FIDELITY U.S. TREASURY PORTFOLIO
CLASS B 82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS 02109
PROSPECTUS
U.S. Treasury Portfolio (the Portfolio), a portfolio of Daily Money Fund
(the Fund), seeks as high a level of current income as is consistent with
the preservation of capital and liquidity by investing in money market
instruments.
The Portfolio offers shares by exchange to investors in Class B shares of
certain Fidelity Advisor Funds ("Class B Shares"). The Portfolio offers
shares to individual, institutional and corporate investors ("Original
Shares"). This Prospectus offers Class B Shares. Initial Class shares are
offered through a separate prospectus.
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL
MAINTAIN A STABLE $1.00 SHARE PRICE.
This Prospectus is designed to provide investors with information that they
should know before investing. Please read and retain this document for
future reference. A Statement of Additional Information (dated May 2, 1994)
has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference. This free Statement of Additional
Information is available upon request from your investment professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, SAVINGS ASSOCIATION, INSURED DEPOSITORY
INSTITUTION OR GOVERNMENT AGENCY, NOR ARE THEY FEDERALLY INSURED OR
OTHERWISE PROTECTED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. INVESTMENTS IN THE PORTFOLIO INVOLVE INVESTMENT RISK, INCLUDING
POSSIBLE LOSS OF PRINCIPAL. THE VALUE OF THE INVESTMENT AND ITS RETURN
WILL FLUCTUATE AND ARE NOT GUARANTEED. WHEN SOLD, THE VALUE OF THE
INVESTMENT MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED.
For further information or assistance in opening an account, please call:
TOLL FREE 800-843-3001
TABLE OF CONTENTS
Summary of Portfolio Expenses
The Portfolio's Financial History
Investment Objectives and Policies
Performance
Distributions and Taxes
How to Invest, Exchange and Redeem
Daily Money Fund and the Fidelity Organization
Management, Distribution and Services
Appendix
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.
May 2, 1994
DMF-PRO-594
SUMMARY OF PORTFOLIO EXPENSES
The expense summary format below was developed for use by all mutual funds
to help you make your investment decisions. Of course you should consider
this expense information along with other important information including
the Portfolio's investment objective and its past performance information.
A. ANNUAL OPERATING EXPENSES: *
Management Fee . .17%
12b-1 Fee . .75%
Other Expenses .18%
Shareholder Service Fee .25%
Total Operating Expenses .132%
1. Projections are based on estimated expenses for first year..
* After waivers.
B. EXAMPLE:
An investor would pay the following expenses on a $1,000 investment in
Class B shares, assuming (1) 5% annual return and (2) redemption at the end
of each time period:
1 YEAR* 3 YEARS* 5 YEARS* 10 YEARS+
$44 $44 $76 $167
* Reflects deductions of applicable contingent deferred sales charge..
+ Reflects conversion to Initial Shares after six years..
EXPLANATION OF TABLE. The purpose of the table is to assist investors in
understanding the various costs and expenses that an investor in Class B
shares would bear directly or indirectly.
A. ANNUAL OPERATING EXPENSES. Annual operating expenses are based on the
Portfolio's historical expenses for the most recent fiscal year ended.
Management fees are paid by the Portfolio to Fidelity Management &
Research Company (FMR) for managing its investments and business affairs.
The rate for management fees is based on the Portfolio's historical
expenses and represents the net rate retained by FMR after payments made
under the distribution and service plan for Initial Shares pursuant to Rule
12-b1 under the Investment Company Act of 1940 (Initial 12b-1 Plan). The
rate for distribution fees incorporates average payments made by FMR
pursuant to the Initial 12b-1 Plan, and a distribution fee payable by Class
B Shares. Long-term shareholders may pay more than the economic equivalent
of the maximum front-end sales charges permitted by the National
Association of Securities Dealers, Inc. (NASD) due to distribution and
shareholder service fees. Class B Shares incur other expenses for
maintaining shareholder records, furnishing shareholder statements and
reports, and for other services. Shareholder service fees are paid to
investment professionals for services and expenses in connection with
personal service to Class B shareholders and/or the maintenance of Class B
shareholder accounts. FMR has voluntarily agreed to reimburse the
Portfolio to the extent that total operating expenses for Class B Shares
(exclusive of taxes, interest, brokerage commissions, and extraordinary
expenses) are in excess of an annual rate of 1.35% of the average net
assets of Class B Shares. If reimbursements were not in effect, the
management fee, other expenses and total operating for Class B Shares would
be .17%, 2.42% and 2.84 respectively. Management fees, distribution fees,
shareholder service fees and other expenses are reflected in the Class B
Share price or dividends and are not charged directly to individual
shareholder acocunts. Please refer to the section entitled "Management
Contract, Distribution and Shareholder Servicing Plans" on page __ for
further information.
B. EXAMPLE. The hypothetical example illustrates the expenses associated
with a $1,000 investment in Class B Shares over periods of 1, 3, 5 and 10
years, based on the expenses in the tables, an assumed annual rate of
return of 5% and deduction of the applicable contingent deferred sales
charge in years 1, 3, and 5. A CDSC is imposed only if you redeem shares
within 5 years of purchase. The return of 5% and expenses should not be
considered indications of actual or expected Class B Share performance,
both of which may vary.
THE PORTFOLIO'S FINANCIAL HISTORY
FINANCIAL HIGHLIGHTS. The following table gives information about the
Portfolio's financial history and uses the Fund's fiscal year (which ends
July 31). The annual information has been audited by Coopers &
Lybrand, independent accountants. Their unqualified report is included in
the Portfolio's Annual Report. On September 29, 1993 U.S. Treasury
Portfolio was converted from a separate series of a Massachusetts business
trust to a separate series of a Delaware business trust and adopted the
audited financial statements of its predecessor portfolio as its own. On
or about May 2, 1994, Class B Shares will be offered by exchange to Class B
shareholders of the Fidelity Advisor Funds. The information below
regarding initial class shares does not reflect the Class B distribution
fee and shareholder servicing fee and therefore, may not be representative
of the actual operational results for Class B Shares.
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Six Months Years Ended July 31,
ended
1/31/94
(Unaudited) 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
SELECTED PER-SHARE DATA
Net asset value, beginning
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
of
period
Income from Investment
.013 .028 .041 .067 .080 .085 .066 .057 .072 .088 .094
Operations
Net interest income
Dividends from net
(.013) (.028) (.041) (.067) (.080) (.085) (.066) (.057) (.072) (.088) (.094)
interest
income
Net asset value, end of
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
period.
TOTAL RETURN
1.33% 2.82 4.21 6.90 8.34 8.81 6.81 5.87 7.39 9.20 9.77
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period
$ $1,445,269 $ 1,451,40 $ 1,531,36 $ 1,714,10 $ 1,349,67 $ 893,611 $ 560,528 $ 440,944 $ 388,832 $ 236,808 $ 104,964
(000 omitted)
3 4 8 0
Ratio of expenses to
.65%* .61 .59 .60 .61 .64 .66 .62 .60 .66 .72
average
net assets
Ratio of expenses to
.65%* .61 .59 .60 .61 .73 .66 .62 .60 .66 .95
average net assets before
voluntary
expense limitation
Ratio of net interest income
2.62%* 2.76 4.19 6.61 7.99 8.56 6.57 5.78 7.11 8.57 9.64
to average net assets
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
The Portfolio's investment objective is to seek as high a level of current
income as is consistent with the preservation of capital and liquidity by
investing in money market instruments. The Portfolio's investment objective
is fundamental and may be changed only by vote of a majority of its
outstanding shares. The Portfolio may not always achieve its objective, but
it will follow the investment style in the following paragraphs.
Unless otherwise noted, the Portfolio's investment policies and limitations
are not fundamental and may be changed without shareholder approval. The
permitted investments of U.S. Treasury Portfolio are as follows:
The Portfolio invests in instruments which are direct obligations of the
U.S. government, and repurchase agreements involving such securities.
Direct U.S. government obligations consist of securities issued or
guaranteed as to principal and interest by the U.S. government and backed
by the full faith and credit of the United States.
These include U.S. Treasury bills, notes and bonds, and instruments issued
by the Export-Import Bank of the U.S., the General Services Administration,
the Government National Mortgage Association, the Small Business
Administration, and the Washington Metropolitan Area Transit Authority. The
Portfolio will not invest in securities of U.S. government agencies or
instrumentalities that are not backed by the full faith and credit of the
United States. The Portfolio intends to invest 100% of its total assets in
U.S. Treasury bills, notes, and bonds and other direct obligations of the
U.S. Treasury. The Portfolio also may engage in repurchase agreements
backed by these obligations. This policy may be changed only upon 90 days'
notice to shareholders.
MATURITY. The Portfolio 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.
Portfolio's ability to achieve its investment objective depends on the
quality and maturity of its investments. Although the Portfolio's policies
are designed to help maintain a stable $1.00 share price, all money market
instruments can change in value when interest rates or issuers'
creditworthiness change, or if an issuer or guarantor of a security fails
to pay interest or principal when due. If these changes in value were large
enough, the Portfolio's share price could fall below $1.00. In general,
securities with longer maturities are more vulnerable to price changes,
although they may provide higher yields.
INVESTMENT LIMITATIONS
The following summarizes the Portfolio's principal investment limitations.
A complete listing is contained in the Statement of Additional Information.
1. The Portfolio will not purchase a security if, as a result: (a) with
respect to 75% of its total assets, more than 5% of its total assets would
be invested in securities of any single issuer; or (b) more than 25% of its
total assets would be invested in issuers having their principal business
activities in a particular industry. These limitations do not apply to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
2. (a) The Portfolio may borrow money for temporary or emergency purposes
or by engaging in reverse repurchase agreements, but not in an amount
exceeding 33 1/3% of its total assets. (b) The Portfolio may borrow money
from banks or from other funds advised by FMR or an affiliate. (c) The
Portfolio will not purchase securities when borrowings (other than reverse
repurchase agreements) exceed 5% of its total assets.
As a non-fundamental policy, the Portfolio may not purchase a security, if
as a result, more than 10% of its net assets would be invested in illiquid
instruments.
Except for the Portfolio's investment objectives, limitation 1, and 33 1/3%
limitations on borrowings and loans, the Portfolio's policies and
limitations described in this Prospectus are not fundamental and may be
changed without shareholder approval. These limitations and the policies
discussed in "Investment Objectives and Policies" are considered at time of
purchase; the sale of securities is not required in the event of a
subsequent change in circumstances.
While there may be occasions when, in order to raise cash to meet
redemptions, the Portfolio might be required to sell securities at a loss,
the Portfolio's policy generally will be to hold securities to maturity
rather than to follow a policy of active trading.
PORTFOLIO TRANSACTIONS
Money market obligations generally are traded in the over-the-counter
market through broker-dealers. A broker-dealer is a securities firm or bank
which makes a market for securities by offering to buy at one price and to
sell at a slightly higher price. The difference between the prices is known
as a spread. Since FMR trades, directly or through affiliated sub-advisers,
a large number of securities, including those of Fidelity's other funds,
broker-dealers are willing to work with the Portfolio on a more favorable
spread than would be possible for most individual investors.
The Portfolio has authorized FMR to allocate transactions to some
broker-dealers who help distribute the Portfolio's shares or the shares of
Fidelity's other funds, to the extent permitted by law, and on an agency
basis to Fidelity Brokerage Services, Inc. (FBSI) and Fidelity Brokerage
Services, Ltd. (FBSL), affiliates of FMR. FMR will make such allocations if
commissions are comparable to those charged by non-affiliated qualified
broker-dealers for similar services.
Higher commissions may be paid to firms that provide research services to
the extent permitted by law. FMR also is authorized to allocate brokerage
transactions to FBSI in order to secure from FBSI research services
produced by third party, independent entities. FMR may use this research
information in managing each Portfolio's assets, as well as assets of other
clients.
PERFORMANCE
The Portfolio may quote its yield, effective yield and total return in
advertisements or in reports or other communications. All performance
information is historical and is not intended to indicate future
performance.
The Portfolio's YIELD refers to the income generated by an investment in
the Portfolio over a seven-day period expressed as an annual percentage
rate. The Portfolio also may calculate an effective yield by compounding
the base period return over a one-year period. The EFFECTIVE YIELD will be
slightly higher than the yield because of the compounding effect on this
assumed reinvestment. In addition, yields quoted in advertising may be
based on historical seven-day periods.
The Portfolio's TOTAL RETURN is based on the overall dollar or percentage
change in value of a hypothetical investment in the Portfolio assuming
dividend distributions are reinvested. A CUMULATIVE TOTAL RETURN reflects
the Portfolio's performance over a stated period of time. An AVERAGE ANNUAL
TOTAL RETURN reflects the hypothetical annually compounded rate that would
have produced the same cumulative total return if performance had been
constant over the entire period. Because average annual returns tend to
smooth out variations in the Portfolio's performance, investors should
recognize that they are not the same as actual year-by-year results.
DISTRIBUTIONS AND TAXES
The Portfolio ordinarily declares dividends from net investment income
daily and pays such dividends monthly. The Portfolio intends to distribute
substantially all of its net investment income and capital gains, if any,
to shareholders within each calendar year as well as on a fiscal year
basis.
FEDERAL TAXES. Dividends derived from net investment income and short-term
capital gains are taxable as ordinary income. The Portfolio's distributions
are taxable when they are paid, whether you take them in cash or reinvest
them in additional shares, except that distributions declared in December
and paid in January are taxable as if paid on December 31. The Portfolio
will send you an IRS Form 1099-DIV by January 31 showing your taxable
distributions for the past calendar year.
OTHER TAX INFORMATION. The information above is only a summary of some of
the federal tax consequences generally affecting the Portfolio and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal tax, investors may be subject to state
or local taxes on their investment.
STATE AND LOCAL TAXES: Investors should consult their tax advisors to
determine whether the Portfolio is suitable to their particular tax
situation. Mutual fund dividends from most U.S. government securities
generally are free from state and local income taxes. Pennsylvania does not
provide this benefit, and some states may limit the benefit. In addition,
certain types of securities, such as repurchase agreements and certain
agency backed securities, may not qualify for the government interest
exemption on a state-by-state basis. Some states may impose intangible
property taxes.
When you sign your account application, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the
Portfolio to withhold 31% of your taxable distributions and redemptions.
HOW TO INVEST, EXCHANGE AND REDEEM
HOW TO INVEST. Class B Shares of the Portfolio are currently available only
to holders of Class B shares of Fidelity Advisor Fund. An investment in the
Portfolio may only be made by exchange of Class B Shares of Fidelity
Advisor Funds or through reinvestment of distributions on Class B Shares.
Direct purchases of class B shares will not be accepted.
Class B Shares of the Portfolio are offered continuously and may be
purchased at the next determined net asset value per share (NAV) after an
exchange order is received and accepted. The Portfolio does not impose any
sales charges in connection with purchases of Class B Shares. However, a
contingent deferred sales charge (CDSC) may be assessed upon redemption of
Class B Shares (see "How to Redeem"). The Portfolio may discontinue
offering its Class B Shares generally or in any particular state without
notice to shareholders.
SHARE PRICE. Fidelity Service Co. (Service) calculates the NAV of Class B
Shares at 2:00 p.m. and 4:00 p.m. Eastern time each day that the Portfolio
is open for business (see "Holiday Schedule" on page ). The NAV of Class B
Shares is determined by adding the value of all securities and other assets
of the Portfolio, deducting its actual and accrued liabilities of Class B
Shares, and dividing by the number of Class B Shares outstanding. The
Portfolio values its portfolio securities on the basis of amortized cost.
Class B Shares purchased begin to earn income dividends on the following
business day.
MINIMUM INVESTMENT AND ACCOUNT BALANCE. The minimum initial investment by
exchange to establish a new account in Class B Shares is $1,000. Subsequent
investments must be at least $250. If you want to keep your account open,
please leave $500 in it. If an account balance falls below $500 due to
redemption, the Portfolio may close it and mail the proceeds less any
applicable CDSC, to the address of record. Investors will be given 30 days'
notice that their account will be closed unless they make an additional
investment to increase their account balance to the $500 minimum.
1.HOW TO EXCHANGE. An exchange is the redemption of Class B Shares of one
fund and the purchase of Class B Shares of another fund, each at the next
determined NAV. The exchange privilege is a convenient way to buy and sell
Class B Shares or Class B shares of certain Fidelity Advisor Funds
registered in your state.
You may only exchange between accounts that are registered in the same
name, address, and taxpayer identification number. You must consult the
prospectus of the fund to be acquired to determine eligibility and
suitability. To protect fund performance and shareholders, Fidelity
discourages frequent trading in response to short-term market fluctuations.
In particular, exchanges that coincide with "market timing" strategies can
have adverse effects on the Portfolio.
The Portfolio reserves the right at any time without prior notice to refuse
exchange purchases by any person or group if, in FMR's judgment, the
Portfolio would be unable to invest effectively in accordance with its
investment objective and policies or would otherwise potentially be
adversely affected. The exchange privilege may be modified or terminated in
the future.
Exchange instructions may be given by you in writing or by telephone
directly to the Transfer Agent or through your investment professional.
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.
RESTRICTIONS. Currently, there is no limit on the number of exchanges out
of the Portfolio, nor are there any administrative or redemption fees
applicable to exchanges out of the Portfolio.
TAXES. Each exchange actually represents the sale of Class B shares of one
fund and the purchase of Class B shares in another, which may produce a
gain or loss for tax purposes.
Class B Shares will be redeemed at the next determined NAV following
receipt and acceptance of the exchange order. Class B Shares to be acquired
will be purchased at the next determined NAV after redemption proceeds are
made available. Investors will earn dividends on the Class B shares of the
acquired fund in accordance with that fund's customary policy. Investors
should note that under certain circumstances, a fund may take up to seven
days to make redemption proceeds available for the exchange purchase of
shares of another fund.
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM. You can exchange a specific
dollar amount of Class B Shares into Class B shares of Fidelity Advisor
Fund on a monthly, quarterly or semiannual basis under the following
conditions:
1. The account from which the exchanges are to be processed must have a
minimum balance of $10,000.
2. The account into which the exchanges are to be processed must be an
existing account with a minimum balance $1,000.
3. Both accounts must have identical registrations and taxpayer
identification numbers. The minimum amount that can be exchanged
systematically into a fund is $100.
4. Systematic Exchanges will be processed at the NAV determined on the
transaction date.
HOW TO SELL SHARES
Orders to sell (redeem) may be placed by you in writing or by telephone or
through your investment professional. How to Redeem. You may redeem all
or a portion of Class B Shares n any day the New York Stock Exchnage (NYSE)
and the Federal Reserve Bank of New York (New York Fed) are open. Class B
Shares will be redeemed at the next NAV calculated after the Portfolio has
received and accepted the redempiton request, less any applicable CDSC (see
below). If you close an account, any accrued dividends will be paid at the
beginning of the following month. Class B Shares redeemed do receive the
dividends declared on the day of redemption.
2.REDEMPTION REQUESTS BY WIRE may be made by calling the Transfer Agent
directly or your investment professional.
You must apply for the wire feature on your account application. The
Transfer Agent will send your notification that this feature is active;
wire redemptions may then be made by calling during trading hours. All wire
redemptions will be processed at the 4:00 p.m. NAV and will generally be
sent the next business day following the redemption of Class B shares from
your account to a pre-designated bank account. Class B shares redeemed by
wire will earn dividends through the date of redemption.
You may change the bank account(s) designated to receive an amount redeemed
at any time by sending a letter of instruction with a signature guarantee
to:
FIIOC
Mail Zone ZR5
P.O. Box 1182
Boston, MA 02103-1182
Further documentation may be required when deemed appropriate by FIIOC.
REDEMPTION REQUESTS BY MAIL. Send a letter of instruction with signature
guarantee(s) to the address given above. The letter should specify the name
of the Portfolio, the number of Class B shares to be sold, name, account
number, address
A signature guarantee is a widely accepted way to protect you and FIIOC by
verifying the signature on your redemption request; it may not be provided
by a notary public.
Signature guarantees will be accepted from banks, brokers, dealers,
municipal securities dealers, municipal securities brokers, government
securities dealers, government securities brokers, credit unions (if
authorized under state law), national securities exchanges, registered
securities associations, clearing agencies and savings associations.
If making immediate payment of redemption proceeds could adversely affect
the Portfolio, it may take up to seven days to pay you. Also, when the
NYSE is closed (or when trading is restricted) for any reason other than
its customary weekend or holiday closings, or under any emergency
circumstances as determined by the SEC to merit such action, the Portfolio
may suspend redemptions or postpone payment dates. Investors unable to
execute transactions by telephone (for example, during times of unusual
market activity), should consider placing orders by mail to FIIOC at the
address above. In cases of suspension of the right of redemption, the
request for redemption may either be withdrawn or payment may be made based
on the NAV next determined after the termination of the suspension.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption, be
assessed a CDSC based on the following schedule:
From Date of Purchase Contingent Deferred
Sales Charge
Less than 1 year 4%
1 year to less than 2 years 3%
2 years to less than 3 years 3%
3 years to less than 4 years 2%
4 years to less than 5 years 1%
5 years to less than 6 years 0%
After a maximum holding period of 6 years, Class B Shares will convert
automatically to Initial Shares of the Portfolio. See "Conversion Feature"
below for more information.
The CDSC will be calculated based on the lesser of the value of Class B
Shares at the time of purchase or on the value of Class B Shares at
redemption, not including any reinvested dividends or capital gains. In
determining the applicability and rate of any CDSC at redemption,
reinvested dividends and capital gains, if any, will be redeemed first,
followed by the remaining Class B Shares beginning with those shares that
have been held the longest. The applicable CDSC calculated is based on the
holding period of Class B Shares of the Fidelity Advisor Funds that were
exchanged for Class B Shares (not including reinvested dividends or capital
gains). The holding period begins with the date of their initial purchase;
and the value that pertains to the Class B Shares is the lessor of their
initial price or exchange date price.
CONVERSION FEATURES. After a maximum of 6 years from the date of purchase,
Class B Shares will convert automatically to Initial Shares of the
Portfolio. Conversion to Initial Shares will be at NAV. At the time of
conversion, a portion of the Class B shares purchased through the
reinvestment of dividends or capital gains (Dividend Shares) will also
convert to Initial Shares. The portion of Dividend Shares that will convert
is determined by the ratio that Class B non-Dividend Shares converting bear
to your total Class B non-Dividend Shares. (A portion of Class B Shares
also may convert, representing the appreciated value and/or reinvested
dividends or capital gains applicable to Fidelity Advisor Fund Class B
Shares prior to their exchange into the Portfolio.)
CONTINGENT DEFERRED SALES CHARGE WAIVERS. The CDSC may be waived (i) in
cases of disability or death, provided that the redemption is made within
one year following the death or initial determination of disability, or
(ii) in connection with a total or partial redemption made in connection
with certain distributions from retirement plans or accounts.
FOR MORE INFORMATION ABOUT THE CDSC, INCLUDING THE CONVERSION FEATURE AND
THE PERMITTED CIRCUMSTANCES FOR CDSC WAIVER, CONTACT YOUR INVESTMENT
PROFESSIONAL.
DISTRIBUTION OPTIONS
When you fill out your account application, you can choose from three
Distribution Options:
1. Reinvestment Option. Dividend distributions will be automatically
reinvested in additional Class B Shares of the Portfolio. If you do not
indicate a choice on your account application, you will be assigned this
option.
2. Income-Earned Option. A check will be sent for each dividend
distribution.
3. Directed Dividends Program. Dividend distributions will be automatically
invested in Class B shares of an identically registered Fidelity Advisor
Fund.
You may change your Distribution Option at any time by notifying the
Transfer Agent in writing. Distribution checks will be mailed no fewer than
seven days after the first day of the month. Reinvestment of distributions
will be made at that day's NAV. Class B Shares acquired through
distributions will not be subject to a CDSC.
STATEMENTS AND REPORTS
FIIOC will send you a confirmation statement after every transaction
(except a reinvestment of dividends or capital gains) that affects the your
Class B Share balance or account registration. In addition, an account
statement will be mailed to the record address quarterly. A statement with
tax information will be mailed by January 31 of each year and also will be
filed with the IRS. At least twice a year investors will receive the
Portfolio's financial statements. To reduce expenses, only one copy of the
Portfolio's reports (such as the Annual Report) may be mailed to each
investor's household. You should contact your investment professional or
the Portfolio to request additional reports each time.
3.HOLIDAY SCHEDULE. The Portfolio is open for business and net asset value
per share (NAV) for Class B Shares is calculated every day that both the
Federal Reserve Bank of New York (New York Fed) and the New York Stock
Exchange (NYSE) are open. The following holiday closings have been
scheduled for 1994: Dr. Martin Luther King, Jr. Day (observed), Presidents'
Day, Good Friday, Memorial Day, Independence Day (observed), Labor Day,
Columbus Day, Veterans' 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 New York Fed or the NYSE may
modify its schedule at any time. The right is reserved to advance the time
by which purchase and redemption requests must be received on any day that:
(1) the New York Fed or the NYSE close early; (2) if in FMR's judgement,
early closing is determined to be in the best interest of the Portfolios
shareholders; or (3) as permitted by the SEC. To the extent that portfolio
securities are traded in other markets on days the New York Fed or the NYSE
is closed, the Class B shares NAV may be affected when investors may not
purchase or redeem shares. Certain other Fidelity funds may follow
different holiday closing schedules.
DAILY MONEY FUND AND THE FIDELITY ORGANIZATION
THE FUND. U.S. Treasury Portfolio is a diversified portfolio of Daily Money
Fund, an open-end management investment company originally organized as a
Massachusetts business trust by Declaration of Trust dated June 7, 1982,
amended and restated as of September 1, 1989, and reorganized as a Delaware
business trust on September 29, 1993. The Fund's Board of Trustees
supervises Fund activities and reviews contractual arrangements with
companies that provide the Portfolio with services. The Fund is not
required to hold annual shareholder meetings, although special meetings may
be called for a class, the Portfolio or the Fund as a whole for purposes
such as electing or removing Trustees, changing fundamental policies,
approving a new or amended management contract or approving a new
distribution plan. Shareholders receive one vote for each share of the
Portfolio and fractional votes for each fractional share of the Portfolio.
Separate votes are taken by each class of shares, or the Portfolio if a
matter affects just that class or the Portfolio, respectively.
U.S. Treasury Portfolio also offers Initial Class Shares to individual,
institutional and corporate investors at NAV.
Initial Shares may be exchanged for shares of certain other Fidelity Funds.
Transfer agent and shareholder services for Initial Shares are performed by
FIIOC. For the fiscal year ended July 31, 1993, total operating expenses
for the Initial Shares were .57% of average net assets.
Under the Initial 12b-1 Plan, certain investment professionals are
compensated up to a maximum annual rate of .38% of the average net assets
of the Initial Shares with respect to which they provide or have provided
shareholder support or distribution services.
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts. It is composed of a number
of different subsidiaries and divisions which provide a variety of
financial products and services. The Fund employs various Fidelity
companies to perform certain activities required to operate the Portfolio.
FMR, the Portfolio's adviser, is the original Fidelity company, founded in
1946. FMR provides a number of mutual funds and other clients with
investment research and portfolio management services. FMR maintains a
large staff of experienced investment personnel and a full complement of
related support facilities. As of January 31, 1994, FMR advised funds
having more than 15 million shareholder accounts with a total value of more
than $225 billion. Fidelity Distributors Corporation (Distributors)
distributes shares for the Fidelity funds.
FMR Texas Inc. (FMR Texas), the Portfolio's sub adviser, is a wholly owned
subsidiary of FMR that provides advice and investment management services
with respect to money market instruments. FMR Texas, a Texas corporation,
has its principal offices at 400 East Las Colinas Boulevard, Irving, Texas.
FMR Corp. is the parent company for the Fidelity companies. Through
ownership of voting common stock, Edward C. Johnson 3d (President and a
Trustee of the Fund), Johnson family members, and various trusts for the
benefit of Johnson family members form a controlling group with respect to
FMR Corp.
MANAGEMENT, DISTRIBUTION AND
SERVICES
MANAGEMENT CONTRACTS. For managing its investments and business affairs,
the Portfolio pays FMR a monthly management fee at the annual rate of .50%
of its average net assets for the month. For the fiscal year ended July 31,
1993, management fees for U.S. Treasury Portfolio amounted to $14,208,606.
FMR has voluntarily agreed to reimburse Class B Shares to the extent that
its aggregate operating expenses (excluding interest, taxes, brokerage
commissions and extraordinary expenses), are in excess of an annual rate of
.1.35% of average net assets. FMR retains the ability to be repaid for
these expense reimbursements in the amount that expenses fall below the
limit prior to the end of the fiscal year.
FMR, on behalf of the Portfolio, has entered into a sub-advisory agreement
with FMR Texas under which FMR Texas has primary responsibility for
providing portfolio investment management services, while FMR retains
responsibility for providing other management services. Under each
sub-advisory agreement, FMR pays FMR Texas a fee equal to 50% of the
management fee retained by FMR under its current management contract with
the Portfolio, after payments by FMR pursuant to the Portfolio's Initial
12b-1 plan and the distribution plan for Class B Shares. 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.
DISTRIBUTION AND SHAREHOLDER SERVICING PLANS. The Trustees of the Fund have
adopted a distribution plan on behalf of the Class B Shares of the
Portfolio (Distribution 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
intended primarily 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 Distribution Plan to allow Class B Shares and FMR
to incur certain expenses that might be considered to constitute direct or
indirect payment by Class B Shares of distribution expenses related to
Class B Shares. Under the Distribution Plan, Class B Shares are authorized
to pay Distributors a monthly distribution fee at an annual rate of up to
.75% of the average net asset of Class B Shares. The Distribution Plan
further provides that FMR may make payments out of its management fee at an
annualized rate of Class B Shares of up to .38% of the Class B shares'
average net assets, directly to Distributors for distribution-related
expenses. The total distribution fee charged to the Class B shares will be
reduced by the amount paid to Distributors by FMR. The amount payable to
Distributors by FMR is determined by the percentage amount paid by FMR to
Distributors in connection with the Initial Class Distribution Plan.
The Trustees of the Fund have also adopted a shareholder servicing plan on
behalf of the Class B shares (Shareholder Servicing Plan) under the Rule.
Pursuant to the Shareholder Servicing Plan, investment professionals are
compensated at an annual rate of .25% of the average net assets of Class B
Shares for providing personal service to Class B shareholders and/or for
the maintenance of Class B shareholder accounts.
Except as described above, fees paid pursuant to the Distribution Plan and
Shareholder Servicing Plan are paid by the Class B Shares not by individual
accounts.
Distributors may, at its own expense, provide promotional incentives to
investment professionals who support the sale of Class B shares of the
Portfolio without reimbursement from the Portfolio. 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 Class B shares.
The NASD has approved amendments which subject asset based sales charges to
its maximum sales charge rule. Fees paid pursuant to the Class B Shares'
Distribution Plan and shareholder servicing plan will be limited by the
restrictions imposed by the NASD rule.
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 fully defined, in Distributors' opinion, it
should not prohibit banks from being paid for shareholder servicing and
record keeping. If, because of changes in law or regulation, or because of
new interpretations of existing law, a bank or the Portfolio were prevented
from continuing these arrangements, it is expected that other arrangements
would be made for these services and that shareholders would not suffer
adverse financial consequences. In addition, state securities laws on this
issue may differ from the interpretations of federal law expressed herein,
and banks and financial institutions may be required to register as dealers
pursuant to state law.
FIIOC, 82 Devonshire Street, Boston, MA, an affiliate of FMR, acts as the
transfer and dividend-paying agent and maintains shareholder records. FIIOC
is paid fees based on the type, size and number of accounts in Class B
Shares of the Portfolio, and the number of transactions made by
shareholders of Class B Shares.
Service, 82 Devonshire Street, Boston, MA, an affiliate of FMR, performs
the calculations necessary to determine the NAV of Class B Shares and
maintains the general accounting records for Class B Shares.
Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New
York, is the custodian of the assets of the Portfolio.
APPENDIX
The following paragraphs provide a brief description of the securities in
which the Portfolio may invest and the transactions it may make. The
Portfolio is not limited by this discussion, however, and may purchase
other types of securities and enter into other types of transactions if
they are consistent with the Portfolio's investment objective and policies.
DELAYED DELIVERY TRANSACTIONS. The Portfolio may buy and sell securities on
a when-issued or delayed delivery or when issued basis, with payment and
delivery taking place at a future date. The market value of securities
purchased in this way may change before the delivery date, which could
affect the market value of the Portfolio's assets. Ordinarily, a Portfolio
will not earn interest on securities purchased until they are delivered.
ILLIQUID INVESTMENTS. The Portfolio will invest less than 10% of its assets
in illiquid investments. Under the supervision of the Board of Trustees,
FMR determines the liquidity of the Portfolio's investments. The absence of
a trading market can make it difficult to ascertain a market value for
illiquid investments. It may be difficult or impossible for the Portfolio
to sell illiquid investments promptly at an acceptable price.
INTERFUND BORROWING PROGRAM. The Portfolio has received permission from the
SEC to lend money to and borrow money from other funds advised by FMR or
its affiliates. The Portfolio 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. Loans may be called on one
day's notice, and the Portfolio may have to borrow from a bank at a higher
interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund could cause a lost investment opportunity or
additional borrowing costs.
MONEY MARKET refers to the marketplace where short-term, high grade debt
securities are traded. These securities include U.S. government
obligations, commercial paper, certificates of deposit and bankers'
acceptances, time deposits and short-term corporate obligations. These
securities normally carry specific rates of return. A portfolio may invest
in variable rate obligations which provide for adjustments in interest
rates on specific dates, and floating rate obligations which have an
interest rate that changes whenever there is a change in the designated
base rate.
MUNICIPAL OBLIGATIONS are issued to raise money for various public
purposes, including general purpose financing for state and local
governments as well as financing for specific projects or public
facilities. Municipal obligations may be backed by the full taxing power of
a municipality or by the revenues from a specific project or the credit of
a private organization.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which a
Portfolio purchases a security and simultaneously commits to resell that
security to the seller at an agreed upon price at a higher price. In the
event of bankruptcy of the other party to a repurchase agreement, a
Portfolio could experience delays in recovering cash. To the extent that,
in the meantime, the value of the securities purchased may have decreased,
a Portfolio could experience a loss. In all cases, FMR must find the
creditworthiness of the other party to a transaction satisfactory.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
Portfolio sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash. At the same time, each Portfolio agrees
to repurchase the instrument at an agreed-upon price and time. Each
Portfolio expects that it will engage in reverse repurchase agreements for
temporary purposes such as to fund redemption requests. Reverse repurchase
agreements may increase the risk of fluctuation in the market value of a
Portfolio's assets or in its yield.
STRIPPED GOVERNMENT SECURITIES. Stripped securities are created by
separating the income and principal components of a debt instrument and
selling them separately. Each Portfolio may purchase U.S. Treasury STRIPS
(Separate Trading of Registered Interest and Principal of Securities), that
are created when the coupon payments and the principal payment are stripped
from an outstanding Treasury bond by a Federal Reserve Bank.
TIME DEPOSITS. Non-negotiable deposits in a banking institution earning a
specified interest rate over a given period of time.
U.S. GOVERNMENT OBLIGATIONS. Debt securities issued or guaranteed by the
U.S. Treasury or by an agency or instrumentality of the U.S. government.
Not all U.S. government obligations are backed by the full faith and credit
of the United States. For example, securities issued by the Federal Farm
Credit Bank or by the Federal National Mortgage Association are supported
by the agency's right to borrow money from the U.S. Treasury under certain
circumstances. Securities issued by the Financing Corporation are supported
only by the credit of the agency. There is no guarantee that the government
will support these types of securities, and therefore they involve more
risk than other government obligations.
VARIABLE OR FLOATING RATE OBLIGATIONS including certain participation
interests in municipal obligations, have interest rate adjustments formulas
that permit a Portfolio sell them a par value plus accrued interest on
short notice. When determining the maturity of a variable or floating rate
instrument, he Portfolio may look to the date the demand feature can be
exercised or to the date the interest rate is readjusted, rather than to
the final maturity of the instrument.
ZERO COUPON BONDS do not make 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 Portfolio takes into account as income a portion of the
difference between a zero coupon bond's purchase price and its face value.
DAILY MONEY FUND
U.S. TREASURY PORTFOLIO: CLASS B
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30, 1994
This Statement is not a prospectus but should be read in conjunction
with the current U.S. Treasury Portfolio: Class B (the Portfolio)
Prospectus (dated June 30, 1994). The Portfolio offers shares to
individual, institutional and corporate investors (Initial Shares). The
Portfolio also offers shares by exchange to investors in Class B shares of
certain Fidelity Advisor Funds (Class B Shares). This Statement offers
Class B Shares. Please retain this Statement for future reference.
Additional copies of this Statement or of the Prospectus or Annual Report,
are available without charge upon request from Fidelity Distributors Corp.,
82 Devonshire Street, Boston, Massachusetts 02109, or from your investment
professional.
TABLE OF CONTENTS
Page
Investment Policies and Limitations
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management and Other Services
The Distributors
Distribution and Service Plan
Description of the Fund
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
SUB-ADVISOR
FMR Texas Inc. (FMR Texas)
DISTRIBUTOR
Fidelity Distributors Corporation (Distributors)
TRANSFER AGENT
Fidelity Investments Institutional Operations Company (FIIOC)
CUSTODIAN
Morgan Guaranty Trust Company of New York
DMF B-PTB-694
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the Portfolio'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 shall
be determined immediately after and as a result of the Portfolio'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 Portfolio's
investment policies and limitations.
The Portfolio's fundamental investment policies and limitations may not be
changed without approval by a "majority of the outstanding voting
securities," as defined in the Investment Company Act of 1940 (the 1940
Act), of the Portfolio. 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.
THE FOLLOWING ARE THE PORTFOLIO'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE PORTFOLIO MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued or
guaranteed as to principal and interest by the government of the United
States, its agencies or instrumentalities) if, as a result thereof more
than 5% of its total assets would be invested in the securities of such
issuer; provided, however, that with respect to 25% of its total assets,
10%, of its assets may be invested in the securities of an issuer;
(2) issue senior securities except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the Portfolio may (i) borrow money for
temporary or emergency purposes (not for leveraging or investment) and (ii)
engage in reverse repurchase agreements for any purpose; provided that (i)
and (ii) in combination do not exceed 33 1/3% of the Portfolio's 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;
(4) underwrite securities issued by others, except to the extent that the
Portfolio may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than the securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities), if, as a result, more than 25% of the Portfolio's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the
Portfolio from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments;
(8) 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;
(9) write or purchase any put or call options;
(10) The Portfolio may, not withstanding 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
Portfolio.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) The Portfolio does not currently intend to purchase a security (other
than a security issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 5% of its total
assets would be invested in the securities of a single issuer; provided
that the Portfolio may invest up to 10% of its total assets in the first
tier securities of a single issuer for up to three business days.
(ii) The Portfolio 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) Subject to revision upon 60 days' notice to shareholders, the
Portfolio does not currently intend to purchase securities on margin,
except that the Portfolio 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 Portfolio 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. The Portfolio will not purchase any
security while borrowings (excluding reverse repurchase agreements)
representing more than 5% of its total assets are outstanding. The
Portfolio 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 Portfolio's total assets.
(v) The Portfolio 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 Portfolio does not currently intend to make loans, but this
limitation does not apply to purchases of debt securities or to
repurchase agreements.
(vii) The Portfolio 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 reorganization,
consolidation, or merger.
(viii) The Portfolio 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.
(ix) The Portfolio does not currently intend to invest in oil, gas or
other mineral exploration or development program or leases.
(x) The Portfolio does not currently intend to purchase the securities
of any issuer if those officers and Trustees of the Fund and those
officers and directors of FMR who individually own more than 1/2 of 1% of
the securities of such issuer together own more than 5% of such issuer's
securities.
(xi) The Portfolio does not currently intend to invest all of its assets
in the securities of a single open-end management inves tment company
with substantially the same fundamental investment objectives, policies,
and limitations as the Portfolio.
(As an operating policy subject to change only upon approval by the Board
of Trustees and 60 days' prior notice to shareholders, the Portfolio does
not currently intend to purchase futures contracts or options on futures
contracts.)
AFFILIATED BANK TRANSACTIONS. The Portfolio may engage in transactions
with financial institutions that are, or may be con sidered to be,
"affiliated persons" of the Portfolio under the 1940 Act. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission (SEC), the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. The Portfolio may buy and sell
securities on a delayed-delivery or when-issued basis. These
transactions involve a commitment by the Portfolio to purchase or sell
specific securities at a predetermined price and/or yield, with payment and
delivery taking place after the customary settlement period for that type
of security (and more than seven days in the future). Typically, no
interest accrues to the purchaser until the security is delivered.
When purchasing securities on a delayed-delivery basis, the Portfolio
assumes the rights and risks of ownership, including the risk of price and
yield fluctuations. Because the Portfolio is not required to pay for
securities until the delivery date, these risks are in addition to the
risks associated with the Portfolio's other investments. If the Portfolio
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
Portfolio will set aside appropriate liquid assets in a segregated
custodial account to cover its purchase obligations. When the
Portfolio has sold a security on a delayed-delivery basis, the Portfolio
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 Portfolio could miss a favorable
price or yield opportunity, or could suffer a loss.
The Portfolio 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.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of
in the ordinary course of business at approximately the prices at which
they are valued. Under the supervision of the Board of Trustees, FMR
determines the liquidity of the Portfolio's investments and, through
reports from FMR, the Board monitors investments in illiquid instruments.
In determining the liquidity of a Portfolio's investments, FMR may consider
various factors including (1) the frequency of trades and quotations, (2)
the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security
(including any demand or tender features) and (5) the nature of the
marketplace for trades (including the ability to assign or offset the
Portfolio's rights and obligations relating to the investment).
Investments currently considered by the Portfolio to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days. In the absence of market quotations, illiquid
investments are valued for purposes of monitoring amortized cost valuation
at fair value as determined in good faith by a committee appointed by the
Board of Trustees. If through a change in values, net assets or other
circumstances, the Portfolio 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.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio 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 involves the
obligation of the seller to pay the agreed upon price, which obligation is
in effect secured by the value (at least equal to the amount of the agreed
upon resale price and marked to market daily) of the underlying security.
The Portfolio may engage in repurchase agreements with respect to any
security type in which it is authorized to invest. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the
underlying securities, as well as delays and costs to the Portfolio in
connection with bankruptcy proceedings), it is the policy of the Portfolio
to limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
Portfolio 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 Portfolio will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The Portfolio will enter into reverse repurchase agreements only with
parties whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the
Portfolio's assets and may be viewed as a form of leverage.
SHORT SALES "AGAINST THE BOX". The Portfolio may sell securities short
when it owns or has the right to obtain securities equivalent in kind
or amount to the securities sold short. Short sales could be used to
protect the net asset value per share of the Portfolio in anticipation of
increased interest rates, without sacrificing the current yield of the
securities sold short. If the Portfolio enters into a short sale against
the box, it will be required to set aside securities equivalent in kind and
amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such
securities while the short sale is outstanding. The Portfolio will incur
transaction costs, including interest expense, in connection with opening,
maintaining, and closing short sales against the box.
VARIABLE OR FLOATING RATE INSTRUMENTS. Variable or floating rate
instruments 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.
Certain variable and floating rate instruments also permit holders to
demand payment from the issuer or a third party at anytime or at periodic
intervals up to 397 days.
Variable rate instruments (including instruments subject to a demand
feature) that mature in 397 days or less and U.S. government securities
with a variable rate of interest adjusted no less frequently than 762 days
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.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the Portfolio by FMR pursuant to authority contained in the
Portfolio's Management Contract. Since FMR has granted investment
management authority to the sub-adviser (see the section entitled
"Management Contract"), the sub-adviser will be authorized to place orders
for the purchase and sale of portfolios securities, and will do so in
accordance with the policies described below. FMR is also responsible for
the placement of transaction orders for other investment companies and
accounts for which it or its affiliates act as investment adviser.
Securities purchased and sold by the Portfolio 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 Portfolio may execute portfolio transactions with broker-dealers who
provide research and execution services to the Portfolio and/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 Portfolio are placed with
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 Portfolio may be useful to FMR in rendering investment
management services to the Portfolio or their 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 Portfolio. 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 were to attempt to develop comparable information through
its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
the Portfolio 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 Portfolio or its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage or 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 Portfolio or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and to place agency transactions with Fidelity Brokerage
Services Inc. (FBSI), sub sidiary of FMR Corp., if the commissions are
fair, reasonable, and comparable to commissions charged by non-affiliated
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such regulations, the Board of
Trustees has authorized FBSI to execute portfolio transactions for the
Portfolio on national securities exchanges in accordance with approved
procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
Portfolio and review commissions paid by the Portfolio over representative
periods of time to determine if they are reasonable in relation to the
benefits to the Portfolio.
From time to time, the Trustees will review whether the recapture for the
benefit of the Portfolio of some portion of the brokerage commissions or
similar fees paid by the Portfolio on portfolio transactions is legally
permissible and advisable. The Portfolio 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 the Portfolio to seek
such recapture.
Although the Trustees and officers are substantially the same as those of
other funds managed by FMR, investment decisions for the Portfolio 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
trans actions are inevitable when several funds and accounts are managed
by the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund or account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with 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
Portfolio is concerned. In other cases, however, the ability of the
Portfolio to participate in volume transactions will produce better
executions and prices for the Portfolio. It is the current opinion of the
Trustees that the desirability of retaining FMR as investment adviser to
the Portfolio outweighs any disadvantages that may be said to exist from
exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
The Portfolio 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 a Portfolio would receive if it sold the
instrument.
Valuing the Portfolio'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 Portfolio must adhere to certain conditions under Rule 2a-7;
these conditions are summarized in the Prospectus.
The Board of Trustees oversees FMR's adherence to SEC rules concerning
money market funds, and has established procedures designed to stabilize
the Portfolio's net asset value per share (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 Portfolio'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 Portfolio's yield based on
amortized cost may be higher than the yield based on market valuations.
Under these circumstances, a shareholder in the Portfolio would be able to
obtain a somewhat higher yield than would result if the Portfolio utilized
market valuations to determine its NAV. The converse would apply in a
period of rising interest rates.
PERFORMANCE
The Portfolio may quote its performance in various ways. All performance
information supplied in advertising is historical and is not intended to
indicate future returns. Share price, yield and total return fluctuate in
response to market conditions and other factors, and the value of shares
when redeemed may be more or less than their original cost.
The Portfolio 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 MONEY FUND AVERAGES/all taxable, which
is reported in the MONEY FUND REPORT, covers over 543 money market
funds.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of return including the effect of reinvesting dividends and
capital gain distributions (if any). Average annual returns are calculated
by determining the growth or decline in value of a hypothetical historical
investment over a stated period and then calculating the annually
compounded percentage rate that would have produced the same results if the
rate of growth or decline in the value of the investment had been constant
over that period. For example, a cumulative 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 performance is not constant
over time, but changes from year to year, and that average annual returns
represent averaged figures as opposed to the actual year-to-year
performance.
In addition to average annual returns, unaveraged or cumulative total
returns reflecting the simple change in value over a stated period may be
quoted. Average annual and cumulative total returns may be quoted as
percentages or as dollar amounts and may be calculated for a single
investment, a series of investments or a series of redemptions over any
time perio d. Total returns may be broken down into their components of
income and capital (including cpaital gains and changes in share price) in
order to illustrate the relationship of these factors and their
contributions to total return. Total returns may be quoted with or without
including the effect of the maximum applicable contingent or deferred sales
charge (CDSC). Total returns may be quoted on a before-tax or
after-tax basis. Total returns, yields, and other performance information
may be quoted numerically or in a table, graph, or similar illustration.
The Initial Shares and Class B Shares cumulative total returns and average
annual returns for the fiscal periods ended January 31, 1994 were as
follows:
U.S. Treasury Portfolio-Initial Class Shares
Historical Portfolio Results
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
One-Year Five-Year Ten-Year Life of Portfolio*
Initial Shares Average Annual 2.65% 5.55% 6.49% 6.59%
Total Returns
Cumulative Total Returns 2.65% 31.00% 87.48% 94.58%
</TABLE>
U.S. Treasury Portfolio-Class B Shares**
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
One-Year Five-Year Ten-Year Life of Portfolio*
Class B Shares Average Annual -1.35% 5.22% 6.49% 6.59%
Total Returns
Cumulative Total Returns -1.35% 29.0% 87.48% 94.58%
</TABLE>
* From August 31, 1983 through July 1, 1994.
* * Total returns include the effect of the maximum applicable
contingent deferred sales charge (CDSC).
YIELD CALCULATIONS. The Portfolio's yield refers to the income generated
by an investment in the Portfolio over a seven day period expressed as an
annual percentage rate. The effective yield, although calculated
similarly, will be slightly higher than the yield because it assumes that
income earned from the investment is reinvested (the compounding effect of
reinvestment). In addition to the current yield, the Portfolio may quote
yields in advertising based on any seven day period.
PERFORMANCE COMPARISONS. The Portfolio'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 which 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 the Portfolio
based on yield. In addition to the mutual fund rankings, the Portfolio's
performance may be compared to mutual fund performance indices prepared by
Lipper.
From time to time performance also may be compared to other mutual funds
tracked by financial or business publications and periodicals. For
example, Morningstar, Inc. may be quoted 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. In addition,
the Portfolio may quote financial or business publications and periodicals
as they relate to portfolio management, investment philosophy, and
investment techniques.
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 Consumer Price Index), 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 Portfolio. Ibbotson calculates total returns in the same
method as the Portfolio. Performance comparisons may also be made to other
compilations or indices that may be developed and made available in the
future.
Performance may also be compared to the yields of other money market
securities or averages of other money market securities as reported by the
Federal Reserve Bulletin, by TeleRate, a financial information network, or
by Salomon Brothers Inc., a broker-dealer firm, and to other fixed-income
investments such as Certificates of Deposit (CDs) or other investments
issued by banks. The principal value and interest rate of CDs and money
market securities are fixed at the time of purchase whereas the Portfolio's
yield will fluctuate. Unlike some CDs and certain other money market
securities, money market mutual funds are not insured by the Federal
Deposit Insurance Corporation (FDIC). Investors should give consideration
to the quality and maturity of the portfolio securities of the respective
investment companies when comparing investment alternatives. The Portfolio
may reference the growth and variety of money market mutual funds and the
FMR's innovation and participation in the industry.
The Portfolio may discuss its fund number, Quotron(registered trademark)
number, CUSIP number, and current portfolio manager.
HISTORICAL FUND RESULTS. The following chart shows the income and
capital elements to year-by-year total returns for the period August
31, 1983 through January 31, 1994 as compared to the cost of living
measured by the Consumer Price Index over the same period.
During the period from August 31, 1983 through January 31, 1994, a
hypothetical investment of $10,000 in Initial Shares would have grown to
$19,462 assuming all dividends were reinvested.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Period Initial Value of Value of Total Consumer
Ended $10,000 Reinvested Reinvested Value Price
7/31 Investment Dividends Capital Gains Index
1984* 10,000 884 0 10,884 10,389
1985 10,000 1,841 0 11,841 10,758
1986 10,000 2,688 0 12,688 10,928
1987 10,000 3,425 0 13,425 11,357
1988 10,000 4,291 0 14,291 11,826
1989 10,000 5,526 0 15,526 12,415
1990 10,000 6,805 0 16,805 13,014
1991 10,000 7,929 0 17,929 13,593
1992 10,000 8,692 0 18,692 14,022
1993 10,000 9,211 0 19,211 14,411
1/31/94 10,000 9,462 0 19,462 14,591
</TABLE>
* From August 31, 1983 through July 31, 1984.
Explanatory Notes: With an initial investment of $10,000 made on August
31, 1983 the net amount invested in Initial Shares was $10,000. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends for the period covered (that is, their cash value at
the time they were reinvested) amounted to $ 19,462. If
distributions had not been reinvested, the amount of distributions
earned from Initial Shares over time would have been smaller and the cash
payments (dividends) for the period would have come to $6,679. Initial
Shares did not distribute any capital gains during the period.
ADDITIONAL PURCHASE EXCHANGE AND REDEMPTION INFORMATION
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the NAV of the Initial Shares Class B Shares. Shareholders
receiving any such securities or other property on redemption may realize
either 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 (the Rule) under the 1940 Act, the Portfolio 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 exchange, or (ii) the Portfolio suspends the redemption of the shares to
be exchanged as permitted under the 1940 Act or the rules and
regulations thereunder, or the fund to be acquired suspends the sale of its
shares because it is unable to invest amounts effectively in accordance
with its investment objective and policies.
The Portfolio 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, it would be unable to invest effectively in
accordance with its investment objective and policies or would otherwise
potentially be adversely affected. Class B Shares are available only by
exchange of Class B shares of the Fidelity Advisor Funds. Direct purchases
of Class B Shares will not be accepted.
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. Dividends from the Portfolio will not normally qualify for the
dividends-received deduction available to corporations, since the
Portfolio's income is primarily derived from interest income and short-term
capital gains. Depending upon state law, a portion of the Portfolio's
dividends attributable to interest income derived from U.S. government
securities may be exempt from state and local taxation. The Portfolio will
provide information on the portion of the Portfolio's dividends, if any,
that qualify for this exemption.
CAPITAL GAIN DISTRIBUTIONS. The Portfolio may distribute short-term
capital gains once a year or more often as necessary to maintain its net
asset value at $1.00 per share or to comply with distribution requirements
under federal tax law. The Portfolio does not anticipate earning
long-term capital gains on securities.
TAX STATUS OF FUND. The Portfolio has qualified and intends to qualify as
a "regulated investment company" under the Internal Revenue Code of 1986,
as amended (the Code), so that the Portfolio will not be liable for federal
income or excise taxes on net investment income or capital gains to the
extent that these are distributed to shareholders in accordance with
applicable provisions of the Code.
STATE AND LOCAL TAX ISSUES. For mutual funds organized as business
trusts, state laws provide for a pass-through of the state and local
income tax exemption afforded to direct owners of U.S. government
securities. Therefore, for residents of most states, the tax treatment of
your dividend distributions from the Portfolio will be the same as if you
directly owned your proportionate share of the Portfolio's securities.
Thus, because the income earned on most U.S. government securities in which
the Portfolio invests is exempt from state and local income taxes in most
states, the portion of your dividends from the Portfolio attributable to
these securities will also be free from income taxes in those states. The
exemption from state and local income taxation does not preclude states
from asserting other taxes on the ownership of U.S. government securities.
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: Fidelity Service
Company, 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 (FMTC), 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 Daily Money Fund are listed
below. Except as indicated, each indiv idual has held the office shown
or other offices in the same company for the last five years. Trustees and
officers elected or appointed prior to the Fund's conversion to a
Delaware business trust served the Massachusetts business trust in
identical capacities. All persons named as Trustees and officers 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 the Fund 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.; 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). B efore retiring in March 1990, Mr. Cox was
President and Chief Operating Officer of Union Pacific Resources Company
(explora tion and production). He is a Director of Bonneville Pacific
Corporation (independent power, 1989), Sanfill 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, Chargin 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.(appraisals 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), York International Corp. (air conditioning and refrigeration,
1989), and 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 Alle gheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer).
In addition, he serves as a Trustee of Corporate Property Investors, the
EPS Foundation at Trinity College, the Naples Philharmonic Center for the
Arts, and Rensellar Polytechnic Institute, and he is a member of the
Advisory Boards of Butler Capital Corporation Funds and Warburg, Pincus
Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee(1933) 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.
LELAND BARRON, Vice President (1993) is also Vice President of other funds
advised by FMR and an employee of FMR Texas Inc.
JOHN TODD, Vice President (1992), is also Vice President of other funds
advised by FMR and an employee of FMR Texas Inc.
THOMAS D. MAHER, is Assistant Vice President of Fidelity's money market
funds and Vice President and Associate General Counsel of FMR Texas Inc.
(1990).
Under a retirement program which became effective November 1, 1989, a
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 Portfolio based on his final year's basic trustees fees
and length of service. Currently, Messrs. Robert L. Johnson, William R.
Spaulding, Bertram H. Witham, and David L. Yunich participate in the
program. On July 31, 1993, the Trustees and officers of the Fund as a group
owned less than 1% of the Portfolio's outstanding shares.
MANAGEMENT AND OTHER SERVICES
The Portfolio employs FMR to furnish investment advisory and other
services. Under its Management Contract with the Portfolio, approved by
shareholders at their August 24, 1989 meeting, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of the Portfolio in accordance with its investment
objective, policies and limitations.
FMR also provides the Portfolio with all necessary office facilities and
personnel for servicing the Portfolio's investments, and compensates all
officers all Fund, all Trustees who are "interested persons" of the Fund or
of FMR, and all personnel of the Portfolio or FMR performing services
relating to research, statistical and investment activities. In addition,
FMR or its affiliates, subject to the supervision of the Board of Trustees,
provide the management and administrative services necessary for the
operation of the Portfolio. These services include providing facilities
for maintaining the Portfolio's organization, supervising relations with
custodians, transfer and pricing agents, accountants, underwriters and
other persons dealing with the Portfolio, preparing all general shareholder
communications and conducting shareholder relations, maintaining the
Portfolio's records and the registration of the Portfolio's shares under
federal and state laws, developing management and shareholder services for
the Portfolio and furnishing reports, evaluations and analyses on a variety
of subjects to the Trustees.
In addition to the management fees payable to FMR and the fees payable
to FIIOC and service, the Portfolio pays all of its expenses, without
limitation, including typesetting, printing and mailing proxy material to
existing shareholders, legal expenses and the fees of the custodian and
auditor. (Effective June 1, 1989, FIIOC, the Portfolio's transfer agent
assumed payment of expenses of typesetting, printing and mailing of
Prospectuses and Statements of Additional Information and reports to
existing shareholders. There is no assurance that such an arrangement will
continue beyond the terms of the Portfolio' current transfer agent
agreements. See "Contracts with Companies Affiliated with FMR.") Other
expenses paid by the Portfolio include the Por tfolio's proportionate
share of insurance premiums and Investment Company Institute dues, and
costs of registering shares under federal and state securities laws.
The Portfolio is also liable for such nonrecurring expenses as may arise,
including costs of litigation to which the Portfolio is a party, and any
obligation they may have to indemnify the officers and Trustees with
respect to such litigation.
For these services, the Portfolio pays FMR a monthly management fee at
the annual rate of .50% of its average net assets that Portfolio
throughout the month. For the fiscal years ended July 31, 1993, 1992 and
1991, FMR received fees amounting to $14,208,606, $10,958,456, and
$8,076,247, respectively from the Portfolio.
Effective October 14, 1988, FMR voluntarily agreed to waive all or a
portion of its management fee or reimburse the Portfolio to the extent that
its aggregate operating expenses, including management fees, were in excess
of an annual rate of .65% of average net assets. FMR retains the ability
to be repaid for these expense reimbursements in the amount that expenses
fall below the limit prior to the end of the fiscal year.
To comply with the California Code of Regulations, FMR will reimburse
the Portfolio if and to the extent that the Portfolio's aggregate
annual operating expenses exceed specified percentages of its average net
assets. The applicable percentages are 2 1/2% of the first $30 million, 2%
of the next $70 million, and 1 1/2% of average net assets in excess of $100
million. When calculating a Portfolio's expenses for purposes of this
regulation, the Portfolio may exclude interest, taxes, brokerage
commissions, and e xtraordinary expenses, as well as a portion of its
distribution plan expenses.
SUB-ADVISER. 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 Portfolio.
Under the sub-advisory agreements, FMR pays FMR Texas fees equal to 50% of
the management fee retained by FMR under its management contract with
the Portfolio, after payments by FMR pursuant to the Portfolio's
Distribution and Service plan. 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 years ended July 31 1993, 1992,
and 1991 FMR paid FMR Texas fees that amounted to $2,400,702,
$1,934,302, and $1,483,943 for the Portfolio.
THE DISTRIBUTOR
FIIOC is the transfer, dividend-paying and shareholder servicing agent
for the Class B Shares and maintains Class B shar eholder records.
FIIOC receives a per account fee and a monetary transaction fee of $65 and
$14, respectively, or $60 and $12, respectively, depending on the nature of
services provided. Fees for institutional retirement plan accounts, if
any, would be based on the NAV of all such accounts in the Portfolio.
In addition, FIIOC pays out-of-pocket expenses associated with providing
transfer agent services, and bears the expense of typesetting, printing and
mailing Prospectuses, Statements of Additional Information, reports,
notices and statements to shareholders.
Fidelity Service Company (Service) performs the calculations necessary
to determine the NAV and dividends of Class B Shares, and maintains the
portfolio's accounting records. Prior to July 1, 1991, the annual fee for
these pricing and bookkeeping services was based on two schedules, one
pertaining to the Portfolio's average net assets, and one pertaining to the
type and number of transactions the Portfolio made. The fee rates in
effect as of July 1, 1991 are based on the Portfolio's average net assets,
specifically .0175% for the first $500 million of average net assets and
.0075% for average net assets in excess of $500 million. The fee is
limited to a minimum of $20,000 and a maximum of $750,000 per year.
The Portfolio has a Distribution Agreement with Distributors, a wholly
owned subsidiary of FMR, organized as a Massachusetts corporation on July
18, 1960. Distributors is a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The Distribution Agreement calls for Distributors to use all
reason able efforts, consistent with its other business, to secure
purchasers for shares of the Portfolio, which are offered continuously.
Promotional and administrative expenses in connection with the offer
and sale of shares are paid by FMR.
DISTRIBUTION AND SERVICE PLANS
The Trustees of the Fund on behalf of the Class B Shares have adopted a
Distribution and Service Plan (the Plan) under Rule 12b-1 of the 1940 Act
(the Rule). As required by the Rule, the Trustees carefully considered all
pertinent factors relating to the implementation of the plan prior to its
approval and have determined that there is a reasonalbe likelihood that the
Plan will benefit Class B and its shareholders. In particular the Trustees
voted that payments under the Plan may provide additional incentives to
promote the sale of Class B shares, which may result in additional sales of
Class B shares and an increase in the Portfolio's assets.
The Plan allows FMR to make payments to Distributors for selling Class B
shares. The Plan authorizes FMR to make such payments from its management
fees, its past profits or any other source available to it; provided that
such payments cannot exceed the amount of the Portfolio's management fee.
The maximum amount payable to Distributors as determined by the Board of
Trustees, is currently .38% of the average net assets of Class B. The
percentage amount payable varies according to the amount paid by FMR to
third parties pursuant to the distribution and Service Plan for the Initial
Shares and shares of Daily Tax-Exempt Money Fund, another fund advised by
FMR.
Pursuant to the Plan, Class B is authorized to pay Distributors a
monthly distribution fee at an annual rate of .75% of Class B's average
daily net assets. FMR may make payments to Distributors out of its
management fee at an annualized rate of up to .38% of Class B's average
daily net assets. The distribution fee paid by FMR for Class B Shares will
be identical to the amount paid by FMR for Initial Shares and shares of
Daily Tax-Exempt Money Fund. The difference between the portion of the
distribution fee paid by FMR and .75% will be paid by the Class B shares.
The total distribution fee paid by Class B will be .75% of its average
daily net assets.
Class B also pays investment professionals a service fee at an annual
rate of .25% of its average daily net assets for personal service and/or
the maintenance of shareholder accounts.
The Glass-Steagall Act generally prohibits federally and state
chartered or supervised banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of
this prohibition under the Glass-Steagall Act has not been clearly defined
in Distributors' opinion it should not prohibit banks form being paid for
shareholder servicing and recordkeeping functions as a Qualified Recipient.
Distributors will engage banks as Qualified Recipients 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 might occur, including
possible termination of any automatic investment or redemption or other
services then being provided by the bank. It is not expected that
shareholders would suffer any adverse financial consequences as a result of
any of these occur rences. The Portfolio may execute portfolio
transactions with and purchase securities issued by depository institutions
that receive payments under the plan. No preference for the instruments of
such depository institutions will be shown in the selection of
inves tments. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and banks
and financial institutions may be required to register as dealers pursuant
to state law.
DESCRIPTION OF THE FUND
TRUST ORGANIZATION. U.S. Treasury Portfolio is a series of Daily Money
Fund, an open-end management investment company organized as a Delaware
business trust on September 29, 1993. The Portfolio acquired all of the
assets of U.S. Treasury Portf olio, a Portfolio of Daily Money Fund, a
Massachusetts business trust. The Declaration of Trust permits the
Trustees to create additional series (or portfolios). Currently, there are
six Portfolios of the Fund: U.S. Treasury Portfolio (which offers Initial
Shares and Class B Shares); Money Market Portfolio; Fidelity U.S. Treasury
Income Portfolio; and Capital Reserves: Money Market Portfolio, U.S.
Government Portfolio and Municipal Money Market Portfolio.
In the event that FMR ceases to be the investment adviser to the Portfolio,
the right of the Portfolio to use the identifying name "Fidelity" may be
withdrawn. There is a remote possibility that one Portfolio might become
liable for any misstatement in its prospectus or statement of additional
information about another Portfolio.
The assets of the Fund received for the issue or sale of shares of each
Portfolio and all income, earnings, profits, and proceeds thereof, subject
only to the rights of creditors, are especially allocated to such
Portfolio, and constitute the underlying assets of such Portfolio. The
underlying assets of each Portfolio are segregated on the books of account,
and are to be charged with the liabilities of such Portfolio and with a
share of the general expenses of the Fund. Expenses with respect to the
Fund are to be allocated in proportion to the asset value of the respective
Portfolios, except where allocations of direct expenses can otherwise be
fairly made. The officers of the Fund, subject to the general
supervision of the Board of Trustees, have the power to determine which
expenses are allocable to a given Portfolio, or which are general or
allocable to all of the Portfolios. In the event of the dissolution or
liquidation of the Fund, shareholders of each Portfolio are entitled to
receive as a class the underlying assets of such Portfolio available for
distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The Fund 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 Fund and
requires that a disclaimer be given in each contract entered into or
executed by the Fund or the Trustees. The Trust Instrument provides for
indemnification out of the Portfolio's property of any shareholders held
personally liable for the obligations of the Portfolio. The Trust
Instrument also provides that the portfolio shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation
of the Portfolio and satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shar eholder
liability is limited to circumstances in which Delaware law does not apply,
no contractual limitation of liability was in ef fect, and the Portfolio
is unable to meet its obligations. FMR believes that, in view of the
above, the risk of personal liability to shareholders is remote.
Claims asserted against Initial Shares may subject holders of Class B
Shares to certain liabilites and claims asserted against Class B Shares
may subject holders of Initial Shares to certain liabilities.
The Trust Instrument further provides that the Trustees, if they have
exercised reasonable care, shall not be personally liable to any person
other than the Fund or its shareholders; moreover, the Trustees shall not
be liable for any conduct whatsoever, provided that a Trustee is not
protected against any liability to which he would otherwise be subject of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office.
VOTING RIGHTS. The Portfolio's capital consists of shares of beneficial
interest. Class B Shares have no preemptive or conve rsion rights; the
voting and dividend rights, the right of redemption, and the privilege of
exchange are described in the Prospectus. Class B Shares are fully paid
and nonassessable, except as set forth under the heading "Shareholder and
Trustee Liability" above. Shareholders representing 10% or more of the
Funds Portfolio or a class may, as set forth in the Trust Instrument, call
meetings of the Fund, Portfolio or class for any purpose related to the
Fund or Portfolio, or class as the case may be, including, in the case of
a meeting of the entire Fund, the purpose of voting on removal of one
or more Trustees.
The Fund or the Portfolio may be terminated upon the sale of its assets
to another open-end management investment company, or upon liquidation
and distribution of its assets to, or 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
Fund or the Portfolio; however, the Trustees may, without prior shareholder
approval, change the form of organization of the Fund by merger,
consolidation, or incorporation. If not so terminated or reorganized, the
Fund and its Portfolios will continue indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the Fund to merge or consolidate into one or more trusts,
partnerships, or corporations, or cause the Trust to be incorporated under
Delaware law, so long as the surviving entity is an open-end management
investment company that will succeed to or assume the Fund registration
statement. The Portfolio may also invest all of its assets in another
investment company.
On March 15, 1994, the following owned of record or beneficially 5% or
more of the outstanding shares of Initial Class Shares: Texas Commerce
Bank, N.A., Houston, Texas, owned 22.73%; and Bank of America, San
Francisco, CA owned 25.31%.
A shareholder owning of record of beneficially more than 25% of the
Portfolio's outstanding shares may be considered a controlling person.
Their votes could have a more significant effect on matters presented at a
shareholders meeting than votes of other shareholders.
CUSTODIAN. Morgan Guaranty Trust Company of New York, 60 Wall Street, New
York, NY, 10260 is custodian of the assets of the Portfolio. The custodian
is responsible for the safekeeping of the Fund's assets and the appointment
of subcustodian banks and clearing agencies. The custodian takes no part
in determining the investment policies of the Portfolio or in deciding
which securities are purchased or sold by the Portfolio. The Portfolio
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 Fund's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and
personal and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other Fund relationships.
AUDITOR. Coopers & Lybrand 1999 Bryan Street, Dallas, TX 75201, serves
as the Fund's independent accountant. The auditor examines financial
statements for the funds and provides other audit, tax, and related
services.
