusetts trust: Fidelity California Tax-Free Insured Portfolio, Fidelity California Tax-Free High Yield Portfolio, Spartan California Intermediate Municipal Portfolio, and Spartan California Municipal High Yield Portfolio. The Massachusetts trust's Declaration of Trust permits the Trustees to create additional funds. Fidelity California Municipal Trust II (the Delaware trust) is an open-end management investment company organized as a Delaware Business trust on June 20, 1991. Currently, there two funds of the Delaware trust: Fidelity California Tax-Free Money Market Fund and Spartan California Municipal Money Market Portfolio. Fidelity California Tax-Free Money Market Fund and Spartan California Municipal Money Market Portfolio entered into agreements to acquire all of the assets of the Fidelity California Tax-Free Money Market Portfolio and Spartan California Municipal Money Market Portfolio, series of the Fidelity California Municipal Trust, on December 30, 1991 and April 18, 1994, respectively. The Delaware trust's Trust Instrument permits the Trustees to create additional funds. In the event that FMR ceases to be investment adviser to a trust or any of its funds, the right of the trust or the fund to use the identifying names "Fidelity" and "Spartan" may be withdrawn. There is a remote possibility that one fund might become liable for any misstatement in its prospectus or statement of additional information about another fund. The assets of each trust received for the issue or sale of shares of each of its funds and all income, earnings, profits and proceeds thereof, subject only to the rights of creditors, are especially allocated to such fund, and constitute the underlying assets of such fund. The underlying assets of each fund are segregated on the books of account, and are to be charged with the liabilities with respect to such fund and with a share of the general liabilities of their respective trusts. Expenses with respect to each trust are to be allocated in proportion to the asset value of their respective funds, except where allocations of direct expense can otherwise be fairly made. The officers of the trusts, subject to the general supervision of the Board of Trustees, have the power to determine which expenses are allocable to a given fund, or which are general or allocable to all of the funds of a certain trust. In the event of the dissolution or liquidation of a trust, shareholders of each fund of that trust are entitled to receive as a class the underlying assets of such fund available for distribution. SHAREHOLDER AND TRUSTEE LIABILITY - MASSACHUSETTS TRUST. The Massachusetts trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust may, under certain circumstances, be held personally liable for the obligations of the trust. The Declaration of Trust provides that the Massachusetts Trust shall not have any claim against shareholders except for the payment of the purchase price of shares and requires that each agreement, obligation, or instrument entered into or executed by the trust or its Trustees shall include a provision limiting the obligations created thereby to the Massachusetts Trust and its assets. The Declaration of Trust provides for indemnification out of each fund's property of any shareholders held personally liable for the obligations of the fund. The Declaration of Trust also provides that each fund shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the fund and satisfy any judgment thereon. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the fund itself would be unable to meet its obligations. FMR believes that, in view of the above, the risk of personal liability to shareholders is remote. The Declaration of Trust further provides that the Trustees, if they have exercised reasonable care, will not be liable for any neglect or wrongdoing, but nothing in the Declaration of Trust protects Trustees against any liability to which they would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of their office. SHAREHOLDER AND TRUSTEE LIABILITY - DELAWARE TRUST. The Delaware Trust is a business trust organized under Delaware law. Delaware law provides that shareholders shall be entitled to the same limitations of personal liability extended to stockholders of private corporations for profit. The courts of some states, however, may decline to apply Delaware law on this point. The Trust Instrument contains an express disclaimer of shareholder liability for the debts, liabilities, obligations, and expenses of the Delaware Trust and requires that a disclaimer be given in each contract entered into or executed by the Delaware Trust or its Trustees. The Trust Instrument provides for indemnification out of each fund's property of any shareholder or former shareholder held personally liable for the obligations of the fund. The Trust Instrument also provides that each fund shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the fund and satisfy any judgment thereon. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which Delaware law does not apply, no contractual limitation of liability was in effect, and the fund is unable to meet its obligations. FMR believes that, in view of the above, the risk of personal liability to shareholders is extremely remote. The Trust Instrument further provides that the Trustees shall not be personally liable to any person other than the Delaware Trust or its shareholders; moreover, the Trustees shall not be liable for any conduct whatsoever, provided that Trustees are not protected against any liability to which they would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of their office. VOTING RIGHTS - BOTH TRUSTS. Each fund's capital consists of shares of beneficial interest. As a shareholder of the Massachusetts trust, you receive one vote for each dollar value of net asset value per share you own. The shares have no preemptive or conversion rights; voting and dividend rights, the right of redemption, and the privilege of exchange are described in the Prospectus. Shares are fully paid and nonassessable, except as set forth under the respective "Shareholder and Trustee Liability" headings above. Shareholders representing 10% or more of a trust or one of its funds may, as set forth in the Declaration of Trust or Trust Instrument, call meetings of the trust or fund for any purpose related to the trust or fund, as the case may be, including, in the case of a meeting of an entire trust, the purpose on voting on removal of one or more Trustees. A trust or any fund may be terminated upon the sale of its assets to (or, in the case of the Delaware Trust and its funds, merger with) another open-end management investment company or series thereof, or upon liquidation and distribution of its assets. Generally such terminations must be approved by vote of the holders of a majority of the outstanding shares of the trust or the fund (for the Delaware Trust), or by a vote of the holders of a majority of the trust or fund, as determined by the current value of each shareholder's investment in the trust or fund (for the Massachusetts Trust); however, the Trustees of the Delaware Trust may, without prior shareholder approval, change the form of the organization of the Delaware Trust by merger, consolidation, or incorporation. If not so terminated or reorganized, the trusts and their funds will continue indefinitely. Under the Trust Instrument, the Trustees may, without shareholder vote, cause the Delaware Trust to merge or consolidate into one or more trusts, partnerships, or corporations, so long as the surviving entity is an open-end management investment company that will succeed to or assume the Delaware Trust registration statement, or cause the Delaware Trust to be incorporated under Delaware law. CUSTODIAN. United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City, Missouri 64106, is custodian of the assets of the funds. The custodian is responsible for the safekeeping of the funds' assets and the appointment of subcustodian banks and clearing agencies. The custodian takes no part in determining the investment policies of the funds or in deciding which securities are purchased or sold by the funds. The funds may, however, invest in obligations of the custodian and may purchase securities from or sell securities to the custodian. FMR, its officers and directors, its affiliated companies, and the trusts' Trustees may from time to time have transactions with various banks, including banks serving as custodian for certain of the funds advised by FMR. Transactions that have occurred to date include mortgages and personal and general business loans. In the judgment of FMR, the terms and conditions of those transactions were not influenced by existing or potential custodial or other fund relationships. AUDITOR. Price Waterhouse, 160 Federal Street, Boston, Massachusetts serves as each trust's independent accountant. The auditor examines financial statements for the funds and provides other audit, tax, and related services. FINANCIAL STATEMENTS The funds' Annual Report for the fiscal year ended February 28, 1994 is a separate report supplied with this Statement of Additional Information and is incorporated herein by reference. APPENDIX DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of each investment by the number of days remaining to its maturity, adding these calculations, and then dividing the total by the value of the fund's portfolio. An obligation's maturity is typically determined on a stated final maturity basis, although there are some exceptions to this rule. For example, if it is probable that the issuer of an instrument will take advantage of a maturity-shortening device, such as a call, refunding, or redemption provision, the date on which the instrument will probably be called, refunded, or redeemed may be considered to be its maturity date. When a municipal bond issuer has committed to call an issue of bonds and has established an independent escrow account that is sufficient to, and is pledged to, refund that issue, the number of days to maturity for the prerefunded bond is considered to be the number of days to the announced call date of the bonds. The descriptions that follow are examples of eligible ratings for the intermediate and high yield funds. The funds may, however, consider ratings for other types of investments and the ratings assigned by other ratings organizations when determining the eligibility of a particular investment. DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND MUNICIPAL NOTES: Moody's ratings for state and municipal and other short-term obligations will be designated Moody's Investment Grade (MIG, or VMIG for variable rate obligations). This distinction is in recognition of the difference between short-term credit risk and long-term credit risk. Factors affecting the liquidity of the borrower and short-term cyclical elements are critical in short-term ratings, while other factors of major importance in bond risk, long-term secular trends for example, may be less important in the short run. Symbols used will be as follows: MIG-1/VMIG-1 - This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group. MIG-3/VMIG-3 - This designation denotes favorable quality, with all security elements accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. MIG-4/VMIG-4 - This designation denotes adequate quality protection commonly regarded as required of an investment security is present and, although not distinctly or predominantly speculative, there is specific risk. DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND MUNICIPAL NOTES: SP-1 - Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. SP-2 - Satisfactory capacity to pay principal and interest. SP-3 - Speculative capacity to pay principal and interest. DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS: AAA - Bonds rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. AA - Bonds rated Aa are judged to be of high quality by all standards. Together with Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long term risks appear somewhat larger than in Aaa securities. A - Bonds rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. BAA - Bonds rated Baa are considered as medium grade obligations, i.e, they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. BA - Bonds rated Ba are judged to have speculative elements. Their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times in the future. Uncertainty of position characterizes bonds in this class. B - Bonds rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments of or maintenance of other terms of the contract over any long period of time may be small. CAA - Bonds rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes possess the strongest investment attributes are designated by the symbols Aa1, A1, Baa1, Ba1, and B1. DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS: AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's to a debt obligation. Capacity to pay interest and repay principal is extremely strong. AA - Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest-rated debt issues only in small degree. A - Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions. BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories. BB - Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. B - Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. CCC - Debt rated CCC has a currently identifiable vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The ratings from AA to CCC may be modified by the addition of a plus or minus to show relative standing within the major rating categories. PART C. OTHER INFORMATION Item 24. Financial Statements and Exhibits (a)(1) Financial Statements for the Fidelity California Tax-Free Funds: Fidelity California Municipal Money Market Portfolio, Fidelity California Tax-Free Insured Portfolio, and Fidelity California Tax-Free High Yield Portfolio for the fiscal year ended February 28, 1994 are incorporated by reference into the funds' Statement of Additional Information and are filed herein as Exhibit 24(a)(1). (a)(2) Financial Statements for the Spartan California Municipal Portfolios: Spartan California Municipal Money Market Portfolio, Spartan California Intermediate Municipal Portfolio, and Spartan California Municipal High Yield Portfolio for the fiscal year ended February 28, 1994 are incorporated by reference into the funds' Statement of Additional Information and are filed herein as Exhibit 24(a)(2). (b) Exhibits: (1) Amended and Restated Declaration of Trust, dated March 17, 1994, is filed herein as Exhibit 24(b)(1). (2) By-Laws of the Trust are incorporated herein by reference to Exhibit 2 to the initial Registration Statement. (3) Not applicable. (4) Not applicable. (5)(a) Form of Management Contract between the Fidelity California Tax-Free Insured Portfolio and Fidelity Management & Research Co. is filed herein as Exhibit 5(a). (b) Form of Management Contract between Fidelity California Tax-Free High Yield Portfolio and Fidelity Management & Research Company is filed herein as Exhibit 5(b). (c) Management Contract, dated October 19, 1989, between Spartan California Municipal High Yield Portfolio and Fidelity Management & Research Company is incorporated herein by reference to Exhibit 5(f) to Post-Effective Amendment No. 13. (d) Management Contract between Spartan California Intermediate Municipal Portfolio and Fidelity Management & Research Company is incorporated herein by reference to Exhibit 5(e) to Post-Effective Amendment 25. 6 (a) General Distribution Agreement, dated August 31, 1986 and amended as of April 1, 1987 between Fidelity California Tax-Free Insured Portfolio and Fidelity Distributors Corporation is incorporated herein by reference to Exhibit 6(b) to Post-Effective Amendment No. 8. (b) General Distribution Agreement, dated June 1, 1986 and amended as of April 1, 1987 between Fidelity California Tax-Free High Yield Portfolio and Fidelity Distributors Corporation is incorporated herein by reference to Exhibit 6(c) to Post-Effective Amendment No. 8. (c) Amendment to General Distribution Agreement, dated January 1, 1988, between Fidelity California Tax-Free Insured Portfolio and Fidelity Distributors Corporation is incorporated herein by reference to Exhibit 6(b) to Post-Effective Amendment No. 9. (d) Amendment to General Distribution Agreement, dated January 1, 1988, between Fidelity California Tax-Free High Yield Portfolio and Fidelity Distributors Corporation is incorporated herein by reference to Exhibit 6(c) to Post-Effective Amendment No. 9. (e) General Distribution Agreement, dated October 19, 1989, between Spartan California Municipal High Yield Portfolio and Fidelity Distributors Corporation is incorporated herein by reference to Exhibit 6(e) to Post-Effective Amendment No. 13. (f) General Distribution Agreement between Spartan California Intermediate Municipal Portfolio and Fidelity Distributors Corporation is incorporated herein by reference to Exhibit 6(g) to Post-Effective Amendment 24. (7) Not applicable. (8)(a) Custodian Agreement between Registrant and United Missouri Bank, N.A., dated July 18, 1991, is incorporated herein by reference to Exhibit 8 to Post-Effective Amendment No. 20. (b) Form of Appendix A to the Custodian Agreement between Fidelity California Municipal Trust and United Missouri Bank, N.A., on behalf of Spartan California Intermediate Municipal Portfolio was filed as Exhibit 8(b) to Post-Effective Amendment 24. (9)(a) Forms of Transfer Agent and Service Agreement and Appendix A between Fidelity California Municipal Trust and United Missouri Bank, N.A. was filed as Exhibit 9(a) to Post-Effective Amendment 24. (b) Forms of Appointment of Sub-Transfer and Sub-Service Agent and Appendix A between Fidelity Service Company and United Missouri Bank, N.A. were filed as Exhibit 9(b) to Post-Effective Amendment 24. (c) Schedule A (transfer agent, Dividend and Distribution Disbursing Agent, and Shareholder Servicing Agent), Schedule B (pricing and bookkeeping), and Schedule C (securities lending) relating to Spartan California Intermediate Municipal Portfolio are filed herein as Exhibit 9(c). (d) Forms of Schedule A (transfer agent, Dividend and Distribution Disbursing Agent, and Shareholder Servicing Agent), Schedule B (pricing and bookkeeping), and Schedule C (securities lending) relating to Fidelity California Tax-Free High Yield Portfolio were filed as Exhibit 9(d) to Post-Effective Amendment 24. (e) Forms of Schedule A (transfer agent, Dividend and Distribution Disbursing Agent, and Shareholder Servicing Agent), Schedule B (pricing and bookkeeping), and Schedule C (securities lending) relating to Fidelity California Tax-Free Insured Portfolio were filed as Exhibit 9(e) to Post-Effective Amendment 24. (f) Forms of Schedule A (transfer agent, Dividend and Distribution Disbursing Agent, and Shareholder Servicing Agent), Schedule B (pricing and bookkeeping), and Schedule C (securities lending) relating to Spartan California Municipal High Yield Portfolio were filed as Exhibit 9(f) to Post-Effective Amendment 24. (10) Not applicable. (11) Consent of Price Waterhouse is filed herein as Exhibit 11. (12) Not applicable. (13) Not applicable. (14) Not applicable. (15)(a) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity California Tax-Free High Yield Portfolio is incorporated herein by reference to Exhibit 15(b) to Post-Effective Amendment No. 5. (b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity California Tax-Free Insured Portfolio is incorporated herein by reference to Exhibit 15(c) to Post-Effective Amendment No. 5. (d) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan California Municipal High Yield Portfolio is incorporated herein by reference to Exhibit 15(e) to Post-Effective Amendment No. 13. (e) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan California Intermediate Municipal Portfolio is incorporated herein by reference to Exhibit 15(e) to Post-Effective Amendment 25. (16)(a) A revised schedule for computation of performance quotations for Fidelity California Tax-Free Insured Portfolio and Fidelity California Tax-Free High Yield Portfolio is incorporated herein by reference to Exhibit 16(a) to Post-Effective Amendment No. 16. (b) A revised schedule for computation of performance quotations for Spartan California Municipal High Yield Portfolio is incorporated herein by reference to Exhibit 16(b) to Post-Effective Amendment No. 16. (c) A schedule for computation of performance calculations is incorporated herein by reference to Exhibit 16(c) to Post-Effective Amendment No. 22. Item 25. Persons Controlled by or under Common Control with Registrant The Board of Trustees of the Registrant is the same as the Boards of other funds advised by FMR, each of which has Fidelity Management & Research Company as its investment adviser. 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, 1994 Title of Class: Shares of Beneficial Interest Name of Series Number of Record Holders Fidelity California Tax-Free High Yield Portfolio 15,398 Fidelity California Tax-Free Insured Portfolio 8,888 Spartan California Municipal High Yield Portfolio 9,748 Spartan California Intermediate Municipal Portfolio 368 Item 27. Indemnification Article XI, Section 2 of the Declaration of Trust sets forth the reasonable and fair means for determining whether indemnification shall be provided to any past or present Trustee or officer. It states that the Registrant shall indemnify any present or past Trustee or officer to the fullest extent permitted by law against liability and all expenses reasonably incurred by him in connection with any claim, action, suit, or proceeding in which he is involved by virtue of his service as a trustee, an officer, or both. Additionally, amounts paid or incurred in settlement of such matters are covered by this indemnification. Indemnification will not be provided in certain circumstances, however. These include instances of willful misfeasance, bad faith, gross negligence, and reckless disregard of the duties involved in the conduct of the particular office involved. Item 28. Business and Other Connections of Investment Adviser (1) FIDELITY MANAGEMENT & RESEARCH COMPANY FMR serves as investment adviser to a number of other investment companies. The directors and officers of the Adviser have held, during the past two fiscal years, the following positions of a substantial nature.
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President and Chief Executive Officer of FMR Corp.; Chairman of the Board and a Director of FMR, FMR Corp., FMR Texas Inc., Fidelity Management & Research (U.K.) Inc. and Fidelity Management & Research (Far East) Inc.; President and Trustee of funds advised by FMR; J. Gary Burkhead President of FMR; Managing Director of FMR Corp.; President and a Director of FMR Texas Inc., Fidelity Management & Research (U.K.) Inc. and Fidelity Management & Research (Far East) Inc.; Senior Vice President and Trustee of funds advised by FMR. Peter S. Lynch Vice Chairman of FMR (1992). David Breazzano Vice President of FMR (1993) and of a fund advised by FMR. Stephan Campbell Vice President of FMR (1993). Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by FMR; Corporate Preferred Group Leader. Will Danoff Vice President of FMR (1993) and of a fund advised by FMR. Scott DeSano Vice President of FMR (1993). Penelope Dobkin Vice President of FMR and of a fund advised by FMR. Larry Domash Vice President of FMR (1993). George Domolky Vice President of FMR (1993) and of a fund advised by FMR. Charles F. Dornbush Senior Vice President of FMR; Chief Financial Officer of the Fidelity funds; Treasurer of FMR Texas Inc., Fidelity Management & Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc. Robert K. Duby Vice President of FMR. Margaret L. Eagle Vice President of FMR and of a fund advised by FMR. Kathryn L. Eklund Vice President of FMR. Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised by FMR. Daniel R. Frank Vice President of FMR and of funds advised by FMR. Gary L. French Vice President of FMR and Treasurer of the funds advised by FMR. Prior to assuming the position as Treasurer he was Senior Vice President, Fund Accounting - Fidelity Accounting & Custody Services Co. Michael S. Gray Vice President of FMR and of funds advised by FMR. Barry A. Greenfield Vice President of FMR and of a fund advised by FMR. William J. Hayes Senior Vice President of FMR; Income/Growth Group Leader and International Group Leader. Robert Haber Vice President of FMR and of funds advised by FMR. Daniel Harmetz Vice President of FMR and of a fund advised by FMR. Ellen S. Heller Vice President of FMR.
John Hickling Vice President of FMR (1993) and of funds advised by FMR.
Robert F. Hill Vice President of FMR; and Director of Technical Research. Stephan Jonas Vice President of FMR (1993). David B. Jones Vice President of FMR (1993). Steven Kaye Vice President of FMR (1993) and of a fund advised by FMR. Frank Knox Vice President of FMR (1993). Robert A. Lawrence Senior Vice President of FMR (1993); and High Income Group Leader. Alan Leifer Vice President of FMR and of a fund advised by FMR. Harris Leviton Vice President of FMR (1993) and of a fund advised by FMR. Bradford E. Lewis Vice President of FMR and of funds advised by FMR. Robert H. Morrison Vice President of FMR and Director of Equity Trading. David Murphy Vice President of FMR and of funds advised by FMR. Jacques Perold Vice President of FMR. Brian Posner Vice President of FMR (1993) and of a fund advised by FMR. Anne Punzak Vice President of FMR and of funds advised by FMR. Richard A. Spillane Vice President of FMR and of funds advised by FMR; and Director of Equity Research. Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised by FMR. Thomas Steffanci Senior Vice President of FMR (1993); and Fixed-Income Division Head. Gary L. Swayze Vice President of FMR and of funds advised by FMR; and Tax-Free Fixed-Income Group Leader. Donald Taylor Vice President of FMR (1993) and of funds advised by FMR. Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised by FMR. Joel Tillinghast Vice President of FMR (1993) and of a fund advised by FMR. Robert Tucket Vice President of FMR (1993). George A. Vanderheiden Senior Vice President of FMR; Vice President of funds advised by FMR; and Growth Group Leader. Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised by FMR. Guy E. Wickwire Vice President of FMR and of a fund advised by FMR. Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of FMR; Vice President, Legal of FMR Corp.; and Secretary of funds advised by FMR.
Item 29. Principal Underwriters (a) Fidelity Distributors Corporation (FDC) acts as distributor for most funds advised by FMR and the following other funds: CrestFunds, Inc. The Victory Funds ARK Funds (b) Name and Principal Positions and Offices Positions and Offices Business Address* With Underwriter With Registrant Edward C. Johnson 3d Director Trustee and President Nita B. Kincaid Director None W. Humphrey Bogart Director None Kurt A. Lange President and Treasurer None William L. Adair Senior Vice President None Thomas W. Littauer Senior Vice President None Arthur S. Loring Vice President and Clerk Secretary * 82 Devonshire Street, Boston, MA (c) Not applicable. Item 30. Location of Accounts and Records All accounts, books, and other documents required to be maintained by Section 31a of the 1940 Act and the Rules promulgated thereunder are maintained by Fidelity Management & Research Company or Fidelity Service Co., 82 Devonshire Street, Boston, MA 02109, or the funds' custodian United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City, MO. Item 31. Management Services Not applicable. Item 32. Undertakings (a) The Registrant on behalf of Fidelity California Tax-Free High Yield Portfolio, Fidelity California Tax-Free Insured Portfolio, Spartan California Intermediate Municipal Portfolio, and Spartan California Municipal High Yield Portfolio undertakes, provided the information required by Item 5A is contained in the annual report, to furnish each person to whom a prospectus has been delivered, upon their request and without charge, a copy of the Registrant's latest annual report to shareholders. (b) The Registrant undertakes for Spartan California Intermediate Municipal Portfolio : (1) to call a meeting of shareholders for the purpose of voting upon the question of removal of a trustee or trustees, when requested to do so by recordholders of not less than 10% of its outstanding shares; and (2) to assist in communications with other shareholders pursuant to Section 16(c)(1) and (2), whenever shareholders meeting the qualifications set forth in Section 16(c) seek the opportunity to communicate with other shareholders with a view toward requesting a meeting. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for the effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 26 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston and Massachusetts, on the 13th day of April 1994. FIDELITY CALIFORNIA MUNICIPAL TRUST By /s/Edward C. Johnson 3d (dagger) Edward C. Johnson 3d, President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. (Signature) (Title) (Date)
/s/Edward C. Johnson 3d(dagger) President and Trustee April 13, 1994 Edward C. Johnson 3d (Principal Executive Officer)
/s/Gary L. French Treasurer April 13, 1994 Gary L. French /s/J. Gary Burkhead Trustee April 13, 1994 J. Gary Burkhead /s/Ralph F. Cox * Trustee April 13, 1994 Ralph F. Cox /s/Phyllis Burke Davis * Trustee April 13, 1994 Phyllis Burke Davis /s/Richard J. Flynn * Trustee April 13, 1994 Richard J. Flynn /s/E. Bradley Jones * Trustee April 13, 1994 E. Bradley Jones /s/Donald J. Kirk * Trustee April 13, 1994 Donald J. Kirk /s/Peter S. Lynch * Trustee April 13, 1994 Peter S. Lynch /s/Edward H. Malone * Trustee April 13, 1994 Edward H. Malone /s/Marvin L. Mann_____* Trustee April 13, 1994 Marvin L. Mann /s/Gerald C. McDonough* Trustee April 13, 1994 Gerald C. McDonough /s/Thomas R. Williams * Trustee April 13, 1994 Thomas R. Williams (dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of attorney dated October 20, 1993 and filed herewith. * Signature affixed by Robert C. Hacker pursuant to a power of attorney dated October 20, 1993 and filed herewith. POWER OF ATTORNEY We, the undersigned Directors, Trustees or General Partners, as the case may be, of the following investment companies:
Fidelity Advisor Series I Fidelity Institutional Trust Fidelity Advisor Series II Fidelity Investment Trust Fidelity Advisor Series III Fidelity Magellan Fund Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust Fidelity Advisor Series V Fidelity Money Market Trust Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust Fidelity Advisor Series VII Fidelity Municipal Trust Fidelity Advisor Series VIII Fidelity New York Municipal Trust Fidelity California Municipal Trust Fidelity Puritan Trust Fidelity Capital Trust Fidelity School Street Trust Fidelity Charles Street Trust Fidelity Securities Fund Fidelity Commonwealth Trust Fidelity Select Portfolios Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P. Fidelity Contrafund Fidelity Summer Street Trust Fidelity Corporate Trust Fidelity Trend Fund Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P. Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities Fidelity Deutsche Mark Performance Fund, L.P. Portfolio, L.P. Fidelity Union Street Trust Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P. Fidelity Exchange Fund Spartan U.S. Treasury Money Market Fidelity Financial Trust Fund Fidelity Fixed-Income Trust Variable Insurance Products Fund Fidelity Government Securities Fund Variable Insurance Products Fund II Fidelity Hastings Street Trust Fidelity Income Fund
plus any other investment company for which Fidelity Management & Research Company acts as investment adviser and for which the undersigned individuals serve as Board Members (collectively, the "Funds"), hereby severally constitute and appoint Arthur J. Brown, Arthur C. Delibert, Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A. Xupolos, each of them singly, our true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for us and in our names in the appropriate capacities, all Pre-Effective Amendments to any Registration Statements of the Funds, any and all subsequent Post-Effective Amendments to said Registration Statements, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in our names and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and Investment Company Act of 1940, and all related requirements of the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof. WITNESS our hands on this twentieth day of October, 1993. /s/Edward C. Johnson 3d /s/Peter S. Lynch Edward C. Johnson 3d Peter S. Lynch /s/J. Gary Burkhead /s/Edward H. Malone J. Gary Burkhead Edward H. Malone /s/Richard J. Flynn /s/Gerald C. McDonough Richard J. Flynn Gerald C. McDonough /s/E. Bradley Jones /s/Thomas R. Williams E. Bradley Jones Thomas R. Williams /s/Donald J. Kirk Donald J. Kirk POWER OF ATTORNEY I, the undersigned President and Director, Trustee or General Partner, as the case may be, of the following investment companies:
Fidelity Advisor Series I Fidelity Institutional Trust Fidelity Advisor Series II Fidelity Investment Trust Fidelity Advisor Series III Fidelity Magellan Fund Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust Fidelity Advisor Series V Fidelity Money Market Trust Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust Fidelity Advisor Series VII Fidelity Municipal Trust Fidelity Advisor Series VIII Fidelity New York Municipal Trust Fidelity California Municipal Trust Fidelity Puritan Trust Fidelity Capital Trust Fidelity School Street Trust Fidelity Charles Street Trust Fidelity Securities Fund Fidelity Commonwealth Trust Fidelity Select Portfolios Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P. Fidelity Contrafund Fidelity Summer Street Trust Fidelity Corporate Trust Fidelity Trend Fund Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P. Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities Fidelity Deutsche Mark Performance Fund, L.P. Portfolio, L.P. Fidelity Union Street Trust Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P. Fidelity Exchange Fund Spartan U.S. Treasury Money Market Fidelity Financial Trust Fund Fidelity Fixed-Income Trust Variable Insurance Products Fund Fidelity Government Securities Fund Variable Insurance Products Fund II Fidelity Hastings Street Trust Fidelity Income Fund
plus any other investment company for which Fidelity Management & Research Company acts as investment adviser and for which the undersigned individual serves as President and Board Member (collectively, the "Funds"), hereby severally constitute and appoint J. Gary Burkhead, my true and lawful attorney-in-fact, with full power of substitution, and with full power to sign for me and in my name in the appropriate capacity, all Pre-Effective Amendments to any Registration Statements of the Funds, any and all subsequent Post-Effective Amendments to said Registration Statements, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorney-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and Investment Company Act of 1940, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof. WITNESS my hand on the date set forth below. /s/Edward C. Johnson 3d October 20, 1993 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:
Fidelity Advisor Series I Fidelity Magellan Fund Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust Fidelity Advisor Series IV Fidelity Money Market Trust Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust Fidelity Advisor Series VIII Fidelity New York Municipal Trust Fidelity California Municipal Trust Fidelity Puritan Trust Fidelity Capital Trust Fidelity School Street Trust Fidelity Charles Street Trust Fidelity Select Portfolios Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P. Fidelity Congress Street Fund Fidelity Summer Street Trust Fidelity Contrafund Fidelity Trend Fund Fidelity Deutsche Mark Performance Fidelity Union Street Trust Portfolio, L.P. Fidelity U.S. Investments-Bond Fund, L.P. Fidelity Devonshire Trust Fidelity U.S. Investments-Government Securities Fidelity Financial Trust Fund, L.P. Fidelity Fixed-Income Trust Fidelity Yen Performance Portfolio, L.P. Fidelity Government Securities Fund Spartan U.S. Treasury Money Market Fidelity Hastings Street Trust Fund Fidelity Income Fund Variable Insurance Products Fund Fidelity Institutional Trust Variable Insurance Products Fund II Fidelity Investment Trust
plus any other investment company for which Fidelity Management & Research Company acts as investment adviser and for which the undersigned individual serves as a Board Member (collectively, the "Funds"), hereby severally constitute and appoint Arthur J. Brown, Arthur C. Delibert, Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A. Xupolos, 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 capacity, all Pre-Effective Amendments to any Registration Statements of the Funds, any and all subsequent Post-Effective Amendments to said Registration Statements, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and Investment Company Act of 1940, and all related requirements of the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof. WITNESS my hand on the date set forth below. /s/Ralph F. Cox October 20, 1993 Ralph F. Cox POWER OF ATTORNEY I, the undersigned Director, Trustee or General Partner, as the case may be, of the following investment companies:
Fidelity Advisor Series I Fidelity Investment Trust Fidelity Advisor Series III Fidelity Special Situations Fund Fidelity Advisor Series IV Fidelity Sterling Performance Portfolio, L.P. Fidelity Advisor Series VI Fidelity Trend Fund Fidelity Advisor Series VII Fidelity U.S. Investments-Bond Fund, L.P. Fidelity Advisor Series VIII Fidelity U.S. Investments-Government Securities Fidelity Contrafund Fund, L.P. Fidelity Deutsche Mark Performance Fidelity Yen Performance Portfolio, L.P. Portfolio, L.P. Spartan U.S. Treasury Money Market Fidelity Fixed-Income Trust Fund Fidelity Government Securities Fund Variable Insurance Products Fund Fidelity Hastings Street Trust Variable Insurance Products Fund II Fidelity Institutional Trust
plus any other investment company for which Fidelity Management & Research Company acts as investment adviser and for which the undersigned individual serves as a Board Member (collectively, the "Funds"), hereby severally constitute and appoint Arthur J. Brown, Arthur C. Delibert, Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A. Xupolos, 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 capacity, all Pre-Effective Amendments to any Registration Statements of the Funds, any and all subsequent Post-Effective Amendments to said Registration Statements, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and Investment Company Act of 1940, and all related requirements of the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof. WITNESS my hand on the date set forth below. /s/Marvin L. Mann October 20, 1993 Marvin L. Mann POWER OF ATTORNEY I, the undersigned Director, Trustee or General Partner, as the case may be, of the following investment companies:
Fidelity Advisor Series I Fidelity Investment Trust Fidelity Advisor Series III Fidelity Mt. Vernon Street Trust Fidelity Advisor Series IV Fidelity School Street Trust Fidelity Advisor Series VI Fidelity Select Portfolios Fidelity Advisor Series VIII Fidelity Sterling Performance Portfolio, L.P. Fidelity Beacon Street Trust Fidelity Trend Fund Fidelity Capital Trust Fidelity Union Street Trust Fidelity Commonwealth Trust Fidelity U.S. Investments-Bond Fund, L.P. Fidelity Contrafund Fidelity U.S. Investments-Government Securities Fidelity Deutsche Mark Performance Fund, L.P. Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P. Fidelity Devonshire Trust Spartan U.S. Treasury Money Market Fidelity Financial Trust Fund Fidelity Fixed-Income Trust Variable Insurance Products Fund Fidelity Government Securities Fund Variable Insurance Products Fund II Fidelity Hastings Street Trust Fidelity Institutional Trust
plus any other investment company for which Fidelity Management & Research Company acts as investment adviser and for which the undersigned individual serves as a Board Member (collectively, the "Funds"), hereby severally constitute and appoint Arthur J. Brown, Arthur C. Delibert, Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A. Xupolos, 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 capacity, all Pre-Effective Amendments to any Registration Statements of the Funds, any and all subsequent Post-Effective Amendments to said Registration Statements, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and Investment Company Act of 1940, and all related requirements of the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof. WITNESS my hand on the date set forth below. /s/Phyllis Burke Davis October 20, 1993 Phyllis Burke Davis EX-24 2 EXHIBIT (A)(1) FIDELITY (Registered trademark) CALIFORNIA TAX-FREE FUNDS ANNUAL REPORT FEBRUARY 28, 1994 CONTENTS PRESIDENT'S MESSAGE 3 NED JOHNSON ON MINIMIZING TAXES FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO 4 PERFORMANCE 7 FUND TALK: THE MANAGER'S OVERVI EW 10 INVESTMENT CHANGES 11 INVESTMENTS 24 FINANCIAL STATEMENTS FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO 28 PERFORMANCE 31 FUND TALK: THE MANAGER'S OVERVI EW 34 INVESTMENT CHANGES 35 INVESTMENTS 45 FINANCIAL STATEMENTS FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO 49 PERFORMANCE 51 FUND TALK: THE MANAGER'S OVERVI EW 53 INVESTMENT CHANGES 54 INVESTMENTS 63 FINANCIAL STATEMENTS NOTES 67 FOOTNOTES TO THE FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS 71 THE AUDITOR'S OPINION THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED BY THE FDIC. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: No one wants to pay more taxes than they have to. But a recent survey of 500 U.S. households, conducted by Fidelity and Yankelovich Partners, showed that few people took steps to reduce their taxes under the new tax laws that went into effect last year. In fact, many people were not completely aware of the changes until they filed their 1993 tax returns. Whether or not you're someone whose tax bill increased as a result of these changes, it may make sense to consider ways to keep more of what you earn. First, if your employer offers a 401(k) or 403(b) retirement savings plan, consider enrolling. These plans are set up so you can make regular contributions - before taxes - to a retirement savings plan. They offer a disciplined savings strategy, the ability to accumulate earnings tax-deferred, and immediate tax savings. For example, if you earn $40,000 a year and contribute 7% of your salary to your 401(k) plan, your annual contribution is $2,800. That reduces your taxable income to $37,200 and, if you're in the 28% tax bracket, saves you $784 in federal taxes. In addition, you pay no taxes on any earnings until withdrawal. It may be a good idea to contact your benefits office as soon as possible to find out when you can enroll or increase your contribution. Most employers allow employees to make changes only a few times each year. Second, consider an IRA. Many people are eligible to make an IRA contribution (up to $2,000) that is fully tax deductible. That includes people who are not covered by company pension plans, or those within certain income brackets. Even if you don't qualify for a fully deductible contribution, any IRA earnings will grow tax-deferred until withdrawal. Third, consider adding to your tax-free investments, either municipal bonds or municipal bond funds. Often these can provide higher after-tax yields than comparable taxable investments. For example, if you're in the new 36% federal income tax bracket and invest $10,000 in a taxable investment yielding 7%, you'll pay $252 in federal taxes and receive $448 in income. That same $10,000 invested in a tax-free bond fund yielding 5.5% would allow you to keep $550 in income. These are three investment strategies that could help lower your tax bill in 1994. If you're interested in learning more, please call us at 1-800-544-8888 or visit a Fidelity Investor Center. We look forward to talking with you. Best regards, Edward C. Johnson 3d, Chairman FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each figure includes changes in a fund's share price, reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value). You can also look at the fund's income. If Fidelity had not reimbursed certain fund expenses during the periods shown, the total returns, dividends and yields would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND California Tax-Free High Yield 5.41% 56.05% 144.91% Lehman Brothers Municipal Bond Index 5.54% 59.02% n/a Average California Tax-Exempt Municipal Bond Fund 5.39% 54.72% n/a Consumer Price Index 2.52% 20.64% 41.47% CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in this case, one year, five years, or since the fund started on July 7, 1984. For example, if you invested $1,000 in a fund that had a 5% return over the past year, you would end up with $1,050. You can compare these figures to the performance of the Lehman Brothers Municipal Bond Index - a broad gauge of the municipal bond market. To measure how the fund stacked up against its peers, you can look at the average California tax-exempt municipal bond fund, which reflects the performance of 75 California tax-exempt municipal bond funds tracked by Lipper Analytical Services. Both benchmarks include reinvested dividends and capital gains, if any. Comparing the fund's performance to the consumer price index helps show how your fund did compared to inflation. (The periods covered by the CPI numbers are the closest available match to those covered by the fund.) AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND California Tax-Free High Yield 5.41% 9.31% 9.72% Lehman Brothers Municipal Bond Index 5.54% 9.72% n/a Average California Tax-Exempt Municipal Bond Fund 5.39% 9.12% n/a Consumer Price Index 2.52% 3.82% 3.65% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND 07/31/84 10000.00 10000.00 08/31/84 10091.42 10224.30 09/30/84 9999.79 10155.59 10/31/84 10110.08 10283.05 11/30/84 10241.75 10434.41 12/31/84 10489.12 10629.95 01/31/85 10883.39 11243.62 02/28/85 10737.58 10963.09 03/31/85 10810.80 11057.70 04/30/85 11139.87 11462.41 05/31/85 11428.94 11860.39 06/30/85 11544.76 11984.81 07/31/85 11606.22 12008.30 08/31/85 11537.71 11924.48 09/30/85 11324.18 11804.88 10/31/85 11672.02 12209.43 11/30/85 11998.54 12647.38 12/31/85 12225.97 12758.55 01/31/86 12804.98 13510.03 02/28/86 13214.28 14045.84 03/31/86 13395.39 14050.33 04/30/86 13334.48 14061.01 05/31/86 13135.62 13832.10 06/30/86 13240.60 13964.06 07/31/86 13295.73 14048.82 08/31/86 13907.61 14677.78 09/30/86 13867.37 14714.62 10/31/86 14099.05 14968.75 11/30/86 14330.39 15265.28 12/31/86 14370.34 15223.14 01/31/87 14752.18 15681.51 02/28/87 14866.47 15758.67 03/31/87 14760.75 15591.62 04/30/87 13630.53 14809.24 05/31/87 13425.31 14735.78 06/30/87 13666.34 15168.43 07/31/87 13821.83 15323.14 08/31/87 13890.79 15357.62 09/30/87 13141.45 14791.38 10/31/87 13263.62 14843.75 11/30/87 13578.18 15231.32 12/31/87 13843.35 15452.32 01/31/88 14503.78 16002.73 02/29/88 14690.30 16171.88 03/31/88 14216.01 15983.48 04/30/88 14273.51 16104.96 05/31/88 14331.83 16058.41 06/30/88 14564.14 16293.35 07/31/88 14649.68 16399.58 08/31/88 14709.00 16414.01 09/30/88 15029.23 16711.10 10/31/88 15379.15 17006.06 11/30/88 15202.69 16850.28 12/31/88 15473.43 17022.66 01/31/89 15688.69 17374.69 02/28/89 15537.66 17176.44 03/31/89 15514.85 17135.39 04/30/89 15964.99 17542.18 05/31/89 16303.20 17906.54 06/30/89 16510.84 18149.71 07/31/89 16660.45 18396.72 08/31/89 16457.92 18216.62 09/30/89 16479.13 18161.97 10/31/89 16643.26 18383.55 11/30/89 16902.02 18705.26 12/31/89 16970.00 18858.64 01/31/90 16851.33 18770.01 02/28/90 17066.71 18937.06 03/31/90 17104.46 18942.74 04/30/90 16860.63 18806.35 05/31/90 17265.86 19216.33 06/30/90 17424.58 19385.43 07/31/90 17693.82 19670.40 08/31/90 17448.90 19385.18 09/30/90 17518.15 19396.81 10/31/90 17744.51 19747.89 11/30/90 18082.38 20144.83 12/31/90 18150.80 20233.46 01/31/91 18315.61 20504.59 02/28/91 18383.23 20682.98 03/31/91 18403.36 20691.25 04/30/91 18620.38 20966.45 05/31/91 18805.36 21153.05 06/30/91 18809.56 21131.90 07/31/91 19046.66 21389.71 08/31/91 19217.32 21672.05 09/30/91 19423.30 21953.79 10/31/91 19663.14 22151.37 11/30/91 19666.07 22213.39 12/31/91 19994.67 22690.98 01/31/92 20102.37 22743.17 02/29/92 20136.66 22749.99 03/31/92 20125.68 22759.09 04/30/92 20284.97 22961.65 05/31/92 20537.43 23232.60 06/30/92 20857.98 23622.91 07/31/92 21503.93 24331.59 08/31/92 21205.71 24093.14 09/30/92 21313.91 24249.75 10/31/92 20918.83 24012.10 11/30/92 21406.80 24441.92 12/31/92 21737.04 24691.22 01/31/93 21996.52 24977.64 02/28/93 23002.36 25881.83 03/31/93 22729.57 25607.49 04/30/93 22933.46 25866.12 05/31/93 23066.96 26010.97 06/30/93 23438.70 26445.36 07/31/93 23438.66 26479.73 08/31/93 24010.21 27030.51 09/30/93 24313.79 27338.66 10/31/93 24355.30 27390.60 11/30/93 24103.82 27149.57 12/31/93 24657.02 27722.42 01/31/94 24936.10 28038.46 02/28/94 24247.14 27312.26 $27,312 $24,247 '94 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity California Tax-Free High Yield Portfolio on July 31, 1984, shortly after the fund started. As the chart shows, by February 28, 1994, the value of your investment would have grown to $24,247 - a 142.47% increase on your initial investment. For comparison, look at how the Lehman Brothers Municipal Bond Index did over the same period. With dividends reinvested, the same $10,000 would have grown to $27,312 - a 173.12% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. Bond prices, for example, move in the opposite direction of interest rates. In turn, the share price, return, and yield of a fund that invests in bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) INCOME YEARS ENDED FEBRUARY 28, 1994 1993 1992 1991 1990 Income return 5.82% 6.89% 6.88% 7.00% 7.18% Capital gain return 2.24% 0.00% 0.00% 0.00% 0.00% Change in share price -2.65% 7.34% 2.66% 0.71% 2.66% Total return 5.41% 14.23% 9.54% 7.71% 9.84% INCOME returns, capital gain returns, and changes in share price are all part of a bond fund's total return. An income return reflects the dividends paid by the fund. A capital gain return reflects the amount paid by the fund to shareholders based on the profits it has from selling bonds that have grown in value. Both returns assume the dividends or gains are reinvested. Changes in the fund's share price include changes in the prices of the bonds owned by the fund. DIVIDENDS AND YIELD PERIODS ENDED FEBRUARY 28, 1994 PAST 30 PAST 6 PAST 1 DAYS MONTHS YEAR Dividends per share n/a 35.64(cents) 71.93(cents) Annualized dividend rate n/a 5.74% 5.79% Annualized yield 4.99% n/a n/a Tax-equivalent yield 8.76% n/a n/a DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $12.52 over the past six months and $12.43 over the past year, you can compare the fund's income over these two periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. The tax-equivalent yield shows what you would have to earn on a taxable investment to equal the fund's tax-free yield, if you're in the 43.04% combined effective 1994 federal and state tax bracket. FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Bond investments - including tax-free issues - provided solid returns for the 12 months ended February 28, 1994, despite a dramatic downturn in February. Falling interest rates pushed up bond prices steadily through mid-October, when the yield on the benchmark 30-year Treasury bond reached a historic low of 5.79%. By year-end, a strengthening economy had fueled mild inflation fears. That pushed up the yield on the 30-year bond to 6.35% on December 31, which forced investors to give back some of their earlier profits. Inflation jitters eased and bond yields dropped in January. However, when the Federal Reserve Bank raised short-term interest rates in an attempt to control inflation on February 4, investors reacted negatively. At the end of February, the yield on the 30-year bonds was 6.66%, about 38 basis points higher than at the beginning of the month. Over the year, higher federal income taxes boosted demand for municipal bonds. But municipal bond prices were hurt by the Fed's action in February and by record new issuance, which kept supplies high and dampened prices. The return on the Lehman Brothers Municipal Bond Index, a broad measure of the tax-free market, rose 5.54%. By comparison, the Lehman Brothers Aggregate Bond Index, which tracks investment-grade taxable bonds, returned 5.40%. Globally, falling interest rates and low inflation drove good annual returns in Europe, Japan, and most emerging markets, although many of these markets fell in February along with the U.S. bond market. The Salomon Brothers World Government Bond Index - which includes U.S. issues - returned 9.34%, while the J.P. Morgan Emerging Markets Bond Index was up a dramatic 29.46%. An interview with John Haley, Portfolio Manager of Fidelity California Tax-Free High Yield Portfolio Q. JOHN, HOW DID THE FUND PERFORM? A. About average. The fund had a total return of 5.41% for the year ended February 28, 1994. The average California tax-free bond fund posted a total return of 5.39% during the period, according to Lipper Analytical Services. Q. WHAT ACCOUNTED FOR THE FUND'S PERFORMANCE? A. First, having a somewhat longer duration than that of the typical California tax-free bond fund. A longer duration makes a fund's share price more sensitive to interest rate changes. I extended the fund's duration from about 7.5 years to 8.9 years during the year because I expected interest rates would continue to decline and drive bond prices higher. That's what happened during most of the period, although the fund gave back some gains when interest rates rebounded in February. Second, the fund also held several issues that were pre-refunded during the period - that is, their issuers set aside a pool of Treasury securities to pay the remaining interest and principal due to bondholders. As a result, the bonds' credit ratings went from A to Aaa, causing investors to bid their prices higher. Plus, their maturities shortened, which also helped boost their prices. Q. WHY DID YOU INCREASE THE FUND'S INVESTMENT IN STATE GENERAL OBLIGATION BONDS (GOS) AND STATE LEASE BONDS? A. During the early part of the year I avoided state GOs, which are backed by the taxing power of the issuer, as well as California lease bonds, which are backed by leases paid by the state. The state's economy was still struggling, and I believed prices of those issues would lag bonds with higher ratings. That proved to be true. But last fall I increased the fund's investment in California GOs, lease bonds and other bonds backed by the state to around 10% because I thought the California economy had hit bottom. Also, I increased the fund's stake in bonds rated A or lower, which are expected to benefit from improvements in the state's economy. These decisions reduced the average credit rating of the fund's holdings. At the end of February, about 45% of the fund's assets are rated Aa or Aaa. As the economy begins to improve, those state GOs and lease bonds should outperform issues with higher credit ratings. Q. AT THE END OF FEBRUARY, NEARLY 20% OF THE FUND'S INVESTMENTS WERE IN HEALTH-CARE BONDS, UP FROM 17.2% A YEAR EARLIER. ARE YOU CONCERNED THAT HEALTH-CARE REFORM WILL HURT THOSE ISSUERS? A. We are cautious on health care because the Clinton plan could affect the health care sector. However, the issues I choose are mainly strong hospitals that are expected to survive and potentially benefit from any shake-up likely to occur. In fact, a number carry ratings of Aa or Aaa. Q. DID THE LOS ANGELES EARTHQUAKE AFFECT THE FUND'S PERFORMANCE? A. Not much. During the past two or three years I de-emphasized issuers in the Los Angeles area because the economy in southern California has been especially sluggish. As a result, we only held one or two bonds of issuers in the vicinity of the earthquake. I believe in geographic diversification, so the fund's investments are spread across different regions of the state. That should offer some protection against future natural disasters. Q. WHAT'S YOUR OUTLOOK FOR THE TAX-EXEMPT BOND MARKET? A. The economy will probably show modest growth and inflation seems likely to remain under control, so I don't expect interest rates to rise dramatically from here. But interest rates aren't likely to fall much more either, so gains in the bond market won't be driven by falling rates. The tax-exempt market will probably benefit from a lower supply of new issues. Also, demand for tax-exempt bonds will likely increase as investors realize that the new, higher federal income tax rates. The combination of lower supply and higher demand should help support prices in the tax-exempt market. Q. WHAT ABOUT THE CALIFORNIA TAX-EXEMPT MARKET? A. I still feel that California bonds are attractive because the state's economy is showing signs that it is set to begin a recovery. As that happens, state GOs and lease bonds, should be especially strong performers, because their credit quality is closely linked to the economy. Those issues may be volatile over the next several months as the state goes through its budget process. But I'll probably take advantage of any price declines to buy more. FUND FACTS GOAL: to provide high current income exempt from California state and federal income taxes START DATE: July 7, 1984 SIZE: as of February 28, 1994 over $575 million MANAGER: John Haley, since September, 1985; manager, Spartan California Tax-Free High Yield Portfolio, since December 1989; Fidelity California Tax-Free Insured Portfolio, since September 1986; Fidelity Advisor Tax-Exempt Portfolio, since 1985 (checkmark) JOHN HALEY ON THE FUND'S STRATEGY: "The fund can invest one-third of its holdings in securities rated below investment-grade. However during recent years, there have been few attractive opportunities in this area. At the same time, I expected a more severe economic downturn in the California economy than most observers. As a result, I stuck mainly with highly-rated issues. But during the past six months I have begun to identify factors that suggest the California economy is reaching a bottom. As a result, I've been increasing the fund's investment in higher-yielding issues. As the economy improves, they should be strong performers." (bullet) As of February 28, 1994 34.5% of the funds investments were in Aaa-rated bonds, 39.1% in Aa- and A-rated bonds, and 15.2% in bonds rated Baa or below. (bullet) The fund's duration as of February 28, 1994 was 8.9 years. That means the fund's share price could decline roughly 8.9% if interest rates rose one percentage point, and rise 8.9% if rates fell one percentage point. FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO INVESTMENT CHANGES TOP FIVE SECTORS AS OF FEBRUARY 28, 1994 % OF FUND'S INVESTMENT % OF FUND'S INVESTMENT S S IN THESE SECTORS 6 MONTHS AGO Lease Revenue 21.8 19.7 Health Care 20.5 15.3 Special Tax 20.0 22.2 Electric Revenue 8.8 12.5 Escrowed/Pre-Refunded 6.1 4.9 AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1994 6 MONTHS AGO Years 21.0 20.1 AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL OF THE BONDS IN THE FUND IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT. DURATION AS OF FEBRUARY 28, 1994 6 MONTHS AGO Years 8.9 8.8 DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, THE SHARE PRICE OF A FUND WITH A FIVE-YEAR DURATION WILL FALL 5%. QUALITY DIVERSIFICATION AS OF FEBRUARY 28, 1994 (MOODY'S RATINGS) Row: 1, Col: 1, Value: 34.5 Row: 1, Col: 2, Value: 39.1 Row: 1, Col: 3, Value: 15.2 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 5, Value: 11.2 Aaa 34.5% Aa, A 39.1% Baa 15.2% Ba, B 0% Non-rated 11.2% THIS CHART EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. NON-RATED SECURITIES CONSIDERED TO BE BAA OR BETTER BY FIDELITY ARE 6.9% OF THE FUNDS LONG TERM INVESTMENTS. FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO INVESTMENTS/FEBRUARY 28, 1994 (Showing Percentage of Total Value of Investments) MUNICIPAL BONDS - 98.3% MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - 96.1% Alameda County Ctfs. of Prtn. Rfdg. (Santa Rita Jail Proj.) 5.375% 6/1/09, (MBIA Insured) Aaa $ 2,250,000 $ 2,210,625 010891KG Alameda Hsg. Auth. Multi-Family Hsg. Rev. (Independence Apts.) Series A, 7.50% 2/20/31, (GNMA Coll.) AAA 2,650,000 2,809,000 010789AA Anaheim Elec. Rev. 3.50% 10/1/94 Aa 2,150,000 2,160,750 032542GU Anaheim Pub. Fing. Auth. Tax Allocation Rev. (Reg. Rites) 10.27% 12/1/18, (MBIA Insured)(c) Aaa 1,500,000 1,788,750 032559AV Arcadia Hosp. Rev. (Methodist Hosp. of Southern California) 6.625% 11/15/22 A 1,650,000 1,755,188 039060BQ Berkeley Health Facs. Rev. Rdfg. (Alta Bates Med. Ctr.) Series A, 6.55% 12/1/22 Baa1 3,500,000 3,513,125 084134AH Brea & Olinda Unified School Dist. (Brea H-O-P-E, Inc. Brea High School Ctfs. of Prtn.) 7.70% 8/1/18 - 1,500,000 1,575,000 106331KM Buena Park Commty. Redev. Agcy. Tax Allocation Rfdg. (Central Business Dist. Proj.) 7.10% 9/1/14 BBB+ 2,000,000 2,115,000 119147CN Burbank Redev. Agcy. Tax Allocation Series A: 6% 12/1/13 Baa1 1,750,000 1,717,188 120823DZ 6% 12/1/23 Baa1 1,975,000 1,925,625 120823EA California Dept. Wtr. Resource Central Valley Rev. Series G, 9.60% 12/1/12, (Pre-Refunded to 12/1/95 @ 102)(d) Aaa 2,250,000 2,404,688 130663ND California Edl. Facs. Auth. Rev. (Mills College) 6.875% 9/1/22 Baa1 1,275,000 1,348,313 130174EP California Gen. Oblig. 4.75%, 9/1/23 Aa 2,000,000 1,727,500 130627BZ California Health Facs. Auth. Rev. (St. Joseph Health Sys.): Rfdg. (Alexian Brothers, San Jose) (MBIA Insured): 7.05% 1/1/09 Aaa 4,500,000 5,000,625 13033H4M 7.125% 1/1/16 Aaa 2,510,000 2,798,650 13033H4N Rfdg. (Catholic Healthcare West) 4.75% 7/1/19(MBIA Insured) Aaa 2,000,000 1,757,500 13033AAU Rfdg. (Sutter Commty. Sacramento Hosp.): 9.125% 1/1/05 A1 1,250,000 1,328,125 130326VE 9.25% 1/1/13 A1 4,000,000 4,255,000 130326VJ (Alexian Brothers San Jose, Inc.) Series A, 9.40% 1/1/16, (Pre-Refunded to 1/1/95 @ 102)(d) AAA 1,850,000 1,979,500 13033HBR (Centinela Hosp. Med. Ctr.) Series A, 9.375% 9/1/15, (MBIA Insured) Aaa 1,850,000 2,044,250 13033HAW MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED California Health Facs. Auth. Rev. - continued (St. Joseph Health Sys.): - continued: (Children's Hosp.) 7% 7/1/13, (MBIA Insured) Aaa $ 3,250,000 $ 3,623,750 13033H6L (Daughters of Charity-Queen Angels) Series A, 9.25% 11/1/15, (Pre-Refunded to 5/1/96 @ 102)(d) Aaa 1,300,000 1,472,250 13033HHC (Daughters of Charity-St. Vincents Hosp.) Series A, 9.25% 11/1/15 Aa 1,000,000 1,117,500 13033HHD (Gould Med. Foundation) Series A, 7.30% 4/1/20 A+ 3,000,000 3,476,250 13033JBW (Kaiser Permanente Health Sys.): Series A: 0% 10/1/09 Aa2 7,140,000 2,980,950 13033H2Q 0% 10/1/10 Aa2 3,795,000 1,484,794 13033H2T 0% 10/1/12 Aa2 14,990,000 5,134,075 13033H2V 9.125% 10/1/15 Aa2 2,500,000 2,734,375 13033HCJ (Robert F. Kennedy Med. Ctr.) Series A, 7.75% 3/1/14 A+ 2,980,000 3,278,000 13033HUP (Sacramento Med. Foundation) Series F, 7.875% 6/1/18 A+ 1,000,000 1,110,000 13033HXJ (St. Elizabeth Hosp. Proj.) 6.30% 11/15/15 A1 1,000,000 1,035,000 13033JL4 (San Diego Hosp. Assoc.) Series A, 6.95% 10/1/21 A1 1,250,000 1,367,188 13033JTM Series 1984 B, 9.875% 7/1/14, (Pre-Refunded to 7/1/95 @ 101)(d) AAA 2,750,000 3,004,375 130326NC California Hsg. Fin. Agcy. Rev. (Home Mtg.): Series A, 8.10% 8/1/16 Aa 1,475,000 1,585,625 130329V9 Series F, 7.875% 8/1/19 Aa 1,175,000 1,249,906 13033CEC California Poll. Cont. Fing. Solid Waste Disp. Rev. (North County Recycling Ctr.) Series A, 6.75% 7/1/11, LOC Union Bank of Switzerland Aaa 2,000,000 2,185,000 130536BQ California Pub. Cap. Impt. Fing. Auth. Rev. (Pooled Proj.) Series B, 8.10% 3/1/18, (MBIA Insured) Aaa 990,000 1,084,050 130552AS California Pub. Wks. Board Lease Rev.: Rfdg. (Dept. Corrections St. Prisons) Series A, 5% 12/1/19, (AMBAC Insured) Aaa 2,500,000 2,281,250 13068GPA (California University Proj.) Series A: 6.30% 12/1/09, (AMBAC Insured) Aaa 2,000,000 2,122,500 13068GKV 5.50% 6/1/10 A1 1,915,000 1,891,063 13068GRE 5.50% 6/1/14 A1 8,550,000 8,250,750 13068GRB 5% 6/1/23 A1 2,500,000 2,190,625 13068GRD MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED California Pub. Wks. Board Lease Rev.: - continued (Dept. Correction State Prisons, Susanville) Series D: 5.25% 6/1/15 (CGIC Insured) Aaa $ 2,000,000 $ 1,915,000 13068GUA 5.375% 6/1/18 A1 1,500,000 1,398,750 13068GTQ (Dept. Corrections State Prisons, Medera) Series E, 5.50% 6/1/15 A1 1,400,000 1,351,000 13068GVV (Univ. of California Projs.): Series A, 5.50% 6/1/14 A1 5,000,000 4,768,750 13068GUX Series B, 5.25% 6/1/07 A1 2,965,000 2,887,169 13068GUR California Statewide Commty. Dev. Auth. 8.83% 7/1/13, (MBIA Insured) (c) Aaa 2,000,000 1,965,000 130909JH California Statewide Commtys. Dev. Corp. Ctfs. of Prtn.: Rfdg. (Insured Health Facs.) (Eskaton, Inc.) 5.875% 5/1/20 A+ 4,000,000 3,920,000 130909GW Rfdg. (Insured Hosp.) (Triad Healthcare): 6.25% 8/1/06 A+ 2,000,000 2,027,500 130909CM 6.50% 8/1/22 A+ 1,500,000 1,524,375 130909CR (Childrens) 6%, 6/1/10 (MBIA Insured) Aaa 2,835,000 2,966,119 130909NH (J. Paul Getty) 5% 10/1/23 Aaa 1,750,000 1,585,937 130907FM (Odd Fellows) 5.375% 10/1/13 A+ 2,500,000 2,325,000 130907EP (St. Joseph Health Sys.) 5.50% 7/1/23 Aa 3,000,000 2,835,000 130909GH (Sisters of Charity Leavenworth) 5% 12/1/23 Aa 4,375,000 3,850,000 130909PR (Villaview Commty. Hosp., Inc.) Series A, 7% 9/1/09 A+ 1,000,000 1,086,250 130907AX 5.50% 10/1/23 A+ 2,000,000 1,865,000 130907EQ California Univ. Hsg. Sys. Series A, 5% 11/1/14, (MBIA Insured) Aaa 2,435,000 2,252,374 914113RP Campbell Ctfs. of Prtn.: Rfdg. (Civic Center Proj.) 6% 10/1/18 A 2,400,000 2,376,000 134111BK (Campbell Commty. Ctr.) 8.90% 8/1/05, (Pre-Refunded to 8/1/95 @ 102)(d) Aaa 1,640,000 1,775,300 134111AB Carson Redev. Agcy. Redev. Proj. Area #1 Tax Allocation: 6.375% 10/1/12 Baa1 1,500,000 1,486,875 145750CZ 6.375% 10/1/16 Baa1 1,000,000 985,000 145750DA Carson Redev. Spl. Tax 6% 10/1/13 Baa 1,750,000 1,708,438 145750DP Central California Jt. Pwrs. Health Fing. Auth. Ctfs. of Prtn.: Rfdg. (Commty. Hosp. of Central California Proj.) 5% 2/1/23 A 1,500,000 1,297,500 152757AR MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Central California Jt. Pwrs. Health Fing. Auth. Ctfs. of Prtn.: - continued (Commty. Hosp. of Central California Proj.) 5.25% 2/1/13 A $ 4,000,000 $ 3,675,000 152757AQ Central Valley Fing. Auth. Cogeneration Proj. Rev. (Carson Ice Generation Proj.) 6.10% 7/1/13 BBB- 1,000,000 988,750 155689AK Central Valley Fing. Auth. Rev. (Cogeneration Proj.) (Carson Ice Gen. Proj.) 6% 7/1/09 BBB- 1,750,000 1,723,750 155689AG Compton Commty. Redev. Agcy. Tax Allocation Rfdg. (Walnut Ind. Park Proj.) 7.50% 8/1/13, (AMBAC Insured) Aaa 5,000,000 5,662,500 204712DR Contra Costa County Ctfs. of Prtn. (Merrithew Mem. Hosp.): Cap. Appreciation 0%, 11/1/13 A1 6,805,000 2,143,575 21223TEJ 0% 11/1/07 A1 4,615,000 2,220,969 21223TEC Contra Costa Home Mtg. Fin. Auth. Home Mtg. Rev. 0% 9/1/17, (MBIA Insured) Aaa 12,500,000 3,156,250 212216CA Del Norte County Pub. Wks. Rev. Rfdg. (Dept. of Corrections) 5.125%, 12/1/08 A1 1,500,000 1,438,125 13068GSY Del Norte County Rev. Rfdg. (Department of Corrections) 5.20%, 12/1/09 A1 4,300,000 4,122,625 13068GSZ Desert Hosp. Rev. Ctfs. of Prtn. (Desert Hosp. Corp.) Series 1992, 10.029% 7/28/20, (Cap. Guaranty Insured)(c) Aaa 4,000,000 4,645,000 25041MAZ Duarte Ctfs of Prtn. (City of Hope Nat'l. Medical Ctr.) 6.25% 4/1/23 Baa1 2,000,000 2,025,000 263584CS Duarte Redev. Agcy. Tax Allocation: (Huntington Drive-PH 1 Redev. Proj.) 9.20% 11/1/01, (Pre-Refunded to 11/1/95 @ 102)(d) - 735,000 815,850 263590BN (Huntington Drive-PH 2 Redev. Proj.) 9.25% 11/1/10, (Pre-Refunded to 11/1/95 @ 102)(d) - 1,640,000 1,822,450 263590BQ Eastern Muni. Wtr. Dist. Wtr. & Swr. Rev. Ctfs. of Prtn. 6.75% 7/1/12, (FGIC Insured) Aaa 1,600,000 1,826,000 276771AR Fontana Redev. Agcy. Tax Allocation Rfdg. (Yurupa Hills) Series 1992 A, 7.10% 10/1/23 BBB 2,495,000 2,713,313 344619CL Fontana Unified School Dist. Rfdg., (AMBAC Insured): 0% 7/1/14 Aaa 1,880,000 582,800 344640HE 0% 7/1/15 Aaa 1,880,000 549,900 344640HF MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Foster City Pub. Fing. Auth. Rev. (Foster City Commty. Rev. Proj.) Series A: 6% 9/1/06 A- $ 1,355,000 $ 1,377,019 350057AN 6% 9/1/07 A- 1,440,000 1,450,800 350057AQ Fountain Valley Agcy. for Commty. Dev. Tax Allocation (Ind. Area Redev. Proj.) 9.10% 1/1/15 BBB+ 1,745,000 1,897,688 350771BD Garden Grove Agcy. Commty. Dev. Tax Allocation Rfdg. (Garden Grove Commty. Proj.) 5.70% 10/1/13 A 2,000,000 1,927,500 365251CN Industry Urban Ind. Dev. Agcy.: Rfdg. (Civic Recreational Proj.#1) Series A, 7.375% 5/1/12 - 11,250,000 12,164,063 456567MG (Civic Recreational Proj.#1-B) 7.375% 5/1/15, (Unrefunded Balanced) - 245,000 264,906 456567QS Intercommunity Hosp. Fing. Auth. Ctfs. of Prtn. 9.75% 8/1/15, (Pre-Refunded to 8/1/95 @ 103)(d) AAA 4,000,000 4,460,000 45853JAJ Intermodal Container Transfer Facs. Joint Pwr. Auth. Rev. Rfdg. Series 1989 A, 7.70% 11/1/14, LOC Industrial Bank of Japan, (BIG Insured) Aa3 1,500,000 1,683,750 458925AK Irvine Ranch Wtr. Dist. Joint Pwr. Agcy. Local Pool Rev. 8.25% 8/15/23 BBB 15,675,000 17,242,500 463656BE Kern County High School Dist. Gen. Oblig. 7% 8/1/09 A1 1,090,000 1,261,675 492246AT La Habra Ctfs. of Prtn. (La Habra and View Park) (Acquisition Proj.) 6.625% 11/1/22, (FSA Insured) Aaa 1,000,000 1,102,500 503423BA Livermore Redev. Agcy. Tax Allocation Rev. (Livermore Redev. Proj.) Series A, 7.75% 8/1/09 - 1,000,000 1,042,500 53819TAL Local Gov't. Fin. Auth. Rev. (Oakland Central Dist.) 0% 9/1/08 Aaa 3,710,000 1,646,313 539558FF Loma Linda Hosp. Rev. (Loma Linda Univ. Med. Ctr Proj.) Series B, 9% 12/1/12 BBB 1,550,000 1,710,813 541482BV Los Angeles Ctfs. of Prtn.: (Health Facs. Construction Loan) (Bay Harbor Hosp.) 7.30% 4/1/20 A+ 2,000,000 2,192,500 544358GV (Solheim Lutheran Home, Inc.) 8.125% 11/1/17 A+ 2,000,000 2,232,500 544358EP Los Angeles Commty. Redev. Agcy. (Central Bus. Dist.) Series E, 8.85% 7/1/10 A- 4,000,000 4,310,000 544389HE Los Angeles County Cap. Asset Leasing Corp. Leasehold Rev. 4.05% 12/1/09, (AMBAC Insured) Aaa 4,030,000 4,130,750 544900CE MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Los Angeles County Ctfs. of Prtn.: (Cap. Appreciation): 0% 9/1/10 A $ 2,980,000 $ 1,102,600 5446634F 0% 3/1/18 A 3,000,000 675,000 5446634W 0% 9/1/19 A 9,190,000 1,883,950 5446634Z 0% 3/1/20 A 1,690,000 335,888 5446634C (Cap. Appreciation Correctional Facs.) 0% 9/1/12, (MBIA Insured) Aaa 3,575,000 1,246,781 544663G9 (Correctional Facs.) 0%, 9/1/10, (MBIA Insured) Aaa 3,770,000 1,479,725 544663G7 (Disney Parking): 0%, 9/1/08 A 2,030,000 898,275 5446633Y 0%, 3/1/11 A 3,950,000 1,397,313 5446634G 0% 3/1/13 A 2,835,000 885,938 5446634L 0% 9/1/15 A 3,800,000 1,007,000 5446634R 0% 9/1/17 A 3,370,000 779,313 5446634V Los Angeles County Trans. Commission Sales Tax Rev. 6.25% 7/1/13, (MBIA Insured) Aaa 2,250,000 2,373,750 545170JE Los Angeles Dept. Wtr. & Pwr. Elec. Plant Rev. 9.20% 10/15/25, (Pre-Refunded to 10/15/95 @ 103) (d) Aa 1,500,000 1,676,250 544508AQ Los Angeles Hbr. Dept. Rev. 7.60% 10/1/18 Aa 5,540,000 6,364,075 544552BQ M-S-R Pub. Pwr. Agcy. San Juan Proj. Rev. Series B, 6.75% 7/1/11, (MBIA Insured) Aaa 2,000,000 2,210,000 553751EV Metropolitan Wtr. Dist. Southern Wtrwks. Rev.: Rfdg. Series A, 5.75% 7/1/21 Aa 2,250,000 2,283,750 592663MS 8.172% 8/10/18(c) Aa 2,500,000 2,637,500 592663MN 6% 7/1/21 Aa 2,500,000 2,550,000 592663KN 8.775% 8/5/22(c) Aa 1,300,000 1,379,625 592663LP Modesto Ctfs. of Prtn. (Golf Course Refing. Proj.) Series B, 5% 11/1/23, (AMBAC Insured) Aaa 2,000,000 1,817,500 607715FF Modesto Irrigation Dist. Ctfs. of Prtn.: Rfdg. & Cap. Impts. Series A, 0% 10/1/05, (MBIA Insured) Aaa 2,140,000 1,155,600 607762DC Rfdg. & Cap. Impts. Series A, 0% 10/1/08, (MBIA Insured) Aaa 2,270,000 1,001,638 607762DF (Geysers Geothermal Pwr. Proj.) Series 1986, 5% 10/1/17 A1 5,000,000 4,437,500 607762BL Northern California Pwr. Agcy. Pub. Pwr. Rev. Rfdg.: Rfdg. (Combustion Turbine Proj. #1) Series A, 6% 8/15/07, (MBIA Insured) Aaa 1,500,000 1,545,000 664843MF Rfdg. (Geothermal Proj. #3) Series A, 5.85% 7/1/10 A 1,000,000 1,022,500 664843SB 7.50% 7/1/23, (AMBAC Insured) (Pre-Refunded to 7/1/21 @ 100)(d) Aaa 1,355,000 1,722,544 664843NV MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Northern California Trans. Rev. (Ore Trans. Proj.) Series A, 7% 5/1/13, (MBIA Insured) Aaa $ 7,000,000 $ 8,128,750 664850BL Norwalk Redev. Agcy. Tax Allocation (Norwalk Redev. Proj. #1): 7.15% 12/1/15 - 2,500,000 2,625,000 668823CM 9.10% 12/1/15, (Pre-Refunded to 12/1/95 @ 102)(d) - 9,285,000 10,155,469 668823CL Oakland Ctfs. of Prtn. Rfdg. (Oakland Museum) Series A, 0%, 4/1/07, (AMBAC Insured) Aaa 2,750,000 1,344,063 671900AR Oakland Redev. Agcy. Rfdg. Central Dist. Redev. (Sr. Tax Allocation) 5.50% 2/1/14, (AMBAC Insured) Aaa 2,400,000 2,376,000 672321ET Ontario Redev. Fing. Auth. Rev. (Cap. Appreciation Proj. #1) (Ctr. City) 0% 8/1/10, (MBIA Insured) Aaa 3,255,000 1,293,863 68304EAW Orange County Ctfs. of Prtn. Rfdg. (Civic Ctr. Facs.), (AMBAC Insured): 0% 12/1/07 Aaa 1,400,000 659,750 684228FE 0% 12/1/09 Aaa 1,000,000 408,750 684228FG Orange County Dev. Agcy. Tax Allocation (Santa Ana Heights Proj.) 6.125% 9/1/23 Baa1 2,500,000 2,471,875 684246CB Orange County Local Trans. Sales Tax Rev. Ltd. Tax 6% 2/15/08 Aa 1,250,000 1,320,313 684273BP Palm Desert Fing. Auth. Tax Allocation RIB 9.83% 4/1/22, (MBIA Insured)(c) Aaa 3,000,000 3,416,250 696617BG Palm Springs Ctfs. of Prtn. (Muni. Golf Course Expansion Proj.) 7.40% 11/1/18 BBB+ 1,750,000 1,935,938 696656FK Palomar Pomerado Health System Rev. 4.75%, 11/1/23 (MBIA Insured) Aaa 4,100,000 3,541,375 69753EAS Pasadena Ctfs. of Prtn. Rfdg. (Old Pasadena Pkg. Facs. Proj.) 6.25% 1/1/18 A1 3,600,000 3,739,500 702204HA Placer County Wtr. Agcy. Middle Fork Proj. Rev. Series A, 3.75% 7/1/12 A 8,830,000 7,384,088 726022DV Pleasanton County Ctfs. of Prtn. (Pleasanton Pub. Facs. Corp. Cap Proj. I & II) 8.75% 10/1/08 Baa1 1,000,000 1,112,500 728809AN Pleasanton Jt. Pwrs. Fin. Auth. Reassessment, Series A: 6% 9/2/05 Baa 2,000,000 2,015,000 728816AU 6.15% 9/1/12 Baa 3,000,000 3,022,500 728816AW Port Oakland Port Rev. Series F, (MBIA Insured): Rfdg. 0% 11/1/06 Aaa 1,990,000 1,004,950 734897RQ Rfdg. (Cap. Appreciation) Series F, 0% 1/1/08, (MBIA Insured) Aaa 1,770,000 778,800 734897RS 0% 11/1/07 Aaa 4,250,000 2,002,813 734897RR MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Poway Redev. Agcy. (Paguay Proj.) Tax Allocation 7.93% 12/15/14, (FGIC Insured) (c) Aaa $ 7,400,000 $ 7,446,250 738800DV Rancho Cucamonga Redev. Agcy. Tax Allocation (Rancho Redev. Proj.) 7.125% 9/1/19, (MBIA Insured) Aaa 7,500,000 8,437,500 752123CQ Rancho Mirage Joint Pwrs. Fing. Auth. Ctfs. of Prtn. (Eisenhower Mem. Hosp.) 7% 3/1/22 Baa1 1,300,000 1,399,125 75212HAM Riverside County Asset Leasing Corp. Leasehold Rev. (Riverside County Hosp. Proj.) Series A: 6.50% 6/1/12 A 7,000,000 7,372,500 768903AR 6.25% 6/1/19 A 2,500,000 2,553,125 768903AG Riverside County Ctfs. of Prtn. (Airforce Village West, Inc.) Series A : Rfdg. 8.125% 6/15/20 A-1+ 5,850,000 6,171,750 768901FQ 8.125% 6/15/12 A-1+ 2,600,000 2,743,000 768901FT Riverside Unified School Dist. Ctfs. of Prtn. (Cap. Appreciation Land Acquisition Proj.) Series B, 0% 9/1/26, (FSA Insured) (g) Aaa 2,275,000 1,711,938 769062AD Rosemead Redev. Agcy. Sub. Lien Tax Allocation Proj. (Area 1) 0% 10/1/02 A- 1,450,000 951,563 777520BM Sacramento Fing. Auth. (Cap. Appreciation Tax Allocation Proj.) Series B, (MBIA Insured): 0% 11/1/13 Aaa 500,000 160,625 785849BP 0% 11/1/15 Aaa 5,695,000 1,608,838 785849BR Sacramento Fing. Auth. Lease Rev. Rfdg. Series A, 5.375% 11/1/14, (AMBAC Insured) Aaa 2,225,000 2,172,155 785846BL Sacramento Muni. Util. Dev. Index Inflows 0% 11/15/08, (FGIC Insured)(c) Aaa 7,000,000 6,938,750 7860042C Sacramento Muni. Util. Dist. Elec. Rev.: Rfdg. Series G, 6.5%, 9/1/13 Aaa 2,100,000 2,312,625 7860044K 9.78% 8/15/18, (FGIC Insured) (c) Aaa 1,750,000 2,021,250 786004U5 Sacramento Redev. Agcy. Tax Allocation (Downtown Redev. Proj.) Series A, 6.75% 11/1/05, (MBIA Insured) Aaa 2,130,000 2,380,275 786059JZ Salinas Facs. Rev. (Villa Sierra Proj.) Series A, 7.95% 4/20/31, (GNMA Coll.) AAA 2,445,000 2,573,363 794904AD Salinas Redev. Agcy. Tax Allocation 0% 11/1/22, (Cap. Guaranty Insured) Aaa 19,895,000 3,804,919 794891DN San Bernadino County Ctfs. of Prtn.: (Cap. Facs. Proj.) Series B: 6.75% 8/1/10 Baa1 2,500,000 2,862,500 796815KM 6.875% 8/1/24 Baa1 2,500,000 2,959,375 796815KR (Equip. Fing.) (Cap. Facs. Proj.) Series B, 6.25% 8/1/19 Baa1 2,500,000 2,746,875 796815KN MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED San Bernadino County Ctfs. of Prtn.: - continued (Med Ctr. Fing. Proj.): 5.50% 8/1/17(e) Baa1 $ 6,500,000 $ 5,988,125 796815NL 5.50% 8/1/22(e) Baa1 4,500,000 4,095,000 796815NN San Diego County Wtr. Auth. Wtr. Rev. Ctfs. of Prtn. (Reg. Rites) 8.50724%, (FGIC Insured) (c) Aaa 1,250,000 1,337,500 797415CS San Diego Multi-Family Hsg. Rev. (Island Gardens Apts. Proj.) Series B, (GNMA Coll.) 9.50% 10/20/20, LOC Swiss Bank AAA 1,585,000 1,656,325 79729HBU San Francisco Bay Area Rapid Trans. Dist. Sales Tax Rev. Rfdg. 6.75% 7/1/10, (AMBAC Insured) Aaa 1,500,000 1,704,375 797669DX San Francisco City & County Redev. Agcy. 7.75% 9/1/06 - 9,000,000 9,528,750 797712AE San Francisco City & County Redev. Fing. Auth. Tax Allocation Rev. (FGIC Insured): Series A: 0% 8/1/06 Aaa 1,035,000 534,319 79771PCN 0% 8/1/07 Aaa 1,085,000 523,513 79771PCP 0% 8/1/08 Aaa 1,085,000 489,606 79771PCQ 0% 8/1/09 Aaa 1,085,000 459,769 79771PCR 0% 8/1/10 Aaa 1,085,000 431,288 79771PCS San Francisco Port Commerce Rev. Series C, 9.50% 7/1/09, LOC Bankers Trust A1 1,000,000 1,047,500 797707CE San Joaquin Hills Trans. Corridor Agcy. Toll Road Rev. (Sr. Lien): 0% 1/1/05 - 2,500,000 1,528,125 798111AF 0% 1/1/07 - 3,000,000 1,890,000 798111AJ 5% 1/1/33 - 8,975,000 7,168,781 798111BJ San Jose Redev. Agcy. Tax Allocation (Merged Area Redev. Proj.) 4.75% 8/1/22, (MBIA Insured) A 5,000,000 4,225,000 798147KX Santa Ana Commty. Redev. Agcy. Tax Allocation Rev. Series B, 7.375% 9/1/09 A 5,000,000 5,537,500 801095FP Santa Barbara Ctfs. of Prtn. (Harbor Rfdg. Proj.) 6.75% 10/1/27 A 1,500,000 1,605,000 801242EX Santa Clara Ctfs. of Prtn. Ref. Series A, 4.75% 2/1/14, (MBIA Insured) Aaa 1,250,000 1,131,250 801400BG Santa Clara Elec. Rev. Series B, 0% 7/1/06, (MBIA Insured) Aaa 2,080,000 1,079,000 801444DH Santa Monica Family Rev. (YMCA Proj.) 9.50% 12/1/05, LOC Bank of Tokyo(f) - 2,890,000 3,150,100 802450AA Sequoia Hosp. 5.375% 8/15/13 A 4,170,000 3,909,375 817393BZ Sequoia Hosp. Dist. Rev. 5.375% 8/15/23 A 8,250,000 7,517,812 817393CA MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Solano County Ctfs. of Prtn. Rfdg. (Justice Facs. & Pub. Bldg. Proj.), 5.875% 10/1/05 Baa1 $ 2,500,000 $ 2,521,874 834131BR Southern California Pub. Pwr. Auth. Pwr. Proj. Rev.: Rfdg. (Palo Verde Proj.) (AMBAC Insured): Series A, 0% 7/1/14 Aaa 5,030,000 1,534,150 842475JH Series C, 0% 7/1/16 Aaa 16,325,000 4,591,405 842475MJ (Multiple Proj.): 6.75% 7/1/10 A 1,400,000 1,552,250 842475KK 6.75% 7/1/11 A 4,000,000 4,455,000 842475KL 6.75% 7/1/13 A 1,000,000 1,121,250 842475KN Southern California Pub. Pwr. Auth. Southern Transmission (Cap. Appreciation) 0% 7/1/14 Aa 5,000,000 1,506,250 842477JF Sulphur Springs Unified School Dist. (MBIA Insured): Series A: 0%, 9/1/07 Aaa 4,445,000 2,105,818 865480EX 0%, 9/1/09 Aaa 2,485,000 1,037,487 865480EZ 0%, 9/1/11 Aaa 1,830,000 677,100 865480FB Unlimited Tax Series A, 0% 9/1/15 Aaa 2,280,000 664,049 865480FF Torrance Hosp. Rev. (Little Co. of Mary Hosp.) 6.875% 7/1/15 A 925,000 1,005,937 891368CK TriDam Pwr. Auth. California Hydro Elec. Rev. (Sand Bar Proj.) 11.375% 1/1/17, (FGIC Insured)(f) - 2,000,000 2,125,000 895566AA Upland Ctfs. Partn. (San Antonio Commty. Hosp.) 5.25% 1/1/08 A 1,850,000 1,764,437 915346DN Upland Hosp. Ctfs. of Prtn. (San Antonio Commtys. Hosp.) 5.25% 1/1/13 A 5,500,000 5,073,750 915346DP Vallejo Ctfs. of Prtn. (Marine World Foundation Proj.): 7.80% 2/1/98 - 1,455,000 1,536,843 919191BE 8.10% 2/1/21 - 3,040,000 3,169,200 919191BC West & Central Basin Fing. Auth. (West Basin Proj.) Series A, 5% 8/1/10, (AMBAC Insured) Aaa 3,000,000 2,850,000 95122ECE Western Placer Unified School Dist. Series A, (FGIC Insured): 0% 8/1/12 Aaa 1,720,000 595,549 959214BR 0% 8/1/13 Aaa 1,855,000 600,555 959214BS 0% 8/1/14 Aaa 2,005,000 614,030 959214BT 0%, 8/1/15 Aaa 2,165,000 625,143 959214BU 0% 8/1/18 Aaa 2,500,000 600,000 959214BP Unltd. Tax: 0% 8/1/16 Aaa 2,340,000 631,799 959214BV 0% 8/1/17 Aaa 2,525,000 650,187 959214BW Yolo County Flood Cont. & Wtr. Cont. Dist. Ctfs. of Prtn. (Tehama-Colusa Canal Wtr. Supply) 7% 7/15/05, (FGIC Insured) Aaa 2,500,000 2,871,874 986012AB 544,189,462 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) PUERTO RICO - 1.6% Puerto Rico Commonwealth Hwy. & Trns. Auth. Rev. Series W, 5.50% 7/1/13 Baa1 $ 4,875,000 $ 4,783,594 745181BZ Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Series O, 0% 7/1/17 Baa1 7,500,000 1,903,125 745268JW Puerto Rico Tel. Auth. Rev. 6.78% 1/1/04, (AMBAC Insured) (c) Aaa 2,250,000 2,188,125 745297HX 8,874,844 U.S. VIRGIN ISLANDS - 0.3% Virgin Islands Pub. Fin. Auth. Rev. Rfdg. Series A, 7.25% 10/1/18 (Escrowed to Maturity) - 1,500,000 1,650,000 927676CF GUAM - 0.3% Guam Arpt. Auth. Rev. 6.50% 10/1/23 BBB 1,700,000 1,776,500 400648BL TOTAL MUNICIPAL BONDS (Cost $520,132,086) 556,490,806 MUNICIPAL NOTES (A) - 1.7% CALIFORNIA - 1.7% Contra Costa TRAN, Series A, 3.25% 7/29/94 MIG 1 3,000,000 3,002,790 212219BV Los Angeles County Trans. Commission Sales Tax Rev. Rfdg. Series 1992 A, 2.25% (FGIC Insured) LOC Industrial Bank of Japan Ltd. VRDN VMIG 1 4,800,000 4,800,000 545170HL Santa Clara County TRAN, Series 1993-1994, 3.25% 7/29/94 MIG 1 2,000,000 2,002,680 801546LF TOTAL MUNICIPAL NOTES (Cost $9,809,087) 9,805,470 OTHER SECURITIES - 0.0% MOODY'S RATINGS VALUE (UNAUDITED) (B) RIGHTS (NOTE 1) CALIFORNIA - 0.0% Riverside County Asset Leasing Corp. Leasehold Rev. (Riverside County Hosp.) Series A (Call Rights) 6.50% 6/1/12 (Cost $59,590) - 1,100 $ 220,688 TOTAL INVESTMENTS - 100% (Cost $530,000,763) $ 566,516,964 FUTURES CONTRACTS AMOUNT IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT AT VALUE GAIN/(LOSS) SELL 65 U.S. Treasury Bond Futures March, 1994 $ 7,306,406 $ 4,721 THE VALUE OF FUTURES CONTRACTS SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 1.3% SECURITY TYPE ABBREVIATIONS TRAN - Tax & Revenue Anticipation Notes VRDN - Variable Rate Demand Notes LEGEND (a) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (b) Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (c) Inverse floating rate security is a security where the coupon is inversely indexed to a floating interest rate. The price will be more volatile than the price of a comparable fixed rate security. (d) Security collateralized by an amount sufficient to pay interest and principal. (e) Security purchased on a delayed delivery basis (see Note 2 of Notes to Financial Statements). (f) Security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $3,215,000. (g) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 59.2% AAA, AA, A 72.7% Baa 7.8% BBB 7.7% Ba 0.0% BB 0.0% B 0.0% B 0.0% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 11.0%. The distribution of municipal securities by revenue source, as a percentage of total value of investment in securities, is as follows: Lease Revenue 21.8% Health Care 20.5 Special Tax 20.0 Others (individually less than 10%) 37.7 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1994 the aggregate cost of investment securities for income tax purposes was $530,077,875. Net unrealized appreciation aggregated $36,439,089, of which $39,960,935 related to appreciated investment securities and $3,521,846 related to depreciated investment securities. The fund hereby designates $1,160,000 as a capital gain dividend for the purpose of the dividend paid deduction. At February 28, 1994 the fund was required to defer $6,602,000 of losses on futures contracts and options. FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994 1.ASSETS 2. 3. 4.Investment in securities, at value (cost $530,000,763) 5. $ 566,516,964 (Notes 1 and 2) - See accompanying schedule 6.Cash 7. 423,114 8.Receivable for investments sold 9. 12,281,033 10.Interest receivable 11. 7,571,140 12. 13.TOTAL ASSETS 14. 586,792,251 15.LIABILITIES 16. 17. 18.Payable for investments purchased $ 10,426,032 19. Delayed Delivery (Note 2) 20.Dividends payable 736,601 21. 22.Accrued management fee 200,912 23. 24.Payable for daily variation on futures contracts 50,781 25. 26.Other payables and accrued expenses 89,154 27. 28. 29.TOTAL LIABILITIES 30. 11,503,480 31.32.NET ASSETS 33. $ 575,288,771 34.Net Assets consist of (Note 1): 35. 36. 37.Paid in capital 38. $ 537,839,637 39.Accumulated undistributed net realized gain (loss) on 40. 928,212 investments 41.Net unrealized appreciation (depreciation) on: 42. 43. 44. Investment securities 45. 36,516,201 46. Futures contracts 47. 4,721 48.49.NET ASSETS, for 47,563,315 shares outstanding 50. $ 575,288,771 51.52.NET ASSET VALUE, offering price and redemption 53. $12.10 price per share ($575,288,771 (divided by) 47,563,315 shares)
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1994 54.55.INTEREST INCOME 56. $ 37,371,692 57.EXPENSES 58. 59. 60.Management fee (Note 4) $ 2,434,987 61. 62.Transfer agent, accounting and custodian fees and 817,364 63. expenses (Note 4) 64.Non-interested trustees' compensation 661 65. 66.Registration fees 757 67. 68.Audit 35,938 69. 70.Legal 46,575 71.Reports to shareholders 21,349 72.Miscellaneous 4,787 73. 74. 75.TOTAL EXPENSES 76. 3,362,418 77.78.NET INTEREST INCOME 79. 34,009,274 80.REALIZED AND UNREALIZED GAIN (LOSS) ON 82. 83. INVESTMENTS (NOTES 1 AND 3) 81.Net realized gain (loss) on: 84. Investment securities 23,219,374 85. 86. Futures contracts 1,695,300 24,914,674 87.Change in net unrealized appreciation (depreciation) 88. 89. on: 90. Investment securities (27,257,141) 91. 92. Futures contracts (549,697) (27,806,838) 93.94.NET GAIN (LOSS) 95. (2,892,164) 96.97.NET INCREASE (DECREASE) IN NET ASSETS 98. $ 31,117,110 RESULTING FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
YEAR TEN MONTHS ENDED ENDED FEBRUARY 28, FEBRUARY 28, 1993 1994 (NOTE 1) 99.INCREASE (DECREASE) IN NET ASSETS 100.Operations $ 34,009,274 $ 27,948,890 Net interest income 101. Net realized gain (loss) on investments 24,914,674 8,864,729 102. Change in net unrealized appreciation (27,806,838) 32,015,891 (depreciation) on investments 103. 31,117,110 68,829,510 104.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 105.Distributions to shareholders (34,009,274) (27,948,890) From net interest income 106. From net realized gain (12,686,288) - 107. 108.TOTAL DISTRIBUTIONS (46,695,562) (27,948,890) 109.Share transactions 155,444,832 135,478,517 Net proceeds from sales of shares 110. Reinvestment of distributions from: 24,320,885 20,206,099 Net interest income 111. 9,675,447 - Net realized gain 112. Cost of shares redeemed (185,364,588) (139,220,074) 113. 4,076,576 16,464,542 Net increase (decrease) in net assets resulting from share transactions 114. (11,501,876) 57,345,162 115.TOTAL INCREASE (DECREASE) IN NET ASSETS 116.NET ASSETS 117. 118. 119. Beginning of period 586,790,647 529,445,485 120. End of period $ 575,288,771 $ 586,790,647 121.OTHER INFORMATION 123. 124. 122.Shares 125. Sold 12,515,698 11,455,837 126. Issued in reinvestment of distributions from: 1,958,696 1,705,997 Net interest income 127. 790,478 - Net realized gain 128. Redeemed (14,926,974) (11,797,097) 129. Net increase (decrease) 337,898 1,364,737
FINANCIAL HIGHLIGHTS
130. YEAR TEN MONTHS YEARS ENDED APRIL 30, ENDED ENDED FEBRUARY 28, FEBRUARY 28, 1993 131. 1994 (NOTE 1) 1992 1991 1990 132.SELECTED PER-SHARE DATA 133.Net asset value, $ 12.430 $ 11.540 $ 11.300 $ 10.940 $ 11.080 beginning of period 134.Income from .719 .611 .744 .752 .756 Investment Operations Net interest income 135. Net realized and (.060) .890 .240 .360 (.140) unrealized gain (loss) on investments 136. Total from .659 1.501 .984 1.112 .616 investment operations 137.Less Distributions (.719) (.611) (.744) (.752) (.756) From net interest income 138. From net realized (.270) - - - - gain on investments 139. Total distributions (.989) (.611) (.744) (.752) (.756) 140.Net asset value, $ 12.100 $ 12.430 $ 11.540 $ 11.300 $ 10.940 end of period 141.TOTAL RETURN (DAGGER) 5.41% 13.40% 8.94% 10.44% 5.61% 142.RATIOS AND SUPPLEMENTAL DATA 143.Net assets, end of $ 575,289 $ 586,791 $ 529,445 $ 523,590 $ 513,682 period (000 omitted) 144.Ratio of expenses .57% .60%* .59% .58% .60% to average net assets 145.Ratio of net interest 5.78% 6.17%* 6.52% 6.71% 6.73% income to average net assets 146.Portfolio turnover 44% 32%* 23% 15% 34% rate
* ANNUALIZED (DAGGER) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each figure includes changes in a fund's share price, reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value). You can also look at the fund's income. If Fidelity had not reimbursed certain fund expenses during the periods shown, the total returns, dividends and yields would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND California Tax-Free Insured 4.59% 56.12% 72.51% Lehman Brothers Municipal Bond Index 5.54% 59.02% n/a Average California Insured Tax-Exempt Municipal Bond Fund 4.99% 57.31% n/a Consumer Price Index 2.52% 20.64% 33.12% CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in this case, one year, five years, or since the fund started on September 18, 1986. For example, if you invested $1,000 in a fund that had a 5% return over the past year, you would end up with $1,050. You can compare these figures to the performance of the Lehman Brothers Municipal Bond Index - a broad gauge of the municipal bond market. To measure how the fund stacked up against its peers, you can look at the average California insured tax-exempt municipal bond fund, which reflects the performance of only 18 California insured tax-exempt municipal bond funds tracked by Lipper Analytical Services. Both benchmarks include reinvested dividends and capital gains, if any. Comparing the fund's performance to the consumer price index helps show how your fund did compared to inflation. (The periods covered by the CPI numbers are the closest available match to those covered by the fund.) AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND California Tax-Free Insured 4.59% 9.32% 7.59% Lehman Brothers Municipal Bond Index 5.54% 9.72% n/a Average California Insured Tax-Exempt Municipal Bond Fund 4.99% 9.48% n/a Consumer Price Index 2.52% 3.82% 3.93% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND 09/30/86 10000.00 10000.00 10/31/86 10123.71 10172.70 11/30/86 10256.03 10374.22 12/31/86 10317.83 10345.59 01/31/87 10603.31 10657.09 02/28/87 10604.78 10709.53 03/31/87 10513.45 10596.01 04/30/87 9640.19 10064.30 05/31/87 9517.05 10014.38 06/30/87 9640.71 10308.40 07/31/87 9744.96 10413.55 08/31/87 9799.01 10436.98 09/30/87 9216.28 10052.17 10/31/87 9475.91 10087.75 11/30/87 9702.92 10351.14 12/31/87 9855.54 10501.34 01/31/88 10443.19 10875.39 02/29/88 10585.54 10990.35 03/31/88 10158.73 10862.31 04/30/88 10215.69 10944.86 05/31/88 10227.01 10913.23 06/30/88 10391.86 11072.89 07/31/88 10423.97 11145.09 08/31/88 10491.94 11154.90 09/30/88 10696.80 11356.80 10/31/88 11006.00 11557.25 11/30/88 10859.52 11451.38 12/31/88 10999.82 11568.53 01/31/89 11198.36 11807.77 02/28/89 11060.27 11673.04 03/31/89 11063.14 11645.14 04/30/89 11360.28 11921.60 05/31/89 11588.22 12169.21 06/30/89 11709.08 12334.47 07/31/89 11830.69 12502.34 08/31/89 11663.09 12379.94 09/30/89 11677.91 12342.80 10/31/89 11761.12 12493.38 11/30/89 11946.84 12712.02 12/31/89 11963.78 12816.26 01/31/90 11852.69 12756.02 02/28/90 12041.01 12869.55 03/31/90 12032.82 12873.41 04/30/90 11831.86 12780.72 05/31/90 12136.60 13059.34 06/30/90 12251.80 13174.26 07/31/90 12443.18 13367.93 08/31/90 12238.67 13174.09 09/30/90 12279.77 13182.00 10/31/90 12475.39 13420.59 11/30/90 12762.40 13690.34 12/31/90 12803.27 13750.58 01/31/91 12895.57 13934.84 02/28/91 12920.79 14056.07 03/31/91 12921.08 14061.69 04/30/91 13094.04 14248.71 05/31/91 13228.26 14375.53 06/30/91 13201.36 14361.15 07/31/91 13390.41 14536.36 08/31/91 13525.25 14728.24 09/30/91 13718.24 14919.71 10/31/91 13911.62 15053.98 11/30/91 13925.98 15096.13 12/31/91 14206.61 15420.70 01/31/92 14265.69 15456.17 02/29/92 14263.38 15460.81 03/31/92 14280.07 15466.99 04/30/92 14421.86 15604.65 05/31/92 14609.32 15788.78 06/30/92 14865.11 16054.03 07/31/92 15355.50 16535.65 08/31/92 15067.00 16373.60 09/30/92 15167.22 16480.03 10/31/92 14817.19 16318.53 11/30/92 15241.60 16610.63 12/31/92 15507.07 16780.06 01/31/93 15684.79 16974.71 02/28/93 16510.39 17589.19 03/31/93 16288.64 17402.75 04/30/93 16454.83 17578.51 05/31/93 16533.51 17676.95 06/30/93 16851.43 17972.16 07/31/93 16807.86 17995.52 08/31/93 17235.80 18369.83 09/30/93 17447.89 18579.25 10/31/93 17462.71 18614.55 11/30/93 17209.68 18450.74 12/31/93 17650.01 18840.05 01/31/94 17870.43 19054.82 02/28/94 17267.64 18561.31 $27,312 $24,247 '94 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity California Tax-Free Insured Portfolio on September 30, 1986, shortly after the fund started. As the chart shows, by February 28, 1994, the value of your investment would have grown to $17,268 - a 72.68% increase on your initial investment. For comparison, look at how the Lehman Brothers Municipal Bond Index did over the same period. With dividends reinvested, the same $10,000 would have grown to $18,561 - a 85.61% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. Bond prices, for example, move in the opposite direction of interest rates. In turn, the share price, return, and yield of a fund that invests in bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) INCOME YEARS ENDED FEBRUARY 28, 1994 1993 1992 1991 1990 Income return 5.35% 6.43% 6.48% 6.58% 6.75% Capital gain return 1.87% 0.00% 0.00% 0.00% 0.00% Change in share price -2.63% 9.32% 3.91% 0.73% 2.12% Total return 4.59% 15.75% 10.39% 7.31% 8.87% INCOME returns, capital gain returns, and changes in share price are all part of a bond fund's total return. An income return reflects the dividends paid by the fund. A capital gain return reflects the amount paid by the fund to shareholders based on the profits it has from selling bonds that have grown in value. Both returns assume the dividends or gains are reinvested. Changes in the fund's share price include changes in the prices of the bonds owned by the fund. DIVIDENDS AND YIELD PERIODS ENDED FEBRUARY 28, 1994 PAST 30 PAST 6 PAST 1 DAYS MONTHS YEAR Dividends per share n/a 28.43(cents) 58.89(cents) Annualized dividend rate n/a 5.15% 5.33% Annualized yield 4.90% n/a n/a Tax-equivalent yield 8.60% n/a n/a DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $11.14 over the past six months and $11.05 over the past year, you can compare the fund's income over these two periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. The tax-equivalent yield shows what you would have to earn on a taxable investment to equal the fund's tax-free yield, if you're in the 43.04% combined effective 1994 federal and state tax bracket. FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Bond investments - including tax-free issues - provided solid returns for the 12 months ended February 28, 1994, despite a dramatic downturn in February. Falling interest rates pushed up bond prices steadily through mid-October, when the yield on the benchmark 30-year Treasury bond reached a historic low of 5.79%. By year-end, a strengthening economy had fueled mild inflation fears. That pushed up the yield on the 30-year bond to 6.35% on December 31, which forced investors to give back some of their earlier profits. Inflation jitters eased and bond yields dropped in January. However, when the Federal Reserve Bank raised short-term interest rates in an attempt to control inflation on February 4, investors reacted negatively. At the end of February, the yield on 30-year bonds was 6.66%, about 38 basis points higher than at the beginning of the month. Over the year, higher federal income taxes boosted demand for municipal bonds. But municipal bond prices were hurt by the Fed's action in February and by record new issuance, which kept supplies high and dampened prices. The return on the Lehman Brothers Municipal Bond Index, a broad measure of the tax-free market, rose 5.54%. By comparison, the Lehman Brothers Aggregate Bond Index, which tracks investment-grade taxable bonds, returned 5.40%. Globally, falling interest rates and low inflation drove good annual returns in Europe, Japan, and most emerging markets, although many of these markets fell in February along with the U.S. bond market. The Salomon Brothers World Government Bond Index - which includes U.S. issues - returned 9.34%, while the J.P. Morgan Emerging Markets Bond Index was up a dramatic 29.46%. An interview with John Haley, Portfolio Manager of Fidelity California Tax-Free Insured Portfolio Q. JOHN, HOW DID THE FUND PERFORM? A. The fund's performance slipped during the past year. The fund had a total return of 4.59% for the year ended February 28, 1994. The average California insured tax-free bond fund posted a total return of 4.99% during the period, according to Lipper Analytical Services. Q. WHY DID THE FUND LAG THE AVERAGE? A. Mainly because its duration was somewhat longer than that of the typical California insured tax-free bond fund. That meant its share price was more sensitive to interest rate changes. During the year I expected interest rates would continue to decline and drive bond prices higher, so I extended the fund's duration from about 7.5 years to 11.3 years. This helped the fund during most of the period. However, when interest rates rose in the fourth quarter of '94 and then again in February, the fund gave back some of its gains. Q. DID YOU RE-STRUCTURE THE FUND TO INCREASE ITS DURATION? A. Somewhat. I added to the fund's stake in non-callable coupon and zero-coupon bonds, neither of which can be redeemed early by their issuers. I invested heavily in bonds that are due to mature in 10 to 20 years; they recently accounted for 41% of the fund's investments. Q. WHY DID THE FUND HOLD SOME UNINSURED BONDS? A. Insured bonds still accounted for 70% of the fund's investments at the end of the period, while approximately 30% of the fund's investments were in uninsured bonds. As the economy in the state improves, those uninsured bonds should benefit and boost the total return of the fund. Some of the fund's uninsured bonds were pre-refunded during the period-that is, their issuers set aside a pool of Treasury securities to pay the remaining interest and principal due to bondholders. As a result, the bonds' credit ratings went from A to Aaa, causing investors to bid their prices higher. Q. YOU INCREASED THE PERCENTAGE OF THE FUND'S ASSETS IN HEALTH-CARE BONDS. WHY - WITH ALL THE CONTROVERSY ABOUT HEALTH-CARE REFORM? A. It's true that in the past six months the fund's stake in health-care has grown from 6% to 9%. That's not to say we aren't cautious on the sector because the Clinton plan could affect these issues. However, the bonds I choose are mainly strong hospitals that are expected to survive and possibly benefit from any shake-up likely to occur. In fact, most are insured. Q. WHAT EFFECT DID THE RECENT EARTHQUAKE HAVE ON THE FUND'S PERFORMANCE? A. The fund only held one or two bonds of issuers in the vicinity of the earthquake, and they were insured. Fortunately, during the past two or three years I have de-emphasized issuers in the Los Angeles area because the economy in southern California has been especially sluggish. I've also tried to spread the fund's investments across different regions of the state. That helps offer some protection against natural disasters, if and when they occur. Q. WHAT'S YOUR OUTLOOK FOR THE TAX-EXEMPT BOND MARKET? A. The economy will probably show modest growth and inflation seems likely to remain under control, so I don't expect interest rates to rise dramatically from here. But interest rates aren't likely to fall much more either, so gains in the bond market won't be driven by falling rates. The tax-exempt market will probably benefit from a lower supply of new issues, which will likely amount to around $175 to $200 billion versus $290 billion last year. Also, demand for tax-exempt bonds will likely increase as investors realize that the new, higher federal income tax rates increase the value of the tax exemption these issues offer. And about $35 billion in tax-exempt bonds will mature in 1994, creating still more demand for new bonds. The combination of lower supply and higher demand should help support prices in the tax-exempt market. Q. WHAT ABOUT THE CALIFORNIA INSURED TAX-EXEMPT MARKET? A. I still feel that California bonds are attractive because the state's economy is showing signs that it is set to begin a recovery. As that happens, state GOs and lease bonds, which are backed by leases held by the state, should be especially strong performers, because their credit quality is closely linked to the economy. Those issues may be volatile over the next several months as the state goes through its budget process. But I'll probably take advantage of any price declines to increase the fund's investment in them. FUND FACTS GOAL: to provide high current income exempt from California state and federal income taxes by investing primarily in long-term California municipal bonds covered by insurance START DATE: September 18, 1986 SIZE: as of February 28,1994, over $291 million MANAGER: John Haley, since September 1986; manager, Spartan California Municipal High Yield Portfolio, since December 1989; Fidelity California Tax-Free High Yield Portfolio, and Fidelity Advisor Tax-Exempt Portfolio, since September 1985 (checkmark) JOHN HALEY ON THE FUND'S STRATEGY: "During the past two to three years I expected a more severe economic downturn in the California economy than most observers. As a result, I stuck mainly with insured issues. Recently I have begun to identify factors that suggest the California economy is reaching a bottom. I expect a gradual rebound in the state's economy, and that should help lower-rated investment-grade bonds outperform higher-rated ones. Thus, I'm using Fidelity's fixed-income research analysts to identify stable and improving investment-grade securities that could enhance the yield and total return of the portfolio." (bullet) As of February 28, 1994, 41% of the fund's investments were in bonds with maturities of 10 to 20 years, and 48% were in bonds with maturities of greater than 20 years. (bullet) The fund's investment in bonds rated Aaa accounted for 75.5% its total investments. (bullet) About 30% of the fund's investments were in uninsured bonds, all rated Baa or higher. (bullet) About one-third of the fund was in lease rental bonds, which could improve with a pickup in the California economy. FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO INVESTMENT CHANGES TOP FIVE SECTORS AS OF FEBRUARY 28, 1994 % OF FUND'S INVESTMENT % OF FUND'S INVESTMENT S S IN THESE SECTORS 6 MONTHS AGO Lease Revenue 33.1 33.9 Special Tax 20.1 18.6 Health Care 9.2 6.0 General Obligation 8.9 10.0 Electric Revenue 8.8 11.3 AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1994 6 MONTHS AGO Years 20.3 19.1 AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL OF THE BONDS IN THE FUND IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT. DURATION AS OF FEBRUARY 28, 1994 6 MONTHS AGO Years 11.3 10.1 DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, THE SHARE PRICE OF A FUND WITH A FIVE-YEAR DURATION WILL FALL 5%. QUALITY DIVERSIFICATION AS OF FEBRUARY 28, 1994 (MOODY'S RATINGS) Row: 1, Col: 1, Value: 75.5 Row: 1, Col: 2, Value: 15.4 Row: 1, Col: 3, Value: 8.699999999999999 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 5, Value: 1.5 Aaa 75.5% Aa, A 15.4% Baa 8.7% Ba, B 0% Non-rated 0.4% THIS CHART EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO INVESTMENTS/FEBRUARY 28, 1994 (Showing Percentage of Total Value of Investments) MUNICIPAL BONDS - 97.7% MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - 96.3% Alameda County Ctfs. of Prtn. Rfdg. (Santa Rita Jail Proj.) 5.375% 6/1/09, (MBIA Insured) Aaa $ 2,500,000 $ 2,456,250 010891KG Alameda Ctfs. of Prtn. Rfdg. (Santa Rita Jail Proj.), 5% 12/1/15 (MBIA Insured) Aaa 1,000,000 921,250 010891KK Anaheim Pub. Fing. Auth. Tax Allocation Rev. (Reg. Rites) 10.27% 12/1/18, (MBIA Insured) (c) Aaa 1,000,000 1,192,500 032559AV Antioch Area Pub. Facs. Fing. Agcy. Special Tax Commty. Facs. Dist. 5% 8/1/18, (FGIC Insured) Aaa 8,795,000 7,981,462 037060CM Bay Area Gov't. Assoc. Rev. (Muni. Fing. Pool) Series A, 8.05% 9/1/10 A 1,515,000 1,658,925 07201TAB Bonita Unified School Dist. Ctfs. of Prtn. (Cap. Appreciation Rfdg. Proj.) 0% 5/1/20, (MBIA Insured) Aaa 6,000,000 1,297,500 098204AX Burbank Redev. Agcy. Tax Allocation (City Ctr. Redev. Proj.) Series A, 5% 12/1/15, (Cap. Guaranty Insured) Aaa 4,000,000 3,705,000 120823EQ California Edl. Facs. Auth. Rev. (Pooled Facs. Prog.) Series 1987, 7.625% 11/1/12, (MBIA Insured) Aaa 1,000,000 1,121,250 130173R5 California Health Facs. Fing. Auth. Rev. (MBIA Insured): Rfdg. (Catholic Healthcare West) 4.75% 7/1/19 Aaa 1,500,000 1,318,125 13033AAU (Children's Hosp.) Series A, 7.50% 10/1/20 Aaa 1,650,000 1,899,562 13033JAJ (Pomona Valley Hosp. Med. Ctr.) Series A, 6.75% 1/1/07 Aaa 1,500,000 1,638,750 13033H3W (Scripps Health) Series A, 4.625% 10/1/13 Aaa 1,345,000 1,188,644 13033J5V (Sharp Temecula Valley) Series A, 7.05% 8/1/21 Aaa 1,000,000 1,118,750 13033JPT California Hsg. Fin. Agcy. Rev.: (Home Mtg.): Series 1983 A, 0% 2/1/15 Aa 13,699,000 1,780,870 130329QE Series 1983 B, 0% 8/1/15 Aa 290,000 35,163 130329RG Series B, 5.1% 2/1/04 (MBIA Insured)(e) Aaa 2,295,000 2,243,362 13033C2R California Poll. Cont. Fing. Auth. Solid Waste Disp. Rev. (North County Recycling Ctr.) 6.75% 7/1/17, LOC Union Bank of Switzerland Aaa 1,500,000 1,638,750 130536BR MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED California Pub. Cap. Impt. Fing. Auth. Rev. (Pooled Proj.) Series B, 8.10% 3/1/18 (MBIA Insured) Aaa $ 2,960,000 $ 3,241,200 130552AS California Pub. Works Board Lease Rev. (Dept. Correction State Prisons, Susanville) Series A, 5% 12/1/19 (AMBAC Insured) Aaa 3,000,000 2,737,500 13068GPA Series D, 5.25% 6/1/15 (CGIC Insured) Aaa 1,000,000 957,500 13068GUA California Statewide Commty. Dev. Auth. 8.83% 7/1/13, (MBIA Insured) (c) Aaa 1,000,000 982,500 130909JH California Statewide Commtys. Dev. Corp. Ctfs. of Prtn.: Rfdg. (Insured Health Facs.) (Eskaton, Inc.) 5.875% 5/1/20 A+ 1,000,000 980,000 130909GW (Childrens Hosp.) 6% 6/1/11, (MBIA Insured) Aaa 1,700,000 1,776,500 130909NJ (St. Joseph Health Sys.) 5.50% 7/1/23 Aa 1,000,000 945,000 130909GH California Univ. Rev. Rfdg. (Hsg. Sys. Group A) (MBIA Insured): Rfdg. Issue II, 7.80% 11/1/15 Aaa 1,000,000 1,102,500 914113CK Series A, 5% 11/1/14 Aaa 2,500,000 2,312,500 914113RP Campbell Ctfs. of Prtn. Rfdg. (Civic Center Proj.) 6% 10/1/18 A 2,000,000 1,980,000 134111BK Carson Redev. Agcy. Redev. Proj. Area #1 Tax Allocation 6.375% 10/1/12 Baa1 1,000,000 991,250 145750CZ Castaic Lake Wtr. Agcy. Ctfs. of Prtn. (Wtr. Sys. Impt. Proj.) 7.125% 8/1/16, (MBIA Insured) Aaa 1,000,000 1,123,750 148370AM Central California Jt. Pwrs. Health Fing. Auth. Ctfs. of Prtn. (Commty. Hosp. of Central California Proj.) 5.25% 2/1/13 A 2,000,000 1,837,500 152757AQ Concord Redev. Agcy. Tax Allocation (Central Concord Redev. Proj.) Series 2, 8% 7/1/18, (MBIA Insured) (Pre-Refunded to 7/1/98 @ 102) (d) Aaa 1,000,000 1,162,500 206141FF Contra Costa Home Mtg. Fin. Auth. Home Mtg. Rev. 0% 9/1/17, (MBIA Insured) Aaa 7,490,000 1,891,225 212216CA Culver City Redev. Fing. Auth. Rev. Rfdg. Tax Allocation (AMBAC Insured): 5.50%, 11/1/14 Aaa 4,000,000 3,990,000 230341BL 4.60%, 11/1/20 Aaa 5,000,000 4,275,000 230341BM Del Norte County Pub. Wks. Rev. Rfdg. (Dept. of Corrections) 5.125%, 12/1/08 A1 2,000,000 1,917,500 13068GSY MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Desert Hosp. Dist. Hosp. Rev. Ctfs. of Prtn. (Desert Hosp. Corp.) 6.35% 7/1/04, (Cap. Guaranty Insured) AAA $ 2,140,000 $ 2,378,075 25041MBD Desert Hosp. Rev. Ctfs. of Prtn. (Desert Hosp. Corp.) Series 1992, 10.029% 7/28/20, (Cap. Guaranty Insured) (c) Aaa 2,000,000 2,322,500 25041MAZ Empire Union School Dist. Spl. Tax (Commty. Facs. Dist. #87-1) Series A, 7.90% 10/1/14, (FGIC Insured) (Pre-Refunded to 10/1/96 @ 103) (d) Aaa 1,000,000 1,125,000 292109AN Eureka Unified School Dist. Ctfs. of Prtn. (Cap. Appreciation) (FSA Insured): Series A, 0% 9/1/27 Aaa 4,085,000 3,727,562 298522AD Series B, 0% 9/1/27 Aaa 1,555,000 1,387,837 298522AE Fontana Redev. Agcy. Tax Allocation Rfdg. (Yurupa Hills) Series 1992 A, 7.10% 10/1/23 BBB 1,000,000 1,087,500 344619CL Fontana Unified School Dist. Rfdg. (AMBAC Insured): 0% 7/1/12 Aaa 1,655,000 581,319 344640HC 0% 7/1/13 Aaa 1,880,000 618,050 344640HD Foothill De Anza Commty. College Ctfs. of Prtn. (Connie Lee Rfdg. Proj.) 5.25% 9/1/21 AAA 1,175,000 1,086,875 345104CX Grossmont Hosp. Dist. Rev. Series A, 8% 11/15/17, (MBIA Insured), (Pre-Refunded to 11/15/97 @ 102) (d) Aaa 1,500,000 1,725,000 399226BH Irvine Ranch Wtr. Dist. Joint Pwr. Agcy. Local Pool Rev.: 7.875% 2/15/23 A 3,100,000 3,351,875 463656AR 8.25% 8/15/23 BBB 3,000,000 3,300,000 463656BE La Habra Ctfs. of Prtn. (La Habra and View Park) (Acquisition Proj.) 6.625% 11/1/22, (FSA Insured) Aaa 1,000,000 1,102,500 503423BA Lemon Grove Commty. Dev. Agcy. Tax Allocation Rev. (Lemon Grove Redev. Proj.) 6.90% 8/1/20 Baa 1,000,000 1,058,750 525638AG Local Gov't. Fin. Auth. Rev. (Oakland Cent. Dist.) 0% 9/1/09, (MBIA Insured) Aaa 3,565,000 1,492,844 539558FG Los Angeles Convention Ctr. Rfdg. Series A, 5.125% 8/15/13, (MBIA Insured) Aaa 3,000,000 2,820,000 544399AK MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Los Angeles County Cap. Asset Leasing Corp. Leasehold Rev. 4.05% 12/1/09, (AMBAC Insured) Aaa $ 2,250,000 $ 2,306,250 544900CE Los Angeles County Ctfs. of Prtn.: (Cap. Appreciation Correctional Facs.) (MBIA Insured) 0% 9/1/12 Aaa 2,700,000 941,625 544663G9 0% 9/1/13 (f) Aaa 3,380,000 1,106,950 544663H4 (Disney Parking Proj.) (Cap. Appreciation): 0% 3/1/10 A 3,000,000 1,143,750 5446634E 0% 3/1/15 A 1,000,000 273,750 5446634Q 0% 3/1/16 A 5,615,000 1,431,825 5446634S 0% 9/1/16 A 7,985,000 1,966,306 5446634T 0% 3/1/17 A 1,835,000 438,106 5446634U Los Angeles County Metropolitan Trans. Auth. Sales Tax Rev. Sr. Series B 4.75% 7/1/13, (AMBAC Insured) Aaa 5,000,000 4,512,500 544712BP Los Angeles County Pub. Wks. Fing. Auth. Lease Rev. (Mult. Cap. Facs. Proj. IV) 4.75% 12/1/13, (MBIA Insured) Aaa 10,000,000 8,950,000 54473EAR M-S-R Pub. Pwr. Agcy. San Juan Proj. Rev. (MBIA Insured): Series B, 6.75% 7/1/11 Aaa 1,000,000 1,105,000 553751EV Series D, 6.75% 7/1/20 Aaa 2,500,000 2,834,375 553751DN Mesa Consolidated Wtr. Dist. Ctfs. of Prtn. (Cap. Impt. Phase II) 7.625% 3/15/08, (AMBAC Insured) Aaa 1,000,000 1,123,750 590589AL Metropolitan Wtr. Dist. Southern Wtrwks. Rev. 8.172% 8/10/18(c) Aa 2,000,000 2,110,000 592663MN Modesto Ctfs. of Prtn. (Commty. Ctr. Refing. Proj.) Series A, 5% 11/1/23, (AMBAC Insured) Aaa 2,500,000 2,271,875 607715FE Modesto Irrigation Dist. Ctfs. of Prtn. Rfdg. & Cap. Impts. Series A, 0% 10/1/09, (MBIA Insured) Aaa 2,270,000 944,887 607762DG Moreno Valley Unified School Dist. Ctfs. of Prtn.: (Land Acquisition) 0% 9/1/11, (FSA Insured) Aaa 4,305,000 3,293,325 616872CT 7.375% 9/1/11 Baa 160,000 162,200 616872BS MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Northern California Pwr. Agcy. Pub. Pwr. Rev.: Rfdg. (Geothermal Proj. #3) Series A, 5.85% 7/1/10 A $ 2,500,000 $ 2,556,250 664843SB 7.50% 7/1/23 (AMBAC Insured) (Pre-Refunded to 7/1/21 @ 100) (d) Aaa 1,300,000 1,652,625 664843NV Norwalk Redev. Agcy. Tax Allocation (Norwalk Redev. Proj. #1) 7.15% 12/1/15 - 1,000,000 1,050,000 668823CM Oakland Redev. Agcy. Central Dist. Redev. (Sub. Tax Allocation): Rfdg. 5.50% 2/1/14, (AMBAC Insured) Aaa 3,000,000 2,970,000 672321ET 5% 9/1/21, (MBIA Insured) Aaa 2,025,000 1,850,344 672321FF Orange County Ctfs. of Prtn. (Civic Ctr. Facs.): 0% 12/1/13, (AMBAC Insured) Aaa 2,500,000 790,625 684228FL 0% 12/1/18, (AMBAC & MBIA Insured) Aaa 7,500,000 1,753,125 684228FR Orange County Dev. Agcy. Tax Allocation (Santa Ana Heights Proj.) 6.125% 9/1/23 Baa1 1,500,000 1,483,125 684246CB Palm Desert Fing. Auth. Tax Allocation RIB 9.83% 4/1/22, (MBIA Insured) (c) Aaa 1,750,000 1,992,812 696617BG Palomar Pomerado Health Sys. Rev. (MBIA Insured): 0% 11/1/00 Aaa 3,080,000 2,221,450 69753EAT 4.75%, 11/1/23 Aaa 1,500,000 1,295,625 69753EAS Placer County Wtr. Agcy. Wtr. Rev. Ctfs. of Prtn. (Phase 1 Cap. Impt. Proj.) 7.75% 7/1/18, (MBIA Insured) Aaa 1,000,000 1,138,750 726030AR Pleasanton Jt. Pwrs. Fin. Auth. Reassessment, Series A, 6% 9/2/05 Baa 2,000,000 2,015,000 728816AU Poway Ctfs. of Prtn. (Poway Royal Mobile Home Park) (Cap. Impt. Proj.) 7% 7/1/20, (FSA Insured) Aaa 1,250,000 1,354,687 738756BC Poway Redev. Agcy. (Paguay Proj.) Tax Allocation 7.93% 12/15/14, (FGIC Insured) (c) Aaa 4,200,000 4,226,250 738800DV Rancho Mirage Joint Pwrs. Fing. Auth. Ctfs. of Prtn. (Eisenhower Mem. Hosp.) 7% 3/1/22 Baa1 1,000,000 1,076,250 75212HAM Rancho Wtr. Dist. Fin. Auth. 4.75% 8/15/21, (AMBAC Insured) Aaa 2,000,000 1,737,500 752111DC MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Redding Elec. Sys. Rev. Ctfs. of Prtn.: (Cap. Appreciation) Series A, (FGIC Insured): 0% 6/1/05 Aaa $ 2,000,000 $ 1,110,000 75728MBZ 0% 6/1/06 Aaa 1,730,000 899,600 75728MCB 0% 6/1/07 Aaa 1,890,000 921,375 75728MCD 0% 6/1/08 Aaa 1,300,000 591,500 75728MCF Series A, 0% 7/1/19, (MBIA Insured) Aaa 2,000,000 387,500 75728MAX Redondo Beach Redev. Agcy. Tax Allocation (South Bay Ctr.) 8.625% 5/1/14, (FGIC Insured) Aaa 1,000,000 1,132,500 757705AB Richmond Redev. Agcy. Tax Allocation (Harbour Redev. Proj.) 7% 7/1/09 (Cap. Guaranty Insured) Aaa 1,750,000 1,986,250 764472BU Riverside County Asset Leasing Corp. Leasehold Rev. (Riverside County Hosp. Proj.) Series A: 6.375% 6/1/09 (Detachable Call Option) A 2,000,000 2,087,500 768903AW 6.50% 6/1/12 A 5,500,000 5,791,875 768903AR 6.25% 6/1/19 A 2,000,000 2,042,500 768903AG Riverside County Trans. Commission Sales Tax Rev. Series A, 5.75% 6/1/09, (AMBAC Insured) Aaa 2,000,000 2,052,500 769125BC Riverside Unified School Dist. Ctfs. of Prtn. (Cap. Appreciation Land Acquisition Proj.) Series B, 0% 9/1/26, (FSA Insured) (g) Aaa 2,000,000 1,505,000 769062AD Sacramento Ctfs. of Prtn. Rfdg. (Lt. Rail Tran. Proj.) 6% 7/1/12 A1 1,000,000 1,003,750 785845FB Sacramento Fing. Auth. (Cap. Appreciation Tax Allocation Proj.) Series A, 0% 11/1/14, (MBIA Insured) Aaa 5,700,000 1,710,000 785849BQ Sacramento Fing. Auth. Lease Rev. Rfdg. Series A, 5.375% 11/1/14, (AMBAC Insured) Aaa 6,500,000 6,345,625 785846BL Sacramento Muni. Util. Dist. Elec. Rev.: Rfdg. Series G, 6.5%, 9/1/13 Aaa 7,000,000 7,708,750 7860044K 9.78% 8/15/18, (FGIC Insured) (c) Aaa 1,000,000 1,155,000 786004U5 Sacramento Muni. Util. Dev. Index 0% 11/15/08, (FGIC Insured) (c) Aaa 3,700,000 3,667,625 7860042C San Bernadino County Ctfs. Prtn. (Med Ctr. Fing. Proj.): 5.50% 8/1/17 (e) Baa1 3,350,000 3,086,187 796815NL 5.50% 8/1/22 (e) Baa1 2,660,000 2,420,600 796815NN MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED San Bernadino County Trans. Auth. Sales Tax Rev. Series A, 6% 3/1/10, (FGIC Insured) Aaa $ 3,625,000 $ 3,765,469 796846AP San Bernadino Redev. Agcy. Tax Allocation Rfdg. (Southeast Ind. Park) 7.40% 3/1/14, (AMBAC Insured) Aaa 2,100,000 2,336,250 796779KY San Diego County Wtr. Auth. Wtr. Rev. Ctfs. of Prtn. (Reg. Rites) 8.55% 5/1/09, (FGIC Insured) (c) Aaa 2,500,000 2,665,625 797415DC San Francisco Bay Area Rapid Transit Dist. Sales Tax Series 1990, 6.75% 7/1/09, (AMBAC Insured) Aaa 3,200,000 3,524,000 797669DW San Francisco City & County Redev. Agcy. Mtg. Rev. Rfdg. (Section 8) Series A, 6.65% 7/1/24, (MBIA Insured) Aaa 1,750,000 1,758,750 797714FP San Jacinto Unified School Dist. Series B, 0% 9/1/26, (FSA Insured) step coupon Aaa 1,585,000 1,376,969 797852BM San Joaquin County Ctfs. of Prtn. Rfdg.: Rfdg. (Cap. Facs. Proj.) 5% 11/15/09, (MBIA Insured) Aaa 1,000,000 957,500 798085EQ (Cap. Facs. Proj.) 5% 11/15/10, (MBIA Insured) Aaa 1,110,000 1,055,888 798085ER (Gen. Hosp. Proj.) 6.625% 9/1/20 A 2,500,000 2,640,625 798085DX San Jose Redev. Agcy. Tax Allocation (Merged Area Redev. Proj.) (MBIA Insured): 6% 8/1/15 Aaa 3,000,000 3,150,000 798147LE 4.75% 8/1/24 Aaa 1,000,000 863,750 798147KV Santa Ana Commty. Redev. Agcy. Tax Allocation (South Main St. Redev.) 5.25% 9/1/13, (MBIA Insured) Aaa 3,000,000 2,868,750 801095GW Santa Barbara Ctfs. of Prtn. (Harbor Rfdg. Proj.) 6.75% 10/1/27 A 1,000,000 1,070,000 801242EX Santa Clara Redev. Agcy. Tax Allocation Rfdg. (Bayshore North Proj.) 5.75% 7/1/14, (AMBAC Insured) Aaa 1,000,000 1,011,250 801453DP Santa Rosa Wtr. Rev. Rfdg. Series B, 6.125% 9/1/17, (FGIC Insured) Aaa 1,000,000 1,041,250 802649GT Sequoia Hosp. 5.375% 8/15/13 A 1,000,000 937,500 817393BZ Solano County Ctfs. of Prtn. Rfdg. (Justice Facs. & Pub. Bldg. Proj.) 5.875% 10/1/05 Baa1 5,000,000 5,043,750 834131BR Southern California Pub. Pwr. Auth. Pwr. Proj. Rev. (Multiple Proj.) 7% 7/1/09 A 1,250,000 1,357,813 842475KE MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Southern California Pub. Pwr. Auth. Rev. Rfdg. (Palo Verde Proj.) Series A, 0% 7/1/12, (AMBAC Insured) Aaa $ 1,855,000 $ 635,338 842475JF Southern California Rapid Transit Dist. Ctfs. of Prtn. (Worker's Compensation Fund) 6% 7/1/10, (MBIA Insured) Aaa 1,500,000 1,573,125 842483AM Sulphur Springs Unified School Dist. Series A, (MBIA Insured): 0% 9/1/08 Aaa 2,000,000 890,000 865480EY 0% 9/1/16 Aaa 3,200,000 880,000 865480FG Tahoe-Truckee Joint Union School Dist. (Cap. Appreciation) Series A, 0% 9/1/10 Aaa 6,625,000 2,583,750 873873EZ Torrance Hosp. Rev. (Little Co. of Mary Hosp.) 6.875% 7/1/15 A 1,475,000 1,604,063 891368CK Valley Ctr. Union School Dist. Series A, 0% 9/1/17, (MBIA Insured) Aaa 8,835,000 2,263,969 919439BT Vista Unified School Dist. Ctfs. of Prtn. Rfdg. (Cap Appreciation) Series A, 0% 11/1/13, (FSA Insured) Aaa 6,145,000 1,951,038 92834MAY Walnut Creek Ctfs. of Prtn. Rfdg. (John Muit Med. Ctr.) 5%, 2/15/16, (MBIA Insured) Aaa 3,250,000 2,969,688 932702CH West & Central Basin Fing. Auth. (West Basin Proj.) Series A, 5% 8/1/10, (AMBAC Insured) Aaa 2,000,000 1,900,000 95122ECE Yolo County Flood Cont. & Wtr. Cont. Dist. Ctfs. of Prtn. (FGIC Insured): (Tehama-Colusa Canal Wtr. Supply) 7% 7/15/05 Aaa 1,000,000 1,148,750 986012AB 7.125% 7/15/15 Aaa 5,500,000 6,153,125 986012AA 274,230,239 PUERTO RICO - 1.4% Puerto Rico Commonwealth Hwy. & Trns. Auth. Rev. Series W, 5.50% 7/1/13 Baa1 2,500,000 2,453,125 745181BZ Puerto Rico Tel. Auth. Rev. 6.78% 1/1/04, (AMBAC Insured) (c) Aaa 1,500,000 1,458,750 745297HX 3,911,875 TOTAL MUNICIPAL BONDS (Cost $267,287,883) 278,142,114 MUNICIPAL NOTES - (A) 2.3% MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - 2.3% Los Angeles County Trans. Commission Sales Tax Rev. Rfdg. Series 1992 A, 2.25% (FGIC Insured) LOC Industrial Bank of Japan Ltd. VRDN VMIG 1 $ 1,340,000 $ 1,340,000 545170HL Orange County Various Sanitation Dist. Ctfs. of Prtn. (Cap. Impt. Prog.) (Dist. 1-7 & 11) 2.20%, (FGIC Insured), VRDN VMIG 1 2,200,000 2,200,000 684285BK Southern California Pub. Pwr. Auth. Rev. (Transmission Proj.) Series 1991, 2.25%, (AMBAC Insured) LOC Swiss Bank, VRDN VMIG 1 3,000,000 3,000,000 842477HH TOTAL MUNICIPAL NOTES (Cost $6,540,000) 6,540,000 OTHER SECURITIES - 0.0% RIGHTS CALIFORNIA - 0.0% Riverside County Asset Leasing Corp. Leasehold Rev. (Riverside County Hosp.) Series A (Call Rights) 6.50% 6/1/12 (Cost $43,600) - 800 160,500 TOTAL INVESTMENTS (Cost $273,871,483) $ 284,842,614 FUTURES CONTRACTS AMOUNT IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT AT VALUE GAIN/(LOSS) SELL 30 U.S. Treasury Bond Futures June, 1994 $ 3,340,313 $ 21,290 THE VALUE OF FUTURES CONTRACTS SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 1.1% SECURITY TYPE ABBREVIATIONS VRDN - Variable Rate Demand Notes LEGEND (a) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (b) Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (c) Inverse floating rate security is a security where the coupon is inversely indexed to a floating interest rate. The price will be more volatile than the price of a comparable fixed rate security. (d) Security collateralized by an amount sufficient to pay interest and principal. (e) Security purchased on a delayed delivery basis (see Note 2 of Notes to Financial Statements). (f) Security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $1,106,950. (g) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 85.5% AAA, AA, A 90.0% Baa 7.0% BBB 2.4% Ba 0.0% BB 0.0% B 0.0% B 0.0% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 0.4%. The distribution of municipal securities by revenue source, as a percentage of total value of investment in securities, is as follows: Lease Revenue 33.1% Special Tax 20.1 Others (individually less than 10%) 46.8 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1994, the aggregate cost of investment securities for income tax purposes was $273,871,483. Net unrealized appreciation aggregated $10,971,131, of which $14,074,614 related to appreciated investment securities and $3,103,483 related to depreciated investment securities. The fund hereby designates $2,359,433 as a capital gain dividend for the purpose of the dividend paid deduction. FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994 147.ASSETS 148. 149. 150.Investment in securities, at value (cost 151. $ 284,842,614 $273,871,483) (Notes 1 and 2) - See accompanying schedule 152.Cash 153. 130,026 154.Receivable for investments sold 155. 11,757,804 156.Interest receivable 157. 3,405,147 158.Receivable for daily variation on futures contracts 159. 22,500 160. 161.TOTAL ASSETS 162. 300,158,091 163.LIABILITIES 164. 165. 166.Payable for investments purchased $ 7,989,434 167. Delayed delivery (Note 2) 168.Dividends payable 260,631 169. 170.Accrued management fee 104,568 171. 172.Other payables and accrued expenses 43,662 173. 174. 175.TOTAL LIABILITIES 176. 8,398,295 177.178.NET ASSETS 179. $ 291,759,796 180.Net Assets consist of (Note 1): 181. 182. 183.Paid in capital 184. $ 274,863,941 185.Accumulated undistributed net realized gain (loss) 186. 5,903,434 on investments 187.Net unrealized appreciation (depreciation) on: 188. 189. 190. Investment securities 191. 10,971,131 192. Futures contracts 193. 21,290 194.195.NET ASSETS, for 27,161,053 shares 196. $ 291,759,796 outstanding 197.198.NET ASSET VALUE, offering price and 199. $10.74 redemption price per share ($291,759,796 (divided by) 27,161,053 shares)
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1994 200.201.INTEREST INCOME 202. $ 17,357,295 203.EXPENSES 204. 205. 206.Management fee (Note 4) $ 1,240,128 207. 208.Transfer agent, accounting and custodian fees and 489,399 209. expenses (Note 4) 210.Non-interested trustees' compensation 1,868 211. 212.Registration fees 11,273 213. 214.Audit 34,682 215. 216.Legal 2,596 217. 218.Reports to shareholders 12,607 219. 220. Total expenses before reductions 1,792,553 221. 222. Expense reductions (Note 9) (352,015) 1,440,538 223.224.NET INTEREST INCOME 225. 15,916,757 226.REALIZED AND UNREALIZED GAIN (LOSS) ON 228. 229. INVESTMENTS (NOTES 1 AND 3) 227.Net realized gain (loss) on: 230. Investment securities 13,524,569 231. 232. Futures contracts 628,258 14,152,827 233.Change in net unrealized appreciation 234. 235. (depreciation) on: 236. Investment securities (16,401,673) 237. 238. Futures contracts (139,726) (16,541,399) 239.240.NET GAIN (LOSS) 241. (2,388,572) 242.243.NET INCREASE (DECREASE) IN NET ASSETS 244. $ 13,528,185 RESULTING FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
YEAR TEN MONTHS ENDED ENDED FEBRUARY 28, FEBRUARY 28, 1993 1994 (NOTE 1) 245.INCREASE (DECREASE) IN NET ASSETS 246.Operations $ 15,916,757 $ 10,158,424 Net interest income 247. Net realized gain (loss) on investments 14,152,827 1,333,021 248. Change in net unrealized appreciation (16,541,399) 19,225,483 (depreciation) on investments 249. 13,528,185 30,716,928 250.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 251.Distributions to shareholders (15,916,757) (10,158,424) From net interest income 252. From net realized gain (5,560,443) - 253. 254.TOTAL DISTRIBUTIONS (21,477,200) (10,158,424) 255.Share transactions 191,511,206 161,300,515 Net proceeds from sales of shares 256. Reinvestment of distributions from: 12,290,624 7,750,883 Net interest income 257. 4,540,746 - Net realized gain 258. Cost of shares redeemed (183,505,791) (92,500,449) 259. 24,836,785 76,550,949 Net increase (decrease) in net assets resulting from share transactions 260. 16,887,770 97,109,453 261.TOTAL INCREASE (DECREASE) IN NET ASSETS 262.NET ASSETS 263. 264. 265. Beginning of period 274,872,026 177,762,573 266. End of period $ 291,759,796 $ 274,872,026 267.OTHER INFORMATION 269. 270. 268.Shares 271. Sold 17,343,548 15,478,983 272. Issued in reinvestment of distributions from: 1,113,708 743,732 Net interest income 273. 417,348 - Net realized gain 274. Redeemed (16,625,614) (8,911,574) 275. Net increase (decrease) 2,248,990 7,311,141
FINANCIAL HIGHLIGHTS
276. YEAR TEN MONTHS YEARS ENDED APRIL 30, ENDED ENDED FEBRUARY 28, FEBRUARY 28, 1993 277. 1994 (NOTE 1) 1992 1991 1990 278.SELECTED PER-SHARE DATA 279.Net asset value, $ 11.030 $ 10.100 $ 9.740 $ 9.370 $ 9.590 beginning of period 280.Income from .589 .492 .603 .605 .618 Investment Operations Net interest income 281. Net realized and (.090) .930 .360 .370 (.220) unrealized gain (loss) on investments 282. Total from .499 1.422 .963 .975 .398 investment operations 283.Less Distributions (.589) (.492) (.603) (.605) (.618) From net interest income 284. From net realized (.200) - - - - gain on investments 285. Total distributions (.789) (.492) (.603) (.605) (.618) 286.Net asset value, $ 10.740 $ 11.030 $ 10.100 $ 9.740 $ 9.370 end of period 287.TOTAL RETURN (DAGGER) 14.48% 10.14% 10.67% 4.15% 4.59% 288.RATIOS AND SUPPLEMENTAL DATA 289.Net assets, end of $ 291,760 $ 274,872 $ 177,763 $ 113,711 $ 87,438 period (000 omitted) 290.Ratio of expenses .48% .63%* .66% .72% .75% to average net assets (DAGGER)(DAGGER) 291.Ratio of expenses .60% .63%* .66% .72% .75% to average net assets before expense reductions (DAGGER)(DAGGER) 292.Ratio of net 5.31% 5.72%* 6.06% 6.30% 6.38% interest income to average net assets 293.Portfolio turnover 60% 27%* 19% 14% 10% rate
* ANNUALIZED (DAGGER) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. (DAGGER)(DAGGER) SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS. FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO PERFORMANCE: THE BOTTOM LINE To measure a money market fund's performance, you can look at either total return or yield. Total return reflects the change in a fund's share price over a given period and reinvestment of its dividends (or income). Yield measures the income paid by a fund. Since a money market fund tries to maintain a $1 share price, yield is an important measure of performance. If Fidelity had not reimbursed certain fund expenses during the periods shown, the total returns, dividends and yields would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND California Tax-Free Money Market 1.97% 20.38% 49.06% Consumer Price Index 2.52% 20.64% 41.47% Average California Tax-Free Money Market Fund 1.96% 20.22% n/a CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in this case, one year, five years or since the fund started on July 7, 1984. For example, if you invested $1,000 in a fund that had a 5% return over the past year, you would end up with $1,050. Comparing the fund's performance to the consumer price index (CPI) helps show how your investment did compared to inflation. To measure how the fund stacked up against its peers, you can compare its return to the average California tax-free money market fund's total return. This average currently reflects the performance of 42 California tax-free money market funds tracked by IBC/Donoghue. (The periods covered by the CPI and IBC/Donoghue numbers are the closest available match to those covered by the fund.) AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND California Tax-Free Money Market 1.97% 3.78% 4.22% Consumer Price Index 2.52% 3.82% 3.65% Average California Tax-Free Money Market Fund 1.96% 3.76% n/a AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. YIELDS
2/28/93 5/31/93 8/31/93 11/30/93 2/28/94 California Tax-Free 1.83% 2.29% 1.97% 1.90% 1.91% Money Market Average California Tax-Free 1.75% 2.22% 2.01% 1.92% 1.96% Money Market Fund California Tax-Free 3.21% 4.02% 3.46% 3.34% 3.35% Money Market Tax-equivalen t Average All Taxable 2.71% 2.62% 2.64% 2.69% 2.79% Money Market Fund
Row: 1, Col: 1, Value: 1.83 Row: 1, Col: 2, Value: 1.75 Row: 2, Col: 1, Value: 1.97 Row: 2, Col: 2, Value: 2.22 Row: 3, Col: 1, Value: 2.32 Row: 3, Col: 2, Value: 2.01 Row: 4, Col: 1, Value: 1.9 Row: 4, Col: 2, Value: 1.92 Row: 5, Col: 1, Value: 1.91 Row: 5, Col: 2, Value: 1.96 California Tax-Free Money Market Average California Tax-Free Money Market Fund 3% - 2% - 1% - 0% YIELD refers to the income paid by the fund over a given period. Yields for money market funds are usually for seven-day periods, expressed as annual percentage rates. A yield that assumes income earned is reinvested or compounded is called an effective yield. The chart above shows the fund's current seven-day yield at quarterly intervals over the past year. You can compare these yields to the average tax-free money market fund. Or you can look at the fund's tax-equivalent yield, which is based on a combined effective 1994 federal and state income tax rate of 43.04%. The tax-equivalent figures are useful in seeing how the fund stacked up against the average taxable money market fund as tracked by IBC/Donoghue. A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS REFLECT PAST RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE. COMPARING PERFORMANCE Yields on tax-free investments are usually lower than yields on taxable investments. However, a straight comparison between the two may be misleading because it ignores the way taxes reduce taxable returns. Tax-equivalent yield - the yield you'd have to earn on a similar taxable investment to match the tax-free yield - makes the comparison more meaningful. Keep in mind that the U.S. government neither insures nor guarantees a money market fund. And there is no assurance that a money fund will maintain a $1 share price. (checkmark) FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW An interview with Deborah Watson, Portfolio Manager of Fidelity California Tax-Free Money Market Portfolio Q. DEBORAH, HOW HAS THE SHORT-TERM MARKET BEHAVED OVER THE LAST SIX MONTHS? A. Short-term interest rates remained stable through the fall, despite a mild uptick in November fueled by inflation fears. The Federal Reserve kept the federal funds rate at or near 3% from August through January. Then, on February 4, the Fed pushed the fed funds rate up to 3.25%, essentially raising all short-term rates. Q. WAS THE FUND WELL POSITIONED FOR HIGHER RATES? A. For the most part, yes. I had gradually reduced the fund's average maturity through the fall and early winter; it fell from 81 days at the end of August to 48 days at the end of January. The fund's shorter average maturity will allow me to capture the higher yields available following February's rate hike. In addition, supply and demand played a role in how I positioned the fund earlier in the year. California usually issues its heaviest supply of new obligations during the summer months, and 1993 was no exception. I lengthened the fund's average maturity through August, and was able to lock in higher-yielding issues before rates fell further. Issuance then slowed heading into fall, which caused me to gradually shorten the average maturity. Q. HOW DID CALIFORNIA'S RECESSION AFFECT THE FUND? A. The state's weak economy caused the financial health of many California issuers to deteriorate. That meant there were fewer securities available that met Fidelity's high standards for credit quality. However, I compensated by buying more of those that did, resulting in little effect on the fund's yield. Rebuilding efforts after January's earthquake should boost economic growth in 1994. However, the annual borrowing season for state and local governments is fast approaching, and their financial picture hasn't improved. This may further reduce the supply of high quality issues in California this summer. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on February was 1.91%, up slightly from 1.83% a year ago. The latest yield translates into a tax equivalent yield of 3.35% for investors in the 43.04% combined federal and state tax bracket. The fund's total return - which assumes reinvestment of monthly dividends - for the 12 months ended February 28 was 1.97%. The average California tax-free money market fund tracked by IBC/Donoghue returned 1.96% during the same period. Q. WHAT'S YOUR VIEW GOING FORWARD? A. I think short-term interest rates will probably rise gradually over the next six months, while the Fed continues inching up the fed funds rate to control inflation. That said, I'll probably keep the fund's average maturity in a neutral 35- to 50-day range. In addition, I've increased the fund's stake in variable rate instruments to 59% by February 28. The coupons (stated interest rates) on these securities are reset at fixed intervals - for example, weekly or monthly - so when rates rise, the fund can benefit from higher coupons at these reset intervals. FUND FACTS GOAL: tax-free income with share price stability by investing in high-quality, short-term California municipal securities START DATE: July 7, 1984 SIZE: as of February 28, 1994, $611 million MANAGER: Deborah Watson, since July 1988; manager, Spartan California Municipal Money Market Portfolio, since November 1989; Spartan Florida Municipal Money Market Portfolio, since August 1992; Spartan Pennsylvania Municipal Money Market Portfolio, since September 1989 (checkmark) WORDS TO KNOW COMMERCIAL PAPER: A security issued by a municipality to finance capital or operating needs. FEDERAL FUNDS RATE: The interest rate banks charge each other for overnight loans. MATURITY: The time remaining before an issuer is scheduled to repay the principal amount on a debt security. When the fund's average maturity - weighted by dollar amount - is short, the fund manager is anticipating a rise in interest rates. When the average maturity is long, the manager is expecting rates to fall. When the average maturity is neutral, the manager wants the flexibility to respond to rising rates, while still capturing a portion of the higher yields available from issues with longer maturities. MUNICIPAL NOTE: A security issued in advance of future tax or other revenues and payable from those specific sources. TENDER BOND: A variable-rate, long-term security that gives the bond holder the option to redeem the bond at face value before maturity. VARIABLE RATE DEMAND NOTE (VRDN): A tender bond that can be redeemed on short notice, typically one or seven days. VRDNs are useful in managing the fund's average maturity and liquidity. FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO INVESTMENT CHANGES MATURITY DIVERSIFICATION DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS 2/28/94 8/31/93 2/28/93 0 - 30 68.2 65.5 62.1 31 - 90 10.1 9.3 15.6 91 - 180 19.3 5.5 18.3 181 - 397 2.4 19.7 4.0 WEIGHTED AVERAGE MATURITY 2/28/94 8/31/93 2/28/93 California Tax-Free Money Market 44 days 81 days 48 days Average California Tax-Free Money Market Fun 50 days 72 days 52 days d* ASSET ALLOCATION AS OF 2/28/94 AS OF 8/31/93 Row: 1, Col: 1, Value: 59.0 Row: 1, Col: 2, Value: 14.7 Row: 1, Col: 3, Value: 3.9 Row: 1, Col: 4, Value: 22.0 Row: 1, Col: 5, Value: 2.0 Row: 1, Col: 1, Value: 54.1 Row: 1, Col: 2, Value: 11.7 Row: 1, Col: 3, Value: 5.9 Row: 1, Col: 4, Value: 27.0 Row: 1, Col: 5, Value: 3.0 Variable rate demand notes (VRDNs) 59.0% Commercial paper 14.7% Tender bonds 3.9% Municipal notes 22.0% Other 0.4% Variable rate demand notes (VRDNs) 54.1% Commercial paper 11.7% Tender bonds 5.9% Municipal notes 27.0% Other 1.3% * SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(Registered trademark) FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO INVESTMENTS/FEBRUARY 28, 1994 (Showing Percentage of Total Value of Investments) MUNICIPAL SECURITIES (A) - 100% MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - 100.0% ABAG Fin. Auth. (L.S. Packard Children Hosp. at Stanford Proj.), 2.30%, (AMBAC Insured) (Liquidity Enhancement Industrial Bank of Japan), VRDN $ 100,000 $ 100,000 00037EBJ Alameda County Ind. Dev. Auth. Ind. Rev.: (Jacobs Investment Co. Proj.) Series 1985 A, 2.60%, LOC Bank of America, VRDN 3,800,000 3,800,000 011106AA (Longview Fibre Co.) Series 1988, 2.45%, LOC ABN-AMRO NV, VRDN 1,750,000 1,750,000 011106AD Alameda County TRAN 3.25% 7/29/94 13,000,000 13,024,737 010878AB Anaheim Ctfs. of Prtn. Series 1993, 2.25% 8/1/19, (Liquidity Enhancement Industrial Bank of Japan Ltd.) 1,500,000 1,500,000 032540KQ Anaheim Hsg. Auth. (Park Vista Apts) 2.50% LOC Citibank, VRDN (b) 6,000,000 6,000,000 032557BH Beverly Hills Pub. Fin. Auth. Lease Rev. Bonds, Series 1993 A, 2.65 % 6/1/94 2,065,000 2,065,000 088006AA Big Bear Lake Ind. Dev. (Southwest Gas Corp. Proj.) Series 1993 A, 2.40% LOC Union Bank of Switzerland, VRDN (b) 1,400,000 1,400,000 08901KAR California Dept. of Wtr. Resources Tender Option Ctfs. Series R-4, 2.50% (Liquidity Enhancement Svenska Handelsbanken), VRDN (c) 17,000,000 17,000,000 130663W3 California Edl. Facs. Auth. Rev. Rfdg. Series L-1 (Stanford University) 2.50% VRDN 5,055,000 5,055,000 130174QL California Gen. Oblig. Adj. Rate RAN, 2.55% 6/28/94 14,000,000 14,000,000 130619D5 California Gen. Oblig. RAN, Series 1993-94, 3.50% 6/28/94 17,160,000 17,192,758 130619D4 California Health. Facs. Fing. Auth. Rev. (Kaiser Permanente) Series A, 2.35% VRDN 3,400,000 3,400,000 13033J3L California Hsg. Fin. Agcy. Home Mtg. Rev. Custodial Receipts: Series 4A, 2.60%, (Liquidity Enhancement Dai-ichi Kangyo Bank), VRDN (b) (c) 5,000,000 5,000,000 13033CQS Series 15B, 2.60% (Liquidity Enhancement Dai-ichi Kangyo Bank), VRDN (b) (c) 2,415,000 2,415,000 13033CWH California Hsg. Fin. Agcy. Home Mtg. Rev. Series 1993 F 2.40% 9/15/94, MT (b) 10,000,000 9,988,952 13033CZ5 California Hsg. Fin. Agcy. Rev. Custodial Receipts Series 15A, 2.60%, (Liquidity Enhancement Dai-ichi Kangyo Bank), VRDN (b) (c) 3,815,000 3,815,000 13033CWJ California Hsg. Fin. Auth. Rev., VRDN: (Camino Colony Apts.) Series 1993 B, 2.50% LOC Federal Home Loan Bank of San Francisco 2,000,000 2,000,000 13033CP8 MUNICIPAL SECURITIES (A) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED California Poll. Cont. & Fin. Auth. CP mode: (Pacific Gas & Elec. Co.): Rfdg. Series 1988 B, 2.55% 4/25/94, LOC Sumitomo Bank of Japan Ltd., CP mode (b) $ 2,500,000 $ 2,500,000 130995GE Series 1988 A, LOC Swiss Bank, CP mode(b): 2.40% 4/13/94 2,000,000 2,000,000 130995FW 2.45% 4/22/94 5,000,000 5,000,000 130995GD 2.60% 5/12/94 3,000,000 3,000,000 130995GL 2.60% 5/13/94 3,500,000 3,500,000 130995GK Series 1988 B, LOC Sumitomo Bank, CP mode (b): 2.60% 5/16/94 5,000,000 5,000,000 130995GJ 2.60% 5/20/94 2,000,000 2,000,000 130995GQ Series 1988 D, 2.35% 3/23/94, LOC Bank of Tokyo, CP mode 2,000,000 2,000,000 130995FX Series 1988 E, 2.50% 5/16/94, LOC Morgan Gauranty Trust Co., CP mode 3,000,000 3,000,000 130995GM Series 1988 F, 2.50% 4/20/94, LOC Banque Nationale De Paris, CP mode 2,000,000 2,000,000 130995GH (Southern California Edison Co.) Series 1985 D, 2.50% 4/18/94, CP mode 2,000,000 2,000,000 130995GG California Poll. Cont. Fing. Auth. Solid Waste Disp. Rev. (Western Waste Ind.) 2.825%, Citibank, VRDN 2,200,000 2,200,000 130536AW California Poll. Cont. Rev. Fing. Auth. Resource Recovery Rev: (Delano Proj.) VRDN (b): Series 1989, 2.30%, LOC ABN-AMRO NV 600,000 600,000 130535AZ Series 1991, 2.30%, LOC ABN-AMRO NV 500,000 500,000 130535BE (Malaga Proj.) Series A,2.35%, LOC Bank of America, VRDN (b) 800,000 800,000 130535AP California Statewide Commty. Dev. Auth. Rev., VRDN: (Covenant Retirement Commty.) 2.45% 12/1/22, LOC Lasalle Nat'l Bank 2,300,000 2,300,000 130907CX (Delancey Street Foundation) 2.55% 3/1/03, LOC Bank of America 3,125,000 3,125,000 130907CY (Florestone Prod. Co.) Series 1989, 2.45%, LOC Bank of Tokyo (b) 1,030,000 1,030,000 130905AF (Tri-H Foods Proj.) Series 1991, 2.90%, LOC Bank of Tokyo(b) 2,375,000 2,375,000 130905BP California Various Purpose Gen. Oblig. Custodial Receipts 2.45% 10/15/93, (AMBAC Insured), (Liquidity Enhancement Citibank) MT 8,000,000 8,000,000 130622WG Chula Vista Ind. Dev. Rev. (San Diego Gas & Elec. Co.) (b): Series B, 2.45%, VRDN 1,000,000 1,000,000 17131HAB MUNICIPAL SECURITIES (A) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Chula Vista Ind. Dev. Rev. - continued 17199BBA (San Diego Gas & Elec. Co.) (b) - continued 17199BBA Series D, 2.30% 3/01/94, CP mode $ 2,000,000 $ 2,000,000 17199BBA Series E, CP mode: 2.65% 3/10/94 2,500,000 2,500,000 17199BAS 2.70% 3/11/94 2,000,000 2,000,000 17199BAT Concord Hsg. Auth. (Arcadian Apt. Proj.) First Nationwide Grantor Trust Series 1991-1D, 2.50%, LOC Federal Home Loan Bank of San Francisco, VRDN (c)(d) 2,800,000 2,800,000 33581FAK Del Mar Race Track Auth. 2.60% 5/26/94 LOC Societe Generale, CP 5,000,000 5,000,000 2451259A Duarte Single-Family Mtg. Rev Trust Ctfs. 2.70% (Liquidity Enhancement Norwest Bank) (Escrowed to Maturity) VRDN (c) 3,100,000 3,100,000 263595AY East Bay Muni. Util. Dist. Wtr. Sys. Rev. 2.55% 5/23/94, CP 3,000,000 3,000,000 2710149X Escondido Commty. Dev. Commission Rev. (Promeneade Proj.) 2.65%, LOC Bank of America, VRDN (b) 4,000,000 4,000,000 296338AA Fontana (Oakcrest Apt. Proj.) First Nationwide Grantor Trust Series 1991-1G, 2.50% LOC Federal Home Loan Bank of San Francisco, VRDN (c) 1,100,000 1,100,000 33581FAD Fremont Bldg. and Equip. Acquisition Fing. Proj. (Fremont Park Facs. Corp.) 3.85%, LOC Mitshbishi Trust & Banking, VRDN 2,600,000 2,600,000 357122BA Fresno County Unified School Dist. TRAN 3.50% 8/11/94 8,500,000 8,516,558 358232AD Fresno TRAN 3% 6/30/94 1,500,000 1,500,535 358082FQ Hayward Hsg. Auth. Rev. (Foothills Garden Apts.) Series 1985 A, 2.35%, LOC Citibank, VRDN 7,650,000 7,650,000 421227AA Huntington Beach Multi-Family Hsg. Rev. (Seabridge Villas Proj.) 1985 A, 2.25%, LOC Bank of America, VRDN 2,000,000 2,000,000 446196AA Irvine Pub. Facs. & Infrastructure Auth. Lease Rev. Series 1985, 2.40%, LOC Nat'l Westminister Bank, VRDN 7,600,000 7,600,000 463904AA Irvine Ranch Wtr. Dist. Rev. (Cap. Impt. Proj.) 2.20%, LOC Morgan Gauranty, VRDN 400,000 400,000 463641AR Kern County TRAN 3.25% 7/5/94 5,000,000 5,009,242 492248AA Lancaster Redev. Agcy. Multi-Family Hsg. Rev. (Westwood Park Apt.) Series 1985-K, 4.35%, LOC Bank of America, VRDN 1,200,000 1,200,000 513795AJ Livermore Ctfs. of Prtn. (Wtr. Reclamation Plant Expansion Proj.) 2.40%, LOC Westminister Nat'l. Bank, VRDN 2,000,000 2,000,000 538164CQ MUNICIPAL SECURITIES (A) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Loma Linda Multi-Family Hsg. Rev. (Loma Linda Springs Apts.) Series 1989, 3.60%, LOC Tokai Bank, VRDN (b) $ 1,490,000 $ 1,490,000 541905AB Los Angeles Ctfs. of Prtn. (Baldwin Hills Public Parking Facs.) Series 1984,2.55% 12/1/14, LOC Wells Fargo Bank, VRDN 10,000,000 10,000,000 544391AU Los Angeles Commty. College Dist. TRAN Series 1993-94, 3.25% 7/6/94 4,000,000 4,007,453 54438CAA Los Angeles Commty. Redev. Agcy. (CMC Med. Plaza) 2.60%, LOC Bank of America, VRDN 600,000 600,000 544391BQ Los Angeles Commty. Redev. Agcy. Multi-Family Hsg. Rev. (Grand Promenade Proj.) Series 1985, 3%, LOC Tokai Bank Ltd., VRDN 1,700,000 1,700,000 544393AD Los Angeles County Hsg. Auth. (Sand Canyon) Series 1985F, 2.35%, LOC Citibank, VRDN 2,500,000 2,500,000 544688BC Los Angeles County Hsg. Auth. Multi-Family Hsg. Rev. (Malibu Meadows Proj.) Series 1991 A, 2.60%, LOC Sumitomo Bank Ltd. VRDN 4,000,000 4,000,000 544688GD (Sand Canyon Villas Proj.) Series 1989 A, 2.60%, LOC Ind. Bank of Japan, VRDN 3,300,000 3,300,000 544688GC Los Angeles County Metropolitan Trans. Auth. Series 1993 A, 2.30%, (Liquidity Enhancement Industrial Bank of Japan Ltd.), VRDN 13,400,000 13,400,000 544712AV Los Angeles County Pub. Wks. Floating Rate Trust Ctfs., Series 8, 2.55% (Liquidity Enhancement Credit Suisse), VRDN (c) 7,695,166 7,695,166 31303KAA Los Angeles County TRAN, Series B 93-94, (Liquidity Enhancement Credit Suisse), CP mode 2,000,000 2,000,000 5446579L Los Angeles County Transit Commty. Custodial Receipts, Series 1992 B-37, 2.80%, (Liquidity Enhancement Sakura Bank) (MBIA Insured), VRDN (c) 2,890,000 2,890,000 545170JQ Los Angeles County Unified School Dist. TRAN 3.25% 7/15/94 10,000,000 10,017,000 544644AE Los Angeles Custodial Receipts, Series A-2, 2.80%, (Liquidity Enhancement Sakura Bank Ltd.) (BIG Insured), VRDN 6,135,000 6,135,000 55377EAM Los Angeles Dept. of Wtr. & Pwr. Elec. Plant (Short Term Prog.) 2.55% 5/23/94, CP 1,000,000 1,000,000 5445219C Los Angeles Dept. of Wtr. & Pwr. Elec. Plant Rev. Issue 93, 2.65%, (Liquidity Enhancement Banker's Trust), VRDN (c) 3,600,000 3,600,000 544506JM Los Angeles Dept. of Wtr. & Pwr. Elec. Plant Rev. Tender Option Ctfs. Series M, 2.70% (Liquidity Enhancement Sanwa Bank), VRDN (c) 5,500,000 5,500,000 544506JM MUNICIPAL SECURITIES (A) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Los Angeles Hsg. Auth. Multi-Family Hsg. Rev. (River Park Apt.) Series 1988 D, 2.70%, LOC Dai-Ichi Kangyo Bank, VRDN $ 2,100,000 $ 2,100,000 544688GB Los Angeles Multi-Family Hsg. Rev.: (Beverly Park Apts.) Series 1988 A, 2.40%, LOC Barclay's Bank, VRDN (b) 3,500,000 3,500,000 544582GV (Channel Gateway Apts.) Series 1989 B, 2.65%, LOC Fuji Bank, VRDN (b) 15,900,000 15,900,000 544582GX (Studio Colony Proj.) Series 1985 C, 2.45%, LOC Industrial Bank of Japan, VRDN 1,900,000 1,900,000 544582CC Los Angeles Wastewtr. Sys. Rev. (Liquidity Enhancement Sumitomo Bank), CP: 2.40% 3/14/94 3,800,000 3,800,000 544999AL 2.60% 3/16/94 4,100,000 4,100,000 544999AK 2.40% 3/17/94 2,300,000 2,300,000 544999AM 2.60% 5/18/94 2,700,000 2,700,000 544999AP Los Angeles Wastewtr. Sys. Rev. Bonds Series B, 8.80% 6/01/94, (MBIA Insured) 550,000 558,209 544652SX Los Angeles Variable Rate Multifamily Hsg. Rev. (Museum Terrace Apt. Proj.) Series H, 2.40%, LOC Bank of America, VRDN 3,800,000 3,800,000 544582AP Madera County TRAN 3.25% 9/30/94 2,000,000 2,004,203 556903AN Midpeninsula Regional Space Dist. (Santa Clara & San Mateo Counties) Series A, 2.70%, LOC Fuji Bank, VRDN 3,800,000 3,800,000 598022BE Oceanside Multi-Family Mtg. Rev. (Riverview Springs Apts.) Series 1990 A, 2.60%, LOC Bank of Tokyo, VRDN (b) 900,000 900,000 675370AB Olcese Wtr. Dist. (Rio Bravo Wtr. Delivery Sys. Proj.) Series 1986 A, 2.40% 3/29/94, LOC Sumitomo Bank, Ltd., CP mode (b) 2,800,000 2,800,000 6794749P Ontario Ind. Dev. Auth. Rev. (Safari Land Proj.) Series 1989, 3.25% 8/1/14, LOC Tokai Bank, VRDN(b) 1,000,000 1,000,000 682908AA Orange County Apt. Dev. Rev.: (Bear Brands Apt.) Issue Z 1985, 2.35%, LOC Fuji Bank, VRDN 4,800,000 4,800,000 684209JQ (Foothill Oaks Apts. Proj.) Issue 1989 B, 2.50%, Bank of America, VRDN (b) 3,100,000 3,100,000 684209JW (Laguna Summit Apts.) Series 1985 X, 3%, LOC Tokai Bank, VRDN 800,000 800,000 684209JN (Niguel Summit II) Issue 1985, Series B, 2.50%, LOC Bank of America, VRDN 4,740,000 4,740,000 684209JL MUNICIPAL SECURITIES (A) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Orange County Apt. Dev. Rev.: - continued (Park Place Apts. Proj.) Series 1989 A, 3.40%, LOC Tokai Bank, VRDN (b) $ 1,000,000 $ 1,000,000 684209JV (Villa Marguerite Apts.) Series 1993 A, 2.40%, LOC Wells Fargo Bank, VRDN 2,600,000 2,600,000 684209KE (Vista Verde Apt. Proj.) Series 1988 A, 3.30%, LOC Wells Fargo Bank, VRDN (b) 1,800,000 1,800,000 684209JU (WLCO Partners) Series 1985 C-1, 3.20%, LOC Tokai Bank Ltd., VRDN 1,000,000 1,000,000 684209CT Orange County (Irvine Coast Assessment District #88-1) 2.60%, LOC Fuji Bank, Ind. Bank of Japan, Mtsubishi Bank, VRDN 1,000,000 1,000,000 684265AV Orange County Hsg. Auth. Apt. Dev. Rev. (Costa Mesa Partners) Series 1985-BB, 3.25%, LOC Tokai Bank, VRDN 17,100,000 17,100,000 684262AF Orange County San. Dist. Rev. (#1,2,3,5,6,7, 11) 2.30%, (Liquidity Enhancement Industrial Bank of Japan), VRDN (d) 5,000,000 5,000,000 684285BL Orange County TRAN 3% 6/30/94 5,000,000 5,007,190 684201EF Orange County Trans. Corridor Agcy. Rev. (Foothill/Eastern) 2.25% LOC Morgan Gauranty, VRDN 3,600,000 3,600,000 345105AA Orange County Wtr. Dist. Ctfs. of Prtn. Rev. Series 1990 B, 3.25%, LOC Nat'l. Westminster Bank, VRDN 1,000,000 1,000,000 684420BR Oxnard Redev. Agcy. Ctfs. of Prtn. Rev. (Channel Islands Bus. Ctr. Proj.) 2.875%, LOC Wells Fargo Bank, VRDN 3,195,000 3,195,000 692018AA Paramount Hsg. Auth. Multi-Family Hsg. Rev. Rfdg. (Centry Place Apt. Proj.) 2.55%, LOC Dai-Ichi Kangyo Bank, VRDN 5,600,000 5,600,000 699195AB Pleasonton (Vally Plaza II Proj.) First Nationwide Grantor Trusty Series 1991-1L, 2.50% LOC Federal Home Loan Bank of San Francisco, VRDN (c) 1,000,000 1,000,000 699195AB Rancho Wtr. Dist. Fin. Auth. Rev. Rfdg. Floating Option Tax-Exempt Receipts Series PA-62, 2.55%, (Liquidity Enhancement Merrill Lynch & Co. Inc.) VRDN (c) 2,600,000 2,600,000 752111DD Redlands Multi-Family Hsg. Rev. (Parkview Terrace Proj.), 2.45%, LOC Bank of America, VRDN 1,600,000 1,600,000 757591AD Riverside Multifamily Hsg. Rev. (Victoria Springs Apts.) Series 1989 C, 2.70%, LOC Bank of Amercia, VRDN (b) 1,500,000 1,500,000 76911MBS MUNICIPAL SECURITIES (A) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Sacramento (Smoketree Apt. Proj.) First Nationwide Grantor Trust Series 1991-1K, 2.50% LOC Federal Home Loan Bank of San Francisco, VRDN (c) $ 2,000,000 $ 2,000,000 786106DM Sacramento County TRAN, 3% 7/29/94 7,000,000 7,010,225 786106DM Sacramento Muni. Util. Dist. Rev. Series H, LOC Bank of America, CP: 2.30% 3/23/94 3,000,000 3,000,000 785995MM 2.50% 4/19/94 3,800,000 3,800,000 785995MN 2.60% 5/19/94 8,000,000 8,000,000 785995MQ San Bernardino (Quail Pte. Apt. Proj.) First Nationwide Grantors Trust Series 1991-1N, 2.50%, LOC Federal Home Loan Bank of San Francisco, VRDN (c) 1,500,000 1,500,000 796900BJ San Bernadino County Mtg. Rev. Rfdg. (Pepperwood Apts.) Series 1993 A, 2.40%, LOC Fed Home Loan Bank of San Francisco, VRDN 4,000,000 4,000,000 796900CL San Bernadino County Multi-Family Hsg. Rev.: (Cedarbrook Terrace Apts. Proj.) Series 1990 A, 3.60%, LOC Sumitrust, VRDN 2,000,000 2,000,000 796900CF (Western Properties II) 2.40%, LOC Bank of America, VRDN 500,000 500,000 796900BJ (Western Properties IV) 2.40%, LOC Bank of America, VRDN 1,500,000 1,500,000 796900BM (Western Properties V Proj.) 2.40%, LOC Bank of America, VRDN 800,000 800,000 796900BN San Diego Commty. College Dist. TRAN Series, 3.15% 6/30/94 2,000,000 2,002,900 797272AA San Diego Hsg. Auth. Multi-Family Hsg. Rev.: (Carmel Del Mar Apr. Proj.) Series 1993-E, 2.55%, LOC Citibank, VRDN 3,000,000 3,000,000 79728FEU (La Cima Apts.) Issue 1985 K, 2.95% 12/1/08, LOC Daiwa Bank, Ltd., VRDN 2,000,000 2,000,000 79728FES (Nobel Court Apt.)Series 1985 L: 2.50%, LOC Citibank, VRDN 3,825,000 3,825,000 79728FEQ 2.95%, LOC Tokai Bank, VRDN 2,600,000 2,600,000 79728FET San Diego Multi-Family Hsg. Rev. Rfdg. (Coral Pointe Apt. Proj.) Series 1993 A, 2.65% (Liquidity Enhancement Continental Casualty Company), VRDN 3,265,000 3,265,000 79729HEQ San Diego TAN Series 1993-94 A, 3% 6/30/94 5,000,000 5,002,121 797236SM San Diego Unified School Dist. TRAN Series 1993-94 A, 3.50% 8/10/94 6,000,000 6,013,827 797355HH San Francisco City & County Multi-Family Hsg. Rev. Bond (Winterland Proj.) 2.35% LOC Citibank, VRDN 6,150,000 6,150,000 79765PCH MUNICIPAL SECURITIES (A) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED San Francisco Multi-Family Redev. Agcy. Hsg. Auth. Rev. (Rincon Ctr.) Series 1985 B, 2.35%, LOC Citibank, VRDN $ 13,405,000 $ 13,405,000 79765TAA San Francisco Redev. Agcy. Rev. (St. Francis Place Proj.) Series 1989 A, 3.25%, LOC Mitsubishi Trust & Banking, VRDN 6,500,000 6,500,000 79771MAM San Jose Multi-Family Hsg. Rev. (Kimberly Woods) Series 1984, 2.40%, LOC Bank of America, VRDN 3,100,000 3,100,000 798165AB San Mateo County TRAN Series 1993-94, 3% 6/30/94 6,000,000 6,009,693 799034AB Santa Ana Ind. Dev. Auth. Rev. (Grand Partnership Proj.) (Grand Plaza Dev. Co.) 2.875%, LOC Wells Fargo Bank, VRDN 1,500,000 1,500,000 801082AA (McFadden Properties Proj.) 2.55%, LOC Bank of America, VRDN 400,000 400,000 801130AA Santa Clara County TRAN Series 1993-94, 3.25% 7/29/94 12,750,000 12,775,081 801546LF Santa Clara Elec. Sys. Rev. Series A, 2.30% LOC National Westminster Bank, VRDN 1,000,000 1,000,000 801444AZ Santa Cruz County TRAN Series 1993-94, 3.25% 8/1/94 5,000,000 5,005,473 801818CQ Simi Valley Multi-Family Hsg. Rev. (Shadowridge Apts.) Series 1989, 2.50%, LOC Citibank, VRDN (b) 3,800,000 3,800,000 828905BX Solano County TRAN 3.25% 11/01/94 1,000,000 1,002,497 834127BH Sonoma County TRAN Series 1993-94, 3.50% 8/2/94 4,000,000 4,008,126 835546BU Southern California Pub. Pwr. Auth. Rev. (Tran Mission Proj.) Series 1991, 2.50%, LOC Swiss Bank, (AMBAC Insured), VRDN 8,500,000 8,500,000 842477HH Stockton Hosp. Rev. (St. Joseph's Hosp.) Series 1985 A, 2.45%, LOC Dai-Ichi Kangyo Bank, VRDN 10,600,000 10,600,000 861344AY Stockton Unified School Dist. TRAN 3% 12/14/94 2,000,000 2,006,812 861419FM Torrance Hospital Rev. (Little Co. of Mary Hosp.-Torrance Memorial Med Ctr.) Series 1992, 2.45%, LOC Fuji Bank, VRDN 5,500,000 5,500,000 891368BX Tustin, Orange County Assessment Dist. 85-1 LOC Mitsubihsi Trust, CP mode: 3.30% 3/2/94 5,000,000 5,000,000 901991MT 3.30% 3/4/94 3,700,000 3,700,000 901991MV MUNICIPAL SECURITIES (A) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Upland Commty. Redev. Agcy. Multi-Family Hsg.: (Northwoods) 1989 B, 2.50%, LOC Sanwa Bank, VRDN $ 3,950,000 $ 3,950,000 915354AB (Pebble Grove Proj.) Series 1989 C, 2.55%, LOC Sanwa Bank, VRDN 2,675,000 2,675,000 915354AD Ventura County TRAN 3% 8/1/94 2,000,000 2,001,078 923035AG Washington Township Hosp. Dist., Series 1985 A, 2.45%, LOC Bank of Tokyo, VRDN 7,400,000 7,400,000 940212AR Woodland (Crossroads Villiage Apt. Proj.) Nationwide Grantor Trust Series 1991-1H, 2.50%, LOC Federal Home Loan Bank of San Francisco, VRDN (c) 1,220,000 1,220,000 940212AR TOTAL INVESTMENTS - 100% $ 605,479,836 Total Cost for Income Tax Purposes $ 605,479,143 SECURITY TYPE ABBREVIATIONS BAN - Bond Anticipation Notes CP - Commercial Paper FRDN - Floating Rate Demand Notes MT - Mandatory Tender OT - Optional Tender RAN - Revenue Anticipation Notes TAN - Tax Anticipation Notes TRAN - Tax & Revenue Anticipation Notes VAN - Variable Rate Tax & Revenue Anticipation Notes VRDN - Variable Rate Demand Notes LEGEND (a) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (b) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals (AMT securities). (c) Provides evidence of ownership in one or more underlying municipal bonds. (d) Security purchased on a delayed delivery basis (see Note 2 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1994, the fund had a capital loss carryforward of approximately $105,800 of which $24,500, $52,500 and $28,800 will expire on February 28, 1996, 1997 and 2000, respectively. FIDELITY CALIFORNIA TAX-FREE MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994 294.ASSETS 295. 296. 297.Investment in securities, at value (Note 1) - See 298. $ 605,479,836 accompanying schedule 299.Cash 300. 6,931,622 301.Interest receivable 302. 4,003,389 303. 304.TOTAL ASSETS 305. 616,414,847 306.LIABILITIES 307. 308. 309.Payable for investments purchased $ 4,308,948 310. Delayed Delivery (Note 2) 311.Dividends payable 10,667 312. 313.Accrued management fee 203,769 314. 315.Other payables and accrued expenses 126,152 316. 317. 318.TOTAL LIABILITIES 319. 4,649,536 320.321.NET ASSETS 322. $ 611,765,311 323.Net Assets consist of (Note 1): 324. 325. 326.Paid in capital 327. $ 611,872,536 328.Accumulated net realized gain (loss) on 329. (108,676) investments 330.Unrealized gain from accretion of market 331. 1,451 discount (Note 1) 332.333.NET ASSETS, for 611,896,376 shares 334. $ 611,765,311 outstanding 335.336.NET ASSET VALUE, offering price and 337. $1.00 redemption price per share ($611,765,311 (divided by) 611,896,376 shares)
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1994 338.339.INTEREST INCOME 340. $ 14,010,724 341.EXPENSES 342. 343. 344.Management fee (Note 4) $ 2,236,908 345. 346.Transfer agent, accounting and custodian fees and 1,174,267 347. expenses (Note 4) 348.Non-interested trustees' compensation 6,855 349. 350.Registration fees 2,752 351. 352.Audit 25,946 353. 354.Legal 5,565 355.Miscellaneous 8,969 356. 357. 358.TOTAL EXPENSES 359. 3,461,262 360.361.NET INTEREST INCOME 362. 10,549,462 363.REALIZED AND UNREALIZED GAIN (LOSS) ON 365. 26,686 INVESTMENTS (NOTE 1) 364.Net realized gain (loss) on investment securities 366.Increase (decrease) in net unrealized gain from 367. 1,451 accretion of market discount 368.369.NET GAIN (LOSS) 370. 28,137 371.372.NET INCREASE IN NET ASSETS RESULTING FROM 373. $ 10,577,599 OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
YEAR TEN MONTHS ENDED ENDED FEBRUARY 28, FEBRUARY 28, 1993 1994 (NOTE 1) 374.INCREASE (DECREASE) IN NET ASSETS 375.Operations $ 10,549,462 $ 10,446,282 Net interest income 376. Net realized gain (loss) on investments 26,686 1,934 377. Increase (decrease) in net unrealized gain from 1,451 - accretion of market discount 378. 10,577,599 10,448,216 379.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 380.Dividends to shareholders from net interest income (10,549,462) (10,446,282) 381.Share transactions at net asset value of $1.00 per 1,472,161,834 832,985,394 share Proceeds from sales of shares 382. Reinvestment of dividends from net interest 10,140,028 10,024,575 income 383. Cost of shares redeemed (1,438,844,793) (831,247,780) 384. 43,457,069 11,762,189 Net increase (decrease) in net assets and shares resulting from share transactions 385. 43,485,206 11,764,123 386.TOTAL INCREASE (DECREASE) IN NET ASSETS 387.NET ASSETS 388. 389. 390. Beginning of period 568,280,105 556,515,982 391. End of period $ 611,765,311 $ 568,280,105
FINANCIAL HIGHLIGHTS
392. YEAR TEN MONTHS YEARS ENDED APRIL 30, ENDED ENDED FEBRUARY 28, FEBRUARY 28, 1993 393. 1994 (NOTE 1) 1992 1991 1990 394.SELECTED PER-SHARE DATA 395.Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 value, beginning of period 396.Income from .020 .019 .035 .047 .054 Investment Operations Net interest income 397.Less (.020) (.019) (.035) (.047) (.054) Distributions From net interest income 398.Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 value, end of period 399.TOTAL 1.92% 3.59 4.85 5.53 RETURN (DAGGER) 1.97 % % % % 400.RATIOS AND SUPPLEMENTAL DATA 401.Net assets, $ 611,765 $ 568,280 $ 556,516 $ 538,791 $ 623,748 end of period (000 omitted) 402.Ratio of .64 .62%* .63 .61 .60 expenses to % % % % average net assets 403.Ratio of net 1.95 2.29%* 3.50 4.75 5.42 interest income to % % % % average net assets
* ANNUALIZED (DAGGER) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1994 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity California Tax-Free High Yield Portfolio (the high yield fund) and Fidelity California Tax-Free Insured Portfolio (the insured fund) are funds of Fidelity California Municipal Trust. Fidelity California Tax-Free Money Market Portfolio (the money market fund) is a fund of Fidelity California Municipal Trust II. Each trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. Fidelity California Municipal Trust and Fidelity California Municipal Trust II (the trusts) are organized as a Massachusetts business trust and a Delaware business trust, respectively. On November 19, 1992, the Trustees approved a change in the fiscal year-end of the trusts to February 28. Each fund is authorized to issue an unlimited number of shares. The following summarizes the significant accounting policies of the funds: SECURITY VALUATION. HIGH YIELD AND INSURED FUNDS. Securities are valued based upon a computerized matrix system and/or appraisals by a pricing service, both of which consider market transactions and dealer-supplied valuations. Short-term securities maturing within sixty days are valued either at amortized cost or original cost plus accrued interest, both of which approximate current value. Securities for which quotations are not readily available through the pricing service are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein, securities are valued initially at cost and thereafter assume a constant amortization to maturity of any discount or premium. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, each fund is not subject to income taxes to the extent that it distributes all of its taxable income for the fiscal year. The schedules of investments include information regarding income taxes under the caption "Income Tax Information." INTEREST INCOME. Interest income, which includes amortization of premium and accretion of original issue discount, is accrued as earned. For the money market fund, accretion of market discount represents unrealized gain until realized at the time of a security disposition or maturity. EXPENSES. Most expenses of each trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid monthly from net interest income. Distributions to shareholders from realized capital gains on investments, if any, are recorded on the ex-dividend date. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for losses deferred due to wash sales and futures and options transactions. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective March 1, 1993 the funds 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, the funds changed the classification of distributions to shareholders to better disclose the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, amounts as of February 28, 1994 have been reclassified as follows: HIGH YIELD FUND. Paid in capital and accumulated net realized loss on investments decreased by $525,684. INSURED FUND. Paid in capital and accumulated net realized loss on investments decreased by $42,568. MONEY MARKET FUND. Paid in capital and accumulated net realized loss on investments increased by $2,034. 2. OPERATING POLICIES. FUTURES CONTRACTS AND OPTIONS. The high yield and insured funds may invest in futures contracts and write options. These investments involve to varying degrees, elements of market risk and risks in excess of the amount recognized in their Statements of Assets and Liabilities. The face or contract amounts reflect the extent of the involvement the high yield and insured funds have in the particular classes of instruments. Risks may be caused by an imperfect correlation between movements in the price of the instruments and the price of the underlying securities and interest rates. Risks also may arise if there is an illiquid secondary market for the instruments, or due to the inability of counterparties to perform. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Options traded on an exchange are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. DELAYED DELIVERY TRANSACTIONS. Each fund may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take place a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. 3. PURCHASES AND SALES OF INVESTMENTS. HIGH YIELD FUND. Purchases and sales of securities, other than short-term securities, aggregated $251,239,277 and $251,166,205, respectively. The gross market value of futures contracts opened and closed amounted to $231,823,309 and $244,703,050, respectively. INSURED FUND. Purchases and sales of securities, other than short-term securities, aggregated $196,311,161 and $170,227,006, respectively. The gross market value of futures contracts opened and closed amounted to $122,485,024 and $135,616,823 respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management & Research Company (FMR) receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of each fund. The group fee rate is the weighted average of a series of rates ranging from .15% to .37% and is based on the monthly average net assets of all the mutual funds advised by FMR. The annual individual fund fee rate is .25%. For the period, the management fees were equivalent to an annual rate of .41% of average net assets for the high yield, insured and money market funds, respectively. The Board of Trustees approved a new group fee rate schedule with rates ranging from .1325% to .3700%. Effective November 1, 1993, FMR has voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee (see Note 6). SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the management fee payable to FMR. The fee is paid prior to any voluntary expense reimbursements which may be in effect, and after reducing the fee for any payments by FMR pursuant to the fund's Distribution and Service Plan. DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service Plans (the Plans), and in accordance with Rule 12b-1 of the 1940 Act, FMR or the funds' distributor, Fidelity Distributors Corporation (FDC), an affiliate of FMR, may use their resources to pay administrative and promotional expenses related to the sale of each fund's shares. Subject to the approval of each Board of Trustees, the Plans also authorize payments to third parties that assist in the sale of each fund's shares or render shareholder support services. FMR or FDC has informed the funds that payments made to third parties under the Plans amounted to $3,519, $4,748 and $31,948 for the high yield, insured and money market funds, respectively, for the period. TRANSFER AGENT AND ACCOUNTING FEES. United Missouri Bank, N.A. (the Bank) is the custodian and transfer and shareholder servicing agent for the funds. The Bank has entered into a sub-contract with Fidelity Service Co. (FSC), an affiliate of FMR, under which FSC per 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED TRANSFER AGENT AND ACCOUNTING FEES - - CONTINUED forms the activities associated with the funds' transfer and shareholder servicing agent and accounting functions. The funds pay transfer agent fees based on the type, size, number of accounts and number of transactions made by shareholders. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses. For the period, FSC received transfer agent and accounting fees amounting to $558,014 and $243,183 for the high yield fund, $346,638, and $134,786 for the insured fund and $1,016,834 and $107,448 for the money market fund, respectively. Shareholders participating in the Fidelity Ultra Service Account(Registered trademark) Program (the Program) pay a $5.00 monthly fee to Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, for performing services associated with the Program. For the period, fees paid to FBSI by shareholders participating in the Program amounted to $148,453. 5. EXPENSE REDUCTIONS INSURED FUND. For the period, FMR voluntarily agreed to reimburse the fund's operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) above a specified percentage of average net assets. This expense limitation ranged from an annual rate of .35% to .55% of average net assets and the reimbursement reduced expenses by $352,015. 6. SHAREHOLDER MEETING. At a special meeting of shareholders of the high yield and insured funds held on February 16, 1994, shareholders approved an amended management contract and amendments to certain fundamental investment limitations of the funds. The new management contract , which became effective on March 1, 1994 will reflect the new group fee rate schedule which FMR voluntarily implemented on November 1, 1993. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and Shareholders of Fidelity California Municipal Trust and Fidelity California Municipal Trust II (the Trusts): Fidelity California Tax-Free High Yield Portfolio Fidelity California Tax-Free Insured Portfolio Fidelity California Tax-Free Money Market Portfolio In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments (except for Moody's and Standard & Poor's ratings), and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity California Tax-Free High Yield Portfolio, Fidelity California Tax-Free Insured Portfolio and Fidelity California Tax-Free Money Market Portfolio at February 28, 1994, the results of their operations, the changes in their net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of each portfolio's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities owned at February 28, 1994 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. /s/Price Waterhouse PRICE WATERHOUSE Boston, Massachusetts March 31, 1994 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA SUB-ADVISER, MONEY MARKET FUND FMR Texas Inc. Irving, TX OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President John F. Haley Jr., Vice President HIGH YIELD AND INSURED FUNDS Deborah F. Watson, Vice President MONEY MARKET FUND Thomas D. Maher, Assistant Vice President - MONEY MARKET FUND Gary L. French, Treasurer John H. Costello, Assistant Treasurer Arthur S. Loring, Secretary BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Phyllis Burke Davis* Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Marvin L. Mann* Edward H. Malone* Gerald C. McDonough* Thomas R. Williams* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENTS United Missouri Bank, N.A. Kansas City, MO and Fidelity Service Co. Boston, MA CUSTODIAN United Missouri Bank, N.A. Kansas City, MO THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE EX-24 3 EXHIBIT 24(A)(2) SPARTAN(Registered trademark) (Registered trademark) CALIFORNIA MUNICIPAL PORTFOLIOS ANNUAL REPORT FEBRUARY 28, 1994 CONTENTS PRESIDENT'S MESSAGE 3 NED JOHNSON ON MINIMIZING TAXES SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO 4 PERFORMANCE 7 FUND TALK: THE MANAGER'S OVERVI EW 10 INVESTMENT CHANGES 11 INVESTMENTS 24 FINANCIAL STATEMENTS SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO 28 PERFORMANCE 30 FUND TALK: THE MANAGER'S OVERVI EW 33 INVESTMENT SUMMARY 34 INVESTMENTS 39 FINANCIAL STATEMENTS SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO 43 PERFORMANCE 45 FUND TALK: THE MANAGER'S OVERVI EW 47 INVESTMENT CHANGES 48 INVESTMENTS 59 FINANCIAL STATEMENTS NOTES 63 FOOTNOTES TO THE FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS 67 THE AUDITOR'S OPINION THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED BY THE FDIC. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: No one wants to pay more taxes than they have to. But a recent survey of 500 U.S. households, conducted by Fidelity and Yankelovich Partners, showed that few people took steps to reduce their taxes under the new tax laws that went into effect last year. In fact, many people were not completely aware of the changes until they filed their 1993 tax returns. Whether or not you're someone whose tax bill increased as a result of these changes, it may make sense to consider ways to keep more of what you earn. First, if your employer offers a 401(k) or 403(b) retirement savings plan, consider enrolling. These plans are set up so you can make regular contributions - before taxes - to a retirement savings plan. They offer a disciplined savings strategy, the ability to accumulate earnings tax-deferred, and immediate tax savings. For example, if you earn $40,000 a year and contribute 7% of your salary to your 401(k) plan, your annual contribution is $2,800. That reduces your taxable income to $37,200 and, if you're in the 28% tax bracket, saves you $784 in federal taxes. In addition, you pay no taxes on any earnings until withdrawal. It may be a good idea to contact your benefits office as soon as possible to find out when you can enroll or increase your contribution. Most employers allow employees to make changes only a few times each year. Second, consider an IRA. Many people are eligible to make an IRA contribution (up to $2,000) that is fully tax deductible. That includes people who are not covered by company pension plans, or those within certain income brackets. Even if you don't qualify for a fully deductible contribution, any IRA earnings will grow tax-deferred until withdrawal. Third, consider adding to your tax-free investments, either municipal bonds or municipal bond funds. Often these can provide higher after-tax yields than comparable taxable investments. For example, if you're in the new 36% federal income tax bracket and invest $10,000 in a taxable investment yielding 7%, you'll pay $252 in federal taxes and receive $448 in income. That same $10,000 invested in a tax-free bond fund yielding 5.5% would allow you to keep $550 in income. These are three investment strategies that could help lower your tax bill in 1994. If you're interested in learning more, please call us at 1-800-544-8888 or visit a Fidelity Investor Center. We look forward to talking with you. Best regards, Edward C. Johnson 3d, Chairman SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each figure includes changes in a fund's share price, reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value), and the effect of the $5 account closeout fee. You can also look at the fund's income. If Fidelity had not reimbursed certain fund expenses during the periods shown, the total returns, dividends and yields would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1994 PAST 1 LIFE OF YEAR FUND Spartan California Municipal High Yield 5.62% 49.13% Lehman Brothers Municipal Bond Index 5.54% n/a Average California Tax-Exempt Municipal Bond Fund 5.39% n/a Consumer Price Index 2.52% 16.52% CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in this case, one year or since the fund started on November 27, 1989. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, you would end up with $1,050. You can compare these figures to the performance of the Lehman Brothers Municipal Bond Index - a broad gauge of the municipal bond market. To measure how the fund stacked up against its peers, you can look at the average California tax-exempt municipal bond fund, which reflects the performance of 75 California tax-exempt municipal bond funds tracked by Lipper Analytical Services. Both benchmarks include reinvested dividends and capital gains, if any. Comparing the fund's performance to the consumer price index helps show how your fund did compared to inflation. (The periods covered by the CPI numbers are the closest available match to those covered by the fund.) AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1994 PAST 1 LIFE OF YEAR FUND Spartan California Municipal High Yield 5.62% 9.84% Lehman Brothers Municipal Bond Index 5.54% n/a Average California Tax-Exempt Municipal Bond Fund 5.39% n/a Consumer Price Index 2.52% 3.66% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND 11/30/89 10000.00 10000.00 12/31/89 10089.59 10082.00 01/31/90 9987.25 10034.61 02/28/90 10117.34 10123.92 03/31/90 10159.31 10126.96 04/30/90 10004.70 10054.05 05/31/90 10291.88 10273.22 06/30/90 10405.50 10363.63 07/31/90 10581.76 10515.97 08/31/90 10331.18 10363.49 09/30/90 10395.12 10369.71 10/31/90 10553.01 10557.40 11/30/90 10839.12 10769.61 12/31/90 10913.35 10816.99 01/31/91 11018.96 10961.94 02/28/91 11069.18 11057.31 03/31/91 11087.32 11061.73 04/30/91 11257.62 11208.85 05/31/91 11362.91 11308.61 06/30/91 11346.28 11297.30 07/31/91 11518.86 11435.13 08/31/91 11648.23 11586.07 09/30/91 11801.24 11736.69 10/31/91 11931.26 11842.32 11/30/91 11937.33 11875.48 12/31/91 12173.80 12130.80 01/31/92 12203.82 12158.70 02/29/92 12206.42 12162.35 03/31/92 12224.29 12167.22 04/30/92 12344.95 12275.51 05/31/92 12515.93 12420.36 06/30/92 12732.26 12629.02 07/31/92 13141.12 13007.89 08/31/92 12932.78 12880.41 09/30/92 13009.41 12964.13 10/31/92 12727.07 12837.09 11/30/92 13058.60 13066.87 12/31/92 13248.13 13200.15 01/31/93 13414.25 13353.27 02/28/93 14043.75 13836.66 03/31/93 13901.26 13689.99 04/30/93 14029.90 13828.26 05/31/93 14111.34 13905.70 06/30/93 14341.34 14137.93 07/31/93 14346.55 14156.31 08/31/93 14721.67 14450.76 09/30/93 14903.96 14615.49 10/31/93 14947.65 14643.26 11/30/93 14794.60 14514.40 12/31/93 15105.41 14820.66 01/31/94 15269.33 14989.61 02/28/94 14833.82 14601.38 $14,834 $14,601 '94 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan California Municipal High Yield Portfolio on November 30, 1989, shortly after the fund started. As the chart shows, by February 28, 1994, the value of your investment would have grown to $14,834 - a 48.34% increase on your initial investment. This assumes you still own the fund on February 28, 1994 and therefore does not include the effect of the $5 account closeout fee. For comparison, look at how the Lehman Brothers Municipal Bond Index did over the same period. With dividends reinvested, the same $10,000 would have grown to $14,601 - a 46.01% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. Bond prices, for example, move in the opposite direction of interest rates. In turn, the share price, return, and yield of a fund that invests in bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) INCOME YEARS ENDED FEBRUARY 28, 1994 1994 1993 1992 1991 Income return 5.62% 6.72% 6.84% 7.51% Capital gain return 3.54% 0.74% 0.00% 0.00% Change in share price -3.54% 7.59% 3.43% 1.89% Total return 5.62% 15.05% 10.27% 9.40% INCOME returns, capital gain returns, and changes in share price are all part of a bond fund's total return. An income return reflects the dividends paid by the fund. A capital gain return reflects the amount paid by the fund to shareholders based on the profits it has from selling bonds that have grown in value. Both returns assume the dividends or gains are reinvested. Changes in the fund's share price include changes in the prices of the bonds owned by the fund. Change in share price and total return figures include the effect of the $5 account closeout fee. DIVIDENDS AND YIELD PERIODS ENDED FEBRUARY 28, 1994 PAST 30 PAST 6 PAST 1 DAYS MONTHS YEAR Dividends per share n/a 31.02(cents) 63.06(cents) Annualized dividend rate n/a 5.51% 5.59% Annualized yield 5.26% n/a n/a Tax-equivalent yield 9.23% n/a n/a DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $11.35 over the past six months and $11.28 over the past year, you can compare the fund's income over these two periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. The tax-equivalent yield shows what you would have to earn on a taxable investment to equal the fund's tax-free yield, if you're in the 43.04% combined effective 1994 federal and state income tax bracket. SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Bond investments - including tax-free issues - provided solid returns for the 12 months ended February 28, 1994, despite a dramatic downturn in February. Falling interest rates pushed up bond prices steadily through mid-October, when the yield on the benchmark 30-year Treasury bond reached a historic low of 5.79%. By year-end, a strengthening economy had fueled mild inflation fears. That pushed up the yield on the 30-year bond to 6.35% on December 31, which forced investors to give back some of their earlier profits. Inflation jitters eased and bond yields dropped in January. However, when the Federal Reserve Bank raised short-term interest rates in an attempt to control inflation on February 4, investors reacted negatively. At the end of February, the yield on the 30-year bonds was 6.66%, about 38 basis points higher than at the beginning of the month. Over the year, higher federal income taxes boosted demand for municipal bonds. But municipal bond prices were hurt by the Fed's action in February and by record new issuance, which kept supplies high and dampened prices. The return on the Lehman Brothers Municipal Bond Index, a broad measure of the tax-free market, rose 5.54%. By comparison, the Lehman Brothers Aggregate Bond Index, which tracks investment-grade taxable bonds, returned 5.40%. Globally, falling interest rates and low inflation drove good annual returns in Europe, Japan, and most emerging markets, although many of these markets fell in February along with the U.S. bond market. The Salomon Brothers World Government Bond Index - which includes U.S. issues - returned 9.34%, while the J.P. Morgan Emerging Markets Bond Index was up a dramatic 29.46%. An interview with John Haley, Portfolio Manager of Spartan California Municipal High Yield Portfolio Q. JOHN, HOW DID THE FUND PERFORM? A. Quite well. The fund had a total return of 5.62% for the year ended February 28, 1994. The average California tax-free bond fund posted a total return of 5.39% during the period, according to Lipper Analytical Services. Q. WHAT ACCOUNTED FOR THE FUND'S PERFORMANCE? A. First, having a somewhat longer duration than that of the typical California tax-free bond fund. A longer duration makes a fund's share price more sensitive to interest rate changes. I extended the fund's duration from about 7.5 years to 9.2 years during the year because I expected interest rates would continue to decline and drive bond prices higher. That's what happened during most of the period, although the fund gave back some gains when interest rates rebounded in February. Second, the fund also held several issues that were pre-refunded during the period - that is, their issuers set aside a pool of Treasury securities to pay the remaining interest and principal due to bondholders. As a result, the bonds' credit ratings went from A to Aaa, causing investors to bid their prices higher. Plus, their maturities shortened, which also helped boost their prices. Q. WHY DID YOU INCREASE THE FUND'S INVESTMENT IN STATE GENERAL OBLIGATION BONDS (GOS) AND STATE LEASE BONDS? A. During the early part of the year I avoided state GOs, which are backed by the taxing power of the issuer, as well as California lease bonds, which are backed by leases paid by the state. The state's economy was still struggling, and I believed prices of those issues would lag bonds with higher ratings. That proved to be true. But last fall I increased the fund's investment in California GOs, lease bonds and other bonds backed by the state to around 10% because I thought the California economy had hit bottom. Also, I increased the fund's stake in bonds rated A or lower, which are expected to benefit from improvements in the state's economy. These decisions reduced the average credit rating of the fund's holdings. At the end of February, about 40% of the fund's investments were rated Aa or Aaa, down from 80%. As the economy begins to improve, those state GOs and lease bonds should outperform issues with higher credit ratings. Q. AT THE END OF FEBRUARY, NEARLY 20% OF THE FUND'S INVESTMENTS WERE IN HEALTH-CARE BONDS, UP FROM 13.5% A YEAR EARLIER. ARE YOU CONCERNED THAT HEALTH-CARE REFORM WILL HURT THOSE ISSUERS? A. We are cautious on health care because the Clinton plan could affect the health care sector. However, the issues I choose are mainly strong hospitals that are expected to survive and potentially benefit from any shake-up likely to occur. In fact, a number carry ratings of Aa or Aaa. Q. DID THE LOS ANGELES EARTHQUAKE AFFECT THE FUND'S PERFORMANCE? A. Not much. During the past two or three years I de-emphasized issuers in the Los Angeles area because the economy in southern California has been especially sluggish. As a result, we only held one or two bonds of issuers in the vicinity of the earthquake. I believe in geographic diversification, so the fund's investments are spread across different regions of the state. That should offer some protection against future natural disasters. Q. WHAT'S YOUR OUTLOOK FOR THE TAX-EXEMPT BOND MARKET? A. The economy will probably show modest growth and inflation seems likely to remain under control, so I don't expect interest rates to rise dramatically from here. But interest rates aren't likely to fall much more either, so gains in the bond market won't be driven by falling rates. The tax-exempt market will probably benefit from a lower supply of new issues. Also, demand for tax-exempt bonds will likely increase as investors realize that the new, higher federal income tax rates. The combination of lower supply and higher demand should help support prices in the tax-exempt market. Q. WHAT ABOUT THE CALIFORNIA TAX-EXEMPT MARKET? A. I still feel that California bonds are attractive because the state's economy is showing signs that it is set to begin a recovery. As that happens, state GO's and lease bonds, should be especially strong performers, because their credit quality is closely linked to the economy. Those issues may be volatile over the next several months as the state goes through its budget process. But I'll probably take advantage of any price declines to buy more. FUND FACTS GOAL: to provide high current income exempt from California state and federal income taxes START DATE: November 27, 1989 SIZE: as of February 28, 1994 over $566 million MANAGER: John Haley, since December, 1989; manager, Fidelity California Tax-Free Insured Portfolio, since 1986; Fidelity California Tax-Free High Yield Portfolio, since 1985; Fidelity Advisor Tax-Exempt Portfolio, since 1985 (checkmark) JOHN HALEY ON THE FUND'S STRATEGY: "The fund can invest one-third of its holdings in securities rated below investment-grade. However during recent years, there have been few attractive opportunities in this area. At the same time, I expected a more severe economic downturn in the California economy than most observers. As a result, I stuck mainly with highly-rated issues. But during the past six months I have begun to identify factors that suggest the California economy is reaching a bottom. As a result, I've been increasing the fund's investment in higher-yielding issues. As the economy improves, they should be strong performers." (bullet) The fund's duration as of February 28, 1994 was 9.2 years. That means the fund's share price could decline roughly 9.2% if interest rates rose one percentage point, and rise 9.2% if rates fell one percentage point. SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO INVESTMENT CHANGES TOP FIVE SECTORS AS OF FEBRUARY 28, 1994 % OF FUND'S % OF FUND'S INVESTMENT INVESTMENTS S IN THESE SECTORS 6 MONTHS AGO Lease Revenue 26.1 23.7 Health Care 19.8 13.8 Special Tax 18.3 20.2 Electric Revenue 8.3 10.2 Housing 6.4 6.0 AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1994 6 MONTHS AGO Years 22.2 22.6 AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL OF THE BONDS IN THE FUND IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT. DURATION AS OF FEBRUARY 28, 1994 6 MONTHS AGO Years 9.2 8.8 DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, THE SHARE PRICE OF A FUND WITH A FIVE-YEAR DURATION WILL FALL 5%. QUALITY DIVERSIFICATION AS OF FEBRUARY 28, 1994 (MOODY'S RATINGS) Aaa 32.4% Aa, A 41.5% Baa 17.4% Ba, B 0% Non-rated 8.7% Row: 1, Col: 1, Value: 32.4 Row: 1, Col: 2, Value: 41.5 Row: 1, Col: 3, Value: 17.4 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 5, Value: 8.699999999999999 THIS CHART EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. NON-RATED SECURITIES CONSIDERED TO BE BAA OR BETTER BY FIDELITY ARE 5.8% OF THE FUNDS LONG TERM INVESTMENTS. SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO INVESTMENTS/FEBRUARY 28, 1994 (Showing Percentage of Total Value of Investments) MUNICIPAL BONDS - 98.5% MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - 95.3% ABAG Fin. Auth. Nonprofit Ctfs. of Prtn. (Peninsula Family YMCA) Series A, 6.80% 10/1/11, LOC Daiwa Bank Ltd A1 $ 1,000,000 $ 1,047,500 00037EAL Alameda County Ctfs. of Prtn. Rfdg. (Santa Rita Jail Proj.) 5.375% 6/1/09, (MBIA Insured) Aaa 1,250,000 1,228,125 010891KG Alameda Hsg. Auth. Multi-Family Hsg. Rev. (Independence Apts.) Series A, 7.50% 2/20/31, (GNMA Coll.) AAA 1,775,000 1,881,500 010789AA Anaheim Pub. Fing. Auth. Tax Allocation Rev.: (Cap. Appreciation Redev. Proj.) 0% 12/1/06, (MBIA Insured) Aaa 5,000,000 2,525,000 032559AP (Reg. Rites) 10.27% 12/1/18, (MBIA Insured)(d) Aaa 1,500,000 1,788,750 032559AV Azusa Redev. Agcy. Tax Allocation (Central Bus. Dist. Redev. Proj.) Series A, 7.875% 8/1/15 Baa 1,025,000 1,083,938 055031BD Bakersfield Hosp. Rev. (Bakersfield Mem. Hosp.) Series A, 6.50% 1/1/22 A 1,500,000 1,565,625 057509CM Berkeley Health Facs. Rev. Rdfg. (Alta Bates Med. Ctr.) Series A, 6.55% 12/1/22 Baa1 3,250,000 3,262,188 084134AH Buena Park Commty. Redev. Agcy. Tax Allocation Rfdg. (Central Business Dist. Proj.) 7.10% 9/1/14 BBB+ 1,500,000 1,586,250 119147CN Burbank Redev. Agcy. Tax Allocation Series A, 6% 12/1/23 Baa1 1,950,000 1,901,250 120823EA California Dept. Wtr. Resources Central Valley Rev. (Wtr. Sys. Proj.) Series J-1, 7% 12/1/12 Aa 1,000,000 1,158,750 130663E6 California Fairs Fing. Auth. Rev. Series 1991, 6.50% 7/1/11, (Cap. Guaranty Insured) Aaa 2,000,000 2,152,500 130205BG California Health Facs. Fing. Auth. Rev.: Rfdg. (Catholic Healthcare West) 4.75% 7/1/19(MBIA Insured) Aaa 4,680,000 4,112,550 13033AAU (Children's Hosp.) 7% 7/1/13, (MBIA Insured) Aaa 2,485,000 2,770,775 13033H6L (Children's Hosp.of San Francisco) Series A, 7.50% 10/1/20, (MBIA Insured) Aaa 2,450,000 2,820,563 13033JAJ (Gould Med. Foundation) Series A, 7.30% 4/1/20 A+ 1,500,000 1,738,126 13033JBW (Kaiser Permanente Health Sys.) Series A, 7% 12/1/10 Aa2 2,800,000 3,083,500 13033JLQ (Los Medanos Health Care Corp.) Series A, 7.25% 3/1/20 A+ 1,500,000 1,653,750 13033H6X MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED California Health Facs. Fing. Auth. Rev.: - continued (Mills-Peninsula Hosp.) Series A, 7.875% 1/15/12 A- $ 2,000,000 $ 2,160,000 13033HRE (San Diego Hosp. Assoc.) Series A: 6.70% 10/1/10, (MBIA Insured) Aaa 4,085,000 4,457,756 13033JTP 6.95% 10/1/21 A1 1,500,000 1,640,625 13033JTM (St. Elizabeths Hosp. Proj.) 6.20% 11/15/09 A1 1,455,000 1,505,925 13033JL2 (Scripps Health) Series A, 4.625% 10/1/13 (MBIA Insured) Aaa 1,075,000 950,031 13033J5V (Sharp Temecula Valley) Series A, 7.05% 8/1/21, (MBIA Insured) Aaa 1,100,000 1,230,625 13033JPT (Valleycare Hosp. Corp.) Series A, 7% 5/1/20 A+ 2,000,000 2,185,000 13033H5P California Hsg. Fin. Agcy. Rev. (Home Mtg.): Series A, 0% 8/1/23 (b) Aa 8,080,000 858,500 13033CPJ Series C: 8.30% 8/1/19 (b) Aa 2,450,000 2,603,124 1303296C 0% 8/1/21 (b) Aa 5,870,000 733,750 13033CTB 7.60% 8/1/30 (b) Aa 7,775,000 8,251,218 13033CPZ Series F, 7.20% 8/1/09 Aa 1,095,000 1,145,643 13033CMW California Poll. Cont. Fing. Auth. Poll. Cont. Rev. (Southern California Edison Company) Series 1988 A, 6.90% 9/1/06(b) A-1+ 1,660,000 1,823,924 130534RP California Poll. Cont. Fing. Auth. Rev. (Pacific Gas & Elec. Co.) Series B, 5.85% 12/1/23 (b) A1 6,000,000 5,925,000 130534VA California Poll. Cont. Fing. Auth. Solid Waste Disp. Rev.: (Keller Canyon Landfill Proj.) Series 1992, 6.875% 11/1/27(b) A2 2,250,000 2,469,374 130536BT (North County Recylcing Ctr.) Series A, 6.75% 7/1/11, LOC Union Bank of Switzerland Aaa 1,000,000 1,092,500 130536BQ California Pub. Cap. Impt. Fing. Auth. Rev. (Pooled Proj.) Series B, 8.10% 3/1/18, (MBIA Insured) Aaa 1,910,000 2,091,450 130552AS California Pub. Wks. Board Lease Rev.: Rfdg. (Dept. Correction State Prisons) Series A, (AMBAC Insured): 5.25% 12/1/13 Aaa 1,355,000 1,300,800 13068GNZ 5% 12/1/19 Aaa 6,500,000 5,931,250 13068GPA MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED California Pub. Wks. Board Lease Rev.: - continued (California University Proj.): Series A: 5.50% 6/1/14 A1 $ 5,750,000 $ 5,548,750 13068GRB 5% 6/1/23 A1 3,500,000 3,066,874 13068GRD (Dept. Correction State Prison) (Medera) Series E, 5.50% 6/1/15 (h) A1 3,300,000 3,184,500 13068GVV (Susanville) Series B, 5.50% 6/1/14 A1 2,000,000 1,907,500 13068GUX Series D, 5.25% 6/1/15 (FGIC Insured) Aaa 2,000,000 1,915,000 13068GUA 5.375% 6/1/18 A1 1,500,000 1,398,750 13068GTQ California Statewide Commty. Dev. Auth. 8.83% 7/1/13, (MBIA Insured) (d) Aaa 2,000,000 1,965,000 130909JH California Statewide Commtys. Dev. Corp. Ctfs. of Prtn.: Rfdg. (Insured Health Facs.) (Eskaton, Inc.) 5.875% 5/1/20 A+ 4,000,000 3,920,000 130909GW Rfdg. (Insured Hosp.) (Triad Healthcare): 6.25% 8/1/06 A+ 2,000,000 2,027,500 130909CM 6.50% 8/1/22 A+ 1,750,000 1,778,437 130909CR (Children's Hosp.) 6%6/1/13 (MBIA Insured) Aaa 1,570,000 1,632,800 130909NE (J. Paul Getty) 5% 10/1/23 Aaa 1,750,000 1,585,937 130907FM (Odd Fellows): 5.375% 10/1/13 A+ 2,500,000 2,325,000 130907EP 5.50% 10/1/23 A+ 3,000,000 2,797,500 130907EQ (St. Joseph Health Sys.) 5.50% 7/1/23 Aa 3,000,000 2,835,000 130909GH (Sisters of Charity Leavenworth) 5% 12/1/23 Aa 4,375,000 3,850,000 130909PR (Villaview Commty. Hosp., Inc.) Series A, 7% 9/1/09 A+ 1,200,000 1,303,500 130907AX California Urban Ind. Dev. Agcy. Rev. (Civic Recreational Proj.#1) 7.30% 5/1/06 - 4,000,000 4,320,000 456567ME Campbell Ctfs. of Prtn. Rfdg. (Civic Center Proj.): 6.75% 10/1/17 A 1,500,000 1,612,500 134111CR 6% 10/1/18 A 2,565,000 2,539,350 134111BK Carson Redev. Agcy. 5.875% 10/1/09 Baa 2,000,000 1,952,500 145750DN Carson Redev. Agcy. Redev. Proj. Area #1 Tax Allocation: 6.375% 10/1/12 Baa1 1,465,000 1,452,180 145750CZ 6.375% 10/1/16 Baa1 1,000,000 985,000 145750DA Castaic Lake Wtr. Agcy. Ctfs. of Prtn. (Wtr. Sys. Impt. Proj.) 7.125% 8/1/16, (MBIA Insured) Aaa 2,750,000 3,090,312 148370AM MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Castaic Unified School Dist. (Cap. Appreciation) Series A, 0% 5/1/18, (FGIC Insured) Aaa $ 8,000,000 $ 1,990,000 148371AH Central California Jt. Pwrs. Health Fing. Auth.: Rfdg. (Commty. Hosp. of Central California Proj.) 5% 2/1/23 A 3,500,000 3,027,500 152757AR Ctfs. of Prtn. (Commty. Hosp. of Central California Proj.) 5.25% 2/1/13 A 4,000,000 3,675,000 152757AQ Central Valley Fing. Auth. Rev. (Cogeneration Proj.) (Carson Ice Gen. Proj.): 6% 7/1/09 BBB- 2,050,000 2,019,250 155689AG 6.10% 7/1/13 BBB- 1,000,000 988,750 155689AK 6.20% 7/1/20 BBB- 1,450,000 1,440,937 155689AH Chico Pub. Fing. Auth. Rev. 6.625% 4/1/21, (FGIC Insured) Aaa 2,000,000 2,177,500 168505BG Clovis Unified School Dist. (Cap. Appreciation) Series B, 0% 8/1/03 A1 3,485,000 2,104,068 189342QG Coalinga Ctfs. of Prtn. 7% 4/1/10 BBB+ 1,655,000 1,739,818 19021CAP Contra Costa County Ctfs. of Prtn. (Merrithew Mem. Hosp.) (Cap. Appreciation) 0% 11/1/14 A1 6,805,000 2,015,980 21223TEK Contra Costa County Multi-Family Hsg. Rev. (Del Norte Place) Series B, 7.85% 8/20/33, (GNMA Coll.)(b) AAA 2,865,000 3,140,756 212249AA Contra Costa Home Mtg. Fin. Auth. Home Mtg. Rev. 0% 9/1/17, (MBIA Insured) (Escrowed to Maturity) (e) Aaa 12,500,000 3,156,250 212216CA Del Norte County Pub. Wks. Rev. Rfdg.: (Dept. of Corrections): 5.125%, 12/1/08 A1 2,250,000 2,157,188 13068GSY 5.20%, 12/1/09 A1 6,110,000 5,857,963 13068GSZ Desert Hosp. Rev. Ctfs. of Prtn. (Desert Hosp. Corp.) Series 1992, 10.029% 7/28/20, (Cap. Guaranty Insured)(d) Aaa 4,000,000 4,645,000 25041MAZ Duarte Ctfs of Prtn. (City of Hope Nat'l. Medical Ctr.) 6.25% 4/1/23 Baa1 2,000,000 2,025,000 263584CS Eastern Muni. Wtr. Dist. Wtr. & Swr. Rev. Ctfs. of Prtn. 6.75% 7/1/12, (FGIC Insured) Aaa 2,000,000 2,282,500 276771AR Escondido Ctfs. of Prtn. Rfdg. (Redwood Terrace Lutheran Home) 7% 11/15 A+ 1,600,000 1,740,000 296337CM Escondido Joint Pwr. Fing. Auth. Rev. (Cap. Appreciation) 0% 9/1/12, (AMBAC Insured) Aaa 2,160,000 756,000 29634EAS MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Fairfield-Suisun Swr. Dist. Swr. Rev. Rfdg. Series A, (MBIA Insured): 0% 5/1/07 Aaa $ 1,635,000 $ 799,106 304730CQ 0% 5/1/08 Aaa 2,085,000 953,888 304730CR 0% 5/1/09 Aaa 2,080,000 889,200 304730CS Folsom Pub. Fing. Auth. Local Agcy. Rev. Series A, 7.25% 10/1/10 BBB+ 1,285,000 1,370,131 344392BB Fontana Redev. Agcy. Tax Allocation Rfdg. (Yurupa Hills) Series 1992 A, 7.10% 10/1/23 BBB 2,000,000 2,175,000 344619CL Foster City Pub. Fing. Auth. Foster City Commty. Rev. (Proj. Loan) Series A, 6% 9/1/13 A- 3,000,000 2,917,500 350057AP Fresno Swr. Rev. (AMBAC Insured): (Fowler Ave. Proj.) Series 1991 A, 6.25% 8/1/11 Aaa 2,500,000 2,628,125 358229BQ Series A-1, 6.25% 9/1/14 Aaa 2,250,000 2,452,500 358229CJ Garden Grove Agcy. Commty. Dev. Tax Allocation Rfdg. (Garden Grove Commty. Proj.) 5.70% 10/1/13 A 2,000,000 1,927,500 365251CN Glendale Hosp. Rev. Rfdg. (Adventist Health) Series A, 6.50% 3/1/07, (MBIA Insured) Aaa 2,500,000 2,706,250 378432DH Industry Urban Ind. Dev. Agcy. Rev.: Rfdg. (Civic Recreational Proj.#1) Series A, 7.375% 5/1/12 - 8,600,000 9,298,750 456567MG (Civic Recreational Proj.#1-B) 7.375% 5/1/15, (Unrefunded Balanced) - 1,140,000 1,232,625 456567QS Inglewood Ctfs. of Prtn. (Civic Center Impt. Proj.) 7% 8/1/19 A 1,000,000 1,057,500 457079AV Irvine Ranch Wtr. Dist. Joint Pwr. Agcy. Local Pool Rev.: 7.80% 2/15/08 A 1,560,000 1,678,950 463656AP 7.875% 2/15/23 A 5,500,000 5,946,875 463656AR 8.25% 8/15/23 BBB 16,365,000 18,001,500 463656BE Kaweah Delta Hosp. Dist. Rev. Rfdg. 7.25% 11/1/16 A 3,000,000 3,198,750 486380AH King Ctfs. of Prtn. 7.50% 7/1/04 - 2,800,000 3,094,000 494688AJ Los Angeles County Cap. Asset Leasing Corp. Leasehold Rev. (AMBAC Insured): 4.05% 12/1/09 Aaa 2,320,000 2,378,000 544900CE 4.05% 12/1/10 Aaa 1,565,000 1,602,169 544900CF MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Los Angeles County Ctfs. of Prtn.: (Cap. Appreciation): 0% 9/1/10 A $ 2,980,000 $ 1,102,600 5446634F 0% 3/1/17 A 3,450,000 823,688 5446634U 0% 3/1/20 A 1,000,000 198,750 5446634C (Correctional Facs.) 0% 9/1/11, (MBIA Insured) Aaa 6,400,000 2,368,000 544663G8 (Disney Parking Proj.): 0% 9/1/11 A 1,000,000 342,500 5446634J 0% 3/1/12 A 2,180,000 724,850 5446634J 0% 3/1/13 A 2,750,000 859,375 5446634L 0% 9/1/13 A 3,215,000 972,538 5446634M 0% 9/1/15 A 3,815,000 1,010,975 5446634R 0% 9/1/18 A 8,775,000 1,908,563 5446634X 0% 3/1/19 A 3,175,000 670,719 5446634Y 0% 9/1/20 A 5,425,000 1,044,313 5446635A (Health Facs. Construction Loan) (Bay Harbor Hosp.) 7.30% 4/1/20 A+ 1,000,000 1,096,250 544358GV Los Angeles County Trans. Commission Sales Tax Rev. Rfdg. Series B, 6.50% 7/1/13 A1 2,300,000 2,443,750 545170GM Los Angeles Dept. Wtr. & Pwr. Wtrwks. Rev. Rfdg. 4.50% 5/15/23 Aa 1,500,000 1,233,750 544524HJ Los Angeles Wastewtr. Sys. Rev. Series D, 6.25% 12/1/15, (MBIA Insured) Aaa 2,000,000 2,102,500 544652NJ M-S-R Pub. Pwr. Agcy. San Juan Proj. Rev. Series B, 6.75% 7/1/11, (MBIA Insured) Aaa 1,750,000 1,933,750 553751EV Manteca Ctfs. of Prtn. (St. Domenic's Hosp.) 7% 6/1/17, (MBIA Insured) Aaa 1,000,000 1,113,750 564512AK Metropolitan Wtr. Dist. Southern Wtrwks. Rev. 8.172% 8/10/18 (d) Aa 2,500,000 2,637,500 592663MN Modesto Ctfs. of Prtn.: (Commty. Ctr. Refing. Proj.) Series A, 5.60% 11/1/14, (AMBAC Insured) Aaa 1,370,000 1,370,000 607715FC (Golf Course Refing. Proj.) Series B, 5% 11/1/23, (AMBAC Insured) Aaa 1,585,000 1,440,369 607715FF Modesto Irrigation Dist. Ctfs. of Prtn. Rfdg. & Cap. Impts. Series A, 0% 10/1/10, (MBIA Insured) Aaa 2,270,000 885,300 607762DH Moreno Valley Unified School Dist. Ctfs. of Prtn. 7.40% 9/1/16 Baa 175,000 174,344 616872BT Mount Shasta Hosp. Rev. Ctfs. of Prtn. (Mercy Med. Ctr.) Series A, 7.25% 7/1/19 A+ 1,435,000 1,592,850 623091AA MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Northern California Pwr. Agcy. Pub. Pwr. Rev.: Rfdg. (Geothermal Proj. #3) Series A: 5.80% 7/1/09 A $ 3,000,000 $ 3,067,500 664843RZ 5.85% 7/1/10 A 1,875,000 1,917,188 664843SB (Hydroelec. Proj. #1) Series E, 7.15% 7/1/24 A 1,000,000 1,090,000 664843NQ 7.50% 7/1/23, (AMBAC Insured) (Pre-Refunded to 7/1/21 @ 100)(e) Aaa 1,170,000 1,487,363 664843NV Norwalk Redev. Agcy. Tax Allocation (Norwalk Redev. Proj. #1) 7.15% 12/1/15, (Pre-Refunded to 12/1/95 @ 102)(e) - 3,900,000 4,095,000 668823CM Ontario Redev. Fing. Auth. Rev. (Ctr. City Cimarron Proj.#1) (MBIA Insured): 0% 8/1/08 Aaa 3,255,000 1,468,819 68304EAU 0% 8/1/09 Aaa 3,260,000 1,381,425 68304EAV Orange County Ctfs. of Prtn. (Civic Ctr. Facs.) 0% 12/1/18, (AMBAC & MBIA Insured) Aaa 7,500,000 1,753,125 684228FR Orange County Dev. Agcy. Tax Allocation (Santa Ana Heights Proj.) 6.125% 9/1/23 Baa1 3,500,000 3,460,625 684246CB Orange County Local Trans. Sales Tax Rev. Ltd. Tax 6% 2/15/08 Aa 1,250,000 1,320,313 684273BP Palm Desert Fing. Auth. Tax Allocation 9.83% 4/1/22, (MBIA Insured) (d) Aaa 2,750,000 3,131,563 696617BG Palm Springs Ctfs. of Prtn. (Muni. Golf Course Expansion Proj.) 7.40% 11/1/18 BBB+ 1,500,000 1,659,375 696656FK Palomar Pomerado Health Sys. Rev. (MBIA Insured): 0% 11/1/03 (Pre-Refunded to 5/1/96 @103) (e) Aaa 3,075,000 1,864,219 69753EAW 0% 11/1/05 Aaa 3,075,000 1,641,281 69753EAY Pasadena Ctfs. of Prtn. Rfdg. (Old Pasadena Pkg. Facs. Proj.) 6.25% 1/1/18 A1 3,605,000 3,744,694 702204HA Perris Single Family Mtg. Rev. Series A, 0% 6/1/23, (GNMA Coll.)(Escrowed to Maturity) (b)(e) Aaa 8,365,000 1,442,963 714386AT Pleasanton Jt. Pwrs. Fin. Auth. Reassessment, Series A, 6.15% 9/1/12 Baa 5,380,000 5,420,350 728816AW MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Port Oakland Port. Rev. Rfdg. Series F, (MBIA Insured): 0% 11/1/06 Aaa $ 1,250,000 $ 631,250 734897RQ 0% 11/1/08 Aaa 3,500,000 1,540,000 734897RS Poway Ctfs. of Prtn. (FSA Insured): Rfdg. (Pointsettia Mobilehome Park) 6.375% 6/1/18 Aaa 2,800,000 2,954,000 738756CD (Poway Royal Mobile Home Park) (Cap. Impt. Proj.) 7% 7/1/20 Aaa 2,500,000 2,709,375 738756BC Poway Redev. Agcy. (Paguay Proj.) Tax Allocation 7.93% 12/15/14, (FGIC Insured) (d) Aaa 9,365,000 9,423,531 738800DV Rancho Cucamonga Redev. Agcy. Tax Allocation (Rancho Redev. Proj.) 7.125% 9/1/19, (MBIA Insured) Aaa 1,000,000 1,125,000 752123CQ Rancho Mirage Joint Pwrs. Fing. Auth. Ctfs. of Prtn. (Eisenhower Mem. Hosp.) 7% 3/1/22 Baa1 1,000,000 1,076,250 75212HAM Rancho Wtr. Dist. Fin. Auth. 4.75% 8/15/21, (AMBAC Insured) Aaa 2,000,000 1,737,500 752111DC Redlands Redev. Agcy. Tax Allocation (Redlands Redev. Proj.) 7% 7/1/17 Baa 3,835,000 3,983,606 757593DP Richmond Joint Pwr. Fing. Auth. Rev. Series B: 7% 5/15/07 A- 2,375,000 2,615,469 764440AH 7.25% 5/15/13 A- 2,500,000 2,775,000 764440AJ Riverside County Asset Leasing Corp. Leasehold Rev. (Riverside County Hosp. Proj.) Series A: 6.375% 6/1/09 (Detachable Call Option) A 3,000,000 3,131,250 768903AW 6.50% 6/1/12 A 5,500,000 5,795,625 768903AR 6.25% 6/1/19 A 4,000,000 4,085,000 768903AG Riverside County Ctfs. of Prtn.: Rfdg. (Air Force Village West, Inc.) Series A, 8.125% 6/15/20 A-1+ 5,500,000 5,802,500 768901FQ (Air Force Village West, Inc.) Series A, 8.125% 6/15/12 A-1+ 2,690,000 2,837,950 768901FT Riverside County Redev. Agcy. Tax Allocation (Redev. Proj. #4) Series A: 7.50% 10/1/10 BBB 1,000,000 1,092,500 769123BN 7.50% 10/1/26 BBB 2,500,000 2,731,250 769123BP Riverside Redev. Agcy. Multi-Family Rev. (First & Market Proj.) Series A, 7.75% 9/1/21 (b) Baa 4,200,000 4,462,500 769046AB Riverside Unified School Dist. Ctfs. of Prtn. (Cap. Appreciation Land Acquisition Proj.) Series B, 0% 9/1/26, (FSA Insured) (f) Aaa 2,150,000 1,617,875 769062AD MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Sacramento City Fing. Auth. (Cap. Appreciation Tax Allocation Proj.)(MBIA Insured): Series A, 0% 11/1/16 Aaa $ 5,700,000 $ 1,517,625 785849BS Series B, 0%11/1/13 Aaa 500,000 160,625 785849BP Sacramento County Single Family Mtg. Rev. Series A, 7.80% 10/1/23, (FNMA & GNMA Coll.)(b) AAA 115,000 120,606 786149EY Sacramento Fing. Auth. Lease Rev. Rfdg. Series A, 5.40% 11/1/20, (AMBAC Insured) Aaa 2,500,000 2,421,875 785846BN Sacramento Muni. Util. Dev. Index Inflows 0% 7.33%11/15/08, (FGIC Insured)(d) Aaa 7,000,000 6,938,750 7860042C Sacramento Muni. Util Dist. Elec. Rev. 9.78% 8/15/18, (FGIC Insured) (d) Aaa 1,750,000 2,021,250 786004U5 Sacramento Redev. Agcy. Tax Allocation (Downtown Redev. Proj.) Series A, (MBIA Insured): 6.75% 11/1/05 Aaa 2,000,000 2,235,000 786059JZ 6.50% 11/1/13 Aaa 2,000,000 2,147,500 786059KA Salinas Facs. Rev. (Villa Sierra Proj.) Series A, 7.95% 4/20/31, (GNMA Coll.) AAA 2,450,000 2,578,625 794904AD San Bernardino County Ctfs. of Prtn.: (Cap. Facs. Proj.) Series B, 6.875% 8/1/24 Baa1 2,500,000 2,959,375 796815KR (Med Ctr. Fing. Proj.)(g): 5.50% 8/1/17 Baa1 6,500,000 5,988,125 796815NL 5.50% 8/1/22 Baa1 4,500,000 4,095,000 796815NN San Bernardino County Trans. Auth. Sales Tax Rev. Series A, 6% 3/1/10, (FGIC Insured) Aaa 2,000,000 2,077,500 796846AP San Bernardino Health Care Sys. Rev. (Sisters of Charity) Series A, 7% 7/1/11 Aa 1,410,000 1,551,000 796790CA San Diego County Wtr. Auth. Wtr. Rev. Ctfs. of Prtn. (Reg. Rites) 8.50724% 4/25/07, (FGIC Insured) (d) Aaa 1,250,000 1,337,500 797415CS San Francisco City & County Redev. Agcy. 7.75% 9/1/06 - 6,000,000 6,352,500 797712AE San Francisco City & County Redev. Agcy. Multi-family Rev. Rfdg. Hsg. (South Beach Proj.) 5.70% 3/1/29 (GNMA Coll.) Aaa 5,000,000 4,812,500 79765TAP San Francisco City & County Redev. Fing. Auth. Tax Allocation: Rfdg. (Cap. Appreciation) (Redev. Proj.) Series B, 0% 8/1/10, (MBIA Insured) Aaa 1,475,000 586,313 79771PDM MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED San Francisco City & County Redev. Fing. Auth. Tax Allocation - continued: Series B, 0% 8/1/12, (MBIA Insured) Aaa $ 1,475,000 $ 523,625 79771PDQ San Francisco City & County Single Family Mtg. Rev. 7.45% 1/1/24, (FNMA & GNMA Coll.)(b) AAA 255,000 273,169 797717FP San Joaquin County Ctfs. of Prtn. (Gen. Hosp. Proj.) 6.25% 9/1/13 A 2,500,000 2,571,875 798085DW San Joaquin Hills Trans. Corridor Agcy. Toll Road Rev. (Sr. Lien): 0% 1/1/04 - 2,350,000 1,424,688 798111AE 0% 1/1/07 - 3,000,000 1,890,000 798111AJ 5% 1/1/33 - 4,975,000 3,973,781 798111BJ San Jose Redev. Agcy. Tax Allocation Redev. Proj. 5% 8/1/21 (MBIA Insured) A 10,000,000 8,787,500 798147LG Santa Barbara Ctfs. of Prtn.: (American Baptist Hosp.) 7.40% 5/15/15 A+ 2,000,000 2,227,500 801242DF 6.40% 2/1/11 A+ 2,490,000 2,570,925 801321DQ Santa Clara Ctfs. of Prtn. Ref. Series A, 4.75% 2/1/14, (MBIA Insured) Aaa 1,250,000 1,131,250 801400BG Selma Redev. Agcy. Tax Allocation (Selma Redev. Proj.) 8.10% 8/1/13 (h) - 825,000 866,250 816537AN Sequoia Hosp. Dist. Rev.: 5.375% 8/15/13 A 4,000,000 3,750,000 817393BZ 5.375% 8/15/23 A 8,275,000 7,540,594 817393CA Solano County Ctfs. of Prtn. Rfdg. (Justice Facs. & Pub. Bldg. Proj.) 5.875% 10/1/05 Baa1 2,500,000 2,521,875 834131BR Southern California Home Fin. Auth. Single Family Mtg. Rev. Series B, 7.75% 3/1/24, (GNMA & FNMA Coll.)(b) AAA 275,000 299,406 842440DQ Southern California Pub. Pwr. Auth. Pwr. Proj. Rev.: Rfdg. (Palo Verde Proj.) Series A: 0% 7/1/14, (AMBAC Insured) Aaa 8,325,000 2,539,125 842475JH 5% 7/1/15 Aa 1,125,000 1,027,969 842475NF (Multiple Proj.): 6.75% 7/1/11 A 6,500,000 7,239,375 842475KL 6.75% 7/1/12 A 1,960,000 2,190,300 842475KM 6.75% 7/1/13 A 3,000,000 3,363,750 842475KN Southern California Pub. Pwr. Auth. Southern Transmission (Cap. Appreciation) 0% 7/1/14 Aa 5,000,000 1,506,250 842477JF Southern California Pub. Pwr. Auth. Transmission Proj. Rev. Rfdg. (Sub Crossover) 0% 7/1/13 (100% GIC In Escrow until 1/1/94) Aa 1,500,000 480,000 842477JE MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Sulphur Springs Unified School Dist. (MBIA Insured): Series A, 0% 9/1/08 Aaa $ 2,745,000 $ 1,221,525 865480EY Unltd. Tax Series A, 0% 9/1/12 Aaa 2,750,000 948,750 865480FC Sunnyvale Fing. Agcy. Util. Rev. (Solid Waste Materials Recovery) Series B, 6% 10/1/17 (MBIA Insured)(b) Aaa 3,000,000 3,082,500 867549BU Torrance Hosp. Rev. (Little Co. of Mary Hosp.) 6.875% 7/1/15 A 920,000 1,000,500 891368CK Upland Ctfs. Partn. (San Antonio Commty. Hosp.) 5.25% 1/1/08 A 1,850,000 1,764,438 915346DN Upland Hosp. Ctfs. of Prtn. (San Antonio Commtys. Hosp.) 5.25% 1/1/13 A 3,000,000 2,767,500 915346DP Upland Hsg. Auth. Rev. Issue A, 7.85% 7/1/20 - 990,000 1,037,025 91536HAL Vallejo Ctfs. of Prtn. (Marine World Foundation Proj.) 8.10% 2/1/21 - 7,780,000 8,110,650 919191BC Valley Ctr. Union School Dist. Series A, 0% 9/1/17, (MBIA Insured) Aaa 8,835,000 2,263,970 919439BT Vista Unified School Dist. Ctfs. of Prtn. 0% 9/1/11, (MBIA Insured) Aaa 8,585,000 2,672,081 92834MAJ Walnut Pub. Fing. Auth. Tax Allocation Rev. Rfdg. (Walnut Impt. Proj.) 6.50% 9/1/22, (MBIA) Aaa 1,500,000 1,618,125 932660AR West & Central Basin Fing. Auth. Rev.: Rfdg. (West Basin Proj.) Series A, 5% 8/1/10, (AMBAC Insured) Aaa 1,155,000 1,097,250 95122ECD (West Basin Proj.) Series A, 5% 8/1/10, (AMBAC Insured) Aaa 1,750,000 1,662,500 95122ECE 527,930,712 GUAM - 0.7% Guam Arpt. Auth. Rev.: Series A, 6.60% 10/1/10(b) BBB 1,000,000 1,045,000 400648BK Series B, 6.70% 10/1/23(b) BBB 2,850,000 2,988,938 400648BM 4,033,938 PUERTO RICO - 2.2% Puerto Rico Commonwealth Hwy. & Trns. Auth. Rev. Series W, 5.50% 7/1/13 Baa1 5,125,000 5,028,906 745181BZ Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Series P, 7% 7/1/21 Baa1 4,000,000 4,440,000 745268LL Puerto Rico Tel. Auth. Rev. 6.78% 1/1/04, (AMBAC Insured) (d) Aaa 2,250,000 2,188,125 745297HX 11,657,031 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) U.S. VIRGIN ISLANDS - 0.3% Virgin Islands Pub. Fin. Auth. Rev. Rfdg. Series A, 7.25% 10/1/18 (e) - $ 1,500,000 $ 1,650,000 927676CF TOTAL MUNICIPAL BONDS (Cost $519,167,374) $ 545,271,681 MUNICIPAL NOTES (A) - 1.5% CALIFORNIA - 1.5% California Poll. Cont. Fing. Auth. Resources Recovery Rev., VRDN: (Delano Proj.) Series 1991, 2.30%, LOC Algemene/ABN-AMRO Bank, (b) P-1 300,000 300,000 130535BE (Ultra Pwr. Rocklin Proj.) Series 1988 B, 2.35%, LOC Bank of America Nat'l. Trust & Savings - 3,000,000 3,000,000 130535AN Contra Costa Tax and Rev. Anticipation Notes, Series A, 3.25% 7/29/94 MIG 1 5,000,000 5,004,650 212219BV TOTAL MUNICIPAL NOTES (Cost $8,309,087) $ 8,304,650 OTHER SECURITIES - 0.0% RIGHTS CALIFORNIA - 0.0% Riverside County Asset Leasing Corp. Leasehold Rev. (Riverside County Hosp.) Series A (Call Rights) 6.50% 6/1/12 (Cost $59,590) - 1,100 220,688 TOTAL INVESTMENTS - 100% (Cost $527,536,051) $ 553,797,019 FUTURES CONTRACTS AMOUNT IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT AT VALUE GAIN/(LOSS) SELL 65 U.S. Treasury Bond Futures March, 1994 7,306,406 $ 4,721 THE VALUE OF FUTURES CONTRACTS SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 1.3% SECURITY TYPE ABBREVIATIONS VRDN - Variable Rate Demand Notes LEGEND (a) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (b) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals (AMT securities). (c) Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (d) Inverse floating rate security is a security where the coupon is inversely indexed to a floating interest rate. The price will be more volatile than the price of a comparable fixed rate security. (e) Security collateralized by an amount sufficient to pay interest and principal. (f) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. (g) Security purchased on a delayed delivery basis (see Note 2 of Notes to Financial Statements). (h) Security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $1,805,000. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 59.5% AAA, AA, A 72.1% Baa 9.6% BBB 9.2% Ba 0.0% BB 0.0% B 0.0% B 0.0% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 8.6%. The distribution of municipal securities by revenue source, as a percentage of total value of investment in securities, is as follows: Lease Revenue 26.1% Health Care 19.8 Special Tax 18.3 Others (individually less than 10%) 35.8 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1994 the aggregate cost of investment securities for income tax purposes was $527,536,051. Net unrealized appreciation aggregated $26,260,968, of which $30,416,067 related to appreciated investment securities and $4,155,099 related to depreciated investment securities. The fund hereby designates $1,656,000 as a capital gain dividend for the purpose of the dividend paid deduction. At February 28, 1994 the fund was required to defer $3,065,000 of losses on futures contracts and options. SPARTAN CALIFORNIA MUNICIPAL HIGH YIELD PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994 1.ASSETS 2. 3. 4.Investment in securities, at value (cost $527,536,051) 5. $ 553,797,019 (Notes 1 and 2) - See accompanying schedule 6.Cash 7. 33,660 8.Receivable for investments sold 9. 19,997,305 10.Interest receivable 11. 7,182,991 12.Redemption fees receivable (Note 1) 13. 1,837 14. 15.TOTAL ASSETS 16. 581,012,812 17.LIABILITIES 18. 19. 20.Payable for investments purchased $ 10,426,032 21. Delayed delivery (Note 2) 22.Payable for fund shares redeemed 3,263,887 23. 24.Dividends payable 409,777 25. 26.Accrued management fee 249,597 27. 28.Payable for daily variation on futures contracts 50,781 29. 30. 31.TOTAL LIABILITIES 32. 14,400,074 33.34.NET ASSETS 35. $ 566,612,738 36.Net Assets consist of (Note 1): 37. 38. 39.Paid in capital 40. $ 533,683,167 41.Accumulated undistributed net realized gain (loss) on 42. 6,663,882 investments 43.Net unrealized appreciation (depreciation) on: 44. 45. 46. Investment securities 47. 26,260,968 48. Futures contracts 49. 4,721 50.51.NET ASSETS, for 51,839,522 shares outstanding 52. $ 566,612,738 53.54.NET ASSET VALUE, offering price and redemption 55. $10.93 price per share ($566,612,738 (divided by) 51,839,522 shares)
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1994 56.57.INTEREST INCOME 58. $ 36,476,769 59.EXPENSES 60. 61. 62.Management fee (Note 4) $ 3,287,940 63. 64.Non-interested trustees' compensation 3,794 65. Total expenses before reductions 3,291,734 66. Expense Reductions (Note 5) (202,856) 3,088,878 67.68.NET INTEREST INCOME 69. 33,387,891 70.REALIZED AND UNREALIZED GAIN (LOSS) ON 72. 73. INVESTMENTS (NOTES 1 AND 3) 71.Net realized gain (loss) on: 74. Investment securities 24,834,702 75. 76. Futures contracts 1,770,838 26,605,540 77.Change in net unrealized appreciation (depreciation) 78. 79. on: 80. Investment securities (26,250,217) 81. 82. Futures contracts (487,377) (26,737,594) 83.84.NET GAIN (LOSS) 85. (132,054) 86.87.NET INCREASE (DECREASE) IN NET ASSETS 88. $ 33,255,837 RESULTING FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
YEAR TEN MONTHS ENDE ENDED D FEBRUARY 28, 1994 FEBRUARY 28, 1993 (NOTE 1) 89.INCREASE (DECREASE) IN NET ASSETS 90.Operations $ 33,387,891 $ 25,995,632 Net interest income 91. Net realized gain (loss) on investments 26,605,540 3,878,795 92. Change in net unrealized appreciation (depreciation) (26,737,594) 37,174,010 on investments 93. 94.NET INCREASE (DECREASE) IN NET ASSETS 33,255,837 67,048,437 RESULTING FROM OPERATIONS 95.Distributions to shareholders (33,387,891) (25,995,632) From net interest income 96. From net realized gain (17,385,450) (3,291,418) 97. In excess of net realized gain (3,001,030) - 98. 99.TOTAL DISTRIBUTIONS (53,774,371) (29,287,050) 100.Share transactions 153,539,687 179,086,059 Net proceeds from sales of shares 101. 46,508,005 25,707,655 Reinvestment of distributions 102. Cost of shares redeemed (186,891,146) (147,921,333) 103. Redemption fees (Note 1) 103,560 100,581 104. 13,260,106 56,972,962 Net increase (decrease) in net assets resulting from share transactions 105. (7,258,428) 94,734,349 106.TOTAL INCREASE (DECREASE) IN NET ASSETS 107.NET ASSETS 108. 109. 110. Beginning of period 573,871,166 479,136,817 111. End of period $ 566,612,738 $ 573,871,166 112.OTHER INFORMATION 114. 115. 113.Shares 116. Sold 13,616,855 16,578,722 117. Issued in reinvestment of distribution 4,155,944 2,379,910 118. Redeemed (16,596,175) (13,752,500) 119. Net increase (decrease) 1,176,624 5,206,132
FINANCIAL HIGHLIGHTS
120. YEAR TEN MONTHS YEARS ENDED APRIL 30, NOVEMBER 27, ENDED ENDED 1989 FEBRUARY 28 FEBRUARY 28, (COMMENCEME , 1993 NT OF OPERATIONS) TO APRIL 30, 121. 1994 (NOTE 1) 1992 1991 1990 122.SELECTED PER-SHARE DATA 123.Net asset value, $ 11.330 $ 10.540 $ 10.240 $ 9.760 $ 10.000 beginning of period 124.Income from .631 .543 .663 .706 .301 Investment Operations Net interest income 125. Net realized and (.012) .858 .297 .472 (.249) unrealized gain (loss) on investments 126. Total from .619 1.401 .960 1.178 .052 investment operations 127.Less Distributions (.631) (.543) (.663) (.706) (.301) From net interest income 128. From net realized (.330) (.070) - - - gain on investments 129. Distributions in (.060) - - - - excess of net realized gain 130. Total distributions (1.021) (.613) (.663) (.706) (.301) 131.Redemption fees .002 .002 .003 .008 .009 added to paid in capital 132.Net asset value, end $ 10.930 $ 11.330 $ 10.540 $ 10.240 $ 9.760 of period 133.TOTAL RETURN (DAGGER) 5.63% 13.76% 9.66% 12.52% .59% 134.RATIOS AND SUPPLEMENTAL DATA 135.Net assets, end of $ 566,613 $ 573,871 $ 479,137 $ 281,725 $ 107,409 period (000 omitted) 136.Ratio of expenses to .52% .40%* .36% .19% - average net assets(DAGGER)(DAGGER) 137.Ratio of expenses to .55% .55%* .55% .55% .55%* average net assets before expense reductions(DAGGER)(DAGGER) 138.Ratio of net interest 5.58% 6.07%* 6.36% 7.02% 7.42%* income to average net assets 139.Portfolio turnover 54% 26%* 13% 15% 5%* rate
* ANNUALIZED (DAGGER) TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. (DAGGER)(DAGGER) SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS. SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each figure includes changes in a fund's share price, reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value), and the effect of the $5 account closeout fee. You can also look at the fund's income. If Fidelity had not reimbursed certain fund expenses during the periods shown, the total returns, dividends and yields would have been lower. CUMULATIVE TOTAL RETURNS PERIOD ENDED FEBRUARY 28, 1994 LIFE OF FUND Spartan California Intermediate Municipal -1.72% Lehman Brothers Municipal Bond Index n/a Average California Tax-Exempt Municipal Intermediate Bond Fund n/a Consumer Price Index 0.62% CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in this case, since the fund started on December 30, 1993. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, you would end up with $1,050. Once the fund is six months old, you can compare the fund's results to the performance of the Lehman Brothers Municipal Bond Index - a broad gauge of the municipal bond market. To measure how the fund stacks up against its peers (again, once it's six months old), you can also look at the average California tax-exempt intermediate municipal bond fund, which reflects the performance of 22 California tax-exempt intermediate municipal bond funds tracked by Lipper Analytical Services. Both benchmarks include reinvested dividends and capital gains, if any. Comparing the fund's performance to the consumer price index helps show how your fund did compared to inflation. (The periods covered by the CPI numbers are the closest available match to those covered by the fund.) AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) results and show you what would have happened if the fund had performed at a consistent rate each year. Average annual returns for the fund and its benchmarks will appear in the fund's next annual report, once the fund is older; this next report will also show the effect of investing $10,000 over the life of the fund for both the fund and the Lehman Brothers Municipal Bond Index. INCOME DECEMBER 30, 1993 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1994 Income return 0.69% Change in share price -2.41% Total return -1.72% INCOME returns and changes in share price are both part of a bond fund's total return. An income return reflects the dividends paid by the fund and assumes the dividends are reinvested. Changes in the fund's share price include changes in the prices of the bonds owned by the fund. Change in share price and total return figures include the effect of the $5 account closeout fee. DIVIDENDS AND YIELD PERIOD ENDED FEBRUARY 28, 1994 PAST 30 LIFE OF DAYS FUND Dividends per share n/a 7.02(cents) Annualized dividend rate n/a 4.21% Annualized yield 4.83% n/a Tax-equivalent yield 8.48% n/a DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $9.97 over the life of the fund, you can compare the fund's income over these two periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. The tax-equivalent yield shows what you would have to earn on a taxable investment to equal the fund's tax-free yield, if you're in the 43.04% combined effective 1994 federal and state income tax bracket. SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Bond investments - including tax-free issues - provided solid returns for the 12 months ended February 28, 1994, despite a dramatic downturn in February. Falling interest rates pushed up bond prices steadily through mid-October, when the yield on the benchmark 30-year Treasury bond reached a historic low of 5.79%. By year-end, a strengthening economy had fueled mild inflation fears. That pushed up the yield on the 30-year bond to 6.35% on December 31, which forced investors to give back some of their earlier profits. Inflation jitters eased and bond yields dropped in January. However, when the Federal Reserve Bank raised short-term interest rates in an attempt to control inflation on February 4, investors reacted negatively. At the end of February, the yield on the 30-year bonds was 6.66%, about 38 basis points higher than at the beginning of the month. Over the year, higher federal income taxes boosted demand for municipal bonds. But municipal bond prices were hurt by the Fed's action in February and by record new issuance, which kept supplies high and dampened prices. The return on the Lehman Brothers Municipal Bond Index, a broad measure of the tax-free market, rose 5.54%. By comparison, the Lehman Brothers Aggregate Bond Index, which tracks investment-grade taxable bonds, returned 5.40%. Globally, falling interest rates and low inflation drove good annual returns in Europe, Japan, and most emerging markets, although many of these markets fell in February along with the U.S. bond market. The Salomon Brothers World Government Bond Index - which includes U.S. issues - returned 9.34%, while the J.P. Morgan Emerging Markets Bond Index was up a dramatic 29.46%. Interview with David Murphy, Portfolio Manager of Spartan California Intermediate Municipal Portfolio Q. DAVID, HOW DID THE FUND DO? A. The fund's total return from the start of operations on December 30, 1993 to February 28, 1994 was -1.72.%. Q. WHAT ACCOUNTED FOR THE NEGATIVE RETURN? A. In February, the Federal Reserve raised short-term interest rates, which caused short-term bond prices to fall. That also caused longer-term bond prices to drop, which in turn hurt the fund's investments. Despite the municipal bond market's negative reaction, I still think interest rates will continue to stay low over the long term. My view is that the Fed is very serious about being the inflation watchdog. Low inflation is generally good for bonds. Historically, a pick-up in the economy - like we saw in the fourth quarter of 1993 - means higher inflation. But this time, I don't think that relationship will hold up. Q. WHY IS THAT? A. Because I think that inflation is low, lower than the market has anticipated. We still haven't seen a broad-based increase in any of the three basic components of higher inflation: commodity prices, labor costs, and the cost of borrowing money. While it's true that some commodity prices - - like gold, grains, and copper - have risen, others - like oil - haven't. Plus, some of the hike in agricultural products was due to extraordinary factors like last year's flood and the recent cold weather. Q. AND THE OTHER TWO INFLATIONARY SIGNALS? A. On the wage side, many U.S. companies now have the flexibility to move their production overseas, where labor prices are often cheaper, and that has kept pressure on labor costs here. Also, productivity has increased, which means the actual cost of producing one unit of a given good has come down. Finally, the cost of borrowing money is still low. In my view, these all add up to continued low inflation, which in turn could lead to falling interest rates, especially in the longer end of the maturity spectrum between 10 and 30 years. Q. WHAT'S YOUR VIEW OF THE CALIFORNIA ECONOMY? A. My view is that the California economy is at a turning point. I think we should start to see evidence of expansion soon, even though that expansion will be modest initially. Employment in California is expected to grow in 1994, and there's been a rebound in retail sales and help-wanted advertising. Plus, the passage of NAFTA should be a positive for the state. Finally, federal assistance and private insurance payments stemming from the recent Los Angeles earthquake will provide a $14 billion stimulus for California. Q. IS YOUR OUTLOOK FOR THE STATE'S FISCAL SITUATION ALSO POSITIVE? A. On that front I have a few concerns. First, the state has drawn down its budget reserves. And second, the proposed 1994 budget assumes a $2.5 billion federal government appropriation earmarked for immigration issues. Yet it's not certain that appropriation will materialize. But, as the economy improves, so should tax revenues. As more people get back into the work force, income tax receipts will rise. If retail sales improve that would translate into higher sales tax revenues. The effect of those factors probably won't be felt for at least a year. So I think the state will continue to face fiscal pressures for the next 12 months. Q. IN LIGHT OF THOSE CONCERNS, WHAT HAS YOUR STRATEGY BEEN? A. Since we haven't seen a significant rebound yet, I've mainly focused on higher quality bonds. The fund's stake in Aaa bonds was 35.5% on February 28. As the economic rebound gains momentum, I may add some A- and Baa-rated bonds. In terms of maturity, I've concentrated on bonds with 10- to 15-year maturities. Out to 15 years, the yield curve -meaning the difference in yield between different maturity bonds - is steep. That means you get more yield buying 12-year bonds than five-year bonds. Beyond 15 years, the yield curve is flat and you don't get rewarded much for buying a longer-term bond. Q. WHAT DO YOU THINK INVESTORS CAN EXPECT FOR THE NEXT SIX MONTHS? A. Over the short term, more volatility. The municipal bond market seems to be expecting the Fed to raise short-term interest rates to 4%. Until that happens, the market probably will remain unsettled. But eventually, I believe that long-term municipal rates could start to fall again, and that intermediate rates could come down as well. Plus, the dwindling supply of municipal bonds should help. Falling interest rates and a shrinking supply would be positive for municipal bond prices. FUND FACTS GOAL: to provide current income exempt from federal and state income taxes START DATE: December 30, 1993 SIZE: as of February 28, 1994, over $22 million MANAGER: David Murphy, since December, 1993; manager, Spartan New York Intermediate Portfolio, since December,1993; Spartan Intermediate Municipal Portfolio, since April 1993; Spartan New Jersey Municipal High Yield Portfolio, since April 1991; Fidelity Limited Term Municipals, since December 1989; Spartan Short-Intermediate Municipal Fund, since December 1989 (checkmark) DAVID MURPHY ON INTERMEDIATE BONDS: "I think that intermediate bonds in the five- to 15- year range will be attractive in 1994. The yield curve - or the difference in yield between bonds with various maturities - is very steep up to 15 years. At the end of the period, a 15-year California Aaa bond paid about 5.40% yield, compared to a five-year bond which paid 4.40%. But in the 15- to 30-year range, the curve was flat. In that longer range, you only got rewarded with about one-quarter of a percentage in incremental yield. What's more, some institutional investors have started to increase their investments in intermediate bonds. That increased demand could be a positive for intermediate municipal bond prices." (bullet) About one-fifth of the fund's investments were in utilities - - like water, sewer, and electric revenue bonds - on February 28, 1994. These were attractive because the utilities have a stable cash flow, which helps insulate them during times when the economy is weak. (bullet) Health-care bonds were the fund's second largest concentration, at 19.2% of the total investments. They were attractive because of their relatively high yields. SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO INVESTMENT SUMMARY TOP FIVE SECTORS AS OF FEBRUARY 28, 1994 % OF FUND'S INVESTMENTS Health Care 19.2 Lease Revenue 19.2 Water & Sewer 12.5 Special Tax 9.9 Electric Revenue 8.4 AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1994 Years 8.3 AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL OF THE BONDS IN THE FUND IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT. DURATION AS OF FEBRUARY 28, 1994 Years 6.0 DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, THE SHARE PRICE OF A FUND WITH A FIVE-YEAR DURATION WILL FALL 5%. QUALITY DIVERSIFICATION AS OF FEBRUARY 28, 1994 (MOODY'S RATINGS) Aaa 35.5% Aa, A 46.3% Baa 18.2% Ba, B 0% Non-rated 0% Row: 1, Col: 1, Value: 35.5 Row: 1, Col: 2, Value: 46.3 Row: 1, Col: 3, Value: 18.2 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 5, Value: 0.0 THIS CHART EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO INVESTMENTS/FEBRUARY 28, 1994 (Showing Percentage of Total Value of Investments) MUNICIPAL BONDS - 78.7% MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - 76.8% ABAG Fin. Auth. for Nonprofit Corp. Cfts. of Prtn. (Stanford Univ. Hosp.) 5% 11/1/04 Aa $ 400,000 $ 401,500 00037EBA California Health Facs. Fing. Auth. Rfdg. (Catholic Healthcare West) 5% 7/1/07 (AMBAC Insured) Aaa 220,000 210,375 13033ABJ California Pub. Wrks. Board Lease Rev. Rfdg. Dept. State Prisons Series A, 5% 12/1/01 A1 200,000 199,500 13068GNR California Statewide Commtys. Dev. Corp. Auth. Rev. Ctfs. of Prtn. Rfdg. (Insured Hosp.) (Triad Healthcare): 5.25% 8/1/97 A+ 250,000 247,812 130909CF 5.90% 8/1/01 A+ 200,000 202,250 130909CK 6.25% 8/1/06 A+ 1,000,000 1,013,750 130909CM California University Rev. Rfdg. (Multiple Purp. Projs.) Series C: Rfdg. (Multiple Purp. Projs.) Series C, 4.80% 9/1/07 (AMBAC Insured) Aaa 300,000 286,500 Series C, 9% 9/1/02 (AMBAC Insured) Aaa 100,000 128,500 914113UE Carson Redev. Agcy. Rfdg. (Redev. Proj. Area 2) (Tax Allocation) 5.50% 10/1/02 Baa 100,000 99,625 145750DK Central Valley Fin. Auth. Cogeneration Proj. Rev. (Carson Ice Proj.) 5.80% 7/1/04 BBB- 200,000 199,500 155689AJ Clovis Unified School Dist. (Cap. Appreciation) Series B, 0% 8/1/02 A1 300,000 192,750 189342QF Cucamonga County Ctfs. of Prtn. Wtr. Dist. Facs. Proj. 5% 9/1/10 (FGIC Insured) Aaa 455,000 431,112 229694CV Fresno Swr. Rev. Series A-1, 5% 9/1/08, (AMBAC Insured) Aaa 105,000 101,587 358229CD Los Angeles County Ctfs. of Prtn. (Multiple Cap. Facs. Proj.) 8.55% 11/1/01 (d) A1 200,000 220,000 544663R9 Los Angeles County Metropolitan Trans. Auth. Sales Tax Rev. Rfdg. Series A: 5.20% 7/1/04 A1 750,000 749,063 544712AM 5.50% 7/1/09 A1 300,000 294,750 544712AA Los Angeles Dept. of Wtr. & Pwr. Elec. Rev.: Rfdg. 4.75% 8/15/07 Aa 800,000 756,000 544507LH 9% 10/15/01 Aa 110,000 138,875 544507JH MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Northern California Pwr. Agcy. Multiple Cap. Facs. Rev. Series A, 6% 8/1/03, (MBIA Insured) Aaa $ 300,000 $ 323,625 664842AH Orange County Dev. Agcy. Tax Allocation (Santa Ana Heights Proj.) 5.80% 9/1/03 Baa1 1,235,000 1,230,369 684246BU Palomar Pomerado Health Sys. Rev. 5% 11/1/07 (MBIA Insured) Aaa 300,000 287,250 69753EAP Port Oakland Port. Rev. Rfdg. Series F, 0% 11/1/05, (MBIA Insured) Aaa 300,000 161,625 734897RP Rancho Cucamonga Redev. Agcy. Tax Allocation (Rancho Redev. Proj.) 5% 9/1/10 (MBIA Insured) Aaa 300,000 286,125 752123DJ Redlands Ctfs. of Prtn. Rfdg. (Wtr. Treatment Facs. Proj.) 4.5% 9/1/15, (FGIC Insured) Aaa 930,000 942,788 757564GL Riverside County Trans. Commtys. Sales Tax Rev. Series A, 5.40% 6/1/03 (AMBAC Insured) Aaa 500,000 517,500 769125BB Rosemead Redev. Agcy. (Subordinated Lien Tax Allocation Proj. Area 1) 0% 10/1/98 A- 1,120,000 908,600 777520BH San Bernadino County Ctfs. of Prtn. Med. Ctr. Fing. 5.25% 8/1/05 (f) Baa1 1,235,000 1,171,706 796815NX San Diego County Ctfs. of Prtn. Rfdg. 5.25% 9/1/04 (AMBAC Insured) Aaa 500,000 509,375 797391HP San Diego County Reg.'l Trans. Common Sales Tax Rev. Rfdg. Series A, 5.20% 4/1/05 (FGIC Insured) Aaa 100,000 100,500 797400CC San Diego Swr. Rev. Series A, 4.90% 5/15/09 (AMBAC Insured) Aaa 500,000 472,500 797304EB San Diego Unified School Dist. Ctfs. of Prtn. Rfdg. Cap. Proj. Series B, 5.25% 7/1/02 Aa 400,000 411,000 797358CU San Francisco Bldg. Auth. Lease Rev. Dept. Gen'l Svcs. Lease Series A: 5% 10/1/05 A1 400,000 388,000 79772LAM 5.10% 10/1/06 (MBIA Insured) Aaa 300,000 296,625 79772LAU Sequoia Hosp. Dist. Rev.: Rfdg. 5% 8/15/03 A 1,285,000 1,264,119 817393BU 4.90% 8/15/02 A 500,000 492,500 817393BT Southern California Pub. Pwr. Auth. Pwr. Proj. Rev.: Rfdg. (Mead Adelanto Proj.) Series A, 4.75% 7/1/08 (AMBAC Insured) (f) Aaa 500,000 464,375 842475QZ MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Southern California Pub. Pwr. Auth. Pwr. Proj. Rev.: - continued Rfdg. (Mead Adelanto Proj.) Series 11, 0% 7/1/15, (Pre-Prefunded to 7/1/00 @ 101)(e) Aaa $ 300,000 $ 224,625 842475JW Walnut Creek Ctfs. of Prtn. Rfdg. (John Muir Med. Ctr.) 4.95% 2/15/05 (MBIA Insured) Aaa 300,000 289,875 932702CD 16,616,531 PUERTO RICO - 1.9% Puerto Rico Commonwealth Gen. Oblig. 5.70% 7/1/08 Baa1 300,000 303,750 745144EB Puerto Rico Commonwealth Rfdg. Impt. Gen. Oblig. 5.375% 7/1/06 Baa1 100,000 99,875 745144KE 403,625 TOTAL MUNICIPAL BONDS (Cost $17,419,727) $ 17,020,156 MUNICIPAL NOTES (A) - 21.3% CALIFORNIA - 21.3% California Poll. Cont. Fing. Auth. Resources Recovery Rev. VRDN (b): (Delano Proj.) Series 1991, 2.30%, LOC Algemene/ABN-AMRO Bank P-1 200,000 200,000 130535BE (Malaga Proj.) Series A, 2.35%, LOC Bank of America Nat'l. Trust & Savings - 700,000 700,000 130535AP (Ultra Pwr. Rocklin Proj.) Series 1988 B, 2.35%, LOC Bank of America Nat'l. Trust & Savings - 700,000 700,000 130535AN Los Angeles County Ind. Dev. Auth. (Cataic & Jae Proj.) 2.45%, LOC Union Banc Corp., VRDN (b) - 800,000 800,000 544689CX Los Angeles County Trans. Commission Sales Tax Rev. Rfdg. Series 1992 A, 2.25% (Liquidity Enhancement Industrial Bank of Japan Ltd., VRDN VMIG 1 800,000 800,000 545170HL Orange County Various Sanitation Dist. Ctfs. of Prtn. (Cap. Impt. Prog.) (Dist. 1-7 & 11) 2.20%, (FGIC Insured), VRDN VMIG 1 700,000 700,000 684285BK MUNICIPAL NOTES (A) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Southern California Pub. Pwr. Auth. Rev. (Transmission Proj.) Series 1991, 2.25%, (AMBAC Insured) LOC Swiss Bank, VRDN VMIG 1 $ 700,000 $ 700,000 842477HH TOTAL MUNICIPAL NOTES (Cost $4,600,000) $ 4,600,000 TOTAL INVESTMENTS - 100% (Cost $22,019,727) $ 21,620,156 SECURITY TYPE ABBREVIATIONS VRDN - Variable Rate Demand Notes LEGEND (a) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (b) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals (AMT securities). (c) Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (d) Inverse floating rate security is a security where the coupon is inversely indexed to a floating interest rate. The price will be more volatile than the price of a comparable fixed rate security. (e) Security collateralized by an amount sufficient to pay interest and principal. (f) Security purchased on a delayed delivery basis (see Note 2 of Notes to Financial Statements). OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 53.4% AAA, AA, A 71.7% Baa 13.4% BBB 7.1% Ba 0.0% BB 0.0% B 0.0% B 0.0% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 0.0%. The distribution of municipal securities by revenue source, as a percentage of total value of investment in securities, is as follows: Health Care 19.2% Lease Revenue 19.2 Water & Sewer 12.5 Others (individually less than 10%) 49.1 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1994 the aggregate cost of investment securities for income tax purposes was $22,019,727. Net unrealized depreciation aggregated $399,571, of which $125 related to appreciated investment securities and $399,696 related to depreciated investment securities. SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 30, 1993 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1994 140.ASSETS 141. 142. 143.Investment in securities, at value (cost 144. $ 21,620,156 $22,019,727) (Notes 1 and 2) - See accompanying schedule 145.Cash 146. 4,120,719 147.Interest receivable 148. 198,003 149.Receivable from investment adviser for expense 150. 7,123 reductions (Note 5) 151. 152.TOTAL ASSETS 153. 25,946,001 154.LIABILITIES 155. 156. 157.Payable for investments purchased $ 3,224,966 158. Delayed delivery (Note 2) 159.Dividends payable 1,044 160. 161.Accrued management fee 7,123 162. 163. 164.TOTAL LIABILITIES 165. 3,233,133 166.167.NET ASSETS 168. $ 22,712,868 169.Net Assets consist of (Note 1): 170. 171. 172.Paid in capital 173. $ 23,112,439 174.Net unrealized appreciation (depreciation) on 175. (399,571) investment securities 176.177.NET ASSETS, for 2,326,091 shares outstanding 178. $ 22,712,868 179.180.NET ASSET VALUE, offering price and 181. $9.76 redemption price per share ($22,712,868 (divided by) 2,326,091 shares)
STATEMENT OF OPERATIONS
DECEMBER 30, 1993 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1994 182.183.INTEREST INCOME 184. $ 60,323 185.EXPENSES 186. 187. 188.Management fee (Note 4) $ 7,123 189. 190.Non-interested trustees' compensation - 191. 192.Total expenses before reductions 7,123 193.Expense reductions (Note 5) (7,123) - 194.195.NET INTEREST INCOME 196. 60,323 197.UNREALIZED GAIN (LOSS) ON INVESTMENTS 198. 199. (NOTES 1 AND 3) 200.Change in net unrealized appreciation 201. (399,571) (depreciation) on investment securities 202.203.NET INCREASE (DECREASE) IN NET ASSETS 204. $ (339,248) RESULTING FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
DECEMBER 30, 1993 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1994 205.INCREASE (DECREASE) IN NET ASSETS 206.Operations $ 60,323 Net interest income 207. Change in net unrealized appreciation (depreciation) on investments (399,571) 208. (339,248) 209.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 210.Dividends to shareholders from net interest income (60,323) 211.Share transactions 27,634,217 Net proceeds from sales of shares 212. Reinvestment of dividends from net interest income 49,121 213. Cost of shares redeemed (4,570,899) 214. 23,112,439 Net increase (decrease) in net assets resulting from share transactions 215. 22,712,868 216.TOTAL INCREASE (DECREASE) IN NET ASSETS 217.NET ASSETS 218. 219. Beginning of period - 220. End of period $ 22,712,868 221.OTHER INFORMATION 223. 222.Shares 224. Sold 2,780,541 225. Issued in reinvestment of dividends from net interest income 5,010 226. Redeemed (459,460) 227. Net increase (decrease) 2,326,091
FINANCIAL HIGHLIGHTS
228. DECEMBER 30, 1993 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 199 4 229.SELECTED PER-SHARE DATA 230.Net asset value, beginning of period $ 10.000 231.Income from Investment Operations $ .070 Net interest income 232. Net realized and unrealized gain (loss) on investments (.240) 233. Total from investment operations (.170) 234.Less Distributions (.070) From net interest income 235.Net asset value, end of period $ 9.760 236.TOTAL RETURN (DAGGER) -1.71% 237.RATIOS AND SUPPLEMENTAL DATA 238.Net assets, end of period (000 omitted) $ 22,713 239.Ratio of expenses to average net assets (DAGGER)(DAGGER) - 240.Ratio of expenses to average net assets before expense reductions (DAGGER) .55%* (DAGGER) 241.Ratio of net interest income to average net assets 4.66%* 242.Portfolio turnover rate -
* ANNUALIZED (DAGGER) TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. (DAGGER)(DAGGER) SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS. SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO PERFORMANCE: THE BOTTOM LINE To measure a money market fund's performance, you can look at either total return or yield. Total return reflects the change in a fund's share price over a given period, reinvestment of its dividends (or income), and the effect of the fund's $5 account closeout fee. Yield measures the income paid by a fund. Since a money market fund tries to maintain a $1 share price, yield is an important measure of performance. Both the fund's returns and yields would have been lower if Fidelity hadn't reimbursed certain fund expenses. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1994 PAST 1 LIFE OF YEAR FUND Spartan California Municipal Money Market 2.45% 18.04% Consumer Price Index 2.52% 16.52% Average California Tax-Free Money Market Fund 1.96% 15.40% CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in this case, one year or since the fund started on November 27, 1989. For example, if you invested $1,000 in a fund that had a 5% return over the past year, you would have $1,050. Comparing the fund's performance to the consumer price index (CPI) helps show how your investment did compared to inflation. To measure how the fund stacked up against its peers, you can compare its return to the average California tax-free money market fund's total return. This average currently reflects the performance of 42 California tax-free money market funds tracked by IBC/Donoghue. (The periods covered by the CPI and IBC/Donoghue numbers are the closest available match to those covered by the fund.) AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1994 PAST 1 LIFE OF YEAR FUND Spartan California Municipal Money Market 2.45% 3.97% Consumer Price Index 2.52% 3.66% Average California Tax-Free Money Market Fund 1.96% 3.43% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. YIELDS 2/28/93 5/31/93 8/31/93 11/30/93 2/28/94 Spartan California 2.16% 2.79% 2.53% 2.37% 2.44% Municipal Money Market Average California Tax-Free 1.75% 2.22% 2.01% 1.92% 1.96% Money Market Fund Spartan California 3.79% 4.90% 4.44% 4.16% 4.28% Municipal Money Market - Tax-equivalent Average All Taxable 2.71% 2.62% 2.64% 2.69% 2.79% Money Market Fund Row: 1, Col: 1, Value: 2.16 Row: 1, Col: 2, Value: 1.75 Row: 2, Col: 1, Value: 2.79 Row: 2, Col: 2, Value: 2.22 Row: 3, Col: 1, Value: 2.53 Row: 3, Col: 2, Value: 2.01 Row: 4, Col: 1, Value: 2.37 Row: 4, Col: 2, Value: 1.92 Row: 5, Col: 1, Value: 2.44 Row: 5, Col: 2, Value: 1.96 Spartan California Municipal Money Market Average California Tax-Free Money Market Fund 3% - 2% - 1% - 0% YIELD refers to the income paid by the fund over a given period. Yields for money market funds are usually for seven-day periods, expressed as annual percentage rates. A yield that assumes income earned is reinvested or compounded is called an effective yield. The chart above shows the fund's current seven-day yield at quarterly intervals over the past year. You can compare these yields to the average all tax-free money market fund. Or you can look at the fund's tax-equivalent yield, which is based on a combined effective 1994 federal and state income tax rate of 43.04%. The tax-equivalent figures are useful in seeing how the fund stacked up against the average taxable money market fund as tracked by IBC/Donoghue. A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS REFLECT PAST RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE. COMPARING PERFORMANCE Yields on tax-free investments are usually lower than yields on taxable investments. However, a straight comparison between the two may be misleading because it ignores the way taxes reduce taxable returns. Tax-equivalent yield - the yield you'd have to earn on a similar taxable investment to match the tax-free yield - makes the comparison more meaningful. Keep in mind that the U.S. government neither insures nor guarantees a money market fund. In fact, there is no assurance that a money fund will maintain a $1 share price. (checkmark) SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW An interview with Deborah Watson, Portfolio Manager of Spartan California Municipal Money Market Portfolio Q. DEBORAH, HOW HAS THE SHORT-TERM MARKET BEHAVED OVER THE LAST SIX MONTHS? A. Short-term interest rates remained stable through the fall, despite a mild uptick in November fueled by inflation fears. The Federal Reserve kept the federal funds rate at or near 3% from August through January. Then, on February 4, the Fed pushed the fed funds rate up to 3.25%, essentially raising all short-term rates. Q. WAS THE FUND WELL POSITIONED FOR HIGHER RATES? A. For the most part, yes. I had gradually reduced the fund's average maturity through the fall and early winter; it fell from 79 days at the end of August to 48 days at the end of January. The fund's shorter average maturity will allow me to capture the higher yields available following February's rate hike. In addition, supply and demand played a role in how I positioned the fund earlier in the year. California usually issues its heaviest supply of new obligations during the summer months, and 1993 was no exception. I lengthened the fund's average maturity through August, and was able to lock in higher-yielding issues before rates fell further. Issuance then slowed heading into fall, which, combined with my growing expectation of higher interest rates, caused me to gradually shorten the average maturity. Q. HOW DID CALIFORNIA'S RECESSION AFFECT THE FUND? A. The state's weak economy caused the financial health of many California issuers to deteriorate. That meant there were fewer securities available that met Fidelity's high standards for credit quality. However, I compensated by buying more of those that did, resulting in little effect on the fund's yield. Rebuilding efforts after January's earthquake should boost economic growth in 1994. However, the annual borrowing season for state and local governments is fast approaching, and their financial picture hasn't improved. This may further reduce the supply of high quality issues in California this summer. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on February 28 was 2.44%, up from 2.16% a year ago. The latest yield translates into a tax equivalent yield of 4.28% for investors in the 43.04% combined federal and state tax bracket. The fund's total return - which assumes reinvestment of monthly dividends - for the 12 months ended February 28 was 2.45%. The average California tax-free money market fund tracked by IBC/Donoghue returned 1.96% during the same period. Q. WHAT'S YOUR VIEW GOING FORWARD? A. I think short-term interest rates will probably rise gradually over the next six months, while the Fed continues inching up the fed funds rate to control inflation. That said, I'll probably keep the fund's average maturity in a neutral 35- to 50-day range. In addition, I've increased the fund's stake in variable rate instruments to 59.3% by February 28. The coupons (stated interest rates) on these securities are reset at fixed intervals - for example, weekly or monthly - so when rates rise, the fund can benefit from higher coupons at these reset intervals. FUND FACTS GOAL: tax-free income with share price stability by investing in high-quality, short-term California municipal securities START DATE: November 27, 1989 SIZE: as of February 28, 1994, over $1 billion MANAGER: Deborah Watson, since November 1989; manager, Fidelity California Tax-Free Money Market Portfolio, since July 1988; Spartan Florida Municipal Money Market Portfolio, since August 1992; Spartan Pennsylvania Municipal Money Market Portfolio, since September 1989 (checkmark) WORDS TO KNOW COMMERCIAL PAPER: A security issued by a municipality to finance capital or operating needs. FEDERAL FUNDS RATE: The interest rate banks charge each other for overnight loans. MATURITY: The time remaining before an issuer is scheduled to repay the principal amount on a debt security. When the fund's average maturity - weighted by dollar amount - is short, the fund manager is anticipating a rise in interest rates. When the average maturity is long, the manager is expecting rates to fall. When the average maturity is neutral, the manager wants the flexibility to respond to rising rates, while still capturing a portion of the higher yields available from issues with longer maturities. MUNICIPAL NOTE: A security issued in advance of future tax or other revenues and payable from those specific sources. TENDER BOND: A variable-rate, long-term security that gives the bond holder the option to redeem the bond at face value before maturity. VARIABLE RATE DEMAND NOTE (VRDN): A tender bond that can be redeemed on short notice, typically one or seven days. VRDNs are useful in managing the fund's average maturity and liquidity. SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO INVESTMENT CHANGES MATURITY DIVERSIFICATION DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS 2/28/94 8/31/93 2/28/93 0 - 30 66.8 66.8 61.8 31 - 90 12.3 8.0 14.8 91 - 180 20.3 5.8 19.7 181 - 397 0.6 19.4 3.7 WEIGHTED AVERAGE MATURITY 2/28/94 8/31/93 2/28/93 Spartan California Municipal Money Market 43 days 79 days 49 days Average California Municipa l 50 days 72 days 52 days Money Market Fund* ASSET ALLOCATION AS OF 2/28/94 AS OF 8/31/93 Row: 1, Col: 1, Value: 59.3 Row: 1, Col: 2, Value: 15.2 Row: 1, Col: 3, Value: 3.0 Row: 1, Col: 4, Value: 23.7 Row: 1, Col: 5, Value: 2.0 Row: 1, Col: 1, Value: 55.8 Row: 1, Col: 2, Value: 11.4 Row: 1, Col: 3, Value: 4.5 Row: 1, Col: 4, Value: 27.1 Row: 1, Col: 5, Value: 2.2 Variable rate demand notes (VRDNs) 59.3% Commercial paper 15.2% Tender bonds 1.7% Municipal notes 23.7% Other 0.1% Variable rate demand notes (VRDNs) 55.8% Commercial paper 11.4% Tender bonds 4.5% Municipal notes 27.1% Other 1.2% * SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(Registered trademark) SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO INVESTMENTS/FEBRUARY 28, 1994 (Showing Percentage of Total Value of Investments) MUNICIPAL SECURITIES (A) - 100% PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - 100.0% Alameda County TRAN 3.25% 7/29/94 $ 15,000,000 $ 15,027,910 010878AB Anaheim Ctfs. of Prtn. Series 1993, 2.25%, (Liquidity Enhancement Industrial Bank of Japan), VRDN 5,500,000 5,500,000 032540KQ Anaheim Hsg. Auth. (Bel Age Apt. Proj.) Nationwide Grantor Trust Series 1991-1Q, 2.50%, LOC Federal Home Loan Bank of San Francisco, VRDN (b)(c) 1,000,000 1,000,000 Anaheim Hsg. Auth. Multi-Family Hsg. Rev. (Sage Park Proj.) Series A, 2.50%, LOC Bank of America, VRDN (b) 1,600,000 1,600,000 032557BB Anaheim Hsg. Auth. Rev. (Park Vista Apts) 2.50% LOC Citibank, VRDN (b) 7,000,000 7,000,000 032557BH City of Big Bear Lake Ind. Dev. (Southwest Gas Corp. Proj.) Series 1993 A, 2.40%, LOC Union Bank of Switzerland, VRDN (b) 2,000,000 2,000,000 08901KAR California Dept. of Wtr. Resources Tender Opt. Ctfs.: (Central Valley Proj.) Series R-3, 2.50% (Liquidity Enhancement Svenska Handelsbanken), VRDN (c) 23,000,000 23,000,000 130663V8 Series R-4, 2.50% (Liquidity Enhancement Svenska Handelsbanken), VRDN (c) 6,000,000 6,000,000 130663W3 California Gen. Oblig. Adj. Rate RAN 2.55% 6/28/94 30,500,000 30,500,000 130619D5 California Gen. Oblig. RAN, 3.5% 6/28/94 26,250,000 26,300,597 130619D4 California Hsg. Fin. Agcy. Home Mtg. Rev. Tender Option Ctfs. Series 19B, 2.60%, (Liquidity Enhancement Banque Nationale De Paris), VRDN (b)(c) 15,200,000 15,200,000 13033CC8 California Hsg. Fin. Agcy. Custodial Receipts, Series 15, 2.60%, (Liquidity Enhancement Daichi Kango Bank), VRDN (b)(c) 11,590,000 11,590,000 13033CWJ California Hsg. & Fing. Auth. Rev. (Camino Colony Apts.) Series 1993 B, 2.50%, LOC Federal Home Loan Bank of San Francisco, VRDN 3,600,000 3,600,000 13033CP8 California Poll. Cont. & Fing Auth. 1st Mtg. Rev. Bonds, (Southern California Edison Co.) Series 1985 C, 2.40% 4/6/94, CP mode 4,300,000 4,300,000 130995GB California Poll. Cont. Fing. Auth. Resource Recovery Rev.: (Delano Proj.), LOC Algemene Bank, VRDN (b): Series 1989, 2.30%, 3,500,000 3,500,000 130535AZ Series 1990, 2.30% 1,000,000 1,000,000 130535BB Series 1991, 2.30% 4,100,000 4,100,000 130535BE (Malaga Proj.) Series A, 2.35%, LOC Bank of America, VRDN (b) 3,400,000 3,400,000 130535AP MUNICIPAL SECURITIES (A) - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - CONTINUED California Poll. Cont. Fing. Auth. Resource Recovery Rev. - continued: (Ultra Pwr. Rocklin Proj.) Series 1988 B, 2.50%, LOC Bank of America, VRDN (b) $ 900,000 $ 900,000 130535AN California Poll. Contr. & Fing Auth. Rev. (Pacific Gas & Elec. Co.): Rfdg. Series 1988 B, LOC Sumitomo Bank of Japan Ltd.,CP mode (b): 2.50% 3/22/94 2,600,000 2,600,000 130995GJ 2.55% 4/25/94 4,500,000 4,500,000 130995GJ 2.60% 5/16/94 4,400,000 4,400,000 130995GJ 2.60% 5/20/94 3,000,000 3,000,000 130995GQ Series 1988 A, LOC Swiss Bank Corp., CP mode (b): 2.40% 4/13/94 3,000,000 3,000,000 130995FW 2.45% 4/21/94 8,500,000 8,500,000 130995GC 2.45% 4/22/94 8,500,000 8,500,000 130995GD 2.60% 5/12/94 3,000,000 3,000,000 130995GL 2.60% 5/13/94 6,500,000 6,500,000 130995GK 2.60% 5/19/94 3,000,000 3,000,000 130995GP 2.70% 5/24/94 10,000,000 10,000,000 130995GS 2.70% 5/25/94 12,000,000 12,000,000 130995GR Series 1988 C, 2.30% 4/11/94 LOC Credit Suisse, CP mode 3,600,000 3,600,000 130995FU Series 1988 D, LOC Bank of Tokyo, CP mode: 2.35% 3/23/94 2,655,000 2,655,000 130995FX 2.35% 4/8/94 9,500,000 9,500,000 130995FV Series 1988 E, 2.50% 5/16/94, LOC Morgan Guaranty Trust Co., CP mode 2,000,000 2,000,000 130995GM (Southern California Edison Co.) 130995GG Series 1985 D, 2.50% 4/18/94, CP mode 3,000,000 3,000,000 130995GG California Poll. Cont. Fing. Auth. Solid Waste Disp. Rev. (Colmac Energy Proj.) LOC Swiss Bank, VRDN: Series A, 2.40% 4,000,000 4,000,000 130536BA Series B, 2.40% 5,000,000 5,000,000 130536BB California Statewide Commty. Dev. Corp. Ind. Dev. Rev., VRDN: (AHNNN Proj.) 2.45%, LOC Bank of Tokyo 440,000 440,000 130905AM (American Zettler, Inc. Proj.) 2.45%, LOC Bank of Tokyo 2,500,000 2,500,000 130905AC (Bro-Co Gen. Partnership Proj.) Series 1990, 2.45%, LOC Union Bank 4,520,000 4,520,000 130905BL (Charles & Loralie Harris Proj.) 2.45%, LOC Bank of Tokyo 1,070,000 1,070,000 130905AK MUNICIPAL SECURITIES (A) - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - CONTINUED California Statewide Commty. Dev. Corp. Ind. Dev. Rev., VRDN: - continued (Covenant Retirement Commty.) 2.45%, LOC Lasalle Nat'l Bank $ 4,800,000 $ 4,800,000 130907CX (Florestone Prod. Co.) Series 1989, 2.45%, LOC Bank of Tokyo (b) 490,000 490,000 130905AF (Grundfos Pumps Corp. Proj.) Series 1989, 2.45%, LOC Bank of Tokyo 5,700,000 5,700,000 130905AG (K.U.M. LTD Proj.) Series 1992, 2.45%, LOC Union Bank (b) 2,000,000 2,000,000 130905CA (Merrill Packaging Proj.) 2.65% LOC Bank of Tokyo(b) 2,095,000 2,095,000 130905CC (Northwest Pipe & Casing Co. Proj.) Series 1990, 2.45%, LOC Bank of Tokyo 4,250,000 4,250,000 130905BA (Rapelli of California Inc. Proj.) Series 1989, 2.45%, LOC Bank of Tokyo 2,500,000 2,500,000 130905AX (Santa Cruz-Wilson Entities Ltd. Proj.) 2.70% LOC Bank of Tokyo, VRDN (b) 1,485,000 1,485,000 80174PAA (Sierra Spring Wtr. Co.) LOC Bank of Tokyo, VRDN: (Manteca Proj.) Series 1989, 2.45%, VRDN 695,000 695,000 130905AV (Richmond Proj.) 2.45% 1,040,000 1,040,000 130905AU (Sacramento Proj.) Series 1989, 2.45% 1,435,000 1,435,000 130905AP (Staub Metals) 2.45%, LOC Bank of Tokyo 440,000 440,000 130905AT (Sunclipse, Inc., Alhambra Proj.) Series 1989, 2.45%, LOC Bank of Tokyo, VRDN 2,600,000 2,600,000 130905AN (Sunclipse, Inc., Union City Proj.) Series 1989, 2.45%, LOC Bank of Tokyo, VRDN 2,500,000 2,500,000 130905AQ (Upholstery Supply Proj.) Series 1990, 2.45%, LOC Bank of Tokyo 700,000 700,000 130905BC (Zarn Inc. Proj.) Series 1989, 2.45%, LOC Bank of Tokyo, VRDN (b) 1,950,000 1,950,000 130905AJ (Zieman Manufacturing Co. Proj.) Series 1990, 2.45%, LOC Bank of Tokyo, VRDN 595,000 595,000 130905BB California Various Purpose Gen. Oblig. Custodial Receipts, 2.45%, (AMBAC Insured),(Liquidity Enhancement Citibank), CP mode(c) 7,925,000 7,925,000 130622WG Chula Vista Ind. Dev. Rev.: (San Diego Gas & Elec. Co.): Series B, 2.45%, VRDN (b) 3,700,000 3,700,000 17131HAB Series D, 2.30% 3/1/94, CP mode (b) 2,000,000 2,000,000 177199BA Series E: 2.65% 3/10/94, CP mode (b) 2,500,000 2,500,000 17199BAS 2.70% 3/11/94, CP mode(b) 3,000,000 3,000,000 17199BAT MUNICIPAL SECURITIES (A) - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Concord Hsg. Auth. (Crossroads Apt. Proj.) First Nationwide Grantor Trust Series 1991-1E, 2.50%, LOC Federal Home Loan Bank of San Francisco, VRDN (c) $ 1,100,000 $ 1,100,000 206131AA Concord Multi-Family Hsg. Rev. (Hill Apt. Proj.) 2.50%, LOC Citibank, VRDN(b) 9,050,000 9,050,000 206131AA Contra Costa Multi Family Hsg. Rev. (Park Regency) Series A, 2.45, LOC Sumitomo Bank,VRDN (b) 6,300,000 6,300,000 212249AB Contra Costa County TRAN Series A, 3.25% 7/29/94 12,930,000 12,951,609 212219BV Contra Costa Transit Auth. Tax Rev. Series 1993 A, 2.40%, (FGIC Insured), VRDN 9,000,000 9,000,000 21221MBJ Del Mar Race Track Auth. 2.60% 5/26/94 LOC Societe Generale, CP 5,500,000 5,500,000 2451259A Duarte Single-Family Mtg. Rev. Trust Ctfs. 2.70%, (Liquidity Enhancement Norwest Bank), VRDN (c) 5,355,000 5,355,000 263595AY Emeryville Redev. Agcy. Multi-Family Hsg. (Emerybay Apts. II) 2.65%, LOC Security Pacific Nat'l. Bank, VRDN(b) 8,000,000 8,000,000 291200AA Escondido Commty. Dev. Commission Rev. (Promenade Proj.) 2.65%, LOC Bank of America, VRDN (b) 1,000,000 1,000,000 296338AA Fairfield Ind. Dev. Auth., 3.05%, LOC Wells Fargo Bank, VRDN (b) 1,800,000 1,800,000 303900AD Fontana (Oakcrest Apt. Proj.) First Nationwide Grantor Trust Series 1991-1G, 2.50%, LOC Federal Home Loan Bank of San Francisco, VRDN (c) 4,200,000 4,200,000 303900AD Fresno County Unified School Dist. TRAN 3.50% 8/11/94 14,500,000 14,528,245 358232AD Fresno City Hsg. Rev. (Palm Lakes Apt. Proj.) Series 1985, 3.75%, LOC Tokai Bank, VRDN 2,000,000 2,000,000 35823HAA Fresno TRAN 3% 6/30/94 4,080,000 4,081,865 358082FQ Garden Grove Hsg. Auth. Multi-Family Hsg. Rev. (Valley View Sr. Villas Proj.) Series 1990 A, 2.95%, LOC Wells Fargo Bank, VRDN (b) 5,200,000 5,200,000 365265AB Huntington Beach Multi-Family Hsg. Rev.: (Five Point Seniors Proj.) Series 1991 A, 2.95%, LOC Wells Fargo Bank, VRDN (b) 6,400,000 6,400,000 446196AQ (Seabridge Villas Proj.) Series 1985 A, 2.25%, LOC Bank of America, VRDN 2,700,000 2,700,000 446196AA Kern County Ctfs. of Prtn., Series 1986 A, 2.35% , LOC Sanwa Bank Ltd., VRDN 1,700,000 1,700,000 49225HAA Kern County TRAN 3.25% 7/5/94 5,000,000 5,009,242 492248AA Livermore Ctfs. of Prtn. (Wtr. Reclamation Plant Expansion Proj.), 2.40%, LOC Westminister Nat'l. Bank, VRDN 3,300,000 3,300,000 538164CQ MUNICIPAL SECURITIES (A) - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Livermore Multi-Family Mtg. Rev. (Portola Meadows Apts.) Series 1989 A, 2.50%, LOC Bank of America, VRDN (b) $ 10,400,000 $ 10,400,000 537900AB Livermore (Park Paseo Apt. Proj) First Nationwide Grantor Trust Series 1991-1A, 2.50%, LOC Federal Home Loan Bank of San Francisco, VRDN (c) 2,000,000 2,000,000 537900AB Loma Linda Multi-Family Hsg. Rev. (Loma Linda Springs Apts.) Series 1989, 3.60%, LOC Tokai Bank, VRDN (b) 12,205,000 12,205,000 541905AB Los Angeles Commty. College Dist. TRAN Series 1993-94, 3.25% 7/6/94 12,500,000 12,523,289 54438CAA Los Angles Ctfs. of Prtn. (Baldwin Hills Public Parking Facs.) Series 1984, 2.55%, LOC Wells Fargo Bank, VRDN 3,700,000 3,700,000 544391AU Los Angeles Commty. Redev. Agcy. Multi-family Hsg. Rev. (Grand Promenade Proj.) Series 1985, 3%, LOC Tokai Bank Ltd., VRDN 1,000,000 1,000,000 544393AD Los Angeles Commty. Redev. Agcy. Rev. Ctfs. of Prtn.: (CMC Med. Plaza) 2.60%, LOC Security Pacific Nat'l. Bank, VRDN 4,700,000 4,700,000 544391BQ Los Angeles County Hsg. Auth.(Sand Canyon) Series 1985F, 2.35%, LOC Citibank, VRDN 1,000,000 1,000,000 Los Angeles County Hsg. Auth. Multi-Family Hsg. Rev.: (Malibu Meadows Proj.) Series 1991 A, 2.60%, LOC Sumitomo Bank Ltd., VRDN 4,811,000 4,811,000 544688GD (Park Sierra Apt.) 2.50%, LOC Citibank, VRDN (b) 39,200,000 39,200,000 544688FQ (Sand Canyon Villas Proj.) Series 1989 A, 2.60%, LOC Ind. Bank of Japan, VRDN (b) 8,700,000 8,700,000 544688GC Los Angeles County Ind. Dev. Auth. Rev. (Caitac & Jae Proj.), 2.45%, LOC Union Bank, VRDN (b) 4,200,000 4,200,000 544689CX Los Angeles County Metropolitan Trans. Auth. Series 1993 A, 2.30%, (Liquidity Enhancement Industrial Bank of Japan) VRDN 2,800,000 2,800,000 544712AV Los Angeles County Pub. Wks. Floating Rate Trust Ctfs., Series 8, 2.55%, (Liquidity Enhancement Credit Suisse), VRDN (c) 11,542,749 11,542,749 31303KAA Los Angeles County TRAN, Series B 93-94, (Liquidity Enhancement Credit Suisse), CP mode: 2.50% 4/05/94 10,000,000 10,000,000 5446579M 2.50% 4/07/94 3,000,000 3,000,000 5446579L Los Angeles County Transit Commty., Custodial Receipts, Series 1992B-36, 2.65%, (MBIA Insured), VRDN (c) 3,000,000 3,000,000 545170JP MUNICIPAL SECURITIES (A) - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Los Angeles County Unified School Dist. TRAN 3.25% 7/15/94 $ 15,000,000 $ 15,026,067 544644AE Los Angeles Dept. of Wtr. & Pwr. Elec. Plant Rev. Tender Option Ctfs. 2.40%, (Liquidity Enhancement Banker's Trust), VRDN (c) 6,430,000 6,430,000 544506JM Los Angeles Dept. of Wtr. & Pwr. Elec. Plant Rev. Tender Option Ctfs. Series M, 2.70%, (Liquidity Enhancement Sanwa Bank Ltd.), VRDN (c) 10,000,000 10,000,000 544507KC Los Angeles Multi-Family Hsg. Rev., VRDN: (Beverly Park Apts.) Series 1988 A, 2.40%, LOC Barclay's Bank (b) 9,500,000 9,500,000 544582GV (Channel Gateway Apts.) Series 1989 B, 2.65%, LOC Fuji Bank (b) 47,700,000 47,700,000 544582GX (Poinsettia Apts. Proj.) Series 1989 A, 2.55%, LOC Dai-Ichi Kangyo Bank(b) 1,000,000 1,000,000 544582GW (Studio Colony Proj.) Series 1985 C, 2.45%, LOC Industrial Bank of Japan 3,000,000 3,000,000 544582CC Los Angeles Variable Rate Multi-family Hsg. Rev. (Museum Terrace Apt. Proj.) Series H, 2.40%, LOC Bank of America, VRDN 4,500,000 4,500,000 544582AP Los Angeles WasteWtr. Sys. Rev. (Liquidity Enhancement Sumitomo Bank Ltd), CP: 2.40% 3/17/94 2,500,000 2,500,000 544999AM 2.60% 5/18/94 2,000,000 2,000,000 544999AP Madera County TRAN 3.25% 9/30/94 3,000,000 3,006,305 556903AN Marin County Hsg. Auth. Rev. (Crest Marin II Apt. Proj.) 2.50%, LOC Citibank, VRDN (b) 14,850,000 14,850,000 56785MAA Metropolitan Wtr. Dist. of Southern California Rev.: 2.60% 3/16/94, CP 5,900,000 5,900,000 5926599K 2.55% 5/23/94, CP 3,000,000 3,000,000 5926599L Metropolitan Wtr. Dist. of Southern California Wtrwks. Tender Option Bonds Series MGT-19A, 2.40%, (Liquidity Enhancement Morgan Guaranty), VRDN (c) 2,400,000 2,400,000 592659VY Newark Ind. Dev. Auth. Rev. (Gas Tech Proj.) Series 1989 A, 2.45%, LOC Union Bank of Switzerland, VRDN (b) 3,000,000 3,000,000 650250AA Oceanside Multi-Family Mtg. Rev. (Riverview Springs Apts.) Series 1990 A, 2.60%, LOC Bank of Tokyo, VRDN ( b) 6,700,000 6,700,000 675370AB MUNICIPAL SECURITIES (A) - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Olcese Wtr. Dist. (Rio Bravo Wtr. Delivery Sys. Proj.) Series 1986 A, 2.40% 3/29/94, LOC Sumitomo Bank, Ltd., CP mode (b) $ 5,000,000 $ 5,000,000 6794749P Ontario Ind. Dev. Auth. Rev. (Safari Land Proj.) Series 1989, 3.25%, LOC Tokai Bank, VRDN (b) 3,500,000 3,500,000 682908AA Orange County Apt. Dev. Rev., VRDN: (Bear Brands Apt.) Issue Z 1985, 2.35%, LOC Fuji Bank 4,700,000 4,700,000 (Foothill Oaks Apts. Proj.) Issue 1989 B, 2.50%, LOC Bank of America (b) 12,175,000 12,175,000 684209CW (Frost Construction) Series 1985 B, 2.35%, LOC Wells Fargo Bank, VRDN 2,000,000 2,000,000 684209JQ (Hon Dev. Corp.-Niguel Summit II) Issue 1985, Series B, 2.50%, LOC Bank of America, VRDN 1,000,000 1,000,000 684209JN (Laguna Summit Apts.) Series 1985 X, 3%, LOC Tokai Bank, VRDN 3,000,000 3,000,000 684209JW (Park Place Apts. Proj.) Series 1989 A, 3.40%, LOC Tokai Bank, VRDN (b) 14,300,000 14,300,000 684209JL (Trabuco Woods Apts.) Series 1993 B, 2.40%, LOC Wells Fargo Bank, VRDN 2,670,000 2,670,000 684209JV (Villa Marguerite Apts.) Series 1993 A, 2.40%, LOC Wells Fargo Bank, VRDN 1,635,000 1,635,000 684209KE (Vista Verde Apt. Proj.) Series 1988 A, 3.30%, LOC Wells Fargo Bank, VRDN (b) 12,050,000 12,050,000 684209JU (WLCO Partners) Series 1985 C-1, 3.20%, LOC Tokai Bank Ltd., VRDN 900,000 900,000 684209CT (Wood Canyon Villas) Issue 1991 B, 2.65% LOC Bank of America, VRDN (b) 5,000,000 5,000,000 684209KA Orange County Hsg. Auth. Apt. Dev. Rev. (Costa Mesa Partners) Series 1985-BB, 3.25%, LOC Tokai Bank, VRDN 9,500,000 9,500,000 684262AF Orange County TRAN 3% 6/30/94 4,500,000 4,504,570 684201EF Orange Unified School Dist. TRAN 3.25% 7/26/94 10,000,000 10,015,629 684133KA Pleasant Hill (Quail Run Apt. Proj.) Fist Nationwide Grantor Trust Series 1991-1A, 2.50%, LOC Federal Home Loan Bank of San Francisco, VRDN (c) 3,200,000 3,200,000 684133KA Rancho Wtr. Dist. Fin. Auth. Rev. Rfdg. Floating Option Tax-Exempt Receipts, Series PA-62, 2.55%, (Liquidity Enhancement Merrill Lynch & Co. Inc.) VRDN (c) 5,120,000 5,120,000 752111DD Riverside County Ind. Dev. Auth. (Golden West Homes Proj.) 3.10%, LOC Wells Fargo Bank, VRDN (b) 2,700,000 2,700,000 76911TAU Sacramento County TRAN, 3% 7/29/94 7,000,000 7,007,759 786106DM MUNICIPAL SECURITIES (A) - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Sacramento Muni. Util. Dist. Series H, LOC Bank of America, CP: 2.30% 3/23/94 $ 5,843,000 $ 5,843,000 785995MM 2.55% 5/11/94 7,400,000 7,400,000 785995MP Sacramento (Smoketree Apt. Proj.) First Nationwide Grantor Trust Series 1991-1K, 2.50% LOC Federal Home Loan Bank of San Francisco, VRDN (c) 1,000,000 1,000,000 796900CF San Bernadino County Ind. Dev. Auth. Rev, LOC Bank of Tokyo, VRDN (b): (McCain Citrus Inc. Proj.) 2.45% 900,000 900,000 796901AL (McElroy Metal Mill Proj.) 2.45%, 900,000 900,000 796901AM (NRI, Inc. Proj.) Series 1989, 2.45% 1,490,000 1,490,000 796901AN San Bernadino County Mtg. Rev. Rfdg. (Pepperwood Apts.) Series 1993 A, 2.40%, LOC Fed Home Loan Bank of San Francisco, VRDN 3,000,000 3,000,000 796900CL San Bernadino County Multi Family Hsg. Rev., VRDN: (Cedarbrook Terrace Apts. Proj.) Series 1990 A, 3.60%, LOC Sumitrust 3,200,000 3,200,000 796900CF (Western Properties II) 2.40%, LOC Bank of America 1,000,000 1,000,000 796900BJ (Western Properties IV) 2.40%, LOC Bank of America 1,000,000 1,000,000 796900BM (Woodview Apts.) 2.40%, LOC Bank of America 1,400,000 1,400,000 796900BK San Diego Commty. College Dist. TRAN Series 1993, 3.15% 6/30/94 3,000,000 3,004,350 797272AA San Diego Hsg. Auth. Multi-Family Hsg. Rev., VRDN: Rfdg. (Coral Pointe Apt. Proj.) Series 1993 A, 2.65%, (Liquidity Enhancement Continental Casualty Company) 5,000,000 5,000,000 79729HEQ (La Cima Apts.) Issue 1985 K, 2.95%, LOC Daiwa Bank, Ltd., VRDN 3,000,000 3,000,000 79728FES (Lusk Mira Mesa Apts.) Series 1985 E, 2.40%, LOC Bank of America, VRDN 2,200,000 2,200,000 79729HAA San Diego Hsg. Auth. Rev. (Carmel Del Mar Apr. Proj.) Series 1993-E, 2.55%, LOC Citibank, VRDN 5,608,000 5,608,000 79728FEU San Diego Regional Trans. Comm. Bonds Series 1993 A, 2.60% 4/1/94, (FGIC Insured) 900,000 900,000 797400BR San Diego TAN Series 1993-94 A, 3% 6/30/94 7,700,000 7,703,237 797236SM San Diego Unified School Dist. TRAN Series 1993-94 A, 3.50% 8/10/94 10,000,000 10,030,134 797355HH San Francisco City and County Multi-Family Hsg. Rev. Bond (Winterland Proj.) 2.35%, LOC Citibank, VRDN 3,400,000 3,400,000 79765PCH MUNICIPAL SECURITIES (A) - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - CONTINUED San Francisco City And County Redev. Agcy. Multi-Family Hsg. Agcy.Rev. Rfdg. (Fillmore Center B-1) 2.30%, LOC Bank of Nova Scotia, VRDN $ 1,000,000 $ 1,000,000 79771MAU San Francisco Redev. Agcy. Rev. (St. Francis Place Proj.) Series 1989 A, 3.25%, LOC Mitsubishi Trust & Banking, VRDN 14,300,000 14,300,000 79771MAM San Jose Multi-Family Hsg. Rev. Bonds (Kimberly Woods) Series 1984, 2.40%, LOC Bank of America, VRDN 4,700,000 4,700,000 798165AB San Jose Multi-Family Mtg. Rev. (Somerset Park Apts.) Series 1987 A, 2.50%, LOC Bank of America, VRDN 3,100,000 3,100,000 798163DZ San Jose Redev. Agcy. Puttable Floating Option Tax-Exempt Receipts Series PA-42, 2.55%, (Liquidity Enhancement Merrill Lynch & Co. Inc.), VRDN (c) 5,080,000 5,080,000 798147MC San Mateo County TRAN Series 1993-94, 3% 6/30/94 20,000,000 20,032,311 799034AB Santa Anna Ind. Dev. Auth. Rev. (McFadden Properties Proj.) 2.55%, LOC Bank of America, VRDN 1,300,000 1,300,000 801130AA Santa Clara County TRAN Series 1993-94, 3.25% 7/29/94 25,600,000 25,648,037 801546LF Santa Cruz County TRAN Series 1993-94, 3.25% 8/1/94 7,500,000 7,508,209 801818CQ Simi Valley Multi-Family Hsg. Rev. (Shadowridge Apts.) Series 1989, 2.50%, LOC Citibank, VRDN 21,200,000 21,200,000 828905BX Solano County TRAN 3.25% 11/01/94 3,000,000 3,007,492 834127BH Sonoma County TRAN Series 1993-94, 3.50 8/2/94 11,000,000 11,022,192 835546BU Southern California Pub. Pwr. Auth. Rev. (Tran Mission Proj.) Series 1991, 2.50%, LOC Swiss Bank, (AMBAC Insured), VRDN 7,500,000 7,500,000 842477HH Stockton Hosp. Rev. (St. Joseph's Hosp.) Series 1985 A, 2.45%, LOC Dai-Ichi Kangyo Bank, VRDN 17,500,000 17,500,000 861344AY Torrance Hospital Rev. (Little Co. Of Mary Hosp.-Torrance Memorial Med. Ctr.) Series1992, 2.45%, LOC Fuji Bank, VRDN 7,800,000 7,800,000 891368BX Tustin, Orange County Assessment Dist. #85-1 Impt. Rev. LOC Mitsubishi Trust, CP mode: 3.30% 3/3/94 6,694,000 6,694,000 901991MU 3.30% 3/4/94 2,409,000 2,409,000 901991MV Upland Commty. Redev. Agcy. Multi-Family Hsg. (Northwoods) 1989 B, 2.50%, LOC Sanwa Bank, VRDN 1,300,000 1,300,000 915354AB Vacaville Hsg. Auth. (Quail Run Apt. Proj.) First Nationwide Grantors Trust Series 1991-1B, 2.50%, LOC Federal Home Loan Bank of San Francisco, VRDN (c) 1,000,000 1,000,000 915354AB Ventura County TRAN 3% 8/1/94 3,000,000 3,001,617 923035AG MUNICIPAL SECURITIES (A) - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Washington Township Hosp. Dist., Series 1985 A, 2.45%, LOC Bank of Tokyo, VRDN $ 2,700,000 $ 2,700,000 940212AR Woodland (Crossroads Village Apt. Proj.) First Nationwide Grantor Trust Series 1991-1H, 2.50%, LOC Federal Home Loan Bank of San Francisco, VRDN 1,900,000 1,900,000 940212AR TOTAL INVESTMENTS - 100% $ 1,059,333,415 Total Cost for Income Tax Purposes $ 1,059,334,599 SECURITY TYPE ABBREVIATIONS BAN - Bond Anticipation Notes CP - Commercial Paper FRDN - Floating Rate Demand Notes MT - Mandatory Tender OT - Optional Tender RAN - Revenue Anticipation Notes TAN - Tax Anticipation Notes TRAN - Tax & Revenue Anticipation Notes VAN - Variable Rate Tax & Revenue Anticipation Notes VRDN - Variable Rate Demand Notes LEGEND (a) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (b) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals (AMT securities). (c) Provides evidence of ownership in one or more underlying municipal bonds. INCOME TAX INFORMATION At February 28, 1994, the fund had a capital loss carryforward of approximately $29,000 which will expire on February 28, 2001. SPARTAN CALIFORNIA MUNICIPAL MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994 243.ASSETS 244. 245. 246.Investment in securities, at value (Note 1) - See 247. $ 1,059,333,415 accompanying schedule 248.Cash 249. 45,771 250.Interest receivable 251. 7,093,997 252. 253.TOTAL ASSETS 254. 1,066,473,183 255.LIABILITIES 256. 257. 258.Payable for investments purchased $ 1,001,908 259. 260.Share transactions in process 655,110 261. 262.Dividends payable 54,873 263. 264.Accrued management fee 158,071 265. 266. 267.TOTAL LIABILITIES 268. 1,869,962 269.270.NET ASSETS 271. $ 1,064,603,221 272.Net Assets consist of (Note 1): 273. 274. 275.Paid in capital 276. $ 1,064,637,582 277.Accumulated net realized gain (loss) on 278. (34,361) investments 279.280.NET ASSETS, for 1,064,637,555 shares 281. $ 1,064,603,221 outstanding 282.283.NET ASSET VALUE, offering price and 284. $1.00 redemption price per share ($1,064,603,221 (divided by) 1,064,637,555 shares)
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1994 285.286.INTEREST INCOME 287. $ 24,829,747 288.EXPENSES 289. 290. 291.Management fee (Note 4) $ 4,714,027 292. 293.Non-interested trustees' compensation 5,983 294. 295. Total expenses before reductions 4,720,010 296. 297. Expense reductions (Note 5) (2,767,561) 1,952,449 298.299.NET INTEREST INCOME 300. 22,877,298 301.302.NET REALIZED GAIN (LOSS) ON INVESTMENTS 303. 30,247 (NOTE 1) 304.305.NET INCREASE IN NET ASSETS RESULTING FROM 306. $ 22,907,545 OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
YEAR TEN MONTHS ENDED ENDED FEBRUARY 28, 1994 FEBRUARY 28, 1993 (NOTE 1) 307.INCREASE (DECREASE) IN NET ASSETS 308.Operations $ 22,877,298 $ 19,896,544 Net interest income 309. Net realized gain (loss) on investments 30,247 (48,709) 310. 22,907,545 19,847,835 311.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 312.Dividends to shareholders from net interest income (22,877,298) (19,896,544) 313.Share transactions at net asset value of $1.00 per 1,234,266,731 668,146,371 share Proceeds from sales of shares 314. Reinvestment of dividends from net interest 22,035,126 19,176,422 income 315. Cost of shares redeemed (1,047,318,874) (749,324,432) 316. 208,982,983 (62,001,639) Net increase (decrease) in net assets and shares resulting from share transactions 317. 209,013,230 (62,050,348) 318.TOTAL INCREASE (DECREASE) IN NET ASSETS 319.NET ASSETS 320. 321. 322. Beginning of period 855,589,991 917,640,339 323. End of period $ 1,064,603,221 $ 855,589,991
FINANCIAL HIGHLIGHTS
324. YEAR TEN MONTHS YEARS ENDED APRIL 30, NOVEMBER 27, ENDED ENDED 1989 FEBRUARY 28, FEBRUARY 28, 199 (COMMENCEMEN 3 T OF OPERATIONS) TO APRIL 30, 325. 1994 (NOTE 1) 1992 1991 1990 326.SELECTED PER-SHARE DATA 327.Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 value, beginning of period 328.Income .024 .022 .041 .054 .025 from Investment Operations Net interest income 329.Less (.024) (.022) (.041) (.054) (.025) Distributions From net interest income 330.Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 value, end of period 331.TOTAL 2.24% 4.15 5.52 2.54% RETURN(DAGGER) 2.45 % % % 332.RATIOS AND SUPPLEMENTAL DATA 333.Net $ 1,064,603 $ 855,590 $ 917,640 $ 763,959 $ 396,652 assets, end of period (000 omitted) 334.Ratio of .21 .10 .07 - expenses to % % % average net assets(DAGGER)(DAGGER) .30%* 335.Ratio of .50 .50%* .50 .50 .50%* expenses to % % % average net assets before expense reductions(DAGGER)(DAGGER) 336.Ratio of net 2.42 2.67%* 4.05 5.33 5.99%* interest incom % % % e to average net assets
* ANNUALIZED (DAGGER) TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. (DAGGER)(DAGGER) SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1994 1. SIGNIFICANT ACCOUNTING POLICIES. Spartan California Municipal High Yield Portfolio, Spartan California Intermediate Municipal Portfolio and Spartan California Municipal Money Market Portfolio (the funds) are funds of Fidelity California Municipal Trust (the trust). The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust (see Note 6). On November 19, 1992, the Trustees approved a change in the fiscal year-end of the trust to February 28. Each fund is authorized to issue an unlimited number of shares. The following summarizes the significant accounting policies of the funds: SECURITY VALUATION. HIGH YIELD AND INTERMEDIATE FUNDS. Securities are valued based upon a computerized matrix system and/or appraisals by a pricing service, both of which consider market transactions and dealer-supplied valuations. Short-term securities maturing within sixty days are valued either at amortized cost or original cost plus accrued interest, both of which approximate current value. Securities for which quotations are not readily available through the pricing service are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein, securities are valued initially at cost and thereafter assume a constant amortization to maturity of any discount or premium. INCOME TAXES. The intermediate fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. The high yield and money market funds are each qualified as a regulated investment company under Subchapter M of the Internal Revenue Code. By so qualifying, each fund is not subject to income taxes to the extent that it distributes all of its taxable income for the fiscal year. The schedules of investments include information regarding income taxes under the caption "Income Tax Information." INTEREST INCOME. Interest income, which includes amortization of premium and accretion of original issue discount, is accrued as earned. For the money market fund, accretion of market discount represents unrealized gain until realized at the time of a security disposition or maturity. EXPENSES. Most expenses of each trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid monthly from net interest income. Distributions to shareholders from realized capital gains on investments, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED treatments for futures and options transactions, excise tax regulations and losses deferred due to wash sales. REDEMPTION FEES. Shares held in the high yield fund less than 180 days are subject to a redemption fee equal to .50% of the proceeds of the redeemed shares. The fee, which is retained by the fund is accounted for as an addition to paid in capital. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective February 1, 1993, the money market and high yield funds 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, the funds changed the classification of distributions to shareholders to better disclose the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, amounts as of February 28, 1993 have been restated to reflect an increase in paid in capital and a decrease in accumulated net realized gain of $45,643 for the high yield fund. No adjustments were necessary for the money market fund. 2. OPERATING POLICIES. DELAYED DELIVERY TRANSACTIONS. Each fund may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take place a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. FUTURES CONTRACTS AND OPTIONS. The high yield and intermediate funds may invest in futures contracts and write options. These investments involve to varying degrees, elements of market risk and risks in excess of the amount recognized in their Statements of Assets and Liabilities. The face or contract amounts reflect the extent of the involvement the high yield and intermediate funds have in the particular classes of instruments. Risks may be caused by an imperfect correlation between movements in the price of the instruments and the price of the underlying securities and interest rates. Risks also may arise if there is an illiquid secondary market for the instruments, or due to the inability of counterparties to perform. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Options traded on an exchange are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. 3. PURCHASES AND SALES OF INVESTMENTS. HIGH YIELD FUND. Purchases and sales of securities, other than short-term securities, aggregated $315,008,869 and $283,241,767, respectively. The gross market value of futures contracts opened and closed amounted to $237,948,678 and $258,547,360, respectively. INTERMEDIATE FUND. Purchases of securities, other than short-term securities, aggregated $17,416,283; there were no sales of securities. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management & Research Company (FMR) pays all expenses except the compensation of the non-interested Trustees and certain exceptions such as interest, taxes, brokerage commissions and extraordinary expenses. FMR receives a fee that is computed daily at an annual rate of .55%, .55% and .50% of average net assets for the high yield, intermediate and money market funds, respectively. SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the management fee payable to FMR. The fee is paid prior to any voluntary expense reimbursements which may be in effect, and after reducing the fee for any payments by FMR pursuant to the fund's Distribution and Service Plan. FMR also bears the cost of providing shareholder services to each fund. For the period, FMR or its affiliates collected certain transaction fees from shareholders which aggregated $11,725, $95 and $34,156 for the high yield, intermediate and money market funds, respectively. 5. EXPENSE REDUCTIONS HIGH YIELD FUND. For the period, FMR voluntarily agreed to reimburse the fund's operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) above a specified percentage of average net assets. This expense limitation ranged from an annual rate of .50% to .55% of average net assets and the reimbursement reduced expenses by $202,856. INTERMEDIATE FUND. For the period, FMR voluntarily agreed to reimburse all of the fund's operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) and the reimbursement reduced expenses by $7,123. MONEY MARKET FUND. For the period, FMR voluntarily agreed to reimburse all of the fund's operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) above a specified percentage of average net assets. This expense limitation ranged from an annual rate of .20% to .35% of average net assets and the reimbursement reduced expenses by $2,767,561. 6. SHAREHOLDER MEETING. At a special meeting of shareholders of the high yield and money market funds held on February 16, 1994, shareholders approved amendments to certain fundamental investment limitations of the funds. 6. SHAREHOLDER MEETING - CONTINUED In addition, shareholders of the money market fund approved an Agreement and Plan of Conversion and Termination (the Plan of Conversion), providing for the conversion of the money market fund (the current fund) from a separate series of Fidelity California Municipal Trust, a Massachusetts business trust, to a separate series (the successor fund) of Fidelity California Municipal Trust II, a Delaware business trust, effective April 20, 1994. The individual investment objective, policies and limitations of the successor fund will be identical to those of the current fund. In connection with the Plan of Conversion, a new management contract, new sub-advisory agreement and new distribution plan identical to those currently in effect for the current fund will take effect on April 20, 1994. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity California Municipal Trust and Shareholders of: Spartan California Municipal High Yield Portfolio Spartan California Intermediate Municipal Portfolio Spartan California Municipal Money Market Portfolio: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments (except for Moody's and Standard & Poor's ratings), and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Spartan California Municipal High Yield Portfolio, Spartan California Intermediate Municipal Portfolio and Spartan California Municipal Money Market Portfolio at February 28, 1994, the results of their operations, the changes in their net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of each portfolio's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities owned at February 28, 1994 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. /s/Price Waterhouse PRICE WATERHOUSE Boston, Massachusetts March 30, 1994 TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call -- you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios.(Registered trademark) 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO WRITE FIDELITY Please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. Please send ALL correspondence about retirement accounts to Dallas. (LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 2269 Boston, MA 02107-2269 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30280 Salt Lake City, UT 84130-0280 (LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments Additional Payments P.O. Box 2656 Boston, MA 02293-0656 Fidelity Investments Additional Payments P.O. Box 620024 Dallas, TX 75262-0024 Fidelity Investments Additional Payments P.O. Box 31455 Salt Lake City, UT 84131-0455 OVERNIGHT EXPRESS Fidelity Investments Additional Payments World Trade Center 164 Northern Avenue Boston, MA 02210 SELLING SHARES Fidelity Investments P.O. Box 193 Boston, MA 02103-0878 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30281 Salt Lake City, UT 84130-0281 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions World Trade Center 164 Northern Avenue Boston, MA 02210 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02101-0193 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 (LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 620024 Dallas, TX 75262-0024 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. 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Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 1 West Pennsylvania Ave. Towson, MD 7401 Wisconsin Avenue Bethesda, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 101 Cambridge Street Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 26955 Northwestern Hwy. Southfield, MI MINNESOTA 38 South Sixth Street Minneapolis, MN MISSOURI 700 West 47th Street Kansas City, MO 200 North Broadway St. Louis, MO NEW JERSEY 60B South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 1903 East Ninth Street Cleveland, OH 28699 Chagrin Boulevard Woodmere Village, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 1010 Lamar Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 175 East 400 South Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 1001 Fourth Avenue Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 222 East Wisconsin Avenue Milwaukee, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA SUB-ADVISER FMR Texas Inc. Irving, TX OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Deborah F. Watson, Vice President MONEY MARKET FUND Thomas D. Maher, Assistant Vice President - MONEY MARKET FUND Gary L. French, Treasurer John H. Costello, Assistant Treasurer Arthur S. Loring, Secretary BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Phyllis Burke Davis* Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* Marvin L. Mann* Gerald C. McDonough* Thomas R. Williams* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENTS United Missouri Bank, N.A. Kansas City, MO and Fidelity Service Co. Boston, MA CUSTODIAN United Missouri Bank, N.A. Kansas City, MO THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE EX-24.B1 4 EXHIBIT 24(b)(1) AMENDED AND RESTATED DECLARATION OF TRUST DATED MARCH 17, 1994 AMENDED AND RESTATED DECLARATION OF TRUST, made March 17, 1994 by each of the Trustees whose signature is affixed hereto (the "Trustees") WHEREAS, the Trustees desire to amend and restate this Declaration of Trust for the sole purpose of supplementing the Declaration to incorporate amendments duly adopted; and WHEREAS, this Trust was initially made on April 28, 1983 by Edward C. Johnson, Caleb Loring, Jr., and Frank Nesvet in order to establish a trust fund for the investment and reinvestment of funds contributed thereto; NOW, THEREFORE, the Trustees declare that all money and property contributed to the trust fund hereunder shall be held and managed in Trust under this Declaration of Trust as herein set forth below. ARTICLE I NAME AND DEFINITIONS NAME Section 1. This Trust shall be known as "Fidelity California Municipal Trust." DEFINITIONS Section 2. Wherever used hererin, unless otherwise required by the context or specifically provided: (a) The Terms "Affiliated Person", "Assignment", "Commission", "Interested Person", "Majority Shareholder Vote" (the 67% or 50% requirement of the third sentence of Section 2(a)(42) of the 1940 Act, whichever may be applicable) and "Principal Underwriter" shall have the meanings given them in the 1940 Act, as amended from time to time; (b) The "Trust" refers to "Fidelity California Municipal Trust" and reference to the Trust, when applicable to one or more Series of the Trust, shall refer to any such Series; (c) "Net Asset Value" means the net asset value of each Series of the Trust determined in the manner provided in Article X, Section 3; (d) "Shareholder" means a record owner of Shares of the Trust; (e) The "Trustees" refer to the individual trustees in their capacity as trustees hereunder of the Trust and their successor or successors for the time being in office as such trustee or trustees; (f) "Shares" means the equal proportionate transferable units of interest into which the beneficial interest of each Series shall be divided from time to time, and includes fractions of shares as well as whole shares consistent with the requirements of Federal and/or other securities laws; and (g) The "1940 Act" refers to the Investment Company Act of 1940, as amended from time to time. (h) "Series" refers to series of Shares of the Trust established in accordance with the provisions of Article III. ARTICLE II PURPOSE OF TRUST The purpose of this Trust is to provide investors a continuous source of managed investment in securities. ARTICLE III BENEFICIAL INTEREST SHARES OF BENEFICIAL INTEREST Section 1. The beneficial interest in the Trust shall be divided into such transferable Shares of one or more separate and distinct Series as the Trustees shall from time to time create and establish. The number of Shares is unlimited and each Share shall be without par value and shall be fully paid and nonassessable. The Trustees shall have full power and authority, in their sole discretion and without obtaining any prior authorization or vote of the Shareholders of the Trust to create and establish (and to change in any manner) Shares with such preferences, voting powers, rights and privileges as the Trustees may from time to time determine, to divide or combine the Shares into a greater or lesser number, to classify or reclassify any issued Shares into one or more Series of Shares, to abolish any one or more Series of Shares, and to take such other action with respect to the Shares as the Trustees may deem desirable. ESTABLISHMENT OF SERIES Section 2. The establishment of any Series shall be effective upon the adoption of a resolution by a majority of the then Trustees setting forth such establishment and designation and the relative rights and preferences of the Shares of such Series. At any time that there are no Shares outstanding of any particular Series previously established and designated, the Trustees may by a majority vote abolish that Series and the establishment and designation thereof. OWNERSHIP OF SHARES Section 3. The ownership of Shares shall be recorded in the books of the Trust. The Trustees may make such rules as they consider appropriate for the transfer of Shares and similar matters. The record books of the Trust shall be conclusive as to who are the holders of Shares and as to the number of Shares held from time to time by each Shareholder. INVESTMENT IN THE TRUST Section 4. The Trustees shall accept investments in the Trust from such persons and on such terms as they may from time to time authorize. Such investments may be in the form of cash or securities in which the appropriate Series is authorized to invest, valued as provided in Article X, Section 3. After the date of the initial contribution of capital, the number of Shares to represent the initial contribution may in the Trustees' discretion be considered as outstanding and the amount received by the Trustees on account of the contribution shall be treated as an asset of the Trust. Subsequent investments in the Trust shall be credited to each Shareholder's account in the form of full Shares at the Net Asset Value per Share next determined after the investment is received; provided, however, that the Trustees may, in their sole discretion, (a) impose a sales charge upon investments in the Trust and (b) issue fractional Shares. ASSETS AND LIABILITIES OF SERIES Section 5. All consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall be referred to as "assets belonging to" that Series. In addition any assets, income, earnings, profits, and proceeds thereof, funds, or payments which are not readily identifiable as belonging to any particular Series shall be allocated by the Trustees between and among one or more of the Series in such manner as they, in their sole discretion, deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series for all purposes, and shall be referred to as assets belonging to that Series. The assets belonging to a particular Series shall be so recorded upon the books of the Trust, and shall be held by the Trustees in trust for the benefit of the holders of Shares of that Series. The assets belonging to each particular Series shall be charged with the liabilities of that Series and all expenses, costs, charges and reserves attributable to that Series. Any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular Series shall be allocated and charged by the Trustees between or among any one or more of the Series in such manner as the Trustees in their sole discretion deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series for all purposes. Any creditor of any Series may look only to the assets of that Series to satisfy such creditor's debt. NO PREEMPTIVE RIGHTS Section 6. Shareholders shall have no preemptive or other right to subscribe to any additional Shares or other securities issued by the Trust or the Trustees. LIMITATION OF PERSONAL LIABILITY Section 7. The Trustees shall have no power to bind any Shareholder personally or to call upon any shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay by way of subscription for any Shares or otherwise. Every note, bond, contract or other undertaking issued by or on behalf of the Trust or the Trustees relating to the Trust shall include a recitation limiting the obligation represented thereby to the Trust and its assets (but the omission of such a recitation shall not operate to bind any Shareholder). ARTICLE IV THE TRUSTEES MANAGEMENT OF THE TRUST Section 1. The business and affairs of the Trust shall be managed by the Trustees, and they shall have all powers necessary and desirable to carry out that responsibility. ELECTION: INITIAL TRUSTEES Section 2. On a date fixed by the Trustees, the Shareholders shall elect not less than three Trustees. A Trustee shall not be required to be a Shareholder of the Trust. The initial Trustees shall be Edward C. Johnson 3rd, Caleb Loring, Jr. and Frank Nesvet and such other individuals as the Board of Trustees shall appoint pursuant to Section 4 of the Article IV. TERM OF OFFICE OF TRUSTEES Section 3. The Trustees shall hold office during the lifetime of this Trust, and until its termination as hereinafter provided; except (a) that any Trustee may resign his trust by written instrument signed by him and delivered to the other Trustees, which shall take effect upon such delivery or upon such later date as is specified therein; (b) that any Trustee may be removed at any time by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal, specifying the date when such removal shall become effective; (c) that any Trustee who requests in writing to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees, specifying the date of his retirement; and (d) a Trustee may be removed at any Special Meeting of the Trust by a vote of two-thirds of the outstanding Shares. RESIGNATION AND APPOINTMENT OF TRUSTEES Section 4. In case of the declination, death, resignation, retirement, removal, incapacity, or inability of any of the Trustees, in case a vacancy shall, by reason of an increase in number, or for any other reason, exist, the remaining Trustees shall fill such vacancy by appointing such other person as they in their discretion shall see fit consistent with the limitations under the Investment Company Act of 1940. Such appointment shall be evidenced by a written instrument signed by a majority of the Trustees in office or by recording in the records of the Trust, whereupon the appointment shall take effect. An appointment of a Trustee may be made by the Trustees then in office in anticipation of a vacancy to occur by reason of retirement, resignation or increase in number of Trustees effective at a later date, provided that said appointment shall become effective only at or after the effective date of said retirement, resignation or increase in number of Trustees. As soon as any Trustee so appointed shall have accepted this trust, the trust estate shall vest in the new Trustee or Trustees, together with the continuing Trustees, without any further act or conveyance, and he shall be deemed a Trustee hereunder. The power of appointment is subject to the provisions of Section 16(a) of the 1940 Act. TEMPORARY ABSENCE OF TRUSTEE Section 5. Any Trustee may, by power of attorney, delegate his power for a period not exceeding six months at any one time to any other Trustee or Trustees, provided that in no case shall less than two Trustees personally exercise the other powers hereunder except as herein otherwise expressly provided. NUMBER OF TRUSTEES Section 6. The number of Trustees, not less than three (3) nor more than twelve (12), serving hereunder at any time shall be determined by the Trustees themselves. Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is filled, or while any Trustee is absent from the Commonwealth of Massachusetts or, if not a domiciliary of Massachusetts, is absent from his state of domicile, or is physically or mentally incapacitated by reason of disease or otherwise, the other Trustees shall have all the powers hereunder and the certificate of the other Trustees of such vacancy, absence or incapacity, shall be conclusive, provided, however, that no vacancy shall remain unfilled for a period longer than six calendar months. EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE Section 7. The death, declination, resignation, retirement, removal, incapacity, or inability of the Trustees, or any one of them, shall not operate to annul the Trust or to revoke any existing agency created Pursuant to the terms of this Declaration of Trust. OWNERSHIP OF ASSETS OF THE TRUST Section 8. The assets of the Trust shall be held separate and apart from any assets now or hereafter held in any capacity other than as Trustee hereunder by the Trustees or any successor Trustees. All of the assets of the Trust shall at all times be considered as vested in the Trustees. No Shareholder shall be deemed to have a severable ownership in any individual asset of the Trust or any right of partition or possession thereof, but each Shareholder shall have a proportionate undivided beneficial interest in the Trust. ARTICLE V POWERS OF THE TRUSTEES POWERS Section 1. The Trustees in all instances shall act as principals, and are and shall be free from the control of the Shareholders. The Trustees shall have full power and authority to do any and all acts and to make and execute any and all contracts and instruments that they may consider necessary or appropriate in connection with the management of the Trust. The Trustees shall not in any way be bound or limited by present or future laws or customs in regard to trust investments, but shall have full authority and power to make any and all investments which they, in their uncontrolled discretion, shall deem proper to accomplish the purpose of this Trust. Subject to any applicable limitation in the Declaration of Trust or the Bylaws of the Trust, the Trustees shall have power and authority: (a) To invest and reinvest cash and other property, and to hold cash or other property uninvested, without in any event being bound or limited by any present or future law or custom in regard to investments by Trustees, and to sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or all of the assets of the Trust. (b) To adopt Bylaws not inconsistent with this Declaration of Trust providing for the conduct of the business of the Trust and to amend and repeal them to the extent that they do not reserve that right to the Shareholders. (c) To elect and remove such officers and appoint and terminate such agents as they consider appropriate. (d) To employ a bank or trust company as custodian of any assets of the Trust subject to any conditions set forth in this Declaration of Trust or in the Bylaws, if any. (e) To retain a transfer agent and Shareholder servicing agent, or both. (f) To provide for the distribution of interests of the Trust either through a principal underwriter in the manner hereinafter provided for or by the Trust itself, or both. (g) To set record dates in the manner hereinafter provided for. (h) To delegate such authority as they consider desirable to any officers of the Trust and to any agent, custodian or underwriter. (i) To sell or exchange any or all of the assets of the Trust, subject to the provisions of Article XII, Section 4(b) hereof. (j) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and deliver powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper. (k) To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities. (l) To hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form; or either in its own name or in the name of a custodian or a nominee or nominees, subject in either case to proper safeguards according to the usual practice of Massachusetts trust companies or investment companies. (m) To establish separate and distinct Series with separately defined investment objectives and policies and distinct investment purposes in accordance with the provisions of Article III. (n) To allocate assets, liabilities and expenses of the Trust to a particular Series, or to apportion the same between or among two or more Series, provided that any liabilities or expenses incurred by a particular Series shall be payable solely out of the assets belonging to that Series as provided for in Article III. (o) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or concern, any security of which is held in the Trust; to consent to any contract, lease, mortgage, purchase, or sale of property by such corporation or concern, and to pay calls or subscriptions with respect to any security held in the Trust. (p) To compromise, arbitrate, or otherwise adjust claims in favor of or against the Trust or any matter in controversy including, but not limited to, claims for taxes. (q) To make distributions of income and of capital gains to Shareholders in the manner hereinafter provided for. (r) To borrow money, and to pledge, mortgage and hypothecate the assets of the Trust, subject to applicable limitations of the 1940 Act. (s) To establish, from time to time, a minimum total investment for Shareholders, and to require the redemption of the Shares of any Shareholders whose investment is less than such minimum upon giving notice to such Shareholder. (t) Notwithstanding any other provision hereof, to invest all of the assets of any Series in a single open-end investment company, including investment by means of transfer of such assets in exchange for an interest or interests in such investment company. No one dealing with the Trustees shall be under any obligation to make any inquiry concerning the authority of the Trustees, or to see to the application of any payments made or property transferred to the Trustees or upon their order. TRUSTEES AND OFFICERS AS SHAREHOLDERS Section 2. Any Trustee, officer or other agent of the Trust may acquire, own and dispose of Shares to the same extent as if he were not a Trustee, officer or agent; and the Trustees may issue and sell or cause to be issued and sold Shares to and buy such Shares from any such person of any firm or company in which he is interested, subject only to the general limitations herein contained as to the sale and purchase of such Shares; and all subject to any restrictions which may be contained in the Bylaws. ACTION BY THE TRUSTEES Section 3. The Trustees shall act by majority vote at a meeting duly called or by unanimous written consent without a meeting or by telephone consent provided a quorum of Trustees participate in any such telephonic meeting, unless the 1940 Act requires that a particular action be taken only at a meeting of the Trustees. At any meeting of the Trustees, a majority of the Trustees shall constitute a quorum. Meetings of the Trustees may be called orally or in writing by the Chairman of the Trustees or by any two other Trustees. Notice of the time, date and place of all meetings of the Trustees shall be given by the party calling the meeting to each Trustee by telephone or telegram sent to his home or business address at least twenty-four hours in advance of the meeting or by written notice mailed to his home or business address at least seventy-two hours in advance of the meeting. Notice need not be given to any Trustee who attends the meeting without objecting to the lack of notice or who executes a written waiver of notice with respect to the meeting. Subject to the requirements of the 1940 Act, the Trustees by majority vote may delegate to any one of their number their authority to approve particular matters or take particular actions on behalf of the Trust. CHAIRMAN OF THE TRUSTEES Section 4. The Trustees may appoint one of their number to be Chairman of the Board of Trustees. The Chairman shall preside at all meetings of the Trustees, shall be responsible for the execution of policies established by the Trustees and the administration of the Trust, and may be the chief executive, financial and accounting officer of the Trust. ARTICLE VI EXPENSES OF THE TRUST TRUSTEE REIMBURSEMENT Section 1. Subject to the provisions of Article III, Section 5, the Trustees shall be reimbursed from the Trust estate or the assets belonging to the appropriate Series for their expenses and disbursements, including, without limitation, fees and expenses of Trustees who are not Interested Persons of the Trust, interest expense, taxes, fees and commissions of every kind, expenses of pricing Trust portfolio securities, expenses of issue, repurchase and redemption of shares including expenses attributable to a program of periodic repurchases or redemptions, expenses of registering and qualifying the Trust and its Shares under Federal and State laws and regulations, charges of custodians, transfer agents, and registrars, expenses of preparing and setting up in type Prospectuses and Statements of Additional Information, expenses of printing and distributing prospectuses sent to existing Shareholders, auditing and legal expenses, reports to Shareholders, expenses of meetings of Shareholders and proxy solicitations therefor, insurance expense, association membership dues and for such non-recurring items as may arise, including litigation to which the Trust is a party, and for all losses and liabilities by them incurred in administering the Trust, and for the payment of such expenses, disbursements, losses and liabilities the Trustees shall have a lien on the assets belonging to the appropriate Series prior to any rights or interests of the Shareholders thereto. This section shall not preclude the Trust from directly paying any of the aforementioned fees and expenses. ARTICLE VII INVESTMENT ADVISER, PRINCIPAL, UNDERWRITER AND TRANSFER AGENT INVESTMENT ADVISER Section 1. Subject to a Majority Shareholder Vote, the Trustees may in their discretion from time to time enter into an investment advisory or management contract(s) with respect to the Trust or any Series thereof whereby the other party(ies) to such contract(s) shall undertake to furnish the Trustees such management, investment advisory, statistical and research facilities and services and such other facilities and services, if any, and all upon such terms and conditions, as the Trustees may in their discretion determine. Notwithstanding any provisions of this Declaration of Trust, the Trustees may authorize the investment adviser(s) (subject to such general or specific instructions as the Trustees may from time to time adopt) to effect purchases, sales or exchanges of portfolio securities and other investment instruments of the Trust on behalf of the Trustees or may authorize any officer, agent, or Trustee to effect such purchases, sales or exchanges pursuant to recommendations of the investment adviser (and all without further action by the Trustees). Any such purchases, sales and exchanges shall be deemed to have been authorized by all of the Trustees. The Trustees may, subject to applicable requirements of the 1940 Act, including those relating to Shareholder approval, authorize the investment adviser to employ one or more sub-advisers from time to time to perform such of the acts and services of the investment adviser, and upon such terms and conditions, as may be agreed upon between the investment adviser and sub-adviser. PRINCIPAL UNDERWRITER Section 2. The Trustees may in their discretion from time to time enter into (a) contract(s) providing for the sale of the Shares, whereby the Trust may either agree to sell the Shares to the other party to the contract or appoint such other party its sales agent for such Shares. In either case, the contract shall be on such terms and conditions as may be prescribed in the Bylaws, if any, and such further terms and conditions as the Trustees may in their discretion determine not inconsistent with the provisions of this Article VII, or of the Bylaws, if any; and such contract may also provide for the repurchase or sale of Shares by such other party as principal or as agent of the Trust. TRANSFER AGENT Section 3. The Trustees may in their discretion from time to time enter into a transfer agency and Shareholder service contract whereby the other party shall undertake to furnish the Trustees with transfer agency and Shareholder services. The contract shall be on such terms and conditions as the Trustees may in their discretion determine not inconsistent with the provisions of this Declaration of Trust or of the Bylaws, if any. Such services may be provided by one or more entities. PARTIES TO CONTRACT Section 4. Any contract of the character described in Sections 1, 2 and 3 of this Article VII or in Article IX hereof may be entered into with any corporation, firm, partnership, trust or association, although one or more of the Trustees or officers of the Trust may be an officer, director, trustee, shareholder, or member of such other party to the contract, and no such contract shall be invalidated or rendered voidable by reason of the existence of any relationship, nor shall any person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of said contract or accountable for any profit realized directly or indirectly therefrom, provided that the contract when entered into was reasonable and fair and not inconsistent with the provisions of this Article VII or the Bylaws, if any. The same person (including a firm, corporation, partnership, trust, or association) may be the other party to contracts entered into pursuant to Sections 1, 2 and 3 above or Article IX, and any individual may be financially interested or otherwise affiliated with persons who are parties to any or all of the contracts mentioned in this Section 4. PROVISIONS AND AMENDMENTS Section 5. Any contract entered into pursuant to Sections 1 and 2 of this Article VII shall be consistent with and subject to the requirements of Section 15 of the 1940 Act (including any amendments thereof or other applicable Act of Congress hereafter enacted) with respect to its continuance in effect, its termination, and the method of authorization and approval of such contract or renewal thereof, and no amendment to any contract, entered into pursuant to Section 1 shall be effective unless assented to by a Majority Shareholder Vote. ARTICLE VIII SHAREHOLDERS' VOTING POWERS AND MEETINGS VOTING POWERS Section 1. The Shareholders shall have power to vote (i) for the election of Trustees as provided in Article IV, Section 2, (ii) for the removal of Trustees as provided in Article IV, Section 3(d), (iii) with respect to any investment advisory or management contract as provided in Article VII, Section 1, (iv) with respect to the amendment of this Declaration of Trust as provided in Article XII, Section 7, (v) to the same extent as the shareholders of a Massachusetts business corporation, as to whether or not a court action, proceeding or claim should be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders, provided, however, that a Shareholder of a particular Series shall not be entitled to bring any derivative or class action on behalf of any other Series of the Trust, and (vi) with respect to such additional matters relating to the Trust as may be required or authorized by law, by this Declaration of Trust, or the Bylaws of the Trust, if any, or any registration of the Trust with the Securities and Exchange Commission (the "Commission") or any State, as the Trustees may consider desirable. On any matter submitted to a vote of the Shareholders, all shares shall be voted by individual Series, except (i) when required by the 1940 Act, Shares shall be voted in the aggregate and not by individual Series; and (ii) when the Trustees have determined that the matter affects only the interests of one or more Series, then only the Shareholders of such Series shall be entitled to vote thereon. A Shareholder of each Series shall be entitled to one vote for each dollar of net asset value (number of Shares owned times net asset value per share of such Series, on any matter on which such Shareholder is entitled to vote and each fractional dollar amount shall be entitled to a proportionate fractional vote). There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required or permitted by law, this Declaration of Trust or any Bylaws of the Trust to be taken by Shareholders. MEETINGS Section 2. The first Shareholders' meeting shall be held as specified in Section 2 of Article IV at the principal office of the Trust or such other place as the Trustees may designate. Special meetings of the Shareholders of any Series may be called by the Trustees and shall be called by the Trustees upon the written request of Shareholders owning at least one-tenth of the outstanding Shares entitled to vote. Whenever ten or more Shareholders meeting the qualifications set forth in Section 16(c) of the 1940 Act, as the same may be amended from time to time, seek the opportunity of furnishing materials to the other Shareholders with a view to obtaining signatures on such a request for a meeting, the Trustees shall comply with the provisions of said Section 16(c) with respect to providing such Shareholders access to the list of the Shareholders of record of the Trust or the mailing of such materials to such Shareholders of record. Shareholders shall be entitled to at least fifteen days' notice of any meeting. QUORUM AND REQUIRED VOTE Section 3. A majority of Shares entitled to vote in person or by proxy shall be a quorum for the transaction of business at a Shareholders' meeting, except that where any provision of law or of this Declaration of Trust permits or requires that holders of any Series shall vote as a Series then a majority of the aggregate number of Shares of that Series entitled to vote shall be necessary to constitute a quorum for the transaction of business by that Series. Any lesser number shall be sufficient for adjournments. Any adjourned session or sessions may be held, within a reasonable time after the date set for the original meeting, without the necessity of further notice. Except when a larger vote is required by any provision of this Declaration of Trust or the Bylaws, a majority of the Shares voted in person or by proxy shall decide any questions and a plurality shall elect a Trustee, provided that where any provision of law or of this Declaration of Trust permits or requires that the holders of any Series shall vote as a Series, then a majority of the Shares of that Series voted on the matter shall decide that matter insofar as that Series is concerned. ARTICLE IX CUSTODIAN APPOINTMENT AND DUTIES Section 1. The Trustees shall at all times employ a bank or trust company having capital, surplus and undivided profits of at least two million dollars ($2,000,000) as custodian with authority as its agent, but subject to such restrictions, limitations and other requirements, if any, as may be contained in the Bylaws of the Trust: (1) to hold the securities owned by the Trust and deliver the same upon written order; (2) to receive and receipt for any moneys due to the Trust and deposit the same in its own banking department or elsewhere as the Trustees may direct; and (3) to disburse such funds upon orders or vouchers; and the Trust may also employ such custodian as its agent: (1) to keep the books and accounts of the Trust and furnish clerical and accounting services; and (2) to compute, if authorized to do so by the Trustees, the Net Asset Value of any Series in accordance with the provisions hereof; all upon such basis of compensation as may be agreed upon between the Trustees and the custodian. If so directed by a Majority Shareholder Vote, the custodian shall deliver and pay over all property of the Trust held by it as specified in such vote. The Trustees may also authorize the custodian to employ one or more sub-custodians from time to time to perform such of the acts and services of the custodian, and upon such terms and conditions, as may be agreed upon between the custodian and such sub-custodian and approved by the Trustees, provided that in every case such sub-custodian shall be a bank or trust company organized under the laws of the United States or one of the states thereof and having capital, surplus and undivided profits of at least two million dollars ($2,000,000) or such other person as may be permitted by the Commission, or otherwise in accordance with the 1940 Act as from time to time amended. CENTRAL CERTIFICATE SYSTEM Section 2. Subject to such rules, regulations and orders as the Commission may adopt, the Trustees may direct the custodian to deposit all or any part of the securities owned by the Trust in a system for the central handling of securities established by a national securities exchange or a national securities association registered with the Commission under the Securities Exchange Act of 1934, or such other person as may be permitted by the Commission, or otherwise in accordance with the 1940 Act as from time to time amended, pursuant to which system all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Trust. ARTICLE X DISTRIBUTIONS AND REDEMPTIONS DISTRIBUTIONS Section 1. (a) The Trustees may from time to time declare and pay dividends. The amount of such dividends and the payment of them shall be wholly in the discretion of the Trustees. (b) The Trustees shall have power, to the fullest extent permitted by the laws of Massachusetts, at any time to declare and cause to be paid dividends on Shares of a particular Series, from the assets belonging to that Series, which dividends, at the election of the Trustees, may be paid daily or otherwise pursuant to a standing resolution or resolutions adopted only once or with such frequency as the Trustees may determine, and may be payable in Shares of that Series at the election of each Shareholder of that Series. (c) Anything in this instrument to the contrary notwithstanding, the Trustees may at any time declare and distribute pro rata among the Shareholders of a particular Series as of the record date of that Series fixed as provided in Section 3 hereof a "stock dividend". REDEMPTIONS Section 2. In case any holder of record of Shares of a particular Series desires to dispose of his Shares, he may deposit at the office of the transfer agent or other authorized agent of that Series a written request or such other form of request as the Trustees may from time to time authorize, requesting that the Series purchase the Shares in accordance with this Section 2; and the Shareholder so requesting shall be entitled to require the Series to purchase, and the Series or the principal underwriter of the Series shall purchase his said Shares, but only at the Net Asset Value thereof (as described in Section 3 hereof). The Series shall make payment for any such Shares to be redeemed, as aforesaid, in cash or property from the assets of that Series and payment for such Shares shall be made by the Series or the principal underwriter of the Series to the Shareholder of record within seven (7) days after the date upon which the request is effective. DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS Section 3. The term "Net Asset Value" of any Series shall mean that amount by which the assets of that Series, exceed its liabilities, all as determined by or under the direction of the Trustees. Such value per Share shall be determined separately for each Series of Shares and shall be determined on such days and at such times as the Trustees may determine. Such determination shall be made with respect to securities for which market quotations are readily available, at the market value of such securities; and with respect to other securities and assets, at the fair value as determined in good faith by the Trustees, provided, however, that the Trustees, without Shareholder approval, may alter the method of appraising portfolio securities insofar as permitted under the 1940 Act and the rules, regulations and interpretations thereof promulgated or issued by the Commission or insofar as permitted by any Order of the Commission applicable to the Series. The Trustees may delegate any of its powers and duties under this Section 3 with respect to appraisal of assets and liabilities. At any time the Trustees may cause the value par Share last determined to be determined again in similar manner and may fix the time when such redetermined value shall become effective. SUSPENSION OF THE RIGHT OF REDEMPTION Section 4. The Trustees may declare a suspension of the right of redemption or postpone the date of payment as permitted under the 1940 Act. Such suspension shall take effect at such time as the Trustees shall specify but not later than the close of business on the business day next following the declaration of suspension, and thereafter there shall be no right of redemption or payment until the Trustees shall declare the suspension at an end. In the case of a suspension of the right of redemption, a Shareholder may either withdraw his request for redemption or receive payment based on the Net Asset Value per Share existing after the termination of the suspension. ARTICLE XI LIMITATION OF LIABILITY AND INDEMNIFICATION LIMITATION OF LIABILITY Section 1. Provided they have exercised reasonable care and have acted under the reasonable belief that their actions are in the best interest of the Trust, the Trustees shall not be responsible for or liable in any event for neglect or wrongdoing of them or any officer, agent, employee or investment adviser of the Trust, but nothing contained herein shall protect any Trustee against any liability to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. INDEMNIFICATION Section 2. (a) Subject to the exceptions and limitations contained in Section (B) below: (i) every person who is, or has been, a Trustee or officer of the Trust (hereinafter referred to as "Covered Person") shall be indemnified by the appropriate Series to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Trustee or officer and against amounts paid or incurred by him in the settlement thereof; (ii) the words "claim," "action," "suit," or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal or other, including appeals), actual or threatened while in office or thereafter, and the words "liability" and "expenses" shall include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities. (b) No indemnification shall be provided hereunder to a Covered Person: (i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office or (B) not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust; or (ii) in the event of a settlement, unless there has been a determination that such Trustee or officer did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, (A) by the court or other body approving the settlement; (B) by at least a majority of those Trustees who are neither interested persons of the Trust nor are parties to the matter based upon a review of readily available facts (as opposed to a full trial-type inquiry); or (C) by written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry); provided, however, that any Shareholder may, by appropriate legal proceedings, challenge any such determination by the Trustees, or by independent counsel. (c) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not be exclusive of or affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be such Trustee or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Nothing contained herein shall affect any rights to indemnification to which Trust personnel, other than Trustees and officers, and other persons may be entitled by contract or otherwise under law. (d) Expenses in connection with the preparation and presentation of a defense to any claim, action, suit or proceeding of the character described in paragraph (a) of this Section 2 may be paid by the applicable Series from time to time prior to final disposition thereof upon receipt of an undertaking by or on behalf of such Covered Person that such amount will be paid over by him to the applicable Series if it is ultimately determined that he is not entitled to indemnification under this Section 2; provided, however, that either (a) such Covered Person shall have provided appropriate security for such undertaking, (b) the Trust is insured against losses arising out of any such advance payments or (c) either a majority of the Trustees who are neither interested persons of the Trust nor parties to the matter, or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as opposed to a trial-type inquiry or full investigation), that there is reason to believe that such Covered Person will be found entitled to indemnification under this Section 2. SHAREHOLDERS Section 3. In case any Shareholder or former Shareholder of any Series of the Trust shall be held to be personally liable solely by reason of his being or having been a Shareholder and not because of his acts or omissions or for some other reason, the Shareholder or former Shareholder (or his heirs, executors, administrators or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the assets belonging to the applicable Series to be held harmless from and indemnified against all loss and expense arising from such liability. The Series shall, upon request by the Shareholder, assume the defense of any claim made against the Shareholder for any act or obligation of the Series and satisfy any judgment thereon. ARTICLE XII MISCELLANEOUS TRUST NOT A PARTNERSHIP Section 1. It is hereby expressly declared that a trust and not a partnership is created hereby. No Trustee hereunder shall have any power to bind personally either the Trust's officers or any Shareholder. All persons extending credit to, contracting with or having any claim against the Trust or the Trustees shall look only to the assets of the appropriate Series for payment under such credit, contract or claim; and neither the Shareholders nor the Trustees, nor any of their agents, whether past, present or future, shall be personally liable therefor. Nothing in this Declaration of Trust shall protect a Trustee against any liability to which the Trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee hereunder. TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY Section 2. The exercise by the Trustees of their powers and discretions hereunder in good faith and with reasonable care under the circumstances then prevailing, shall be binding upon everyone interested. Subject to the provisions of Section 1 of this Article XII and to Article XI, the Trustees shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation this Declaration of Trust, and subject to the provisions of Section 1 of this Article XII and to Article XI, shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is obtained. ESTABLISHMENT OF RECORD DATES Section 3. The Trustees may close the stock transfer books of the Trust for a period not exceeding sixty (60) days preceding the date of any meeting of Shareholders, or the date for the payment of any dividends,or the date for the allotment of rights, or the date when any change or conversion or exchange of Shares shall go into effect; or in lieu of closing the stock transfer books as aforesaid, the Trustees may fix in advance a date not exceeding sixty (60) days preceding the date of any meeting of Shareholders, or the date for payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of Shares shall go into effect, as a record date for the determination of the Shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of Shares, and in such case such Shareholders and only such Shareholders as shall be Shareholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend, or to receive such allotment or rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any Shares on the books of the Trust after any such record date fixed or aforesaid. TERMINATION OF TRUST Section 4. (a) This Trust shall continue without limitation of time but subject to the provisions of sub-section (b) of this Section 4. (b) Subject to a Majority Shareholder Vote of each Series affected by the matter or, if applicable, to a Majority Shareholder Vote of the Trust, the Trustees may (i) sell and convey the assets of the Trust or any affected Series to another trust, partnership, association or corporation organized under the laws of any state which is a diversified open-end management investment company as defined in the 1940 Act, for adequate consideration which may include the assumption of all outstanding obligations, taxes and other liabilities, accrued or contingent, of the Trust or any affected Series, and which may include shares of beneficial interest or stock of such trust, partnership, association or corporation; or (ii) at any time sell and convert into money all of the assets of the Trust or any affected Series. Upon making provision for the payment of all such liabilities in either (i) or (ii), by such assumption or otherwise, the Trustees shall distribute the remaining proceeds or assets (as the case may be) ratably among the holders of the Shares of the Trust or any affected Series then outstanding. (c) Upon completion of the distribution of the remaining proceeds or the remaining assets as provided in sub-section (b), the Trust or any affected Series shall terminate and the Trustees shall be discharged of any and all further liabilities and duties hereunder and the right, title and interest of all parties shall be cancelled and discharged. FILING OF COPIES, REFERENCES, AND HEADINGS Section 5. The original or a copy of this instrument and of each declaration of trust supplemental hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. A copy of this instrument and of each supplemental declaration of trust shall be filed by the Trustees with the Secretary of the Commonwealth of Massachusetts and the Boston City Clerk, as well as any other governmental office where such filing may from time to time be required. Anyone dealing with the Trust may rely on a certificate by an officer or Trustee of the Trust as to whether or not any such supplemental declarations of trust have been made and as to any matters in connection with the Trust hereunder, and with the same effect as if it were the original, may rely on a copy certified by an officer or Trustee of the Trust to be a copy of this instrument or of any such supplemental declaration of trust. In this instrument or in any such supplemental declaration of trust, references to this instrument and all expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to this instrument as amended or affected by any such supplemental declaration of trust. Headings are placed herein for convenience of reference only and in case of any conflict, the text of this instrument, rather than the headings, shall control. This instrument may be executed in any number of counterparts each of which shall be deemed an original. APPLICABLE LAW Section 6. The trust set forth in this instrument is made in the Commonwealth of Massachusetts, and it is created under and is to be governed by and construed and administered according to the laws of said Commonwealth. The Trust shall be of the type commonly called a Massachusetts business trust, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust. AMENDMENTS Section 7. If authorized by votes of the Trustees and a Majority Shareholder Vote, or by any larger vote which may be required by applicable law or this Declaration of Trust in any particular case, the Trustees shall amend or otherwise supplement this instrument, by making a declaration of trust supplemental hereto, which thereafter shall form a part hereof, except that an amendment which shall affect the Shareholders of one or more Series but not the Shareholders of all outstanding Series shall be authorized by vote of the Shareholders holding a majority of the Shares entitled to vote of each Series affected and no vote of Shareholders of a Series not affected shall be required. Amendments having the purpose of changing the name of the Trust or of supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision contained herein shall not require authorization by Shareholder vote. Copies of the supplemental declaration of trust shall be filed as specified in Section 5 of this Article XII. FISCAL YEAR Section 8. The fiscal year of the Trust shall end on a specified date as set forth in the Bylaws, provided, however, that the Trustees may, without Shareholder approval, change the fiscal year of the Trust. USE OF THE WORD "FIDELITY" Section 9. Fidelity Management & Research Company ("FMR") has consented to the use by any Series of the Trust of the identifying word "Fidelity" in the name of any Series of the Trust at some future date. Such consent is conditioned upon the employment of FMR as investment adviser of each Series of the Trust. As between the Trust and itself, FMR controls the use of the name of the Trust insofar as such name contains the identifying word "Fidelity". FMR may from time to time use the identifying word "Fidelity" in other connections and for other purposes, including, without limitation, in the names of other investment companies, corporations or businesses which it may manage, advise, sponsor or own or in which it may have a financial interest. FMR may require the Trust or any Series thereof to cease using the identifying word "Fidelity" in the name of the Trust or any Series thereof if the Trust or any Series thereof ceases to employ FMR or a subsidiary or affiliate thereof as investment adviser. IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust, have executed this instrument this 17th day of March, 1994. /s/Edward C. Johnson 3d /s/Donald S. Kirk Edward C. Johnson 3d Donald J. Kirk /s/J. Gary Burkhead /s/Peter S. Lynch J. Gary Burkhead Peter S. Lynch /s/Ralph F. Cox /s/Gerald C. McDonough Ralph F. Cox Gerald C. McDonough /s/Phyllis Burke Davis /s/Edward H. Malone Phyllis Burke Davis Edward H. Malone /s/Richard J. Flynn /s/Marvin L. Mann Richard J. Flynn Marvin L. Mann /s/E. Bradley Jones /s/Thomas R. Williams E. Bradley Jones Thomas R. Williams EX-5.A 5 EXHIBIT 5(a) FORM OF MANAGEMENT CONTRACT between FIDELITY CALIFORNIA MUNICIPAL TRUST: FIDELITY CALIFORNIA TAX-FREE INSURED PORTFOLIO and FIDELITY MANAGEMENT & RESEARCH COMPANY MODIFICATION made this 1st day of March, 1994 by and between Fidelity California Municipal Trust, a Massachu setts business trust which may issue one or more series of shares of beneficial interest (hereinafter called the "Fund"), on behalf of Fidelity California Tax-Free Insured Portfolio (hereinafter called the "Portfolio"), and Fidelity Management & Research Company, a Massachusetts corporation (hereinafter called the "Adviser"). Required authorization and approval by shareholders and Trustees having been obtained, the Fund, on behalf of the Portfolio, and the Adviser hereby consent, pursuant to Paragraph 6 of the existing Management Contract modified November 1, 1989 to a modification of said Contract in the manner set forth below. The Modified Management Contract shall when executed by duly authorized officers of the Fund and the Adviser, take effect on the later of March 1, 1994 or the first day of the month following approval. 1. (a) Investment Advisory Services. The Adviser undertakes to act as investment adviser of the Portfolio and shall, subject to the supervision of the Fund's Board of Trustees, direct the investments of the Portfolio in accordance with the investment objective, policies and limitations as provided in the Portfolio's Prospectus or other governing instruments, as amended from time to time, the Investment Company Act of 1940 and rules thereunder, as amended from time to time (the "1940 Act"), and such other limitations as the Portfolio may impose by notice in writing to the Adviser. The Adviser shall also furnish for the use of the Portfolio office space and all necessary office facilities, equipment and personnel for servicing the investments of the Portfolio; and shall pay the salaries and fees of all officers of the Fund, of all Trustees of the Fund who are "interested persons" of the Fund or of the Adviser and of all personnel of the Fund or the Adviser performing services relating to research, statistical and investment activities. The Adviser is authorized, in its discretion and without prior consultation with the Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds and other securities and investment instruments on behalf of the Portfolio. The investment policies and all other actions of the Portfolio are and shall at all times be subject to the control and direction of the Fund's Board of Trustees. (b) Management Services. The Adviser shall perform (or arrange for the performance by its affiliates of) the management and administrative services necessary for the operation of the Fund. The Adviser shall, subject to the supervision of the Board of Trustees, perform various services for the Portfolio, including but not limited to: (i) providing the Portfolio with office space, equipment and facilities (which may be its own) for maintaining its organization; (ii) on behalf of the Portfolio, supervising relations with, and monitoring the performance of, custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, insurers and other persons in any capacity deemed to be necessary or desirable; (iii) preparing all general shareholder communications, including shareholder reports; (iv) conducting shareholder relations; (v) maintaining the Fund's existence and its records; (vi) during such times as shares are publicly offered, maintaining the registration and qualification of the Portfolio's shares under federal and state law; and (vii) investigating the development of and developing and implementing, if appropriate, management and shareholder services designed to enhance the value or convenience of the Portfolio as an investment vehicle. The Adviser shall also furnish such reports, evaluations, information or analyses to the Fund as the Fund's Board of Trustees may request from time to time or as the Adviser may deem to be desirable. The Adviser shall make recommendations to the Fund's Board of Trustees with respect to Fund policies, and shall carry out such policies as are adopted by the Trustees. The Adviser shall, subject to review by the Board of Trustees, furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform its obligations under this Contract. (c) The Adviser shall place all orders for the purchase and sale of portfolio securities for the Portfolio's account with brokers or dealers selected by the Adviser, which may include brokers or dealers affiliated with the Adviser. The Adviser shall use its best efforts to seek to execute portfolio transactions at prices which are advantageous to the Portfolio and at commission rates which are reasonable in relation to the benefits received. In selecting brokers or dealers qualified to execute a particular transaction, brokers or dealers may be selected who also provide brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or the other accounts over which the Adviser or its affiliates exercise investment discretion. The Adviser is authorized to pay a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Portfolio which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the Adviser determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or dealer. This determination may be viewed in terms of either that particular transaction or the overall responsibilities which the Adviser and its affiliates have with respect to accounts over which they exercise investment discretion. The Trustees of the Fund shall periodically review the commissions paid by the Portfolio to determine if the commissions paid over representative periods of time were reasonable in relation to the benefits to the Portfolio. The Adviser shall, in acting hereunder, be an independent contractor. The Adviser shall not be an agent of the Portfolio. 2. It is understood that the Trustees, officers and shareholders of the Fund are or may be or become interested in the Adviser as directors, officers or otherwise and that directors, officers and stockholders of the Adviser are or may be or become similarly interested in the Fund, and that the Adviser may be or become interested in the Fund as a shareholder or otherwise. 3. The Adviser will be compensated on the following basis for the services and facilities to be furnished hereunder. The Adviser shall receive a monthly management fee, payable monthly as soon as practicable after the last day of each month, composed of a Group Fee Rate and an Individual Fund fee rate. (a) Group Fee Rate. The Group Fee Rate shall be based upon the monthly average of the net assets of the registered investment companies having Advisory and Service or Management Contracts with the Adviser (computed in the manner set forth in the charter of each investment company) determined as of the close of business on each business day throughout the month. The Group Fee Rate shall be determined on a cumulative basis pursuant to the following schedule: Average Net Assets Annualized Fee Rate (for each level) $0 - 3 billion .3700% 3 - 6 .3400 6 - 9 .3100 9 - 12 .2800 12 - 15 .2500 15 - 18 .2200 18 - 21 .2000 21 - 24 .1900 24 - 30 .1800 30 - 36 .1750 36 - 42 .1700 42 - 48 .1650 48 - 66 .1600 66 - 84 .1550 84-120 .1500 120-174 .1450 174-228 .1400 228-282 .1375 282-336 .1350 Over 336 .1325 (b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be .25%. The sum of the Group Fee Rate, calculated as described above to the nearest millionth, and the Individual Fund Fee Rate shall constitute the Annual Management Fee Rate. One-twelfth of the Annual Management Fee Rate shall be applied to the average of the net assets of the Portfolio (computed in the manner set forth in the Fund's Declaration of Trust or other organizational document) determined as of the close of business on each business day throughout the month. 4. It is understood that the Portfolio will pay all its expenses, which expenses payable by the Portfolio shall include, without limitation, (i) interest and taxes; (ii) brokerage commissions and other costs in connection with the purchase or sale of securities and other investment instruments; (iii) fees and expenses of the Fund's Trustees other than those who are "interested persons" of the Fund or the Adviser; (iv) legal and audit expenses; (v) custodian, registrar and transfer agent fees and expenses; (vi) fees and expenses related to the registration and qualification of the Fund and the Portfolio's shares for distribution under state and federal securities laws; (vii) expenses of printing and mailing reports and notices and proxy material to shareholders of the Portfolio; (viii) all other expenses incidental to holding meetings of the Portfolio's shareholders, including proxy solicitations therefor; (ix) a pro rata share, based on relative net assets of the Portfolio and other registered investment companies having Advisory and Service or Management Contracts with the Adviser, of 50% of insurance premiums for fidelity and other coverage; (x) its proportionate share of association membership dues; (xi) expenses of typesetting for printing Prospectuses and Statements of Additional Information and supplements thereto; (xii) expenses of printing and mailing Prospectuses and Statements of Additional Information and supplements thereto sent to existing shareholders; and (xiii) such non-recurring or extraordinary expenses as may arise, including those relating to actions, suits or proceedings to which the Portfolio is a party and the legal obligation which the Portfolio may have to indemnify the Fund's Trustees and officers with respect thereto. 5. The services of the Adviser to the Portfolio are not to be deemed exclusive, the Adviser being free to render services to others and engage in other activities, provided, however, that such other services and activities do not, during the term of this Contract, interfere, in a material manner, with the Adviser's ability to meet all of its obligations with respect to rendering services to the Portfolio hereunder. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Adviser, the Adviser shall not be subject to liability to the Portfolio or to any shareholder of the Portfolio for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. 6. (a) Subject to prior termination as provided in sub-paragraph (d) of this paragraph 6, this Contract shall continue in force until June 30, 1994 and indefinitely thereafter, but only so long as the continuance after such date shall be specifically approved at least annually by vote of the Trustees of the Fund or by vote of a majority of the outstanding voting securities of the Portfolio. (b) This Contract may be modified by mutual consent, such consent on the part of the Fund to be authorized by vote of a majority of the outstanding voting securities of the Portfolio. (c) In addition to the requirements of sub-paragraphs (a) and (b) of this paragraph 6, the terms of any continuance or modification of this Contract must have been approved by the vote of a majority of those Trustees of the Fund who are not parties to the Contract or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. (d) Either party hereto may, at any time on sixty (60) days' prior written notice to the other, terminate this Contract, without payment of any penalty, by action of its Trustees or Board of Directors, as the case may be, or with respect to the Portfolio by vote of a majority of the outstanding voting securities of the Portfolio. This Contract shall terminate automatically in the event of its assignment. 7. The Adviser is hereby expressly put on notice of the limitation of shareholder liability as set forth in the Fund's Declaration of Trust or other organizational document and agrees that the obligations assumed by the Fund pursuant to this Contract shall be limited in all cases to the Portfolio and its assets, and the Adviser shall not seek satisfaction of any such obligation from the shareholders or any shareholder of the Portfolio or any other Portfolios of the Fund. In addition, the Adviser shall not seek satisfaction of any such obligations from the Trustees or any individual Trustee. The Adviser understands that the rights and obligations of any Portfolio under the Declaration of Trust or other organizational document are separate and distinct from those of any and all other Portfolios. 8. This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect to the choice of laws provisions thereof. The terms "vote of a majority of the outstanding voting securities," "assignment," and "interested persons," when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or as hereafter amended, and subject to such orders as may be granted by the Securities and Exchange Commission. IN WITNESS WHEREOF the parties have caused this instrument to be signed in their behalf by their respective officers thereunto duly authorized, and their respective seals to be hereunto affixed, all as of the date written above. [SIGNATURE LINES OMITTED] EX-5.B 6 EXHIBIT 5(b) FORM OF MANAGEMENT CONTRACT between FIDELITY CALIFORNIA MUNICIPAL TRUST: FIDELITY CALIFORNIA TAX-FREE HIGH YIELD PORTFOLIO and FIDELITY MANAGEMENT & RESEARCH COMPANY MODIFICATION made this 1st day of March, 1994 by and between Fidelity California Municipal Trust, a Massachu setts business trust which may issue one or more series of shares of beneficial interest (hereinafter called the "Fund"), on behalf of Fidelity California Tax-Free High Yield Portfolio (hereinafter called the "Portfolio"), and Fidelity Management & Research Company, a Massachusetts corporation (hereinafter called the "Adviser"). Required authorization and approval by shareholders and Trustees having been obtained, the Fund, on behalf of the Portfolio, and the Adviser hereby consent, pursuant to Paragraph 6 of the existing Management Contract modified November 1, 1989 to a modification of said Contract in the manner set forth below. The Modified Management Contract shall when executed by duly authorized officers of the Fund and the Adviser, take effect on the later of March 1, 1994 or the first day of the month following approval. 1. (a) Investment Advisory Services. The Adviser undertakes to act as investment adviser of the Portfolio and shall, subject to the supervision of the Fund's Board of Trustees, direct the investments of the Portfolio in accordance with the investment objective, policies and limitations as provided in the Portfolio's Prospectus or other governing instruments, as amended from time to time, the Investment Company Act of 1940 and rules thereunder, as amended from time to time (the "1940 Act"), and such other limitations as the Portfolio may impose by notice in writing to the Adviser. The Adviser shall also furnish for the use of the Portfolio office space and all necessary office facilities, equipment and personnel for servicing the investments of the Portfolio; and shall pay the salaries and fees of all officers of the Fund, of all Trustees of the Fund who are "interested persons" of the Fund or of the Adviser and of all personnel of the Fund or the Adviser performing services relating to research, statistical and investment activities. The Adviser is authorized, in its discretion and without prior consultation with the Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds and other securities and investment instruments on behalf of the Portfolio. The investment policies and all other actions of the Portfolio are and shall at all times be subject to the control and direction of the Fund's Board of Trustees. (b) Management Services. The Adviser shall perform (or arrange for the performance by its affiliates of) the management and administrative services necessary for the operation of the Fund. The Adviser shall, subject to the supervision of the Board of Trustees, perform various services for the Portfolio, including but not limited to: (i) providing the Portfolio with office space, equipment and facilities (which may be its own) for maintaining its organization; (ii) on behalf of the Portfolio, supervising relations with, and monitoring the performance of, custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, insurers and other persons in any capacity deemed to be necessary or desirable; (iii) preparing all general shareholder communications, including shareholder reports; (iv) conducting shareholder relations; (v) maintaining the Fund's existence and its records; (vi) during such times as shares are publicly offered, maintaining the registration and qualification of the Portfolio's shares under federal and state law; and (vii) investigating the development of and developing and implementing, if appropriate, management and shareholder services designed to enhance the value or convenience of the Portfolio as an investment vehicle. The Adviser shall also furnish such reports, evaluations, information or analyses to the Fund as the Fund's Board of Trustees may request from time to time or as the Adviser may deem to be desirable. The Adviser shall make recommendations to the Fund's Board of Trustees with respect to Fund policies, and shall carry out such policies as are adopted by the Trustees. The Adviser shall, subject to review by the Board of Trustees, furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform its obligations under this Contract. (c) The Adviser shall place all orders for the purchase and sale of portfolio securities for the Portfolio's account with brokers or dealers selected by the Adviser, which may include brokers or dealers affiliated with the Adviser. The Adviser shall use its best efforts to seek to execute portfolio transactions at prices which are advantageous to the Portfolio and at commission rates which are reasonable in relation to the benefits received. In selecting brokers or dealers qualified to execute a particular transaction, brokers or dealers may be selected who also provide brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or the other accounts over which the Adviser or its affiliates exercise investment discretion. The Adviser is authorized to pay a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Portfolio which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the Adviser determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or dealer. This determination may be viewed in terms of either that particular transaction or the overall responsibilities which the Adviser and its affiliates have with respect to accounts over which they exercise investment discretion. The Trustees of the Fund shall periodically review the commissions paid by the Portfolio to determine if the commissions paid over representative periods of time were reasonable in relation to the benefits to the Portfolio. The Adviser shall, in acting hereunder, be an independent contractor. The Adviser shall not be an agent of the Portfolio. 2. It is understood that the Trustees, officers and shareholders of the Fund are or may be or become interested in the Adviser as directors, officers or otherwise and that directors, officers and stockholders of the Adviser are or may be or become similarly interested in the Fund, and that the Adviser may be or become interested in the Fund as a shareholder or otherwise. 3. The Adviser will be compensated on the following basis for the services and facilities to be furnished hereunder. The Adviser shall receive a monthly management fee, payable monthly as soon as practicable after the last day of each month, composed of a Group Fee Rate and an Individual Fund fee rate. (a) Group Fee Rate. The Group Fee Rate shall be based upon the monthly average of the net assets of the registered investment companies having Advisory and Service or Management Contracts with the Adviser (computed in the manner set forth in the charter of each investment company) determined as of the close of business on each business day throughout the month. The Group Fee Rate shall be determined on a cumulative basis pursuant to the following schedule: Average Net Assets Annualized Fee Rate (for each level) $0 - 3 billion .3700% 3 - 6 .3400 6 - 9 .3100 9 - 12 .2800 12 - 15 .2500 15 - 18 .2200 18 - 21 .2000 21 - 24 .1900 24 - 30 .1800 30 - 36 .1750 36 - 42 .1700 42 - 48 .1650 48 - 66 .1600 66 - 84 .1550 84-120 .1500 120-174 .1450 174-228 .1400 228-282 .1375 282-336 .1350 Over 336 .1325 (b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be .25%. The sum of the Group Fee Rate, calculated as described above to the nearest millionth, and the Individual Fund Fee Rate shall constitute the Annual Management Fee Rate. One-twelfth of the Annual Management Fee Rate shall be applied to the average of the net assets of the Portfolio (computed in the manner set forth in the Fund's Declaration of Trust or other organizational document) determined as of the close of business on each business day throughout the month. 4. It is understood that the Portfolio will pay all its expenses, which expenses payable by the Portfolio shall include, without limitation, (i) interest and taxes; (ii) brokerage commissions and other costs in connection with the purchase or sale of securities and other investment instruments; (iii) fees and expenses of the Fund's Trustees other than those who are "interested persons" of the Fund or the Adviser; (iv) legal and audit expenses; (v) custodian, registrar and transfer agent fees and expenses; (vi) fees and expenses related to the registration and qualification of the Fund and the Portfolio's shares for distribution under state and federal securities laws; (vii) expenses of printing and mailing reports and notices and proxy material to shareholders of the Portfolio; (viii) all other expenses incidental to holding meetings of the Portfolio's shareholders, including proxy solicitations therefor; (ix) a pro rata share, based on relative net assets of the Portfolio and other registered investment companies having Advisory and Service or Management Contracts with the Adviser, of 50% of insurance premiums for fidelity and other coverage; (x) its proportionate share of association membership dues; (xi) expenses of typesetting for printing Prospectuses and Statements of Additional Information and supplements thereto; (xii) expenses of printing and mailing Prospectuses and Statements of Additional Information and supplements thereto sent to existing shareholders; and (xiii) such non-recurring or extraordinary expenses as may arise, including those relating to actions, suits or proceedings to which the Portfolio is a party and the legal obligation which the Portfolio may have to indemnify the Fund's Trustees and officers with respect thereto. 5. The services of the Adviser to the Portfolio are not to be deemed exclusive, the Adviser being free to render services to others and engage in other activities, provided, however, that such other services and activities do not, during the term of this Contract, interfere, in a material manner, with the Adviser's ability to meet all of its obligations with respect to rendering services to the Portfolio hereunder. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Adviser, the Adviser shall not be subject to liability to the Portfolio or to any shareholder of the Portfolio for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. 6. (a) Subject to prior termination as provided in sub-paragraph (d) of this paragraph 6, this Contract shall continue in force until June 30, 1994 and indefinitely thereafter, but only so long as the continuance after such date shall be specifically approved at least annually by vote of the Trustees of the Fund or by vote of a majority of the outstanding voting securities of the Portfolio. (b) This Contract may be modified by mutual consent, such consent on the part of the Fund to be authorized by vote of a majority of the outstanding voting securities of the Portfolio. (c) In addition to the requirements of sub-paragraphs (a) and (b) of this paragraph 6, the terms of any continuance or modification of this Contract must have been approved by the vote of a majority of those Trustees of the Fund who are not parties to the Contract or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. (d) Either party hereto may, at any time on sixty (60) days' prior written notice to the other, terminate this Contract, without payment of any penalty, by action of its Trustees or Board of Directors, as the case may be, or with respect to the Portfolio by vote of a majority of the outstanding voting securities of the Portfolio. This Contract shall terminate automatically in the event of its assignment. 7. The Adviser is hereby expressly put on notice of the limitation of shareholder liability as set forth in the Fund's Declaration of Trust or other organizational document and agrees that the obligations assumed by the Fund pursuant to this Contract shall be limited in all cases to the Portfolio and its assets, and the Adviser shall not seek satisfaction of any such obligation from the shareholders or any shareholder of the Portfolio or any other Portfolios of the Fund. In addition, the Adviser shall not seek satisfaction of any such obligations from the Trustees or any individual Trustee. The Adviser understands that the rights and obligations of any Portfolio under the Declaration of Trust or other organizational document are separate and distinct from those of any and all other Portfolios. 8. This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect to the choice of laws provisions thereof. The terms "vote of a majority of the outstanding voting securities," "assignment," and "interested persons," when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or as hereafter amended, and subject to such orders as may be granted by the Securities and Exchange Commission. IN WITNESS WHEREOF the parties have caused this instrument to be signed in their behalf by their respective officers thereunto duly authorized, and their respective seals to be hereunto affixed, all as of the date written above. [SIGNATURE LINES OMITTED] EX-9.C 7 EXHIBIT 9(c) Dated as of December 17, 1993 FIDELITY CALIFORNIA MUNICIPAL TRUST: SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO (the Portfolio) SCHEDULE A: TRANSFER AGENT, DIVIDEND AND DISTRIBUTION DISBURSING AGENT, AND SHAREHOLDER SERVICING AGENT I. Services To Be Performed: United Missouri Bank, N.A. (the Bank) shall be responsible for the following: A. The Bank shall administer and/or perform transfer agent functions for the Portfolio. It will: (1) receive for acceptance, orders for the purchase of Portfolio shares, and promptly deliver payments received by it and appropriate documentation therefor to the Portfolio's custodian; (2) pursuant to purchase orders, issue the appropriate number of Portfolio shares and properly register such shares to the appropriate shareholder account; (3) receive for acceptance, redemption requests and redemption instructions (including redemptions by check transmitted to the Bank by any duly appointed check processing agent) and process payments for redemption to shareholders in accordance with the terms, conditions and rules governing each shareholder's account as set forth in the Portfolio's prospectus, statement of additional information and each shareholder's account application; (4) effect transfers of shares by the registered owners thereof upon receipt of appropriate instructions; and (5) prepare and mail to Portfolio shareholders such confirmations and statements of account as may be required under applicable law and as may be reasonably requested by the Portfolio. B. The Bank shall act as service agent of the Portfolio in connection with dividend and capital gains distributions by the Portfolio. It will: (1) for each Portfolio shareholder who has elected to receive dividends and/or distributions in cash, send payments to shareholders in accordance with the shareholder's election; and (2) for each Portfolio shareholder who has elected to receive dividends and/or distributions in shares of the Portfolio or in shares of another mutual fund for which the Bank serves as transfer agent, credit the shareholder's account(s) for the proper number of shares. C. In addition to the foregoing services, the Bank shall: (1) perform all the customary administrative services related to its transfer agent and dividend and distribution disbursing agent functions, including, but not limited to: (a) maintaining all shareholder accounts, (b) preparing shareholder meeting lists, and supervising, but not paying for, various agents and contractors employed to mail proxy materials and receive and tabulate proxies, (c) typesetting, printing and mailing shareholder reports and prospectuses to current Portfolio shareholders, (d) withholding taxes (including withholding for foreign taxes) for shareholders for whom withholdings are required by federal or state regulation and filing all required reports with respect thereto, (e) preparing, distributing and filing all requisite shareholder tax statements on appropriate forms and responding to inquiries with respect thereto, and (f) establishing and supervising the operation of bank accounts for the receipt of funds for share purchases and the payment of dividends, distributions and redemption proceeds; (2) furnish the Portfolio with all necessary reports of Portfolio shares sold in each state in order to permit compliance with the state securities laws; and (3) as required, respond to shareholder inquiries relating to the status of their accounts, Portfolio performance, distributions, and share price, and furnish shareholders with copies of account histories and make adjustments to shareholder accounts to correct account files. II. Compensation: For the performance of its obligations hereunder, the Portfolio shall pay the Bank in accordance with this Schedule A. A. Certain Defined Terms For purposes of this Schedule A, the following terms shall have the meanings indicated: An "account" shall mean each and every account or subaccount of a Portfolio shareholder of record maintained on a transfer agency system by the Bank or on a transfer agency system operated by divisions and subsidiaries of FMR Corp. or any other entity to whom the Bank has delegated all or a portion of its duties under this Schedule A such term shall not include an account maintained on any subaccounting system operated by broker, bank or other intermediary who is acting on behalf of its customer and who is not acting pursuant to a delegation of duties by the Bank. "Basic Retail Account" shall mean any account of the Portfolio other than a USA Account, an Institutional Trading Account, a Broker-Dealer Trading Account or an Institutional Employee Benefit Account. "Broker-Dealer Trading Account" shall mean any account of the Portfolio maintained on behalf of a broker-dealer (other than broker-dealer affiliates of FMR) or its clients. "Centralized Service Transaction" shall mean each monetary transaction described in Exhibit A to this Schedule A executed on behalf of an institutional customer (such as a bank trust department, corporation or investment adviser), or its clients who has no remote system access and for whom the Bank inputs all account activity information and performs all account maintenance functions. "Institutional Employee Benefit Account" shall mean an account of the Portfolio maintained on behalf of a corporation, association, partnership or other employer for the benefit of employees, by which employer and employee contributions are invested in the Portfolio as part of a qualified or non-qualified employee benefit plan primarily through payroll deductions. "Institutional Trading Account" shall mean any account maintained on behalf of an institutional client (such as a bank, investment advisor, insurance company or law firm), other than a broker-dealer, or its clients. "Remote Service Transaction" shall mean each monetary transaction described in Exhibit A-1 to the Schedule A executed on behalf of an institutional customer (such as a bank, investment adviser, insurance company or law firm), or its clients, who utilizes remote system access equipment to input account activity information and to perform account maintenance functions. "USA Account" shall mean any account of the Portfolio established as the core feature under the Fidelity USA Program, into which brokerage account cash balances may be swept and from which brokerage account, credit card and check debits may be satisfied. B. Schedule of Account and Transaction Fees (1) Basic Retail Accounts (a) Account Fees - The Portfolio shall pay an account fee at the annual rates (adjusted in accordance with the procedures set forth in II.C.(1)(a) and (c) below) of $15.00 for Basic Retail Accounts with a value of less than $5,000 and $25.50 for Basic Retail Accounts with a value of $5,000 or more (the "December 31, 1992 Retail Account Fee Rates"). (b) Transaction Fees - For all Basic Retail Accounts the Portfolio shall pay a fee (adjusted in accordance with the procedures set forth in II.C.(1)(a) and (c) below) of $5.61 for each transaction described in Exhibit A-1 to this Schedule A (the "December 31, 1992 Retail Transaction Fee Rate"). (2) USA Accounts (a) Account Fees - The Portfolio shall pay an account fee, in lieu of the fees set forth in II.B.(1)(a), at the annual rate (adjusted in accordance with the procedures set forth in II.C.(1)(b) and (c) below) of $12.35 for each USA Account (the "December 31, 1992 Account Fee Rate"). (b) Transaction Fees - For all USA Accounts the Portfolio shall pay a fee (adjusted in accordance with the procedures set forth in II.C.(1)(b) below), in lieu of the fees set forth in II.B.(1)(b), of $0.74 for each transaction described in Exhibit A-2 to this Schedule A (the "December 31, 1992 USA Transaction Fee Rate"). (c) Shareholder Service Fees - The foregoing Account Fees and Transactions Fees, shall be in addition to, and not be reduced by, the fees charged to shareholders directly for participating in the Fidelity USA program. (3) Institutional Trading Accounts (a) Account Fees - The Portfolio shall pay an account fee, in lieu of the fees set forth in II.B.(1)(a) at the annual rate of $95.00 for each Institutional Trading Account. (b) Transaction Fees - The Portfolio shall pay a fee, in lieu of the fees set forth in II.B.(1)(b), of $20.00 for each Centralized Service Transaction and $17.50 for each Remote Service Transaction of such Institutional Trading Account. (4) Broker-Dealer Trading Accounts (a) Account Fees - The Portfolio shall pay an account fee, in lieu of the fees set forth in II.B.(1)(a), at the annual rate of $30.00 for each Broker-Dealer Institutional Trading Account. (b) Transaction Fees - The Portfolio shall pay a fee, in lieu of the fees set forth in II.B.(1)(b) of $6.00 for each Centralized Service Transaction and each Remote Service Transaction of such Broker-Dealer Institutional Trading Account. (5) Institutional Employee Benefit Plan Accounts - The Portfolio shall pay a fee, in lieu of the fees set forth in II.B.(1), based upon the month end value of all Institutional Employee Benefit Plan Accounts at an annual rate of 0.30%. C. Rate Changes (1) Basic Retail Account and USA Account Rate Adjustments (a) Annual Cost of Living Adjustment for Basic Retail Accounts - The December 31, 1992 Retail Account Fee Rates and Retail Transaction Fee Rates set forth in II.B.(1) of this Schedule A shall be adjusted annually for increases in the cost of living as of the first day of January. On each January 1, beginning January 1, 1994, the rates shall be adjusted by multiplying 70% of the percentage change in the National Consumer Price Index for Urban Areas Index (the Index) for the preceding calendar year times the rates in effect for the preceding calendar year and adding the results to the respective rates for the preceding calendar year to determine the then current rate for the ensuing calendar year. Each adjustment shall be rounded to the nearest one cent. SAMPLE CALCULATION: Assuming the December 31, 1992 Retail Account Rate was $7.00 and the December 31, 1992 Retail Transaction Fee Rate was $5.00, that the Index reported a change in wage and price levels for the 12 months ended December 31, 1993 of 5%, then the adjusted rates for the period beginning January 1, 1994 would be calculated as follows: Basic Retail Account Fee Rate Computation: 70% x 5% x $7.00 = $ .25 Add 7.00 1994 Basic Retail Account Fee $ 7.25 Basic Retail Transaction Fee Rate Computation: 70% x 5% x $5.00 = $ .18 Add 5.00 1994 Basic Retail Transaction Fee $ 5.18 (b) Annual Cost of Living Adjustment for USA Accounts - The December 31, 1992 USA Account Fee Rate and USA Transaction Fee Rate set forth in II.B.(2) of this Schedule A shall be adjusted annually for increases in the cost of living as of the first day of January. On each January 1, beginning January 1, 1994, the rates shall be adjusted by multiplying 70% of the percentage change in the Index for the preceding calendar year times the rates in effect for the preceding calendar year and adding the results to the respective rates for the preceding calendar year to determine the then current rate for the ensuing calendar year. SAMPLE CALCULATION: Assuming the December 31, 1992 USA Account Rate was $11.00 and the December 31, 1992 USA Transaction Fee Rate was $.65, that the Index reported a change in wage and price levels for the 12 months ended December 31, 1993 of 5%, then the adjusted rates for the period beginning January 1, 1994 would be calculated as follows: USA Account Fee Rate Computation: 70% x 5% x $11.00 = $ .39 Add 11.00 1994 USA Account Fee $ 11.39 USA Transaction Fee Rate Computation: 70% x 5% x $0.65 = $ .02 Add .65 1994 USA Transaction Fee $ 0.67 (c) Postal Rate Changes - On the first day of any month following the month in which the United States Postal Service implements a postal rate increase, or if the increase is effective with the first day of a month, then commencing on that first day, (Effective Date) the Account Fees and Transaction Fees for Basic Retail Accounts and USA Accounts then in effect shall be adjusted by a Postage Increase Factor (PIF). The PIF adjustment shall be computed in the following fashion. The Account Fees and the Transaction Fees for Basic Retail Accounts and USA Accounts then in effect shall each be multiplied by the PIF and the resulting amounts shall be added to the respective current rates. The PIF shall be determined by dividing the revenues derived from the Account Fees and Transaction Fees for Basic Retail Accounts and USA Accounts for the 12 months preceding the Effective Date of the postal rate increase into the postal costs associated with Basic Retail Accounts and with USA Accounts, respectively, for the same 12-month period and then multiplying the result times a Class Cost Factor. The Class Cost Factor shall be derived by calculating the dollar weighted postage increase for all classes of postage being utilized to perform services to Basic Retail Accounts and to USA Accounts, respectively. The dollar-weighted postage increase shall be calculated by multiplying the percentage increase for each class by the postal costs for each such class and dividing the sum of such calculations by the total postage costs for the 12 months preceding the Effective Date. Each adjustment should be rounded to the nearest one cent. SAMPLE CALCULATION: Postal rate adjustments would be calculated for Account Fees and Transaction Fees for Basic Retail Accounts and USA Accounts in the example set forth below for Basic Retail Accounts, assuming (a) that on May 31 prior to the implementation of a postal rate increase, the annual rate for Basic Retail Account Fees is $7.00 and the Transaction Fee rate is $5.00, (b) that for the previous 12 months the revenues from such fees are $10 million, and (c) that there were following three classes of Basic Retail Account postage costs for the same period and the following increases occur on June 1: Postage 12 months of Postage Rate Class Postage Cost Increases 1st $400,000 6% 2nd $100,000 9% 3rd $200,000 11% STEP 1: CALCULATION OF THE DOLLAR-WEIGHTED POSTAGE INCREASE. $400,000 x 6% = $ 24,000 $100,000 x 9% = 9,000 $200,000 x 11% = 22,000 $ 55,000 divided by total postage costs $700,000 Class Cost Factor .0785 STEP 2: CALCULATION OF POSTAGE INCREASE FACTOR (PIF). 12 month postage costs $700,000 divided by 12 month revenues 10,000,000 .07 multiplied by the Class Cost Factor .0785 PIF .0055 STEP 3: CALCULATION OF JUNE 1 RATES. Basic Retail Account Fee computation: $7.00 x .0055 = $ .04 Add 7.00 6/1 Basic Retail Account Fee $7.04 Basic Retail Transaction Fee Computation: $5.00 x .0055 = $ .03 Add 5.00 6/1 Basic Retail Transaction Fee $5.03 D. Schedule of Payments The Bank shall be entitled to receive the account fee in respect of an account under the applicable provisions of paragraph B above in each year in which such account has a share balance greater than zero as of January 1, and in respect of each account opened after January 1 of such year. Accounts with a share balance of zero shall be closed as of December 31 each year, and no account fee shall be paid in respect of such accounts for the following year unless it is reopened. Account fees shall be billed monthly on a pro rata basis at one-twelfth of the applicable annual rate as of the end of each calendar month for each account open or opened during the month. An account shall be a billable account as of the end of the month in which it is opened, and the end of each month thereafter through December 31, even though the value of such account may become zero. The net asset value of an account as most recently determined in accordance with the Portfolio's prospectus before 11:59 p.m., Boston time, on the last calendar day of a month shall be the value used to determine the applicable fee for the entire month. The Bank may bill for accounts maintained on transfer agency systems maintained by other divisions and subsidiaries of FMR Corp. or any other entity to whom the Bank has delegated all or a portion of its duties under this Schedule A. Transaction fees with respect to an account are billable by the Bank as of the end of each month in which the transaction occurs. In the event that a transaction is canceled or corrected, the cancellation or correction shall be reflected as a credit to the Fund against billable transactions for the month in which the cancellation or correction occurs. E. Shareholder Charges - The Bank shall be entitled to charge a shareholder directly, and may redeem shares of the Portfolio held in a shareholder's account, for: (1) Exchange Fees - The Bank may from time to time receive, through payment by shareholders of the Portfolio, all or a portion of an exchange fee in an amount and under circumstances authorized by the Trustees of the Fund. If a portion of any exchange fee collected is to be allocated to the Portfolio, such amount shall be applied to reduce transaction fees or other charges otherwise payable to the Bank pursuant to this Agreement in accordance with the allocation authorization by the Board of Trustees of the Fund. (2) Wire fees - any fees in effect on January 1, 1993 as disclosed in the Portfolio's Prospectus or which may be approved by the Trustees of the Fund for executing a wire transfer of the proceeds of any wire redemption order placed by a shareholder. (3) Dishonored Checks - any fees reasonably related to cost and imposed by the Bank when a shareholder purchases shares by check and the purchase is subsequently canceled because the check was dishonored by the shareholder's bank. (4) Account Histories - any fees reasonably related to cost and imposed by the Bank to prepare, at the request of a shareholder, an account history or provide other research information for any year(s) prior to the calendar year in which the request is made by the shareholder. (5) Miscellaneous Supplemental Fees - any fees imposed by the Bank or any affiliate of the Bank for providing supplemental services to a shareholder pursuant to separate arrangements with the customer, including but not limited to fees for personal advisory services, fees for providing check redemption services, for maintaining and providing services to an individual retirement custodian account, a Keogh custodian account, a Prototype Profit Sharing or Money Purchase Pension Plan account or for other similar supplemental services. III. Costs and Expenses A. Allocation of Costs. The Bank will be responsible for all expenses, costs and other charges arising out of the performance of its obligations hereunder, including the fees and disbursements of any third party retained to perform any of the services to the Portfolio on behalf of the Bank (including the fees and handling charges of brokers, banks and other intermediaries for forwarding shareholder reports and statements with respect to each account for which an account fee is imposed); all paper, typesetting, printing, stationery, envelopes, postage, labeling costs, mail sorting and other similar costs of preparing and mailing any dividend or redemption payment, all shareholder reports (including the cost of printing and mailing prospectuses sent to current shareholders), tax statements, confirmations, notices and statements of account; all telephone and computer equipment and usage charges; and all personnel expenses, heat, light, rent, utilities, equipment purchases or rentals; all insurance premiums associated with the provision of services under this agreement, unless the Trustees shall have specifically authorized an allocation of all or a portion of the premium to the Portfolio; all costs associated with the provision of check redemption services (including, the costs of printing and mailing of checks and checkbooks to shareholders, the charges of any vendor retained by the Portfolio to process checks for payment, and the charges of sending canceled checks to shareholders); and other necessary expenses associated with the provision of services hereunder. Notwithstanding the foregoing, the Portfolio shall be required to bear all expenses for all accounts, including USA Core Accounts, Institutional Trading Accounts, Broker-Dealer Trading Accounts and Institutional Employee Benefit Accounts, associated with: (1) the printing, handling, forwarding or mailing of shareholder reports and notices to shareholders who own shares through an account of a broker, bank or other intermediary if the Bank is not compensated by an account fee for each sub-account, (2) the charges of any bank for establishing and operating accounts for the receipt of funds for share purchases and the payment of dividends, distributions and redemption proceeds, (3) all fees and expenses of registering shares for sale under the state securities laws, and (4) the holding of annual or special meetings of Portfolio shareholders, including: the costs of typesetting, printing, postage and mailing notices, proxy cards and proxy statements (and, if required, annual reports sent to shareholders who have opened accounts subsequent to the last regular mailing date of such reports to shareholders); the fees and other disbursements of any agent hired to mail proxy materials and/or tabulate proxies; all charges incurred by any proxy soliciting agent; the reasonable and customary fees and handling charges of brokers, banks and other intermediaries for forwarding proxy materials; and all other customary expenses associated with the holding of shareholder meetings. B. Reports. Once each year, the Bank shall cause Service to submit to the Fund and the other funds advised by Fidelity Management & Research Company with which the Bank has Transfer Agent Agreements (the Funds) a report setting forth the total amount of costs and expenses incurred by the Bank in the performance of its obligations to the Funds under the Transfer Agent Agreements and the total amounts payable by the Funds for such services. The Bank shall also cause Service to provide annually a report by an independent certified public accounting firm (who may be the auditors of Service) on Service's income and expenses. The term "Transfer Agent Agreements" shall mean this agreement between the Bank and the Fund and agreements of like tenor between the Bank and other Funds. Fidelity Management & Research Co. (FMR) and the Trust on behalf of the Portfolio have entered into a management contract pursuant to which FMR has agreed to pay certain enumerated expenses. FMR hereby agrees with the Bank to pay all compensation set forth in paragraph II of this Schedule A and, so long as the management contract remains in effect, the Bank agrees with the Portfolio to look exclusively to FMR for payment of the fees and expenses set forth in paragraph II of this Schedule A. FIDELITY MANAGEMENT & RESEARCH COMAPNY By: /s / J. Gary Burkhead Name: J. Gary Burkhead Title: President UNITED MISSOURI BANK, N.A. By: /s / Patricia A. Peterson Name: Patricia A. Peterson Title: Senior Vice President FIDELITY CALIFORNIA MUNICIPAL TRUST on behalf of SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO By: /s / Gary L. French Name: Gary L. French Title: Treasurer Exhibit A-1 Monetary Transaction Types The following monetary transactions may be billed by United Missouri Bank, N.A. under the Transfer Agent Agreement with FIDELITY CALIFORNIA MUNICIPAL TRUST: SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO: Direct Payments - an investor pays cash and shares are issued pursuant to a single order to purchase shares. Direct Redemption - an investor's shares are redeemed and a check is sent for redemption proceeds. Exchange Redemption - A shareholder has entered an order to sell shares of the Portfolio and invest proceeds in another Fund that permits exchange privileges. Exchange Purchase - A shareholder has entered an order of redemption to another Fund and directed that proceeds of the redemption be invested in the Portfolio. Transfer - The change of ownership of an account is registered, by opening a new account in the Portfolio and transferring of shares to the new account. Wire Purchases - An investor places an order for the purchase of shares and purchase price is wired to the Portfolio. Purchase by Directed Dividend - Pursuant to standing instruction of a shareholder, shares of the Portfolio are purchased and the purchase price is paid by a dividend from a different Fund. Check Redemption - A shareholder's check is presented for payment and shares sufficient to honor the check are redeemed. Wire Liquidation - A shareholder requests that a specified number of shares or dollar amount of shares be redeemed and a bank wire is sent for the proceeds of redemption, less any applicable bank charges for the wire. Electronic Funds Purchase - Shares are purchased by an electronic funds transfer. Electronic Funds Redemption - Shares are redeemed and the proceeds of redemption are transferred electronically to the shareholder. Systematic Withdrawal Plan Redemptions - Pursuant to standing instructions, a shareholder redeems a specified amount of shares. Exhibit A-2 USA Account Transaction Fees The following monetary transactions may be billed by United Missouri Bank, N.A. under the Transfer Agent Agreement with FIDELITY CALIFORNIA MUNICIPAL TRUST: SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO in connection with a USA Account: Cash Advances - Each cash advance to a shareholder from a participating financial institution for which the debit balance in the Fidelity USA account is satisfied by a redemption of Portfolio shares. Checks Paid - Each check drawn by a shareholder (other than a check issued in connection with the Fidelity USA bill payment program) which is presented for payment and results in a redemption of Portfolio shares. Checks Received - Each check which is deposited into a Fidelity USA account and results in the purchase of Portfolio shares. Debit Card Purchases - Each use of a debit (or credit) card issued to a Fidelity USA account participant to pay for goods or services which results in the redemption of Portfolio shares in an account sufficient to cover the debit (or credit) card charge. Direct Deposit - Each pre-authorized deposit of funds through a participating financial institution by a Fidelity USA program participant to such program participant's Fidelity USA account which results in a purchase of Portfolio shares. EFT Received - Each electronic transfer of funds to a Fidelity USA account by a Fidelity USA program participant which results in a purchase of Portfolio shares. EFT Paid - Each electronic transfer of funds by a Fidelity USA program participant from such program participant's Fidelity USA account, which results in a redemption of Portfolio shares. Wire Received - Each wire transfer of funds by a Fidelity USA program participant to a Fidelity USA account, which results in a purchase of Portfolio shares. Wire Sent - Each wire transfer of funds by a Fidelity USA program participant from such program participant's Fidelity USA account, which results in a redemption of Portfolio shares. Automatic Teller - Each use of an automatic teller machine by a Fidelity USA program participant to secure cash or to transfer funds, which results in a redemption of Portfolio shares. Dated December 17, 1993 FIDELITY CALIFORNIA MUNICIPAL TRUST: SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO (the Portfolio) FORM OF SCHEDULE B: AGENT TO PERFORM PORTFOLIO PRICING AND BOOKKEEPING I. Services To Be Performed. United Missouri Bank, N.A. (the Bank) shall be responsible for: A. Accounting relating to the Portfolio and portfolio transactions of the Portfolio. B. The determination of net asset value per share of the outstanding shares of the Portfolio and the offering price, if any, at which shares are to be sold, at the times and in the manner described in the Declaration of Trust or Partnership Agreement, as amended, and the Prospectus of the Portfolio (pricing). C. The determination of distributions, if any. D. The timely communication of information determined in B and C above, to the person or persons designated by the Portfolio. E. Maintaining the books of account of the Portfolio. F. In conjunction with the Custodian, receiving information and keeping records about all corporate actions, including, but not limited to, cash and stock distributions or dividends, stock splits and reverse stock splits, taken by companies whose securities are held by the Portfolio. G. Monitoring foreign corporate actions and foreign trades and entering orders to convert foreign currency or establish contracts for future settlement of foreign currency. H. Processing and monitoring the settlement of Variable Rate Demand Notes and GNMA's. I. Monitoring and accounting for futures and options. II. Compensation. For the performance of its obligations hereunder, the Portfolio shall pay the Bank an annual fee based on average daily net assets for each month. The fee schedule is as follows: Portfolio's Average Daily Net Assets Fee Rate $500 million and under .04% Over $500 million .02% Fidelity Management & Research Co. (FMR) and the Trust on behalf of the Portfolio have entered into a management contract pursuant to which FMR has agreed to pay certain enumerated expenses. FMR hereby agrees with the Bank to pay all compensation set forth in paragraph II of this Schedule B and, so long as the management contract remains in effect, the Bank agrees with the Portfolio to look exclusively to FMR for payment of the fees and expenses set forth in paragraph II of this Schedule B. FIDELITY MANAGEMENT & RESEARCH COMAPNY By: /s/ J. Gary Burkhead Name: J. Gary Burkhead Title: President UNITED MISSOURI BANK, N.A. By: /s/Patricia A. Peterson Name: Patricia A. Peterson Title: Senior Vice President FIDELITY CALIFORNIA MUNICIPAL TRUST on behalf of SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO By: /s/ Gary L. French Name: Gary L. French Title: Treasurer Dated December 17, 1993 FIDELITY CALIFORNIA MUNICIPAL TRUST: SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO (the Portfolio) FORM OF SCHEDULE C: AGENT FOR SECURITIES LENDING TRANSACTIONS I. Services To Be Performed. United Missouri Bank, N.A. (the Bank) shall be responsible for administering a program of securities lending from the Portfolio's portfolio by: A. Carrying out security loan transactions between approved borrowers and the Portfolio, including assisting Custodian in receiving and returning collateral for loans. B. Marking to market loans outstanding each day. C. Ensuring that the value of collateral for loans is 100% or more of loaned securities at market price and issuing demands for additional collateral should the percentage fall below 100%. The details of operating standards and procedures to be followed shall be established from time to time by agreement between the Bank and the Portfolio and shall be expressed in a procedures manual maintained by the Bank. II. Compensation. For the performance of its obligations hereunder, the Portfolio shall pay the Bank according to the following: Opening a loan $15 Closing a loan $15 Daily mark to market of collateral $ 5 Fidelity Management & Research Co. (FMR) and the Trust on behalf of the Portfolio have entered into a management contract pursuant to which FMR has agreed to pay certain enumerated expenses. FMR hereby agrees with the Bank to pay all compensation set forth in paragraph II of this Schedule C and, so long as the management contract remains in effect, the Bank agrees with the Portfolio to look exclusively to FMR for payment of the fees and expenses set forth in paragraph II of this Schedule C. FIDELITY MANAGEMENT & RESEARCH COMAPNY By: /s/ J. Gary Burkhead Name: J. Gary Burkhead Title: President UNITED MISSOURI BANK, N.A. By: /s/Patricia A. Peterson Name: Patricia A. Peterson Title: Senior Vice President FIDELITY CALIFORNIA MUNICIPAL TRUST on behalf of SPARTAN CALIFORNIA INTERMEDIATE MUNICIPAL PORTFOLIO By: /s/ Gary L. French Name: Gary L. French Title: Treasurer EX-11 8 EXHIBIT 11 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses and Statements of Additional Information constituting parts of this Post-Effective Amendment No. 26 to the Registration Statement on Form N-1A (the "Registration Statement") of Fidelity California Municipal Trust of our reports dated March 31, 1994 and March 30, 1994, relating to the financial statements and financial highlights appearing in the February 28, 1994 Annual Reports to Shareholders of Fidelity California Tax-Free Funds and Spartan California Municipal Portfolios, respectively, which are incorporated by reference in such Registration Statement. We further consent to the references to us under the headings "Auditor" in the Statements of Additional Information and "Financial Highlights" in the Prospectuses. /s/ Price Waterhouse Price Waterhouse Boston, Massachusetts April 11, 1994 -----END PRIVACY-ENHANCED MESSAGE-----