DAILY MONEY FUND/MA/, 497, 1994-06-30

DAILY MONEY FUND/MA/
497, 1994-06-30

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DAILY MONEY FUND: 82 DEVONSHIRE STREET
(Money Market Portfolio and U.S. Treasury Portfolio) 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.
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.
A Statement of Additional Information (dated May 2, 1994 ) has been
filed with the Securities and Exchange Commission (SEC) and is incorporated
herein by reference. This free Statement of Additional Information is
available upon request from Fidelity Distributors Corporation
(Distributors), 82 Devonshire Street, Boston, Massachusetts 02109. To
obtain an additional copy of these documents, please call the appropriate
number below.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, SAVINGS ASSOCIATION, INSURED DEPOSITORY
INSTITUTION AL OR GOVERNMENT AGENCY, NOR ARE THEY FEDERALLY INSURED
OR OTHERWISE PROTECTED BY THE FD I C, THE FEDERAL RESERVE BOARD, OR
ANY OTHER AGENCY. INVESTMENTS IN THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE VALUE OF THE INVESTMENT AND ITS
RETURN WILL FLUCTUATE AND ARE NOT GUARANTEED. WHEN SOLD, THE VALUE OF THE
INVESTMENT MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED.
For further information or assistance in opening an account, please call:
TOLL FREE 800-843-3001
TABLE OF CONTENTS
Summary of Portfolio Expenses
The Portfolios' Financial History
Investment Objectives and Policies
Performance
Distributions and Taxes
How to Invest, Exchange and Redeem
Daily Money Fund and the Fidelity Organization
Management, Distribution and Services
Appendix
Financial Statements 16

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
May 2, 1994
1.SUMMARY OF PORTFOLIO EXPENSES
The expense summary format below was developed for use by all mutual funds
to help you make your investment decisions. Of course you should consider
this expense information along with other important information including
each Portfolio's investment objective and its past performance information.
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 .50% .50%
12b-1 Fees .00% .00%
Other Expenses .11% .07%
Total Operating Expenses .61% .57%
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 $6 $20 $34 $76
U.S. Treasury
Portfolio $6 $18 $32 $71
EXPLANATION OF TABLE. The purpose of the table 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. Management fees are based on the Portfolios'
historical expenses. Management fees are paid by each Portfolio to Fidelity
Management & Research Company (FMR) for managing its investments and
business affairs. Each Portfolio's Distribution and Service Plan
requires FMR to make payments to certain third parties (Qualified
Recipients) from its management fee, its past profits or any other source
available to it. The maximum amount payable to Qualified Recipients under
the Plan is currently at the annual rate of 0.38% of the average net assets
of the Portfolio's shares to which that Qualified Recipient is related.
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 Other Expenses 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. EXAMPLE. The hypothetical example illustrates the expenses associated
with a $1,000 investment 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.
2.THE PORTFOLIOS' FINANCIAL HISTORY
FINANCIAL HIGHLIGHTS. 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 have been audited by Coopers
& Lybrand, independent accountants. Their unqualified 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 a
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

Six Months Years Ended July 31,

ended

1/31/94

(Unaudited) 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984

SELECTED PER-SHARE DATA

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

Income from Investment
.013 .028 .041 .067 .080 .085 .066 .057 .072 .088 .094
Operations
Net interest income

Dividends from net
(.013) (.028) (.041) (.067) (.080) (.085) (.066) (.057) (.072) (.088) (.094)
interest
income

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

TOTAL RETURN
1.33% 2.82 4.21 6.90 8.34 8.81 6.81 5.87 7.39 9.20 9.77

RATIOS AND SUPPLEMENTAL
DATA

Net assets, end of period
$1,445,269 1,451,403 1,531,364 1,714,108 1,349,670 893,611 560,528 440,944 388,832 236,808 104,964
(000 omitted)

Ratio of expenses to
.65%* .61 .59 .60 .61 .64 .66 .62 .60 .66 .72
average
net assets

Ratio of expenses to
.65%* .61 .59 .60 .61 .73 .66 .62 .60 .66 .95
average net assets before
voluntary
expense limitation

Ratio of net interest income
2.62%* 2.76 4.19 6.61 7.99 8.56 6.57 5.78 7.11 8.57 9.64
to average net assets

</TABLE>

U.S. TREASURY PORTFOLIO

Six Months Years Ended July 31, August 31,

ended 1983

1/31/94 (Commencem

ent of

Operations) to

July 31, 1984

(Unaudited) 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984

SELECTED PER-SHARE DATA

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

Income from Investment
.013 .027 .042 .065 .079 .083 .063 .057 .069 .085 .085
Operations
Net interest income

Dividends from net
(.013) (.027) (.042) (.065) (.079) (.083) (.063) (.057) (.069) (.085) (.085)
interest
income

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

TOTAL RETURN (dagger)
1.31% 2.78 4.25 6.69 8.24 8.64 6.45 5.81 7.15 8.79 8.84

RATIOS AND SUPPLEMENTAL
DATA

Net assets, end of period
$2,694,872 2,949,171 3,093,714 1,701,704 1,177,290 994,133 319,708 240,298 157,386 128,751 108,216
(000 omitted)

Ratio of expenses to
.58%* .57 .59 .59 .59 .64 .64 .58 .60 .60 .66*
average
net assets

Ratio of expenses to
.58%* .57 .59 .59 .59 .64 .64 .58 .60 .60 .84*
average net assets before
voluntary
expense limitation

Ratio of net interest income
2.58%* 2.73 4.14 6.42 7.91 8.47 6.26 5.67 6.89 8.41 9.60*
to average net assets

</TABLE>

* ANNUALIZED
(dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
3.INVESTMENT OBJECTIVES AND POLICIES
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.
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 A1 rating) from
at least two NRSROs (or one, if only one has rated the security). T he
Portfolio may purchase unrated obligations determined to be of equivalent
quality pursuant to procedures adopted by the Board of Trustees. The
Portfolio's investments include:
(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. Under normal conditions, the Portfolio will invest
more than 25% of its total assets in obligations of companies in the
financial services industry.
(bullet) Obligations of governments and their agencies and
instrumentalities.
(bullet) Short-term corporate obligations, including commercial paper,
notes and bonds.
(bullet) Other short-term debt 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. The Portfolio intends to invest 100% of its total assets in
U.S. Treasury bills, notes, and bonds and other direct obligations of the
U.S. Treasury. The Portfolio also may engage in repurchase agreements
backed by these obligations. This policy may be changed only upon 90 days'
notice to shareholders.
MATURITY. 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: (a) with
respect to 75% of its total assets, more than 5% of its total assets would
be invested in securities of any single issuer; or (b) more than 25% of its
total assets would be invested in issuers having their principal business
activities in a particular industry, 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, 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 (other than reverse
repurchase agreements) exceed 5% of its total assets.
4. 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.
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 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. These limitations and the policies
discussed in "Investment Objectives and Policies" are considered at time of
purchase; the sale of securities is not required in the event of a
subsequent change in circumstances.
While there may be occasions when, in order to raise cash to meet
redemptions, a Portfolio might be required to sell securities at a loss,
each Portfolio's policy generally will be to hold securities to maturity
rather than to follow a policy of active trading.
PORTFOLIO TRANSACTIONS
Money market obligations generally are traded in the over-the-counter
market through broker-dealers. A broker-dealer is a securities firm or bank
which makes a market for securities by offering to buy at one price and to
sell at a slightly higher price. The difference between the prices is known
as a spread. Since FMR trades, directly or through affiliated sub-advisers,
a large number of securities, including those of Fidelity's other funds,
broker-dealers are willing to work with the 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.
4.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 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.
Each Portfolio's current yield and effective yield calculations are
illustrated below for the seven-day period ended Janua r y 31,
199 4 :
MONEY MARKET U.S. TREASURY
PORTFOLIO PORTFOLIO
Effective Effective
Yield Yield Yield Yield
2.62 % 2.65 % 2.54 % 2.57%
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.
5.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: Investors should consult their tax advisors to
determine whether a Portfolio is suitable to their particular tax
situation. Mutual fund dividends from most U.S. government securities
generally are free from state and local income taxes. Pennsylvania does not
provide this benefit, and some states may limit the benefit. In addition,
certain types of securities, such as repurchase agreements and certain
agency backed securities, may not qualify for the government interest
exemption on a state-by-state basis. Some states may impose intangible
property taxes.
When you sign your account application, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require each
Portfolio to withhold 31% of your taxable distributions and redemptions.
6.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 its 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 or the Fund directly.
SHARE PRICE. Fidelity Service Co. (Service) calculates each Portfolio's NAV
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 each 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 shares outstanding of the Portfolio. 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, please 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 day's 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 payable to Daily Money Fund and the name of the Portfolio, together
with a completed application, to the address below:
7.Daily Money Fund:
U.S. Treasury Portfolio or
Money Market Portfolio
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182

Checks must be drawn on a U.S. bank payable to Daily Money Fund and the
Portfolio in which the investor plans to invest.
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
I nstitutional Trading before 2 p.m., to advise them of the wire, and
for wiring instructions.
INSTITUTIONAL TRADING:
NATIONWIDE 800-343-6310
IN MASSACHUSETTS 800-462-2603
OR 617-439-0270
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.
8.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
shares of other funds in that program. Other shareholders may not exchange
shares of a Portfolio for 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 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.
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
Portfolio name, account number and number of shares to be redeemed, and the
name of the fund's shares to be 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.
TAXES. Each exchange actually represents the sale of shares of one
fun d 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 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 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 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 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 dividends declared on the day of
redemption.
REDEMPTION REQUESTS BY CHECK (minimum $500):
(bullet) Investors must have applied for the checkwriting feature on their
account application.
(bullet) There are no limits on the number of checks that may be written.
(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.
9.REDEMPTION REQUESTS BY WIRE may be made by calling Institutional Trading
(see the "Institutional Trading" phone numbers on page ).
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.
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 Tenants, Sole Proprietorship, Custodial Letter of instruction signed by all person(s) required to sign
(Uniform Gifts or Transfers to Minors Act), General for the account exactly as it is registered, accompanied by
Partners signature guarantee(s).
Letter of instruction and a corporate resolution, signed by
Corporations, Associations person(s) required to sign for the account accompanied by
signature guarantee(s).
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.)
Trusts

</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 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 redemption 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.
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 Portfolios 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.
10.HOLIDAY SCHEDULE. Each Portfolio is open for business and its net asset
value per share (NAV) is calculated every day that both the Federal Reserve
Bank of New York (New York Fed) and the New York Stock Exchange (NYSE) are
open. The following holiday closings have been scheduled for
199 4 : 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. T he right
is reserved to advance the tim e by which purchase and redemption
requests must be received on any day that: (1) the New York Fed or the
NYSE close early; (2) if in FMR's judgement, early closing is determined to
be in the best interest of the Portfolio's shareholders; or (3) as
permitted by the SEC. To the extent that portfolio securities are
traded in other markets on days the New York Fed or the NYSE is closed,
each Portfolio's NAV may be affected when investors may not purchase or
redeem shares. Certain other Fidelity funds may follow different holiday
closing schedules.
11.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 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 , class, or the Fund as a whole for purposes such
as electing or removing Trustees, changing fundamental policies or
approving a new or amended 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 , or class if a matter affects just that Portfolio or
class .
As set forth under "How to Invest, Exchange and Redeem" shares of U.S.
Treasury Portfolio are offered to individual, institutional and corporate
investors ("Original Shares"). U.S. Treasury Portfolio also offers a class
of shares to retail investors who engage an investment professional for
investment advice, with a contingent deferred sales charge ("Class B
Shares". Class B Shares are subject to a .75% annual distribution fee, a
.25% annual service fee and a contingent deferred sales charge upon
redemption within five years of purchase, which decreases from a maximum of
4% to 0%. After six years, Class B Shares automatically convert to
Original Shares.
Class B Shares are available only through an exchange from certain
Fidelity Advisor Funds offering Class B Shares. Class B Shares may be
exchanged only for Class B Shares of certain Fidelity Advisor Funds.
Transfer agent and shareholder services for Class B Shares are performed by
FIIOC.
For the current fiscal year, total operating expenses for Class B
Shares will be capped at 1.35%. If expenses were not capped they would have
been 2.84% (estimated).
Class B Shares will generally have a lower yield and total return than
Original Shares due to higher expenses in general. Investment professionals
may receive different levels of compensation with respect to one particular
class of shares over another class of shares in the 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 anuary 31, 1993, FMR advised
funds having more than 1 5 million shareholder accounts with a total
value of more than $ 22 5 billion. Fidelity Distributors Corporation
(Distributors) 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 parent company for the Fidelity companies. Through
ownership of voting common stock, Edward C. Johnson 3d (President and a
Trustee of the Fund), Johnson family members, and various trusts for the
benefit of Johnson family members form a controlling group with respect to
FMR Corp.
12.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 each Portfolio to the extent that its aggregate 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, 1993, management fees for Money Market Portfolio and U.S. Treasury
Portfolio amounted to $7,773,471 and $14,208,606, 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 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. For the fiscal year ended July 31, 1993, sub-advisory fees for
Money Market Portfolio and U.S. Treasury Portfolio amounted to $3,886,735
and $7,104,303, respectively.
DISTRIBUTION AND SERVICE PLAN. The Trustees of the Fund have adopted a
Distribution and Service Plan (the Plan) on behalf of the Original
Shares of U.S. Treasury Portfolio and 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 to allow each Portfolio or class
and FMR to incur certain expenses that might be considered to
constitute direct or indirect payment by the Portfolios or class of
distribution expenses. No separate payments are authorized to be made by
the Original Shares of U.S. Treasury Portfolio and shares of Money Market
Portfolio under the Plan. Rather, the Plan recognizes 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 shares of the Original
Shares of U.S. Treasury Portfolio and shares of Money Market Portfolio
or perform other distribution-related activities. Qualified Recipients
currently are compensated under the Plan at a maximum rate of up to .38%
annually of the average net assets of the Original Shares of U.S.
Treasury Portfolio and shares of Money Market Portfolio with respect to
which they provide or have provided shareholder support or distribution
services.
Distributors may, at its own expense, provide promotional incentives to
Qualified Recipients who support the sale of the Original Shares of U.S.
Treasury Portfolio and shares of Money Market Portfolio without
reimbursement from the Portfolios. In some instances, these incentives may
be offered only to certain institutions whose representatives provide
services in connection with the sale or expected sale of significant
amounts of shares.
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 and maintains shareholder records. FIIOC
is paid fees based on the type, size and number of accounts in each
Portfolio, and the number of transactions made by shareholders of a
Portfolio. Effective January 1, 1993 FIIOC is paid a per account fee of $95
and a monetary transaction fee of $20 or $17.50 depending on the nature of
the services provided. In addition, FIIOC pays all transfer agent
out-of-pocket expenses. For the fiscal year ended July 31, 1993 these
payments amounted to $1,220,839 and $1,310,256 for Money Market Portfolio
and U.S. Treasury Portfolio, respectively.
Service, 82 Devonshire Street, Boston, MA, an affiliate of FMR, performs
the calculations necessary to determine the NAV of each Portfolio and
maintains the general accounting records for each Portfolio. The fees for
these services are based on each 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, 1993, Service received fees of $167,470 and $263,327 from
Money Market Portfolio and U.S. Treasury Portfolio, respectively.
Total expenses for the fiscal year ended July 31, 1993 were .61% of average
net assets for Money Market Portfolio and .57% of average net assets for
U.S. Treasury Portfolio.
Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New
York, is the custodian of the assets of each Portfolio of the Fund.
13.APPENDIX
The following paragraphs provide a brief description of the securities in
which the Portfolios may invest and the transactions they may make.
Consistent with its investment objective and policies, each Portfolio
may invest in or engage in one or more of the following securities
transactions. However, Portfolio may purchase or engage in
one or more of the following securities or transactions if they are
consistent with the Portfolios' investment objective and policies.
ASSET BACKED SECURITIES. M ay 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. N egotiable 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. N egotiable 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. S hort-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 or when issued basis, with
payment and delivery taking place at a future date. The market value of
securities purchased in this way may change before the delivery date, which
could affect the market value of 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), 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.
MONEY MARKET refers to the marketplace where short-term, high grade debt
securities are traded. These securities include U.S. government
obligations, commercial paper, certificates of deposit and bankers'
acceptances, time deposits and short-term corporate obligations. These
securities normally carry specific rates of return. A portfolio may invest
in variable rate obligations which provide for adjustments in interest
rates on specific dates, and floating rate obligations which have an
interest rate that changes whenever there is a change in the designated
base rate.
MUNICIPAL OBLIGATIONS are issued to raise money for various public
purposes, including general purpose financing for state and local
governments as well as financing for specific projects or public
facilities. Municipal obligations may be backed by the full taxing power of
a municipality or by the revenues from a specific project or the credit of
a private organization.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which a
Portfolio purchases a security and simultaneously commits to resell that
security to the seller at an agreed upon price at a higher price. In the
event of bankruptcy of the other party to a repurchase agreement, a
Portfolio could experience delays in recovering cash. To the extent that,
in the meantime, the value of the securities purchased may have decreased,
a Portfolio could experience a loss. In all cases, FMR must find the
creditworthiness of the other party to a transaction satisfactory.
RESTRICTED SECURITIES ( cannot be sold to the public without
registration under the Securities Act of 1933 (restricted securities).
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 sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash. At the same time, each Portfolio agrees
to repurchase the instrument at an agreed-upon price and time. Each
Portfolio expects that it will engage in reverse repurchase agreements for
temporary purposes such as to fund redemption requests. Reverse repurchase
agreements may increase the risk of fluctuation in the market value of a
Portfolio's assets or in its yield.
STRIPPED GOVERNMENT SECURITIES. Stripped securities are created by
separating the income and principal components of a debt instrument and
selling them separately. Each Portfolio may purchase U.S. Treasury STRIPS
(Separate Trading of Registered Interest and Principal of Securities), that
are created when the coupon payments and the principal payment are stripped
from an outstanding Treasury bond by a Federal Reserve Bank.
TIME DEPOSITS. Non-negotiable deposits in a banking institution earning a
specified interest rate over a given period of time.
U.S. GOVERNMENT OBLIGATIONS. Debt securities issued or guaranteed by the
U.S. Treasury or by an agency or instrumentality of the U.S. government.
Not all U.S. government obligations are backed by the full faith and credit
of the United States. For example, securities issued by the Federal Farm
Credit Bank or by the Federal National Mortgage Association are supported
by the agency's right to borrow money from the U.S. Treasury under certain
circumstances. Securities issued by the Financing Corporation are supported
only by the credit of the agency. There is no guarantee that the government
will support these types of securities, and therefore they involve more
risk than other government obligations.
VARIABLE OR FLOATING RATE OBLIGATIONS including certain
participation interests in municipal obligations, have interest rate
adjustment formulas that help stabilize their market values. Many variable
and floating rate instruments also carry demand features that permit a
Portfolio to sell them at par value plus accrued interest on short
notice . When determining the maturity of a variable or floating rate
instrument, 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 instrument.
ZERO COUPON BONDS do not make interest payments; instead they are sold at a
deep discount from their face value and are redeemed at face value when
they mature. Because zero coupon bonds do not pay current income, their
prices can be very volatile when interest rates change. In calculating its
daily dividend, a Portfolio takes into account as income a portion of the
difference between a zero coupon bond's purchase price and its face value.

DAILY MONEY FUND:
MONEY MARKET PORTFOLIO
U.S. TREASURY PORTFOLIO: INITIAL SHARES
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30, 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
June 30, 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
Distribution and Service Plan
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-694
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of 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, 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 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 date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is
in effect secured by the value (at least equal to the amount of the agreed
upon resale price and marked to market daily) of the underlying security.
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 the policy of each Portfolio
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 INSTRUMENTS. Variable or floating rate
instruments bear variable or floating interest rates and carry rights
that permit holders to demand payment of the unpaid principal balance plus
accrued interest from the issuers or certain financial intermediaries.
Floating rate instruments have interest rates that change whenever there is
a change in a designated base rate while variable rate instruments provide
for a specified periodic adjustment in the interest rate. These formulas
are designed to result in a market value for the instrument that
approximates its par value.
A Portfolio may invest in variable or floating rate instruments that
ultimately mature in more than 397 days, if a Portfolio acquires a
right to sell the instruments that meets certain requirements set forth in
Rule 2a-7. Variable rate instruments (including instruments subject to a
demand feature) that mature in 397 days or less and U.S. government
securities with a variable rate of interest adjusted no less frequently
than 762 days may be deemed to have maturities equal to the period
remaining until the next readjustment of the interest rate. Other variable
rate instruments with demand features may be deemed to have a maturity
equal to the period remaining until the next adjustment of the interest
rate or the period remaining until the principal amount can be recovered
through demand. A floating rate instrument subject to a demand feature may
be deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of 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 January 31, 1994 were as follows:
Historical Portfolio Results
One Year Five Years Ten Years

Average Annual Total Returns 2.67% 5.63% 6.65%

Cumulative Total Returns 2.67% 31.51% 90.45

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, 1983 through
January 31, 1994 as compared to the cost of living measured by the Consumer
Price Index over the same period.
During the period from July 31, 1983 through January 31, 1994, a
hypothetical investment of $10,000 in the Money Market Portfolio would have
grown to $19,918 assuming all dividends were reinvested.
Years Initial Value of Value of Total Consumer
Ended $10,000 Reinvested Reinvested Value Price
7/31 Investment Dividends Capital Gains Index

1984 10,000 977 0 10,977 10,420

1985 10,000 1,988 0 11,988 10,791

1986 10,000 2,874 0 12,874 10,961

1987 10,000 3,629 0 13,629 11,391

1988 10,000 4,557 0 14,557 11,862

1989 10,000 5,840 0 15,840 12,452

1990 10,000 7,160 0 17,160 13,053

1991 10,000 8,345 0 18,345 13,634

1992 10,000 9,117 0 19,117 14,064

1993 10,000 9,656 0 19,656 14,454
1/31/94 10,000 9,918 0 19,918 14,635

** From month-end closest to the initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on July
31, 1983, 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 $19,918. 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
$6,911. The Portfolio did not distribute any capital gains during the
period.
Cumulative total returns and average annual returns for the fiscal periods
ended January 31, 1994 for Initial Shares and Class B Shares of U.S.
Treasury Portfolio were as follows:
Historical Portfolio Results
One-Year Five-Year Ten Year

Average Annual Total Returns 2.65% 5.55% 6.49%

Cumulative Total Returns 2.65% 31.00% 87.48%

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 January 31, 1994 as compared to the cost of living measured by
the Consumer Price Index over the same period.
During the period from August 31, 1983 through January 31, 1994, a
hypothetical investment of $10,000 in the U.S. Treasury Portfolio would
have grown to $19,462 assuming all dividends were reinvested.

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

*1984 10,000 884 0 10,884 10,389

1985 10,000 1,841 0 11,841 10,758

1986 10,000 2,688 0 12,688 10,928

1987 10,000 3,425 0 13,425 11,357

1988 10,000 4,291 0 14,291 11,826

1989 10,000 5,526 0 15,526 12,415

1990 10,000 6,805 0 16,805 13,014

1991 10,000 7,929 0 17,929 13,593

1992 10,000 8,692 0 18,692 14,022

1993 10,000 9,211 0 19,211 14,411
1/31/94 10,000 9,462 0 19,462 14,591

</TABLE>

* From August 31, 1983 through July 31, 1984.
** 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 $19,462. 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 $6,679. 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.
JOHN TODD, Vice President (1992), is also Vice President of other funds
advised by FMR and an employee of FMR Texas Inc.
THOMAS D. MAHER, is Assistant Vice President of Fidelity's money market
funds and Vice President and Associate General Counsel of FMR Texas Inc.
(1990).
Under a retirement program which became effective November 1, 1989, a
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, 1993, 1992 and 1991, FMR
received fees amounting to $7,773,471, $8,206,375 and $8,057,006,
respectively, from Money Market Portfolio and $14,208,606, $10,958,456
and $8,076,247, 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 1993,
1992, and 1991, FMR paid FMR Texas fees that amounted to $1,726,876,
$1,825,881, and $1,775,118, for Money Market Portfolio and $2,400,702,
$1,934,302, and $1,483,943 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, 1993, 1992 and 1991 were $1,220,834,
$938,144, and $1,060,757, respectively, for Money Market Portfolio,
$1,310,256, $915,597, and $909,265, 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 1993, 1992 and 1991, the fees paid to Service for pricing and
bookkeeping services (including related out-of-pocket expenses) were
$167,470, $175,549, and $180,1 85, respectively, for Money Market
Portfolio, and $263,327 $217,831, and $158,474, 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 March 15, 1994, the following owned of record or beneficially 5% or more
of the outstanding shares of the Portfolios:
For Initial Shares of Money Market Portfolio: Texas Commerce Bank,
N.A., Houston,Texas, owned 8.42%; Boston Financial Data Services, North
Quincy, MA owned 7.04% and Old Republic International Corp. owned 5.19%.
For U.S. Treasury Portfolio: Bank of America, San Francisco, CA, owned
25.31% and Texas Commerce Bank, N.A. Houston, Texas, owned 24.73%.
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 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.