DAILY MONEY FUND/MA/, 485BPOS, 1994-09-19

DAILY MONEY FUND/MA/
485BPOS, 1994-09-19

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO 2-77909)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 27 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
Daily Money Fund
(Exact Name of Registrant as Specified in Declaration of Trust)
82 Devonshire St., Boston, MA 02109
(Address Of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code (617) 570-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, MA 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) Immediately upon filing pursuant to paragraph (b) of Rule 485
(X) On September 19, 1994 pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a) of Rule 485
( ) On ( ) pursuant to paragraph (a) of Rule 485
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the notice required by
such rule on or about September 30, 1994.

DAILY MONEY FUND:
CAPITAL RESERVES: MONEY MARKET PORTFOLIO,
CAPITAL RESERVES: U.S. GOVERNMENT PORTFOLIO
CAPITAL RESERVES: MUNICIPAL MONEY MARKET PORTFOLIO
CROSS REFERENCE SHEET
Form N-1A Item Number
Part A Prospectus Caption
1............................... Cover Page
2............................... Summary of Portfolio Expenses
3a,b............................ The Portfolio's Financial History
c.............................. Performance
4a(i)........................... The Portfolios and the Fidelity
Organization
a(ii),b,c...................... Investment Objectives; Investment
Policies, Risks, and Limitations; Appendix
5a.............................. The Portfolios and the Fidelity
Organization
5A.............................. *
b,c,d,e,f........................ Management, Distribution and Service
Fees
g.............................. Portfolio Transactions
6a(i)........................... The Portfolios and the Fidelity
Organization
a(ii).......................... How to Invest, Exchange and Redeem
a(iii)......................... The Portfolios and the Fidelity
Organization
b,c,d.......................... *
e.............................. Cover Page; How to Invest, Exchange and
Redeem
f,g............................ How to Invest, Exchange and Redeem;
Distributions and Taxes
7a.............................. Management, Distribution and Service Fees
b(i,ii)........................ How to Invest, Exchange and Redeem
b(iii,iv)...................... *
b(v)........................... How to Invest, Exchange and Redeem
c.............................. *
d.............................. How to Invest, Exchange and Redeem
e,f(i,ii)...................... Management, Distribution and Service Fees
f(iii)......................... *
8............................... How to Invest, Exchange and Redeem
9............................... *

*Not Applicable

Part B Statement of Additional Information
10,11........................... Cover Page
12.............................. FMR; Description of the Fund
13a,b,c......................... Investment Policies and Limitations
d............................. *
14a,b........................... Trustees and Officers
c............................. *
15a............................. *
b............................. Description of the Fund
c............................. *
16a(i,ii)....................... FMR; Trustees and Officers
a(iii),b,c,d.................. Management Contracts; Contracts with
Companies Affiliated with FMR
e............................. Portfolio Transactions
f............................. Distribution and Service Plans
g............................. *
h............................. Description of the Fund
i............................. Contracts with Companies Affiliated with
FMR
17a............................. Portfolio Transactions
b............................. *
c,d........................... Portfolio Transactions
e............................. *
18a............................. Description of the Fund
b............................. *
19a............................. Distribution and Service Plans
b............................. Valuation of Portfolio Securities
20.............................. Distributions and Taxes
21a(i,ii)....................... Contracts with Companies Affiliated with
FMR
a(iii),b,c.................... *
22.............................. Performance
23.............................. The Portfolios' Annual Reports for the
fiscal year ended July 31, 1994 are filed as part of the prospectus.

*Not Applicable

CAPITAL RESERVES:
Money Market Portfolio
U.S. Government Portfolio 82 DEVONSHIRE STREET
Municipal Money Market Portfolio BOSTON, MASSACHUSETTS, 02109
PROSPECTUS
Capital Reserves: Money Market Portfolio (Money Market Portfolio), Capital
Reserves: U.S. Government Portfolio (U.S. Government Portfolio) and Capital
Reserves: Municipal Money Market Portfolio (Municipal Money Market
Portfolio) (each, a Portfolio), portfolios of Daily Money Fund (the Fund),
each offers individual and institutional investors a convenient and
economical way to invest in professionally managed portfolios of money
market instruments. Money Market Portfolio and U.S. Government Portfolio
each seeks as high a level of current income as is consistent with the
preservation of capital and liquidity by investing in money market
instruments within the prescribed standards. Municipal Money Market
Portfolio is designed to provide investors with as high a level of current
income, exempt from federal income taxes, as is consistent with a
diversified portfolio of high-quality short-term municipal obligations
selected for preservation of capital and liquidity.
AN INVESTMENT IN EACH PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT A 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. The Annual Report is attached.
A Statement of Additional Information (dated September 26, 1994) has been
filed with the Securities and Exchange Commission and is incorporated
herein by reference. This free Statement of Additional Information is
available upon request from National Financial Services Corporation (the
Distributor), 82 Devonshire Street, Boston, Massachusetts 02109. To obtain
an additional copy of this document please call the appropriate
number below.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE
NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
For further information or assistance in opening an account, please call:
NATIONWIDE 800-843-3001
IN MASSACHUSETTS, CALL COLLECT 617-330-0586
If you are investing through another institution, contact that institution
directly.
TABLE OF CONTENTS
Summary of Portfolio Expenses
Financial History
Investment Objectives
Investment Policies, Risks and Limitations
Portfolio Transactions
Performance
Distributions and Taxes
How To Invest, Exchange and Redeem
The Portfolios and the Fidelity Organization
Management, Distribution and Service Fees
Appendix
Financial Statements 1 9
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.
SUMMARY OF PORTFOLIO EXPENSES
The expense summary format below was developed for use by all mutual funds
to help investors make their investment decisions. Of course, investors
should consider this expense information along with other important
information, including each Portfolio's investment objective and its past
performance. There are no transaction expenses associated with purchases,
exchanges, or redemptions of each Portfolio's shares.
A. ANNUAL OPERATING EXPENSES
(as a percentage of average net assets):

<TABLE>
<CAPTION>
<S> <C> <C> <C>
MONEY U.S. MUNICIP
MARKET GOVERN AL
PORTFOLI MENT MONEY
O PORTFOLI MARKET
O PORTFOLIO

Management Fee .37 %* .46 % * .45 % *

12b-1 Fee .35 % .35 % .35 %

Other Expenses .27 % .18 % .19 %

TOTAL FUND .99% .99% .99%
OPERATING EXPENSES

</TABLE>

*NET OF REIMBURSEMENT
B. EXAMPLE: An investor would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2) full redemption at the
end of each time period:
MONEY U.S. MUNICIP
MARKET GOVERN AL
PORTFOLIO MENT MONEY
PORTFOLIO MARKET
PORTFOLIO

1 Year $ 10 $ 10 $ 10

3 Years $ 32 $ 32 $ 32

5 Years $ 55 $ 55 $ 55

10 Years $ 121 $ 121 $ 121

EXPLANATION OF TABLE
The purpose of the table above is to assist investors in understanding the
various costs and expenses that an investor in a Portfolio would bear
directly or indirectly.
A. ANNUAL OPERATING EXPENSES are based on each Portfolio's historical
expenses after reimbursement. Management fees are paid by each Portfolio to
Fidelity Management & Research Company (FMR) for managing its investments
and business affairs. Each Portfolio has adopted a Distribution and Service
Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 (1940
Act). 12b-1 fees are paid by the Portfolios to the Distributor for services
and expenses in connection with the distribution of Portfolio 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 12b-1 payments. Each Portfolio
incurs other expenses for maintaining shareholder records, furnishing
shareholder statements and reports, and other services. Management fees,
12b-1 fees and other expenses are reflected in each Portfolio's share price
and are not charged directly to individual accounts. FMR will voluntarily
reimburse each Portfolio's expenses to the extent that total Portfolio
operating expenses, including management fees (but excluding interest,
taxes, brokerage commissions and extraordinary expenses), exceed an annual
rate of .99% of average net assets. If FMR were not reimbursing each
Portfolio, management fees and total operating expenses would have been
.50 % and 1.12 % for Money Market Portfolio, .50 % and
1.03 % for U.S. Government Portfolio, and .50 % and
1.04 % for Municipal Money Market Portfolio. Please refer to
"Management, Distribution and Service Fees" on page for further
information.
B. EXAMPLE: The above hypothetical example illustrates the expenses
associated with a $1,000 investment in each Portfolio over periods of 1, 3,
5, and 10 years, based on the expenses in the table and an assumed annual
rate of return of 5%. THE RETURN OF 5% AND EXPENSES SHOULD NOT BE
CONSIDERED INDICATIONS OF ACTUAL OR EXPECTED PORTFOLIO PERFORMANCE, BOTH OF
WHICH MAY VARY.
FINANCIAL HISTORY
FINANCIAL HIGHLIGHTS
The tables that follow are included in each Portfolio's Annual Report and
have been audited by Coopers & Lybrand L.L.P. , independent
accountants. Their report on the financial statements and financial
highlights is included in the Annual Report. The financial statements and
financial highlights are part of this prospectus. On September 29, 1993
each Portfolio was converted from a separate series of a
Massachusetts business trust to a separate series of a Delaware
business trust and each adopted the audited financial statements of its
predecessor portfolio as its own.
MONEY MARKET PORTFOLIO

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Years Ended July 31, October 23, 1990
(Commencement
of Operations) to
July 31,

1994 1993 1992 1991

SELECTED PER-SHARE DATA

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

Income from Investment Operations .027 .025 .041 .047
Net interest income

Less Distributions (.027) (.025) (.041) (.047)
From net interest income

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

TOTAL RETURN B 2.72% 2.57% 4.13% 4.79%

Ratios and Supplemental Data

Net assets, end of period (000 omitted) $ 680,149 $ 601,498 $ 354,189 $ 108,991

Ratio of expenses to average net assets C .98% .95% .82% .83%A

Ratio of expenses to average net assets before
expense reductions C 1.12% 1.14% 1.17% 1.25%A

Ratio of net interest income to average net assets 2.70% 2.52% 3.81% 5.71%A

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Years Ended July 31, October 23, 1990
(Commencement
of Operations) to
July 31,

1994 1993 1992 1991

SELECTED PER-SHARE DATA

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

Income from Investment Operations .025 .024 .041 .046
Net interest income

Less Distributions (.025) (.024) (.041) (.046)
From net interest income

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

TOTAL RETURN B 2.52% 2.40% 4.15% 4.66%

Ratios and Supplemental Data

Net assets, end of period (000 omitted) $ 306,261 $ 264,483 $ 308,542 $ 80,762

Ratio of expenses to average net assets C .98% .95% .65% .70%A

Ratio of expenses to average net assets before
expense reductions C 1.03% 1.07% 1.14% 1.27%A

Ratio of net interest income to average
net assets 2.50% 2.39% 3.82% 5.65%A

</TABLE>

MUNICIPAL MONEY MARKET PORTFOLIO

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Year Ended July 31, November 29, 1990
(Commencement
of Operations) to
July 31,

1994 1993 1992 1991

SELECTED PER-SHARE DATA

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

Income from Investment Operations .018 .019 .031 .028
Net interest income

Less Distributions (.018) (.019) (.031) (.028)
From net interest income

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

TOTAL RETURN B 1.80% 1.96% 3.14% 2.82%

Ratios and Supplemental Data

Net assets, end of period (000 omitted) $ 116,497 $ 116,274 $ 68,497 $ 19,578

Ratio of expenses to average net assets C .98% .95% .95% .95%A

Ratio of expenses to average net assets before
expense reductions C 1.04% 1.23% 1.40% 2.63%A

Ratio of net interest income to average net
assets 1.78% 1.92% 2.89% 3.97%A

</TABLE>

A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
C SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.
INVESTMENT OBJECTIVES
MONEY MARKET PORTFOLIO'S AND U.S. GOVERNMENT 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.
MUNICIPAL MONEY MARKET PORTFOLIO'S investment objective is to provide
investors with as high a level of current income, exempt from federal
income taxes, as is consistent with a portfolio of high quality, short-term
municipal obligations selected on the basis of preservation of capital and
liquidity.
A Portfolio may not achieve its objective, but it will follow the
investment style described in the following paragraphs. Except for each
Portfolio's investment objective and the investment limitations identified
as fundamental, each Portfolio's investment policies are not fundamental
policies and may be changed without shareholder approval.
INVESTMENT POLICIES, RISKS AND LIMITATIONS
MONEY MARKET PORTFOLIO invests in a broad range of short-term, U.S.
dollar-denominated obligations of domestic and foreign issuers.
The Portfolio will purchase only debt obligations that are of high quality.
These instruments include:
(solid bullet) Obligations of foreign and domestic banks, savings and loan
associations, consumer and industrial finance companies, securities
brokerage companies, real estate-related companies, leasing companies, and
a variety of insurance-related firms such as multi-line, property and
casualty, and life insurance companies. These obligations may include time
deposits, certificates of deposit, bankers' acceptances, and commercial
paper.
(solid bullet) Obligations issued or guaranteed as to principal and
interest by governments or their agencies or instrumentalities.
(solid bullet) Other short-term money market obligations, including
commercial paper, notes, and bonds.
Money Market Portfolio invests in U.S. dollar-denominated obligations of
U.S. banks and foreign branches of U.S. banks, foreign banks and foreign
branches of foreign banks (referred to as Eurodollars), and U.S. branches
and agencies of foreign banks (referred to as Yankee dollars). Eurodollar
and Yankee dollar investments involve risks that are different from
investments in domestic banks. These risks may include unfavorable
political and economic developments and possible withholding taxes, seizure
of foreign deposits, currency controls, interest limitations, or other
governmental restrictions that might affect the payment of principal or
interest on securities owned by the Portfolio. Additionally, there may be
less public information available about foreign banks and their branches
and agencies. Although FMR carefully considers these factors when making
investments, the Portfolio does not limit the amount of its assets that can
be invested in any type of instrument or in any foreign country.
Because Money Market Portfolio concentrates more than 25% of its total
assets in the financial services industry, its performance may be affected
by conditions affecting banks and other financial services companies.
Companies in the financial services industry are subject to various risks
related to that industry, such as governmental regulations, changes in
interest rates, and exposure on loans, including loans to foreign
borrowers. Investments in the financial services industry may include
obligations of foreign and domestic banks, savings and loan associations,
consumer and industrial finance companies, securities brokerage companies,
leasing companies, and a variety of firms in the insurance field. These
obligations include time deposits, certificates of deposit, bankers'
acceptances, and commercial paper.
U.S. GOVERNMENT PORTFOLIO. As a non-fundamental policy, the Portfolio
intends to invest 100% of its total assets in U.S. Treasury bills, notes,
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. The
Portfolio will invest only in securities of U.S. government agencies or
instrumentalities that are backed by the full faith and credit of the
United States.
Money Market Portfolio and U.S. Government Portfolio may invest in illiquid
securities, may purchase zero coupon bonds and purchase or sell securities
on a delayed-delivery basis, and may engage in repurchase agreements and
reverse repurchase agreements. Money Market Portfolio may also purchase
restricted securities. See the Appendix for further discussion of each
Portfolio's investments.
MUNICIPAL MONEY MARKET PORTFOLIO. It is the Portfolio's fundamental policy
that at least 80% of its income will be exempt from federal income tax
under normal conditions. The Portfolio also maintains the ability under
normal conditions to invest as much as 100% of its assets in municipal
securities issued to finance private activities, whose interest is a
preference item for purposes of the federal alternative minimum tax (AMT).
Such private activity securities might include industrial development bonds
and bonds issued to finance such projects as solid waste disposal
facilities, student loans, or water and sewerage projects. Thus, if you are
subject to the AMT, a portion of your income may not be exempt from federal
income tax (see "Distributions and Taxes" on page ).
Municipal Money Market Portfolio may invest up to 25% of its total assets
in a single issuer's securities. The Portfolio may invest any portion of
its assets in industrial revenue bonds (IRBs) backed by private issuers,
and may invest up to 25% of its total assets in IRBs related to a single
industry. The Portfolio may also invest more than 25% of its total assets
in securities whose revenue sources are from similar types of projects,
e.g., education, electric utilities, health care, housing, transportation,
or water, sewer, and gas utilities. Economic, business or political
developments or changes may affect all securities of a similar type.
Therefore, developments affecting a single issuer or industry, or
securities financing similar types of projects, could have a significant
effect on the Portfolio's performance.
Municipal securities 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
securities 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. Some municipal securities are insured by private insurance
companies, while others may be supported by letters of credit furnished by
domestic or foreign banks. FMR monitors the financial condition of parties
(including insurance companies, banks, and corporations) upon whose
creditworthiness it relies in determining the credit quality of securities
the Portfolio may purchase.
Municipal Money Market Portfolio invests in high quality, short-term
municipal securities but also may invest in high-quality, long-term fixed,
variable, or floating rate instruments (including tender option bonds)
whose features give them interest rates, maturities, and prices similar to
short-term instruments. The Portfolio's investments in municipal securities
may include tax, revenue, or bond anticipation notes; tax-exempt commercial
paper; general obligation or revenue bonds (including municipal lease
obligations and resource recovery bonds); and zero coupon bonds. The
Portfolio may invest in illiquid securities, may buy or sell securities on
a when-issued or delayed-delivery basis, and may purchase restricted
securities. See the Appendix for further discussion of the Portfolio's
investments.
FMR normally invests the Portfolio's assets according to its investment
strategy and does not expect to invest in federally taxable obligations.
The Portfolio also reserves the right to hold a substantial amount of
uninvested cash or to invest more than normally permitted in federally
taxable obligations for temporary , defensive purposes.
QUALITY. Pursuant to procedures adopted by the Board of Trustees, Money
Market Portfolio and Municipal Money Market Portfolio may purchase only
high-quality securities that FMR believes present minimal credit risks. To
be considered high quality, a security must be a U.S. government
security ; rated in accordance with applicable rules in one of the
two highest categories for short-term securities by at least two nationally
recognized rating services (or by one, if only one rating service has rated
the security) ; or, if unrated, judged to be of equivalent quality by
FMR.
High-quality securities , other than U.S. government securities, are
divided into "first tier" and "second tier" securities. FIRST TIER
SECURITIES have received the highest rating (e.g., Standard & Poor's
A-1 rating) from at least two rating services (or one, if only one
has rated the security). SECOND TIER SECURITIES have received ratings
within the two highest categories (e.g., Standard & Poor's A-1 or
A-2) from at least two rating services (or one, if only one has rated the
security), but do not qualify as first tier securities. If a security has
been assigned different ratings by different rating services, at least two
rating services must have assigned the higher rating in order for FMR to
determine eligibility on the basis of that higher rating. Based on
procedures adopted by the Board of Trustees, FMR may determine that an
unrated security is of equivalent quality to a rated first or second tier
security.
Money Market Portfolio may not invest more than 5% of its total assets in
second tier securities. In addition, Money Market Portfolio may not invest
more than 1% of its total assets or $1 million (whichever is greater) in
the second tier securities of a single issuer.
MATURITY. Each Portfolio must limit its investments to securities
with remaining effective maturities of 397 days or less and must maintain a
dollar-weighted average maturity of 90 days or less.
Each Portfolio's ability to achieve its investment objective depends on the
quality and maturity of its investments. Although each 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, a 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 each Portfolio's principal investment limitations.
A complete listing is contained in the Statement of Additional Information.
1. Each 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 the same industry. Money
Market Portfolio will invest more than 25% of its total assets in the
financial services industry. These limitations do not apply to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities for any Portfolio and, for Municipal Money Market
Portfolio, to tax-exempt obligations issued or guaranteed by the U.S., a
state, or local government.
2 . (a) Each Portfolio may borrow money or engage in reverse
repurchase agreements for temporary or emergency purposes, but not in an
amount exceeding 33 1/3% of its total assets. (b) Each Portfolio may borrow
money from banks or from other funds advised by FMR or an affiliate. (c)
Each Portfolio will not purchase securities when borrowings (excluding
reverse repurchase agreements) exceed 5% of its total assets.
3 . Money Market Portfolio (a) may lend its portfolio securities to
broker-dealers and institutions but only when the loans are fully
collateralized; (b) may make loans to other funds advised by FMR and its
affiliates not to exceed 10% of its net assets; and (c) will limit these
loans to 33 1/3% of its total assets.
Except for the Portfolios' investment objectives, limitation 1 and
the 33 1/3% limitations on borrowings and loans, the Portfolios' policies
and limitations described in this Prospectus are not fundamental and may be
changed without shareholder approval. As a non-fundamental policy, each
Portfolio may not purchase a security if, as a result, more than 10% of its
net assets would be invested in illiquid investments. These limitations and
the policies discussed in "Investment Policies, Risks and
Limitations" are considered at the time of purchase; the sale of securities
is not required in the event of a subsequent change in circumstances.
PORTFOLIO TRANSACTIONS
Money market obligations are generally 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 amount of securities, including those of Fidelity's
other funds, broker-dealers are willing to work with the Portfolios on a
more favorable spread than would be possible for most individual investors.
Each Portfolio has authorized FMR to allocate transactions to some dealers
who help distribute the Portfolio's shares or shares of Fidelity's other
funds 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
Each Portfolio may quote its current yield, effective yield and total
return in advertising or in reports or other communications with
shareholders. All performance information is historical and is not intended
to indicate future performance.
Each Portfolio's current yield and effective yield calculations for the
seven-day period ended July 31, 1994 are shown below.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MONEY MARKET U.S. GOVERNMENT MUNICIPAL MONEY
PORTFOLIO PORTFOLIO MARKET PORTFOLIO

Current Effective Current Effective Current Effective
Yield Yield Yield Yield Yield Yield

3.63% 3.70% 3.32% 3.37% 2.13% 2.15%

</TABLE>

If FMR had not reimbursed each Portfolio during the period shown, the
current yields and effective yields, respectively, would have been 3.50%
and 3.56% (Money Market Portfolio); 3.28% and 3.33% (U.S. Government
Portfolio); and 2.08% and 2.10% (Municipal Money Market Portfolio).
The CURRENT YIELD refers to the income generated by an investment in a
Portfolio over a seven-day period expressed as an annual percentage rate.
The EFFECTIVE YIELD is calculated similarly, but assumes that the income
earned from the investment is reinvested.
The effective yield will be slightly higher than the current yield because
of the compounding effect on this assumed reinvestment. In addition to the
current yield, each Portfolio may quote yields in advertising based on any
historical seven-day period.
Municipal Money Market Portfolio also may quote TAX-EQUIVALENT YIELD, which
shows the taxable yield an investor would have to earn, before taxes, to
equal the Portfolio's tax-free yield. A tax - equivalent yield is
calculated by dividing the Portfolio's tax-exempt yield by the result of
one minus a stated federal and/or state tax rate.
Each Portfolio's TOTAL RETURN is based on the overall dollar or percentage
change in value of a hypothetical investment in a Portfolio assuming
dividend distributions are reinvested. A CUMULATIVE TOTAL RETURN reflects a
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 a Portfolio's performance, investors should
recognize that they are not the same as actual year-by-year results.
DISTRIBUTIONS AND TAXES
INCOME DIVIDENDS. Income dividends normally are declared daily and paid
monthly. Each Portfolio intends to distribute substantially all of its net
investment income and capital gains to shareholders each year. Any net
realized capital gains normally are declared in December.
FEDERAL TAXES - MONEY MARKET PORTFOLIO AND U.S. GOVERNMENT PORTFOLIO.
Distributions from the Portfolios' income and short-term capital gains are
taxable as ordinary income. The Portfolios' 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 Portfolios will send you a tax
statement by January 31 showing the tax status of the distributions you
received in the past year, and will file a copy with the Internal Revenue
Service (IRS).
STATE AND LOCAL TAXES. Mutual fund dividends from U.S. government
securities generally are free from state and local income taxes. However,
particular states may limit this benefit, and some types of securities,
such as repurchase agreements and some agency-backed securities, may not
qualify for this benefit. Some states may impose intangible property taxes.
FEDERAL TAXES - MUNICIPAL MONEY MARKET PORTFOLIO. Although dividends
derived from Municipal Money Market Portfolio's tax-exempt income are not
subject to federal income tax, shareholders must report these dividends to
the IRS. Exempt-interest dividends are included in income for purposes of
computing the portion of Social Security and railroad retirement benefits
that may be subject to federal tax. Shareholders who are subject to the
federal AMT must include the portion of the Portfolio's exempt-interest
dividends derived from "private activity" bonds as a tax preference item in
their AMT computation.
If the Portfolio earns taxable income or capital gains from its
investments, these amounts will be designated as taxable distributions.
Dividends from taxable investment income and short-term capital gains are
taxable as ordinary income. Gains on the sale of tax-free bonds result in a
taxable distribution. Short-term capital gains and a portion of the gain on
bonds purchased at a discount are taxed as dividends. 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 a tax statement showing the amount of tax-exempt distributions and
AMT income, if any, for the past calendar year, and will send a tax
statement by January 31 if the Portfolio makes any taxable distributions.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each Portfolio and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal tax, shareholders may be subject to
state or local taxes on their investments. Investors should consult their
tax advisors for details and up-to-date information to determine whether a
Portfolio is suitable to their particular tax situation.
When an account application is signed, investors will be asked to certify
that their Social Security or taxpayer identification number is correct and
that they are not subject to 31% backup withholding for failing to report
income to the IRS. If an investor violates IRS regulations, the IRS can
require a Portfolio to withhold 31% of the investor's taxable distributions
and redemptions.
HOW TO INVEST, EXCHANGE AND REDEEM
Shares of each Portfolio are offered continuously and may be purchased at
the net asset value per share (NAV) next determined after an order is
received and accepted. The Portfolios do not impose any sales charges in
connection with purchases of their shares, although institutions may charge
their clients fees in connection with purchases and sales for their
clients' accounts. Each Portfolio may discontinue offering its shares
generally or in any particular state without notice to shareholders.
IF YOU ARE INVESTING THROUGH A SECURITIES DEALER OR BANK (FINANCIAL
INSTITUTION), CONTACT THAT FINANCIAL INSTITUTION DIRECTLY.
If you are purchasing shares of the Portfolios through a program of
services offered by a Financial Institution, you should read the program
materials in conjunction with this Prospectus. Certain features of the
Portfolios, such as the minimum for subsequent investment amounts and
exchanges with certain Fidelity funds, may be modified in these programs
and administrative charges (in addition to payments the Financial
Institution may receive pursuant to a Portfolio's Distribution and Service
Plan) may be imposed for the services rendered. For further information,
including copies of prospectuses, statements of additional information and
applications, contact your Financial Institution or the Portfolio directly.
SHARE PRICE. Fidelity Service Co. (Service) calculates NAV for Money Market
Portfolio and U.S. Government Portfolio at 2:00 p.m. and 4:00 p.m. Eastern
time and for Municipal Money Market Portfolio at 12:00 noon and 4:00 p.m.
Eastern time each day the applicable Portfolio is open for business (see
"Holiday Schedule" on page ). The NAV of each Portfolio is determined by
adding the amortized cost valuation and other assets of the Portfolio,
deducting its actual and accrued liabilities, and dividing by the number of
Portfolio shares outstanding. Each Portfolio values its portfolio
securities on the basis of amortized cost. Shares purchased at the 2:00
p.m. price (or 12:00 noon price for Municipal Money Market Portfolio) earn
the income dividend declared that day. Shares purchased at the 4:00 p.m.
price (including all purchases by check) begin to earn income dividends on
the following business day.
MINIMUM INVESTMENT AND ACCOUNT BALANCE. The minimum initial investment to
establish a new account in each Portfolio is $1,000. Subsequent investments
must be at least $250. If you want to keep your account open, leave
$500 in it. If your account balance falls below $500 due to redemption,
your account may be closed and the proceeds mailed to you at the record
address. You will be given 30 days' notice that your account will be closed
unless you make an additional investment to increase your account balance
to the $500 minimum.
HOW TO INVEST
Unless investors already have a Fidelity mutual fund account, they must
complete and sign the application.
INVESTING BY CHECK. Investors or their Financial Institution must send a
check payable to Capital Reserves (name of Portfolio), together with a
completed application to:
Capital Reserves
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
Checks must be drawn on a U.S. bank.
INVESTING BY MAIL. To make additional investments directly, mail a check
with the investor's account number to the address above. If an investor
makes a purchase with more than one check, each check must have a value of
at least $50 and the minimum investment requirement still applies. Each
Portfolio reserves the right to limit the number of checks processed at one
time. If a check does not clear, the investor's purchase will be canceled
and the investor could be liable for any losses or fees incurred.
INVESTING BY WIRE. An investor may purchase shares of each Portfolio by
wire. For wiring information and instructions, investors should call the
institution through which they trade, or Client Administration at
1-800-843-3001. To receive same-day acceptance of the investment, investors
must telephone Institutional Trading at 1-800-343-6310 between 8:30 a.m.
and 2:00 p.m. (or 12:00 noon for Municipal Money Market Portfolio) Eastern
time on days a Portfolio is open for business to advise them of the
wire and to place the trade.
Investors are urged to initiate the purchase of shares as early in the day
as possible and to provide advance notice on large transactions. If
Institutional Trading is not advised of the order prior to 2:00 p.m. (or
12:00 noon for Municipal Money Market Portfolio) Eastern time, or if
clearing house funds are transferred via the Bank Wire System, the order
will be accepted on the business day following the day of transfer and
shares will begin earning dividends on that day. There is no fee imposed by
the Portfolios for wire purchases. However, banks may impose such a fee.
HOW TO EXCHANGE
An exchange is a convenient way to buy shares of a Portfolio or other
Fidelity funds. The Fidelity family of funds has a variety of investment
objectives. You may exchange shares of each Portfolio for shares of other
Fidelity funds that are registered in your state (subject to the minimum
initial investment requirement and the terms of the program of services
offered by your Financial Institution). Investors may only exchange between
accounts that are registered in the same name, address, and taxpayer
identification number. Investors should 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
funds.
The Portfolios reserve the right at any time without prior notice to refuse
exchange purchases by any person or group if, in FMR's judgment, a
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.
TO EXCHANGE BY TELEPHONE. Exchanges may be requested by calling
Institutional Trading:
NATIONWIDE 800-343-6310
IN MASSACHUSETTS 800-462-2603
OR 617-439-0270
TO EXCHANGE BY MAIL. Written requests for exchanges should include the
name, the investor's account number, number of shares to be
redeemed, and the name of the fund whose shares are being purchased. The
letter must be signed by a person authorized to act on the account. Letters
should be sent to:
Capital Reserves
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
RESTRICTIONS. Currently, there is no limit on the number of exchanges out
of each Portfolio, nor are there any administrative or redemption fees
applicable to exchanges out of the Portfolios. However, other funds may
restrict or limit exchanges, and may impose administrative fees of up to
$7.50 and redemption fees of up to 1.5% on exchanges. Check each fund's
prospectus for details.
TAXES. Each exchange actually represents the sale of shares of one fund or
portfolio and the purchase of shares in another, which may produce a gain
or loss for tax purposes.
Shares will be redeemed at the next determined NAV following receipt of the
exchange order. Shares of the fund to be acquired will be purchased at its
next determined NAV after redemption proceeds are made available. Investors
will earn dividends in the acquired fund in accordance with that fund's
customary policy, normally on the day the exchange request is received.
Investors should note that under certain circumstances, a Portfolio may
take up to seven days to make redemption proceeds available for the
exchange purchase of shares of another fund.
HOW TO REDEEM
Investors may redeem all or a portion of their shares on any business day.
Shares will be redeemed at the next NAV calculated after the Portfolio has
received and accepted a redemption request. If an account is closed by an
investor, any accrued dividends will be paid at the beginning of the
following month. A Portfolio may hold payment until it is reasonably
satisfied that investments made by check have been collected (which can
take up to seven days). Shares redeemed at the 2:00 p.m. price (or 12:00
noon price for Municipal Money Market Portfolio) do not receive the
dividend declared on the day of redemption. Shares redeemed at the 4:00
p.m. price do receive the dividends declared on the day of redemption.
REDEMPTION REQUESTS BY CHECK (MINIMUM $500):
(solid bullet) An investor must have applied for the checkwriting feature
on the account.
(solid bullet) An investor may write any number of checks.
(solid bullet) If the amount of a check is greater than the value of the
account, the check will be returned and the investor may be subject to
extra charges.
Redemption Requests By Wire may be made by calling Institutional Trading:
NATIONWIDE 800-343-6310
IN MASSACHUSETTS 800-462-2603
OR 617-439-0270
An investor must apply for the wire feature on the account application.
Institutional Trading will then notify the investor that this feature is
active and wire redemptions may then be made by calling Institutional
Trading during trading hours.
If telephone instructions are received before 2:00 p.m. (or 12:00 noon for
Municipal Money Market Portfolio) Eastern time, proceeds of the redemption
will be wired in federal funds on the same day to the client's bank account
designated on the application. If instructions are received after 2:00 p.m.
(or 12:00 noon for Municipal Money Market Portfolio) and before 4:00 p.m.
Eastern time, redemption of shares will be processed at 4:00 p.m. Eastern
time and proceeds will be wired on the next business day.
A shareholder 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:
Fidelity Investments Institutional Operations Company (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. A letter of instruction is required,
specifying the name of the Portfolio, the number of shares to be redeemed,
the investor's name and account number, and the additional requirements
listed below that apply to the particular account.
TYPE OF REGISTRATION REQUIREMENTS

Individual, Joint Tenants, Letter of instruction signed
Sole Proprietorship, by all person(s) required to
Custodial (Uniform Gifts sign for the account
or Transfers to Minors exactly as it is registered,
Act), General Partners
accompanied by signature

guarantee(s).
Corporations, Letter of instruction and a
Associations corporate resolution,
signed by person(s)
required to sign for the
account accompanied by
signature guarantee(s).

Trusts A letter of instruction
signed by the Trustee(s)
with signature
guarantee(s). (If the
Trustee's name is not
registered on the account,
also provide a copy of the
trust document, certified
within the last 60 days.)

An investor who does not fall into any of these registration categories
(i.e., executors, administrators, conservators, guardians) should call
Institutional Trading for further instructions.
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 a
Portfolio, it may take up to seven (7) days to pay an investor. Also, when
the New York Stock Exchange (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
Securities and Exchange Commission (SEC) to merit such action, the
Portfolios may suspend redemption or postpone payment dates. If investors
are unable to execute transactions by telephone to Institutional
Trading or by calling their Financial Institution (for example, during
times of unusual market activity), they should consider placing their
orders by mail to FIIOC at the address given above. In cases of suspension
of the right of redemption, an investor may either withdraw a request for
redemption or receive payment based on the next determined NAV after the
termination of the suspension.
CHOOSING A DISTRIBUTION OPTION
The Portfolios offer two distribution options:
A. THE SHARE OPTION reinvests dividend distributions in additional shares.
This option is assigned automatically if no choice is made on your
application and provides for the purchase of new shares at their NAV as of
the close of business on the day dividends are distributed.
B. THE INCOME-EARNED OPTION reinvests capital gain distributions and pays
income dividends in cash.
STATEMENTS AND REPORTS
Investors will receive a monthly statement which details every transaction
that affects their share balance or account registration. 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
Portfolios' financial statements. To reduce expenses, only one copy of the
Portfolios' reports (such as the Portfolios' Annual Report) may be mailed
to each household. Investors should contact their Financial Institution or
the Portfolios to request additional reports.
ADDITIONAL INFORMATION. Each Portfolio also reserves the right to reject
any specific purchase order including certain purchases by exchange (see
"How to Exchange" on page ). Purchase orders may be refused if, in FMR's
opinion, they are of a size that would disrupt management of a Portfolio.
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.
HOLIDAY SCHEDULE. Money Market Portfolio and U.S. Government Portfolio are
open for business and their respective NAVs are calculated each day both
the Federal Reserve Bank of New York (New York Fed) and the NYSE are open
for trading. Municipal Money Market Portfolio is open for business and its
NAV is calculated each day both the Federal Reserve Bank of Kansas City
(Kansas City Fed) and the NYSE are open for trading.
The following holiday closings have been designated 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
Year's Day, to be observed in the future, the New York Fed (for Money
Market Portfolio and U.S. Government Portfolio), the Kansas City Fed (for
Municipal Money Market Portfolio) or the NYSE may modify its holiday
schedule at any time. The right is reserved to advance the time by which
purchase and redemption orders must be received on any day: (1) that the
New York Fed (for Money Market and U.S. Government Portfolios) or the
Kansas City Fed (for Municipal Money Market Portfolio) or the NYSE closes
early, or (2) as permitted by the SEC. Certain Fidelity funds may follow
different holiday closing schedules.
THE PORTFOLIOS AND THE FIDELITY ORGANIZATION
Each 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 Portfolios with services. The Fund is not required to hold annual
shareholder meetings, although special meetings may be called for a
specific Portfolio or the Fund as a whole for purposes such as electing or
removing Trustees, changing fundamental investment policies or approving a
management contract. Shareholders receive one vote for each share of a
Portfolio they own and fractional votes for each fractional share of a
Portfolio they own. Separate votes are taken by each Portfolio if a matter
affects just that Portfolio.
Fidelity Investments is one of America's largest investment management
organizations and has its principal business address at 82 Devonshire
Street, Boston, Massachusetts. It includes a number of different companies
that provide a variety of financial services and products. FMR employs
various Fidelity companies to perform activities required to operate the
Fund.
FMR, the Portfolios' adviser, is the original Fidelity company, founded in
1946. It provides a number of mutual funds and other clients with
investment research and portfolio management services. It maintains a large
staff of experienced investment personnel and a full complement of related
support facilities. As of July 31, 1994, FMR advised funds having more than
19 million shareholder accounts with a total value of more than
$ 225 billion.
FMR Texas Inc. (FMR Texas), the Portfolios' 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.
Fidelity Distributors Corporation distributes shares for the Fidelity
funds. FMR Corp. is the ultimate parent company of FMR and FMR Texas.
Through ownership of voting common stock, members of the Edward C. Johnson
3d family form a controlling group with respect to FMR Corp. Changes may
occur in the Johnson family group, through death or disability, which would
result in changes in each individual family members' holding of stock. Such
changes could result in one or more family members becoming holders of over
25% of the stock. FMR Corp. has received an opinion of counsel that changes
in the composition of the Johnson family group under these circumstances
would not result in the termination of the Portfolios' management or
distribution contracts and, accordingly, would not require a shareholder
vote to continue operation under those contracts.
MANAGEMENT, DISTRIBUTION AND SERVICE FEES
MANAGEMENT CONTRACTS. For managing its investments and business affairs,
each Portfolio pays FMR a monthly management fee at the annual rate of .50%
of its average net assets for the month. FMR is voluntarily reimbursing
each Portfolio's expenses to the extent that total portfolio operating
expenses, including management fees (but excluding interest, taxes,
brokerage commissions and extraordinary expenses), exceed an annual rate of
.99% of average net assets. Management fees for the fiscal year ended
July 31, 1994 were $3,322,784 (Money Market Portfolio), $1,571,910 (U.S.
Government Portfolio), and $662,897 (Municipal Money Market Portfolio).
FMR, on behalf of each 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
each Portfolio, after payments by FMR pursuant to each 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. Sub-advisory fees for the fiscal year ended July 31,
1994 were $883,835 (Money Market Portfolio), $358,950 (U.S. Government
Portfolio), and $187,077 (Municipal Money Market Portfolio).
DISTRIBUTION AND SERVICE PLANS. The Trustees of the Fund have adopted a
Distribution and Service Plan on behalf of each Portfolio (the Plan)
pursuant to Rule 12b-1 under the 1940 Act (the Rule). The Rule provides in
substance that a mutual fund may not engage directly or indirectly in
financing any activity that is 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 Plans to allow each Portfolio
and FMR to incur certain expenses that might be considered to constitute
direct or indirect payment by the Portfolios of distribution expenses.
Under the Plans, each Portfolio is authorized to pay Fidelity
Distributor s Corporation (the Distributor) , 82 Devonshire Street,
Boston, Massachusetts, an affiliate of FMR and the distributor of the
Portfolios' shares, a monthly distribution fee as compensation for its
services and expenses in connection with such distribution. Each Portfolio
pays to the Distributor a distribution fee at an annual rate of .35% of its
average net assets. The distribution fee is a Portfolio expense in addition
to the management fee and the Portfolios' other expenses. Such expenses
reduce the Portfolios' net investment income and total return.
The Distributor may pay all or a portion of the distribution fee to
securities dealers or other entities, including banks and other financial
institutions that have selling agreements with the Portfolios (Qualified
Recipients) as compensation for selling shares of the Portfolios and
providing ongoing shareholder support services. In addition, each Plan also
specifically recognizes that FMR may make payments from its management fee,
revenue, past profits or other resources to Qualified Recipients for their
services to the Portfolios' shareholders. Qualified Recipients currently
may be compensated by FMR at a maximum annual rate of up to .25% of the
average net assets of the Portfolios with respect to which they provide or
have provided shareholder support or distribution services. The Distributor
also may act in the capacity of a Qualified Recipient, and as such may
receive compensation under the Plans. Qualified Recipients, including the
Distributor acting as a Qualified Recipient, at their discretion may retain
any portion of their compensation received pursuant to the Plans and
reallow the balance of such compensation to their correspondents.
The Distributor will, at its own expense, provide promotional incentives to
Qualified Recipients who support the sale of shares of the Portfolios. In
some instances, these incentives will be offered only to certain types of
Qualified Recipients, such as those whose representatives provide services
in connection with the sale or expected sale of significant amounts of
shares.
The NASD has approved amendments which subject asset-based sales charges to
its maximum sales charge rule. Fees paid pursuant to each Portfolio's
Distribution and Service 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 performing shareholder
servicing and recordkeeping. If, because of changes in law or regulation,
or because of new interpretations of existing law, a bank or a 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 other financial institutions
may be required to register as dealers pursuant to state law.
FIIOC, 82 Devonshire Street, Boston, Massachusetts, an affiliate of FMR,
acts as transfer and dividend-paying agent and maintains shareholder
records for Money Market Portfolio and U.S. Government Portfolio. United
Missouri Bank, N.A. (United Missouri) acts as transfer and dividend-paying
agent and maintains shareholder records for Municipal Money Market
Portfolio. United Missouri has entered into a sub-contract with FIIOC which
provides that FIIOC performs the processing activities associated with the
transfer agent and shareholder servicing functions for Municipal Money
Market Portfolio. Under each contract, FIIOC is paid fees based on the
total number of accounts in each Portfolio and the number of transactions
made by shareholders of each Portfolio. In addition, FIIOC pays all
transfer agent and related out-of-pocket expenses. Fees for institutional
retirement plan accounts, if any, are based on the net asset value
of all such accounts in a Portfolio. For fiscal 1994 these payments
amounted to $ 1,413,536 (Money Market Portfolio), $ 287,530
(U.S. Government Portfolio), and $ 43,149 (Municipal Money Market
Portfolio).
Money Market Portfolio and U.S. Government Portfolio pay Service, 82
Devonshire Street, Boston, Massachusetts, an affiliate of FMR, to calculate
their daily share prices and to maintain their general accounting records.
United Missouri employs Service to perform these functions for Municipal
Money Market Portfolio. The fees for pricing and bookkeeping services are
based on each Portfolio's average net assets, and must fall within a range
of $20,000 to $750,000 per year. For fiscal 1994 fees for pricing and
bookkeeping services amounted to $ 99,866 (Money Market Portfolio),
$ 55,216 (U.S. Government Portfolio), and $ 29,177 (Municipal
Money Market Portfolio).
APPENDIX
The following paragraphs provide a brief description of the securities in
which the Portfolios may invest and the transactions they may make. The
Portfolios are 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 Portfolios' investment objectives and
policies.
A complete listing of each Portfolio's policies and limitations and more
detailed information about each Portfolio's investments are contained in
the Statement of Additional Information. Current holdings and recent
investment strategies are described in each Portfolio's financial
report.
ASSET-BACKED SECURITIES. Asset-backed securities may include interests in
pools of mortgages, loans, receivables or other assets. Payment of
principal and interest may be largely dependent upon the cash flows
generated by the assets backing the securities.
BANKERS' ACCEPTANCES. Bankers' acceptances are negotiable obligations of a
bank to pay a draft which has been drawn on it by a customer. These
obligations are backed by large banks and usually backed by goods in
international trade.
CERTIFICATES OF DEPOSIT. Certificates of deposit are negotiable
certificates representing a commercial bank's obligations to repay funds
deposited with it, earning specified rates of interest over a given period
of time.
COMMERCIAL PAPER. Short-term obligations issued by banks, broker-dealers,
corporations, and other entities for purposes such as financing their
current operations.
DELAYED-DELIVERY TRANSACTIONS. Securities can be bought and sold on a
when-issued or delayed-delivery 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 a Portfolio's assets. Ordinarily, the Portfolios will not earn
interest on the securities purchased until they are delivered.
INTERFUND BORROWING PROGRAM. The Portfolios have received permission from
the SEC to lend money to and borrow money from other funds advised by FMR
or its affiliates. U.S. Government Portfolio and Municipal Money Market
Portfolio will participate in the interfund lending program only as
borrowers. Interfund loans and borrowings normally will extend overnight,
but can have a maximum duration of seven days. Money Market Portfolio will
lend through the program only when the returns are higher than those
available at the same time from other short-term instruments (such as
repurchase agreements), and each Portfolio will borrow through the program
only when the costs are equal to or lower than the cost of bank loans.
Money Market Portfolio will not lend more than 10% of its assets to other
funds, and each Portfolio will not borrow through the program if, after
doing so, total outstanding borrowings would exceed 15% of total assets.
Loans may be called on one day's notice, and the Portfolios 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 result in a
lost investment opportunity or additional borrowing costs.
ILLIQUID INVESTMENTS. Under the supervision of the Board of Trustees, FMR
determines the liquidity of each Portfolio's investments. The absence of a
trading market can make it difficult to ascertain a market value for
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for a Portfolio to sell illiquid investments promptly at an
acceptable price.
MUNICIPAL SECURITIES include GENERAL OBLIGATION SECURITIES, which are
backed by the full taxing power of a municipality, and REVENUE SECURITIES,
which are backed by the revenues of a specific tax, project, or facility.
INDUSTRIAL REVENUE BONDS are a type of revenue bond backed by the credit
and security of a private issuer and may involve greater risk. PRIVATE
ACTIVITY MUNICIPAL SECURITIES, which may be subject to the federal
alternative minimum tax, include securities issued to finance housing
projects, student loans, and privately owned solid waste disposal and water
and sewage treatment facilities.
TAX AND REVENUE ANTICIPATION NOTES are issued by municipalities in
expectation of future tax or other revenues, and are payable from those
specific taxes or revenues. BOND ANTICIPATION NOTES normally provide
interim financing in advance of an issue of bonds or notes, the proceeds of
which are used to repay the anticipation notes. TAX-EXEMPT COMMERCIAL PAPER
is issued by municipalities to help finance short-term capital or operating
needs.
MUNICIPAL LEASE OBLIGATIONS are issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities.
These obligations typically are not fully backed by the municipality's
credit, and their interest may become taxable if the lease is assigned. If
funds are not appropriated for the following year's lease payments, the
lease may terminate, with the possibility of significant loss to a
Portfolio. CERTIFICATES OF PARTICIPATION in municipal lease obligations or
installment sales contracts entitle the holder to a proportionate interest
in the lease-purchase payments made.
RESOURCE RECOVERY BONDS are a type of revenue bond issued to build
facilities such as solid waste incinerators or waste-to-energy plants.
Typically, a private corporation will be involved, at least during the
construction phase, and the revenue stream will be secured by fees or rents
paid by municipalities for use of the facilities. The viability of a
resource recovery project, environmental protection regulations, and
project operator tax incentives may affect the value and credit quality of
resource recovery bonds.
VARIABLE OR FLOATING RATE OBLIGATIONS provide for periodic adjustments
of the interest rates paid. Floating rate obligations have interest rates
that change whenever there is a change in a designated base rate, while
variable rate obligations 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. When determining
the maturity of a variable or floating rate obligation , a 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
obligation .
TENDER OPTION BONDS and similarly structured obligations combine
previously issued notes or bonds with demand features and interest rate
features. The creditworthiness of the issuer of the underlying bond, third
parties (such as banks or insurance companies) that provide credit
enhancement, and the party providing the demand or tender feature may each
affect the credit quality of the obligation.
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.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which a
Portfolio purchases a security and simultaneously commits to resell that
security to the seller at a higher price. In the event of the bankruptcy of
the other party to a repurchase agreement, the Portfolio could experience
delays in recovering cash. To the extent that, in the meantime, the value
of the securities purchased had decreased or the value of the securities it
lent had increased, 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 temporarily transfers possession of a portfolio instrument to
another party, such as a bank or broker-dealer, in return for cash. At the
same time, the Portfolio agrees to repurchase the instrument at an
agreed-upon price and time. The Portfolios expect that they will engage in
reverse repurchase agreements for temporary purposes such as to fund
redemptions or when they are able to invest the cash so acquired at
a rate higher than the cost of the agreement, which would increase income
earned by the Portfolios . Reverse repurchase agreements may increase
the risk of fluctuation in the market value of the Portfolios' assets or in
their yield.
RESTRICTED SECURITIES cannot be sold to the public without registration
under the Securities Act of 1933. Unless registered for sale, these
securities can only be sold in privately negotiated transactions or
pursuant to an exemption from registration.
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 Federal Home Loan Banks are
supported only by the credit of those entities. There is no guarantee that
the government will support these types of securities, and therefore they
involve more risk than other government obligations.
ZERO COUPON BONDS. Zero coupon bonds do not make regular interest payments;
instead, they are sold at a deep discount from their face value and are
redeemed at face value when they mature. Because zero coupon bonds do not
pay current income, their prices can be very volatile when interest rates
change. In calculating its daily dividend, each Portfolio takes into
account as income a portion of the difference between a zero coupon bond's
purchase price and its face value.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
MONEY U.S. MUNICIP
MARKET GOVERN AL
PORTFOLI MENT MONEY
O PORTFOLI MARKET
O PORTFOLIO

Management Fee .37 %* .46 % * .45 % *

12b-1 Fee .35 % .35 % .35 %

Other Expenses .27 % .18 % .19 %

TOTAL FUND .99% .99% .99%
OPERATING EXPENSES

</TABLE>

1 Year $ 10 $ 10 $ 10

3 Years $ 32 $ 32 $ 32

5 Years $ 55 $ 55 $ 55

10 Years $ 121 $ 121 $ 121

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Years Ended July 31, October 23, 1990
(Commencement
of Operations) to
July 31,

1994 1993 1992 1991
SELECTED PER-SHARE DATA

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

Income from Investment Operations .027 .025 .041 .047
Net interest income

Less Distributions (.027) (.025) (.041) (.047)
From net interest income

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

TOTAL RETURN B 2.72% 2.57% 4.13% 4.79%

Ratios and Supplemental Data

Net assets, end of period (000 omitted) $ 680,149 $ 601,498 $ 354,189 $ 108,991

Ratio of expenses to average net assets C .98% .95% .82% .83%A

Ratio of expenses to average net assets before
expense reductions C 1.12% 1.14% 1.17% 1.25%A

Ratio of net interest income to average net
assets 2.70% 2.52% 3.81% 5.71%A

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Years Ended July 31, October 23, 1990
(Commencement
of Operations) to
July 31,

1994 1993 1992 1991

SELECTED PER-SHARE DATA

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

Income from Investment Operations .025 .024 .041 .046
Net interest income

Less Distributions (.025) (.024) (.041) (.046)
From net interest income

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

TOTAL RETURN B 2.52% 2.40% 4.15% 4.66%

Ratios and Supplemental Data

Net assets, end of period (000 omitted) $ 306,261 $ 264,483 $ 308,542 $ 80,762

Ratio of expenses to average net assets C .98% .95% .65% .70%A

Ratio of expenses to average net assets before
expense reductions C 1.03% 1.07% 1.14% 1.27%A

Ratio of net interest income to average
net assets 2.50% 2.39% 3.82% 5.65%A

</TABLE>

MUNICIPAL MONEY MARKET PORTFOLIO

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Year Ended July 31, November 29, 1990
(Commencement
of Operations) to
July 31,

1994 1993 1992 1991

SELECTED PER-SHARE DATA

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

Income from Investment Operations .018 .019 .031 .028
Net interest income

Less Distributions (.018) (.019) (.031) (.028)
From net interest income

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

TOTAL RETURN B 1.80% 1.96% 3.14% 2.82%

Ratios and Supplemental Data

Net assets, end of period (000
omitted) $ 116,497 $ 116,274 $ 68,497 $ 19,578

Ratio of expenses to average net
assets C .98% .95% .95% .95%A

Ratio of expenses to average net
assets before expense reductions C 1.04% 1.23% 1.40% 2.63%A

Ratio of net interest income to
average net assets 1.78% 1.92% 2.89% 3.97%A

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MONEY MARKET U.S. GOVERNMENT MUNICIPAL MONEY
PORTFOLIO PORTFOLIO MARKET PORTFOLIO

Current Effective Current Effective Current Effective
Yield Yield Yield Yield Yield Yield

3.63% 3.70% 3.32% 3.37% 2.13% 2.15%

</TABLE>

guarantee(s).
Corporations, Letter of instruction and a
Associations corporate resolution,
signed by person(s)
required to sign for the
account accompanied by
signature guarantee(s).

ANNUALIZED ANNUALIZED
YIELD AT YIELD AT
DUE TIME OF PRINCIPAL VALUE DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1) DATE PURCHASE AMOUNT (NOTE 1)
Bankers' Acceptances - 3.3%
DOMESTIC BANKERS ACCEPTANCE - 0.2%
Chase Manhattan Bank
8/19/94 4.41% $ 1,366,989 $ 1,363,982
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 3.1%
Credit Suisse
8/15/94 4.55 9,000,000 8,984,250
Fuji Bank, Ltd.
8/22/94 4.47 5,800,000 5,784,944
Mitsubishi Bank, Ltd.
8/29/94 4.42 2,000,000 1,993,156
Rabobank Nederland, N.V.
8/16/94 4.52 5,000,000 4,990,625
21,752,975
TOTAL BANKERS' ACCEPTANCES 23,116,957
Certificates of Deposit - 17.0%
DOMESTIC CERTIFICATES OF DEPOSIT - 2.9%
NBD Bank, N.A.
8/4/94 4.50 5,000,000 5,000,000
8/16/94 4.52 5,000,000 5,000,000
8/18/94 4.52 5,000,000 5,000,000
Trust Company Bank
1/31/95 3.75 5,000,000 4,991,932
19,991,932
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 13.4%
ABN-AMRO Bank
9/6/94 4.62 1,000,000 999,878
Bank of Nova Scotia
9/1/94 4.64 5,000,000 5,000,000
Banque Nationale de Paris
8/1/94 4.55 1,000,000 1,000,000
Credit Lyonnais
8/1/94 4.53 (a) 5,000,000 5,000,000
Caisse Nationale de Credit Agricole
9/8/94 4.80 (a) 5,000,000 5,000,443
Dai-Ichi Kangyo Bank, Ltd.
9/21/94 4.59 5,000,000 5,000,347
Fuji Bank, Ltd.
8/17/94 4.53 5,000,000 5,000,000
9/1/94 4.50 5,000,000 5,000,000
Industrial Bank of Japan, Ltd.
8/1/94 4.54 5,000,000 5,000,000
Sanwa Bank, Ltd.
8/8/94 4.55% $ 5,000,000 $ 5,000,000
10/19/94 4.60 5,000,000 4,999,785
Societe Generale
8/16/94 4.40 8,000,000 7,996,925
9/1/94 4.00 7,000,000 7,000,000
1/17/95 5.18 5,000,000 5,000,000
Sumitomo Bank, Ltd.
8/1/94 4.54 5,000,000 5,000,000
8/15/94 4.48 5,000,000 5,000,190
8/15/94 4.60 5,000,000 5,000,019
8/19/94 4.45 5,000,000 5,000,149
9/1/94 4.52 5,000,000 4,999,867
Union Bank of Switzerland
8/22/94 3.85 2,000,000 1,999,793
93,997,396
LONDON BRANCH, EURODOLLAR DOLLAR, FOREIGN BANKS - 0.7%
Mitsubishi Bank, Ltd.
11/16/94 5.25 5,000,000 5,000,145
TOTAL CERTIFICATES OF DEPOSIT 118,989,473
Commercial Paper - 38.5%
B.B.V. Finance (Delaware), Inc.
8/8/94 4.52 5,000,000 4,995,625
BNP U.S. Finance Corporation
1/6/95 5.21 5,000,000 4,888,522
Bear Stearns Companies Inc.
8/29/94 4.51 5,000,000 4,982,539
Beneficial Corporation
8/15/94 4.57 5,000,000 4,991,153
Bradford & Bingley Building Society
8/24/94 4.55 1,983,000 1,977,299
CIT Group Holdings, Inc.
8/24/94 4.55 10,000,000 9,971,122
Commercial Credit Company
9/7/94 4.47 5,000,000 4,977,132
CoreStates Capital Corp.
8/15/94 4.50 (a) 5,000,000 5,000,000
Corporate Asset Funding Company, Inc.
8/5/94 4.47 2,000,000 1,999,011
Deere & Company
8/26/94 4.61 15,000,000 14,952,292
ANNUALIZED ANNUALIZED
YIELD AT YIELD AT
DUE TIME OF PRINCIPAL VALUE DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1) DATE PURCHASE AMOUNT (NOTE 1)
COMMERCIAL PAPER - CONTINUED
Ford Motor Credit Corporation
9/14/94 4.64% $ 5,000,000 $ 4,971,889
11/16/94 4.88 9,000,000 8,871,600
1/17/95 5.13 5,000,000 4,882,639
GTE Corporation
8/1/94 4.56 5,000,000 5,000,000
General Electric Capital Corporation
8/15/94 4.58 (a) 5,000,000 5,000,000
9/6/94 4.47 (a) 5,000,000 5,000,000
9/19/94 4.09 10,000,000 9,945,555
10/5/94 3.43 5,000,000 4,969,757
12/12/94 5.02 3,000,000 2,945,470
1/11/95 5.58 5,000,000 4,878,316
General Electric Capital Services Inc.
12/12/94 5.06 5,000,000 4,908,562
General Motors Acceptance Corporation
8/17/94 4.63 3,000,000 2,993,867
8/24/94 4.65 7,000,000 6,979,316
9/6/94 4.58 5,000,000 4,977,350
Goldman Sachs Group, L.P. (The)
9/6/94 4.71 5,000,000 4,976,650
Government of Canada
8/2/94 4.46 1,000,000 999,876
Grand Metropolitan Finance
10/24/94 5.12 5,000,000 4,941,667
Hanson Finance (UK), PLC
8/25/94 4.55 12,500,000 12,462,500
Hertz Corporation
8/10/94 4.57 15,000,000 14,982,937
IBM Corporation
8/17/94 4.47 7,000,000 6,986,156
8/24/94 4.47 5,000,000 4,985,785
ITT Corporation
9/16/94 4.58 5,000,000 4,970,931
ITT Financial
8/22/94 4.62 5,000,000 4,986,583
8/23/94 4.47 5,000,000 4,986,403
Kredietbank, N.V.
8/31/94 4.55 10,000,000 9,962,500
Merrill Lynch, Inc.
9/12/94 4.26 14,000,000 13,927,317
New Center Asset Trust
8/9/94 4.38 10,000,000 9,990,333
PNC Funding Corp.
10/11/94 4.34% $ 5,000,000 $ 4,958,090
Prospect Street Senior Portfolio LP
8/12/94 4.59 1,647,000 1,644,700
Sears Roebuck Acceptance Corp.
8/4/94 4.52 5,000,000 4,998,125
Texaco Inc.
8/1/94 4.35 4,000,000 4,000,000
Textron, Inc.
8/17/94 4.62 5,000,000 4,989,778
Unocal Corporation
8/26/94 4.52 2,000,000 1,993,750
8/29/94 4.52 2,000,000 1,993,000
WCP Funding, Inc.
8/8/94 4.57 10,000,000 9,991,153
TOTAL COMMERCIAL PAPER 268,787,250
Federal Agencies - 4.1%
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 2.1%
10/26/94 4.45 15,000,000 14,844,125
INTERNATIONAL BANK OF RECONSTRUCTION AND DEVELOPMENT -
DISCOUNT NOTES - 2.0%
12/23/94 3.52 13,880,000 13,690,677
TOTAL FEDERAL AGENCIES 28,534,802
U.S. Treasury Obligations - 0.4%
U.S. Treasury Bills
1/12/95 3.55 3,000,000 2,953,123
Bank Notes - 7.9%
Bank of New York
8/1/94 4.98 (a) 5,000,000 4,998,283
9/6/94 4.59 (a) 10,000,000 10,000,000
Bank One, Dayton
8/1/94 4.98 (a) 5,000,000 5,000,000
Bank One, Milwaukee
8/1/94 4.61 (a) 10,000,000 9,994,137
Comerica Bank-Detroit
8/1/94 4.99 (a) 10,000,000 9,998,219
First National Bank of Boston
8/22/94 4.58 5,000,000 5,000,000
PNC Bank
8/2/94 4.52 (a) 5,000,000 4,994,099
Society National Bank
8/1/94 4.99 (a) 5,000,000 4,998,212
TOTAL BANK NOTES 54,982,950
ANNUALIZED ANNUALIZED
YIELD AT YIELD AT
DUE TIME OF PRINCIPAL VALUE DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1) DATE PURCHASE AMOUNT (NOTE 1)
Master Notes (a) - 3.9%
J.P. Morgan Securities
8/1/94 4.54% $ 10,000,000 $ 10,000,000
8/1/94 4.56 8,000,000 8,000,000
Morgan Stanley Group, Inc.
8/1/94 4.51 5,000,000 5,000,000
Norwest Corporation
8/1/94 4.50 4,000,000 4,000,000
TOTAL MASTER NOTES 27,000,000
Medium-Term Notes - 13.6%
Abbey National Treasury Service (c)
9/30/94 4.76 (a) 26,000,000 26,000,000
Abbey National (UK), PLC (c)
8/1/94 4.98 (a) 5,000,000 4,999,275
Beneficial Corporation
8/15/94 4.46 (a) 5,000,000 4,998,668
General Motors Acceptance Corporation
8/7/94 4.64 (a) 6,000,000 6,000,000
Goldman Sachs Group, L.P. (The)
9/1/94 4.54 (a) (c) 6,000,000 6,000,000
12/13/94 4.97 5,000,000 4,945,862
12/16/94 4.93 (a) (c) 6,000,000 6,000,000
Kingdom of Sweden - A (c)
10/25/94 4.81 (a) 4,000,000 4,000,000
Kingdom of Sweden - B (c)
8/23/94 4.62 (a) 4,000,000 4,000,000
Kingdom of Sweden - C (c)
9/23/94 4.62 (a) 4,000,000 4,000,000
Norwest Corporation
9/15/94 4.58 (a) 7,000,000 7,000,000
PHH Corporation
8/1/94 5.00 (a) 5,000,000 5,000,000
Swedish National Housing Finance Corp. A (c)
9/20/94 4.59 (a) 2,000,000 2,000,000
Swedish National Housing Finance Corp. B (c)
10/5/94 4.97 (a) 2,000,000 2,000,000
Swedish National Housing Finance Corp. C (c)
8/23/94 4.65 (a) 3,000,000 3,000,000
Westdeutsche Landesbank Gironzentrale
1/11/95 3.70 5,000,000 5,001,903
TOTAL MEDIUM-TERM NOTES 94,945,708
Short-Term Notes (a) (b) - 4.9%
SMM Trust Company (1993-D)
10/28/94 4.86% $ 4,000,000 $ 4,000,000
SMM Trust Company (1993-F)
8/15/94 4.87 12,000,000 12,000,000
SMM Trust Company (1994-A)
9/18/94 4.59 18,000,000 18,000,000
TOTAL SHORT-TERM NOTES 34,000,000
Time Deposits - 2.1%
Dai-Ichi Kangyo Bank, Ltd.
8/29/94 4.50 5,000,000 5,000,000
Sumitomo Bank, Ltd.
8/4/94 4.37 10,000,000 10,000,000
TOTAL TIME DEPOSITS 15,000,000
Municipal Bonds (a) - 1.6%
Harris County Texas Health Facilities Authority
8/5/94 4.62 10,000,000 10,000,000
New Orleans Aviation Board (MBIA Insured)
8/5/94 4.61 1,600,000 1,600,000
TOTAL MUNICIPAL BONDS 11,600,000

MATURITY
AMOUNT
Repurchase Agreements - 2.7%
With Lehman Government Securities:
At 4.30%, dated 7/18/94 due 8/1/94:
U.S. Government Obligations
(principal amount $15,810,999)
3.668% to 4.719%,
1/1/21 to 9/1/23 $ 15,025,083 15,000,000
In a joint trading account
(U.S. Treasury Obligations)
dated 7/29/94, due 8/1/94 (Note 2)
At 4.26% 3,712,316 3,711,000
TOTAL REPURCHASE AGREEMENTS 18,711,000
TOTAL INVESTMENTS - 100% $ 698,621,263
Total Cost for Income Tax Purposes - $698,621,263

LEGEND:
(1.) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or when applicable,
the final maturity date.
(2.) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
SMM Trust Company:
(1993-D) 4/28/94 $ 4,000,000
(1993-F) 11/15/93 $ 12,000,000
(1994-A) 3/18/94 $ 18,000,000

(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $61,999,275 or 9.1% of net
assets.
INCOME TAX INFORMATION:
At July 31, 1994, the fund had a capital loss carryforward of approximately
$157,000 of which $8,000 and $149,000 will expire on July 31, 2001 and
2002, respectively.
MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS

Statement of Assets and Liabilities

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
July 31, 1994

ASSETS

Investment in securities, at value (including repurchase agreements of $18,711,000) (Notes 1 and 2) - $ 698,621,263
See accompanying schedule

Interest receivable 2,113,232

Receivable from investment adviser for expense reductions (Note 5) 52,770

TOTAL ASSETS 700,787,265

LIABILITIES

Payable for investments $ 18,927,317
purchased

Share transactions in process 858,568

Dividends payable 180,505

Accrued management fee 290,084

Other payables and accrued expenses 382,012

TOTAL LIABILITIES 20,638,486

NET ASSETS $ 680,148,779

Net Assets consist of:

Paid in capital $ 680,293,391

Accumulated net realized gain (loss) on investments (144,612)

NET ASSETS, for 680,293,391 shares outstanding $ 680,148,779

NET ASSET VALUE, offering price and redemption price per share ($680,148,779 (divided by)(verticle 8)(solid club) $1.00
shares)

</TABLE>

Statement of Operations

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended July 31, 1994

INTEREST INCOME $ 24,494,062

EXPENSES

Management fee (Note 4) $ 3,322,784

Transfer agent fees (Note 4) 1,413,536

Distribution fees (Note 4) 2,325,949

Accounting fees and expenses (Note 4) 99,866

Non-interested trustees' compensation 4,000

Custodian fees and expenses 68,357

Registration fees 153,686

Audit 19,080

Legal 6,460

Miscellaneous 7,839

Total expenses before 7,421,557
reductions

Expense reductions (880,912) 6,540,645
(Note 5)

NET INTEREST INCOME 17,953,417

NET REALIZED GAIN (LOSS) ON (148,964)
INVESTMENTS (NOTE 1)

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,804,453

</TABLE>

Statement of Changes in Net Assets

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED JULY 31,

1994 1993

INCREASE (DECREASE) IN NET ASSETS

Operations $ 17,953,417 $ 11,181,033
Net interest income

Net realized gain (loss) (148,964) (8,089)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 17,804,453 11,172,944

Dividends to shareholders from net interest income (17,953,417) (11,181,033)

Share transactions at net asset value of $1.00 per share 3,974,385,280 2,536,376,162
Proceeds from sales of shares

Reinvestment of dividends from net interest income 16,240,483 10,067,106

Cost of shares redeemed (3,911,825,770) (2,299,126,791)

Net increase (decrease) in net assets and shares resulting
from share transactions 78,799,993 247,316,477

TOTAL INCREASE (DECREASE) IN NET ASSETS 78,651,029 247,308,388

NET ASSETS

Beginning of period 601,497,750 354,189,362

End of period $ 680,148,779 $ 601,497,750

</TABLE>

CAPITAL RESERVES: U.S. GOVERNMENT PORTFOLIO
INVESTMENTS/JULY 31, 1994
(SHOWING PERCENTAGE OF TOTAL VALUE OF
INVESTMENTS)

ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE MATURITY VALUE
DATE PURCHASE AMOUNT (NOTE 1) AMOUNT (NOTE 1)
U.S. Treasury Obligations - 36.4%
U.S. TREASURY BILLS - 24.8%
9/29/94 3.92% $ 14,000,000 $ 13,911,681
10/13/94 4.04 9,000,000 8,927,730
10/20/94 3.36 5,000,000 4,963,555
10/20/94 4.16 7,000,000 6,936,611
12/15/94 4.60 17,000,000 16,711,321
1/5/95 4.87 11,000,000 10,772,132
1/19/95 4.96 10,000,000 9,770,100
1/26/95 4.96 7,000,000 6,832,482
78,825,612
U.S. TREASURY NOTES - 11.6%
8/15/94 3.08 4,000,000 4,014,192
8/15/94* 4.50 20,000,000 20,017,365
9/30/94 3.22 10,000,000 10,011,052
1/31/95 3.63 3,000,000 3,008,268
37,050,877
TOTAL U.S. TREASURY OBLIGATIONS 115,876,489
Repurchase Agreements - 63.6%
With First Boston Corporation:
At 4.35%, dated 7/25/94 due 8/24/94:
U.S. Treasury Obligations
(principal amount $14,410,000)
0%, 9/1/04 $ 14,050,750 $ 14,000,000
In a joint trading account
(U.S. Treasury Obligations)
dated 7/29//94, due 8/1/94
(Notes 2 and 3)
At 4.24% 162,057,243 162,000,000
At 4.25% 26,327,328 26,318,000
TOTAL REPURCHASE AGREEMENTS 202,318,000
TOTAL INVESTMENTS - 100% $ 318,194,489
Total Cost For Income Tax Purposes - $318,194,489
* Securities identified as being segregated in custodian records (See Note
2 of Notes to Financial Statements).
INCOME TAX INFORMATION:
At July 31, 1994, the fund had a capital loss carryforward of approximately
$41,000 of which $6,000 and $35,000 will expire on July 31, 2001 and 2002,
respectively.
U.S. GOVERNMENT PORTFOLIO
FINANCIAL STATEMENTS

Statement of Assets and Liabilities

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
July 31, 1994

ASSETS

Investment in securities, at value $ 318,194,489
(including repurchase
agreements of $202,318,000)
(Notes 1 and 2) - See
accompanying schedule

Cash 1,330,719

Interest receivable 1,144,258

Receivable from investment 6,103
adviser for expense reductions
(Note 5)

TOTAL ASSETS 320,675,569

LIABILITIES

Payable for reverse repurchase $ 13,905,158
agreement (Note 2)

Dividends payable 223,598

Accrued management fee 134,019

Other payables and accrued 152,093
expenses

TOTAL LIABILITIES 14,414,868

NET ASSETS $ 306,260,701

Net Assets consist of:

Paid in capital $ 306,299,161

Accumulated net realized gain (38,460)
(loss) on investments

NET ASSETS, for 306,299,161 $ 306,260,701
shares outstanding

NET ASSET VALUE, offering price $1.00
and redemption price per share
($306,260,701(divided by)(solid club)
shares)

</TABLE>

Statement of Operations

DRAFT
Year Ended July 31, 1994

INTEREST INCOME $ 10,944,591

EXPENSES

Management fee (Note 4) $ 1,571,910

Transfer agent fees (Note 4) 287,530

Distribution fees (Note 4) 1,100,338

Accounting fees and expenses 55,216
(Note 4)

Non-interested trustees' 1,905
compensation

Custodian fees and expenses 35,448

Registration fees 161,901

Audit 24,337

Legal 3,164

Miscellaneous 3,384

Total expenses before 3,245,133
reductions

Expense reductions (152,522) 3,092,611
(Note 5)

NET INTEREST INCOME 7,851,980

NET REALIZED GAIN (LOSS) ON (34,704)
INVESTMENTS (NOTE 1)

NET INCREASE IN NET ASSETS $ 7,817,276
RESULTING FROM OPERATIONS

Statement of Changes in Net Assets

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED JULY 31,

1994 1993

INCREASE (DECREASE) IN NET ASSETS

Operations $ 7,851,980 $ 6,429,830
Net interest income

Net realized gain (loss) (34,704) (5,505)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 7,817,276 6,424,325

Dividends to shareholders from net interest income (7,851,980) (6,429,830)

Share transactions at net asset value of $1.00 per share 2,416,632,169 1,815,220,928
Proceeds from sales of shares

Reinvestment of dividends from net interest income 6,256,268 5,539,936

Cost of shares redeemed (2,381,075,779) (1,864,814,792)

Net increase (decrease) in net assets and shares resulting
from share transactions 41,812,658 (44,053,928)

TOTAL INCREASE (DECREASE) IN NET ASSETS 41,777,954 (44,059,433)

NET ASSETS

Beginning of period 264,482,747 308,542,180

End of period $ 306,260,701 $ 264,482,747

</TABLE>

CAPITAL RESERVES: MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENTS/JULY 31, 1994
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)

PRINCIPAL VALUE
AMOUNT (NOTE 1)
MUNICIPAL SECURITIES (a) - 100%
ALABAMA - 0.6%
Talladega Ind. Dev. Rev. (Wehadkee Yarn Mills Proj.) Series 1990, 3.10%,
LOC Trust Company Bank of Georgia, VRDN (b) $ 750,000 $ 750,000
ARIZONA - 4.8%
Arizona Ed. Loan Mktg. Corp. Series 1991 A, 2.95%, LOC Dresdner Bank, VRDN
(b) 300,000 300,000
Mojave County Ind. Dev. Auth. Ind. Dev. Rev. Bonds (Citizen Utilities Co.)
Series 1993 E, 3%, tender 10/6/94 (b) 2,360,000 2,360,000
Yavapai County Ind. Dev. Auth. Ind. Dev. Rev. Bonds (Citizen Utilities Co.)
Series 1993, 3%, tender 10/6/94 (b) 3,000,000 3,000,000
5,660,000
CALIFORNIA - 4.7%
California TRAN (Cash Reserve Prog. Auth.) Series A, 4.50% 7/5/95
2,000,000 2,013,372
Oakland TRAN 3.50% 8/15/94 2,500,000 2,500,418
Orange County Apt. Dev. Rev. (Niguel Summit I) Issue 1985 U, Series A,
3.55%, LOC Toki Bank Ltd., VRDN 1,000,000 1,000,000
5,513,790
COLORADO - 8.9%
Arapahoe County Cap. Impt. Rev. Bonds (Hwy. E-470 Proj.) Series 1986 M,
2.90%, tender 8/31/94 2,190,000 2,190,000
Denver City & County Airport Sys. Rev. 1992 F, 3.20%, LOC Bank of Montreal,
VRDN (b) 2,000,000 2,000,000
Denver County Airport Sys. Rev. Bonds: (b)
Series 1990 D, 3%, tender 8/23/94, LOC Sumitomo Trust & Banking Ltd.
1,000,000 1,000,000
Series 1990 E:
3.30%, tender 10/3/94, LOC Sumitomo Trust & Banking Ltd. 1,675,000
1,675,000
3.45%, tender 10/12/94, LOC Sumitomo Trust & Banking Ltd. 1,000,000
1,000,000
Fort Collins County Ind. Dev. Rev. (Phelps-Tointon Millwork Proj.) Series
1993, 3.25%
LOC Bank One, Milwaukee, VRDN (b) 1,500,000 1,500,000
Wheat Ridge County Ind. Dev. Rev. (Adolph Coors Co. Proj.) Series 1993,
3.10%,
LOC Wachovia Bank, Georgia, VRDN (b) 1,000,000 1,000,000
10,365,000
DISTRICT OF COLUMBIA - 0.5%
Dist. of Columbia Hsg. Fin. Auth. Multi-Family Hsg. Rev. Rfdg. (Mount
Vernon Plaza Apts.) Series 1991 B, 3.20%,
LOC Bank One, VRDN (b) 650,000 650,000
FLORIDA - 10.7%
Broward County Ind. Dev. Auth. Rev. Rfdg. (Goldline Lab., Inc. Proj.)
Series 1989 B, 3.10%,
LOC Barnett Bank, VRDN (b) 279,000 279,000
Dade County Hsg. Fin. Corp. Participating VRDN, Series 1991 A, 3.35%,
Liquidity Facility Bank One (b) (c) 2,850,000 2,850,000
Dade County Ind. Dev. Auth. Rev. , VRDN (b):
(Guastafeste Proj.) Series 1987, 3.10%, LOC Sun Bank, N.A. 300,000
300,000
(Montenay-Dade Proj.) Series 1988, 3.05%, LOC Banque Paribas 3,500,000
3,500,000
Dade County Multi-Family Hsg. Rev. (Biscayne View Apts. Proj.) Series 1993,
3.30%,
BPA Commonwealth Life Ins. Co., VRDN (b) 1,475,000 1,475,000
Indian Trace Commty. Dev. Dist. Bonds (Broward County-Basin I Wtr. Mgmt.)
3.30%, tender 8/3/94, LOC Tokai Bank Ltd. 1,650,000 1,650,000
NCNB Participating VRDN, Series 1989 A, 3.45%, LOC NationsBank (b) (c)
1,425,000 1,425,000
Okeechobee County Solid Wst. Rev. (Chambers Wst. Sys.) Series 1992, 3.20%,
LOC NationsBank, VRDN (b) 1,000,000 1,000,000
12,479,000
GEORGIA - 0.6%
Pierce County Ind. Dev. & Bldg. Auth. Rev. (American Egg Prods. Inc. Proj.)
Series 1989, 3.10%,
LOC Barclays Bank, VRDN (b) 170,000 170,000
Rockdale County Ind. Dev. Rev. (Takahashi Works USA) Series 1990, 3.10%,
LOC Sanwa Bank, VRDN (b) 500,000 500,000
670,000
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MUNICIPAL SECURITIES (a) - CONTINUED
ILLINOIS - 6.2%
Chicago O'Hare Int'l. Arpt. Rev.,VRDN (b).:
(Northwest Orient Airlines), 3.30%, LOC Mitsubishi Bank $ 300,000 $
300,000
Series 1988 A, 3.10%, LOC Sanwa Bank 2,900,000 2,900,000
Series 1988 B, 3.10%, LOC Sanwa Bank 1,100,000 1,100,000
Illinois Dev. Fin. Auth. Ind. Dev. Rev., VRDN: (b)
(MTI Corp. Proj.) Series 1989, 3.275%, LOC Industrial Bank of Japan
1,000,000 1,000,000
(Rich Products Corp. Proj.) Series 1993, 3.10%, LOC Trust Company Bank of
Georgia 800,000 800,000
Illinois Dev. Fin. Auth., VRDN: (b)
(Kindlon Partners Proj.) 3.15%, LOC Northern Trust, Chicago 900,000
900,000
(R.S. Anderson Co. Proj.) 3.15%, LOC Comerica Bank 200,000 200,000
7,200,000
INDIANA - 0.4%
Shelbyville Ind. Econ. Dev. Rev. (Nippisun Indiana Corp. Proj.) 3.10%, LOC
Industrial Bank of Japan, VRDN (b) 500,000 500,000
IOWA - 0.6%
Sioux City Hosp. Rev. Rfdg. Bonds (Sisters of Mercy Health Corp. Oblig.
Group) Series 1993, 3.10% 8/15/94 765,000 765,000
KENTUCKY - 1.0%
Cynthiana Ind. Dev. Rev. (E.D. Bullard Co. Proj.), 3.20%, LOC NationsBank,
VRDN (b) 1,140,000 1,140,000
LOUISIANA - 2.5%
Calcaseiu Parish Pub. Trust Auth. Solid Waste Disp. Rev. (PPG Industries
Inc. Proj.) Series 1994, 3.10%, VRDN (c) 1,000,000 1,000,000
Lake Charles Harbor and Terminal Dist. Port Impt. Rev., 3.10%, LOC Nat'l.
Westminster Bank, VRDN (b) 2,000,000 2,000,000
3,000,000
MAINE - 0.6%
Maine Fin. Auth. Econ. Dev. Rev. Series 1992 B, 3.05%, LOC Sumitomo Bank
Ltd., VRDN (b) 700,000 700,000
MARYLAND - 0.9%
Montgomery County Hsg. Opportunity Committee (Draper Lane Apts.) 3.25%,
FGIC Insured,
BPA Sumitomo Bank Ltd., VRDN (b) 1,000,000 1,000,000
MICHIGAN - 0.9%
Sterling Heights Econ. Dev. Corp. Ltd. Oblig. Rev. (Cherrywood Ctr. Assoc.
Proj.) 3.15%, LOC Comerica Bank, VRDN (b) 1,100,000 1,100,000
MISSOURI - 0.9%
University of Missouri RAN Series 1994-95A, 4.50% 6/30/95 1,000,000
1,005,708
NEVADA - 2.0%
Henderson Pub. Impt. Trust Multi-Family Hsg. Bonds (Victory Village Proj.)
4.45%, tender 8/8/94 1,290,000 1,290,000
Washoe County Gas Fac. Rev. Bonds (Sierra Pacific Pwr. Co.) Series 1990,
2.80%, tender 8/22/94,
LOC Union Bank Switzerland (b) 1,000,000 1,000,000
2,290,000
NEW HAMPSHIRE - 0.9%
New Hampshire Hsg. Fin. Auth. Multi-Family (Fairways Proj.), 3.05%, LOC
G.E. Capital Corp., VRDN (b) 1,000,000 1,000,000
NORTH CAROLINA - 3.1%
Johnston County Ind. Facs. Poll. Cont. Rev. Fin. Auth. Ind. Dev. Rev.
(Kabivitrum Inc. Proj.) 2.95%,
LOC Wachovia, VRDN 2,750,000 2,750,000
Piedmont Triad Arpt. Auth. Spl. Facs. Rev. (Triad Int'l. Maintenance Corp.
Proj.) Series 1989, 3.15%,
LOC Mellon Bank, VRDN (b) 900,000 900,000
3,650,000
OHIO - 3.0%
Cleveland Pub. Pwr. Sys. Impt. BAN Series 1993 B, 3.50% 8/1/94 1,000,000
1,000,000
Ohio Wtr. Dev. Auth. Bonds (Toledo Edison Co. Proj.) Series 1988 A, 3.20%,
tender 9/15/94, LOC Citibank (b) 2,500,000 2,500,000
3,500,000
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MUNICIPAL SECURITIES (a) - CONTINUED
OKLAHOMA - 0.9%
Southeastern Ind. Auth. Solid Wst. Disp. Rev. (Weyerhaeuser Co. Proj.)
3.09%, VRDN (b) $ 1,000,000 $ 1,000,000
PENNSYLVANIA - 10.2%
Bucks County Ind. Dev. Auth. Ind. Dev. (Double H Plastics Inc. Proj.)
Series 1993, 3.45%,
LOC Meridian Bank NA, VRDN (b) 2,445,000 2,445,000
Carbon County Ind. Dev. Auth. Resource Recovery Bonds (Panther Creek
Partners Proj.): (b)
Series B:
3.15%, tender 8/8/94, LOC Nat'l. Westminster Bank 2,700,000 2,700,000
3.20%, tender 10/14/94, LOC Nat'l. Westminster Bank 1,060,000
1,060,000
Northumberland County Ind. Dev. Resource Recovery,
(Foster Wheeler Mt. Carmel Inc.), VRDN: (b)
Series 1987 A, 3.15%, LOC Union Bank of Switzerland 1,000,000
1,000,000
Series 1987 B, 3.15%, LOC Union Bank of Switzerland 200,000 200,000
Pennsylvania Econ. Dev. Fin. Auth. Rev., VRDN: (b)
(Kaminski Lumber Proj.) Series 1989 A-6, 3.20%, LOC Pittsburgh Nat'l. Bank
875,000 875,000
(Port Erie Plastics Proj.) Series 1989 D-9, 3.20%, LOC Pittsburgh Nat'l.
Bank 90,000 90,000
Pennsylvania Econ. Dev. Fing. Auth. Ind. Dev. Rev. (ASK Foods, Inc.) Series
A-1, 3.20%,
LOC Pittsburgh Nat'l. Bank, VRDN (b) 535,000 535,000
Philadelphia TRAN Series 1994-95D, 4.75% 6/15/95, LOC Morgan Guaranty Trust
Co. 1,000,000 1,007,565
Venango Ind. Dev. Auth. Resource Recovery Rev. Bonds (Scrubgrass Proj.):
(b)
Series 1990 B:
3.20%, tender 10/11/94, LOC Nat'l. Westminster Bank 1,000,000
1,000,000
3.20%, tender 10/14/94, LOC Nat'l. Westminster Bank 1,000,000
1,000,000
11,912,565
RHODE ISLAND - 0.9%
Providence Pub. Parking (Washington Street Garage Proj.) Series 1991,
2.90%, LOC Credit Suisse, VRDN (b) 1,000,000 1,000,000
TENNESSEE - 5.1%
Cookeville Ind. Dev. Board Ind. Dev. Rev. (Delbar Products Inc. Proj.)
3.20%, LOC PNC Bank, VRDN (b) 1,400,000 1,400,000
Morristown Ind. Rev., VRDN: (b)
(Lakeway Container Inc. Proj.) Series 1993, 3.45%, LOC First Tennessee
Bank, NA. 2,500,000 2,500,000
(Tuff Torq Corp. Proj.) Series 1989, 3.40%, LOC Bank of Tokyo 1,450,000
1,450,000
Trenton Ind. Dev. Rev. (Dyersburg Fabrics Inc.) Series 1990, 3.10%, LOC
Trust Company Bank of Georgia, VRDN (b) 585,000 585,000
5,935,000
TEXAS - 8.1%
Greater East Texas Higher Ed. Auth. Student Loan Rev., Series 1988 A, 3%,
AMBAC Insured,
BPA Citibank, VRDN (b) 300,000 300,000
Greater East Texas Higher Ed. Student Loan Rev. Series 1991 A, 3.15%,
LOC Student Loan Mktg. Assoc., VRDN (b) 2,000,000 2,000,000
Harris County Toll Road Rev. Rfdg. Bonds Series 1994 X, 4.65% 10/28/94
1,000,000 1,002,506
Lower Colorado River Auth. Series B, 3.40% 8/9/94, Liquidity Facility
Morgan Guaranty Trust Co., CP 1,000,000 1,000,000
North Texas Higher Ed. Student Loan Rev. Bonds, Series 1991 C, 3.05%, AMBAC
Insured,
BPA Student Loan Mktg. Assoc., VRDN (b) 2,000,000 2,000,000
San Antonio Elec. & Gas Sys. Series A, 3.30% 8/9/94, CP 2,700,000
2,700,000
Travis County Hsg. Fin. Corp. Multi-Family Hsg. Rev. (Primecrest Ltd..
Proj.), VRDN: (b)
Series 1990 A, 3%, LOC Algemene Bank 300,000 300,000
Series 1990 B, 3%, LOC Algemene Bank 200,000 200,000
9,502,506
UTAH - 4.9%
Intermountain Pwr. Agcy. Participating VRDN, Series BT-49, 3.40%, BPA
Bankers Trust Co. (c) 1,698,300 1,698,300
Tooele County Waste Rev. Bonds (Union Pacific Corp./USPCI Proj.) Series
1992 A, 2.70%, tender 8/5/94
Liquidity Facility Union Pacific Corp. (b) 4,000,000 4,000,000
5,698,300
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MUNICIPAL SECURITIES (a) - CONTINUED
VIRGINIA - 2.6%
Virginia Hsg. Dev. Auth. Commonwealth Mtg. Rev. Bonds, Series 1993 E,
3.05%, tender, 8/10/94 (b) $ 2,000,000 $ 2,000,103
Virginia Hsg. Dev. Auth. Mtg. Bonds Series 1994 C, 2.85%, tender 8/10/94
(b) 1,100,000 1,100,000
3,100,103
WASHINGTON - 6.4%
Algona Econ. Dev. Corp. Ind. Rev. (Aitchison Family Partnership) Series
1992, 3.20%,
LOC Wells Fargo Bank, VRDN (b) 2,740,000 2,740,000
Port Angeles Ind. Dev. Corp. (Daishowa America Proj.) Series 1991, 3.20%,
LOC Industrial Bank of Japan, VRDN (b) 200,000 200,000
Port Longview Ind. Dev. Corp. Solid Waste Disp. Rev. (Weyerhaeuser Co.
Proj.) Series 1993, 3.15%, VRDN 2,000,000 2,000,000
Port of Grays Harbor Solid Waste Fac. Rev. (Pacific Veneer, Weyerhaeuser
Co.) Series1993, 3.15%, VRDN 2,500,000 2,500,000
7,440,000
WEST VIRGINIA - 1.3%
Wood County Ind. Dev. Rev. (AGA Gas Inc. Proj.) Series 1988, 2.85%, LOC
Svenska Handelsbanken, VRDN (b) 1,500,000 1,500,000
WISCONSIN - 3.5%
Appleton Ind. Dev. Rev. (Pensar Corp. Proj.) Series 1993, 3.25%, LOC Bank
One, Milwaukee, VRDN (b) 1,200,000 1,200,000
Racine Ind. Dev. Rev. (Burlington Graphic Sys.) Series 1994, 3.25%, LOC
Bank One, Milwaukee, VRDN (b) 1,835,000 1,835,000
Wisconsin TRAN Series 1994, 4.50% 6/15/95 1,000,000 1,005,202
4,040,202
WYOMING - 2.3%
Sweetwater County Env. Impt. Rev. Bonds (Pacific Corp. Proj.):
Series 1990 A:
3.05%, tender 8/11/94, LOC Nat'l. Westminster Bank 1,400,000 1,400,000
3.20%, tender 10/11/94, LOC Nat'l. Westminster Bank 1,300,000
1,300,000
2,700,000
TOTAL INVESTMENTS - 100% $ 116,767,174
Total Cost for Income Tax Purposes - $116,767,174

SECURITY TYPE ABBREVIATIONS:
BAN - Bond Anticipation Notes
CP - Commercial Paper
FRDN - Floating Rate Demand Notes
RAN - Revenue Anticipation Notes
TAN - Tax Anticipation Notes
TRAN - Tax & Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
VT - Variable Tender
LEGEND:
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals (AMT securities).
(c) Provides evidence of ownership in an underlying pool of municipal
bonds.
INCOME TAX INFORMATION:
At July 31, 1994 the fund had a capital loss carryforward of approximately
$13,000 of which $200, $5,600 $2,200 and $5,000 will expire on July 31,
1999, 2000, 2001 and 2002, respectively.
MUNICIPAL MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS

Statement of Assets and Liabilities

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
July 31, 1994

ASSETS

Investment in securities, at value (Note 1) - See accompanying schedule $ 116,767,174

Cash 296,760

Interest receivable 572,341

TOTAL ASSETS 117,636,275

LIABILITIES

Share transactions in process $ 1,003,893

Dividends payable 5,602

Accrued management fee 51,839

Other payables and accrued expenses 77,818

TOTAL LIABILITIES 1,139,152

NET ASSETS $ 116,497,123

Net Assets consist of :

Paid in capital $ 116,510,046

Accumulated net realized gain (loss) on investments (12,923)

NET ASSETS, for 116,510,046 shares outstanding $ 116,497,123

NET ASSET VALUE, offering price and redemption price per share ($116,497,123 (divided by)(hollow bullet) $1.00
shares)

</TABLE>

Statement of Operations

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended July 31, 1994

INTEREST INCOME $ 3,662,852

EXPENSES

Management fee (Note 4) $ 662,897

Transfer agent, accounting and custodian fees and expenses (Note 4) 95,163

Distribution fees (Note 4) 463,096

Non-interested trustees' compensation 804

Registration fees 126,934

Audit 18,019

Legal 3,875

Miscellaneous 2,257

Total expenses before 1,373,045
reductions

Expense reductions (68,560) 1,304,485
(Note 5)

NET INTEREST INCOME 2,358,367

NET REALIZED GAIN (LOSS) ON (4,997)
INVESTMENTS (NOTE 1)

</TABLE>

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,353,370

Statement of Changes in Net Assets

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED JULY 31,

1994 1993

INCREASE (DECREASE) IN NET ASSETS

Operations $ 2,358,367 $ 1,759,949
Net interest income

Net realized gain (loss) (4,997) (2,166)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,353,370 1,757,783

Dividends to shareholders from net interest income (2,358,367) (1,759,949)

Share transactions at net asset value of $1.00 per share 502,816,505 364,076,414
Proceeds from sales of shares

Reinvestment of dividends from net interest income 2,273,420 1,714,690

Cost of shares redeemed (504,861,716) (318,011,966)

Net increase (decrease) in net assets and shares resulting
from share transactions 228,209 47,779,138

TOTAL INCREASE (DECREASE) IN NET ASSETS 223,212 47,776,972

NET ASSETS

Beginning of period 116,273,911 68,496,939

End of period $ 116,497,123 $ 116,273,911

</TABLE>

NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JULY 31, 1994

1. SIGNIFICANT ACCOUNTING POLICIES.
Capital Reserves: Money Market Portfolio, U.S. Government Portfolio, and
Municipal Money Market Portfolio (the funds) are funds of Daily Money Fund
(the trust). The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Delaware business trust. Each fund is authorized to
issue an unlimited number of shares. The following summarizes the
significant accounting policies of the funds:
SECURITY VALUATION. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes all of its taxable income for the fiscal
year. The schedules of investments include information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
Municipal Money Market fund, accretion of market discount represents
unrealized gain until realized at the time of a security disposition or
maturity.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The funds' investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by
U.S. Treasury or Federal Agency obligations.
REVERSE REPURCHASE AGREEMENTS. At all times that a reverse repurchase
agreement is outstanding, the fund identifies cash and liquid securities as
segregated in its custodian records with a value at least equal to its
obligation under the agreement. On July 31, 1994, the U.S. Government fund
had a reverse repurchase agreement outstanding amounting to $13,899,000 at
4.00%. The agreement, which matured August 1, 1994, was collateralized by
$14,000,000 of U.S. Treasury Notes due August 15, 1994.
RESTRICTED SECURITIES. The Money Market and Municipal Money Market funds
are permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the period, restricted
securities (excluding 144A issues) amounted to $34,000,000 or 5.0% of net
assets for the Money Market fund.
3. JOINT TRADING ACCOUNT.
At the end of the period, the U.S. Government fund had 20% or more of its
total investments in repurchase agreements through a joint trading account.
These repurchase agreements were with entities whose creditworthiness has
been reviewed and found satisfactory by FMR. The repurchase agreements were
dated July 29, 1994 and due August 1, 1994. The maturity values of the
joint trading account investments were $162,057,243 at 4.24% and
$26,327,328 at 4.25%, respectively. The investments in repurchase
agreements through the joint trading account are summarized as follows:
SUMMARY OF JOINT TRADING ACCOUNT
MAXIMUM
AMOUNT AGGREGATE AGGREGATE AGGREGATE
NO. OF WITH ONE PRINCIPAL MATURITY MARKET COUPON MATURITY
DEALERS DEALER AMOUNT OF AMOUNT OF VALUE OF RATES OF DATES OF
OR BANKS OR BANK AGREEMENTS AGREEMENTS COLLATERAL COLLATERAL COLLATERAL
At 4.24% 11 38.4% $3,167,000,000 $3,168,119,063 $3,237,651,418 0%-14%
8/4/94-8/15/23
At 4.25% 6 16.9% $630,000,000 $630,223,300 $643,834,972 0%-14%
8/4/94-8/15/23
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a fee that
is computed daily at an annual rate of .50% of the fund's average net
assets.
SUB-ADVISER FEE. As each fund's investment sub-adviser, FMR Texas Inc., a
wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the
management fee payable to FMR. The fees are paid prior to any voluntary
expense reimbursements which may be in effect, and after reducing the fee
for any payments by FMR pursuant to each fund's Distribution and Service
Plan.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plans (the Plans), and in accordance with Rule 12b-1 of the 1940 Act, each
fund is authorized to pay its distributor, National Financial Services
Corporation (the Distributor), an affiliate of FMR, a monthly distribution
fee at an annual rate of .35% of its average net assets. The Distributor
may pay all or a portion of the fee to securities dealers or banks
(Qualified Recipients) that have selling agreements with each fund. In
addition, FMR may use its resources to pay Qualified Recipients who provide
shareholder support or distribution services at a maximum annual rate of up
to .25% of each fund's average net assets. Qualified Recipients, including
the Distributor acting in the capacity of a Qualified Recipient, may at
their discretion, retain any portion of their compensation and reallocate
the balance to their correspondents. For the period, FMR made payments
under the Plans in the amount of $1,555,114, $854,010 and $288,744 for the
Money Market, U.S. Government and Municipal Money Market funds,
respectively.
TRANSFER AGENT AND ACCOUNTING FEE. Fidelity Investments Institutional
Operations Company (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent for the Money Market and U.S.
Government funds. United Missouri Bank N.A. (the Bank) is the custodian and
transfer and shareholder servicing agent for the Municipal Money Market
fund. The Bank has entered into a sub-contract with FIIOC to perform the
activities associated with the Municipal Money Market fund's transfer and
shareholder servicing agent functions. FIIOC receives fees based on the
type, size, number of accounts and the number of transactions made by
shareholders of each fund. FIIOC pays for typesetting, printing and mailing
of all shareholder reports, except proxy statements. For the period, FIIOC
received transfer and shareholder servicing agent fees amounting to $43,149
for the Municipal Money Market fund.
Fidelity Service Co. (FSC), an affiliate of FMR, maintains the accounting
records for the Money Market and U.S. Government funds. The Bank also has a
sub-contract with FSC to maintain the Municipal Money Market fund's
accounting records. The accounting fee is based on the level of average net
assets for the month plus out-of-pocket expenses. For the period, FSC
received accounting fees amounting to $29,177 for the Municipal Money
Market fund.
5. EXPENSE REDUCTIONS.
For the period August 1, 1993 through September 30, 1993, FMR voluntarily
agreed to reimburse the funds for total operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses) above an
annual rate of .95% of average net assets. Effective October 1, 1993, this
expense limitation was increased to .99% of average net assets. For the
period, the reimbursement reduced expenses by $880,912, $152,522 and
$68,560 for the Money Market, U.S. Government and Municipal Money Market
funds, respectively.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Trustees of Daily Money Fund:
Capital Reserves: Money Market Portfolio
Capital Reserves: U.S. Government Portfolio
Capital Reserves: Municipal Money Market Portfolio
We have audited the accompanying statements of assets and liabilities of
Daily Money Fund: Capital Reserves: Money Market Portfolio, Capital
Reserves: U.S. Government Portfolio and Capital Reserves: Municipal Money
Market Portfolio, including the schedules of portfolio investments, as of
July 31, 1994 and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for the three years
then ended and for the period October 23, 1990 (Commencement of Operations)
to July 31, 1991 for the Money Market and U.S. Government Portfolios and
November 29, 1990 (Commencement of Operations) to July 31, 1991 for the
Municipal Money Market Portfolio. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments and cash held by the custodian as of July 31, 1994, and
confirmation by correspondence with brokers as to securities purchased but
not received at that date, or other auditing procedures where confirmations
from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of the Daily Money Fund: Capital Reserves: Money Market Portfolio, Capital
Reserves: U.S. Government Portfolio and Capital Reserves: Municipal Money
Market Portfolio as of July 31, 1994, the results of their operations for
the year then ended, the changes in their net assets for each of the two
years in the period then ended, and the financial highlights for the three
years then ended and for the period October 23, 1990 (Commencement of
Operations) to July 31, 1991 for the Money Market and U.S. Government
Portfolios and November 29, 1990 (Commencement of Operations) to July 31,
1991 for the Municipal Money Market Portfolio, in conformity with generally
accepted accounting principles.

COOPERS & LYBRAND L.L.P.
Dallas, Texas
August 25, 1994

NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK AND FUND
SHARES ARE NOT BACKED OR GUARANTEED BY
ANY BANK OR INSURED BY THE FDIC.

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CAPITAL RESERVES:
MONEY MARKET PORTFOLIO
U.S. GOVERNMENT PORTFOLIO
MUNICIPAL MONEY MARKET PORTFOLIO
PORTFOLIOS OF DAILY MONEY FUND
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 26, 1994
This Statement is not a prospectus but should be read in conjunction with
the Portfolios' current Prospectus (dated September 26, 1994). Please
retain this Statement for future reference. The Portfolios' financial
statements and financial highlights, included in the Annual Report, for the
fiscal period ended July 31, 1994 are attached to the Prospectus. To
obtain an additional copy of the Prospectus and Annual Report, please call
Fidelity nationwide at 800-843-3001. If you are investing through a
financial institution, contact that institution directly.
TABLE OF CONTENTS
Page
Investment Policies and Limitations 2
Portfolio Transactions 9
Valuation of Portfolio Securities 11
Performance 11
Additional Purchase and Redemption Information 16
Distributions and Taxes 16
FMR 18
Trustees and Officers 18
Management Contracts 20
Contracts with Companies Affiliated with FMR 22
Distribution and Service Plans 23
Description of the Fund 25
Financial Statements 27
Appendix 27
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
SUB-ADVISER
FMR Texas Inc. (FMR Texas)
DISTRIBUTOR
National Financial Services Corporation (the Distributor)
TRANSFER AGENTS
Fidelity Investments Institutional Operations Company (FIIOC)
United Missouri Bank, N.A. (United Missouri)
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a 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.
Each 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 (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.
INVESTMENT LIMITATIONS OF MONEY MARKET PORTFOLIO
THE FOLLOWING ARE MONEY MARKET PORTFOLIO'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE PORTFOLIO MAY NOT:
(1) with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities) if, as a
result thereof, (a) more than 5% of the Portfolio's total assets would be
invested in the securities of that issuer, or (b) the Portfolio would hold
more than 10% of the voting securities of such 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 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, except that the Portfolio
will invest more than 25% of its total assets in the financial services
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; or
(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 limit
does not apply to purchases of debt securities or to repurchase
agreements).
(9) The Portfolio may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies, and limitations as the
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 25% 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) 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.
(iv) 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.
(v) The Portfolio does not currently intend to lend assets other than
securities to other parties, except by lending money (up to 10% of the
Portfolio's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser. (This limitation
does not apply to purchases of debt securities or repurchase agreements).
(vi) 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.
(vii) The Portfolio does not currently intend to invest in oil, gas, or
other mineral exploration or development programs or leases.
(viii) The Portfolio does not currently intend to invest all of its assets
in the securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies, and
limitations as the Portfolio.
(ix) The Portfolio does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or traded together with, their underlying securities, and does
not apply to securities that incorporate features similar to options and
futures contracts.
INVESTMENT LIMITATIONS OF U.S. GOVERNMENT PORTFOLIO
THE FOLLOWING ARE U.S. GOVERNMENT PORTFOLIO'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE PORTFOLIO MAY NOT:
(1) with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities) if, as a
result thereof, (a) more than 5% of the Portfolio's total assets would be
invested in the securities of that issuer, or (b) the Portfolio would hold
more than 10% of the voting securities of such 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) or (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 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; or
(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 limit
does not apply to purchases of debt securities or to repurchase
agreements).
(9) The Portfolio may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies, and limitations as the
Portfolio.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) 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.
(ii) 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.
(iii) 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.
(iv) The Portfolio does not currently intend to make loans, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(v) 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.
(vi) The Portfolio does not currently intend to invest in oil, gas, or
other mineral exploration or development programs or leases.
(vii) The Portfolio does not currently intend to invest all of its assets
in the securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies, and
limitations as the Portfolio.
(viii) The Portfolio does not currently intend to purchase or sell
futures contracts or call options. This limitation does not apply to
options attached to, or traded together with, their underlying securities,
and does not apply to securities that incorporate features similar to
options and futures contracts.
INVESTMENT LIMITATIONS OF MUNICIPAL MONEY MARKET PORTFOLIO
THE FOLLOWING ARE MUNICIPAL MONEY MARKET PORTFOLIO'S FUNDAMENTAL
INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE PORTFOLIO MAY NOT:
(1) with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities) if, as a
result thereof, (a) more than 5% of the Portfolio's total assets would be
invested in the securities of that issuer, or (b) the Portfolio would hold
more than 10% of the voting securities of such 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) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation;
(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 securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
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; or
(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 limit
does not apply to purchases of debt securities or to repurchase
agreements).
(9) The Portfolio may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies, and limitations as the
Portfolio.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) 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.
(ii) 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 (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
Portfolio will not purchase any security while borrowings 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.
(iii) 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.
(iv) The Portfolio does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to purchases
of debt securities.
(v) 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.
(vi) The Portfolio does not currently intend to invest in oil, gas, or
other mineral exploration or development programs or leases.
(vii) The Portfolio does not currently intend to invest all of its assets
in the securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies, and
limitations as the Portfolio.
(viii) The Portfolio does not currently intend to invest more than 25% of
its total assets in industrial revenue bonds related to a single industry.
(ix) The Portfolio does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or traded together with, their underlying securities, and does
not apply to securities that incorporate features similar to options and
futures contracts.
AFFILIATED BANK TRANSACTIONS. The Portfolios may engage in transactions
with financial institutions that are, or may be considered to be,
" affiliated persons " of the Portfolios 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.
ASSET-BACKED SECURITIES. Asset-backed securities may include interests in
pools of mortgages, loans, receivables or other assets. Payment of
principal and interest may be largely dependent upon the cash flows
generated by the assets backing the securities, and, in certain cases,
supported by letters of credit, surety bonds, or other credit enhancements.
The value of asset-backed securities may also be affected by the
creditworthiness of the servicing agent for the pool, the originator of the
loans or receivables, or the financial institution(s) providing the credit
support.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and sold on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a Portfolio to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered.
When purchasing securities on a delayed-delivery basis, a Portfolio
assumes the rights and risks of ownership, including the risk of price and
yield fluctuations. Because a 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 a 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 a 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.
Each 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 a Portfolio's investments and, through reports from FMR,
the Board monitors investments in illiquid instruments. In determining the
liquidity of the Portfolios' 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 market place for
trades (including the ability to assign or offset the Portfolios' rights
and obligations relative to the investment). Investments currently
considered to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days. Also, FMR
may determine some restricted securities, time deposits and municipal lease
obligations to be illiquid . 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, a 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, a Portfolio
purchases a security and simultaneously commits to resell that security to
the seller at an agreed - upon price ^. The resale price reflects the
purchase price plus an agreed - upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security. A
repurchase agreement involves the obligation of the seller to pay the
agreed - upon resale 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. A Portfolio may engage in ^ repurchase ^
agreements with respect to any type of security in which it
is authorized to invest ^ (except that the security ^ may have a
maturity in excess of 397 days) . While it does not presently appear
possible to eliminate all risks from these transactions (particularly the
possibility of a ^ decline in the market value of the
underlying securities, as well as ^ delays and costs to a Portfolio
in connection with bankruptcy proceedings), it is ^ each Portfolio's
current policy to limit repurchase ^ agreement transactions to
those parties whose ^ creditworthiness has been reviewed and found
satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a Portfolio may be obligated to pay all or part
of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time the Portfolio may be
permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the
Portfolio might obtain a less favorable price than prevailed when it
decided to seek registration of the security. However, in general, the
Portfolios anticipate holding restricted securities to maturity or selling
them in an exempt transaction.
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 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. A
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. A 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 a 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 expenses, in connection with opening, maintaining and
closing short sales against the box.
VARIABLE OR FLOATING RATE OBLIGATIONS ^ provide for periodic
adjustments of the interest rate paid. Floating rate obligations have
interest rates that change whenever there is a change in a designated base
rate , while variable rate ^ obligations 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.
^ Some variable or floating rate obligations permit holders to demand
payment of the unpaid principal balance plus accrued interest from the
issuer or certain financial intermediaries. Issuers or financial
intermediaries who provide demand features or stand-by commitments often
obtain letters of credit (LOCs) or other guarantees from domestic or
foreign banks to support their repurchase commitments. FMR may rely upon
its evaluation of a bank's credit in determining whether to purchase an
obligation supported by an LOC. In evaluating a foreign bank's credit, FMR
will consider whether adequate public information about the bank is
available and whether the bank may be subject to unfavorable political or
economic developments, currency controls, or other governmental
restrictions that might affect the bank's ability to honor its credit
commitment.
^ When determining the maturity of a variable or floating rate
obligation, a 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 obligation.

^ TENDER OPTION BONDS and similarly structured obligations combine
previously issued notes or bonds with demand features and interest rate
adjustment features. These features cause the obligations to have an
effective maturity and price characteristics that qualify them for purchase
by a money market fund. The creditworthiness of the issuer of the
underlying bond, ^ third parties (such as banks or insurance companies),
that provide credit enhancement, and the party providing the demand or
tender feature may each affect the credit quality of the obligation and a
Portfolio could experience a loss if any of these parties fails to perform
its payment or repurchase obligations .
ZERO COUPON BONDS do not make regular interest payments. Instead, they
are sold at a deep discount from their 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, each Portfolio takes into account as income a portion of the
difference between a zero coupon bond's purchase price and its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement
at an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. A Portfolio may
acquire standby commitments to enhance the liquidity of portfolio
securities but only when the issuers of the commitments present minimal
risk of default.
Ordinarily Municipal Money Market Portfolio will not transfer a standby
commitment to a third party, although it could sell the underlying
municipal security to a third party at any time. The Portfolio may
purchase standby commitments separate from or in conjunction with the
purchase of securities subject to such commitments. In the latter case,
the Portfolio would pay a higher price for the securities acquired, thus
reducing their yield to maturity. Standby commitments will not affect the
dollar-weighted average maturity of the Portfolio, or the valuation of the
securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
purchase an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the Portfolio; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. A Portfolio may invest a portion of its
assets in municipal leases and participation interests therein. These
obligations, which may take the form of a lease, an installment purchase,
or a conditional sale contract, are issued by state and local governments
and authorities to acquire land and a wide variety of equipment and
facilities. Generally, the Portfolio will not hold such obligations
directly as a lessor of the property, but will purchase a participation
interest in a municipal obligation from a bank or other third party. A
participation interest gives the Portfolio a specified, undivided interest
in the obligation in proportion to its purchased interest in the total
amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
^ FEDERALLY TAXABLE OBLIGATIONS. Municipal Money Market Portfolio
does not intend to invest in securities whose interest is federally
taxable; however, from time to time, the Portfolio may invest a portion of
its assets on a temporary basis in fixed-income obligations whose interest
is subject to federal income tax. For example, the Portfolio may invest in
obligations whose interest is federally taxable pending the investment or
reinvestment in municipal securities of proceeds from the sale of its
shares or sales of portfolio securities.
Should the Portfolio invest in federally taxable obligations, it would
purchase securities that in FMR's judgment are of high quality. These
would include obligations issued or guaranteed by the U.S. government or
its agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. The Portfolio will purchase taxable obligations
only if they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before state legislatures that
would affect the state tax treatment of the Portfolio's distributions. If
such proposals were enacted, the availability of municipal obligations and
the value of the Portfolio's holdings would be affected and the Trustees
would reevaluate the Portfolio's investment objective and policies.
The Portfolio anticipates being as fully invested as practicable in
municipal securities; however, there may be occasions when, as a result of
maturities of portfolio securities, sales of Portfolio shares, or in order
to meet redemption requests, the Portfolio may hold cash that is not
earning income. In addition, there may be occasions when, in order to
raise cash to meet redemptions, the Portfolio may be required to sell
securities at a loss.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the Portfolios by FMR ^ pursuant to authority contained in each
Portfolio's management contract. ^ If FMR ^ grants
investment management authority to the sub-adviser (see the section
entitled "Management Contracts"), the sub-adviser ^ is authorized to
place orders for the purchase and sale of portfolio securities, and will do
so in accordance with the policies described below. FMR is also
responsible for the placement of transaction orders for other investment
companies and accounts for which it or its affiliates act as investment
adviser. Securities purchased and sold by the Portfolios generally will be
traded on a net basis (i.e., without commission). In selecting
brokers-dealers, subject to applicable limitations of the federal
securities laws, FMR ^ considers various relevant factors,
including, but not limited to, the size and type of the transaction; the
nature and character of the markets for the security to be purchased or
sold; the execution efficiency, settlement capability, and financial
condition of the broker- dealer firm; the broker-dealer's execution
services rendered on a continuing basis; and the reasonableness of any
commissions.
The Portfolios may execute portfolio transactions with broker-dealers who
provide research and execution services to the Portfolios 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 Portfolios are placed with
broker-dealers (including broker-dealers on the list) without regard to the
furnishing of such services, it is not possible to estimate the proportion
of such transactions directed to such broker-dealers solely because such
services were provided. The selection of such broker-dealers generally is
made by FMR (to the extent possible consistent with execution
considerations) based upon the quality of research and execution services
provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the Portfolios may be useful to FMR in rendering investment
management services to the Portfolios or ^ its other clients, and
conversely, such ^ research provided by broker-dealers who have
executed transaction orders on behalf of other FMR clients may be useful to
FMR in carrying out its obligations to the Portfolios. The receipt of such
research has not reduced FMR's normal independent research activities;
however, it enables FMR to avoid the additional expenses that could be
incurred if FMR tried to develop comparable information through its own
efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
the Portfolios 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 Portfolios and its other clients. In researching
this determination, FMR will not attempt to place a specific dollar value
on the brokerage and research services provided, or to determine what
portion of the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the Portfolios or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Brokerage Services, Ltd. (FBSL), subsidiaries of
FMR Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non- affiliated, qualified brokerage firms for
similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
Portfolios and review the commissions paid by each Portfolio over
representative periods of time to determine if they are reasonable in
relation to the benefits to the Portfolios.
For the fiscal years ended July 31, 1994, 1993, and 1992, the
Portfolios paid no brokerage commissions.
From time to time, the Trustees will review whether the recapture for the
benefit of the Portfolios of some portion of the brokerage commissions or
similar fees paid by the Portfolios on portfolio transactions is legally
permissible and advisable. Each 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 each Portfolio to seek
such recapture.
Although the Trustees and officers of each Portfolio are
substantially the same as those of other funds managed by FMR, investment
decisions for each 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 transactions are inevitable when
several funds and accounts are managed by the same investment adviser,
particularly when the same security is suitable for the investment
objective of more than one fund or account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as ^ each Portfolio is concerned. In
other cases, however, the ability of the Portfolios to participate in
volume transactions will produce better executions and prices for the
Portfolios. It is the current opinion of the Trustees that the
desirability of retaining FMR as investment adviser to ^ each
Portfolio outweighs any disadvantages that may be said to exist from
exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Each 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 each 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. Each Portfolio must adhere to certain conditions
under Rule 2a-7; these conditions are summarized in the Prospectus.
The Board of Trustees of the Fund oversees FMR's adherence to SEC rules
concerning money market funds, and has established procedures designed to
stabilize each Portfolio's NAV at $1.00. At such intervals as they deem
appropriate, the Trustees consider the extent to which NAV calculated by
using market valuations would deviate from $1.00 per share. If the
Trustees believe that a deviation from the Portfolios' 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, a Portfolio's yield based on
amortized cost may be higher than the yield based on market valuations.
Under these circumstances, a shareholder in a 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
^ Performance may be quoted in various ways. All performance
information supplied in advertising is historical and is not intended to
indicate future results. Share price, yield and total return fluctuate in
response to market conditions and other factors .
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of a Portfolio's 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 in a Portfolio 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 value 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 a
Portfolio's performance is not constant over time, but changes from year to
year, and that average annual returns represent averaged figures as opposed
to the actual year-to-year performance.
In addition to average annual returns, a Portfolio may quote unaveraged or
cumulative total returns reflecting the simple change in the value of an
investment over a stated period. 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 period. Total returns may be broken down into
their components of income and capital in order to illustrate the
relationship of these factors and their contributions to total return.
Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration. The Portfolios'
cumulative total returns and average annual returns for the fiscal year
ended July 31, 1994 were as follows:
MONEY MARKET PORTFOLIO
HISTORICAL ^ PORTFOLIO RESULTS

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

One Year Life ^ of Fund* One ^ Year Life of Fund^ *

2.72% 14.96% 2.72% 3.76%

</TABLE>

^ * From October 23, 1990 (commencement of operations)^
The following chart shows the income and capital elements of the
Portfolio's year-by-year total returns for the period October 23, 1990
through July 31, 1994 as compared to the cost of living measured by the
Consumer Price Index over the same period.
During the period from October 23, 1990 through July 31, 1994, a
hypothetical investment of $10,000 in the Portfolio would have grown to ^
$11,496 assuming all dividends were reinvested.
Value of Value of
Period Initial Value of Reinvested Consumer
Ended $10,000 Reinvested Capital Gains Total Price
7/31 Investment Dividends Distributions Value Index**
1991* $10,000 $ ^ 479 $0 $10,479 $10,202
1992 ^ 10,000 912 0 10,912 10,524
1993 ^ 10,000 1,192 0 11,192 10,816
1994 ^ 10,000 1,496 0 11,496 11,116
^ * From October 23, 1990 (commencement of operations)^
** From month-end closest to the initial investment date
Explanatory Notes: With an initial investment of $10,000 made on October
23, 1990, the net amount invested in shares of the Portfolio 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 ^ $11,496 . If
distributions had not been reinvested, the amount of distributions earned
from the Portfolio over time would have been smaller and the cash payments
(dividends) for the period would have come to ^ $1,397 . The
Portfolio did not distribute any capital gains during the period.
U.S. GOVERNMENT PORTFOLIO
HISTORICAL ^ PORTFOLIO RESULTS

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

One Year Life ^ of Fund* One ^ Year Life of Fund^ *

2.52% 14.43% 2.52% 3.64%

</TABLE>

^ * From October 23, 1990 (commencement of operations)^
The following chart shows the income and capital elements of the
Portfolio's year-by-year total returns for the period October 23, 1990
through July 31, 1994 as compared to the cost of living measured by the
Consumer Price Index over the same period.
During the period from October 23, 1990 through July 31, 1994, a
hypothetical investment of $10,000 in the Portfolio would have grown to ^
$11,443 assuming all dividends were reinvested.
Value of Value of
Period Initial Reinvested Value of Consumer
Ended $10,000 Dividends Reinvested Total Price
7/31 Investment Distributions Capital Gains Value Index **
1991* $10,000 $ ^ 466 $0 $10,466 $10,202
1992 ^ 10,000 900 0 10,900 10,524
1993 ^ 10,000 1,162 0 11,162 10,816
1994 ^ 10,000 1,443 0 11,443 11,116
^ * From October 23, 1990 (commencement of operations)^
** From month-end closest to the initial investment date
Explanatory Notes: With an initial investment of $10,000 made on October
23, 1990, the net amount invested in shares of the Portfolio 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 ^ $11,443 . If
distributions had not been reinvested, the amount of distributions earned
from the Portfolio over time would have been smaller and the cash payments
(dividends) for the period would have come to ^ $1,350 . The
Portfolio did not distribute any capital gains during the period.
MUNICIPAL MONEY MARKET PORTFOLIO
HISTORICAL ^ PORTFOLIO RESULTS

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

One Year Life ^ of Fund* One ^ Year Life of Fund^ *

1.80% 10.07% 1.80% 2.65%

</TABLE>

^ * From November 29, 1990 (commencement of operations)
^
The ^ chart on the following page shows the income and capital
elements of the Portfolio's year-by-year total returns for the period
November 29, 1990 through July 31, 1994 as compared to the cost of living
measured by the Consumer Price Index over the same period.
During the period from November 29, 1990 through July 31, 1994, a
hypothetical investment of $10,000 in the Portfolio would have grown to ^
$11,007 assuming all dividends were reinvested.
Value of Value of Value of
Period Initial Reinvested Reinvested Consumer
Ended $10,000 Dividend Capital Gains Total Price
7/31 Investment Distributions Distributions Value Index **
1991* $10,000 $ ^ 282 $0 $10,282 $10,179
1992 ^ 10,000 605 0 10,605 10,501
1993 ^ 10,000 813 0 10,813 10,792
1994 ^ 10,000 1,007 0 11,007 11,091
^ * From November 29, 1990 (commencement of operations)^
** From month-end closest to the initial investment date
Explanatory Notes: With an initial investment of $10,000 made on November
29, 1990, the net amount invested in shares of the Portfolio 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 ^ $11,007 . If
distributions had not been reinvested, the amount of distributions earned
from the Portfolio over time would have been smaller and the cash payments
(dividends) for the period would have come to ^ $961 . The Portfolio
did not distribute any capital gains during the period.
^
Each Portfolio's performance may be compared to the performance of other
mutual funds in general, or to the performance of particular types of
mutual funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that monitors the performance of
mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank the Portfolios based on yield. In
addition to the mutual fund rankings, a Portfolio's performance may be
compared to mutual fund performance indices prepared by Lipper.
From time to time, a Portfolio's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, a Portfolio may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A Portfolio may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks or other depository
institutions. Mutual funds differ from bank investments in several
respects. For example, a Portfolio may offer greater liquidity or higher
potential returns than CDs, and a Portfolio does not guarantee your
principal or your return, and Portfolio shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial strategies.
For example, Fidelity's FundMatch$ Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to
those of the funds. Ibbotson calculates total returns in the same method
as the funds. The funds may also compare performance to that of other
compilations or indices that may be developed and made available in the
future.
A 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 IBC/Donoghue's MONEY FUND
AVERAGES(trademark) /All Taxable, which is reported in the MONEY FUND
REPORT(registered trademark), covers over 680 taxable money market funds
and the IBC/Donoghue's MONEY FUND AVERAGES(trademark)/All Tax-Free, which
is reported in the MONEY FUND REPORT(registered trademark), covers over 360
tax-free money market funds.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; charitable
giving; and the Fidelity credit card. In addition, Fidelity may quote
financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques. Fidelity may also reprint, and use
as advertising and sales literature, articles from Fidelity Focus, a
quarterly magazine provided free of charge to Fidelity fund
shareholders.
A Portfolio may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
Money Market Portfolio and U.S. Government Portfolio may be available
for purchase through retirement plans or other programs offering deferral
of, or exemption from, income taxes, which may produce superior after-tax
returns over time. For example, a $1,000 investment earning a taxable
return of 10% annually would have an after-tax value of $1,949 after ten
years, assuming tax was deducted from the return each year at a 31% rate.
An equivalent tax-deferred investment would have an after-tax value of
$2,100 after ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
Municipal Money Market Portfolio may compare and contrast in
advertising the relative advantages of investing in a mutual fund versus an
individual municipal bond. Unlike tax-free mutual funds, individual
municipal bonds offer a stated rate of interest and, if held to maturity,
repayment of principal. Although some individual municipal bonds might
offer a higher return, they do not offer the reduced risk of a mutual fund
that invests in many different securities. The initial investment
requirements and sales charges of many tax-free mutual funds are lower than
the purchase cost of individual municipal bonds, which are generally issued
in $5,000 denominations and are subject to direct brokerage costs.
Municipal Money Market Portfolio also may quote its tax-equivalent
yield, which shows the taxable yield an investor would have to earn, before
taxes, to equal the Portfolio's tax-free yield. A tax-equivalent yield is
calculated by dividing the Portfolio's tax-exempt yield by the result of
one minus a state federal and/or state tax rate.
The following chart, based on 1994 tax tables, may be used to indicate
approximate effective federal tax brackets and tax-equivalent yields.
1994 TAX RATES AND TAX-EQUIVALENT YIELDS

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Federal If individual tax-free yield is:

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Single Return* Joint Return* Bracket Then taxable-equivalent yield is:
**

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 22,751 - $ 55,100 $ 38,001 - $ 91,850 28% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72% 11.11%

$ 55,101 - $115,000 $ 91,851 - $140,000 31% 2.90% 4.35% 5.80% 7.25% 8.70% 10.14% 11.59%

$115,001 - $250,000 $140,001 - $250,000 36% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94% 12.50%

$250,001 - + $250,001 - + 39.6% 3.31% 4.97% 6.62% 8.28% 9.93% 11.59% 13.25%

</TABLE>

*Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only; does not include impact of
preferential rate on long-term capital gain income.
**Excludes the impact of the phaseout of personal exemptions, limitation
on itemized deductions, and other credits, exclusions, and adjustments
which may raise a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's tax-
equivalent yield.
Each Portfolio may reference the growth and variety of money market
mutual funds and the adviser's innovation and participation in the
industry.
According to the Investment Company Institute, over the past ten years,
sales in tax-exempt funds increased from ^ $63.7 billion in ^
1984 to approximately ^ $357.9 billion at the end of ^
1993 .
ADDITIONAL PURCHASE 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 a Portfolio's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 (the Rule) under the 1940 Act, a 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
an exchange, or (ii) a Portfolio suspends the redemption of 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 Portfolios have notified shareholders that they reserve the right at
any time, without prior notice, to refuse exchange purchases by any person
or group if, in FMR's judgment, the Portfolios would be unable to invest
effectively in accordance with their investment objectives and policies, or
would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
MONEY MARKET PORTFOLIO AND U.S. GOVERNMENT PORTFOLIO DIVIDENDS: Dividends
from each Portfolio will not normally qualify for the dividends-received
deduction available to corporations, since each Portfolio's income is
primarily derived from interest income and short- term capital gains.
Depending upon state law, a portion of each Portfolio's dividends
attributable to interest income derived from U.S. government securities may
be exempt from state and local taxation. The Portfolios will provide
information on the portion of each Portfolio's dividends, if any, that
qualify for this exemption.
MUNICIPAL MONEY MARKET PORTFOLIO 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
tax-exempt interest income and short-term capital gains. Depending upon
state law, a portion of each Portfolio's dividends attributable to
tax-exempt interest earned on obligations issued by that state 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: Long-term capital gains (if any) earned by
Municipal Money Market Portfolio on the sale of securities and distributed
to shareholders are federally taxable as long-term capital gains,
regardless of the length of time that shareholders have held their shares.
If a shareholder receives a long-term capital gain distribution on shares
of the Portfolio and such shares are held six months or less and are sold
at a loss, the portion of the loss equal to the amount of the long-term
capital gain distribution will be considered a long-term loss for tax
purposes.
A portion of the gain on bonds purchase at a discount after April 30, 1993
and short-term capital gains distributed by the Portfolio are federally
taxable to shareholders as dividends, not as capital gains. Distributions
from short-term capital gains do not qualify for the dividends-received
deduction. Dividend distributions resulting from a recharacterization of
gain from the sale of bonds purchased at a discount after April 30, 1993
are not considered income for purposes of Municipal Money Market
Portfolio's policy of investing so that at least 80% of its income is free
from federal income tax. Each Portfolio may distribute any net realized
short-term capital gains once a year or more often as necessary to maintain
its NAV at $1.00 per share.
TAX STATUS OF THE PORTFOLIOS: Each Portfolio has qualified and intends to
qualify as a "registered investment company" under the Internal Revenue
Code of 1986, as amended (the Code), so that each 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.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities (referred to as "qualified bonds" in the Internal
Revenue Code) is subject to the federal alternative minimum tax (AMT),
although the interest continues to be excludable from gross income for
other tax purposes. Interest from private activity securities is a
tax-preference item for the purposes of determining whether a taxpayer is
subject to the AMT and the amount of AMT to be paid, if any. Private
activity securities issued after August 7, 1986 to benefit a private or
industrial uses or to finance a private facility are affected by this rule.
In order for Municipal Money Market Portfolio to distribute its tax-
exempt interest as exempt interest dividends, it must hold at least 50% of
its total assets in tax-exempt obligations at the end of each fiscal
quarter. Because Municipal Money Market Portfolio intends to invest
substantially all of its assets in tax-exempt obligations, the Portfolio
expects to comply with the 50% asset test. The Portfolio purchases
municipal obligations based on the opinions of counsel regarding the
federal income tax status of the obligations. These opinions generally
will be based upon covenants by the issuers regarding continuing compliance
with federal tax requirements. If the issuer of an obligation fails to
comply with its covenants at any time, interest on the obligation could
become federally taxable retroactive to the date the obligation was issued.
STATE AND LOCAL TAX ISSUES. For mutual funds organized as business trusts,
most state law provides for a pass-through of the state and local income
tax exemption afforded to direct owners of U.S. government securities.
Some states limit this pass through to mutual funds that invest a certain
amount in U.S. government securities; and some types of securities, such as
repurchase agreements and some agency-backed securities, may not qualify
for this pass-through benefit. The tax treatment of your dividend
distributions from the U.S. Government Portfolio will be the same as if you
directly owned your proportionate share of the U.S. government securities
in the fund's portfolio. 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. The exemption from state and local income taxation does not
preclude states from assessing other taxes on the ownership of U.S.
government securities.
FMR
FMR is a wholly owned subsidiary of FMR Corp., ^ ultimate parent
company organized in 1972. All of the stock of FMR is owned by FMR
Corp. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp. At present, the principal
operating activities of FMR Corp. are those conducted by three of its
divisions as follows: Fidelity Service Co., which is the transfer and
shareholder servicing agent for certain of the funds advised by FMR; FIIOC,
which performs shareholder servicing functions for certain institutional
customers; and Fidelity Investments Retail Marketing Company, which
provides marketing services to various companies within the Fidelity
organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. Fidelity Management & Research (U.K.) Inc. (FMR
U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far East),
both wholly owned subsidiaries of FMR formed in 1986, supply investment
research, and may supply portfolio management services, to FMR in
connection with certain funds advised by FMR. Analysts employed by FMR, FMR
U.K. and FMR Far East research and visit thousands of domestic and foreign
companies each year. FMR Texas, a wholly owned subsidiary of FMR formed in
1989, supplies portfolio management and research services in connection
with certain money market funds advised by FMR.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. Trustees and officers elected or
appointed 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 serve in similar capacities for
other funds advised by FMR. Unless otherwise noted, the business address
of each Trustee and officer is 82 Devonshire Street, Boston, Massachusetts
02109, which is also the address of FMR. Those Trustees who are
" interested persons " (as defined in the Investment Company
Act of 1940) by virtue of their affiliation with 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). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill Corporation (non-hazardous
waste, 1993) and CH2M Hill Companies (engineering). In addition, he served
on the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, 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), and York International Corp. (air conditioning and
refrigeration, 1989), Commercial Intertech Corp. (water treatment
equipment, 1992) and Associated Estates Realty Corporation (a real estate
investment trust, 1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee^.
Prior to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer).
In addition, he serves as a Trustee of Corporate Property Investors, the
EPS Foundation at Trinity College, the Naples Philharmonic Center for the
Arts, and Rensselaer Polytechnic Institute, and he is a member of the
Advisory Boards of Butler Capital Corporation Funds and Warburg, Pincus
Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company of
Vermont, American Software, Inc. (1989), and AppleSouth Inc. (restaurants,
1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior
Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel
of FMR, Vice President-Legal of FMR Corp., and Clerk of Fidelity
Distributors Corporation.
FRED L. HENNING, Jr., Vice President (1994), is Vice President of
Fidelity's money market funds and Senior Vice President of FMR Texas.
THOMAS D. MAHER, Assistant Vice President (1990), is Assistant Vice
President of Fidelity's money market funds and Vice President and Associate
General Counsel of FMR Texas Inc. (1990). Prior to 1990, Mr. Maher was
an employee of FMR and Assistant Secretary of all the Fidelity funds
(1985-1989).
LELAND BARRON, Vice President of U.S. Government Portfolio (1994) is an
employee of FMR.
ROBERT LITTERST, Vice President of Money Market Portfolio (1992), is an
employee of FMR.
SARAH ZENOBLE, Vice President of Municipal Money Market Portfolio (1992)
is an employee of FMR.
Under a retirement ^ program that became effective November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the ^ Portfolios based on their 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, 1994, the Trustees and officers of the Fund owned in
the aggregate less than 1% of each Portfolio's outstanding shares.
MANAGEMENT CONTRACTS
Each Portfolio employs FMR to furnish investment advisory and other
services. Under its management contract with each Portfolio, FMR acts as
investment adviser and, subject to the supervision of the Board of
Trustees, directs the investments of each Portfolio in accordance with its
investment objective, policies, and limitations. FMR also provides each
Portfolio with all necessary office facilities and personnel for servicing
the Portfolio's investments, and compensates all officers of the Fund, all
Trustees who are an " interested persons " of the Fund or of
FMR, and all personnel of the Fund or FMR performing services relating to
research, statistical and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of each Portfolio. These services include
providing facilities for maintaining each Portfolio's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with each Portfolio;
preparing all general shareholder communications and conducting shareholder
relations; maintaining each Portfolio's records and the registration of
each Portfolio's shares under federal and state law; developing management
and shareholder services for each Portfolio; and furnishing reports,
evaluations and analyses on a variety of subjects to the Board of Trustees.
In addition to the management fees payable to FMR, payments under each
Portfolio's Distribution and Service Plan and the fees payable to FIIOC,
each Portfolio pays all of its expenses, without limitation, that are not
assumed by those parties. Each Portfolio pays for typesetting, printing,
and mailing of proxy material to shareholders, legal expenses, and the fees
of the custodian, auditor, and non-interested Trustees. Other expenses
paid by the Portfolios include interest , taxes, brokerage
commissions, the Portfolios' proportionate share of insurance premiums and
Investment Company Institute dues, and costs of registering shares under
various federal and state securities laws. The Portfolios are also liable
for such nonrecurring expenses as may arise, including costs of any
litigation to which a Portfolio may be a party, and any obligation it may
have to indemnify the Fund's officers and Trustees with respect to
litigation.
FMR is each Portfolio's manager pursuant to a management contract dated
September ^ 30 , 1993. For the services of FMR under each contract,
each Portfolio pays FMR a monthly management fee at the annual rate of .50%
of the average net assets of that Portfolio throughout the month. For the
fiscal years ended July 31, 1994, 1993, and 1992, FMR received the
following fees:

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio 1994 1993 ^ 1992
U.S. Government Portfolio $3,322,784 $2,216,684 $1,052,468
Municipal Money Market Portfolio 1,571,910 1,347,482 1,052,067
662,897 458,762 243,546

</TABLE>

During these periods FMR voluntarily agreed to reimburse each Portfolio if
and to the extent that, the operating expenses of each Portfolio, including
management fees but excluding certain expenses were in excess of an annual
rate of ^ .99% of its average net assets. For the fiscal years ended
July 31, 1994, 1993, and 1992, the total operating expenses exceeded the
limitations by the following amounts:

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio 1994 1993 1992
U.S. Government Portfolio $880,912 $844,393 $ 728,122
Municipal Money Market Portfolio 152,522 329,676 1,037,629
68,560 252,273 216,109

</TABLE>

^ To comply with the California Code of Regulations, FMR will reimburse a
Portfolio if and to the extent that a 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, a Portfolio may exclude interest, taxes, brokerage commissions,
and extraordinary expenses, as well as a portion of its distribution plan
expenses.
SUB-ADVISER. On behalf of each Portfolio, FMR has entered into a sub-
advisory agreement dated September 30, 1993 with FMR Texas pursuant
to which FMR Texas has primary responsibility for providing portfolio
investment management services to the Portfolios.
Under each sub-advisory agreement, FMR pays FMR Texas fees equal to 50% of
the management fee retained by FMR under its current management contract
with each Portfolio, after payments by FMR pursuant to each Portfolio's
12b-1 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.
The table below shows fees paid to FMR Texas for the fiscal years ended
July 31, 1994, 1993, and 1992.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio 1994 1993 ^ 1992
U.S. Government Portfolio $883,835 $690,829 $206,724
Municipal Money Market Portfolio 358,950 435,543 116,058
187,077 149,002 47,905

</TABLE>

CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
FIIOC is transfer, dividend disbursing, and shareholders' servicing agent
for Money Market Portfolio and U.S. Government Portfolio. United Missouri
is the custodian and transfer agent for Municipal Money Market Portfolio.
United Missouri has a sub-contract with FIIOC under which FIIOC performs as
transfer, dividend disbursing, and shareholders' servicing agent for
Municipal Money Market Portfolio. Under the Fund's contracts with FIIOC
and United Missouri's subcontract with FIIOC, each Portfolio pays a
per-account fee of $95 and a monetary transaction fee of $20 or $17.50
depending on the nature of the services provided. From June 1, 1990
through December 31, 1992, FIIOC was paid a per account fee and a monetary
transaction fee of $65 and $14, or $60 and $12, respectively. Fees for
certain institutional retirement plan accounts are based on the net assets
of all such accounts in Money Market Portfolio and U.S. Government
Portfolio. Under the contracts, FIIOC pays out-of-pocket expenses
associated with providing transfer agent services. In addition, FIIOC
bears the expense of typesetting, printing, and mailing prospectuses,
statements of additional information, and all other reports, notices, and
statements to shareholders, with the exception of proxy statements.
Transfer agent fees, including reimbursement for out-of-pocket expenses,
paid to FIIOC for the fiscal years ended July 31, 1994, 1993, and 1992 are
shown in the table below.
TRANSFER AGENT FEES

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio 1994 1993 1992
U.S. Government Portfolio ^ $1,413,536 $888,002 $371,500
Municipal Money Market Portfolio ^ 287,530 210,488 119,614
^ 43,149 49,660 26,798

</TABLE>

The Fund (on behalf of each of Money Market Portfolio and U.S. Government
Portfolio) has a contract with Service and United Missouri (on behalf of
Municipal Money Market Portfolio) has a subcontract with Service. The
contracts provide that Service will perform the calculations necessary to
determine the Portfolios' net asset value per share and dividends, and
maintain the Portfolios' accounting records. The fee rates in effect are
based on a Portfolio's 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. Pricing and bookkeeping fees, including related
out-of-pocket expenses, paid to Service for fiscal 1994, 1993, and 1992 are
shown in the table ^ on the following page .
PRICING AND BOOKKEEPING FEES

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio 1994 1993 1992
U.S. Government Portfolio ^ $99,866 $76,919 $30,943
Municipal Money Market Portfolio ^ 55,216 ^ 47,337 33,693
^ 29,177 26,418 28,699

</TABLE>

The transfer agent fees and charges, and pricing and bookkeeping fees
described above for Municipal Money Market Portfolio are paid by United
Missouri, which is entitled to reimbursement from Municipal Money Market
Portfolio for these expenses.
Each Portfolio has a Distribution Agreement with National Financial
Services Corporation (the Distributor), a Massachusetts corporation
organized June 3, 1981. The Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. Each distribution agreement calls
for the Distributor to use all reasonable efforts, consistent with its
other business, to secure purchasers for shares of the Portfolios, which
are continuously offered at net asset value. Promotional and administrative
expenses in connection with the offer and sale of shares are paid by FMR.
DISTRIBUTION AND SERVICE PLANS
The Trustees of the Fund , on behalf of each Portfolio , have
adopted a Distribution and Service Plan (each , a Plan) ^
under Rule 12b-1 ^ of the Investment Company Act of 1940 . 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 reasonable likelihood that the Plan
will benefit each Portfolio and its shareholders. In particular, the
Trustees noted that payments under the Plans may provide additional
incentives to promote the sale of shares of the Portfolios, which may
result in additional sales of the Portfolio's shares and an increase in the
Portfolios' assets. Each Portfolio pays the Distributor a distribution fee
as compensation for its services and expenses in connection with the
distribution of shares of the Portfolios at the annual rate of .35% of its
average net assets determined as of the close of business on each day
throughout the month. This distribution fee is paid by the Portfolios, not
by individual accounts.
The Distributor may pay all or a portion of the distribution fee to
securities dealers and banks that have selling agreements with the
Portfolios (Qualified Recipients) as compensation for selling shares of the
Portfolios and providing ongoing shareholder support services. In
addition, the Plans also specifically recognize that FMR may make payments
from its management fee revenue, past profits or other resources to
Qualified Recipients for their services to the Portfolios' shareholders.
Qualified Recipients currently may be compensated by FMR at a maximum
annual rate of up to .25% of the average net assets of the Portfolios with
respect to which they provide or have provided shareholder support or
distribution services. The percentage amount payable varies according to
the aggregate dollar level of assets to which the Qualified Recipient is
related in all three Portfolios. The Distributor also may act in the
capacity of a Qualified Recipient, and as such may receive compensation
under the Plans. Qualified Recipients, including the Distributor acting in
the capacity of a Qualified Recipient, at their discretion may retain any
portion of their compensation received pursuant to the Plans and reallow
the balance of such compensation to their correspondents. Under the Plans,
if the payment by the Portfolio to FMR of management fees should be deemed
to be indirect financing of the distribution of the Portfolio's shares,
such payment is authorized by the Plan. The table below shows distribution
fees that each Portfolio paid to the Distributor for the ^ fiscal ^
years ended July 31, 1994 , 1993, and 1992 .

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio 1994 1993 1992
U.S. Government Portfolio $2,325,949 $1,551,678 $736,728
Municipal Money Market Portfolio 1,100,338 943,237 736,447
463,096 321,133 170,483

</TABLE>

The table below shows fees paid by FMR on behalf of each Portfolio
under the Plans for fiscal 1994, 1993 and 1992.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio 1994 1993 ^ 1992
U.S. Government Portfolio $1,555,114 $835,027 $639,020
Municipal Money Market Portfolio 854,010 476,396 819,952
288,744 160,759 147,736

</TABLE>

For fiscal 1994, 1993, and 1992, the Distributor reallocated ^ the
following amounts to non-affiliated third parties, as shown in the table
below.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio 1994 1993 ^ 1992
U.S. Government Portfolio $1,834,468 $1,285,593 $946,281
Municipal Money Market Portfolio 573,088 464,693 742,278
406,997 251,561 217,870

</TABLE>

Out of fees paid by the Portfolios and FMR for the 1994, 1993, and 1992
fiscal periods, the Distributor retained the following amounts:

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio 1994 1993 1992
U.S. Government Portfolio $1,471,097 $1,101,112 $429,467
Municipal Money Market Portfolio 974,958 954,940 814,121
250,578 230,331 100,349

</TABLE>

Each Plan may be deemed by the Staff of the SEC to be a
" compensation plan " because payments made are not tied
directly to actual expenses incurred, and the Distributor is given
discretion concerning what expenses are payable under the Plan. The fees
received by the Distributor pursuant to the Plan may exceed or,
particularly in the early years of the Portfolios, be less than the
estimated direct and indirect costs incurred by the Distributor in
providing its services under the Plan and the General Distribution
Agreement with each Portfolio. If the fees received exceed expenses
incurred, the Distributor may be deemed to have received a
" profit " to the extent of such excess. For example, if the
Distributor pays $1 for distribution related expenses and receives $2 under
the Plan, the $1 difference could be said to be a profit for the
Distributor. If the fees received are less than expenses incurred, each
Plan does not carryover any excess costs over fees to a subsequent annual
period. Any revenue from an increase in distribution fees may not be used
against excess costs incurred in a previous period.
The Plans do not provide for specific payment by each Portfolio of any of
the expenses of the Distributor, nor obligate the Distributor or FMR to
perform any specific type or level of distribution activities or incur any
specific level of expense in connection with distribution activities.
After payments by the Distributor for advertising, marketing and
distribution and payments to Qualified Recipients, the amounts remaining,
if any, may be used as the Distributor may elect.
Functions of Qualified Recipients may include, among other things,
services rendered in the distribution of shares of the Portfolios,
answering routine client inquiries regarding a Portfolio, providing
necessary facilities and personnel to establish and maintain shareholder
records, processing purchase and redemption transactions, processing
automatic investment and redemption of client cash account balances,
assisting clients in changing dividend options, account registrations and
addresses, performing sub-accounting, arranging for bank wires, and
providing such other services as the Portfolios may reasonably request, to
the extent the Qualified Recipient is permitted to do so by applicable
statute, rule or regulation.
The fees to be paid to Qualified Recipients, and the basis on which
payment is made, are determined by Distributors and/or FMR; provided,
however, that a majority of the Board of Trustees, including a majority of
those Trustees who are not "interested persons" of the Portfolios and have
no direct or indirect interest in the operations of the Plans or any
related agreements (the "Independent Trustees") may at any time and from
time to time decrease the maximum percentage amount and/or maximum total
amount payable to Qualified Recipients with respect to the shares to which
they are related, or remove any person as a Qualified Recipient.
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 the Distributor's
opinion it should not prohibit banks from being paid for shareholder
servicing and recordkeeping functions. The Distributor intends to engage
banks only to perform such functions. However, changes in federal or state
statutes and regulation pertaining to the permissible activities of banks
and their affiliates or subsidiaries, as well as further judicial or
administrative decisions or interpretations, could prevent a bank from
continuing to perform all or a part of the contemplated services. If a bank
were prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of a
Portfolio might occur, including possible termination of any automatic
investment or redemption or other services then provided by the bank. It
is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. Each Portfolio may
execute portfolio transactions with and purchase securities issued by
depository institutions that act as Qualified Recipients. No preference
will be shown in the selection of investments for the instruments of such
depository institutions acting as Qualified Recipients under the Plans. 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.
Under its terms, each Plan shall remain in effect from year to year as
long as such continuance is approved at least annually by a vote of a
majority of the Trustees and of the Independent Trustees. Each Plan may
not be amended to increase materially the amount to be spent for
distribution without the approval of a majority of the outstanding shares
of the Portfolio, and may not be materially amended in any case without a
vote of a majority of the outstanding shares of the Portfolio, and may not
be materially amended in any case without a vote of a majority of the
Trustees and of the Independent Trustees. So long as each Plan is in
effect, the selection and nomination of the Trustees who are not interested
persons of the Fund shall be committed to the discretion of the Trustees
who are not interested persons of the Fund. Each Plan may be terminated at
any time by vote of a majority of the Independent Trustees, or by vote of a
majority of the outstanding shares of a Portfolio, and terminates
automatically in the event of its assignment.
DESCRIPTION OF THE FUND
TRUST ORGANIZATION. Capital Reserves: Money Market Portfolio, U.S.
Government Portfolio and Municipal Money Market Portfolio are portfolios of
Daily Money Fund (the Fund), an open-end management investment company
organized as a Delaware business trust on September 29, 1993. The
Portfolios acquired all of the assets of Capital Reserves: Money Market
Portfolio, U.S. Government Portfolio, and Municipal Money Market Portfolio,
respectively, portfolios of Daily Money Fund, a Massachusetts business
trust, on September 29, 1993. Currently, there are six series of the Fund:
Money Market Portfolio, U.S. Treasury Portfolio, Capital Reserves: Money
Market Portfolio, Capital Reserves: U.S. Government Portfolio, Capital
Reserves: Municipal Money Market Portfolio, and Fidelity U.S. Treasury
Income Portfolio. The Trust Instrument permits the Trustees to create
additional series.
In the event that FMR ceases to be the investment adviser to the Fund or a
Portfolio, the right of the Fund or 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 with respect to 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 expense 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 each Portfolio's property of any shareholder or
former shareholder held personally liable for the obligations of the
Portfolio. The Trust Instrument also provides that each 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 shareholder liability is limited to circumstances in which
Delaware law does not apply, no contractual limitation of liability was in
effect, 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 extremely remote.
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 Trustees are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
VOTING RIGHTS. Each Portfolio's capital consists of shares of beneficial
interest. The shares have no preemptive or conversion rights; the voting
and dividend rights, the right of redemption, and the privilege of exchange
are described in the Prospectus. Shares are fully paid and nonassessable,
except as set forth under the heading " Shareholder and Trustee Liability"
above. Shareholders representing 10% or more of the Fund or a Portfolio
may, as set forth in the Trust Instrument, call meetings of the Fund or
Portfolio for any purpose related to the Fund or Portfolio, 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 any Portfolio may be terminated upon the sale 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 each Portfolio 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 Fund 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's registration
statement. Each portfolio may invest all of its assets in another
investment company.
As of ^ July 31 , 1994, the following owned of record or
beneficially 5% or more of the outstanding shares of the Portfolios:
U.S. GOVERNMENT MONEY MARKET PORTFOLIO: Texas Commerce Bank, N.A.,
Houston, TX owned 41%; FirsTier Bank, Omaha, NE owned 8%; Citibank Arizona,
Phoenix, AZ owned 7%; and Saperston Financial Group, Buffalo, NY owned
6%.
MONEY MARKET PORTFOLIO: Muriel Siebert & Co., Inc., New York, NY owned
13%; Morgan Stanley Asset Management Inc., New York, NY owned 8%;
Securities America Inc., Omaha, NE owned 7%; and H.P. Vest Advisory
Service, Irving, TX owned 6%.
MUNICIPAL MONEY MARKET PORTFOLIO: FirsTier Bank, Omaha, NE owned 13%;
Securities America Inc., Omaha, NE owned 9%; Muriel Siebert & Co., Inc.,
New York, NY owned 8%; and Texas Commerce Bank, N.A. Houston, TX owned
8%.
A shareholder owning of record or beneficially more than 25% of a
Portfolio's outstanding shares may be considered a controlling person.
That shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other shareholders of a
Portfolio. ^
CUSTODIAN. Morgan Guaranty Trust Company of New York, 60 Wall Street, New
York, New York 10260 is custodian of the assets of Money Market Portfolio
and U.S. Government Portfolio. United Missouri Bank, N.A., 1010 Grand
Avenue, Kansas City, Missouri 64106 is custodian of the assets of Municipal
Money Market Portfolio.
The custodians are responsible for the safekeeping of the Portfolios'
assets and the appointment of subcustodian banks and clearing agencies.
The custodians take no part in determining the investment policies of each
Portfolio or in deciding which securities are purchased or sold by each
Portfolio. Each Portfolio may, however, invest in obligations of the
custodian and may purchase or sell securities from 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 that,
including the 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 Portfolio relationships.
AUDITOR. ^ Coopers & Lybrand L.L.P. , 1999 Bryan Street, Dallas,
Texas serves as the Fund's independent accountant. The auditor examines
financial statements for the Portfolios and provides other audit, tax, and
related services.
FINANCIAL STATEMENTS
Each Portfolio's financial statements and financial highlights for the
fiscal ^ year ended July 31, 1994 are included in each Portfolio's
annual report, which is a separate report attached to the prospectus. Each
Portfolio's financial statements and financial highlights are incorporated
herein by reference.
APPENDIX
The descriptions that follow are examples of eligible ratings for the
Portfolios. The Portfolios may, however, consider the ratings for other
types of investments and the ratings assigned by other rating organizations
when determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF COMMERCIAL
PAPER:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following
characteristics:
_ Leading market positions in well established industries.
_ High rates of return on funds employed.
_ Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
_ Broad margins in earning coverage of fixed financial charges and with
high internal cash generation.
_ Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND
MUNICIPAL NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important in the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF MUNICIPAL ^
BONDS :
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and generally are referred to as " gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with Aaa group they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in Aaa securities.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF COMMERCIAL
PAPER :
A - Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2, and 3 to indicate the relative degree of
safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+)
sign designation.
A-2 - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated A-1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF CORPORATE BONDS:
AAA - Debt rated AAA is the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND
MUNICIPAL NOTES:
SP-1 - Very strong or strong capacity to pay principle and interest.
Those issues determined to possess overwhelming safety characteristics will
be given a (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF MUNICIPAL BONDS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal, and differs from the highest-rated debt issues only in small
degree.
^
DAILY MONEY FUND: Fidelity U.S. Treasury Income Portfolio
CROSS REFERENCE SHEET
Part A Prospectus Caption
1 ...................... Cover Page
2 b,c................. Summary of Portfolio Expenses
3 a,................... Financial Highlights
3 b,................... *
c..................... Performance
4 a(i).................. The Portfolio and the Fidelity Organization
a(ii)................. Investment Objective; Investment Policies, Risks
and Limitations; Appendix
4 b,c................... Investment Policies, Risks and Limitations
5 a..................... The Portfolio and the Fidelity Organization
b,c,d................... Management Contract; Distribution and Service
Plan
e..................... Management Contract,Distribution and Service
Plan; Portfolio Transactions
f . ...... ........... Portfolio Transactions
g . ................. *
6 a(i).................. The Portfolio and the Fidelity Organization
a(ii)................. How to Invest, Exchange and Redeem
a(iii)................ The Portfolio and the Fidelity Organization
b,c,d................. *
e..................... Cover Page; How to Invest, Exchange and Redeem
f,g(i,ii,iii)........... Distributions and Taxes, How to Invest, Exchange
and Redeem
7 a..................... How to Invest, Exchange and Redeem
b(i,ii)............... How to Invest, Exchange and Redeem
b(iii,iv,v),c......... *
d..................... How to Invest, Exchange and Redeem
e..................... *
f(i,ii)............... Management Contract, Distribution and Service Plan
f(iii)................ *
8 a..................... How to Invest, Exchange and Redeem
b..................... *
c..................... How to Invest, Exchange and Redeem
d..................... *
9 ...................... *

* Not Applicable

DAILY MONEY FUND: Fidelity U.S. Treasury Income Portfolio
CROSS REFERENCE SHEET
Part B Prospectus Caption
10 ................... Cover Page
11 ................... Cover Page
12 ................... The Portfolio and the Fidelity Organization
13 a,b,c.............. Investment Policies, Risks and Limitations
d.................. *
14 a,b................ The Portfolio and the Fidelity Organization
c.................. *
15 a.................. *
15 b,c.................. The Portfolio and the Fidelity Organization
16 a(i)............... The Portfolio and the Fidelity Organization
a(ii),b............ Management Contract, Distribution and Service Plan
c,d,e.............. *
f.................. Management Contract, Distribution and Service Plan
g.................. *
h.................. The Portfolio and Fidelity Organization
17 a.................. Portfolio Transactions
b.................. *
c,d................ Portfolio Transactions
e.................. *
18 a.................. The Portfolio and Fidelity Organization
b.................. *
19 a.................. How to Invest, Exchange and Redeem
b.................. Portfolio Transactions
c,d................ *
20 ................... Distributions and Taxes
21 a(i,ii)............ Management Contract, Distribution and Service Plan
a(iii),b,c......... *
22 ................... Performance
23 ................... Financial statement for the fiscal year ended July
31, 1994 is included in the Prospectus.

* Not Applicable
LG922620.015

FIDELITY U. S. TREASURY INCOME PORTFOLIO 82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS 02109
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
Fidelity U.S. Treasury Income Portfolio (the Portfolio), a portfolio of
Daily Money Fund (the Fund), offers institutional, corporate and individual
investors a convenient and economical means of investing in a
professionally managed portfolio. The Portfolio seeks as high a level of
current income as is consistent with the security of principal and
liquidity. The Portfolio invests only in U.S. Treasury securities, namely
bills, notes, bonds, and other direct obligations of the U.S. Treasury that
are guaranteed as to principal and interest by the full faith and credit of
the U.S. government. The Portfolio provides income that is exempt from
state and local income tax (in most states) under state law.
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 and Statement of Additional Information is designed to
provide investors with information that they should know before investing.
Please read and retain this document for future reference. The Portfolio's
financial statements and financial highlights, included in the Annual
Report for the fiscal year ended July 31, 1994, are
incorporated herein by reference. To obtain additional copies of these
documents, please call the number below.
For further information, or assistance in opening a new account, please
call:
NATIONWIDE 800-843-3001
If you are investing through a Financial Institution, contact that
Institution directly.
TABLE OF CONTENTS
Summary of Portfolio Expenses
Portfolio Summary
Financial Highlights
Investment Objective
Investment Policies, Risks, and Limitations
How to Invest, Exchange and Redeem
Distributions and Taxes
Portfolio Transactions
Performance
Management Contract, Distribution and Service Plan
The Portfolio and the Fidelity Organization
Trustees and Officers
Appendix .
Financial Statements 22
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SUMMARY OF PORTFOLIO EXPENSES
The purpose of the table below is to assist investors in understanding the
various costs and expenses that an investor in the Portfolio would bear
directly or indirectly. This expense summary format below was developed for
use by all mutual funds to help investors make their investment decisions.
This expense information should be considered along with other important
information including the Portfolio's investment objective and past
performance. There are no transaction expenses associated with purchases or
sales of the Portfolio's shares.
A. ANNUAL OPERATING EXPENSES
(as a percentage of average net assets):
Management Fees .20%*

Other Expenses .00%

TOTAL FUND OPERATING EXPENSES .20%

* Net of reimbursement
B. EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS

$2 $6 $11 $26

EXPLANATION OF TABLE
A. ANNUAL OPERATING EXPENSES are based on the Portfolio's historical
expenses. Management fees are paid by the Portfolio to Fidelity Management
& Research Company (FMR) for managing its investments and business affairs.
FMR is responsible for the payment of all expenses of the Portfolio with
the exception of certain limited expenses. Please refer to the section
"Management Contract, Distribution and Service Plan" on page , for further
information.
FMR has voluntarily agreed to temporarily reimburse the Portfolio if and
when the total operating expenses (excluding interest, taxes, brokerage
commissions, and extraordinary expenses) exceed an annual rate of .20% of
the Portfolio's average net assets. If this agreement had not been in
effect, the Total Operating Expenses (which include Management Fees and
Other Expenses) would have been .42%.
B. EXAMPLE. The hypothetical example illustrates the expenses associated
with a $1,000 investment in the Portfolio over periods of one, three, five,
and ten years based on expenses in the table above and an assumed annual
rate of return of 5%. THE RETURN OF 5% AND EXPENSES SHOULD NOT BE
CONSIDERED INDICATIONS OF ACTUAL OR EXPECTED PORTFOLIO PERFORMANCE OR
EXPENSES, BOTH OF WHICH MAY VARY.
PORTFOLIO SUMMARY
INVESTMENT OBJECTIVE. The Portfolio seeks as high a level of current income
as is consistent with the security of principal and liquidity, and to
maintain a constant net asset value per share (NAV) of $1.00. The Portfolio
invests only in U.S. Treasury securities, namely bills, notes, bonds, and
other direct obligations of the U.S. Treasury that are guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
government.
INVESTING IN THE PORTFOLIO. The Portfolio's shares may be purchased at the
next determined NAV without a sales charge. The Portfolio requires a
minimum initial investment of $100,000. Additional investments may be made
in any amount. For immediate acceptance of purchases, federal funds must be
transmitted. Investors should be aware that there is a possibility that
unusual changes in interest rates could cause the Portfolio's share price
to change, although the Portfolio only invests in the highest quality
securities. See "How to Invest" on page .
REDEMPTION OF SHARES. Investors may redeem all or any part of the value of
their accounts by instructing the Portfolio to redeem shares as described
under "How to Redeem" on page . Redemptions may be requested by telephone
and are effected at the NAV next determined after receipt of the request.
Amounts redeemed will be wired to the investor's bank account designated on
the account application.
INVESTMENT ADVISER. FMR, 82 Devonshire Street, Boston, MA 02109, is the
investment adviser to the Portfolio. FMR, one of the largest investment
management organizations in the United States, serves as investment adviser
to investment companies which had aggregate net assets of more than
$ 225 billion and more than 19 million accounts as of July 31,
1994. FMR has entered into a sub-advisory agreement with FMR Texas Inc.
(FMR Texas) pursuant to which FMR Texas has primary responsibility for
providing investment management services to the Portfolio. See the sections
"Management Contract, Distribution and Service Plan" and "FMR" on pages
and , respectively.
FINANCIAL HIGHLIGHTS
The table that follows is included in the Portfolio's Annual Report and
has been audited by Coopers & Lybrand L.L.P., independent accountants.
Their report on the financial statements and financial highlights is
included in the Annual Report beginning on page 22. The financial
statements and financial highlights are a part of this prospectus.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
___ Years Ended July 31, October 3, 1990
(Commencement
of Operations) to
July 31,

1994 1993 1992 1991

SELECTED PER-SHARE DATA

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

Income from Investment Operations .032 .031 .045 .055
Net interest income

Less Distributions (.032) (.031) (.045) (.055)
From net interest income

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

TOTAL RETURN B 3.27% 3.10% 4.64% 5.63%

Ratios and Supplemental Data

Net assets, end of period (000 omitted) $ 1,049,170 $ 1,047,791 $ 1,197,559 $ 705,543

Ratio of expenses to average net assets C .20% .20% .20% .03%A

Ratio of expenses to average net assets before
expense reductions C .42% .42% .42% .42%A

Ratio of net interest income to average net
assets 3.22% 3.05% 4.43% 6.34%A

</TABLE>

INVESTMENT OBJECTIVE
The Portfolio's investment objective is to seek as high a level of current
income as is consistent with the security of principal and liquidity, and
to maintain a constant NAV of $1.00 per share. The Portfolio invests only
in U.S. Treasury securities, namely bills, notes and bonds and other direct
obligations of the U.S. Treasury that are guaranteed as to payment of
principal and interest by the full faith and credit of the U.S. government.
The Portfolio's investment objective is fundamental and can only be changed
by vote of a majority of the outstanding shares of the Portfolio.
The Portfolio may not always achieve its objective, but it will follow the
investment style described in the following paragraphs. The Portfolio's
investments may bear fixed or variable rates of interest, and its share
price and yield are not guaranteed by the U.S. government.
INVESTMENT POLICIES, RISKS, AND LIMITATIONS
The Portfolio limits its investments to those U.S. Treasury securities
whose interest is specifically exempt from state and local income taxes
under federal law; of course, the interest is not exempt from federal
income tax. However, shareholders do not directly receive interest on U.S.
government securities, but rather receive dividends from the Portfolio that
are derived from such interest. Most states allow the character of the
Portfolio's income to pass through to its shareholders, so that
distributions from the Portfolio are exempt from state and local income
taxes to the extent that they are derived from interest that is exempt from
such taxes when received directly by a taxpaying shareholder. See
"Distributions and Taxes" on page for further information. The Portfolio
does not engage in repurchase agreements because income from such
investments is generally not exempt from state and local income taxes.
QUALITY AND MATURITY. Pursuant to procedures adopted by the Board of
Trustees, the Portfolio may purchase only high-quality securities that FMR
believes present minimal credit risks. To be considered high quality, a
security must be a U.S. government security; rated in accordance with
applicable rules in one of the two highest categories for short-term
securities by at least two nationally recognized rating services (or by
one, if only one rating service has rated the security); or, if unrated,
judged to be of equivalent quality by FMR. The Portfolio currently intends
to limit its investments to securities with remaining maturities of 397
days or less, and to maintain a dollar-weighted average maturity of 90 days
or less.
SUITABILITY. The Portfolio is designed as an economical and convenient
vehicle for institutional, corporate and individual investors who seek to
obtain the yields available from money market instruments and income that
is free from state and local income taxes in most states, while maintaining
liquidity. By itself, the Portfolio does not constitute a balanced
investment plan. Investors should recognize that many securities can
provide a higher yield than U.S. Treasury securities, although they will
not provide the same high quality and security of principal, and may not
provide state and local income tax advantages.
The Portfolio offers the advantages associated with large purchasing power.
Generally, in purchasing money market investments from dealers, the
percentage difference between the bid and ask prices tends to decrease as
the size of the transaction increases. The Portfolio also offers investors
the opportunity to participate in a portfolio of U.S. Treasury securities
which is more diversified than the investor's investment might otherwise
permit.
Investment in the Portfolio relieves the investor of many management and
administrative burdens usually associated with the direct purchase and sale
of money market instruments. These include surveying the market for the
best terms at which to buy and sell; scheduling and monitoring maturities
and reinvestments; receipt, delivery and safekeeping of securities; and
portfolio record keeping.
The 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. Unless otherwise noted, whenever an investment
policy or limitation states a maximum percentage of the Portfolio's assets
which may be invested in any security or other asset or sets forth a policy
regarding quality standards, such standards 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 later
increase or decrease in percentage resulting from a 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 (1940 Act))
of the Portfolio. However, except for the Portfolio's investment objective
and the numbered investment limitations set forth below, the investment
policies and limitations described in this Prospectus and 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. issue senior securities, except as permitted under the 1940 Act;
2. 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;
3. 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;
4. purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) 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;
5. 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);
6. purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments; and
7. lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
8. The Portfolio may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies and limitations as the
Portfolio.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL:
(i) 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 purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The Portfolio will not
borrow from other portfolios advised by FMR or its affiliates if total
outstanding borrowings immediately after such borrowing would exceed 15% of
the Portfolio's total assets.
(ii) Subject to revision upon 90 days' notice to shareholders, the
Portfolio does not intend to engage in reverse repurchase agreements.
(iii) The Portfolio does not currently intend to make loans, but this
limitation does not apply to purchases of debt securities.
(iv) The Portfolio does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies, and
limitations as the Portfolio.
For the Portfolio's policies on quality and maturity, see the section
entitled "Quality and Maturity" on page .
HOW TO INVEST, EXCHANGE AND REDEEM
Shares of the Portfolio are offered continuously and may be purchased at
the NAV next determined after an order is received and accepted. The
Portfolio does not impose any sales charge in connection with purchases of
its shares, although institutions may charge their clients fees in
connection with purchases and sales for the accounts of their clients. The
Portfolio reserves the right to suspend the offering of shares for a period
of time. The Portfolio also reserves the right to reject any specific
purchase order including certain purchases by exchange (see "How to
Exchange" on page ). Purchase orders may be refused if, in FMR's opinion,
they are of a size that would disrupt management of the Portfolio.
Investments in the Portfolio must be made using the Federal Reserve Wire
System. Checks will not be accepted as a means of investment.
SHARE PRICE. The NAV for the Portfolio is determined by Fidelity Service
Co. (Service), 82 Devonshire Street, Boston, MA 02109 as of 12:00 noon,
Eastern time, each day the Portfolio is open for business. (See "Holiday
Schedule" on page .) The NAV of the Portfolio is determined by adding the
value of all securities and other assets of the Portfolio, deducting its
actual and accrued liabilities, and dividing by the number of Portfolio
shares outstanding. (See "How Net Asset Value is Determined" on page .)
MINIMUM INVESTMENT AND ACCOUNT BALANCE. The minimum initial investment to
establish a new account in the Portfolio is $100,000. Subsequent
investments may be made in any amount. To keep an account open, a minimum
balance of $100,000 must be maintained. If an account balance falls below
$100,000 due to redemption, the Portfolio may close the account and wire
the proceeds to the bank account of record. An investor will be notified if
the minimum balance is not being maintained and will be allowed 30 days to
make additional investments before the account is closed. For the purposes
of determining the minimum balance, multiple accounts invested in the
Portfolio will be aggregated.
HOW TO INVEST. An initial investment in the Portfolio must be preceded or
accompanied by a completed, signed application. Unless you already have a
Fidelity mutual fund account, you must complete and sign the application.
The application should be forwarded to:
Fidelity Investments Client Services
82 Devonshire Street ZR5
Boston, MA 02109
An investor may purchase shares of the Portfolio by wiring funds through
the Federal Reserve Wire System to the Portfolio's custodian bank. In order
to receive same-day acceptance of the investment, investors must telephone
Institutional Trading before 12:00 noon, Eastern time, to advise them of
the wire and for wiring instructions:
NATIONWIDE 800-343-6310
IN MASSACHUSETTS 800-462-2603OR 617-439-0270
Investors will be entitled to the dividend declared by the Portfolio on the
day of purchase, provided the Portfolio's custodian bank receives the wire
by the close of the Federal Reserve Wire System on the day the purchase
order is accepted. Investors are advised to wire funds as early in the day
as possible, and to provide advance notice to Institutional Trading for
large transactions.
HOW TO EXCHANGE. The Portfolio's shares may be exchanged (subject to the
minimum initial investment requirement of the fund whose shares are being
purchased) for shares of other Fidelity funds that are registered in the
investor's state. Exchanges must be made between accounts that are
registered in the same name, address, and taxpayer identification number.
Investors must consult the prospectus of the fund to be acquired to
determine eligibility and suitability.
TO EXCHANGE BY TELEPHONE. Exchanges may be requested by calling
Institutional Trading:
NATIONWIDE 800-343-6310
IN MASSACHUSETTS 800-462-2603 OR 617-439-0270
TO EXCHANGE BY MAIL. Written requests for exchange should contain the name,
account number, and number of shares to be redeemed, and the name of the
fund whose shares are being purchased. The letter must be signed by a
person authorized to act on the account. Letters should be sent to :
Fidelity Investments Client Services
82 Devonshire Street ZR5
Boston, MA 02109
An exchange involves the redemption of all or a portion of the shares of
one fund and the purchase of shares in another fund. Shares will be
redeemed at the next-determined NAV following receipt of the exchange
order. Shares of the fund to be acquired will be purchased at its
next-determined NAV after redemption proceeds are made available. If you
exchange into a fund with a sales charge, you pay the percentage difference
between that fund's sales charge and any sales charge you already have paid
in connection with the shares you are exchanging. Investors should note
that under certain circumstances, the Portfolio may take up to seven days
to make redemption proceeds available for the exchange purchase of shares
of another fund. In addition, the Portfolio hereby 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. Your exchanges may be
restricted or refused if the Portfolio receives or anticipates simultaneous
orders affecting significant portions of the Portfolio's assets. In
particular, a pattern of exchanges that coincide with a "market timing"
strategy may be disruptive to the Portfolio. Although the Portfolio will
attempt to give you prior notice whenever it is reasonably able to do so,
it may impose these restrictions at any time. The exchange privilege may be
modified or terminated at any time.
Pursuant to Rule 11a-3 under the the 1940 Act, the Portfolio is required to
give shareholders at least 60 days' notice prior to terminating or
modifying the Portfolio's 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 shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder or the fund whose shares are 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.
HOW TO REDEEM. Shareholders may redeem all or any part of the value of
their account(s) on any business day. Redemptions may be requested by
telephone and are effected at the NAV next determined after receipt of the
redemption request.
Shareholders must designate on their applications their U.S. commercial
bank account(s) into which they wish redemption proceeds deposited. A
shareholder may change the bank account(s) designated to receive amounts
redeemed at any time prior to making a redemption request. A letter of
instruction, including a signature guarantee, should be sent to Client
Services. 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.
Redemption proceeds will be wired via the Federal Reserve Wire System to
the bank account of record on the same day a redemption request is
received, provided it is made before 12:00 noon Eastern time. Shares
redeemed will not receive the dividend declared on the day of redemption.
Redemption requests can be made by calling Institutional Trading:
NATIONWIDE 800-343-6310
IN MASSACHUSETTS 800-462-2603 OR 617-439-0270
There is no charge imposed for wiring of redemption proceeds. If you
purchase shares through a financial institution, they may charge a fee for
these services.
Under the 1940 Act, the right of redemption may be suspended or the date of
payment postponed for more than seven days at times when the New York Stock
Exchange (NYSE) is closed, other than customary weekend or holiday
closings, or when trading on the NYSE is restricted, or under certain
emergency circumstances as determined by the Securities and Exchange
Commission (SEC). If investors are unable to execute a transaction by
telephone (for example, during time of unusual market activity) they may
consider placing their order by mail. In case of the suspension of the
right of redemption, investors may either withdraw their request for
redemption or receive payment based on the NAV next determined after
termination of the suspension.
ADDITIONAL INFORMATION. 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.
In order to allow FMR to manage the Portfolio effectively, investors are
strongly urged to initiate all trades (investments, exchanges or
redemptions of shares) as early in the day as possible and to notify the
Portfolio at least one day in advance of transactions in excess of $5
million. In advising the Portfolio of such transactions, the name of the
registered shareholder and the account number must be supplied for each
transaction.
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 Portfolio's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
INVESTOR ACCOUNTS. Fidelity Investments Institutional Operations Company
(FIIOC) is the transfer, dividend disbursing and shareholder servicing
agent for the Portfolio and maintains an account for each investor
expressed in terms of full and fractional shares of the Portfolio rounded
to the nearest 1/1000th of a share.
The Portfolio does not issue share certificates, but FIIOC mails investors
a confirmation of each investment or redemption from their account. Within
ten days after the end of each month, FIIOC will send investors a statement
setting forth the transactions in their account for the month and the
month-end balance of full and fractional shares held in the account. The
cost of the investor services described above are paid by FMR.
SUBACCOUNTING AND SPECIAL SERVICES. Special processing has been arranged
with FIIOC for banks, corporations and other institutions that wish to open
multiple accounts (a master account and subaccounts). An investor wishing
to utilize FIIOC's subaccounting facilities or other special services for
individual or multiple accounts will be required to enter into a separate
agreement with FIIOC. Charges for these services, if any, will be
determined on the basis of the level of services to be rendered.
Subaccounts may be opened with the initial investment or at a later date.
HOLIDAY SCHEDULE. The Portfolio is open for business and its NAV is
calculated every day that both the Federal Reserve Bank of New York (New
York Fed) and the NYSE are open for trading. The following holiday closings
have been scheduled for 1994: Dr. Martin Luther King, Jr. Day (observed),
Presidents' Day, Good Friday, Memorial Day (observed), Independence Day
(observed), Labor Day, Columbus Day (observed), Veterans' Day (observed),
Thanksgiving Day, and Christmas Day (observed). Although FMR expects the
same holiday schedule, with the addition of New Year's Day, to be observed
in the future, the New York Fed or the NYSE may modify its holiday schedule
at any time. The right is reserved to advance the time by which purchase
and redemption orders must be received on any day: (1) that the principal
government securities markets close early, such as on days in advance of
holidays generally observed by participants in such markets; (2) the New
York Fed or NYSE close early, or (3) as permitted by the SEC. To the extent
that the Portfolio's securities are traded in other markets on days the New
York Fed or the NYSE is closed, the Portfolio's NAV may be affected on days
when investors do not have access to the Portfolio to purchase or redeem
shares. Certain Fidelity funds may follow different holiday closing
schedules.
HOW NET ASSET VALUE IS DETERMINED. 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
the 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 on page .
The Board of Trustees of the Fund oversees FMR's adherence to SEC rules
concerning money market funds, and has established procedures designed to
stabilize the Portfolio's NAV at $1.00. At such intervals as they deem
appropriate, the Trustees consider the extent to which NAV calculated by
using market valuations would deviate from $1.00 per share. If the Trustees
believe that a deviation from the 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.
DISTRIBUTIONS AND TAXES
DIVIDENDS. 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.
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 dividends, if any, that qualifies 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 NAV 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 held by the Portfolio.
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.
FEDERAL TAXES. Dividends derived from net investment income and short-term
capital gains are taxable as ordinary income. Distributions are taxable
when paid, except that distributions declared in December and paid in
January are taxable as if paid on December 31st, whether you receive
distributions in cash or reinvest them in additional shares. The Portfolio
will send you an IRS Form 1099-DIV by January 31st showing your taxable
distributions for the past calendar year.
STATE AND LOCAL TAX ISSUES. For mutual funds organized as business trusts,
most states' 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. Some states
may impose intangible property taxes. The exemption from state and local
income taxation does not preclude states from assessing other taxes on the
ownership of U.S. government securities.
Mutual fund dividends from U.S. government securities generally are free
from state and local taxes. However, particular states may limit this
benefit, and some types of securities such as repurchase agreements and
some asset-backed securities, may not qualify for this benefit.
TAX STATUS OF THE PORTFOLIO. 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 tax on net investment income or capital gains
to the extent that these are distributed to shareholders in accordance with
applicable provisions of the Code.
OTHER TAX INFORMATION. The information above is only a summary of some of
the 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, shareholders may be subject to
state or local taxes on their investments. Investors should consult their
tax advisors for details and up-to-date information on the tax laws in
their state to determine whether the Portfolio is suitable to their
particular tax situations.
When investors sign their account application, they will be asked to
certify that their Social Security or taxpayer identification number is
correct and that they are not subject to 31% backup withholding for failing
to report income to the Internal Revenue Service (IRS). If investors
violate IRS regulations, the IRS can require the Portfolio to withhold 31%
of their taxable distributions and redemptions.
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
Management Contract. Since FMR has granted investment management authority
to the sub-advisor (see "Management Contract , Distribution and Service
Plan" beginning on page 13 ), the sub-advisor is authorized to place
orders for the purchase and sale of Portfolio securities, and will do so in
accordance with the policies described below. FMR is also responsible for
the placement of transaction orders for other investment companies and
accounts for which it acts 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
considers various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions.
The Portfolio may execute Portfolio transactions with broker-dealers who
provide research and execution services to the Portfolio or other accounts
over which FMR exercises 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
broker-dealers (including broker-dealers on the list) without regard to the
furnishing of such services, it is not possible to estimate the proportion
of such transactions directed to such 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 its other clients, and conversely,
such research provided by broker-dealers who have executed transaction
orders on behalf of other FMR clients may be useful to FMR in carrying out
its obligations to the 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 tried to
develop comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
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 and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the Portfolio or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Brokerage Services, Ltd. (FBSI), subsidiaries of
FMR Corp., if the commissions are fair, reasonable and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services. Section 11(a) of the Securities Exchange Act of 1934
prohibits members of national securities exchanges from executing exchange
transactions for accounts which they or their affiliates manage, unless
certain requirements are satisfied. Pursuant to such requirements, the
Board of Trustees has authorized FBSI to execute portfolio transactions on
national securities exchanges in accordance with approved procedures and
applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
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 of the Portfolio 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.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund
or account .
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as the 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.
PERFORMANCE
The Portfolio advertises its YIELD and EFFECTIVE YIELD in advertisements or
in reports or other communications to shareholders. Both yield figures are
based on historical earnings and are 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 to the current yield, the
Portfolio may quote yields in advertising based on any historical seven day
period. The Portfolio's annualized current and effective yields for
the 7 days ended July 31 , 1994 were 4.14% and 4.23%,
respectively . If FMR had not reimbursed the Portfolio for
certain expenses, the annualized current and effective yields for
the 7 days ended July 31, 1994 would have been 3.92% and 4.00%,
respectively.
The Portfolio's TOTAL RETURN is based on the overall dollar or percentage
change in value of a hypothetical investment in the Portfolio, assuming
dividends 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.
LIFE OF PORTFOLIO
1 YEAR

Average Annual Total 3.27% 4.34%
Returns

Cumulative Total Returns 3.27% 17.67%

Total returns are historical, will vary and are for the period ended July
31, 1994. Life of Portfolio figures are from October 3, 1990 to July 31,
1994.
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 that monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of
total return, assuming reinvestment of distributions, but does not take
sales charges or redemption fees into consideration, and is prepared
without regard to tax consequences. Lipper may also rank funds based on
yield. In addition to the mutual fund rankings, the Portfolio's performance
may be compared to mutual fund performance indices prepared by Lipper.
The Portfolio may be compared in advertising to Certificates of Deposits
(CDs) or other investments issued by banks. Mutual funds differ from bank
investments in several respects. For example, the Portfolio may offer
greater liquidity or higher potential returns than CDs, and the Portfolio
does not guarantee your principal or your return.
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
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
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 IBC/Donoghue's MONEY FUND AVERAGESTM/ GOVERNMENT ONLY -
INSTITUTIONAL ONLY, which is reported in the MONEY FUND REPORT, covers over
100 money market funds.
The Portfolio's yield may be compared to yields on 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.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging. In addition, Fidelity may quote
financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques.
The Portfolio may present its fund number, QuotronTM number and CUSIP
number, and discuss or quote its current portfolio manager.
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 Depository 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 adviser's innovation and participation in the industry.
MANAGEMENT CONTRACT, DISTRIBUTION AND SERVICE PLAN
MANAGEMENT CONTRACT. The Fund on behalf of the Portfolio, employs
FMR to furnish investment advisory and other services to the Portfolio.
Under its Management Contract with the Fund on behalf of the Portfolio, 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, compensates all officers of the Fund
who are "interested persons" of the Fund or of FMR, and performs services
relating to research, statistical and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provides 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 the 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 securities laws, developing management and
shareholder services for the Portfolio and furnishing reports, evaluations
and analyses on a variety of subjects to the Trustees.
FMR pays all the expenses of the Portfolio as described herein. Specific
expenses payable by FMR include, without limitation, the fees and expenses
of registering and qualifying the Portfolio and its shares for distribution
under federal and state securities laws; expenses of typesetting for
printing prospectuses; custodian charges; auditing and legal expenses;
insurance expense; association membership dues; the expense of reports to
shareholders; shareholder's meetings; and proxy solicitation. FIIOC
performs transfer agency, dividend disbursing and shareholder servicing
functions for the Portfolio and Service calculates the Portfolio's
NAV and dividends, and maintains the Portfolio's general accounting
records, the costs of which services are borne by FMR pursuant to its
Management Contract with the Fund on behalf of the Portfolio. Both FIIOC
and Service are affiliates of FMR.
FMR pays all other expenses of the Portfolio with the following exceptions:
the payment of fees and expenses of all Trustees of the Fund who are not
"interested persons" of the Fund or FMR; brokerage fees or commissions (if
any); interest on borrowings; and such extraordinary non-recurring expenses
as may arise, including litigation to which the Portfolio may be a party.
For these services the Portfolio pays a monthly management fee to FMR at
the annual rate of .42% of the average net assets of the Portfolio as
determined as of the close of business on each day throughout the month.
The management fees paid to FMR are reduced by an amount equal to the fees
and expenses of those Trustees who are not "interested persons" of the Fund
or FMR. The Management Contract was approved by the shareholders on
March 24, 1993.
Effective September 1, 1991, FMR has voluntarily agreed to temporarily
reimburse the Portfolio if and when total expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) exceed an annual
rate of .20% of the Portfolio's average net assets (see Note 3 of Notes to
Financial Statements).
For the fiscal years ended July 31, 1994, 1993, and 1992, management fees
for the Portfolio amounted to $2,242,352 , $2,325,068, and
$1,989,404, respectively. If FMR had not reimbursed the Portfolio for
certain expenses, its fee would have been $4,716,697, $4,892,175
and $4,249,814 for fiscal years 1994, 1993 and 1992,
respectively.
From time to time, FMR may reimburse all or some of the Portfolio's
expenses at various levels depending on the Portfolio's size and market
conditions.
SUB-ADVISOR. FMR has entered into a sub-advisory agreement with FMR Texas.
Pursuant to the agreement, FMR Texas has primary responsibility for
providing portfolio investment management services to the Portfolio, while
FMR retains responsibility for providing other management services. Under
the sub-advisory agreement, FMR pays FMR Texas a fee equal to 50% of the
management fee payable to FMR under its current Management Contract with
the Fund on behalf of the Portfolio. 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, 1994, 1993,
and 1992, FMR paid FMR Texas fees amounting to $ 2,358,349 ,
$2,446,088, and $2,124,907, respectively. The sub-advisory agreement was
approved by the shareholders on March 24 , 1993.
DISTRIBUTION AND SERVICE PLAN. The Portfolio has a Distribution Agreement
with Fidelity Distributors Corporation (Distributors), 82 Devonshire
Street, Boston, MA 02109, a wholly-owned subsidiary of FMR Corp.
Distributors, a Massachusetts corporation organized on July 18, 1960, 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 reasonable
efforts, consistent with its other business, to secure purchasers for
shares of the Portfolio, which are continuously offered. Promotional and
administrative expenses, in connection with the offer and sale of shares,
are paid by FMR.
Distributors also acts as general distributor for the other publicly
offered Fidelity Funds. The expenses of these operations are borne by FMR
or Distributors.
The Fund's Board of Trustees has approved a Distribution and Service Plan
(the Plan) on behalf of the Portfolio pursuant to Rule 12b-1 (the Rule)
under the 1940 Act. The Rule provides in substance that a mutual fund may
not engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of the mutual fund
except pursuant to a plan adopted by the mutual fund under the Rule. The
Board has approved the Plan to allow the Portfolio and FMR to incur certain
expenses that might be considered to constitute indirect payment by the
Portfolio of distribution expenses. Under the Plan, if the payment by the
Portfolio to FMR of management fees should be deemed to be indirect
financing by the Portfolio of the distribution of its shares, such payment
is authorized by the Plan. The Plan does not authorize the payment of
additional fees or expenses by the Portfolio to FMR or to any other party.
The Plan specifically recognizes that FMR, either directly or through
Distributors, may use its management fee revenue, past profits or other
resources, without limitation, to pay promotional and administrative
expenses in connection with the offer and sale of shares of the Portfolio.
In addition, the Plan provides that FMR may use its resources, including
its management fee revenue, to make payments to third parties that provide
assistance in selling shares of the Portfolio or to third parties,
including banks, that render shareholder support services. The Trustees
have not yet authorized any such payments.
The Portfolio's Plan was approved by the shareholders on March 24 ,
1993. As required by the Rule, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan prior to their
approval, and have determined that there is a reasonable likelihood that
the Plan will benefit the Portfolio and its shareholders. In particular,
the Trustees noted that the Plan does not authorize payments by the
Portfolio other than those made to FMR under its Management Contract with
the Fund on behalf of the Portfolio. To the extent that the Plan gives FMR
and Distributors greater flexibility in connection with the distribution of
shares of the Portfolio, additional sales of the Portfolio's shares may
result. Additionally, certain shareholder support services may be provided
more effectively under the Plan by local entities with whom shareholders
have other relationships.
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 from being paid for shareholder servicing and
recordkeeping. Distributors intends to engage banks only to perform such
functions. However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates or
subsidiaries, as well as further judicial or administrative decisions or
interpretations, could prevent a bank from continuing to perform all or a
part of the contemplated services. If a bank were prohibited from so
acting, the Trustees would consider what actions, if any, would be
necessary to continue to provide efficient and effective shareholder
services. In such event, changes in the operation of the Portfolio might
occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed
herein, and banks and other financial institutions may be required to
register as dealers pursuant to state law. The Portfolio may execute
portfolio transactions with and purchase securities issued by depository
institutions that may receive payments under the Plan. No preference for
the instruments of such depository institutions will be shown in the
selection of investments.
THE PORTFOLIO AND THE FIDELITY ORGANIZATION
FUND ORGANIZATION. Fidelity U.S. Treasury Income Portfolio is a portfolio
of Daily Money Fund, an open-end management investment company originally
organized as a Massachusetts business trust on June 7, 1982, as amended and
restated September 1, 1989. On September 30, 1993, the Fund was converted
to a Delaware business trust pursuant to an agreement approved by
shareholders on March 24, 1993. Currently, there are six portfolios of the
Fund: Money Market Portfolio, U.S. Treasury Portfolio, U.S. Treasury Income
Portfolio, Capital Reserves: Money Market Portfolio, Capital Reserves: U.S.
Government Portfolio, and Capital Reserves: Municipal Money Market
Portfolio. The Trust Instrument permits the Trustees to create additional
portfolios.
In the event that FMR ceases to be the investment adviser to the Portfolio,
the right of the Fund or 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 expense 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
each portfolio's property of any shareholder or former shareholder held
personally liable for the obligations of the portfolio. The Trust
Instrument also provides that each 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 shareholder
liability is limited to circumstances in which Delaware law does not apply,
no contractual limitation of liability was in effect, 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 extremely remote.
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 by
reason 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. The shares have no preemptive or conversion rights; the voting
and dividend rights, the right of redemption, and the privilege of exchange
are described herein. 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 Fund or a portfolio may, as
set forth in the Trust Instrument, call meetings of the Fund or portfolio
for any purpose related to the Fund or portfolio, 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 any portfolio may be
terminated upon the sale 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
a 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 Trust to merge or
consolidate into one or more trusts, partnerships, or corporations, or
cause the Fund 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's registration statement. Each portfolio may
also invest all of its assets in another investment company.
As of August 30 , 1994 the following owned of record or beneficially
5% or more of the outstanding shares of the Portfolio: First Union
National Bank, Charlotte, NC owned 30.7%; Shawmut Bank of Boston, N.A.,
Boston, MA owned 8.5%; and Ropes & Gray, Boston, MA owned 7% . A
shareholder owning of record or beneficially more than 25% of the
Portfolio's outstanding shares may be considered to be 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, New York, NY, is
custodian of the assets of the Portfolio. The custodian is responsible for
the safekeeping of the Portfolio'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 L.L.P. 1999 Bryan Street, Dallas,
Texas, serves as the Portfolio's independent accountant. The auditor
examines financial statements for the Portfolio and provides other audit,
tax, and related services.
FMR. FMR, 82 Devonshire Street, Boston, Massachusetts 02109, 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 July 31, 1994, FMR advised funds having more than
19 million shareholder accounts with a total value of more than
$ 225 billion. Distributors distributes shares for the Fidelity
funds.
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: Service, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; FIIOC, 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. FMR Corp. is the ultimate parent company of FMR and FMR
Texas through ownership of voting common stock, members of the Edward C.
Johnson 3d family form a controlling group with respect to FMR Corp.
Changes may occur in the Johnson family group, through death or disability,
which would result in changes in each individual family members' holding of
stock. Such changes could result in one or more family members becoming
holders of over 25% of the stock. The Portfolio has received an opinion of
counsel that changes in the composition of the Johnson family group under
these circumstances would not result in the termination of the Portfolio's
management or distribution contracts and, accordingly, would not require a
shareholder vote to continue operation under those contracts.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. Fidelity Management & Research (U.K.) Inc. (FMR
U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far East),
both wholly owned subsidiaries of FMR formed in 1986, supply investment
research, and may supply portfolio management services, to FMR in
connection with certain funds advised by FMR. Analysts employed by FMR, FMR
U.K., and FMR Far East research and visit thousands of domestic and foreign
companies each year. FMR Texas, a wholly owned subsidiary of FMR formed in
1989, supplies portfolio management and research services in connection
with certain money market funds advised by FMR.
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, MA. It is composed of a number of
different subsidiaries and divisions which provide a variety of financial
products and services. The Portfolio employs various Fidelity companies to
perform certain activities required for its operation.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund are listed below. Except as
indicated, each individual has held the office shown or other offices in
the same company for the last five years. Trustees and officers elected or
appointed to the Fund prior to conversion to a Delaware 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 1994, he was
President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill Corporation (non-hazardous waste,
1993) and CH2M Hill Companies (engineering). In addition, he served on the
Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992). Prior
to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc. (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation (1988), Hyster-Yale Materials Handling, Inc. (1989), and
RPM, Inc. (manufacturer of chemical products, 1990). In addition, he serves
as a Trustee of First Union Real Estate Investments, Chairman of the Board
of Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, 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), 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 (1988).
Prior to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company. He
is a Director of Allegheny Power Systems, Inc. (electric utility), General
Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensellar Polytechnic Institute, and he is a member of the Advisory
Boards of Butler Capital Corporation Funds and Warburg, Pineus Partnership
Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company of
Vermont, American Software, Inc. (1989), and AppleSouth, Inc. (restaurants,
1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior
Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity Funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President (1993)
and General Counsel of FMR, Vice President - Legal of FMR Corp., and Vice
President and Clerk of Distributors.
THOMAS D. MAHER, Assistant Vice President (1990), is Assistant Vice
President of Fidelity's money market funds and Vice President and Associate
General counsel of FMR Texas, Inc. (1990). Prior to 1990, Mr. Maher was
an employee of FMR and Assistant Secretary of all the Fidelity funds
(1985-1989).
LELAND BARRON, Vice President (1994) is also Vice President of other funds
advised by FMR and an employee of FMR Texas, Inc.
FRED L. HENNING, JR., Vice President (1994) is Vice President of
Fidelity's money market funds and Senior Vice President of FMR Texas
Inc.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the Fund based on their basic trustee fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
On August 31, 1994, the Trustees and officers of the Trust owned in the
aggregate less than 1% of the Portfolio's outstanding shares.
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 may invest or engage in one or more of the following securities
or transactions if they are consistent with the Portfolio's investment
objective and policies.
AFFILIATED BANK TRANSACTIONS. The Portfolio may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the Portfolio under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions and short-term
borrowings. In accordance with exemptive orders issued by the SEC, the
Board of Trustees has established and periodically reviews procedures
applicable to transactions involving affiliated financial institutions.
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, but it 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. The Portfolio will borrow through
the program only when the costs are equal to or lower than the cost of bank
loans. The Portfolio will not borrow through the program if, after doing
so, total outstanding borrowings would exceed 15% of total assets. 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.
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.
STRIPPED GOVERNMENT SECURITIES. Stripped securities are created by
separating the income and principal components of a debt instrument and
selling them separately. The Portfolio may purchase U.S. Treasury STRIPS
(Separate Trading of Registered Interest and Principal of Securities) that
are created when coupon payments and the principal payment are stripped
from an outstanding Treasury bond by a Federal Reserve Bank.
FIDELITY U.S. TREASURY INCOME PORTFOLIO
INVESTMENTS/JULY 31, 1994
(SHOWING PERCENTAGE OF TOTAL VALUE OF
INVESTMENTS)

ANNUALIZED ANNUALIZED
YIELD AT YIELD AT
DUE TIME OF PRINCIPAL VALUE DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1) DATE PURCHASE AMOUNT (NOTE 1)
U.S. Treasury Obligations - 100.0%
U.S. TREASURY BILLS - 64.8%
8/4/94 3.96% $ 3,394,000 $ 3,392,891
8/4/94 4.07 25,000,000 24,991,615
8/18/94 4.25 50,000,000 49,900,833
8/18/94 4.30 7,957,000 7,941,049
8/25/94 4.23 30,839,000 30,753,025
8/25/94 4.27 14,713,000 14,671,656
9/1/94 4.17 44,411,000 44,253,248
9/1/94 4.19 15,000,000 14,946,396
9/8/94 4.06 20,430,000 20,343,093
9/8/94 4.10 18,701,000 18,620,658
9/15/94 4.26 5,595,000 5,565,451
9/15/94 4.28 11,994,000 11,930,582
9/15/94 4.39 6,564,000 6,528,513
9/15/94 4.45 29,781,000 29,617,763
9/22/94 4.24 6,627,000 6,586,892
9/22/94 4.25 15,690,000 15,594,361
9/22/94 4.29 18,512,000 18,398,758
9/29/94 4.26 1,762,000 1,749,843
9/29/94 4.49 21,270,000 21,116,271
10/6/94 4.35 3,942,000 3,910,924
10/6/94 4.36 10,743,000 10,658,112
10/6/94 4.38 25,000,000 24,801,541
10/13/94 4.28 1,951,000 1,934,285
10/13/94 4.30 25,000,000 24,785,056
10/20/94 4.42 4,745,000 4,698,921
10/20/94 4.43 10,956,000 10,849,118
10/20/94 4.53 1,372,000 1,358,356
10/20/94 4.55 15,097,000 14,946,869
10/27/94 4.39 4,740,000 4,690,343
10/27/94 4.39 5,323,000 5,267,235
10/27/94 4.53 29,935,000 29,613,436
11/3/94 4.45 15,000,000 14,827,863
11/17/94 4.70 50,000,000 49,310,750
12/8/94 4.59 40,395,000 39,745,078
12/8/94 4.60 15,322,000 15,075,207
12/8/94 4.61 2,605,000 2,562,901
12/15/94 4.60 10,000,000 9,830,189
12/22/94 4.78 29,046,000 28,506,035
1/26/95 4.78 4,773,000 4,662,789
648,937,906
U.S. TREASURY NOTES - 35.2%
8/15/94 3.78% $ 15,000,000 $ 15,017,444
8/15/94 3.82 4,428,000 4,433,071
8/15/94 3.94 474,000 474,833
8/15/94 3.95 25,000,000 25,081,812
8/15/94 4.23 15,000,000 15,047,102
8/15/94 4.52 35,000,000 35,030,222
8/15/94 4.80 23,227,000 23,294,523
9/30/94 4.29 18,000,000 18,118,040
9/30/94 4.33 27,360,000 27,357,624
10/15/94 4.39 6,718,000 6,784,123
10/15/94 4.40 10,000,000 10,097,852
10/15/94 4.49 40,000,000 40,383,064
10/31/94 4.43 10,000,000 9,992,101
10/31/94 4.58 10,434,000 10,421,897
11/15/94 4.56 2,205,000 2,213,186
11/15/94 4.57 26,420,000 26,627,326
11/15/94 4.58 17,487,000 17,550,896
11/15/94 4.59 10,000,000 10,194,429
11/15/94 4.60 33,965,000 34,622,475
11/15/94 4.62 18,902,000 19,088,024
TOTAL U.S TREASURY OBLIGATIONS 351,830,044
TOTAL INVESTMENTS - 100% $ 1,000,767,950
Total Cost for Income Tax Purposes - $1,000,767,950

INCOME TAX INFORMATION:
At July 31, 1994, the fund had a capital loss carryforward of approximately
$222,000 of which $60,000, and $162,000 will expire on July 31, 2001 and
2002, respectively.

Statement of Assets and Liabilities

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
July 31, 1994

ASSETS

Investment in securities, at value $ 1,000,767,950
(Note 1) - See accompanying
schedule

Receivable for investments sold 40,305,000

Interest receivable 11,094,211

TOTAL ASSETS 1,052,167,161

LIABILITIES

Share transactions in process $ 141,471

Dividends payable 2,675,166

Accrued management fee 180,908

TOTAL LIABILITIES 2,997,545

NET ASSETS $ 1,049,169,616

Net Assets consist of:

Paid in capital $ 1,049,189,264

Accumulated net realized gain (19,648)
(loss) on investments

NET ASSETS, for 1,049,189,264 $ 1,049,169,616
shares outstanding

NET ASSET VALUE, offering price $1.00
and redemption price per share
($1,049,169,616(divided by)
(verticle 8)(solid club) shares)

</TABLE>

Statement of Operations

DRAFT
Year Ended July 31, 1994

INTEREST INCOME $ 38,429,861

EXPENSES

Management fee (Note 2) $ 4,716,697

Non-interested trustees' 7,052
compensation

Total expenses before 4,723,749
reductions

Expense reductions (2,474,345) 2,249,404
(Note 3)

NET INTEREST INCOME 36,180,457

NET REALIZED GAIN (LOSS) ON (162,127)
INVESTMENTS (NOTE 1)

NET INCREASE IN NET ASSETS $ 36,018,330
RESULTING FROM OPERATIONS

Statement of Changes in Net Assets

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED JULY 31,

1994 1993

INCREASE (DECREASE) IN NET ASSETS

Operations $ 36,180,457 $ 35,642,094
Net interest income

Net realized gain (loss) (162,127) (59,984)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 36,018,330 35,582,110

Dividends to shareholders from net interest income (36,180,457) (35,642,094)

Share transactions at net asset value of $1.00 per share 4,258,629,047 5,005,239,937
Proceeds from sales of shares

Reinvestment of dividends from net interest income 9,408,877 11,294,869

Cost of shares redeemed (4,266,497,201) (5,166,243,130)

Net increase (decrease) in net assets and shares resulting
from share transactions 1,540,723 (149,708,324)

TOTAL INCREASE (DECREASE) IN NET ASSETS 1,378,596 (149,768,308)

NET ASSETS

Beginning of period 1,047,791,020 1,197,559,328

End of period $ 1,049,169,616 $ 1,047,791,020

</TABLE>

NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JULY 31, 1994

6. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity U.S. Treasury Income Portfolio (the fund) is a fund of Daily Money
Fund (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Delaware business trust. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
7. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) pays all expenses except the compensation of the
non-interested Trustees and certain exceptions such as interest, taxes,
brokerage commissions and extraordinary expenses. FMR receives a fee that
is computed daily at an annual rate of .42% of the fund's average net
assets.
SUB-ADVISER FEE. As the fund's investment sub-adviser, FMR Texas Inc., a
wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect, and after reducing the fee
for any payments by FMR pursuant to the fund's Distribution and Service
Plan.
8. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .20% of average net assets. For the
period, the reimbursement reduced the expenses by $2,474,345.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Daily Money Fund and the Shareholders of Fidelity U.S.
Treasury Income Portfolio:
We have audited the accompanying statement of assets and liabilities of
Daily Money Fund: Fidelity U.S. Treasury Income Portfolio, including the
schedule of portfolio investments, as of July 31, 1994, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the three years in the period then ended
and for the period October 3, 1990 (commencement of Operations) to July 31,
1991. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments and cash held by the custodian as of July 31, 1994. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Daily Money Fund: Fidelity U.S. Treasury Income Portfolio as of July 31,
1994, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the three years in the period then ended,
and for the period October 3, 1990 (commencement of operations) to July 31,
1991 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
August 25, 1994

NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK AND FUND
SHARES ARE NOT BACKED OR GUARANTEED BY
ANY BANK OR INSURED BY THE FDIC.

Page 28 (Back Cover) = BLANK
Do NOT strip-in this type
DAILY MONEY FUND: INITIAL SHARES
U.S. TREASURY PORTFOLIO AND MONEY MARKET PORTFOLIO
CROSS REFERENCE SHEET
Form N-1A Item Number
Part A Prospectus Caption
1 Cover Page
2 a Summary of Portfolio Expenses
b,c Summary of Portfolio Expenses
3 a,b Financial Highlights
c Performance
4 a(i) Daily Money Fund and the Fidelity Organization
a(ii) Investment Objectives; Investment Policies, Risks, and Limitations;
Appendix
b,c Investment Policies, Risks and Limitations
5 a Daily Money Fund and the Fidelity Organization;
b,c,d,e Management, Distribution and Services
f Portfolio Transactions
6 a(i) Investment Policies, Risks and Limitations; Daily Money Fund and
the Fidelity Organization
a(ii) How to Invest, Exchange and Redeem
a(iii) Daily Money Fund and the Fidelity Organization
b,c,d *
e Cover Page; How to Invest, Exchange and Redeem
f,g How to Invest, Exchange and Redeem; Distributions and Taxes
7 a Daily Money Fund and the Fidelity Organization; Management,
Distribution and Services
b(i),(ii) How to Invest, Exchange and Redeem
b(iii),(iv) *
b(v) How to Invest, Exchange and Redeem
c *
d How to Invest, Exchange and Redeem
e,f(i),(ii) Management, Distribution and Services
8 a,b,c,d How to Invest, Exchange and Redeem
9 *
10 Cover Page
11 Table of Contents
12 Financial Statements
13 a,b,c Investment Policies and Limitations
d *
14 a,b Trustees and Officers
c *
15 a, *
b Description of the Fund
c *
16 a(i),(ii) FMR; Trustees and Officers
a(iii),b,c,d Management and Other Services
e Portfolio Transactions
f Distribution and Service Plans
g *
h Description of the Fund
i Management and Other Services; Distribution and Service Plans
17 a Portfolio Transactions
b *
c,d Portfolio Transactions
e *
18 a Description of the Fund
b *
19 a Distribution and Service Plans
b Valuation of Portfolio Securities
20 Distributions and Taxes
21 a(i),(ii) Management and Other Services
(iii),b,c *
22 Performance
23 Financial Statements for the fiscal year ended July 31, 1994 are filed
herein.
_______________
*Not Applicable

DAILY MONEY FUND: 82 DEVONSHIRE STREET
(Money Market Portfolio and U.S. Treasury Portfolio : Initial Shares )
BOSTON, MASSACHUSETTS 02109
PROSPECTUS
Daily Money Fund (the Fund) offers individual, institutional and corporate
investors a convenient and economical way to invest in professionally
managed portfolios. 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 within the standards prescribed for Money Market
Portfolio and U.S. Treasury Portfolio (each Portfolio) .
AN INVESTMENT IN EACH PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT EACH 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. The Annual Report to Shareholders is incorporated
herein.
To learn more about the Fund and its investments, you can obtain a copy
of the Fund's most recent financial report and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated September 19, 1994.
The SAI has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference. For a free copy of either
document, call your investment professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE
NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
For further information or assistance in opening an account, please call:
TOLL FREE 800-843-3001
TABLE OF CONTENTS
Summary of Portfolio Expenses
Financial Hi ghlights
Investment Objectives
Investment Policies, Risks, and Limitations
Portfolio Transactions
Performance
Distributions and Taxes
How to Invest, Exchange and Redeem
Management, Distribution and Services
Daily Money Fund and the Fidelity Organization
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.
September 19 , 1994
9.SUMMARY OF PORTFOLIO EXPENSES
U.S. Treasury Portfolio offers two classes of shares: Initial shares
and Class B shares . Class B shares of U.S. Treasury Portfolio
are offered through a separate prospectus. The purpose of the table
below is to assist you in understanding the various costs and expenses that
an investor in Initial Sh ares of U.S. Treasury Portfolio or
shares of Money Market Portfolio would bear directly or indirectly.
Hereafter, unless otherwise noted, all references to "shares" of a
Portfolio shall mean Initial Shares of U.S. Treasury Portfolio or
shares of Money Market Portfolio. This standard format was developed for
use by all mutual funds to help investors make their investment decisions.
This expense information should be considered along with other important
information such as each Portfolio's investment objective and past
performance. There are no transaction expenses associated with purchases or
sales of each Portfolio's shares.
A. ANNUAL OPERATING EXPENSES:
MONEY U.S.
MARKET TREASURY
PORTFOLIO PORTFOLIO
Management Fee .08% *(dagger) . 17 % *
12b-1 Fee . 33 % * . 33 % *
Other Expenses .24% . 10 %
Total Operating Expenses .6 5 % (dagger) . 60 %
* THE RATE FOR MANAG E MENT FEES REPRESENTS THE NET RATE
RETAINED BY FMR AFTER PAYMENTS MADE TO DISTRIBUTORS. THE MANAGEMENT FEE
BEFORE PAYMENTS MADE TO DISTRIBUTORS BY FMR IS .50%.
(dagger) NET OF REIMBURSEMENTS.
B. EXAMPLE:
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Money Market
Portfolio $ 7 $2 1 $3 6 $ 81
U.S. Treasury
Portfolio $6 $1 9 $3 3 $7 5
A. Annual O perating E xpenses are based on historical
expenses for the most recent fiscal year. Management fees are paid by each
Portfolio to Fidelity Management & Research Company (FMR) for managing its
investments and business affairs. The Distribution and Service Plan s
(the Plans) require FMR to make 12b-1 payments from its management
fee, its past profits or any other source available. The maximum amount
payable is currently at the annual rate of .38% of the average net assets.
Based on historical expenses, the payment made by FMR was .33%.
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 12b-1 fees. Each Portfolio incurs
o ther e xpenses for maintaining shareholder records,
furnishing shareholder statements and reports, and for other services.
Management fees and other expenses are reflected in each Portfolio's share
price or dividends and are not charged directly to individual shareholder
accounts. Please refer to the section entitled "Management, Distribution
and Services" on page for further information.
B. The hypothetical example illustrates the expenses associated with
a $1,000 investment in shares of each Portfolio over periods of 1, 3, 5 and
10 years, based on the expenses in the table and an assumed annual rate of
return of 5%. THE RETURN OF 5% AND EXPENSES SHOULD NOT BE CONSIDERED
INDICATIONS OF ACTUAL OR EXPECTED PERFORMANCE , BOTH OF WHICH MAY
VARY.
10.FINANCIAL HI GHLIGHTS
The following tables give information about each Portfolio's financial
history and use the Fund's fiscal year (which ends July 31). The annual
information in the tables ha ve been audited by Coopers & Lybrand
L.L.P. , independent accountants. Their report is included in the
Portfolios' Annual Report on page 27. On September 29, 1993 , Money
Market Portfolio and U.S. Treasury Portfolio were converted from separate
series of a Massachusetts business trust to separate series of a Delaware
business trust and each adopted the audited financial statements of its
predecessor portfolio as its own.
MONEY MARKET PORTFOLIO

<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years Ended July 31,

1994 1993 1992 1991 1990 1989 1988 1987 1986 1985

SELECTED PER-SHARE DATA

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

Income from Investment Operations
.029 .028 .041 .067 .080 .085 .066 .057 .072 .088
Net interest income

Less Distributions
(.029) (.028) (.041) (.067) (.080) (.085) (.066) (.057) (.072) (.088)
From net interest income

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

TOTAL RETURN A
2.98% 2.82% 4.21% 6.90% 8.34% 8.81% 6.81% 5.87% 7.39% 9.20%

Ratios and Supplemental Data

Net assets, end of period (000 omitted)
$ 1,524,86 $ 1,451,40 $ 1,531,36 $ 1,714,10 $ 1,349,67 $ 893,611 $ 560,528 $ 440,944 $ 388,832 $ 236,808
8 3 4 8 0

Ratio of expenses to average net assets
.65% .61% .59% .60% .61% .64% .66% .62% .60% .66%
B

Ratio of expenses to average net assets
.74% .61% .59% .60% .61% .73% .66% .62% .60% .66%

before expense reductions B

Ratio of net interest income to average
2.96% 2.76% 4.19% 6.61% 7.99% 8.56% 6.57% 5.78% 7.11% 8.57%
net assets

</TABLE>

A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
B SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.
U.S. TREASURY PORTFOLIO - INITIAL CLASS

<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years Ended July 31,

1994 1993 1992 1991 1990 1989 1988 1987 1986 1985

SELECTED PER-SHARE DATA

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

Income from Investment Operations

Net interest income
.029 .027 .042 .065 .079 .083 .063 .057 .069 .085

Less Distributions

From net interest income
(.029) (.027) (.042) (.065) (.079) (.083) (.063) (.057) (.069) (.085)

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

TOTAL RETURN
2.89% 2.78% 4.25% 6.69% 8.24% 8.64% 6.45% 5.81% 7.15% 8.79%

Ratios and Supplemental Data

Net assets, end of period (000 omitted)
$ 2,025,14 $ 2,949,17 $ 3,093,71 $ 1,701,70 $ 1,177,29 $ 994,133 $ 319,708 $ 240,298 $ 157,386 $ 128,751

9 1 4 4 0

Ratio of expenses to average net assets
.60% .57% .59% .59% .59% .64% .64% .58% .60% .60%

Ratio of net interest income to average
2.81% 2.73% 4.14% 6.42% 7.91% 8.47% 6.26% 5.67% 6.89% 8.41%
net assets

</TABLE>

U.S. TREASURY PORTFOLIO - CLASS B

<TABLE>
<CAPTION>
<S> <C>
July 1, 1994
(Commenceme
nt
of Operations) t
o
July 31,
1994

SELECTED PER-SHARE DATA

Net asset value, beginning of period $ 1.000

Income from Investment Operations

Net interest income .002

Less Distributions

From net interest income (.002)

Net asset value, end of period $ 1.000

TOTAL RETURN B 0.25%

Ratios and Supplemental Data

Net assets, end of period (000 omitted) $ 628

Ratio of expenses to average net assets C 1.35%A

Ratio of expenses to average net assets before expense reductions C 2.52%A

Ratio of net interest income to average net assets 3.03%A

</TABLE>

A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
C SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.
11.INVESTMENT OBJECTIVES
Each 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. Each Portfolio's investment
objective is fundamental and may be changed only by vote of a majority of
its outstanding shares. Each Portfolio may not always achieve its
objective, but it will follow the investment style in the following
paragraphs.
12.INVESTMENT POLICIES , RISKS, AND LIMITATIONS
The Fund's portfolios are differentiated in terms of their permitted
investments. Unless otherwise noted, each Portfolio's investment policies
and limitations are not fundamental and may be changed without shareholder
approval. The permitted investments of Money Market Portfolio and U.S.
Treasury Portfolio are as follows:
MONEY MARKET PORTFOLIO invests in U.S. dollar-denominated money market
instruments of domestic and foreign issuers. As a non-fundamental policy,
the Portfolio will invest in "first tier" securities. First tier securities
have received the highest rating (e.g., S&P A-1 rating) from at least two
NRSROs (or one, if only one has rated the security) or are obligations of
the U.S. government, its agencies and instrumentalities. The Portfolio may
engage in repurchase agreements and may purchase unrated obligations
determined to be of equivalent quality pursuant to procedures adopted by
the Board of Trustees. The Portfolio's investments include:
(medium solid bullet) Obligations of companies in the financial services
industry, including banks, savings and loans associations, consumer
industrial and finance companies, securities brokerage companies and a
variety of firms in the insurance field.
(medium solid bullet) Obligations of governments and their agencies and
instrumentalities.
(medium solid bullet) Short-term corporate obligations, including
commercial paper, notes and bonds.
(medium solid bullet) Other short-term obligations.
Except for temporary defensive purposes, Money Market Portfolio will invest
more than 25% of its total assets in obligations of companies in the
financial services industry. Because Money Market Portfolio concentrates
more than 25% of its total assets in the financial services industry, its
performance may be affected by conditions affecting banks and other
financial services companies. The Money Market Portfolio also may invest in
restricted securities (see the Appendix beginning on page ).
Money Market Portfolio invests in U.S. dollar-denominated obligations of
U.S. banks and foreign branches of U.S. banks, foreign banks and foreign
branches of foreign banks (referred to as Eurodollars), and U.S. branches
and agencies of foreign banks (referred to as Yankee dollars). Eurodollar
and Yankee dollar investments involve risks that are different from
investments in securities of U.S. domestic banks. These risks may include
future unfavorable political and economic developments and possible
withholding taxes, seizure of foreign deposits, currency controls, interest
limitations or other governmental restrictions which might affect the
payment of principal or interest on securities owned by the Portfolio.
Additionally, there may be less public information available about foreign
banks and their branches and agencies. Foreign branches of foreign banks
are not regulated by U.S. banking authorities, and generally are not bound
by accounting, auditing and financial reporting standards comparable to
those of U.S. banks. Although FMR carefully considers these factors when
making investments, the Portfolio does not limit the amount of its assets
that can be invested in any one type of instrument or in any one foreign
country.
U.S. TREASURY 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. T he Portfolio intends to invest 100 % of its
total assets in U.S. Treasury bills, notes, and bonds . The
Portfolio may also invest in other direct obligations of the U.S.
government . 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. Each 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.
Each Portfolio's ability to achieve its investment objective depends on the
quality and maturity of its investments. Although each 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, a 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 each Portfolio's principal investment limitations.
A complete listing is contained in the Statement of Additional Information.
1. Money Market Portfolio normally may not invest more than 5% of its
total assets in the securities (other than U.S. government securities) of
any single issuer. Under certain conditions, however, 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.
2. Each Portfolio will not purchase a security if, as a result more than
25% of its total assets would be invested in issuers having their principal
business activities in a particular industry, but Money Market Portfolio
will invest more than 25% of its total assets in the obligations of
companies in the financial services industry, except for temporary
defensive purposes. These limitations do not apply to obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
3. (a) Each Portfolio may borrow money for temporary or emergency purposes
or by engaging in reverse repurchase agreements for any purpose , but
not in an amount exceeding 33 1/3% of its total assets. (b) Each Portfolio
may borrow money from banks or from other funds advised by FMR or an
affiliate or in an emergency by investing in a reverse repurchase
agreement . (c) Each Portfolio will not purchase securities when
borrowings (other than reverse repurchase agreements) exceed 5% of its
total assets.
4. Money Market Portfolio (a) may make loans to other parties, but not
in excess of 33 1/3% of its total assets and, (b) may lend money to other
funds or Portfolios for which FMR or an affiliate serves as adviser.
As a non-fundamental policy, each 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 Portfolios' investment objectives, limitation 2, and 331/3%
limitations on borrowings and loans, the Portfolios' 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 Investment Policies" are considered
at time of purchase; the sale of securities is not required in the event of
a subsequent change in circumstances.
While a Portfolio may sell securities at a loss or gain , each
Portfolio's policy generally will be to hold securities to maturity rather
than to follow a policy of active trading.
13.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 Portfolios on a more favorable
spread than would be possible for most individual investors.
Each Portfolio has authorized FMR to allocate transactions to some
broker-dealers who help distribute the Portfolios' 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.
14.PERFORMANCE
Each 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.
Each Portfolio's CURRENT YIELD refers to the income generated by an
investment in a Portfolio over a seven-day period expressed as an annual
percentage rate. Each 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 current yield and effective yield calculations for Initial
Sh ares of U.S. Treasury Portfolio and shares of Money Market
Portfolio are illustrated for the seven-day period ended July 31,
1994:
MONEY MARKET U.S. TREASURY
PORTFOLIO PORTFOLIO
Current Effective Current Effective
Yield Yield Yield Yield
3.8 2% 3.89 % 3.62 % 3.68 %
Each Portfolio's TOTAL RETURN is based on the overall dollar or percentage
change in value of a hypothetical investment in a Portfolio assuming
dividend distributions are reinvested. A CUMULATIVE TOTAL RETURN reflects a
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 a Portfolio's performance, investors should
recognize that they are not the same as actual year-by-year results.
15.DISTRIBUTIONS AND TAXES
Each Portfolio ordinarily declares dividends from net investment income
daily and pays such dividends monthly. Each 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. Each 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
Portfolios 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 a 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: Mutual fund dividends from U.S. government
securities generally are free from state and local income taxes.
However, some states may limit the benefi t, and some types of
securities, such as repurchase agreements and some agency backed
securities, may not qualify for this benefit. Some states may impose
intangible property taxes.
OTHER TAX INFORMATION. The information above is only a summary of
some of the tax consequences generally affecting the fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal tax, shareholders may be subject to
state or local taxes on their investments. Investors should consult their
tax advisors for details and up-to-date information on the tax laws in
their state to determine whether the fund is suitable to their particular
tax situation.
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 each
Portfolio to withhold 31% of your taxable distributions and redemptions.
16.HOW TO INVEST, EXCHANGE AND REDEEM
Shares of each Portfolio are offered continuously and may be purchased at
the next determined net asset value per share (NAV) after an order is
received and accepted. The Portfolios do not impose any sales charges in
connection with purchases of their shares, although institutions may charge
their clients fees in connection with purchases and sales for the accounts
of their clients. Each Portfolio may discontinue offering its shares
generally or in any particular state without notice to shareholders.
IF YOU ARE INVESTING THROUGH A SECURITIES DEALER OR BANK (FINANCIAL
INSTITUTION), CONTACT THAT FINANCIAL INSTITUTION DIRECTLY.
Investors purchasing shares of the Portfolios through a program of services
offered by a Financial Institution should read the program materials in
conjunction with this Prospectus. Certain features of the Portfolios may be
modified in these programs and administrative charges (in addition to
payments the Financial Institution may receive pursuant to the
Distribution and Service Plan) may be imposed for the services rendered.
These features include the minimum for subsequent investment amounts and
exchanges with certain Fidelity funds. For further information, including
copies of prospectuses, statements of additional information and
applications, investors should contact their Financial Institution
directly.
SHARE PRICE. Fidelity Service Co. (Service) calculates the NAV of
the Initial shares of U.S. Treasury Portfolio and the shares of Money
Market Portfolio at 2:00 p.m. and 4:00 p.m. Eastern time each day that the
applicable Portfolio is open for business (see "Holiday Schedule" on page
). The NAV for Initial Class Shares of U.S. Treasury Portfolio is
determined by adding the Initial Shares' pro-rata share of the value of all
securities and other assets of the Portfolio, deducting the Initial Shares'
pro-rata share of the actual and accrued liabilities of the Portfolio,
deducting the actual and accrued liabilities of the Initial shares, and
dividing by the number of Initial Shares outstanding. The NAV for shares of
Money Market Portfolio is determined by adding the value of all securities
and other assets of the Portfolio, deducting the actual and accrued
liabilities of the Portfolio, and dividing by the number of outstanding
shares. Each Portfolio values its portfolio securities on the basis of
amortized cost. Shares purchased at the 2 p.m. price earn the income
dividend declared that day. Shares purchased at the 4 p.m. price (including
all purchases by check) begin to earn income dividends on the following
business day.
MINIMUM INVESTMENT AND ACCOUNT BALANCE. The minimum initial investment to
establish a new account in each Portfolio is $1,000. Subsequent investments
must be at least $250. If you want to keep your account open, leave $500 in
it. If an account balance falls below $500 due to redemption, a Portfolio
may close it and mail the proceeds 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.
HOW TO INVEST. Unless you already have a Fidelity mutual fund account you
must complete and sign the application.
INVESTING BY CHECK. An investor or a Financial Institution must send a
check drawn on a U.S. bank payable to Daily Money Fund and the name
of the Portfolio in which the investor plans to invest , together
with a completed application, to the address below:
Daily Money Fund:
U.S. Treasury Portfolio or
Money Market Portfolio
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
INVESTING BY MAIL. To make additional investments directly, put the account
number on the check and mail to the address above. If a purchase is made
with more than one check, each check must have a value of at least $50, and
the minimum investment requirement still applies. Each Portfolio reserves
the right to limit the number of checks processed at one time. If a check
does not clear, the purchase will be canceled and the investor could be
liable for any losses and/or fees incurred.
INVESTING BY WIRE. An investor may purchase shares of each Portfolio by
wiring funds through the Federal Reserve System of the Portfolios'
custodian bank. The Portfolios require notification of all wire purchases.
To secure same day acceptance, investors must telephone Institutional
Trading before 2 p.m., to advise them of the wire, and for wiring
instructions.
17.INSTITUTIONAL TRADING 800-843-3001
Investors are urged to initiate the purchase of shares as early in the day
as possible and to provide advance notice to Institutional Trading of large
transactions. If Institutional Trading is not advised of the order prior to
2 p.m., or if clearing house funds are transferred via the Bank Wire
system, the order will be accepted on the business day following the day of
transfer and shares will begin earning dividends on that day. There is no
fee imposed by the Portfolios for wire purchases. However, banks may impose
such a fee.
18.HOW TO EXCHANGE. An exchange is a convenient way to buy shares of a
Portfolio or other Fidelity funds. The Fidelity family of funds has a
variety of investment objectives. Investors may exchange shares of each
Portfolio for shares of other Fidelity funds (subject to the minimum
initial investment requirement and the terms of the program of services
offered by their Financial Institution) that are registered in their state.
If you have purchased shares of a Portfolio in connection with the Fidelity
Advisor Funds program, your shares may be exchanged only for Class A shares
of Fidelity Advisor Funds. Other shareholders may not exchange shares of a
Portfolio for Class A shares of Fidelity Advisor Funds.
You may only exchange between accounts that are registered in the same
name, address, and taxpayer identification number. Exchanges will not be
permitted until a completed and signed mutual fund application is on file.
Investors must consult the prospectus of the fund to be acquired to
determine eligibility and suitability. To protect Portfolio 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 Portfolios.
Each 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.
TO EXCHANGE BY TELEPHONE. Exchanges may be requested by calling
Institutional Trading (see "Redemption Requests by Wire" on page ).
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.
TO EXCHANGE BY MAIL. Written requests for exchanges should contain the Fund
name, account number and number of shares to be redeemed, and the name of
the Portfolio whose shares are being purchased. The letter
must be signed by a person authorized to act on the account and must
include a signature guarantee. Letters should be sent to FIIOC at the
following address:
Daily Money Fund:
U.S. Treasury Portfolio or
Money Market Portfolio
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
RESTRICTIONS. Currently, there is no limit on the number of exchanges out
of each Portfolio, nor are there any administrative or redemption fees
applicable to exchanges out of the Portfolios. However, other funds may
restrict or limit exchanges, and may impose administrative fees of up to
$7.50 and redemption fees of up to 1.5% on exchanges. Check each fund's
prospectus for details.
Shares of a Portfolio will be redeemed at the next determined NAV following
receipt of the exchange order. Shares of the fund to be acquired will be
purchased at the next determined NAV after redemption proceeds are made
available. Investors will earn dividends in the acquired fund in accordance
with the fund's customary policy, normally on the day the exchange request
is received and accepted. Investors should note that under certain
circumstances, a fund may take up to seven calendar days to make redemption
proceeds available for the exchange purchase of shares of another fund.
Investors must apply for the wire feature on their account application.
Institutional Trading will send notification that this feature is active;
wire redemptions may then be made by calling Institutional Trading during
trading hours. If telephone instructions are received before 2 p.m.,
proceeds of the redemption will be wired in federal funds on the same day
to the bank account designated on the application. If an account is closed
by wire redemption, any accrued dividends will be paid at the beginning of
the following month.
TAXES. The exchange of shares is considered a sale and may be
taxable .
HOW TO REDEEM. Investors may redeem all or a portion of their shares on any
business day. Shares will be redeemed at the next NAV calculated after the
Portfolio has received and accepted the redemption request. If an investor
closes an account, any accrued dividends will be paid at the beginning of
the following month. Remember that a Portfolio may hold payment until it is
reasonably satisfied that investments made by check have been collected
(which can take up to seven calendar days). Shares redeemed at the 2 p.m.
price do not receive the dividend declared on the day of redemption. Shares
redeemed at the 4 p.m. price do receive the dividend declared on the day of
redemption.
REDEMPTION REQUESTS BY CHECK (minimum $500):
(medium solid bullet) Investors must have applied for the checkwriting
feature on their account application.
(medium solid bullet) There are no limits on the number of checks that may
be written.
(medium solid bullet) If the amount of a check written is greater than the
value of the account, the check will be returned and the investor may be
subject to extra charges.
19.REDEMPTION REQUESTS BY WIRE may be made by calling Institutional Trading
(see the "Institutional Trading" phone numbers on page ) .
An investor 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 shares to be sold, name, account number,
address, and should include the additional requirements listed below that
apply to each particular account.

<TABLE>
<CAPTION>
<S> <C>
Type of Registration Requirements

Individual, Joint Tenant, Sole Proprietorship, Letter of instruction signed by all person(s) required
Custodial (Uniform Gifts or Transfers to Minors to sign for the account exactly as it is registered,
Act), General Partners accompanied by signature guarantee(s).

Corporations, Associations Letter of instruction and a corporate resolution,
signed by person(s) required to sign for the account
accompanied by signature guarantee(s).

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
Type of Registration Requirements

Trusts A letter of instruction signed by the Trustee(s) with
signature guarantee(s). (If the Trustee's name is not
registered on the account, also provide a copy of the
trust document, certified within the last 60 days.)

</TABLE>

Investors who do not fall into any of these registration categories (i.e.,
executors, administrators, conservators, or guardians) should call
Institutional Trading for further instructions.
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 New
York Stock Exchange (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, a Portfolio may suspend redemptions or postpone payment dates.
Investors unable to execute transactions by telephone to Institutional
Trading or their Financial Institution (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.
CHOOSING A DISTRIBUTION OPTION
Investors may choose from two distribution options:
A. THE SHARE OPTION reinvests dividend distributions in additional shares
of the applicable Portfolio. This option is assigned automatically if no
choice is made on the application. The Share Option provides for the
purchase of new shares on the day dividends are distributed.
B. THE INCOME-EARNED OPTION means all income dividends are paid in cash.
STATEMENTS AND REPORTS
Service will send the investor a confirmation statement after every
transaction (except a reinvestment of dividends or capital gains) that
affects the 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
Portfolios' financial statements. To reduce expenses, only one copy of the
Portfolios' reports (such as the Annual Report) may be mailed to each
investor's household. Investors should contact their Financial Institution
or the Fund to request additional reports each time.
ADDITIONAL INFORMATION. Each Portfolio also reserves the right to reject
any specific purchase order including certain purchases by exchange (see
"How to Exchange" on page ). Purchase orders may be refused if, in FMR's
opinion, they are of a size that would disrupt management of a Portfolio.
20.HOLIDAY SCHEDULE. Each Portfolio is open for business and its NAV is
calculated every day that both the New York Fed and the NYSE are open
for trading . 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 Year's Day, to
be observed in the future, the New York Fed or the NYSE may modify its
holiday 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; or ( 2 ) 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 NAV of
each Portfolio's shares may be affected when investors may not
purchase or redeem shares. Certain other Fidelity funds may follow
different holiday closing schedules.
21.MANAGEMENT, DISTRIBUTION AND SERVICES
MANAGEMENT CONTRACTS. For managing its investments and business affairs,
each Portfolio pays FMR a monthly management fee at the annual rate of .50%
of its average net assets for the month. FMR has voluntarily agreed to
reimburse the Initial Shares of U.S. Treasury Portfolio and the shares
of Money Market Portfolio to the extent that their respective
total operating expenses (excluding interest, taxes, brokerage commissions
and extraordinary expenses), including management fees, are in excess of an
annual rate of .65% of average net assets. For the fiscal year ended July
31, 199 4 , management fees for Money Market Portfolio and U.S.
Treasury Portfolio amounted to $ 7,553,008 and $ 13,343,263 ,
respectively. FMR retains the ability to be repaid for expense
reimbursements in the amount that expenses fall below the limit prior to
the end of the fiscal year.
FMR, on behalf of each 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 Portfolios, after payments by FMR pursuant to each plan of
distribution for Initial Sh ares of U.S. Treasury and shares
of Money Market Portfolio. 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 year ended July 31, 199 4 ,
sub-advisory fees for Money Market Portfolio and U.S. Treasury Portfolio
amounted to $ 1,884,963 and $ 2,367,209 , respectively.
DISTRIBUTION AND SERVICE PLAN S . The Trustees of the Fund have
adopted Distribution and Service Plan s (the Plan s ) on behalf
of the Initial Share s of U.S. Treasury Portfolio and the
shares of Money Market Portfolio 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 except pursuant
to a plan adopted under the Rule. The Board of Trustees has adopted the
Plan s to allow the Initial Sh ares or the shares of Money
Market Portfolio , as applicable, and FMR to incur certain expenses
that might be considered to constitute direct or indirect payment of
distribution expenses. No separate payments are authorized to be made by
the Initial Share s or shares of Money Market Portfolio under the
Plan s . Rather, the Plan recognize s that FMR makes payments
from its management fee or any other sources available , to parties
such as banks or broker-dealers (Qualified Recipients) that provide
shareholder support services or assist in selling Initial Share s
of U.S. Treasury Portfolio or shares of Money Market Portfolio or
perform other distribution-related activities. Qualified Recipients
currently are compensated under each Plan at a maximum rate of up to
.38% annually of the average net assets of the Initial Share s of
U.S. Treasury Portfolio or shares of Money Market Portfolio with
respect to which they provide or have provided shareholder support or
distribution services.
Distributors may, at its expense, provide promotional incentives such as
sales contests and trips to investment professionals who support the sale
of shares. In some instances, these incentives will be offered only to
certain types of qualified recipients, such as bank affiliated or non-bank
affiliated broker-dealers, or to qualified recipients whose representatives
provide services in connection with the sale or expected sale of
significant amounts of shares.
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 Fund 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 for Initial Sh ares of U.S.
Treasury Portfolio and shares of Money Market Portfolio and maintains
records for the holders of such shares. FIIOC is paid fees based on the
type, size and number of accounts in Initial Sh ares of U.S.
Treasury Portfolio of Money Market Portfolio and the number of
transactions made by shareholders of a Portfolio. For the fiscal year ended
July 31, 199 4, these payments amounted to $3,072,314 for Money
Market Portfolio and $1,820,605 for both classes of U.S. Treasury
Portfolio, of which Initial Shares paid the entire amount.
Service, 82 Devonshire Street, Boston, MA, an affiliate of FMR, performs
the calculations necessary to determine the NAV of the Initial Shares of
U.S. Treasury Portfolio and the shares of Money Market Portfolio and
maintains the general accounting records for the Initial Shares of U.S.
Treasury Portfolio and the shares of Money Market Portfolio. The
fees are based on the Portfolio's average net assets, but must fall within
a range of $20,000 to $750,000 per year. For the fiscal year ended July 31,
1994, Service received fees of $163,480, and $250,737 from Money Market
Portfolio and U.S. Treasury Portfolio, respectively.
22.DAILY MONEY FUND AND THE FIDELITY ORGANIZATION
THE FUND. Money Market Portfolio and U.S. Treasury Portfolio are
diversified portfolios 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
Portfolio activities and reviews contractual arrangements with
companies that provide the Portfolios with services. The Fund is not
required to hold annual shareholder meetings, although special meetings may
be called for a class of shares, Portfolio, or the Fund as a whole for
purposes such as electing or removing Trustees, changing fundamental
policies or approving a management contract or plan of distribution.
Shareholders receive one vote for each share of a Portfolio they own and
fractional votes for each fractional share of a Portfolio they own.
Separate votes are taken by each Portfolio or class of shares if a matter
affects just that Portfolio or class, respectively.
CLASS B SHARES. As set forth under "Summary of Portfolio Expenses"
U.S. Treasury Portfolio offers a class of shares with a contingent
deferred sales charge to retail investors who engage an investment
professional for investment advice ( Class B shares ). Class B
shares are subject to an annual distribution fee of .75% of average net
assets, an annual service fee of .25% of average net assets, and a
contingent deferred sales charge upon redemption within five years of
purchase, which decreases from a maximum of 4% to 0%. After a maximum
holding period of six years, Class B shares automatically
convert to Initial share s.
Class B shares are available only through exchange from Fidelity
Advisor Funds which offer Class B shares . Class B shares
of U.S. Treasury Portfolio may be exchanged only for Class B
shares of Fidelity Advisor Funds. Transfer agent and shareholder
services for Class B shares are performed by FIIOC.
For the current fiscal year, FMR has voluntarily agreed to reimburse
Class B shares to the extent that total operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses), including management fees, are in excess of an annual rate of
1.35%. If FMR did not agreed to reimburse Class B
shares , total operating expenses would be 2. 52 % of
average net assets.
Investment professionals may receive different levels of compensation with
respect to one class of shares over another class of shares in U.S.
Treasury Portfolio.
Fidelity Investments is one of the largest investment management
organizations in the U.S. 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 Portfolios.
FMR, the Portfolios' 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 J uly 31, 199 4 , FMR advised
funds having more than 1 9 million shareholder accounts with a total
value of more than $225 billion. Fidelity Distributors Corporation
distributes shares for the Fidelity funds.
FMR Texas Inc. (FMR Texas), the Portfolios' 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 ultimate parent company of FMR and FMR Texas. Through
ownership of voting common stock, members of the Edward C. Johnson 3d
family form a controlling group with respect to FMR Corp. Changes may occur
in the Johnson family group, through death or disability, which would
result in changes in each individual family member's holding of stock. Such
changes could result in one or more family members becoming holders of over
25% of the stock. The Portfolios have received an opinion of counsel that
changes in the composition of the Johnson family group under these
circumstances would not result in the termination of the portfolio's
management or distribution contracts and accordingly, would not require a
shareholder vote to continue operation under these contracts.
23.APPENDIX
The following paragraphs provide a brief description of securities in which
the Portfolios may invest and the transactions they may make. The
Portfolios are not limited by this discussion, 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.
ASSET BACKED SECURITIES. May include pools of mortgages, loans, or
receivables. Payment of principal and interest may be largely dependent
upon the cash flows generated by the assets backing the securities.
BANKERS' ACCEPTANCES. Negotiable obligations of a bank to pay a draft which
has been drawn on it by a customer. These obligations are backed by large
banks and usually are backed by goods in international trade.
CERTIFICATES OF DEPOSIT. Negotiable certificates representing a commercial
bank's obligations to repay funds deposited with it, earning specified
rates of interest over a given period of time.
COMMERCIAL PAPER. Short-term obligations issued by banks, broker-dealers,
corporations and other entities for purposes such as financing their
current operations.
DELAYED DELIVERY TRANSACTIONS. A Portfolio may buy and sell securities on a
when-issued or delayed delivery 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 a
Portfolio's assets. Ordinarily, a Portfolio will not earn interest on
securities purchased until they are delivered.
FINANCIAL SERVICES INDUSTRY. Because the Money Market Portfolio
concentrates more than 25% of its total assets in the financial services
industry, its performance may be affected by conditions affecting banks and
other financial services companies. Companies in the financial services
industry are subject to various risks related to that industry, such as
governmental regulation, changes in interest rates, and exposure on loans,
including loans to foreign borrowers. Investments in the financial services
industry may include obligations of foreign and domestic banks, savings and
loan associations, consumer and industrial finance companies, securities
brokerage companies, leasing companies, and a variety of firms in the
insurance field. These obligations include time deposits, certificates of
deposit, bankers' acceptances, and commercial paper.
ILLIQUID INVESTMENTS. Under the supervision of the Board of Trustees, FMR
determines the liquidity of the Portfolios' 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 Portfolios
to sell illiquid investments promptly at an acceptable price.
INTERFUND BORROWING PROGRAM. Each Portfolio has received permission from
the SEC to lend money to and borrow money from other funds advised by FMR
or its affiliates. U.S. Treasury 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. Money
Market Portfolio will lend through the program when the returns are higher
than those available at the same time from other short-term instruments
(such as repurchase agreements), and will borrow through the program only
when the costs are equal to or lower than the cost of bank loans. The Money
Market Portfolio will not lend more than 10% of its assets to other funds,
and neither Portfolio will borrow through the program if, after doing so,
total outstanding borrowings would exceed 15% of the Portfolio's total
assets. Loans may be called on one day's notice, and the Portfolios 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.
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. In a repurchase, the Portfolio buys a security at
one price and simultaneously agrees to sell it back at a higher price. In
the event that the other party to a repurchase agreement declares
bankruptcy, the Portfolio could experience delays in recovering its cash.
To the extent that, in the meantime, the value of securities purchased had
decreased, the Portfolio could experience a loss. In all cases, FMR must
find the creditworthiness of the other party to the transaction
satisfactory.
RESTRICTED SECURITIES cannot be sold to the public without registration
under the Securities Act of 1933. Unless registered for sale, these
securities can only be sold in privately negotiated transactions or
pursuant to an exemption from registration.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
Portfolio temporarily transfers possession of a portfolio instrument
to another party, such as a bank or broker-dealer, in return for cash. Each
Portfolio expects that it will engage in reverse repurchase agreements for
temporary purposes such as funding redemptions or when it is able to
invest the cash so acquired at a rate higher than the cost of the
agreement, which would increase the income earned by the Portfolio .
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 provide for periodic adjustments
of the interest rates paid. Floating rate obligations have interest rates
that change whenever there is a change in a designated base rate, while
variable rate obligations 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. When determining the
maturity of a variable or floating rate obligation, the 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
obligation.
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: MONEY MARKET PORTFOLIO
INVESTMENTS/JULY 31, 1994
(SHOWING PERCENTAGE OF TOTAL VALUE OF
INVESTMENTS)

ANNUALIZED ANNUALIZED
YIELD AT YIELD AT
DUE TIME OF PRINCIPAL VALUE DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1) DATE PURCHASE AMOUNT (NOTE 1)
Bankers' Acceptances - 1.4%
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS
Industrial Bank of Japan, Ltd.
8/15/94 4.54% $ 15,000,000 $ 14,973,692
Sakura Bank, Ltd.
8/19/94 4.49 6,250,000 6,236,031
TOTAL BANKERS' ACCEPTANCES 21,209,723
Certificates of Deposit - 18.8%
DOMESTIC CERTIFICATES OF DEPOSIT - 0.6%
NBD Bank, N.A.
8/4/94 4.50 10,000,000 10,000,000
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 18.2%
Banque Nationale de Paris
8/16/94 4.45 15,000,000 14,999,352
9/8/94 4.70 30,000,000 29,996,762
12/21/94 5.09 5,000,000 4,994,671
Banque Paribas
8/1/94 4.50 25,000,000 25,000,000
Bayerische Hypotheken-und Weschel
8/26/94 4.40 20,000,000 20,000,000
Commerzbank
11/21/94 4.96 13,000,000 12,992,619
Fuji Bank, Ltd.
8/17/94 4.53 25,000,000 25,000,000
Mitsubishi Bank, Ltd.
10/31/94 4.94 20,000,000 20,000,498
Royal Bank of Canada
11/30/94 5.00 20,000,000 19,991,703
Sakura Bank, Ltd.
8/8/94 4.60 20,000,000 20,000,000
Societe Generale
8/17/94 4.30 10,000,000 10,000,000
1/17/95 5.18 20,000,000 20,000,000
Sumitomo Bank, Ltd.
8/1/94 4.56 5,000,000 5,000,000
8/15/94 4.60 5,000,000 5,000,019
Swiss Bank Corporation
8/10/94 4.55 25,000,000 25,000,000
Westdeutsche Landesbank Gironzentrale
8/10/94 4.52 25,000,000 25,000,000
282,975,624
TOTAL CERTIFICATES OF DEPOSIT 292,975,624
Commercial Paper - 45.3%
Abbey National (UK), PLC
8/29/94 4.55% $ 15,000,000 $ 14,947,500
B.B.V. Finance (Delaware), Inc.
8/9/94 4.52 39,000,000 38,961,000
B. P. America, Inc.
8/30/94 4.40 25,000,000 24,911,389
Beneficial Corporation
8/15/94 4.57 15,000,000 14,973,458
Berliner Handels-und Frankfurter Bank
8/4/94 4.52 25,000,000 24,990,625
Caisse Nationale des Telecommunications
8/22/94 4.43 9,000,000 8,976,900
Commerzbank U.S. Finance, Inc.
8/19/94 4.32 5,000,000 4,989,350
1/20/95 5.18 5,000,000 4,879,361
Corporate Asset Funding Company, Inc.
8/2/94 4.46 9,370,000 9,368,842
Dean Witter, Discover & Co.
8/16/94 4.36 25,000,000 24,954,688
Eiger Capital Corporation
8/19/94 4.41 29,995,000 29,929,011
8/23/94 4.41 15,000,000 14,959,667
Exxon Imperial U.S., Inc.
8/22/94 4.37 30,000,000 29,923,700
Gaz de France
11/2/94 4.98 19,700,000 19,450,631
General Electric Capital Corporation
8/15/94 4.58 (a) 10,000,000 10,000,000
9/6/94 4.47 (a) 25,000,000 25,000,000
9/19/94 4.09 5,000,000 4,972,778
12/9/94 5.05 20,000,000 19,642,500
12/12/94 5.02 7,000,000 6,872,763
1/10/95 5.58 10,000,000 9,758,125
Generale Bank
8/19/94 4.48 12,000,000 11,973,300
Goldman Sachs Group, L.P. (The)
8/2/94 4.53 11,000,000 10,998,619
HYPO U.S. Finance
11/2/94 5.13 10,000,000 9,870,833
Hertz Corporation
8/25/94 4.42 15,000,000 14,956,000
ANNUALIZED ANNUALIZED
YIELD AT YIELD AT
DUE TIME OF PRINCIPAL VALUE DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1) DATE PURCHASE AMOUNT (NOTE 1)
COMMERCIAL PAPER - CONTINUED
ITT Corporation
8/26/94 4.41% $ 13,890,000 $ 13,847,558
International Nederlanden U.S. Funding Corp.
8/9/94 4.50 25,000,000 24,975,111
Matterhorn Capital Corporation
8/17/94 4.36 35,000,000 34,932,333
Merck & Company, Inc.
8/24/94 4.38 30,000,000 29,917,200
Merrill Lynch & Co., Inc.
8/11/94 4.33 15,000,000 14,982,000
8/12/94 4.33 15,000,000 14,980,200
National Australia Funding, Inc.
8/29/94 4.65 20,000,000 19,928,289
New South Wales Treasury Corp.
8/30/94 3.90 10,000,000 9,969,147
10/11/94 4.81 23,980,000 23,755,354
Preferred Receivables Funding Corporation
8/8/94 4.57 15,000,000 14,986,729
Royal Bank of Canada
8/31/94 4.55 22,000,000 21,917,500
Siemens Corporation
8/23/94 4.39 8,000,000 7,978,587
South Australian Government Financing Authority
9/30/94 4.60 14,500,000 14,389,800
Texaco Inc.
8/8/94 4.38 15,000,000 14,987,313
Toronto Dominion Holdings USA, Inc.
8/5/94 4.48 40,000,000 39,980,178
WCP Funding, Inc.
8/8/94 4.57 15,000,000 14,986,729
TOTAL COMMERCIAL PAPER 706,775,068
Federal Agencies - 15.1%
FEDERAL FARM CREDIT BANK - DISCOUNT NOTES - 1.0%
10/17/94 4.62 5,000,000 4,951,661
10/19/94 4.47 5,000,000 4,952,051
10/21/94 4.49 5,000,000 4,950,613
14,854,325
FEDERAL HOME LOAN MORTGAGE CORP. - DISCOUNT NOTES - 2.2%
9/23/94 4.04 18,185,000 18,079,249
10/21/94 4.47 17,125,000 16,956,618
35,035,867
FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS - 1.6%
8/1/94 4.85 (a) 25,000,000 25,000,000
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 10.3%
9/1/94 4.02% $ 50,000,000 $ 49,829,931
10/4/94 4.27 25,000,000 24,814,222
10/17/94 4.59 15,000,000 14,855,625
10/26/94 4.45 30,000,000 29,688,250
10/27/94 4.50 25,000,000 24,734,167
1/18/95 5.10 17,350,000 16,941,987
160,864,182
TOTAL FEDERAL AGENCIES 235,754,374
U.S. Treasury Obligations - 1.9%
U.S. Treasury Bills
2/9/95 3.83 30,000,000 29,410,400
Short-Term Notes (a) (b) - 3.5%
CSA Funding, Inc. - A
8/5/94 4.72 10,000,000 10,000,000
CSA Funding, Inc. - B
8/5/94 4.72 22,000,000 22,000,000
CSA Funding, Inc. - C
8/5/94 4.72 23,000,000 23,000,000
TOTAL SHORT-TERM NOTES 55,000,000
Time Deposits - 3.2%
Hongkong & Shanghai Banking Corp.
8/2/94 4.31 25,000,000 25,000,000
Society National Bank
8/1/94 4.31 25,000,000 25,000,000
TOTAL TIME DEPOSITS 50,000,000
Municipal Bonds (a) - 6.3%
Harris County Texas Health Facilities Authority
8/5/94 4.62 9,700,000 9,700,000
Illinois Student Assistance Commission
8/5/94 4.81 10,000,000 10,000,000
Louisiana Public Facilities Authority
8/5/94 4.62 47,200,000 47,200,000
New Orleans Aviation Board (MBIA Insured)
8/5/94 4.61 9,700,000 9,700,000
San Diego County General Obligation
8/1/94 4.54 16,000,000 16,000,000
Texas General Obligation
8/5/94 4.48 6,000,000 6,000,000
TOTAL MUNICIPAL BONDS 98,600,000

MATURITY VALUE
AMOUNT (NOTE 1)
Repurchase Agreements - 4.5%
With Goldman, Sachs & Co.:
At 4.35%, dated 7/29/94 due 8/11/94:
U.S. Government Obligations
(principal amount $25,603,413)
3.52% to 8.50%,
7/1/1 to 7/1/24 $ 25,039,271 $ 25,000,000
At 4.35%, dated 7/29/94 due 8/12/94:
U.S. Government Obligations
(principal amount $25,603,413)
3.52% to 8.50%,
7/1/1 to 7/1/24 25,042,292 25,000,000
In a joint trading account
(U.S. Treasury Obligations)
dated 7/29/94, due 8/1/94
(Note 2)
At 4.25% 19,767,004 19,760,000
TOTAL REPURCHASE AGREEMENTS 69,760,000
TOTAL INVESTMENTS - 100% $ 1,559,485,189
Total Cost for Income Tax Purposes - $1,559,485,189

LEGEND:
(24.) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or when applicable,
the final maturity date.
(25.) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
CSA Funding, Inc.:
Series A 10/28/93 $10,000,000
Series B 10/28/93 $22,000,000
Series C 10/28/93 $23,000,000
INCOME TAX INFORMATION:
At July 31, 1994, the fund had a capital loss carryforward of approximately
$190,000 of which $30,000, $35,000 and $125,000 will expire on July 31,
2000, 2001 and 2002, respectively.

Statement of Assets and Liabilities

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
July 31, 1994

ASSETS

Investment in securities, at value (including repurchase agreements of $69,760,000) (Notes 1 and 2) - $ 1,559,485,189
See accompanying schedule

Interest receivable 2,227,924

Receivable from investment adviser for expense reductions (Note 5) 273,211

TOTAL ASSETS 1,561,986,324

LIABILITIES

Payable for investments $ 24,911,389
purchased

Share transactions in process 10,760,098

Dividends payable 313,783

Accrued management fee 656,571

Other payables and accrued expenses 476,280

TOTAL LIABILITIES 37,118,121

NET ASSETS $ 1,524,868,203

Net Assets consist of:

Paid in capital $ 1,525,058,098

Accumulated net realized gain (loss) on investments (189,895)

NET ASSETS, for 1,525,058,098 shares outstanding $ 1,524,868,203

NET ASSET VALUE, offering price and redemption price per share ($1,524,868,203 (divided by) $1.00
(hollow bullet)(solid club)(hollow bullet)(hollow bullet)(verticle 8)(verticle 8) shares)

</TABLE>

Statement of Operations

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended July 31, 1994

INTEREST INCOME $ 54,602,716

EXPENSES

Management fee (Note 4) $ 7,553,008

Transfer agent fees (Note 4) 3,072,314

Accounting fees and expenses (Note 4) 163,480

Non-interested trustees' compensation 9,270

Custodian fees and expenses 108,425

Registration fees 237,707

Audit 35,781

Legal 16,754

Miscellaneous 22,087

Total expenses before 11,218,826
reductions

Expense reductions (1,399,918) 9,818,908
(Note 5)

NET INTEREST INCOME 44,783,808

NET REALIZED GAIN (LOSS) ON (124,844)
INVESTMENTS (NOTE 1)

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 44,658,964

</TABLE>

Statement of Changes in Net Assets

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED JULY 31,

INCREASE (DECREASE) IN NET ASSETS 1994 1993

Operations $ 44,783,808 $ 42,868,040
Net interest income

Net realized gain (loss) (124,844) (34,675)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 44,658,964 42,833,365

Dividends to shareholders from net interest income (44,783,808) (42,868,040)

Share transactions at net asset value of $1.00 per share 9,151,729,228 8,652,766,139
Proceeds from sales of shares

Reinvestment of dividends from net interest income 37,385,748 35,339,347

Cost of shares redeemed (9,115,524,819) (8,768,032,138)

Net increase (decrease) in net assets resulting from
share transactions 73,590,157 (79,926,652)

TOTAL INCREASE (DECREASE) IN NET ASSETS 73,465,313 (79,961,327)

NET ASSETS

Beginning of period 1,451,402,890 1,531,364,217

End of period $ 1,524,868,203 $ 1,451,402,890

</TABLE>

DAILY MONEY FUND: U.S. TREASURY PORTFOLIO
INVESTMENTS/JULY 31, 1994
(SHOWING PERCENTAGE OF TOTAL VALUE OF
INVESTMENTS)

ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE MATURITY VALUE
DATE PURCHASE AMOUNT (NOTE 1) AMOUNT (NOTE 1)
U.S. Treasury Obligations - 32.9%
U.S. TREASURY BILLS - 27.0%
9/29/94 3.92% $ 116,000,000 $ 115,268,218
10/13/94 4.04 70,000,000 69,437,900
10/20/94 3.36 7,000,000 6,948,978
10/20/94 4.16 50,000,000 49,547,222
12/15/94 4.60 123,000,000 120,911,323
1/5/95 4.87 74,000,000 72,467,069
1/19/95 4.96 65,000,000 63,505,650
1/26/95 4.96 50,000,000 48,803,444
546,889,804
U.S. TREASURY NOTES - 5.9%
8/15/94 3.08 39,000,000 39,138,437
8/15/94 3.81 15,000,000 15,050,009
8/15/94 4.50 55,000,000 55,047,753
1/31/95 3.63 10,000,000 10,027,558
119,263,757
TOTAL U.S. TREASURY OBLIGATIONS 666,153,561
Repurchase Agreements - 67.1%
With First Boston Corporation:
At 4.35%, dated 7/25/94 due 8/24/94:
U.S. Treasury Obligations
(principal amount $105,562,321)
0%, 12/15/94 to 1/12/95 $ 103,373,375 $ 103,000,000
With Nikko Securities Co. International, Inc.:
At 4.20%, dated 7/29/94 due 8/1/94:
U.S. Treasury Obligations
(principal amount $153,491,896)
4.75%, 2/15/97 150,052,500 150,000,000
In a joint trading account
(U.S. Treasury Obligations)
dated 7/29/94, due 8/1/94
At 4.24% 1,063,375,612 1,063,000,000
At 4.25% 45,740,207 45,724,000
TOTAL REPURCHASE AGREEMENTS 1,361,724,000
TOTAL INVESTMENTS - 100% $ 2,027,877,561
Total Cost for Income Tax Purposes - $2,027,877,561
INCOME TAX INFORMATION:
At July 31, 1994, the fund had a capital loss carryforward of approximately
$505,000 of which $44,000 and $461,000 will expire on July 31, 2001 and
2002, respectively.

Statement of Assets and Liabilities

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
July 31, 1994

ASSETS

Investment in securities, at value (including repurchase agreements of $1,361,724,000) (Notes 1 and 2) $ 2,027,877,561
- - See accompanying schedule

Interest receivable 5,634,573

Receivable from investment adviser for expense reductions (Note 5) 204

TOTAL ASSETS 2,033,512,338

LIABILITIES

Share transactions in process $ 3,551,875

Dividends payable 3,027,373

Accrued management fee 884,193

Other payables and accrued expenses 271,677

TOTAL LIABILITIES 7,735,118

NET ASSETS $ 2,025,777,220

Net Assets consist of:

Paid in capital $ 2,026,232,225

Accumulated net realized gain (loss) on investments (455,005)

NET ASSETS $ 2,025,777,220

$1.00
INITIAL CLASS :
NET ASSET VALUE, offering price and redemption price per share ($2,025,149,164 (divided by) (solid club)(solid club)(hollow
bullet)(solid club)(verticle 8) shares)

CLASS B: $1.00
NET ASSET VALUE, offering price and redemption price per share ($628,056 (divided by)(solid club)(verticle 8) shares)

</TABLE>

Statement of Operations

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended July 31, 1994

INTEREST INCOME $ 91,004,079

EXPENSES

Management fee (Note 4) $ 13,343,263

Transfer agent fees (Note 4) 1,820,605
Initial Class

Distribution fees - Class B 117
(Note 4)

Accounting fees and expenses (Note 4) 250,737

Non-interested trustees' compensation 16,986

Custodian fees and expenses 108,991

Registration fees - Initial Class 279,430

Registration fees - Class B 232

Audit 50,616

Legal 27,370

Miscellaneous 38,875

Total expenses before 15,937,222
reductions

Expense reductions - Class B (204) 15,937,018
(Note 5)

NET INTEREST INCOME 75,067,061

NET REALIZED GAIN (LOSS) ON (460,852)
INVESTMENTS (NOTE 1)

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 74,606,209

</TABLE>

Statement of Changes in Net Assets

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED JULY 31,

INCREASE (DECREASE) IN NET ASSETS 1994 1993

Operations $ 75,067,061 $ 77,613,277
Net interest income

Net realized gain (loss) (460,852) (44,237)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 74,606,209 77,569,040

Distributions to shareholders from:
Net interest income

Initial Class (75,066,532) (77,613,277)

Class B (529) -

Share transactions - net increase (decrease) at net
asset value of $1.00 per share (Note 6) (922,932,430) (144,499,082)

TOTAL INCREASE (DECREASE) IN NET ASSETS (923,393,282) (144,543,319)

NET ASSETS

Beginning of period 2,949,170,502 3,093,713,821

End of period $ 2,025,777,220 $ 2,949,170,502

</TABLE>

NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JULY 31, 1994

26. SIGNIFICANT ACCOUNTING POLICIES.
Money Market Portfolio and U.S. Treasury Portfolio (the funds) are funds of
Daily Money Fund (the trust). The trust is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Delaware Business trust. Each fund is
authorized to issue an unlimited number of shares.
U.S. Treasury Portfolio offers two classes of shares, Initial Class and
Class B, each of which has equal rights to earnings, assets and voting
privileges except that each class bears different distribution and transfer
agent expenses and certain registration fees. Each class has exclusive
voting rights with respect to its distribution plans. The Class B shares
are offered by exchange only, to investors in Class B shares of certain
Fidelity Advisor Funds. Class B commenced operations on July 1, 1994.
The following summarizes the significant accounting policies of the funds:
SECURITY VALUATION. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes all of its taxable income for the fiscal
year. The schedules of investments include information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
ALLOCATED EARNINGS AND EXPENSES. Interest income, expenses (other than
expenses incurred under each class' Distribution and Service Plans,
Transfer Agent Agreements and certain registration fees) and realized and
unrealized gains or losses on investments are allocated to each class of
shares based upon their relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
27. OPERATING POLICIES.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The funds' investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by
U.S. Treasury or Federal Agency obligations.
RESTRICTED SECURITIES. The Money Market fund is permitted to invest in
privately placed restricted securities. These securities may be resold in
transactions exempt from registration or to the public if the securities
are registered. Disposal of these securities may involve time-consuming
negotiations and expense, and prompt sale at an acceptable price may be
difficult. At the end of the period, restricted securities (excluding 144A
issues) amounted to $55,000,000 or 3.6% of net assets.
28. JOINT TRADING ACCOUNT.
At the end of the period, the U.S. Treasury fund had 20% or more of its
total investments in repurchase agreements through a joint trading account.
These repurchase agreements were with entities whose creditworthiness has
been reviewed and found satisfactory by FMR. The repurchase agreements were
dated July 29, 1994 and due August 1, 1994. The maturity values of the
joint trading account investments were $1,063,375,612 at 4.24% and
$45,740,207 at 4.25%.
3. JOINT TRADING ACCOUNT - CONTINUED
The investments in repurchase agreements through the joint trading account
are summarized as follows:
MAXIMUM
AMOUNT AGGREGATE AGGREGATE AGGREGATE
NO. OF WITH ONE PRINCIPAL MATURITY MARKET COUPON MATURITY
DEALERS DEALER AMOUNT OF AMOUNT OF VALUE OF RATES OF DATES OF
OR BANKS OR BANK AGREEMENTS AGREEMENTS COLLATERAL COLLATERAL COLLATERAL
At 4.24% 11 38.4% $3,167,000,000 $3,168,119,063 $3,237,651,418 0%-14%
8/4/94-8/15/23
At 4.25% 6 16.9% $630,000,000 $630,223,300 $643,834,972 0%-14%
8/4/94-8/15/23
29. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a fee that
is computed daily at an annual rate of .50% of the fund's average net
assets.
SUB-ADVISER FEE. As each fund's investment sub-adviser, FMR Texas Inc., a
wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the
management fee payable to FMR. The fees are paid prior to any voluntary
expense reimbursements which may be in effect, and after reducing the fee
for any payments by FMR pursuant to each fund's Distribution and Service
Plan.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plans (the Plans) adopted on behalf of shares of the Money Market fund and
the Initial shares of U.S. Treasury fund, and in accordance with Rule 12b-1
of the 1940 Act, FMR or the funds' distributor, FDC, an affiliate of FMR,
may use their resources to pay administrative and promotional expenses
related to the sale of each fund's shares at a maximum annual rate of up to
.38% of each fund's average net assets. Subject to the approval of the
Board of Trustees, the Plans also authorize payments to third parties that
assist in the sale of each fund's shares or render shareholder support
services. FMR or FDC has informed the funds that payments made to third
parties under the Plans amounted to $3,783,083 and $8,608,846 for the Money
Market fund and the Initial shares of U.S. Treasury fund, respectively, for
the period.
Pursuant to the Distribution and Service Plan (the Plan) adopted on behalf
of Class B shares, and in accordance with Rule 12b-1 of the 1940 Act, Class
B pays FDC a monthly distribution fee based on an annual rate of .75% of
its average net assets net of a payment made by FMR of up to .38% of Class
B shares' average net assets. Payments made to FDC by Class B and FMR
amounted to $73 and $58, respectively, for the period.
In addition, pursuant to the Plan, Class B pays investment professionals a
fee based on an annual rate of .25% of its average net assets for providing
ongoing shareholder support services to investors in Class B shares.
Payments made to investment professionals amounted to $44 for the period.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption
within five years of purchase, be assessed a contingent deferred sales
charge which decreases from a maximum of 4% to 0% based on the holding
period of the shares. For the period, FDC did not receive any contingent
deferred sales charges.
TRANSFER AGENT FEE. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. FIIOC receives fees based on the type,
size, number of accounts and the number of transactions made by
shareholders. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEE. Fidelity Service Co., an affiliate of FMR, maintains the
funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
30. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the Money Market, U.S. Treasury Initial
Class and U.S. Treasury Class B funds' operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses) above an
annual rate of .65%, .65% and 1.35%, respectively, of average net assets.
For the period, the reimbursement reduced the expenses of the Money Market
and U.S. Treasury Class B funds by $1,399,918 and $204, respectively.
31. SHARE TRANSACTIONS.
Share transactions for both classes of the U.S. Treasury fund at net asset
value of $1.00 per share were as follows:
YEARS ENDED JULY 31,
1994 1993
U.S. TREASURY PORTFOLIO INITIAL CLASS
Proceeds from sales of shares $ 13,798,065,710 $ 13,719,270,587
Reinvestment of dividends from net interest income 41,469,354
42,776,435
Cost of shares redeemed (14,763,095,691) (13,906,546,104)
Net increase (decrease) in net assets and shares resulting from share
transactions $ (923,560,627) $ (144,499,082)
U.S. TREASURY PORTFOLIO CLASS B *
Proceeds from sales of shares $ 627,668 $ -
Reinvestment of dividends from net interest income 529 -
Cost of shares redeemed - -
Net increase (decrease) in net assets and shares resulting from share
transactions $ 628,197 $ -
(*) Share transactions for U.S. Treasury Portfolio Class B are for the
period July 1, 1994 (commencement of operations) to July 31, 1994.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Daily Money Fund and the Shareholders of Money Market
Portfolio and U.S. Treasury Portfolio:
We have audited the accompanying statements of assets and liabilities of
Daily Money Fund: Money Market Portfolio and U.S. Treasury Portfolio,
including the schedules of portfolio investments, as of July 31, 1994, and
the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the ten years in the
period then ended for the Money Market Portfolio and each of the nine years
in the period then ended and for the period August 31, 1983 (commencement
of operations) to July 31, 1984 for the U.S. Treasury Portfolio (Initial
Class) and for the period July 1, 1994 (commencement of operations) to July
31, 1994 for the U.S. Treasury Portfolio (Class B). These financial
statements and financial highlights are the responsibility of the fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments and cash held by the custodian as of July 31, 1994. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Daily Money Fund: Money Market Portfolio and U.S. Treasury Portfolio as
of July 31, 1994, the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the ten years in the
period then ended for the Money Market Portfolio and each of the nine years
in the period then ended and for the period August 31, 1983 (commencement
of operations) to July 31, 1984 for the U.S. Treasury Portfolio (Initial
Class) and for the period July 1, 1994 (commencement of operations) to July
31, 1994 for the U.S. Treasury Portfolio (Class B), in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
August 25, 1994

NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK AND FUND
SHARES ARE NOT BACKED OR GUARANTEED BY
ANY BANK OR INSURED BY THE FDIC.

DAILY MONEY FUND:
MONEY MARKET PORTFOLIO
U.S. TREASURY PORTFOLIO: INITIAL SHARES
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 19 , 1994
This Statement is not a prospectus but should be read in conjunction
with the current Prospectus for Daily Money Fund: Money Market Portfolio
(the Portfolio or Fund) and U.S. Treasury Portfolio: Initial Shares (dated
September 19, 1994). U.S. Tre asury Portfolio offers shares to
individual, institutional and corporate investors (Initial Shares). U.S.
Treasury Portfolio also offers shares by exchange to investors in Class B
shares of Fidelity Advisor Funds (Class B Shares). This statement offers
Initial Shares of U.S. Portfolio and shares of Money Market Portfolio. The
Annual Report is incorporated into the Prospectus. 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 Distributor

Description and Service Plans

Description of the Fund

Appendix

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-PTB-994
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 each 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 each 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 each Portfolio's
investment policies and limitations.
Each 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 set
forth below, the investment policies and limitations described in this
Statement of Additional Information are not fundamental and may not be
changed without shareholder approval.
U.S. TREASURY PORTFOLIO
THE FOLLOWING ARE U.S. TREASURY 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 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 investment company with
substantially the same fundamental investment objectives, policies, and
limitations as the Portfolio.
MONEY MARKET PORTFOLIO
THE FOLLOWING ARE MONEY MARKET 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 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, except that the Portfolio
will invest more than 25% of its total assets in the financial services
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, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies and limitations as the
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
agents 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 lend assets other than
securities to other parties, except by lending money (up to 10% of the
Portfolio's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser. (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 securities of
business enterprises that, including predecessors, have a record of less
than three years' continuous operation;
(ix) The Portfolio does not currently intend to invest in oil, gas or other
mineral exploration or development programs 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 investment company with
substantially the same fundamental investment objective, 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, neither Portfolio
currently intends to purchase futures contracts or options on futures
contracts.)
AFFILIATED BANK TRANSACTIONS. Each Portfolio may engage in transactions
with financial institutions that are, or may be considered to be,
"affiliated persons" of a 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, the Board of Trustees has established and periodically reviews
procedures applicable to transactions involving affiliated financial
institutions.
ASSET BACKED SECURITIES may include pools of mortgages, loans, receivables
or other assets. Payment of principal and interest may be largely dependent
upon the cash flows generated by the assets backing the securities, and, in
certain cases, supported by letters of credit, surety bonds, or other
credit enhancements, The value of asset-backed securities may also be
affected by the creditworthiness of the servicing agent for the pool, the
originator of the loans or receivables, or financial institution(s)
providing the credit support.
DELAYED-DELIVERY TRANSACTIONS. Each Portfolio may buy and sell securities
on a delayed-delivery or when-issued basis. These transactions involve a
commitment by a 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, a Portfolio assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a 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 a 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, a Portfolio will
set aside appropriate liquid assets in a segregated custodial account to
cover its purchase obligations. When a 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, a
Portfolio could miss a favorable price or yield opportunity, or could
suffer a loss.
A 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.
FOREIGN SECURITIES. The obligations of foreign branches of U.S. banks may
be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by
governmental regulation. Payment of interest and principal upon these
obligations also may be affected by governmental action in the country of
domicile of the branch (generally referred to as sovereign risk). In
addition, evidences of ownership of portfolio securities may be held
outside of the United States and the Money Market Portfolio may be
subject to t he risks associated with the holding of such property
overseas. Various provisions of federal law governing the establishment and
operation of domestic branches do not apply to foreign branches of domestic
banks.
Obligations of U.S. branches and agencies of foreign banks may be general
obligations of the main bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation as well as by governmen tal action in the country in which the
foreign bank has its head office. The Money Market Portfolio's ability to
access assets from abroad for payment may be subject to foreign law.
Obligations of foreign issuers also involve certain additional risks.
Foreign issuers may be subject to less government regulation and
supervision than U.S. issuers. Foreign issuers also generally are not bound
by uniform accounting, auditing and financial reporting requirements
comparable to those applicable to U.S. issuers.
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 each 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 s to be illiquid
include repurchase agreements not entitling the holder to payment of
principal and interest within seven days. Also, FMR may determine some
restricted securities and time deposits to be illiquid . 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, a 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, a Portfolio purchases a
security and simultaneously commits to resell that security to the seller
at an agreed - upon price on an agreed - upon price . The
resale price reflects the purchase price plus an agreed - upon
incremental amount which is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the
seller to pay the agreed - upon resale price, which obligation
is in effect secured by the value (at least equal to the amount of the
agreed - upon resale price and marked to market daily) of the
underlying security. Each 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 a
Portfolio in connection with bankruptcy proceedings), it is each
Portfolio 's current policy to limit repurchase agreement
transactions to those parties whose creditworthiness has been reviewed and
found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a Portfolio may be obligated to pay all or
part of the registration expense and a considerable period may elapse
between the ti me it decides to seek registration and the time the
Portfolio may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions
were to develop, the Portfolio might obtain a less favorable price than
prevailed when it decided to seek registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
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.
Each 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 each
Portfolio's assets and may be viewed as a form of leverage.
SHORT SALES "AGAINST THE BOX." Each 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 a 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. A Portfolio will incur transaction costs,
including interest expense, in connection with opening, maintaining, and
closing short sales against the box.
VARIABLE OR FLOATING RATE OBLIGATIONS . provide for
periodic adjustments of the interest rate paid . Floating rate
obligations have interest rates that change whenever there is a
change in a designated base rate s while variable rate
obligations 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.
Some variable or floating rate obligations permit holders to demand
payment of the unpaid principal balance plus an accrued interest from the
issuers or certain financial intermediaries. Issuers or financial
intermediaries who provide demand features or stand-by commitments often
obtain letters of credit (LOCs) or other guarantees from domestic or
foreign banks to support their repurchase commitments. FMR may rely upon
its evaluation of a bank's credit in determining whether to purchase an
obligation supported by an LOC. In evaluating a foreign bank's credit, FMR
will consider whether adequate public information about the bank is
available and whether the bank may be subject to unfavorable political or
economic developments, currency controls, or other governmental
restrictions that might affect the bank's ability to honor its credit
commitment.
When determining the maturity of a variable or floating rate obligation,
the fund 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 obligation.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of each Portfolio by FMR pursuant to authority contained in the
Management Contract. Since FMR has granted investment management authority
to the sub-adviser (see the section entitled "Management Contracts"), the
sub-adviser will be authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the policies
described below. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for
which it or its affiliates act as investment adviser. Securities purchased
and sold by the Portfolios 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 Portfolios may execute portfolio transactions with broker-dealers who
provide research and execution services to the Portfolios 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 Portfolios 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 Portfolios may be useful to FMR in rendering investment
management services to the Portfolios and/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 Portfolios. 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
Portfolios 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 Portfolios 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 Portfolios or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services
Inc. (FBSI) and Fidelity Brokerage Services, Ltd. (FBSL), subsidiaries of
FMR Corp., if the commissions are fair and reasonable and comparable to
commissions charged by non-affiliated qualified brokerage firms for similar
services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC
rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
Portfolios and review commissions paid by the Portfolios over
representative periods of time to determine if they are reasonable in
relation to the benefits to the Portfolios.
From time to time, the Trustees will review whether the recapture for the
benefit of the Portfolios of some portion of the brokerage commissions or
similar fees paid by the Portfolios on portfolio transactions is legally
permissible and advisable. The Portfolios seek 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 Portfolios 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 Portfolios 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 Portfolios are
concerned. In other cases, however, the ability of the Portfolios to
participate in volume transactions will produce better executions and
prices for the Portfolios. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to the Portfolios
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Each 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 each 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. Each 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 proce dures designed to stabilize
each 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 a 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, a Portfolio's yield based on
amortized cost may be higher than the yield based on market valuations.
Under these circumstances, a shareholder in a 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
Performance may be quoted 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.
Each 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 Portfolios based on yield. In
addition to the mutual fund rankings, each Portfolio's performance may be
compared to mutual fund performance indices prepared by Lipper.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising
reflect all aspects of a Portfolio's 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 in a Portfolio 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 a Portfolio's performance is not constant over time, but
changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance.
In addition to average annual returns, a Portfolio may quote unaveraged or
cumulative total returns reflecting the simple change in the value of an
investment over a stated perio d 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 period. Total returns may be broken
down into their components of income and capital in order to illustrate the
relationship of these factors and their contributions to total return.
Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration. The Money Market
Portfolio's cumulative total returns and average annual returns for periods
ended J ul y 31, 1994 were as follows:
HISTORICAL PORTFOLIO RESULTS

<TABLE>
<CAPTION>
<S> <C> <C> <C>
ONE YEAR FIVE YEARS TEN YEARS

Average Annual Total Returns 2. 98 % 5. 03 % 6. 31 %

Cumulative Total Returns 2. 98 % 27.80 % 84.40 %

</TABLE>

Each Portfolio may discuss its fund number, Quotron(trademark) number,
CUSIP number, and current portfolio manager.
YIELD CALCULATIONS . The Portfolios' yield refers to the income
generated by an investment in a 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, a Portfolio may quote
yields in advertising based on any historical seven day period.
PERFORMANCE COMPARISONS . The Portfolios may compare performance
or the performance of securities in which they may invest to averages
published by IBC USA (Publications), Inc. of Ashland, Massachusets. These
averages assume reinvestment of distributions. The MONEY FUND AVERAGES
which is reported in the MONEY FUND REPORT, covers over 543 money market
funds.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging. In addition, Fidelity may quote
financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques.
From time to time, each Portfolio's performance also may be compared to
other mutual funds tracked by financial or business publications and
periodicals. For example, each Portfolio may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating service
that rates mutual funds on the basis of risk-adjusted performance. Rankings
that compare the performance of Fidelity funds to one another in
appropriate categories over specific periods of time may also be quoted in
advertising. In addition, each 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
funds. Ibbotson calculates total returns in the same method as the
Portfolios. Performance comparisons may also be made to other compilations
or indices that may be developed and made available in the future.
The Portfolios also may compare their performance 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
each Portfolio's yield will fluctuate. Unlike some CDs and certain other
money market securities, money market mutual funds are not insured by the
Federal Depository 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.
Each Portfolio may reference the growth and variety of money market mutual
funds and the FMR's innovation and participation in the industry.
The following chart shows the income and capital elements of a Money Market
Portfolio's year-by-year total returns for the period July 31, 198 4
through J uly 31, 1994 as compared to the cost of living measured by
the Consumer Price Index over the same period.
During the period from July 31, 198 4 through July 31, 1994, a
hypothetical investment of $10,000 in the Money Market Portfolio would have
grown to $ 20,242 assuming all dividends were reinvested.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS INITIAL VALUE OF VALUE OF CONSUMER
ENDED $10,000 REINVESTED REINVESTED TOTAL PRICE
7/31 INVESTMENT DIVIDENDS CAPITAL GAINS VALUE INDEX**

198 5 10,000 9 20 0 10,9 20 10, 355

198 6 10,000 1, 228 0 11, 728 10, 519

198 7 10,000 2, 416 0 12, 416 10, 932

198 8 10,000 3, 261 0 13, 261 11, 383

198 9 10,000 4, 429 0 14, 429 11, 950

19 90 10,000 5, 632 0 15, 632 1 2,256

199 1 10,000 6,711 0 1 6,711 13, 084

199 2 10,000 7,415 0 1 7,415 13, 407

199 3 10,000 7,906 0 1 7,906 1 3,871

199 4 10,000 8,440 0 1 8,440 14, 256

</TABLE>

** From month-end closest to the initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on July
31, 1984, th e net amount invested in shares of the Money Market
Portfolio 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 $ 18,440 . If distributions had not been reinvested, the
amount of distributions earned from the Portfolio over time would have been
smaller and the cash payments (dividends) for the period would have come to
$6, 137 . The Portfolio did not distribute any capital gains during
the period.
Cumulative total returns and average annual returns for the fiscal periods
ended J ul y 31, 1994 for Initial Shares and Class B Shares of U.S.
Treasury Portfolio were as follows:
HISTORICAL PORTFOLIO RESULTS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ONE YEAR FIVE YEAR TEN YEAR LIFE OF PORTFOLIO

Average Annual Total Returns 2.89% 4.95% 6.15% 6.43%

Cumulative Total Returns 2.89% 27.31% 81.60% 97.62%

</TABLE>

The following chart shows the income and capital elements of the U.S.
Treasury Portfolio's year-by-year total returns for the period August 31,
1983 through July 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 J ul y 31, 1994, a
hypothetical investment of $10,000 in the U.S. Treasury Portfolio would
have grown to $19, 766 assuming all dividends were reinvested.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PERIOD INITIAL VALUE OF VALUE OF CONSUMER
ENDED $10,000 REINVESTED REINVESTED TOTAL PRICE
7/31 INVESTMENT DIVIDENDS CAPITAL GAINS VALUE 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
19 94 10,000 9,766 0 19,766 14,591

</TABLE>

* From August 31, 1983 through July 31, 1984.
** From month-end closest to the initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on August
31, 1983, the net amount invested in Initial Shares of U.S. Treasury
Portfolio 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, 766 . If distributions had not been reinvested,
the amount of distributions earned from Initial Shares of U.S. Treasury
Portfolio over time would have been smaller and the cash payments
(dividends) for the period would have come to $6,834. Initial Shares of
U.S. Treasury Portf olio did not distribute any capital gains during the
period.
ADDITIONAL PURCHASE 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 Portfolios' NAV. 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 under the 1940 Act (the Rule), each 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) a 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.
Each 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.
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 each Portfolio will not normally qualify for the
dividends-received deduction available to corporations, since each
Portfolio's income is primarily derived from interest income and short-term
capital gains. Depending upon state law, a portion of each Portfolio's
dividends attributable to interest income derived from U.S. government
securities may be exempt from state and local taxation. The Portfolios
will provide information on the portion of each Portfolio's dividends, if
any, that qualify for this exemption.
CAPITAL GAIN DISTRIBUTIONS. Each 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 Portfolios do not anticipate earning long-term
capital gains on securities.
TAX STATUS OF FUND. Each 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 neither Portfolio will 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, most state law provides for 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 a 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 Portfolios invest is exempt from state and local income taxes in most
states, the portion of your dividends from the Portfolios 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 (the Fund) are
listed below. Except as indicated, each individual has held the office
shown or other offices in the same company for the last five years.
Trustees and officers elected or appointed 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). Before retiring in March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company (exploration
and production). He is a Director of Bonneville Pacific Corporation
(independent power, 1989), Sanfill Corporation (nonhazardous waste, 1993)
and CH2M Hill Companies (engineering). In addition, he served on the Board
of Directors of the Norton Company (manufacturer of industrial devices,
1983-1990) and continues to serve on the Board of Directors of the Texas
State Chamber of Commerce, and is a member of advisory boards of Texas A&M
University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O Box 264 Bridgehampton, NY, Trustee (1992). Prior
to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief
Executive Officer of LTV Steel Company. Prior to May 1990, he was Director
of National City Corporation (a bank holding company) and National City
Bank of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation (1988), Hyster-Yale Materials Handling, Inc. (1989), and
RPM, Inc. (manufacturer of chemical products, 1990). In addition, he serves
as a Trustee of First Union Real Estate Investments; Chairman of the Board
of Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and Valuation Research Corp.(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.
FRED L. HENNING, JR., Vice President (1994), is Vice President of
Fidelity's money market funds and Senior Vice President of FMR Texas.
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, Assistant Vice President (1990), is also 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
Trustee, upon reaching age 72, becomes eligible to participate in a defined
benefit retirement program under which he receives payments during his
lifetime from the Portfolios 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
own less than 1% of each Portfolio's outstanding shares.
MANAGEMENT AND OTHER SERVICES
Each Portfolio employs FMR to furnish investment advisory and other
services. Under its Management Contract with each 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 each Portfolio in accordance with its investment
objective, policies and limitations.
FMR also provides each 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 each 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 each Portfolio. These services include providing facilities
for maintaining each Portfolio's organization, supervising relations with
custodians, transfer and pricing agents, accountants, underwriters and
other persons dealing with each Portfolio, preparing all general
shareholder communications and conducting shareholder relations,
maintaining each Portfolio's records and the registration of each
Portfolio's shares under federal and state laws, developing management and
shareholder services for each 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, each 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 Portfolios' 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 Portfolios' current transfer agent
agreements. See "Contracts with Companies Affiliated with FMR.") Other
expenses paid by the Portfolios include each Portfolio's proportionate
share of insurance premiums and Investment Company Institute dues, and
costs of registering shares under federal and state securities laws. The
Portfolios are also liable for such nonrecurring expenses as may arise,
including costs of litigation to which a Portfolio is a party, and any
obligation they may have to indemnify the officers and Trustees with
respect to such litigation.
For these services, each Portfolio pays FMR a monthly management fee at the
annual rate of .50% of the average net assets of that Portfolio throughout
the month. For the fiscal years ended July 31, 199 4 , 199 3 and
199 2 , FMR received fees amounting to $7,553,008, $7,773,471 and
$8,206,375, respectively, from Money Market Portfolio and $13,343,263,
$14,208,606 and $ 10,958,456 , respectively, from U.S. Treasury
Portfolio.
Effective October 14, 1988, FMR voluntarily agreed to waive all or a
portion of its management fee or reimburse each 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 a
Portfolio if and to the extent that a 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, a Portfolio may exclude interest, taxes, brokerage commissions,
and extraordinary expenses, as well as a portion of its distribution plan
expenses and for Money Market Portfolio, custodian fees attributable to
investments in foreign securities.
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 Portfolios.
Under the sub-advisory agreements, FMR pays FMR Texas fees equal to 50% of
the management fee retained by FMR under its management contracts with
the Portfolios, after payments by FMR pursuant to the Portfolios'
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, 1994,
1993, and 1992, FMR paid FMR Texas fees that amounted to $1,884,963,
$ 1,726,876 , and $ 1,825,881 , for Money Market Portfolio and
$ 2,367,209 , $ 2,400,702 , and $ 1,934,302 for U.S.
Treasury Portfolio.
THE DISTRIBUTOR
FIIOC is the transfer, dividend-paying and shareholder servicing agent
for the Initial Shares of U.S. Treasury Portfolio and the Shares of Money
Market Portfolio and maintains shareholder records. FIIOC receives a per
account fee and a monetary transa ction 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 a 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. Transfer agent fees and expenses
for the fiscal years ended July 31, 199 4 , 199 3 and
199 2 were $ 3,072,314 , $ 1,220,834 , and $938,144,
respectively, for Money Market Portfolio, $1,820,605, $1,310,256, and
$915,597, respectively, for Initial Shares of U.S. Treasury Portfolio.
Fidelity Service Company (Service) performs the calculations necessary
to determine the NAV and dividends for Initial Shares of U.S. Treasury
Portfolio and shares of Money Market Portfolio, and maintains each
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 each Portfolio's average net assets, and one pertaining to
the type and number of transactions each Portfolio made. The fee rates in
effect as of July 1, 1991 are based on each 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. For the fiscal
199 4 , 199 3 and 199 2 , the fees paid to Service for
pricing and bookkeeping services (including related out-of-pocket expenses)
were $ 163,480 , $167,420, and $175,549 , respectively, for
Money Market Portfolio, and $ 250,737, $ 263,327 , and
$ 217,831 , respectively, for Initial Shares of U.S. Treasury
Portfolio.
Prior to December 5, 1991, FMTC served as the custodian of the assets of
Money Market Portfolio. FMTC, an affiliate of FMR, was organized as a
Massachusetts bank in 1981. FMTC is an FDIC insured bank, but is not a
member of the Federal Reserve System. FMTC also provides investment
management and certain fiduciary services to employee benefit plans of
large to mid-sized domestic companies. For services as custodian, FMTC was
compensated according to an annual fee based upon average net assets for
each month and received fees for security transactions. For the period
August 1, 1991 through December 4, 1991, and the fiscal year ended July 31,
1991, FMTC received fees amounting to $78,817 and $96,022, respectively,
for its services, as custodian for Money Market Portfolio. Effective
December 5, 1991, Morgan Guaranty Trust Company of New York is the
custodian of Money Market Portfolio's assets.
Each 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
reasonable efforts, consistent with its other business, to secure
purchasers for shares of each 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 Initial Shares of U.S.
Treasury Portfolio and the shares of Money Market Portfolio have adopted a
Distribution and Service Plan (the Plans) under Rule 12b-1 under the 1940
Act (the Rule). As required by the Rule, the Trustees carefully considered
all pertinent factors relating to the implementation of the Plans prior to
their approval and have determined that there is a reasonable likelihood
that the Plans will benefit the Initial Shares of U.S. Treasury Portfolio
and the shares of Money Market Portfolio and their respective shareholders.
In particular, the Trustees voted that payments under the plans may provide
additional incentives to promote the sale of Initial Shares of U.S.
Treasury Portfolio and shares of Money Market Portfolio, which may result
in sales of such shares and an increase in the assets of the respective
Portfolios.
Each Plan requires FMR to make payments to certain third parties (Qualified
Recipients), other than Distributors, for assis tance in selling Initial
Shares of U.S. Treasury Portfolio or shares of Money Market Portfolio or
for providing shareholder support services. Each Plan authorizes FMR to
make such payments from its management fees, its past profits or any other
source avai lable to it; provided that such payments cannot exceed the
amount of each Portfolio's management fee. The maximum amount payable to
Qualified Recipients under each Plan, as determined by the Board of
Trustees, is currently at the annual rate of .38% of the average net asset
value of the Initial Shares of U.S. Treasury Portfolio or shares of Money
Market Portfolio to which that Qual ified Recipient is related. The
percentage amount payable varies according to the aggregate dollar level of
assets to which a Quali fied Recipient is related to Initial Shares of
U.S. Treasury Portfolio or shares of Money Market Portfolio and in Daily
Tax-Exempt Money Fund, another fund advised by FMR.
QUALIFIED RECIPIENTS. Qualified Recipients are broker-dealers, banks or
other parties with whom Distributors has entered into written Service
Contracts and who assist or have assisted in selling shares of the Fund or
who provide shareholder support services. Under each Plan, payments may
be made to Qualified Recipients with respect to shares to which the
Qualified Recipient is related, that is, shares owned by shareholders
for whom the Qualified Recipient is the dealer of record or holder of
record, the investment adviser, or a custodian; for whom the Qualified
Recipient was instrumental in the purchase of shares; or with whom the
Qualified Recipient has a servicing relationship. Should a shareholder
cease to be a client of a Qualified Recipient, but continue to hold
shares of the Portfolios, the Qualified Recipient would no longer be
entitled to payments under the Plans.
Functions of Qualified Recipients may include, among other things, services
rendered in the distribution of Portfolio shares, answering routine client
inquiries regarding the Portfolios, providing necessary facilities and
personnel to establish and maintain shareholder records, processing
purchase and redemption transactions, processing automatic investment and
redemption of client cash account balances, assisting clients in changing
dividend options, account registrations and addresses, performing
sub-accounting, arranging for bank wires, and providing such other services
as the Portfolios may reasonably request, to the extent the Qualified
Recipient is permitted to do so by applicable statute, rule or regulation.
The Plans also permit Qualified Recipients to pay the costs of
advertising, implementing activities under the Plans, and printing and
distributing Prospectuses, Statements of Additional Information and
sales literature to prospective investors.
The fees to be paid to Qualified Recipients, and the basis on which payment
is made, are determined by Distributors and/or FMR; provided, however, that
a majority of the Board of Trustees, including a majority of those Trustees
who are not "interested persons" of the Fund and have no direct or
indirect interest in the operations of the Plans or any related agreements
(the Indepe ndent Trustees) may at any time and from time to time
decrease the maximum percentage amount and/or maximum total amount payable
to Qualified Recipients with respect to the shares to which they are
related, or remove any person as a Qualified Recipient. Amounts payable
under each Plan are payable to Distributors, which pays such amounts to the
Qualified Recipients. A report of amounts expended under each Plan must be
made to the Board of Trustees at least quarterly.
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 of the Portfolios 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 occurrences. The Portfolios may execute portfolio transactions
with and purchase securities issued by depository institu tions that act
as Qualified Recipients. No preference will be shown for the instruments of
depository institutions acting as Qualified Recipients under each Plan in
the selection of investments. 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
FUND ORGANIZATION. Money Market Portfolio and U.S. Treasury Portfolio are
portfolios of Fidelity Daily Money Fund, an open-end management investment
company organized as a Delaware business trust on September 29, 1993. The
Portfolios acquired all of the assets of the Money Market Portfolio and
U.S. Treasury Portfolio, respectively, portfolios 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; Money Market Portfolio;
Fidelity U.S. Treasury Income Portfolio; and Capital Reserves: Money Market
Portfolio, U.S. Government Portfolio and Municipal Money Market Portfolio.
The Trust Instrument permits the Trustees to create additional portfolios.
In the event that FMR ceases to be the investment adviser to a
Portfolio, the right of the Fund or 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 with respect to 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
expense 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 a Portfolio's property of any shareholders held personally liable for
the obligations of the portfolio. The Trust Instrument also provides that
each 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 shareholder liability is limited to
circumstances in which Delaware law does not apply, no contractual
limitation of liability was in effect, 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 Class
B Shares of U.S. Treasury Portfolio may subject holders of Initial Shares
to certain liabilities, and claims asserted against Initial Shares may
subject holders of Class B 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 Trust 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. Each Portfolio's capital consists of shares of beneficial
interest. The shares have no preemptive or conversion rights; the voting
and dividend rights, the right of redemption, and the privilege of exchange
are described in the Prospectus. Shares are fully paid and nonassessable,
except as set forth under the heading "Shareholder and Trustee Liability"
above. Share holders representing 10% or more of the Fund or a Portfolio
may, as set forth in the Trust Instrument, call meetings of the Fund,
Portfolio or a class for any purpose related to the Fund, 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 any 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 the
Portfolios will continue indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the Trust 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. Each Portfolio may also invest all of its assets in another
investment company.
On July 31 , 1994, the following owned of record or
beneficially 5% or more of the outstanding shares of the Portfolios:
For U.S. Treasury Portfolio: Bank of America, San Francisco, CA, owned
32.59 % and Texas Commerce Bank, N.A. Houston, Texas, owned
13.57 %.
A shareholder owning of record of beneficially more than 25% of a
Portfolio's outstanding shares may be considered a co ntrolling 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 Fund. The custodian is
responsible for the safekeeping of the Fund's assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the Fund or in deciding which
securities are purchased or sold by the Fund. The Fund 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 L.L.P., 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.
APPENDIX
The descriptions that follow are examples of eligible ratings for the
Portfolios. The Portfolios may, however, consider the ratings for other
types of investments and the ratings assigned by other rating organizations
when determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S COMMERCIAL PAPER RATING:
PRIME-1 - issuers (or related institutions) have a superior capacity for
repayment of short-term promissory obligations.
Prime -1 repayment capacity will normally be evidenced by the following
characteristics:
Leading market positions in well established industries.
High rates of return on funds employed.
Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
Broad margins in earnings coverage of fixed financial charges with high
internal cash generation.
Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2 - issuers (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited in the Prime-1
rating but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issuers.
AA - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long term risks appear somewhat
larger than in Aaa securities.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S COMMERCIAL PAPER RATING:
A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+)
sign designation.
A-2 - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from AAA issues only in small degree.
DAILY MONEY FUND
MONEY MARKET PORTFOLIO: CLASS B
CROSS REFERENCE SHEET
Form N-1A Item Number
Part A Prospectus Caption
1 Cover Page
2 a Summary of Portfolio Expenses
b,c Summary of Portfolio Expenses
3 a,b Financial Highlights
c Performance
4 a(i) Daily Money Fund and the Fidelity Organization
a(ii) Investment Objectives; Investment Policies, Risks, and Limitations;
Appendix
b,c Investment Policies, Risks and Limitations
5 a Daily Money Fund and the Fidelity Organization;
b,c,d,e Management, Distribution and Services
f Portfolio Transactions
6 a(i) Investment Policies, Risks and Limitations; Daily Money Fund and
the Fidelity Organization
a(ii) How to Invest, Exchange and Redeem
a(iii) Daily Money Fund and the Fidelity Organization
b,c,d *
e Cover Page; How to Invest, Exchange and Redeem
f,g How to Invest, Exchange and Redeem; Distributions and Taxes
7 a Daily Money Fund and the Fidelity Organization; Management,
Distribution and Services
b(i),(ii) How to Invest, Exchange and Redeem
b(iii),(iv) *
b(v) How to Invest, Exchange and Redeem
c *
d How to Invest, Exchange and Redeem
e,f(i),(ii) Management, Distribution and Services
8 a,b,c,d How to Invest, Exchange and Redeem
9 *
10 Cover Page
11 Table of Contents
12 Financial Statements
13 a,b,c Investment Policies and Limitations
d *
14 a,b Trustees and Officers
c *
15 a, *
b Description of the Fund
c *
16 a(i),(ii) FMR; Trustees and Officers
a(iii),b,c,d Management and Other Services
e Portfolio Transactions
f Distribution and Service Plan
g *
h Description of the Fund
i Management and Other Services; Distribution and Service Plan
17 a Portfolio Transactions
b *
c,d Portfolio Transactions
e *
18 a Description of the Fund
b *
19 a Distribution and Service Plan
b Valuation of Portfolio Securities
20 Distributions and Taxes
21 a(i),(ii) Management and Other Services
(iii),b,c *
22 Performance
23 Financial Statements for the fiscal year ended July 31, 1994 are filed
herein.
_______________
*Not Applicable

DAILY MONEY FUND: 82 DEVONSHIRE STREET
(U.S. Treasury Portfolio Class B ) 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 Fidelity Advisor Funds ( Class B shares) . This
Prospectus offers Class B shares . The Portfolio offers shares to
individual, institutional and corporate investors (Initial
s hares ) . Initial s hares 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. The Annual report to shareholders is incorporated
herein.
To learn more about the fund and its investments, you can obtain a copy
of the fund's most recent financial report and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated September 19, 1994.
The SAI has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference. For a free copy of either
document, call your investment professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE
NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
TABLE OF CONTENTS
Summary of Portfolio Expenses
Financial Highlights
Investment Objective
Investment Policies , Risks, and Limitations
Portfolio Transactions 5
Performance
Distributions and Taxes
How to Invest, Exchange and Redeem
Management, Distribution and Services
Daily Money Fund and the Fidelity Organization
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.
September 19 , 1994
DMFB-PRO- 9 94
32.SUMMARY OF PORTFOLIO EXPENSES
The purpose of the table below is to assist you in understanding the
various costs and expenses that an investor in Class B shares would
bear directly or indirectly. The standard format was developed for use by
all mutual funds to help investors make their investment decisions. The
expense information should be considered along with other important
information such as the Portfolio's investment objective and past
performance.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption proceeds) 4.00%*
Sales Charge on Reinvested Di stributions None
Exchange Fees None
* Declines from 4.00% to 0.00% for Class B Shares held for 5
years or more .
SHAREHOLDER TRANSACTION EXPENSES represent charges paid when you
sell or exchange Class B shares of the Portfolio. See "How to Buy
Shares" and "How to Sell Shares" beginning on page .
CLASS B ANNUAL OPERATING EXPENSES:
Management Fee .17% (dagger)
12b-1 Fee (including .25%
Shareholder Service Fee) 1.00%
Other Expenses .18%*
Total Operating Expenses 1 . 35%*
* After waivers
(dagger) The rate for management fees represents the net rate retained
by FMR after
payments made to Distributors. The management fee before payments made to

Distributors by FMR is .50%.
EXAMPLE: An investor would pay the following expenses on a $1,000
investment in Class B shares , assuming a 5% annual return and either
(1) redemption or (2) no redemption at the end of each time period:
1 YEAR* 3 YEARS* 5 YEARS 10 YEARS+
(1) $ 5 4 (2) $14 (1) $ 73 (2) $43 (1)
$ 74 (2) $74 (1) $1 21 (2) $121
* Reflects deductions of applicable contingent deferred sales charge.
+ Reflects conversion to Initial Shares after six years.
ANNUAL OPERATING EXPENSES are based on historical expenses for the most
recent fiscal year. The rate for management fees represents the net
rate retained by FMR after payments made to Distributors. The
management fee before payments made to Distributors by FMR is .50%.
Class B pays 12b-1 fees at an annualized rate of 1.00% of
average daily net assets. This total 1.00% is composed of a .75%
Distribution Fee and a .25% S hareholder Service Fee. The .75%
Distribution Fee is paid to Distributors for services and expenses in
connection with the distribution of shares net of payment made by FMR of up
to .38% from its management fee, past profits or any other source
available. Management fees are paid by the Portfolio to Fidelity Management
& Research Company (FMR) for managing its investments and business affairs.
The remainder of the .75% Distribution Fee is paid directly out of the net
assets of Class B. The .25% Shareholder Service Fee is paid to investment
professionals for services and expenses incurred in connection with
providing personal service and/or maintenance of shareholder account to
shareholders and is also paid directly out of Class B assets. 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 fees and shareholder service
fees. The Portfolio incurs other expenses for maintaining shareholder
records, furnishing shareholder statements and reports, and for other
services. 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 i t s average net
assets. If reimbursements were not in effect, other expenses and total
operating expenses for Class B shares would have been
1.35 % and 2.52 %, respectively. Operating
expenses are reflected in the Class B s hare price or dividends
and are not charged directly to individual shareholder accounts. Please
refer to the section entitled "Management, Distribution and
Servic e s" on page for further information.
The HYPOTHETICAL EXAMPLE illustrates the estimated expenses
associated with a $1,000 investment in Class B shares over periods
of 1, 3, 5 and 10 years, based on the estimated expenses (after
reimbursement) in the table, an assumed annual rate of return of 5% and
deduction of applicable contingent deferred sales charge (CDSC) in years 1,
3, and 5. A CDSC IS IMPOSED ONLY IF YOU REDEEM CLASS B SHARES
WITHIN 5 YEARS. SEE "HOW TO SELL SHARES," PAGE , FOR INFORMATION ABOUT
THE CDSC. THE RETURN OF 5% AND ESTIMATED EXPENSES S HOULD NOT BE
CONSIDERED INDICATIONS OF ACTUAL OR EXPECTED CLASS B SHARE
PERFORMANCE OR EXPENSES , BOTH OF WHICH MAY VARY.
33.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 in the table has been audited by Coopers & Lybrand
L.L.P. , independent accountants. Their unqualified report is included
in the Portfolio's Annual Report. The Annual Report is incorporated by
reference into its SAI. 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
June 30 , 1994, Class B shares will be offered by exchange to
Class B shareholders of the Fidelity Advisor Funds. The information below
regarding Initial Shares does not reflect the Class B 12b-1
fee and therefore, may not be representative of the actual operational
results for Class B shares .
U.S. TREASURY PORTFOLIO - CLASS B

<TABLE>
<CAPTION>
<S> <C>
July 1, 1994
(Commenceme
nt
of Operations) t
o
July 31, 1994

SELECTED PER-SHARE DATA

Net asset value, beginning of period $ 1.000

Income from Investment Operations

Net interest income .002

Less Distributions

From net interest income (.002)

Net asset value, end of period $ 1.000

TOTAL RETURN B 0.25%

Ratios and Supplemental Data

Net assets, end of period (000 omitted) $ 628

Ratio of expenses to average net assets C 1.35%A

Ratio of expenses to average net assets before expense reductions C 2.52%A

Ratio of net interest income to average net assets 3.03%A

</TABLE>

<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years Ended July 31,

1994 1993 1992 1991 1990 1989 1988 1987 1986 1985

SELECTED PER-SHARE DATA

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

Income from Investment Operations

Net interest income
.029 .027 .042 .065 .079 .083 .063 .057 .069 .085

Less Distributions

From net interest income
(.029) (.027) (.042) (.065) (.079) (.083) (.063) (.057) (.069) (.085)

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

TOTAL RETURN
2.89% 2.78% 4.25% 6.69% 8.24% 8.64% 6.45% 5.81% 7.15% 8.79%

Ratios and Supplemental Data

Net assets, end of period (000 omitted)
$ 2,025,14 $ 2,949,17 $ 3,093,71 $ 1,701,70 $ 1,177,29 $ 994,133 $ 319,708 $ 240,298 $ 157,386 $ 128,751
9 1 4 4 0

Ratio of expenses to average net assets
.60% .57% .59% .59% .59% .64% .64% .58% .60% .60%

Ratio of net interest income to average
2.81% 2.73% 4.14% 6.42% 7.91% 8.47% 6.26% 5.67% 6.89% 8.41%
net assets

</TABLE>

34.INVESTMENT OBJECTIVE
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.
35.INVESTMENT POLICIES , RISKS, AND LIMITATIONS
Unless otherwise noted, the Portfolio's investment policies and limitations
are not fundamental and may be changed without shareholder approval.
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. T he Portfolio intends to invest 100 % of its
total assets in U.S. Treasury bills, notes, and bonds. The Portfolio may
also invest in other direct obligations of the U.S. government .
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.
The 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 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 for any purpose , 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 or in an emergency by investing in a reverse repurchase
agreement . (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 objective, limitation 1, and 33 1/3%
limitations on borrowings, 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 Policies , Risks, and Limitations " are considered at time
of purchase; the sale of securities is not required in the event of a
subsequent change in circumstances.
W hile the Portfolio m ay sell securities at a loss or a
gain , the Portfolio's policy generally will be to hold securities to
maturity rather than to follow a policy of active trading.
36.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 the Portfolio's assets, as well as assets of other
clients.
37.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 CURRENT 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.
38.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: Mutual fund dividends from U.S. government
securities generally are free from state and local income taxes.
However, particular states may limit the benefit and some
types of securities, such as repurchase agreements and some agency
backed securities, may not qualify for th is benefit. Some states may
impose intangible property taxes.
OTHER TAX INFORMATION. The information above is only a summary of
some of the tax consequences generally affecting the fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal tax, shareholders may be subject to
state or local taxes on their investments. Investors should consult their
tax advisors for details and up-to-date information on the tax laws in
their state to determine whether a portfolio is suitable to their
particular tax situation.
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.
39.HOW TO INVEST, EXCHANGE AND REDEEM
HOW TO BUY SHARES . Class B shares of the Portfolio are
currently available only to holders of Class B shares of Fidelity
Advisor Funds. An investment in Class B shares 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 to
investors who engage an investment professional for investment advice and
may be purchased at the net asset value per share (NAV) next determined
after the transfer agent receives your order. Fidelity Investments
Institutional Operations C ompany (FIIOC or the Transfer
Agent), ZR5, P.O. Box 1182, Boston, MA 02103-1182, an affiliate of FMR,
provides transfer and dividend paying services for Class B
shares .
The Class B shares are offered at NAV without an initial sales
charge. Class B shares may be subject to a CDSC upon redemption. For
more information on how the CDSC is calculated, see "How to Sell
Shares," page . It is the responsibility of your investment
professional to transmit your order to the Transfer Agent before 4:00 p.m.
Eastern time in order for you to receive that day's Class B s hare
price.
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 Class B's pro-rata
share of the value of all securities and other assets of the Portfolio,
deducting Class B's pro-rata share of the actual and accrued
liabilities of the Portfolio, deducting the 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, 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.
40.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. A CDSC WILL NOT APPLY TO CLASS B SHARES
REDEEMED BY EXCHANGE. The applicable CDSC for Class B shares
will be based on the date of acquisition and cost of the Class B
shares initially purchased. The exchange privilege is a convenient way
to buy and sell Class B shares registered in your state.
To protect the Portfolio's performance and shareholders, FMR
discourages frequent trading in response to short-term market fluctuations.
The Portfolio reserves the right to refuse exchange purchases by any person
or group if, in FMR's opinion, the Portfolio would be unable to invest
effectively in accordance with its investment objective and policies or
would otherwise potentially be adversely affected. Your exchanges
may be restricted or refused if the Portfolio receives or anticipates
simultaneous orders effecting significant portions of the Portfolio's
assets. In particular, exchanges that coincide with "market timing"
strategies can have adverse effects on the Portfolio. The exchange
privilege may be modified or terminated in the future. The exchange limit
may be modified for certain institutional retirement plans.
Exchange instructions may be given by you in writing or by telephone
directly to the Transfer Agent or through your investment professional. For
more information on entering an exchange transaction, please consult your
investment professional.
Before you make an exchange:
1. Read the prospectus of the f und into which you want to exchange.
2. Class B shares may be exchanged only into Class B shares
of a Fidelity Advisor Fund, seven calendar days after purchase at NAV.
3. You may exchange only between accounts that are registered in the same
name, address, and taxpayer identification number.
4. Currently, there is no limit on the number of exchanges out of the
Portfolio.
5. TAXES: The exchange of Class B s hares is considered a sale
and may be taxable. The Transfer Agent will send you or your investment
professional a confirmation of each exchange transaction.
You may initiate 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.
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 calendar 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 a
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 Class B shares is $100.
4. Systematic e xchanges will be processed at the NAV determined on
the transaction date.
41.HOW TO SELL SHARES
You may sell (redeem) all or a portion of your Class B shares on any
day the New York Stock Exchange (NYSE) and the Federal Reserve Bank of New
York (New York Fed) are open at the NAV next determined after FIIOC
receives your request to sell, less any applicable CDSC (see below).
Orders to sell may be placed by you in writing or by telephone or through
your investment professional. For orders to sell placed through your
investment professional, it is the investment professional's responsibility
to transmit such orders to FIIOC by 4:00 p.m. Eastern time for you
to receive that day's Class B s hare price.
Once your Class B shares are redeemed, the Portfolio normally
will send the proceeds on the next business day to the address of record.
If making immediate payment could adversely affect the Portfolio ,
the Portfolio may take up to seven days to pay you.
When the NYSE or New York Fed is closed (or when trading is restricted) for
any reason other than their customary weekend or holiday closings, or under
any emergency circumstances as determined by the SEC to merit such action,
the Portfolio may suspend redemption or postpone payment dates for
more than seven days. FIIOC requires additional documentation to
redeem Class B shares registered in the name of a
corporation, agent or fiduciary or a surviving joint owner. Call
1-800-221-5207 for specific requirements.
42.REDEMPTION REQUESTS BY TELEPHONE:
TO RECEIVE A CHECK. You may sell Class B shares having a
value of $100,000 or less from your account by calling FIIOC .
Redemption proceeds must be sent to the address of record listed on the
account, and a change of address must not have occurred within the
preceding 3 0 days.
TO RECEIVE A WIRE. You may sell Class B shares and have the
proceeds wired to a pre-designated bank account. Wires will generally be
sent the next business day following the redemption of Class B
shares from your account.
Telephone redemptions cannot be processed for Fidelity Advisor Fund
prototype retirement accounts where State Street Bank and Trust Company is
the custodian.
REDEMPTION REQUESTS IN WRITING. For your protection, if you sell
Class B shares having a value of more than $100,000, or if you are
sending the proceeds of a redemption of any amount to an address other than
the address of record listed on the account, or if you have requested a
change of address within the preceding 3 0 days, or if you wish to
have the proceeds wired to a non-predesignated bank account, you must send
a letter of instruction signed by all registered owners with signature(s)
guaranteed to FIIOC . A signature guarantee is a widely recognized
way to protect you by guaranteeing the signature on your request; it may
not be provided by a notary public. Signature guarantee(s) 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.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your
Class B s hares you may reinvest an amount equal to all or a portion
of the redemption proceeds in Class B shares of the Portfolio
or Class B shares of any of the other Fidelity Advisor Fund, at the
NAV next determined after receipt of your investment order, provided that
such reinvestment is made within 30 days of redemption. Under these
circumstances, the dollar amount of the CDSC you paid will be reimbursed to
you by reinvesting that amount in Class B shares or Class B shares of a
Fidelity Advisor Fund . You must reinstate your Class B s hares
into an account with the same registration. This privilege may be exercised
only once by a shareholder with respect to the Portfolio and certain
restrictions may apply. For purposes of the CDSC schedule, the holding
period of the Class B shares will continue as if the Class B
shares had not been redeemed.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon
redemption, be assessed a CDSC based on the following schedule:
From Date of Purchase Contingent Deferred Sales Charge

Less than 1 year 4%

1 year to less than 3 years 3%

3 years to less than 4 years 2%

4 years to less than 5 years 1%

5 years to less than 6 years* 0%

* After a maximum holding period of 6 years, Class B shares will
convert automatically to Initial s hares of the Portfolio. See
"Conversion Feature" for more information.
In determining the applicability and rate of any CDSC at redemption,
Class B shares representing reinvested dividends and capital gains,
if any, will be redeemed first, followed by Class B shares that have
been held the longest period of time. The CDSC will be calculated
based on the holding period of Class B shares of the Fidelity
Advisor Funds that were exchanged for Class B shares . The holding
period begins with the date of the initial purchase of Class B shares of
the Fidelity Advisor Fund(s) which were exchanged for Class B shares ;
and the value of Class B shares to be redeemed is the
less e r of the initial price of the Class B shares of the Fidelity
Advisor Fund(s) (not including reinvested dividends or capital gains)
or exchange date price of the Class B shares .
CONVERSION FEATURE. After a maximum holding period of 6 years from the
initial date of purchase, Class B shares convert automatically to
Initial s hares of the Portfolio. Conversion to Initial s hares
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 s hares. The portion
of Dividend s hares that will convert is determined by the ratio
of the converting Class B non-Dividend s hares to your total
Class B non-Dividend s hares.
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 S , CONTACT YOUR
INVESTMENT PROFESSIONAL.
43.DISTRIBUTION OPTIONS
When you fill out your Class B account application, you can choose from
three Distribution Options:
1. REINVESTMENT OPTION. Dividend distributions will be automatically
reinvested in additional Class B shares . If you do not indicate a
choice on your account application, you will be assigned this option.
2. CASH 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 FIIOC
in writing. Distribution checks will be mailed no later 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.
SHAREHOLDER COMMUNICATIONS
FIIOC or your investment professional will send you a confirmation
after every transaction that affects your Class B s hare balance or
account registration. In addition, a consolidated statement will be
provided at least quarterly. At least twice a year each shareholder will
receive the Portfolio's financial statements. To reduce expenses, only one
copy of most shareholder reports (such as the Annual Report) will be mailed
to each shareholder address. Please write to FIIOC or contact your
investment professional if you need to have additional reports sent each
time.
The Portfolio pays for these shareholder communications, but not for
special services that are required by a few shareholders, such as a request
for a historical transcript of an account. You may be required to pay a fee
for such special services. If you are purchasing Class B shares of
the Portfolio through a program of administrative services offered
by an investment professional, you should read the additional materials
pertaining to that program in conjunction with this prospectus. Certain
features of the Portfolio , such as the minimum initial or subsequent
investment, may be modified in these programs, and administrative charges
may be imposed for the services rendered.
44.HOLIDAY SCHEDULE. The Portfolio is open for business and its NAV
is calculated every day that both the New York Fed and the NYSE are open
for trading. 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
holiday 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 ) 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
Portfolio's NAV may be affected when investors may not purchase or
redeem shares. Certain other Fidelity funds may follow different holiday
closing schedules.
45.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,
199 4 , management fees for U.S. Treasury Portfolio amounted to
$ 13,343,263 . 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 distribution and
service plan for the Initial shares and the distribution and service
plan for the 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. For the fiscal year ended July 31, 1994,
sub-advisory fees for U.S. Treasury Portfolio amounted to $2,367,209.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN. The Board of Trustees
of the Fund ha s adopted a distribution and service plan (the Plan)
on behalf of Class B shares pursuant to 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 a fund except
pursuant to a plan adopted by the fund under the Rule. The Board of
Trustees has adopted the 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.
Under the Plan, Class B shares are authorized to pay Distributors a
monthly distribution fee as compensation for its services and expenses in
connection with the distribution of Class B shares . Class B
Shares pay Distributors a distribution fee at an annual rate of .75% of
the average net asset of Class B shares determined as of the close
of business on each day throughout the month. The Plan further provides
that FMR will make payments out of its management fee at an
annualized rate of up to .38% of 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 distribution and service plan for the Initial
shares .
In addition, pursuant to the Plan, investment professionals are
compensated at an annual rate of .25% of average daily net assets of th e
Portfolio's Class B Shares for providing ongoing shareholder
support services to investors in Class B shares .
The distribution fees and the shareholder service fees paid pursuant to
the Plan will comply with the restrictions imposed by the NASD
rule regarding asset based sales charges. Such fees will reduce the net
investment income and total return of the Class B shares.
Distributors may, at its expense, provide promotional incentives such as
sales contests and trips to investment professionals who support the sale
of Class B shares . In some instances, these incentives will be
offered only to certain types of investment professionals, such as bank
affiliated or non-bank affiliated broker-dealers, or to investment
professionals whose representatives provide services in connection with the
sale or expected sale of significant amounts of Class B shares .

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 is paid transfer agent fees based on the type, size and number
of accounts in Class B shares , and the number of transactions made
by Class B shareholders. FIIOC has delegated certain transfer,
dividend paying and shareholder services to State Street Bank and Trust
company (State Street) P.O. Box 8302, Boston, Massachusetts 02766-8302.

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 .
The fees are based on the Portfolio's average net assets, but must fall
within a range of $20,000 to $750,000 per year. For the fiscal year ended
July 31, 1994, Service received fees of $250,737 from U.S. Treasury
Portfolio.
46.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 Portfolio 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 of shares, the Portfolio or the Fund as a whole for
purposes such as electing or removing Trustees, changing fundamental
policies, approving a management contract or a plan of distribution.
Shareholders receive one vote for each share of the Portfolio and
fractional votes for each fractional share of the Portfolio they
own . Separate votes are taken by each class of shares, or the Portfolio
if a matter affects just that class or the Portfolio, respectively.
INITIAL SHARES. U.S. Treasury Portfolio also offers Initial Shares to
individual, institutional and corporate investors at NAV. Initial Shares
may be exchanged for shares of other Fidelity funds. If Initial Shares were
acquired in connection with a Fidelity Advisor Fund program, Initial Shares
may then only be exchanged for shares of Fidelity Advisor Funds. Transfer
agent and shareholder services for Initial Shares are performed by FIIOC.
For the fiscal year ended July 31, 1994, total operating expenses for the
Initial Shares were .60% of average net assets. Under the 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.
Investment professionals may receive different levels of compensation with
respect to one class of shares over another class of shares in the
Portfolio.
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 J uly 31, 1994, FMR advised funds
having more than 1 9 million shareholder accounts with a total value
of more than $225 billion. Fidelity Distributors Corporation 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 ultimate parent company of FMR and FMR Texas. Through
ownership of voting common stock, members of the Edward C. Johnson 3d
family form a controlling group with respect to FMR Corp. Changes may occur
in the Johnson family group, through death or disability, which would
result in changes in each individual family member's holding of stock. Such
changes could result in one or more family members becoming holders of over
25% of the stock. The Portfolios have received an opinion of counsel that
changes in the composition of the Johnson family group under these
circumstances would not result in the termination of the portfolio's
management or distribution contracts and accordingly, would not require a
shareholder vote to continue operation under these contracts.
47.APPENDIX
The following paragraphs provide a brief description of securities in which
the Portfolio may invest and 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, 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, the Portfolio will not earn interest
on securities purchased until they are delivered.
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.
REPURCHASE AGREEMENTS. In a repurchase, the Portfolio buys a
security at one price and simultaneously agrees to sell it back at a higher
price. In the event that the other party to a repurchase agreement declares
bankruptcy, the Portfolio could experience delays in recovering its cash.
To the extent that, in the meantime, the value of securities purchased had
decreased, the Portfolio could experience a loss. In all cases, FMR must
find the creditworthiness of the other party to the transaction
satisfactory.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement,
the Portfolio temporarily transfers possession of a portfolio
instrument to another party, such as a bank or broker-dealer, in return for
cash. The Portfolio expects that it will engage in reverse
repurchase agreements for temporary purposes such as funding redemptions
or when it is able to invest the cash so acquired at a rate higher than the
cost of the agreement which would increase the income earned by the
Portfolio. Reverse repurchase agreements may increase the risk of
fluctuation in the market value of the 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. The 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.
VARIABLE OR FLOATING RATE OBLIGATIONS provide for periodic
adjustments of the interest rates paid. Floating rate obligations have
interest rates that change whenever there is a change in a designated base
rate, while variable rate obligations 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. When
determining the maturity of a variable or floating rate obligation, the
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 obligation.
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, the 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: MONEY MARKET PORTFOLIO
INVESTMENTS/JULY 31, 1994
(SHOWING PERCENTAGE OF TOTAL VALUE OF
INVESTMENTS)

ANNUALIZED ANNUALIZED
YIELD AT YIELD AT
DUE TIME OF PRINCIPAL VALUE DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1) DATE PURCHASE AMOUNT (NOTE 1)
Bankers' Acceptances - 1.4%
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS
Industrial Bank of Japan, Ltd.
8/15/94 4.54% $ 15,000,000 $ 14,973,692
Sakura Bank, Ltd.
8/19/94 4.49 6,250,000 6,236,031
TOTAL BANKERS' ACCEPTANCES 21,209,723
Certificates of Deposit - 18.8%
DOMESTIC CERTIFICATES OF DEPOSIT - 0.6%
NBD Bank, N.A.
8/4/94 4.50 10,000,000 10,000,000
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 18.2%
Banque Nationale de Paris
8/16/94 4.45 15,000,000 14,999,352
9/8/94 4.70 30,000,000 29,996,762
12/21/94 5.09 5,000,000 4,994,671
Banque Paribas
8/1/94 4.50 25,000,000 25,000,000
Bayerische Hypotheken-und Weschel
8/26/94 4.40 20,000,000 20,000,000
Commerzbank
11/21/94 4.96 13,000,000 12,992,619
Fuji Bank, Ltd.
8/17/94 4.53 25,000,000 25,000,000
Mitsubishi Bank, Ltd.
10/31/94 4.94 20,000,000 20,000,498
Royal Bank of Canada
11/30/94 5.00 20,000,000 19,991,703
Sakura Bank, Ltd.
8/8/94 4.60 20,000,000 20,000,000
Societe Generale
8/17/94 4.30 10,000,000 10,000,000
1/17/95 5.18 20,000,000 20,000,000
Sumitomo Bank, Ltd.
8/1/94 4.56 5,000,000 5,000,000
8/15/94 4.60 5,000,000 5,000,019
Swiss Bank Corporation
8/10/94 4.55 25,000,000 25,000,000
Westdeutsche Landesbank Gironzentrale
8/10/94 4.52 25,000,000 25,000,000
282,975,624
TOTAL CERTIFICATES OF DEPOSIT 292,975,624
Commercial Paper - 45.3%
Abbey National (UK), PLC
8/29/94 4.55% $ 15,000,000 $ 14,947,500
B.B.V. Finance (Delaware), Inc.
8/9/94 4.52 39,000,000 38,961,000
B. P. America, Inc.
8/30/94 4.40 25,000,000 24,911,389
Beneficial Corporation
8/15/94 4.57 15,000,000 14,973,458
Berliner Handels-und Frankfurter Bank
8/4/94 4.52 25,000,000 24,990,625
Caisse Nationale des Telecommunications
8/22/94 4.43 9,000,000 8,976,900
Commerzbank U.S. Finance, Inc.
8/19/94 4.32 5,000,000 4,989,350
1/20/95 5.18 5,000,000 4,879,361
Corporate Asset Funding Company, Inc.
8/2/94 4.46 9,370,000 9,368,842
Dean Witter, Discover & Co.
8/16/94 4.36 25,000,000 24,954,688
Eiger Capital Corporation
8/19/94 4.41 29,995,000 29,929,011
8/23/94 4.41 15,000,000 14,959,667
Exxon Imperial U.S., Inc.
8/22/94 4.37 30,000,000 29,923,700
Gaz de France
11/2/94 4.98 19,700,000 19,450,631
General Electric Capital Corporation
8/15/94 4.58 (a) 10,000,000 10,000,000
9/6/94 4.47 (a) 25,000,000 25,000,000
9/19/94 4.09 5,000,000 4,972,778
12/9/94 5.05 20,000,000 19,642,500
12/12/94 5.02 7,000,000 6,872,763
1/10/95 5.58 10,000,000 9,758,125
Generale Bank
8/19/94 4.48 12,000,000 11,973,300
Goldman Sachs Group, L.P. (The)
8/2/94 4.53 11,000,000 10,998,619
HYPO U.S. Finance
11/2/94 5.13 10,000,000 9,870,833
Hertz Corporation
8/25/94 4.42 15,000,000 14,956,000
ANNUALIZED ANNUALIZED
YIELD AT YIELD AT
DUE TIME OF PRINCIPAL VALUE DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1) DATE PURCHASE AMOUNT (NOTE 1)
COMMERCIAL PAPER - CONTINUED
ITT Corporation
8/26/94 4.41% $ 13,890,000 $ 13,847,558
International Nederlanden U.S. Funding Corp.
8/9/94 4.50 25,000,000 24,975,111
Matterhorn Capital Corporation
8/17/94 4.36 35,000,000 34,932,333
Merck & Company, Inc.
8/24/94 4.38 30,000,000 29,917,200
Merrill Lynch & Co., Inc.
8/11/94 4.33 15,000,000 14,982,000
8/12/94 4.33 15,000,000 14,980,200
National Australia Funding, Inc.
8/29/94 4.65 20,000,000 19,928,289
New South Wales Treasury Corp.
8/30/94 3.90 10,000,000 9,969,147
10/11/94 4.81 23,980,000 23,755,354
Preferred Receivables Funding Corporation
8/8/94 4.57 15,000,000 14,986,729
Royal Bank of Canada
8/31/94 4.55 22,000,000 21,917,500
Siemens Corporation
8/23/94 4.39 8,000,000 7,978,587
South Australian Government Financing Authority
9/30/94 4.60 14,500,000 14,389,800
Texaco Inc.
8/8/94 4.38 15,000,000 14,987,313
Toronto Dominion Holdings USA, Inc.
8/5/94 4.48 40,000,000 39,980,178
WCP Funding, Inc.
8/8/94 4.57 15,000,000 14,986,729
TOTAL COMMERCIAL PAPER 706,775,068
Federal Agencies - 15.1%
FEDERAL FARM CREDIT BANK - DISCOUNT NOTES - 1.0%
10/17/94 4.62 5,000,000 4,951,661
10/19/94 4.47 5,000,000 4,952,051
10/21/94 4.49 5,000,000 4,950,613
14,854,325
FEDERAL HOME LOAN MORTGAGE CORP. - DISCOUNT NOTES - 2.2%
9/23/94 4.04 18,185,000 18,079,249
10/21/94 4.47 17,125,000 16,956,618
35,035,867
FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS - 1.6%
8/1/94 4.85 (a) 25,000,000 25,000,000
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 10.3%
9/1/94 4.02% $ 50,000,000 $ 49,829,931
10/4/94 4.27 25,000,000 24,814,222
10/17/94 4.59 15,000,000 14,855,625
10/26/94 4.45 30,000,000 29,688,250
10/27/94 4.50 25,000,000 24,734,167
1/18/95 5.10 17,350,000 16,941,987
160,864,182
TOTAL FEDERAL AGENCIES 235,754,374
U.S. Treasury Obligations - 1.9%
U.S. Treasury Bills
2/9/95 3.83 30,000,000 29,410,400
Short-Term Notes (a) (b) - 3.5%
CSA Funding, Inc. - A
8/5/94 4.72 10,000,000 10,000,000
CSA Funding, Inc. - B
8/5/94 4.72 22,000,000 22,000,000
CSA Funding, Inc. - C
8/5/94 4.72 23,000,000 23,000,000
TOTAL SHORT-TERM NOTES 55,000,000
Time Deposits - 3.2%
Hongkong & Shanghai Banking Corp.
8/2/94 4.31 25,000,000 25,000,000
Society National Bank
8/1/94 4.31 25,000,000 25,000,000
TOTAL TIME DEPOSITS 50,000,000
Municipal Bonds (a) - 6.3%
Harris County Texas Health Facilities Authority
8/5/94 4.62 9,700,000 9,700,000
Illinois Student Assistance Commission
8/5/94 4.81 10,000,000 10,000,000
Louisiana Public Facilities Authority
8/5/94 4.62 47,200,000 47,200,000
New Orleans Aviation Board (MBIA Insured)
8/5/94 4.61 9,700,000 9,700,000
San Diego County General Obligation
8/1/94 4.54 16,000,000 16,000,000
Texas General Obligation
8/5/94 4.48 6,000,000 6,000,000
TOTAL MUNICIPAL BONDS 98,600,000

LEGEND:
(48.) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or when applicable,
the final maturity date.
(49.) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
CSA Funding, Inc.:
Series A 10/28/93 $10,000,000
Series B 10/28/93 $22,000,000
Series C 10/28/93 $23,000,000
INCOME TAX INFORMATION:
At July 31, 1994, the fund had a capital loss carryforward of approximately
$190,000 of which $30,000, $35,000 and $125,000 will expire on July 31,
2000, 2001 and 2002, respectively.

Statement of Assets and Liabilities

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
July 31, 1994

ASSETS

Investment in securities, at value (including repurchase agreements of $69,760,000) (Notes 1 and 2) - $ 1,559,485,189
See accompanying schedule

Interest receivable 2,227,924

Receivable from investment adviser for expense reductions (Note 5) 273,211

TOTAL ASSETS 1,561,986,324

LIABILITIES

Payable for investments $ 24,911,389
purchased

Share transactions in process 10,760,098

Dividends payable 313,783

Accrued management fee 656,571

Other payables and accrued expenses 476,280

TOTAL LIABILITIES 37,118,121

NET ASSETS $ 1,524,868,203

Net Assets consist of:

Paid in capital $ 1,525,058,098

Accumulated net realized gain (loss) on investments (189,895)

NET ASSETS, for 1,525,058,098 shares outstanding $ 1,524,868,203

NET ASSET VALUE, offering price and redemption price per share ($1,524,868,203 (divided by) $1.00
(hollow bullet)(solid club)(hollow bullet)(hollow bullet)(verticle 8)(verticle 8) shares)

</TABLE>

Statement of Operations

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended July 31, 1994

INTEREST INCOME $ 54,602,716

EXPENSES

Management fee (Note 4) $ 7,553,008

Transfer agent fees (Note 4) 3,072,314

Accounting fees and expenses (Note 4) 163,480

Non-interested trustees' compensation 9,270

Custodian fees and expenses 108,425

Registration fees 237,707

Audit 35,781

Legal 16,754

Miscellaneous 22,087

Total expenses before 11,218,826
reductions

Expense reductions (1,399,918) 9,818,908
(Note 5)

NET INTEREST INCOME 44,783,808

NET REALIZED GAIN (LOSS) ON (124,844)
INVESTMENTS (NOTE 1)

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 44,658,964

</TABLE>

Statement of Changes in Net Assets

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED JULY 31,

INCREASE (DECREASE) IN NET ASSETS 1994 1993

Operations $ 44,783,808 $ 42,868,040
Net interest income

Net realized gain (loss) (124,844) (34,675)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 44,658,964 42,833,365

Dividends to shareholders from net interest income (44,783,808) (42,868,040)

Share transactions at net asset value of $1.00 per share 9,151,729,228 8,652,766,139
Proceeds from sales of shares

Reinvestment of dividends from net interest income 37,385,748 35,339,347

Cost of shares redeemed (9,115,524,819) (8,768,032,138)

Net increase (decrease) in net assets resulting from share
transactions 73,590,157 (79,926,652)

TOTAL INCREASE (DECREASE) IN NET ASSETS 73,465,313 (79,961,327)

NET ASSETS

Beginning of period 1,451,402,890 1,531,364,217

End of period $ 1,524,868,203 $ 1,451,402,890

</TABLE>

DAILY MONEY FUND: U.S. TREASURY PORTFOLIO
INVESTMENTS/JULY 31, 1994
(SHOWING PERCENTAGE OF TOTAL VALUE OF
INVESTMENTS)

Statement of Assets and Liabilities

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
July 31, 1994

ASSETS

Investment in securities, at value (including repurchase agreements of $1,361,724,000) (Notes 1 and 2) $ 2,027,877,561
- - See accompanying schedule

Interest receivable 5,634,573

Receivable from investment adviser for expense reductions (Note 5) 204

TOTAL ASSETS 2,033,512,338

LIABILITIES

Share transactions in process $ 3,551,875

Dividends payable 3,027,373

Accrued management fee 884,193

Other payables and accrued expenses 271,677

TOTAL LIABILITIES 7,735,118

NET ASSETS $ 2,025,777,220

Net Assets consist of:

Paid in capital $ 2,026,232,225

Accumulated net realized gain (loss) on investments (455,005)

NET ASSETS $ 2,025,777,220

$1.00
INITIAL CLASS :
NET ASSET VALUE, offering price and redemption price per share ($2,025,149,164 (divided by) (solid club)(solid club)(hollow
bullet)(solid club)(verticle 8) shares)

CLASS B: $1.00
NET ASSET VALUE, offering price and redemption price per share ($628,056 (divided by) (solid club)(verticle 8) shares)

</TABLE>

Statement of Operations

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended July 31, 1994

INTEREST INCOME $ 91,004,079

EXPENSES

Management fee (Note 4) $ 13,343,263

Transfer agent fees (Note 4) 1,820,605
Initial Class

Distribution fees - Class B 117
(Note 4)

Accounting fees and expenses (Note 4) 250,737

Non-interested trustees' compensation 16,986

Custodian fees and expenses 108,991

Registration fees - Initial Class 279,430

Registration fees - Class B 232

Audit 50,616

Legal 27,370

Miscellaneous 38,875

Total expenses before 15,937,222
reductions

Expense reductions - Class B (204) 15,937,018
(Note 5)

NET INTEREST INCOME 75,067,061

NET REALIZED GAIN (LOSS) ON (460,852)
INVESTMENTS (NOTE 1)

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 74,606,209

</TABLE>

Statement of Changes in Net Assets

DRAFT

<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED JULY 31,

INCREASE (DECREASE) IN NET ASSETS 1994 1993

Operations $ 75,067,061 $ 77,613,277
Net interest income

Net realized gain (loss) (460,852) (44,237)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 74,606,209 77,569,040

Distributions to shareholders from:
Net interest income

Initial Class (75,066,532) (77,613,277)

Class B (529) -

Share transactions - net increase (decrease) at net asset
value of $1.00 per share (Note 6) (922,932,430) (144,499,082)

TOTAL INCREASE (DECREASE) IN NET ASSETS (923,393,282) (144,543,319)

NET ASSETS

Beginning of period 2,949,170,502 3,093,713,821

End of period $ 2,025,777,220 $ 2,949,170,502

</TABLE>

NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JULY 31, 1994

50. SIGNIFICANT ACCOUNTING POLICIES.
Money Market Portfolio and U.S. Treasury Portfolio (the funds) are funds of
Daily Money Fund (the trust). The trust is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Delaware Business trust. Each fund is
authorized to issue an unlimited number of shares.
U.S. Treasury Portfolio offers two classes of shares, Initial Class and
Class B, each of which has equal rights to earnings, assets and voting
privileges except that each class bears different distribution and transfer
agent expenses and certain registration fees. Each class has exclusive
voting rights with respect to its distribution plans. The Class B shares
are offered by exchange only, to investors in Class B shares of certain
Fidelity Advisor Funds. Class B commenced operations on July 1, 1994.
The following summarizes the significant accounting policies of the funds:
SECURITY VALUATION. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes all of its taxable income for the fiscal
year. The schedules of investments include information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
ALLOCATED EARNINGS AND EXPENSES. Interest income, expenses (other than
expenses incurred under each class' Distribution and Service Plans,
Transfer Agent Agreements and certain registration fees) and realized and
unrealized gains or losses on investments are allocated to each class of
shares based upon their relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
51. OPERATING POLICIES.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The funds' investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by
U.S. Treasury or Federal Agency obligations.
RESTRICTED SECURITIES. The Money Market fund is permitted to invest in
privately placed restricted securities. These securities may be resold in
transactions exempt from registration or to the public if the securities
are registered. Disposal of these securities may involve time-consuming
negotiations and expense, and prompt sale at an acceptable price may be
difficult. At the end of the period, restricted securities (excluding 144A
issues) amounted to $55,000,000 or 3.6% of net assets.
52. JOINT TRADING ACCOUNT.
At the end of the period, the U.S. Treasury fund had 20% or more of its
total investments in repurchase agreements through a joint trading account.
These repurchase agreements were with entities whose creditworthiness has
been reviewed and found satisfactory by FMR. The repurchase agreements were
dated July 29, 1994 and due August 1, 1994. The maturity values of the
joint trading account investments were $1,063,375,612 at 4.24% and
$45,740,207 at 4.25%.
3. JOINT TRADING ACCOUNT - CONTINUED
The investments in repurchase agreements through the joint trading account
are summarized as follows:
MAXIMUM
AMOUNT AGGREGATE AGGREGATE AGGREGATE
NO. OF WITH ONE PRINCIPAL MATURITY MARKET COUPON MATURITY
DEALERS DEALER AMOUNT OF AMOUNT OF VALUE OF RATES OF DATES OF
OR BANKS OR BANK AGREEMENTS AGREEMENTS COLLATERAL COLLATERAL COLLATERAL
At 4.24% 11 38.4% $3,167,000,000 $3,168,119,063 $3,237,651,418 0%-14%
8/4/94-8/15/23
At 4.25% 6 16.9% $630,000,000 $630,223,300 $643,834,972 0%-14%
8/4/94-8/15/23
53. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a fee that
is computed daily at an annual rate of .50% of the fund's average net
assets.
SUB-ADVISER FEE. As each fund's investment sub-adviser, FMR Texas Inc., a
wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the
management fee payable to FMR. The fees are paid prior to any voluntary
expense reimbursements which may be in effect, and after reducing the fee
for any payments by FMR pursuant to each fund's Distribution and Service
Plan.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plans (the Plans) adopted on behalf of shares of the Money Market fund and
the Initial shares of U.S. Treasury fund, and in accordance with Rule 12b-1
of the 1940 Act, FMR or the funds' distributor, FDC, an affiliate of FMR,
may use their resources to pay administrative and promotional expenses
related to the sale of each fund's shares at a maximum annual rate of up to
.38% of each fund's average net assets. Subject to the approval of the
Board of Trustees, the Plans also authorize payments to third parties that
assist in the sale of each fund's shares or render shareholder support
services. FMR or FDC has informed the funds that payments made to third
parties under the Plans amounted to $3,783,083 and $8,608,846 for the Money
Market fund and the Initial shares of U.S. Treasury fund, respectively, for
the period.
Pursuant to the Distribution and Service Plan (the Plan) adopted on behalf
of Class B shares, and in accordance with Rule 12b-1 of the 1940 Act, Class
B pays FDC a monthly distribution fee based on an annual rate of .75% of
its average net assets net of a payment made by FMR of up to .38% of Class
B shares' average net assets. Payments made to FDC by Class B and FMR
amounted to $73 and $58, respectively, for the period.
In addition, pursuant to the Plan, Class B pays investment professionals a
fee based on an annual rate of .25% of its average net assets for providing
ongoing shareholder support services to investors in Class B shares.
Payments made to investment professionals amounted to $44 for the period.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption
within five years of purchase, be assessed a contingent deferred sales
charge which decreases from a maximum of 4% to 0% based on the holding
period of the shares. For the period, FDC did not receive any contingent
deferred sales charges.
TRANSFER AGENT FEE. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. FIIOC receives fees based on the type,
size, number of accounts and the number of transactions made by
shareholders. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEE. Fidelity Service Co., an affiliate of FMR, maintains the
funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
54. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the Money Market, U.S. Treasury Initial
Class and U.S. Treasury Class B funds' operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses) above an
annual rate of .65%, .65% and 1.35%, respectively, of average net assets.
For the period, the reimbursement reduced the expenses of the Money Market
and U.S. Treasury Class B funds by $1,399,918 and $204, respectively.
55. SHARE TRANSACTIONS.
Share transactions for both classes of the U.S. Treasury fund at net asset
value of $1.00 per share were as follows:
YEARS ENDED JULY 31,
1994 1993
U.S. TREASURY PORTFOLIO INITIAL CLASS
Proceeds from sales of shares $ 13,798,065,710 $ 13,719,270,587
Reinvestment of dividends from net interest income 41,469,354
42,776,435
Cost of shares redeemed (14,763,095,691) (13,906,546,104)
Net increase (decrease) in net assets and shares resulting from share
transactions $ (923,560,627) $ (144,499,082)
U.S. TREASURY PORTFOLIO CLASS B *
Proceeds from sales of shares $ 627,668 $ -
Reinvestment of dividends from net interest income 529 -
Cost of shares redeemed - -
Net increase (decrease) in net assets and shares resulting from share
transactions $ 628,197 $ -
(*) Share transactions for U.S. Treasury Portfolio Class B are for the
period July 1, 1994 (commencement of operations) to July 31, 1994.
REPORT OF INDEPENDENT ACCOUNTANTS

NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK AND FUND
SHARES ARE NOT BACKED OR GUARANTEED BY
ANY BANK OR INSURED BY THE FDIC.

DAILY MONEY FUND
U.S. TREASURY PORTFOLIO: CLASS B
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 19, 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 September 19, 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 Exchange and Redemption Information

Distributions and Taxes

FMR

Trustees and Officers

Management and Other Services

The Distributor

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-994
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 resale 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 Portfolio 's
current policy 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 OBLIGATIONS. provide for periodic adjustments
of the interest rate paid. Floating rate obligations have interest rates
that change whenever there is a change in a designated base rates while
variable rate obligations 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.
Some variable or floating rate obligations permit holders to demand
payment of the unpaid principal balance plus an accrued interest from the
issuers or certain financial intermediaries. Issuers or financial
intermediaries who provide demand features or stand-by commitments often
obtain letters of credit (LOCs) or other guarantees from domestic or
foreign banks to support their repurchase commitments. FMR may rely upon
its evaluation of a bank's credit in determining whether to purchase an
obligation supported by an LOC. In evaluating a foreign bank's credit, FMR
will consider whether adequate public information about the bank is
available and whether the bank may be subject to unfavorable political or
economic developments, currency controls, or other governmental
restrictions that might affect the bank's ability to honor its credit
commitment.
When determining the maturity of a variable or floating rate obligation,
the fund 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 obligation.
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 capital gains and changes in share price) in
order to illustrate the relationship of these factors and their
contributions to total return. Total returns may be quoted with or without
including the effect of the maximum applicable contingent 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 July 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
2.89% 4.95% 6.15% 6.43%
Average Annual Total Returns

Cumulative Total Returns 2.89% 27.31% 81.60% 97.62%

</TABLE>

U.S. Treasury Portfolio Class B Shares**

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Life of Portfolio*

Class B Shares Average
6.59%
Average Annual Total Returns

Cumulative Total Returns 0.25%

</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 July 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 July 31, 1994, a
hypothetical investment of $10,000 in Initial Shares would have grown to
$19, 766 assuming all dividends were reinvested.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Period Initial Value of Value of Consumer
Ended $10,000 Reinvested Reinvested Total Price
7/31 Investment Dividends Capital Gains Value 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

1994 10,000 9, 766 0 19, 766 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 $ 19,766. 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 $6,834. 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.
FRED L. HENNING, JR., Vice President (1994), is Vice President of
Fidelity's money market funds and Senior Vice President of FMR Texas.
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, Assistant Vice President (1990), is also 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 the average net assets of that Portfolio
throughout the month. For the fiscal years ended July 31, 1994, 1993 and
1992, FMR received fees amounting to $13,343,263, $14,208,606, and
$10,958,456 , 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 for the Initial Class,
or 1.35% for Class B . 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 1994, 1993,
and 1992 FMR paid FMR Texas fees that amounted to $2,367,209,
$2,400,702, and $1,934,302 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 reasonable 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 liabilities
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.
As of July 31, 1994, the following owned of record or beneficially 5% or
more of the outstanding shares of Class B: Melbourne, N. and Cynthia L.
Wann, Bradford Woods, PA owned 15%; Doug and Jane Anderson, Berkshire,
England owned 12%; Peter Z. Cohen, Pittsburgh, PA owned 12%; Dewey
Furniture and Carpet, Vermilion, OH owned 12%; Donald and Patricia
MacDonald, Pittburgh, PA owned 12%; Frank and Joan Ostrowski, Pittsburgh,
PA owned 10%; and Cynthia L. Zeth, Pittsburgh, PA owned 6%.
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 L.L.P., 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for the effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 27 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston, and Commonwealth of Massachusetts, on the _____ day
of September 1994.
DAILY MONEY FUND
By ______________________________(dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)

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_______________________________(dagger) President and Trustee September ,
1994

Edward C. Johnson 3d (Principal Executive Officer)

_______________________________ Treasurer September ,
1994

Gary L. French

_______________________________ Trustee September ,
1994

J. Gary Burkhead