SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO. 2-78458)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 21 [ x]
and
REGISTRATION STATEMENT (NO. 811-3518) UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
Daily Tax-Exempt Money Fund
(Exact Name of Registrant as Specified in Declaration of Trust)
1201 N. Market Street - P.O. Box 1347
Wilmington, DE 19899-1347
(Address Of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code (617) 570-7000
Arthur Loring
82 Devonshire Street
Boston, MA 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box:
( ) Immediately upon filing pursuant to paragraph (b)
( ) On ( ) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
(x) On December 26, 1994 pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) On ( ) pursuant to paragraph (a)(ii) of Rule 485. If
appropriate, check the following box:
( ) This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the notice required by
such Rule by the end of December, 1994.
DC-160828.3
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DAILY TAX-EXEMPT MONEY FUND:
CROSS REFERENCE SHEET
Form N-1A Item Number Caption
1 ...................... Cover Page
2 b,c................... Summary of Fund Expenses
3 a,b................... Financial Highlights
c..................... Performance
4 a(i).................. The Fund and the Fidelity Organization
a(ii),b,c............ Investment Objective; Investment
Policies, Risks, and Limitations
5 a..................... *
b,c,d,e............... Management; Distribution and Services
f(i)(ii).............. Portfolio Transactions
6 a(i).................. The Fund and the Fidelity Organization
a(ii)................. How to Invest, Exchange and Redeem
a(iii)................ The Fund and the Fidelity Organization
b,c,d................. *
e..................... Cover Page; How to Invest, Exchange and
Redeem
f,g(i,ii,iii)......... Distributions and Taxes; How to Invest,
Exchange and Redeem
7 a..................... Management, Distribution and Services
b(i,ii)............... How to Invest, Exchange and Redeem
b(iii,iv,),........... *
b(v).................. How to Invest, Exchange and Redeem
c *
d..................... How to Invest, Exchange and Redeem
e,f(i,ii)............. Management Contract, Distribution and
Services
f(iii)................ *
8 a,b,c,d.............. How to Invest, Exchange and Redeem
9 ...................... *
* Not Applicable
DC-160829.2
<PAGE>
Form N-1A Item Number Caption
10,11 ................. Cover Page
12 ................... FMR; Description of the Fund
13 a,b,c.............. Investment Policies and Limitations
d.................. *
14 a,b................ Trustees and Officers
c.................. *
15 a.................. *
15 b.................. Description of the Fund
c.................. *
16 a(i)(ii)........... FMR; Trustees and Officers
a(iii),b,c,d....... Management Contract, Interest of FMR
Affiliates
e.................... Portfolio Transactions
f.................. Distribution and Service Plan
g.................. *
h.................. Description of the Fund
i.................. Interest of FMR Affiliates
17 a.................. Portfolio Transactions
b.................. *
c,d................ Portfolio Transactions
e.................. *
18 a.................. Description of the Fund
b.................. *
19 a.................. Distribution and Service Plan
b.................. Valuation of Portfolio Securities
c,d................ *
20 ................... Distributions and Taxes
21 a(i,ii)............ Interest of FMR Affiliates
a(iii),b,c......... *
22 ................... Performance
23 ................... Financial statements for the fiscal year
ended October 31, 1994 will be filed by
subsequent amendment.
* Not Applicable
LG933200007
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DAILY TAX-EXEMPT
MONEY FUND
PROSPECTUS
Daily Tax-Exempt Money Fund (the Fund) is designed to provide investors
with as high a level of current income, exempt from federal income taxes,
as is consistent with a diversified portfolio of high-quality, short-term
municipal obligations selected on the basis of liquidity and stability of
principal. The Fund offers individual and institutional investors a
convenient and economical way to invest in a professionally managed
portfolio of short-term municipals.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL MAINTAIN A
STABLE $1.00 SHARE PRICE.
The Prospectus is designed to provide investors with information they
should know before investing. PLEASE READ AND RETAIN THIS DOCUMENT FOR
FUTURE REFERENCE. The Annual Report is ^ attached to this Prospectus.
^ To learn more about the Fund and its investments, you can obtain a copy
of the Fund's most recent financial report and portfolio listing, or a
copy of the Statement of Additional Information ^(SAI) dated December ^
26, 1994. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is incorporated herein by reference. ^ For a free
copy of either document, please call the appropriate number below.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF^, OR ENDORSED OR
GUARANTEED BY^, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
For further information, or assistance in opening a new account, please
call:
Nationwide . . 800-843-3001
In Massachusetts (call collect) 617-330-0586
If you are investing through a Financial Institution, contact that
institution directly.
DC-136145.2
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TABLE OF CONTENTS
Summary of Fund Expenses . . . . . . . . . . . . . . . . . . . . . . 2 ^
Financial ^ Highlights . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Objective . . . . . . . . . . . . . . . . . . . . . . . . ^ 5
Investment Policies, Risks, and Limitations . . . . . . . . . . . . . . 5
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . 8
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ^
Distributions and ^ Taxes . . . . . . . . . . . . . . . . . . . . . . . 9
How to Invest, Exchange and ^ Redeem . . . . . . . . . . . . . . . . . 10
The Fund and the Fidelity ^ Organization . . . . . . . . . . . . . . . 17
Management, Distribution and ^ Services . . . . . . . . . . . . . . . . 18
^ Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Financial ^ Statements . . . . . . . . . . . . . . . . . . . . . . . . 22
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SUMMARY OF FUND EXPENSES
The expense summary format below was developed for use by all mutual funds
to help you make your investment decisions. Of course, you should
consider this expense information along with other important information,
including the Fund's investment objective and its past performance. There
are no transaction expenses associated with purchases, exchanges or sales
of the Fund's shares.
A. ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees ^.__%*
12b-1 Fees ^.__%
Other Expenses ^.__%
TOTAL FUND OPERATING EXPENSES .61%
* The rate for management fees represents the net rate retained by FMB
after payments made to Fidelity Distributors Corporation ("Distributors").
The management fee before payments made to Distributors by FMR is 50%. No
12b-1 payments are made directly from Fund assets.
A. ANNUAL ^ OPERATING EXPENSES are based on ^ historical expenses
for the most recent fiscal year. Management fees are paid by the Fund to
Fidelity Management & Research Company (FMR) for managing its investments
and business affairs. The ^ Distribution and Service Plan ^ provides that
December 26, 1994 - 2 - prospectus
<PAGE>
FMR may make payments from its management fee, its past profits or any
other source available ^ for sales and service support services. The
maximum amount payable ^ is currently at the annual rate of .38% of the ^
average net assets. Based on historical expenses, the payment made by FMR
was ___% and this amount is shown as the 12b-1 fee. Long-term
shareholders may be deemed to pay more than the economic equivalent of the
maximum ^ front-end sales ^ charge permitted by the National Association
of Securities Dealers, Inc. (NASD) due to ^ 12b-1 fees. The Fund incurs
other expenses for maintaining shareholder records, furnishing shareholder
statements and reports, and for other services.^ Management fees and
other expenses are reflected in the ^ fund's shareprice or dividends and
are not charged directly to individual shareholder accounts. Please refer
to the section entitled "Management, Distribution and Services" on page 18
for further information.
B. EXAMPLE: You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of
each time period:
1 Year 3 Years 5 Years 10 Years
$6 $20 $34 $76
B. EXAMPLE OF EXPENSES. The hypothetical example illustrates the
expenses associated with a $1,000 investment over periods of one, three,
five and ten 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 FUND PERFORMANCE OR EXPENSES,
BOTH OF WHICH MAY VARY.
December 26, 1994 - 3 - prospectus
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^ FINANCIAL HIGHLIGHTS ^
The table that follows is included in the Fund's Annual Report and has ^
been audited by ^__________, independent accountants. Their ^ report on
the financial statements and financial highlights is included on page ^__.
The financial statements and financial highlights are part of this
prospectus.
[Financial Highlights to be filed by subsequent amendment]
December 26, 1994 - 4 - prospectus
<PAGE>
INVESTMENT OBJECTIVE ^
Daily Tax-Exempt Money Fund's investment objective is to provide investors
with as high a level of current income, exempt from federal income taxes,
as is consistent with a diversified portfolio of high-quality, short-term
municipal obligations selected on the basis of liquidity and stability of
principal. The Fund only purchases instruments that it judges to present
minimal credit risk within the quality criteria described below^ .
The Fund may not always achieve its objective, but it will follow the
investment style described in this section. The Fund's ability to achieve
its objective depends, to a great extent, on the ability of its various
issuers to meet their scheduled payments of principal and interest. Under
normal conditions the Fund will invest so that at least 80% of its income
distributions will be exempt from federal income tax. (This policy is
fundamental and can only be changed with shareholder approval.) It is the
current policy of the Fund that none of its income will be derived from
private activity securities. For a discussion of tax-exempt income, see
"Distributions and Taxes," on page ^ 9.
INVESTMENT POLICIES, RISKS, AND LIMITATIONS
Municipal securities are issued to raise money for various public
purposes, including general purpose financing for state and local
governments as well as financing for specific projects or public
facilities. Municipal securities may be backed by the full taxing power
of a municipality or by the revenues from a specific project or the credit
of a private organization. Some municipal securities are insured by
private insurance companies, while others may be supported by letters of
credit furnished by domestic or foreign banks. FMR monitors the financial
condition of parties (including insurance companies, banks, and
corporations) whose creditworthiness is relied upon in determining the
credit quality of securities the Fund may purchase.
The Fund invests in U.S. dollar denominated high-quality, short- term
municipal securities but also may invest in high-quality, long-term fixed,
variable^-, or floating-rate instruments (including tender option bonds)
whose features give them interest rates, maturities, and prices similar to
short-term instruments. The Fund's investments in municipal securities
may include tax, revenue, or bond anticipation notes; tax-exempt
commercial paper; general obligation or revenue bonds (including municipal
lease obligations and resource recovery bonds); and zero coupon bonds.
The Fund may buy or sell securities on a when-issued or delayed-delivery
basis, and may purchase restricted securities. See the Appendix for
further discussion of the Fund's investments.
^ FMR normally invests the Fund's assets according to its investment
strategy and does not expect to invest in federally taxable obligations ^.
The Fund also reserves the right ^ to hold a substantial amount of
December 26, 1994 - 5 - prospectus
<PAGE>
uninvested cash or to invest more than normally permitted in federally
taxable obligations for temporary, defensive purposes.
QUALITY. Pursuant to procedures adopted by the Board of Trustees, the
Fund may purchase only high-quality securities that FMR believes present
minimal credit risk. To be considered high quality, a security must be
rated in accordance with applicable rules in one of the two highest
categories for ^ short-term securities by at least two nationally
recognized rating services (or by one if only one rating service has rated
the security), or, if unrated, judged to be of equivalent quality by FMR.
MATURITY. The Fund limits its investments to securities with remaining
maturities of 397 days or less and maintains a dollar- weighted average
maturity of 90 days or less.
Yields on municipal obligations are the product of a variety of factors,
including the general conditions of the money market and of the municipal
bond and municipal note markets, the size of a particular offering, the
maturity of the obligation and the rating of the issue. The value of
municipal obligations moves inversely to interest rates. Municipal
obligations with longer maturities tend to produce higher yields and
generally are subject to potentially greater price fluctuations than
obligations with shorter maturities.
The Fund may invest up to 25% of its total assets in a single issuer's
securities. The Fund may invest any portion of its assets in industrial
revenue bonds (IRBs) backed by private issuers, and may invest up to 25%
of its total assets in IRBs related to a single industry. The Fund may
also invest 25% or more of its total assets in securities whose revenue
sources are from similar types of projects, e.g., education, electric
utilities, healthcare, housing, transportation, or water, sewer, and gas
utilities. There may be economic, business or political developments or
changes that affect all securities of a similar type. Therefore,
developments affecting a single issuer or industry or securities financing
similar types of projects could have a significant effect on the Fund's
performance.
The Fund's ability to achieve its investment objective depends on the
quality and maturity of its investments. Although the Fund's policies are
designed to help maintain a stable $1.00 share price, all money market
instruments can change in value when interest rates or issuers'
creditworthiness change, or if an issuer or guarantor of a security fails
to pay interest or principal when due. If these changes in value were
large enough, the Fund'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.
The Board of Trustees monitors adherence to the rules and regulations of
the SEC, including credit quality and maturity standards.
December 26, 1994 - 6 - prospectus
<PAGE>
The Fund maintains a fundamental policy requiring it to use its best
efforts to maintain a constant net asset value per share (NAV) of $1.00
and values its portfolio securities on the basis of the amortized cost
valuation technique, pursuant to Rule 2a-7 under the Investment Company
Act of 1940 (the 1940 Act) (see "How to Invest, Exchange and Redeem" on
page __). This method values an instrument at cost and assumes a steady
rate of income from the date of purchase until maturity instead of looking
at actual changes in market value. The Trustees have established
procedures designed to stabilize, to the extent reasonably possible, the
Fund's NAV, as computed for the purpose of sales and redemptions, at a
single value.
INVESTMENT LIMITATIONS
The Fund follows certain limitations in managing its investments that may
help to reduce risks.
1. The Fund will not purchase a security if, as a result, with
respect to 75% of its total assets more than 5% of its total assets would
be invested in the securities of any single issuer.
2. (a) The Fund may borrow money for temporary or emergency purposes
in an amount not to exceed 33 1/3% of the value of its total assets; (b)
the Fund may borrow money only from a bank or a registered investment
company or portfolio for which FMR or an affiliate serves as investment
adviser; and (c) the Fund will not purchase securities while borrowings in
excess of 5% of its total assets are outstanding.
3. The Fund does not currently intend to make loans (but this limit
shall not apply to purchases of debt securities).
Limitation 1 does not apply to U.S. government securities and federal
agency obligations. Except for the investment limitations and policies
identified as fundamental (and Investment Limitations 1 and 2(a)), the
policies described in this Prospectus are not fundamental.
Non-fundamental policies may be changed without shareholder approval.
These limitations and the policies discussed in "Investment Objective and
Policies" are considered at the time of purchase. With the exception of
Limitation 2(a) concerning borrowings, the sale of securities is not
required in the event of a subsequent change in circumstances.
^ PORTFOLIO TRANSACTIONS
Municipal obligations generally are traded in the over-the-counter market
through broker-dealers. FMR chooses broker-dealers by judging
professional ability and quality of service. A ^ broker-dealer is a
securities firm which makes a market for securities by offering to buy at
one price and sell at a slightly higher price. The difference between the
prices is known as a spread. Since FMR trades, either 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 Fund
December 26, 1994 - 7 - prospectus
<PAGE>
on a more favorable spread than would be possible for most individual
investors.
The Fund has authorized FMR to allocate transactions to some
broker-dealers who help distribute the Fund's shares or the shares of
Fidelity's other funds, to the extent permitted by law, and on an agency
basis to an affiliate, Fidelity Brokerage Services, Inc. (FBSI). FMR will
make such allocations if commissions are comparable to those charged by
non-affiliated broker-dealers for similar services.
Higher commissions may be paid to those firms that provide research
services, to the extent permitted by law. FMR also is authorized to
allocate brokerage transactions to FBSI in order to secure from FBSI
research services produced by third-party, independent entities. FMR may
use this research information in managing the Fund's assets, as well as
assets of other clients.
PERFORMANCE
From time to time the Fund may advertise its YIELD and EFFECTIVE YIELD in
advertisements or in reports or other communications. Both yield figures
are based on historical earnings and are not intended to indicate future
performance.
The Fund's yield refers to the income generated by an investment in the
Fund over a seven-day period expressed as an annual percentage rate. The
Fund also may calculate 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.
The Fund's yield and effective yield figures are illustrated below for the
seven-day period ended October 31, ^ 1994:
Yield Effective Yield
^____% ____%
The Fund also may quote its TAX-EQUIVALENT YIELD, which shows the taxable
yield an investor would have to earn, before taxes, to equal the Fund's
tax-free yield. A tax-equivalent yield is calculated by dividing the
Fund's tax-exempt yield by the result of one minus a stated federal and/or
state tax rate.
The Fund's TOTAL RETURN is based on the overall dollar or percentage
change in value of a hypothetical investment in the Fund assuming dividend
distributions are reinvested. A CUMULATIVE TOTAL RETURN reflects the
Fund's performance over a stated period of time. An AVERAGE ANNUAL TOTAL
RETURN reflects the hypothetical annually compounded rate that would have
December 26, 1994 - 8 - prospectus
<PAGE>
produced the same cumulative total return if performance had been constant
over the entire period. Because average annual returns tend to smooth out
variations in the Fund's performance, investors should recognize that they
are not the same as actual year-by-year results.
DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from net investment income daily
and pays such dividends monthly. The Fund 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 the Fund's tax-exempt income are
not subject to federal income tax, but must be reported to the IRS by
shareholders. Exempt-interest dividends are included in income for
purposes of computing the portion of social security and railroad
retirement benefits that may be subject to federal tax. The Fund ^ does
not currently intend to purchase obligations whose interest is subject to
the federal alternative minimum tax.
If the Fund earns taxable income or capital gains from its investments,
these amounts will be designated as taxable distributions. Dividends
derived from taxable investment income and short-term capital gains are
taxable as ordinary income. Gains from the sale of tax-free bonds results
in a taxable distribution. Short-term capital gains and a portion of the
gain on bonds purchased at a discount are taxed as dividends.
Distributions are taxable when they are paid, whether shareholders 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 31st. The Fund will send shareholders a tax statement
showing the amount of tax- exempt distributions for the past calendar
year, and will send an IRS Form 1099-DIV by January 31st if the Fund makes
any taxable distributions.
OTHER TAX INFORMATION. The information above is only a summary of some of
the federal tax consequences generally affecting the Fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal tax, you may be subject to state or
local taxes on your investment. Investors should consult their tax
advisors to determine whether the Fund is suitable to their particular tax
situation.
HOW TO INVEST, EXCHANGE AND REDEEM
Shares of the Fund are offered continuously and may be purchased at the
NAV next determined after an order is received and accepted. The Fund
does not impose any sales charges in connection with purchases of ^ its
shares, although institutions may charge their clients fees in connection
with purchases and sales for the accounts of their clients. The Fund may
discontinue offering its shares generally or in any particular state
without notice to shareholders.
December 26, 1994 - 9 - prospectus
<PAGE>
IF YOU ARE INVESTING THROUGH A SECURITIES DEALER OR BANK (FINANCIAL
INSTITUTION), CONTACT THAT FINANCIAL INSTITUTION DIRECTLY. IT IS THE
RESPONSIBILITY OF YOUR FINANCIAL INSTITUTION TO SUBMIT YOUR PURCHASE IN
ORDER FOR YOU TO RECEIVE THE NEXT DETERMINED NAV.
If you are purchasing shares of the Fund through a program of services
offered by a Financial Institution, you should read the program materials
in conjunction with this prospectus. Certain features of the Fund may be
modified in these programs and administrative charges (in addition to
payments the Financial Institution may receive pursuant to the
Distribution and Service Plan) may be imposed for the services rendered.
These features include the minimum for subsequent investment amounts and
exchanges with certain Fidelity funds. For further information, including
copies of prospectuses, ^ SAIs and applications, contact your Financial
Institution or the Fund directly.
SHARE PRICE. Fidelity Service Co. (Service) calculates the Fund's NAV ^
at 12:00 noon and 4:00 p.m. Eastern time each day the Fund is open for
business (see "Holiday Schedule" on page ^ 16). The NAV of the Fund is
determined by adding the value of all securities and other assets of the
Fund, deducting its actual and accrued liabilities, and dividing by the
number of shares outstanding. Shares purchased at the 12:00 noon price
earn the income dividend declared that day. Shares purchased at the 4:00
p.m. price (including all purchases by check) begin to earn income
dividends on the following business day. Purchases made by federal funds
wire will be processed at the ^ 12:00 noon price if you call Fidelity
Investments Institutional Operations Company (FIIOC) before 12:00 noon
Eastern time and the Fund receives federal funds that day. If you do not
call FIIOC to give notice of your wire investment before 12:00 noon
Eastern time, you will not begin to earn dividends until the first
business day following receipt of your wire.
MINIMUM INVESTMENT AND ACCOUNT BALANCE. The minimum initial investment to
establish a new account in the Fund is $1,000. Subsequent investments
must be at least $250. If ^ you want to keep ^ your account open, ^ you
must leave $500 in it. If ^ your account balance falls below $500 due to
redemption, ^ your account may be closed and the proceeds mailed to ^ you
at the record address. ^ You will be given 30 days' notice that ^ your
account will be closed unless ^ you make an additional investment to
increase ^ your account balance to the $500 minimum.
HOW TO INVEST
An initial investment in the Fund must be preceded or accompanied by a
completed, signed application. Unless you already have a Fidelity mutual
fund account, you must complete and sign the application.
December 26, 1994 - 10 - prospectus
<PAGE>
INVESTING BY CHECK. You or your Financial Institution must send a check
payable to the Fund, together with a completed application to the address
below:
Daily Tax-Exempt Money Fund
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
Checks must be drawn on a U.S. bank.
INVESTING BY MAIL. To make additional investments directly, put your
account number on the check and mail to the address above. If you make a
purchase with more than one check, each check must have a value of at
least $50, and the minimum investment requirement still applies. The Fund
reserves the right to limit the number of checks processed at one time.
If your check ^ does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred.
INVESTING BY WIRE. ^ You may purchase shares of the Fund by wire. For
wiring information and instructions, ^ you should call ^ your Financial
Institution, or Client Services at 1-800- 843-3001. In order to receive
same day acceptance of the investment, ^ you must telephone Client
Services between 8:30 a.m. and 12:00 noon, Eastern time on days the Fund
is open for business, to advise them of the wire and to place the trade.
^ You are urged to initiate the purchase of shares as early in the day as
possible and to provide advance notice ^ of large transactions to Client
Services. If Client Services is not advised of the order prior to 12:00
noon Eastern time, or if clearing house funds are transferred via the Bank
Wire System, ^ your 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 Fund for wire purchases. However, ^
Financial Institutions may impose such a fee.
HOW TO EXCHANGE
An exchange is a convenient way to buy shares of the Fund or other
Fidelity funds. The Fidelity family of funds has a variety of investment
objectives. You may exchange shares of the Fund for shares of other
Fidelity funds (subject to the minimum initial investment requirement and
the terms of the program of services offered by your Financial
Institution) that are registered in your state. If you have purchased
shares of the Fund 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 exchange shares of the Fund for shares of
other Fidelity funds, but not for shares of Fidelity Advisor Funds. When
making an exchange, the registrations and tax identification numbers of
the two accounts must be identical. ^ You should consult the ^ prospectus
of the fund to be acquired to determine eligibility and suitability. To
protect fund performance and shareholders, Fidelity discourages frequent
trading in response to short-term market fluctuations. In particular,
December 26, 1994 - 11 - prospectus
<PAGE>
exchanges that coincide with "market timing" strategies can have adverse
effects on the funds.
To ^ Exchange by Telephone. Exchanges may be requested by calling Client
Services:
Nationwide . . 800-843-3001
TO EXCHANGE BY MAIL. Written requests for exchanges should contain the
Fund name, account number, and number of shares to be redeemed, and the ^
name of the fund whose shares ^ are being purchased. The letter must be
signed by a person authorized to act on the account. Letters should be
sent to:
Daily Tax-Exempt Money Fund
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
RESTRICTIONS: Currently, there is no limit on the number of
exchanges out of the Fund, nor are there any administrative or redemption
fees applicable to exchanges out of the Fund. However, other funds may
restrict or limit exchanges, and may impose administrative fees of up to
$7.50 and redemption fees of up to 1.5% on exchanges. Check each fund's
prospectus for details.
TAXES: Each exchange actually represents the sale of shares of
one fund and the purchase of shares in another, which may produce a gain
or loss for tax purposes.
An exchange involves the redemption of all or a portion of ^ your shares
of one fund and the purchase of shares in another fund. Shares will be
redeemed at the next determined NAV following receipt of the exchange
order. Shares of the fund to be acquired will be purchased at its next
determined NAV after redemption proceeds are made available. ^ You will
earn dividends in the acquired fund in accordance with the fund's
customary policy, normally on the day the exchange request is received. ^
You should note that under certain circumstances, ^ the Fund may take up
to seven days to make redemption proceeds available for the exchange
purchase of shares of another fund.
HOW TO REDEEM
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next NAV calculated after the Fund has
received and accepted your redemption request. If you close your account,
any accrued dividends will be paid to you at the beginning of the
following month. Remember that the Fund 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 12:00 noon
price do not receive the dividend declared on the day of redemption.
December 26, 1994 - 12 - prospectus
<PAGE>
Shares redeemed at the 4:00 p.m. price do receive the dividends declared
on the day of redemption.
REDEMPTION REQUESTS BY CHECK (minimum $500):
o You must have applied for the checkwriting feature on your
account.
o You may write as many checks as you like.
o If the amount of a check you write is greater than the value of
your account, your check will be returned to you and you may be
subject to extra charges.
REDEMPTION REQUESTS BY WIRE may be made by calling Client Services:
Nationwide . . 800-843-3001
You must apply for the wire feature on your account application. Client
Services will then notify you that this feature is active and you may then
make wire redemptions by calling Client Services during trading hours.
If telephone instructions are received before 12:00 noon Eastern time,
proceeds of the redemption normally will be wired in federal funds on the
same day to ^ your previously designated bank account. If your
instructions are received after 12:00 noon and before 4:00 p.m. Eastern
time, redemption of your shares will be processed at 4:00 p.m. Eastern
time and proceeds will be wired on the next business day. If you close
your account, any accrued dividends will be paid to you at the beginning
of the following month. Remember that the Fund may hold payment until it
is reasonably satisfied that investments made by check have been
collected.
You may change the bank account(s) designated to receive amounts redeemed
at any time by sending a letter of instruction with a signature guarantee
to:
Fidelity Investments-Client Services
Mail Zone ZR5
P.O. Box 1182
Boston, MA 02103-1182
REDEMPTION REQUESTS BY MAIL:
Send a letter of instruction with your signature(s) guaranteed to the
address given above. The letter should specify the name of the Fund, the
number of shares to be sold, your name, your account number, and should
include the additional requirements listed below that apply to your
particular account.
TYPE OF REGISTRATION REQUIREMENTS
December 26, 1994 - 13 - prospectus
<PAGE>
Individual, Joint Tenants, ^ Letter of instruction signed by all
Sole Proprietorship, person(s) required to sign for the account
Custodial (Uniform Gifts exactly as it is registered, accompanied by
or Transfers to Minors signature guarantee(s)^.
Act), General Partners
Corporations, Associations Letter of instruction and a corporate
resolution, signed by person(s) required to
sign for the account accompanied by signature
guarantee(s).
Trusts A letter of instruction signed by the
Trustee(s) with a signature guarantee. (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.)
If you do not fall into any of these registration categories
(i.e., Executors, Administrators, Conservators, Guardians) please call ^
Client Services 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 Fund, it may take up to seven days to pay you. Also, when the New
York Stock Exchange (NYSE)or the Federal Reserve Bank of Kansas City
(Kansas City Fed) is closed (or when trading is restricted) for any reason
other than its customary weekend or holiday closings, or under any
emergency circumstances as determined by the SEC to merit such action, the
Fund may suspend redemption or postpone payment dates. If you are unable
to execute transactions by telephone, consider placing your order by mail
to FIIOC at the address given above. In cases of suspension of the right
of redemption, you may either withdraw your request for redemption or
receive payment based on the NAV next determined after the termination of
the suspension.
CHOOSING A DISTRIBUTION OPTION
When filling out the application, ^ you may choose from two distribution
options:
A. THE SHARE OPTION reinvests your dividend distributions in
additional shares. This option is assigned to you automatically if you
December 26, 1994 - 14 - prospectus
<PAGE>
make no choice on the application. Option A provides for the purchase of
new shares at their NAV as of the close of business on the day your
dividends are distributed.
B. THE INCOME-EARNED OPTION means you will receive income dividends
and capital gain distributions (if any) in cash. Distribution checks will
be mailed no later than seven days after the last day of the month.
STATEMENTS AND REPORTS
You will receive a monthly statement which details every transaction that
affects your share balance or your account registration. A statement with
tax information will be mailed to you by January 31 of each year. At
least twice a year you will receive the Fund's financial statements. To
reduce expenses, only one copy of the Fund's reports (such as the Fund's
Annual Report) may be mailed to your household. Contact your Financial
Institution or the Fund to request additional reports each time.
ADDITIONAL INFORMATION. The Fund reserves the right to reject any
specific purchase order including certain purchases by exchange. Purchase
orders may be refused if, in FMR's, opinion, they are of a size that would
disrupt management of the Fund.
^ You may initiate many transactions by telephone. ^ The Transfer Agent
may only be liable for losses resulting from unauthorized transactions if
it ^ does not follow 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.
The Fund ^ reserves the right at any time, without prior notice, to refuse
exchange purchases by any person or group if, in FMR's judgment, the Fund
would be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected. The exchange privilege may be modified or terminated in the
future.
HOLIDAY SCHEDULE
The Fund is open for business and ^ the NAV is calculated each day that
both the Kansas City Fed and the NYSE are open for trading. The NYSE has
designated the following holiday closings ^ for 1995: New Year's Day
(observed), Washington's Birthday (observed), Good Friday, Memorial Day
(observed), Independence Day (observed), Labor ^ Day, Thanksgiving Day,
and Christmas Day (observed). Although FMR expects the same holiday
schedule ^ to be observed in the future, the Kansas City Fed or the NYSE
may modify its holiday schedule at any time. ^ The right is reserved to
advance the time ^ by which purchase and redemption orders must be
received on any day: (1) that the principal government securities markets
December 26, 1994 - 15 - prospectus
<PAGE>
close early, such as on days in advance of holidays generally observed by
participants in such markets, (2) that the Kansas City Fed or the NYSE
close early, or (3) as permitted by the SEC. To the extent that portfolio
securities are traded in other markets on days when the Kansas City Fed or
the NYSE is closed, the Fund's NAV may be affected ^ when investors do not
have access to the Fund to purchase or redeem shares. Certain Fidelity
funds may follow different holiday closing schedules.
THE FUND AND THE FIDELITY ORGANIZATION
The Fund is a diversified series of Daily Tax-Exempt Money Fund (the
Trust), an open-end management investment company organized as a Delaware
business trust pursuant to a Trust Instrument dated June 20, 1991. The
Fund was originally organized as a series of a Massachusetts Business
Trust (named Daily Tax-Exempt Money Fund), pursuant to a Declaration of
Trust dated July 16, 1982, as amended and restated December 1, 1989 (the
Predecessor Trust). The Fund converted to a series of the Trust on
December 30, 1991 and the Trust succeeded to the name and business of the
Predecessor Trust. The Fund's Board of Trustees supervises Fund
activities and reviews contractual arrangements with companies that
provide the Fund with services. The Fund is not required to hold annual
shareholder meetings, although special meetings may be called for purposes
such as electing or removing Trustees, changing fundamental policies or
limitations or approving a management contract or distribution plan. As a
shareholder, you are entitled to one vote for each share and fractional
votes for fractional shares you own.
Fidelity Investments is one of America's largest investment management
organizations and has its principal business address at 82 Devonshire
Street, Boston, MA 02109. It includes a number of different subsidiaries
and divisions which provide a variety of financial services and products.
FMR employs various Fidelity companies to perform certain activities
required to operate the Fund.
FMR, the Fund's adviser, is the original Fidelity company, founded in
1946. FMR provides a number of mutual funds and other clients with
investment research and portfolio management services. FMR maintains a
large staff of experienced investment personnel and a full complement of
related support facilities. As of October 31, ^ 1994, FMR advised funds
having more than ^__ million shareholder accounts with a total value of
more than ^ $___ billion. Fidelity Distributors Corporation
("Distributors") distributes shares for the Fidelity funds. FMR Corp. is
the ultimate parent company of FMR and FMR Texas, Inc. ("FMR Texas") and,
through ^ ownership of voting common stock, members of the Edward C.
Johnson 3d ^ family ^ form a controlling group with respect to FMR Corp.
Changes may occur in the Johnson family group, through death or
disability, which would result in changes in each individual family
members' holding of stock. Such changes could result in one or more
family members becoming holders of over 25% of the stock. FMR Corp. has
received an opinion of counsel that changes in the composition of the
Johnson family group under these circumstances would not result in the
termination of the Fund's management or distribution contracts and,
December 26, 1994 - 16 - prospectus
<PAGE>
accordingly, would not require a shareholder vote to continue operation
under those contracts.
MANAGEMENT, DISTRIBUTION AND SERVICES
MANAGEMENT CONTRACT. For managing the Fund's investments and business
affairs, the Fund pays FMR a monthly management fee at the annual rate of
.50% of its average net assets for the month. FMR has voluntarily ^
agreed to reimburse the Fund to the extent that its aggregate operating
expenses, including management fees, exceed an annual rate of .65% of
average net assets. For the fiscal year ended October 31, ^ 1994
management fees (no reimbursement in ^ 1994), amounted to ^ $_________.
FMR 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 the 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 Fund, after payments by FMR pursuant to the
Fund's ^ Distribution and Service Plan. The fees paid to FMR Texas are
not reduced by any voluntary or mandatory expense reimbursements that may
be in effect from time to time.
DISTRIBUTION AND SERVICE PLAN. The Trustees of the Fund ^ adopted a
Distribution and Service Plan (the Plan) pursuant to Rule 12b-1 under the
1940 Act (the Rule). The Rule provides in substance that a mutual fund
may not engage directly or indirectly in financing any activity that is
intended primarily to result in the sale of shares ^ except pursuant to a
plan adopted ^ under the Rule. The Board of Trustees has adopted the Plan
to allow the Fund and FMR to incur certain expenses that might be
considered to constitute direct or indirect payment ^ of distribution
expenses. No separate payments are authorized to be made by the Fund
under the Plan. Rather the Plan ^ requires FMR ^ to make payments from
its management fee or any other sources available to ^ Investment
Professionals that provide shareholder support services or assist in
selling shares of the Fund or perform other distribution activities. ^
Investment Professionals currently are compensated under the Plan at a
maximum rate of ^.38% annually of the average net assets of the Fund for
shareholder support or distribution services.
^ Distributors ^ will, at its own expense, provide promotional incentives
such as sales contests and trips to ^ Investment Professionals who support
the sale of shares of the Fund. In some instances, these incentives may
be offered only to certain types of ^ Investment Professionals such as
bank-affiliated or non-bank affiliated broker-dealers, or to the ^
Investment Professionals whose representatives provide services in
connection with the sale or expected sale of significant amounts of
shares.
^
December 26, 1994 - 17 - prospectus
<PAGE>
SERVICE AGREEMENTS. United Missouri Bank, N.A. (United Missouri), 1010
Grand Avenue, Kansas City, Missouri, acts as the Fund's custodian and
transfer agent. United Missouri employs FIIOC to perform dividend-paying
functions and to maintain the Fund's shareholder records. FIIOC is paid
sub-transfer agent fees based on the type, size, and number of accounts in
the Fund and the number of transactions made by shareholders. For the
fiscal year ended ^ October 31, 1994, the Fund's fees for transfer agent
services amounted to ^ $_______. United Missouri employs Service to
calculate the Fund's daily share price and to maintain its general
accounting records. The fees for these services are based on the Fund's
average net assets, but must fall within a range of $20,000 to $750,000
per year. For the fiscal year ended ^ 1994, the Fund's fees for pricing
and bookkeeping services (including out-of-pocket expenses) amounted to ^
$_______.
APPENDIX
The following paragraphs provide a brief description of securities in
which the Fund may invest and transactions it may make. The Fund is not
limited by this discussion, however, and may purchase other types of
securities and enter into other types of transactions if they are
consistent with the Fund's investment objective and policies. Current
holdings and recent investment strategies are described in the Fund's
financial report, which is sent to shareholders twice a year.
MUNICIPAL SECURITIES include GENERAL OBLIGATION SECURITIES, which are
backed by the full taxing power of a municipality, and REVENUE SECURITIES,
which are backed by the revenues of a specific tax, project, or facility.
INDUSTRIAL REVENUE BONDS are a type of revenue bond backed by the credit
and security of a private issuer and may involve greater risk. PRIVATE
ACTIVITY MUNICIPAL SECURITIES, which may be subject to the federal
alternative minimum tax, include securities issued to finance housing
projects, student loans, and privately owned solid waste disposal and
water and sewage treatment facilities.
TAX AND REVENUE ANTICIPATION NOTES are issued by municipalities in
expectation of future tax or other revenues, and are payable from those
specific taxes or revenues. BOND ANTICIPATION NOTES normally provide
interim financing in advance of an issue of bonds or notes, the proceeds
of which are used to repay the anticipation notes. TAX-EXEMPT COMMERCIAL
PAPER is issued by municipalities to help finance short-term capital or
operating needs.
MUNICIPAL LEASE OBLIGATIONS are issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities.
These obligations typically are not fully backed by the municipality's
credit, and their interest may become taxable if the lease is assigned.
If funds are not appropriated for the following year's lease payments, the
lease may terminate, with the possibility of significant loss to the
Fund. CERTIFICATES OF PARTICIPATION in municipal lease obligations or
installment sales contracts entitle the holder to a proportionate interest
in the lease-purchase payments made.
December 26, 1994 - 18 - prospectus
<PAGE>
^
RESOURCE RECOVERY BONDS are a type of revenue bond issued to build
facilities such as solid waste incinerators or waste-to- energy plants.
Typically, a private corporation will be involved, at least during the
construction phase, and the revenue stream will be secured by fees or
rents paid by municipalities for use of the facilities. The viability of
a resource recovery project, environmental protection regulations, and
project operator tax incentives may affect the value and credit quality of
resource recovery bonds.
VARIABLE ^- OR FLOATING-RATE OBLIGATIONS provide for periodic adjustments
of the interest rates paid. Floating rate obligations have interest rates
that change whenever there is a change in a designated base rate, while
variable rate obligations provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market
value for the instrument that approximates its par value. When
determining the maturity of a variable or floating rate ^ obligation, the
^ Fund may look to the date the demand feature can be exercised, or to the
date the interest rate is readjusted, rather than to the final maturity of
the obligation ^.
TENDER ^ OPTION BONDS and similarly structured obligations combine
previously issued notes or bonds with demand features and interest rate
features. The creditworthiness of the issuer of the underlying bond ^,
third parties (such as banks or insurance companies) that provide credit
enhancement, and the party providing the demand or tender feature may each
affect the credit quality of the obligation.
ILLIQUID INVESTMENTS. The Fund may invest ^ in illiquid investments.
Under the supervision of the Board of Trustees, FMR determines the
liquidity of the Fund's investments. The absence of a trading market can
make it difficult to ascertain a market value for illiquid investments.
It may be difficult or impossible for the Fund to sell illiquid
investments promptly at an acceptable price.
RESTRICTED SECURITIES. The Fund may purchase securities which 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.
DELAYED-DELIVERY TRANSACTIONS. The Fund may buy and sell securities on a
when-issued or delayed-delivery basis, with payment and delivery taking
place at a future date. The market value of securities purchased in this
way may change before the delivery date, which could affect the market
value of the Fund's assets. Ordinarily, the Fund will not earn interest
on the securities purchased until they are delivered.
December 26, 1994 - 19 - prospectus
<PAGE>
INTERFUND BORROWING PROGRAM. The Fund has received permission from the
SEC to lend money to and borrow money from other funds advised by FMR or
its affiliates, but it will participate in the interfund borrowing program
only as a borrower. Interfund loans normally will extend overnight, but
can have a maximum duration of seven days. The Fund will borrow through
the program only when the costs are equal to or lower than the cost of
bank loans. The Fund will not borrow through the program if, after doing
so, total outstanding borrowings would exceed 15% of total assets. Loans
may be called on one day's notice, and the Fund may have to borrow from a
bank at a higher interest rate if an interfund loan is called or not
renewed.
ZERO COUPON BONDS. Zero coupon bonds do not make interest payments:
instead, they are sold at a deep discount from their face value and are
redeemed at face value when they mature. Because zero coupon bonds do not
pay current income, their prices can be very volatile when interest rates
change. In calculating its daily dividend, the Fund takes into account as
income a portion of the difference between a zero coupon bond's purchase
price and its face value.
December 26, 1994 - 20 - prospectus
<PAGE>
This redlined draft, generated by CompareRite - The Instant Redliner,
shows the differences between - original document :
Deletions appear as a normal ^
Additions appear as "redlined" text
December 26, 1994 - 21 - prospectus
<PAGE>
DAILY ^ TAX-EXEMPT MONEY FUND
STATEMENT OF ADDITIONAL INFORMATION
December ^ 26, 1994
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the Fund's current Prospectus (dated
December ^ 26, 1994). Please retain this ^ SAI for future reference. To
obtain additional copies of this ^ SAI or of the Fund's Prospectus and
Annual Report, please call Fidelity ^ at 800-843-3001. If you are
investing through a Financial Institution, contact that Institution
directly.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 2
Portfolio Transactions ^ 9
Valuation of Portfolio Securities ^ 12
^ Performance 13
Additional Purchase and Redemption ^ Information 19
^ Distributions and Taxes ^ 20
FMR ^ 21
Trustees and Officers ^ 21
Management ^ Contract 24
Interest of FMR Affiliates ^ 26
Distribution and Service ^ Plan 27
Description of the ^ Fund 29
^ Appendix 32
Investment Adviser
Fidelity Management & Research Company (FMR)
Sub-Advisor
FMR Texas, Inc. (FMR Texas)
Distributor
Fidelity Distributors Corporation (Distributors)
Custodian/Transfer Agent
United Missouri ^ Bank, N.A. (United Missouri)
DTETX-SAI-12-94 ^
DC-164132.2 Comparison DC-160863.1 to DC-160863.2
<PAGE>
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the Fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation shall be
determined immediately after and as a result of the Fund's acquisition of
such security or other asset. Accordingly, any later increase or decrease
resulting from a change in values, net assets or other circumstances will
not be considered when determining whether the investment complies with
the Fund's investment policies and limitations.
The Fund's fundamental investment limitations may not be changed
without approval of a "majority of the outstanding shares" (as defined in
the Investment Company Act of 1940 ^(1940 Act) of the Fund. However,
except for the numbered investment limitations set forth below, the
investment policies and limitations described in this ^ SAI are not
fundamental and may be changed without shareholder approval.
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
1. with respect to 75% of the Fund's total assets, purchase the
securities of any issuer (other than securities issued or
guaranteed by the U.S. government, or any of its agencies or
instrumentalities), if as a result thereof, (a) more than 5% of
the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the
outstanding voting securities of that issuer;
2. issue senior securities, except as permitted under the Investment
Company Act of 1940;
3. make short sales of securities;
4. purchase any securities on margin, except for such ^ short-term
credits as are necessary for the clearance of transactions;
5. borrow money, except for temporary or emergency purposes (not for
leveraging or investment) in an amount not to exceed 33 1/3% of
the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). Any borrowings that
come to exceed ^ 33 1/3% of the Fund's assets by reason of a
decline in net assets will be reduced within three days
(exclusive of Sundays and holidays) to the extent necessary to
comply with the 33 1/3% limitation;
6. underwrite any issue of securities; except to the extent that the
purchase of municipal bonds in accordance with the Fund's
investment objective, policies, and restrictions, either directly
- 2 -
<PAGE>
from the issuer, or from an underwriter for an issuer, may be
deemed to be underwriting;
7. purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities, or tax-exempt obligations issued
or guaranteed by a U.S. territory or possession or a state or
local government, or a political subdivision of any of the
foregoing) if, as a result, more than 25% of the Fund's total
assets would be invested in securities of companies whose
principal business activities are in the same industry;
8. purchase or sell real estate, but this shall not prevent the Fund
from investing in municipal bonds or other obligations secured by
real estate or interests therein;
9. purchase or sell commodities or commodity (futures) contracts;
10. lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties
(but this limit does not apply to purchases of debt securities or
to repurchase agreements); or
11. invest in oil, gas or other mineral exploration or development
programs.
^ 12. The Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities
of a single ^ open-end management investment company with
substantially the same fundamental investment objectives,
policies, and limitations as the Fund. ^ The Fund has no current
intention of implementing this policy.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The Fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR
or an affiliate serves as investment adviser or (b) by
engaging in reverse repurchase agreements with any
party (reverse repurchase agreements are treated as
borrowings for purposes of the Fund's fundamental
investment limitation 5). The Fund will not purchase any
security while borrowings representing more than 5% of
its total assets are outstanding. The Fund will not
borrow from other funds advised by FMR or its affiliates
if total outstanding borrowings immediately after such
borrowing would exceed 15% of the Fund's total assets.
(ii) The Fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets
- 3 -
<PAGE>
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.
(iii) The Fund does not currently intend to engage in
repurchase agreements or make loans, but this limitation
does not apply to purchases of debt securities.
(iv) The Fund does not currently intend to purchase the
securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or
political subdivisions thereof) if, as a result, more
than 5% of its total assets would be invested in the
securities of business enterprises that, including
predecessors, have a record of less than three years of
continuous operation.
(v) The Fund 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.
(vi) The Fund does not currently intend to invest in warrants,
oil and gas leases and in real estate limited
partnerships.
For purposes of limitations (1) and (7), FMR identifies the
issuer of a security depending on its terms and conditions. In
identifying the issuer, FMR will consider the entity or entities
responsible for payment of interest and repayment of principal and the
source of such payments; the way in which assets and revenues of an
issuing political subdivision are separated from those of other political
entities; and whether a government body is guaranteeing the security.
AFFILIATED BANK TRANSACTIONS. Pursuant to exemptive orders
issued by the Securities and Exchange Commission (SEC), the Fund may
engage in transactions with banks that are, or may be considered to be,
"affiliated persons" of the Fund under the ^ 1940 Act. Such transactions
may be entered into only pursuant to procedures established and
periodically reviewed by the Board of Trustees. These transactions may
include repurchase agreements with custodian banks; purchases, as
principal, of ^ short-term obligations of, and repurchase agreements
with, the 50 largest U.S. banks (measured by deposits); transactions in
municipal securities; and transactions in U.S. government securities with
affiliated banks that are primary dealers in these securities.
DELAYED-DELIVERY TRANSACTIONS. The Fund may buy and sell
securities on a delayed-delivery or when-issued basis. These transactions
- 4 -
<PAGE>
involve a commitment by the Fund to purchase or sell specific securities
at a predetermined price or yield, with payment and delivery taking place
after the customary settlement period for that type of security (and more
than seven days in the future). Typically, no interest accrues to the
purchaser until the security is delivered.
When purchasing securities on a delayed-delivery basis, the Fund
assumes the rights and risks of ownership, including the risk of price and
yield fluctuations. Because the Fund is not required to pay for
securities until the delivery date, these risks are in addition to the
risks associated with the Fund's other investments. If the Fund remains
substantially fully invested at a time when delayed-delivery purchases are
outstanding, the delayed-delivery purchases may result in a form of
leverage. When delayed-delivery purchases are outstanding, the Fund will
set aside appropriate liquid assets in a segregated custodial account to
cover its purchase obligations. When the Fund has sold a security on a
delayed-delivery basis, the Fund does not participate in further gains or
losses with respect to the security. If the other party to a delayed-
delivery transaction fails to deliver or pay for the securities, the Fund
could miss a favorable price or yield opportunity, or could suffer a loss.
The Fund may renegotiate delayed-delivery transactions after they
are entered into, and may sell underlying securities before they are
delivered, which may result in capital gains or losses.
ILLIQUID INVESTMENTS are investments that cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued. Under the supervision of the Board of Trustees,
FMR determines the liquidity of the Fund's investments and, through
reports from FMR, the Board monitors investments in illiquid instruments.
In determining the liquidity of the Fund's investments, FMR may consider
various factors including (1) the frequency of trades and quotations, (2)
the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security
(including any demand or tender features) and (5) the nature of the
marketplace for trades (including the ability to assign or offset the
Fund's rights and obligations relating to the investment). Investments
currently considered by the Fund to be illiquid include restricted
securities and municipal lease obligations determined by FMR 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, the Fund were in a position where more than 10% of its net
assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration under
the Securities Act of 1933, or in a registered public offering. Where
- 5 -
<PAGE>
registration is required, the Fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time the Fund may be
permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the
Fund might obtain a less favorable price than prevailed when it decided to
seek registration of the security.
^
TENDER OPTION BONDS are created by coupling an intermediate ^-or
long-term tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, ^ broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, the Fund effectively holds a demand
obligation that bears interest at the prevailing ^ short-term tax-exempt
rate. Subject to applicable regulatory requirements, the Fund may buy
tender option bonds if the agreement gives the Fund the right to tender
the bond to its sponsor no less frequently than once every 397 days. In
selecting tender option bonds for the Fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
STANDBY COMMITMENTS are puts that entitle holders to same- day
settlement at an exercise price equal to the amortized cost of the
underlying security plus accrued interest, if any, at the time of
exercise. The Fund may acquire standby commitments to enhance the
liquidity of portfolio securities, but only when the issuers of the
commitments present minimal risk of default.
Ordinarily the Fund will not transfer a standby commitment to a
third party, although it could sell the underlying municipal security to a
third party at any time. The Fund may purchase standby commitments
separate from or in conjunction with the purchase of securities subject to
such commitments. In the latter case, the Fund would pay a higher price
for the securities acquired, thus reducing their yield to maturity.
Standby commitments will not affect the dollar-weighted average maturity
of the Fund, or the valuation of the securities underlying the
commitments.
Issuers or financial intermediaries may obtain letters of credit
or other guarantees to support their ability to buy securities on demand.
FMR may rely upon its evaluation of a bank's credit in determining whether
to support an instrument supported by a letter of credit.
- 6 -
<PAGE>
Standby commitments are subject to certain risks, including the
ability of issuers of standby commitments to pay for securities at the
time the commitments are exercised; the fact that standby commitments are
not marketable by the Fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. The Fund may invest a portion of
its assets in municipal leases and participation interests therein. These
obligations, which may take the form of a lease, an installment purchase,
or a conditional sale contract, are issued by state and local governments
and authorities to acquire land and a wide variety of equipment and
facilities. Generally, the Fund will not hold such obligations directly
as a lessor of the property, but will purchase a participation interest in
a municipal obligation from a bank or other third party. A participation
interest gives the Fund a specified, undivided interest in the obligation
in proportion to its purchased interest in the total amount of the
obligation.
Municipal leases frequently have risks distinct from those
associated with general obligation or revenue bonds. State constitutions
and statutes set forth requirements that states or municipalities must
meet to incur debt. These may include voter referenda, interest rate
limits, or public sale requirements. Leases, installment purchases, or
conditional sale contracts (which normally provide for title to the leased
asset to pass to the governmental issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting
their constitutional and statutory requirements for the issuance of debt.
Many leases and contracts include "non- appropriation clauses" providing
that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purposes
by the appropriate legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance limitations.
VARIABLE OR FLOATING RATE DEMAND OBLIGATIONS ^ provide for
periodic adjustments of the interest rate paid. Floating rate obligations
have interest rates that change whenever there is a change in a designated
base rate while variable rate ^ obligations provide ^ for a specified
periodic adjustment in the interest rate. These formulas are designed to
result in a market value for the instrument that approximates its par
value.
^ Some variable or floating rate obligations permit holders to
demand payment of the unpaid principal balance plus accrued interest from
the issuers or certain financial intermediaries. Issuers or financial
intermediaries who provide demand features or stand-by commitments often
obtain letters of credit (LOC's) or other guarantees from domestic or
foreign banks to support their repurchase comitments. FMR may rely upon
its evaluation of a bank's credit in determining whether to purchase an
obligation supported by an LOC. In evaluating a foreign bank's credit,
FMR will consider whether adequate public information about the bank is
available and whether the bank may be subject to unfavorable political or
- 7 -
<PAGE>
economic developments, currency controls, or other governmental
restrictions that might affect the bank's ability to honor its credit
commitment.
^ When determining the maturity of a variable or floating rate
obligation, the Fund may look to the date the demand feature can be
exercised, or to the date the interest rate is readjusted, rather than to
the final maturity of the obligation.
ZERO COUPON BONDS do not make regular interest payments.
Instead, they are sold at a deep discount from their face value and are
redeemed at face value when they mature. Because zero coupon bonds do not
pay current income, their prices can be very volatile when interest rates
change. In calculating its daily dividend, the Fund takes into account as
income a portion of the difference between a zero coupon bond's purchase
price and its face value.
FEDERALLY TAXABLE OBLIGATIONS. The Fund does not intend to
invest in securities whose interest is federally taxable; however, from
time to time, the Fund may invest a portion of its assets on a temporary
basis in fixed-income obligations whose interest is subject to federal
income tax. For example, the Fund may invest in obligations whose
interest is federally taxable pending the investment or reinvestment in
municipal securities of proceeds from the sale of its shares or sales of
portfolio securities.
Should the Fund invest in federally taxable obligations, it would
purchase securities that in FMR's judgment are of high^ quality. These
would include obligations issued or guaranteed by the U.S. government or
its agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. The Fund's standards for high-quality taxable
obligations are essentially the same as those described by Moody's
Investors Service, Inc. (Moody's) in rating corporate obligations within
its two highest ratings of Prime-1 and Prime-2, and those described by
Standard and Poor's Corporation (S&P) in rating corporate obligations
within its two highest ratings of A-1 and A- 2. The Fund will purchase
taxable obligations only if they meet its quality requirements as set
forth in the Prospectus.
Proposals to restrict or eliminate the federal income tax
exemption for interest on municipal obligations are introduced before
Congress from time to time. Proposals also may be introduced before state
legislatures that would affect the state tax treatment of the Fund's
distributions. If such proposals were enacted, the availability of
municipal obligations and the value of the Fund's holdings would be
affected and the Trustees would reevaluate the Fund's investment
objectives and policies.
The Fund anticipates being as fully invested as practicable in
municipal securities; however, there may be occasions when, as a result of
maturities of portfolio securities, sales of Fund shares, or in order to
- 8 -
<PAGE>
meet redemption requests, the Fund may hold cash that is not earning
income. In addition, there may be occasions when, in order to raise cash
to meet redemptions, the Fund may be required to sell securities at a
loss.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are
placed on behalf of the Fund by FMR ^ pursuant to authority contained in
the Management Contract. If FMR grants investment management authority to
the sub-adviser (see the section entitled "Management Contract"), the
sub-adviser is authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the policies
described below. FMR is also responsible for the placement of transaction
orders for other investment companies and accounts for which it or its
affiliates act as investment adviser. Securities purchased and sold by
the Fund generally will be traded on a net basis (i.e., without
commission). In selecting broker-dealers, subject to applicable
limitations of the federal securities laws, FMR will consider various
relevant factors, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security to
be purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker- dealer firm; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness
of any commissions.
The Fund may execute portfolio transactions with broker- dealers
who provide research and execution services to the Fund or other accounts
over which FMR or its affiliates exercise investment discretion. Such
services may include advice concerning the value of securities; the
advisability of investing in, purchasing or selling securities; 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 dealers who provide such services
on a regular basis. However, as many transactions on behalf of the Fund
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 dealers solely
because such services were provided. The selection of such broker-dealers
generally is made by FMR (to the extent possible consistent with execution
considerations) based upon the quality of such research and execution
services provided.
The receipt of research from broker-dealers that execute
transactions on behalf of the Fund may be useful to FMR in rendering
investment management services to the Fund or its other clients, and
conversely, such research provided by ^ broker-dealers who have executed
transaction orders on behalf of other FMR clients may be useful to FMR in
carrying out its obligations to the Fund. The receipt of such research
- 9 -
<PAGE>
has not reduced FMR's normal independent research activities; however, it
enables FMR to avoid the additional expenses that could be incurred if FMR
tried to develop comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
the Fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers
viewed in terms of a particular transaction or FMR's overall
responsibilities to the Fund and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on
the brokerage and research services provided or to determine what portion
of the compensation should be related to those services.
FMR is authorized to use research services provided by and to
place portfolio transactions with brokerage firms that have provided
assistance in the distribution of shares of the Fund, or shares of other
Fidelity funds, to the extent permitted by law, and may use research
services provided by and place agency transactions with Fidelity Brokerage
Services, Inc. (FBSI), a member of the New York Stock Exchange (NYSE) and
subsidiary 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 effect 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 Fund and review the commissions paid by the
Fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the Fund.
From time to time the Trustees will review whether the recapture
for the benefit of the Fund of some portion of the brokerage commissions
or similar fees paid by the Fund on portfolio transactions is legally
permissible and advisable. The Fund seeks to recapture soliciting 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 Fund to seek such
recapture.
- 10 -
<PAGE>
Although the Trustees and officers of the Fund are substantially
the same as those of other funds managed by FMR, investment decisions for
the Fund are made independently from those of other funds managed by FMR
affiliates. It sometimes happens that the same security is held in the
portfolio of more than one of these funds or accounts. Simultaneous
transactions are inevitable when several funds are managed by the same
investment adviser, particularly when the same security is suitable for
the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase
or sale of the same security, the prices and amounts are allocated in
accordance with a formula considered by the officers of the funds involved
to be equitable to each fund. In some cases this system could have a
detrimental effect on the price or value of the security as far as the
Fund is concerned. In other cases, however, the ability of the Fund to
participate in volume transactions will produce better executions for the
Fund. It is the current opinion of the Trustees that the desirability of
retaining FMR as investment adviser to the funds outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.
VALUATION OF PORTFOLIO SECURITIES
The Fund values its investments on the basis of amortized cost.
This technique involves valuing an instrument at its cost as adjusted for
amortization of premium or accretion of discount rather than its value
based on current market quotations or appropriate substitutes which
reflect current market conditions. The amortized cost value of an
instrument may be higher or lower than the price the Fund would receive if
it sold the instrument.
Valuing the Fund's instruments on the basis of amortized cost and
use of the term "money market fund" are permitted by Rule 2a-7 under the
1940 Act. The Fund must adhere to certain conditions under Rule 2a-7;
these conditions are summarized in the Prospectus.
The Board of Trustees of the Fund oversees FMR's adherence to SEC
rules concerning money market funds, and has established procedures
designed to stabilize the Fund's net asset value per share ("NAV") at
$1.00. At such intervals as they deem appropriate, the Trustees consider
the extent to which NAV calculated by using market valuations would
deviate from $1.00 per share. If the Trustees believe that a deviation
from the Fund's amortized cost per share may result in material dilution
or other unfair results to shareholders, the Trustees have agreed to take
such corrective action, if any, as they deem appropriate to eliminate or
reduce, to the extent reasonably practicable, the dilution or unfair
results. Such corrective action could include selling portfolio
instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends; redeeming
shares in kind; establishing NAV by using available market quotations; and
such other measures as the Trustees may deem appropriate.
- 11 -
<PAGE>
During periods of declining interest rates, the Fund's yield
based on amortized cost may be higher than the yield based on market
valuations. Under these circumstances, a shareholder in the Fund would be
able to obtain a somewhat higher yield than would result if the Fund
utilized market valuations to determine its NAV. The converse would apply
in a period of rising interest rates.
PERFORMANCE
The Fund may quote performance in various ways. ^ All
performance information supplied by the Fund in advertising is historical
and is not intended to indicate future returns. The Fund's yield and
total return fluctuate in response to market conditions and other factors.
YIELD CALCULATIONS. ^ To compute the Fund's yield for a period,
the net change in value of a hypothetical account containing one share
reflects the value of additional shares purchased with dividends from the
one original share and dividends declared on both the original share and
any additional shares. The net change is then divided by the value of the
account at the beginning of the period to obtain a base period return.
This base period return is annualized to obtain a current annualized
yield.^ The Fund also may calculate an effective yield by compounding the
base period return over a one-year period. ^ In addition to the current
yield, the fund may quote yields in advertising based on any historical
seven-day period. Yields for the Fund are calculated on the same basis as
other money market funds, as required by applicable regulations.
Yield information may be useful in reviewing the Fund's
performance and in providing a basis for comparison with other investment
alternatives. However, the Fund's yield ^ fluctuates , unlike ^
investments ^ that pay a fixed ^ interest rate over a stated period of
time. ^ When comparing investment alternatives, investors should also
note the quality and maturity of the portfolio securities of respective
investment companies ^ they have chosen to consider.
Investors should recognize that in periods of declining interest
rates the Fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates the Fund's yield
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the Fund from the continuous sale of its
shares will likely be invested in instruments producing lower yields than
the balance of the Fund's holdings, thereby reducing the Fund's current
yield ^. In periods of rising interest rates, the opposite can be
expected to occur.
The ^ Fund's tax-equivalent yield ^ is the rate an investor would
have to earn ^ from a fully taxable investment after taxes to equal the ^
Fund's tax-free yield. ^ Tax-equivalent ^ yields are calculated by
- 12 -
<PAGE>
dividing the Fund's ^ yield by the result of one minus a stated federal ^
or combined federal and state tax rate. If only a portion of the Fund's
yield is tax-exempt, only that portion is adjusted in the calculation.
The following ^ table shows the effect of a shareholder's tax
status on effective yield under federal income tax laws for 1994. It
shows the approximate yield a taxable security must provide at various
income brackets to produce after-tax yields equivalent to those of
hypothetical tax-exempt obligations yielding from 2% to 8%. Of course, no
assurance can be given that the Fund will achieve any specific tax-exempt
yield. While the Fund invests principally in obligations whose interest
is exempt from federal income tax, other income received by the Fund may
be taxable.
<TABLE>
<CAPTION>
^ 1994 Tax Rates and Tax- Equivalent Yields
-------------------------------------------
^ Individual tax-free yield
is:
^ Federal
Taxable Income* tax 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
<S>
bracket:** Then tax- equivalent yield is: Single ReturnJoint Return
----------------------------------------- -------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 12,101 - $53,500 $36,901 - ^ $89,150 28% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72% 11.11%
$ 53,501 - $115,000 $89,151 - ^ $140,000 31% 2.90% 4.35% 5.80% 7.25% 8.70% 10.14% 11.59%
$115,001 - $250,000 $140,001 -$250,000 36% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94% 12.50%
$250,001- + $250,001 + 39.6% 3.31% 4.97% 6.62% 8.28% 9.93% 11.59% 13.25%
</TABLE>
* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only^.
** Excludes the impact of the phaseout of personal exemptions, ^
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may raise a taxpayer's marginal tax rate. An increase in
a shareholder's marginal tax rate would increase that shareholder's tax-
equivalent yield.
- 13 -
<PAGE>
^ The Fund may invest a portion of its assets in obligations that are
subject to federal income tax. When the Fund invests in these
obligations, its tax-equivalent yields will be lower. In the table above,
tax-equivalent yields are calculated assuming investments are 100%
federally tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising
reflect all aspects of the Fund's return, including the effect of
reinvesting dividends and capital gain distributions^. Average annual
returns are calculated by determining the growth or decline in value of a
hypothetical historical investment in the Fund over a stated period; and
then calculating the annually compounded percentage rate that would have
produced the same ^ result if the rate of growth or decline in value 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 the Fund'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 of the
Fund.
In addition to average annual returns, the Fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as ^ a percentage or as a dollar ^
amount and may be calculated for a single investment, a series of
investments or a series of redemptions over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains) 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.
^
HISTORICAL FUND RESULTS. The following table shows the Fund's
7-day yields, tax-equivalent yields and ^ total returns for the period ^
ended October 31, 1994.
The tax-equivalent yield is based on a ___% federal income tax
rate. Note that the Fund may invest in securities whose income is subject
to the federal alternative minimum tax.
<TABLE>
<CAPTION>
- 14 -
<PAGE>
<S> Average Annual Total Returns Cumulative Total Returns
---------------------------- ------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
Seven-Day Tax-Equiva-
Yield lent Yield One Year Five Years Ten Years One Year Five Years Ten Years
--------- ---------- --------- ---------- --------- -------- ---------- ---------
</TABLE>
The following chart shows the income and capital elements of the Fund's
year-by-year total returns for the period November 1, 1985 through October
31, ^ 1994 as compared to the cost of living measured by the Consumer
Price Index over the same period.
^ The following table shows the income and capital elements of
the Fund's cumulative total return. The table compares the Fund's return
to the record of the Standard & Poor's Composite Index of 500 Stocks (S&P
500), the Dow Jones Industrial Average (DJIA), and the cost of living
(measured by the Consumer Price Index, or CPI) over the same period. The
CPI information is as of the month end closest to the initial investment
date. The S&P 500 and DJIA comparisons are provided to show how the
Fund's total return compared to the record of a broad average of common
stocks and a narrower set of stocks of major industrial companies,
respectively, over the same period. Of course, since the Fund invests in
short-term fixed-income securities, common stocks represent a different
type of investment from the Fund. Common stocks generally offer greater
growth potential than the Fund, but generally experience greater price
volatility, which means greater potential for loss. In addition, common
stocks generally provide lower income than a fixed-income investment such
as the Fund. Figures for the S&P 500 and DJIA are based on the prices of
unmanaged groups of stocks and, unlike the Fund's returns, do not include
the effect of paying brokerage commissions or other costs of investing.
During the period from November 1, 1984 through October 31, 1994, a
hypothetical investment of $10,000 in the Fund would have grown to $______
assuming all dividends were reinvested. This was a period of fluctuating
interest rates and the figures below should not be considered
representative of the dividend income or capital gain or loss that could
be realized from an investment in the Fund today.
<TABLE>
<CAPTION>
- 15 -
<PAGE>
Value of Value of Value of
Year Initial Reinvested Reinvested Cost of
Ended $10,000 Distributions Distributions Living
10/31 Investment Dividends Capital Gains Total Value S&P 500 Indices DJIA
----- ---------- ------------ ------------- ----------- ------- ------- -----
<S>
<C> <C> <C> <C> <C> <C> <C> <C>
1985 10,000 1,042 0 11,042 10,741
1986 10,000 1,541 0 11,541 10,899
1987 10,000 1,994 0 11,994 11,393
1988 10,000 2,540 0 12,540 11,877
1989 10,000 3,257 0 13,257 12,411
1990 10,000 3,970 0 13,970 13,192
1991 10,000 4,593 0 14,593 13,577
1992 10,000 5,021 0 15,021 14,012
1993 10,000 5,338 0 15,338 14,397
1994
</TABLE>
Explanatory Notes: With an initial investment of $10,000 made on November
^ 1, 1984, the net amount invested in shares of the Fund 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 ^ $______. If distributions
had not been reinvested, the amount of distributions earned from the Fund
over time would have been smaller and the cash payments (dividends) for
the period would have come to ^ $______. The Fund did not distribute any
capital gains during the period.
The ^ Fund's performance may be compared to the performance of
other mutual funds in general, or to the performance of particular types
of mutual funds. These comparisons may be expressed as ^ mutual fund
rankings prepared by Lipper Analytical Services, Inc. (Lipper ^), an
independent service located in Summit, New Jersey that monitors the
performance of mutual funds. ^ Lipper generally ranks funds on the basis
of total return, assuming reinvestment of distributions, but does not take
sales charges or redemption fees into consideration, and is prepared
without regard to tax consequences. Lipper may also rank funds based on
yield. In addition to the mutual fund rankings, the Fund's performance
may be compared to stock, bond, and money market mutual fund performance
indices prepared by Lipper or other organizations. When comparing these
indices, it is important to remember the risk and return characteristics
of each type of investment. For example, while stock mutual funds may
offer higher potential returns, they also carry the highest degree of
share price volatility. Likewise, money market funds may offer greater
stability of principal, but generally do not offer the higher potential
returns from stock mutual funds ^.
- 16 -
<PAGE>
From time to time,^ the Fund's performance may also ^ be compared
to other mutual ^ funds tracked by financial or business publications and
periodicals. For example, the Fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating service
that rates mutual funds on the basis of ^ risk-adjusted performance.
Rankings that compare the performance of Fidelity funds to one another in
appropriate categories over specific periods of time may also be quoted in
advertising.
The Fund may be compared in advertising to Certificates of
Deposit (CDs) or other investments issued by banks or other depository
institutions. Mutual funds differ from bank investments in several
respects. For example, the Fund may offer greater liquidity or higher
potential returns than CDs, the Fund does not guarantee your principal or
your return, and Fund shares are not FDIC-insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires designed
to help create a personal financial profile; worksheets used to project
savings needs based on assumed rates of inflation and hypothetical rates
of return; and action plans offering investment alternatives. Materials
may also include discussions of Fidelity's asset allocation funds and
other Fidelity funds, products and services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States, including
common stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is
based on the returns of different indices.
Fidelity funds may use the performance of these capital markets
in order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to
those of the funds. Ibbotson calculates total returns using the same
method as the funds. The funds may also compare performance to that of
other compilations or indices that may be developed and made available in
the future.
- 17 -
<PAGE>
The Fund may compare its performance or the performance of
securities in which it may invest to averages published by IBC USA
(Publications), Inc. of Ashland, Massachusetts. These averages assume
reinvestment of distributions. The IBC/Donoghue's MONEY FUND
AVERAGES /Tax-Exempt, which is reported in the MONEY FUND REPORT , covers
over ____ tax-exempt money market funds.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college or other
goals; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services and
products. Fidelity may also reprint, and use as advertising and sales
literature, articles from Fidelity Focus, a quarterly magazine provided
free of charge to Fidelity fund shareholders.
The Fund may reference and discuss its Fund number, Quotron number, and
CUSIP number, and discuss or quote its current portfolio manager in
advertising.
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 Fund's NAV. Shareholders receiving securities or
other property on redemption may realize a gain or loss for tax purposes,
and will incur any costs of sale, as well as the associated
inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act (the Rule), ^ the Fund
is required to give shareholders at least 60 days' notice prior to
terminating or modifying its exchange privilege. Under the Rule, the
60-day notification requirement may be waived if (i) the only effect of a
modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the Fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
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<PAGE>
^ In the prospectus, the Fund has notified shareholders that it
reserves the right at any time without prior notice to refuse exchange
purchases by any person or group if, in FMR's judgment, the Fund would be
unable to invest effectively in accordance with its investment objective
and policies or might otherwise 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 the Fund will not normally qualify for
the dividends-received deduction available to corporations, since the
Fund's income is primarily derived from tax-exempt interest income and
short-term capital gains. Depending upon state law, a portion of the
Fund's dividends attributable to tax-exempt interest earned on ^
obligations issued by that state may be exempt from state and local
taxation. The Fund will provide information on the portion of its
dividends, if any, that qualify for this exemption.
CAPITAL GAIN DISTRIBUTIONS: The Fund 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 Fund does not anticipate earning long-term
capital gains on securities held by the portfolio.
TAX STATUS OF FUND: The Fund has qualified and intends to
continue to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986 (the "Code"), as amended, so that the Fund will not
be liable for federal income or excise taxes on net investment income or
capital gains to the extent that these are distributed to shareholders in
accordance with applicable provisions of the Code. In order for the Fund
to distribute its tax-exempt interest as exempt-interest dividends, the
Fund must hold at least 50% of its total assets in tax-exempt obligations
at the end of each fiscal quarter. Because the Fund intends to invest
substantially all of its assets in tax-exempt obligations, the Fund
expects to comply with the 50% asset test.
The Fund purchases municipal obligations based on the opinions of
counsel regarding the federal income tax status of the obligations. These
opinions generally will be based upon covenants by the issuers regarding
continuing compliance with federal tax requirements. If the issuer of an
obligation fails to comply with its covenants at any time, interest on the
obligation could become federally taxable retroactive to the date the
obligation was issued.
FMR
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<PAGE>
All of the stock of FMR is ^ owned ^ by FMR Corp., ^ its ultimate
parent company organized in 1972. Through ownership of voting common
stock and the execution of a shareholders' voting agreement, Edward C.
Johnson, 3d, Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: Fidelity Service
Company (Service), which is the transfer and shareholder servicing agent
for certain of the funds advised by FMR; Fidelity Investments
Institutional Operations Company (FIIOC), which performs shareholder
servicing functions for certain institutional customers; and Fidelity
Investments Retail Marketing Company, which provides marketing services to
various companies within the Fidelity organization.
^
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Trustees and
officers elected or appointed prior to the Fund's conversion to a Delaware
business trust served the Massachusetts business trust in identical
capacities. All persons named as Trustees serve in similar capacities for
other funds advised by FMR. Unless otherwise noted, the business address
of each Trustee and officer is 82 Devonshire Street, Boston, Massachusetts
02109, which is also the address of FMR. Those Trustees who are
"interested persons" (as defined in the ^ 1940 Act) by virtue of their
affiliation with either the Fund or FMR, are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR
Texas Inc. (1989), Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc. and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994,
he was President of Greenhill Petroleum Corporation (petroleum exploration
and production, 1990). ^ Until March 1990, Mr. Cox was President and
Chief Operating Officer of Union Pacific Resources Company (exploration
and production). He is a Director of ^ Sanifill Corporation ^
(non-hazardous waste, 1993) and CH2M Hill Companies (engineering). In
addition, he served on the Board of Directors of the Norton Company
(manufacturer of industrial devices, 1983- 1990) and continues to serve on
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<PAGE>
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, 340 E. 64th Street #22C, New York, 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 ^ is a member of
the ^ President's Advisory Council of The University of Vermont School of
Business Administration^.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He
is currently a Director of Mechanics Bank and a Trustee of College of the
Holy Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, ^ 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief
Executive Officer of LTV Steel Company. Prior to May 1990, he was
Director of National City Corporation (a bank holding company) and
National City Bank of Cleveland. He is a Director of TRW Inc. (original
equipment and replacement products), Cleveland-Cliffs Inc (mining), NACCO
Industries, Inc. (mining and marketing), Consolidated Rail Corporation,
Birmingham Steel Corporation^, Hyster-Yale Materials Handling, Inc.
(1989), and RPM, Inc. (manufacturer of chemical products, 1990). In
addition, he serves as a Trustee of First Union Real Estate Investments;
Chairman of the Board of Trustees and a member of the Executive Committee
of the Cleveland Clinic Foundation, a Trustee and a member of the
Executive Committee of University School (Cleveland), and a Trustee of
Cleveland Clinic Florida.
DONALD J. KIRK, ^ 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor ^ at Columbia University Graduate School of
Business and a financial consultant. Prior to 1987, he was Chairman of
the Financial Accounting Standards Board. Mr. Kirk is a Director of
General Re Corporation (reinsurance)^, and Valuation Research Corp.
(appraisals and valuations, 1993). In addition, he serves as Vice
Chairman of the Board of Directors of the National Arts Stabilization Fund
and Vice Chairman of the Board of Trustees of the Greenwich Hospital
Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR ^(a position he held until March 31,
1991); Vice President of Fidelity Magellan Fund and FMR Growth Group
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<PAGE>
Leader; and Managing Director of FMR Corp. Mr. Lynch was also Vice
President of Fidelity Investments Corporate Services (1991-1992). He is a
Director of W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen
Corporation (engineering and construction^). In addition, he serves as a
Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic
Deerfield (1989) and Society for the Preservation of New England
Antiquities, and as an Overseer of the Museum of Fine Arts of Boston
(1990).
^
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989),
is Chairman of G.M. Management Group (strategic advisory services). Prior
to his retirement in July 1988, he was Chairman and Chief Executive
Officer of Leaseway Transportation Corp. (physical distribution services).
Mr. McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. ^(air conditioning and refrigeration,
1989), ^ Commercial InterTech Corp. (water treatment equipment, 1992), and
Associated States Realty Corporation (a real estate investment trust,
1993). In addition, he serves as a Director for United Way Services of
Greater Cleveland, a member of the Executive Committee of the Weatherhead
School of Management, and as a Trustee of The Center for Economic
Education.
EDWARD H. MALONE, 5601 Turtle Bay Drive Apt. 2104, Naples, FL, Trustee^.
Prior to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer).
^ In addition, he serves as Trustee of Corporate Property Investors, the
EPS Foundation at Trinity College, the Naples Philharmonic Center for the
Arts and Rensselaer Polytechnic Institute, and he is a member of the
Advisory Boards of Butler Capital Corporation Funds and Warburg, Pincus
Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri- State United
Way (1993) and is a member of the University of Alabama President's
Cabinet (1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee^, is President of The Wales Group, Inc. (management and financial
- 22 -
<PAGE>
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).
FRED L. HENNING, JR., Vice President (1994), is Vice President of
Fidelity's money market funds and Senior Vice President of FMR Texas Inc.
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
Distributors.
THOMAS D. MAHER, Assistant Vice President (1990), is Assistant Vice
President of Fidelity's money market funds and Vice President and
Associate General Counsel of FMR Texas Inc. (1990).
SARAH ZENOBLE, Vice President (1993) of the Fund and other funds advised
by FMR and is an employee of FMR.
Under a retirement plan that became effective on November 1,
1989, Trustees, upon reaching age 72, become eligible to participate in a
defined benefit retirement program under which they receive payments
during their lifetime from the ^ Fund, based on their basic trustee fees
and length of service. Currently, Messrs.^ William R. Spaulding, Bertram
H. Witham, and David L. Yunich participate in the program. On October 31,
^ 1994 the Trustees and officers of the Fund owned in aggregate less than
1% of its outstanding shares.
MANAGEMENT CONTRACT
The Fund employs FMR to furnish investment advisory and other
services to the Fund. Under its Management Contract with the Fund last
approved by shareholders at their October 23, 1991 meeting, FMR acts as
investment adviser and shall, subject to the supervision of the Board of
Trustees, direct the investments of the Fund in accordance with its
investment objective, policies, and limitations.
- 23 -
<PAGE>
FMR also provides the Fund with all necessary office facilities
and personnel for servicing the Fund's investments, and compensates all
officers of the Fund, all Trustees who are " interested persons" of the
Fund and FMR, and of all personnel of the Fund or FMR performing services
relating to research, statistical and investment activities. In addition,
FMR or its affiliates, subject to the supervision of the Board of
Trustees, provide the management and administrative services necessary for
the operation of the Fund. These services include providing facilities
for maintaining the Fund's organization, supervising relations with
custodians, transfer and pricing agents, accountants, underwriters and
other persons dealing with the Fund, preparing all general shareholder
communications and conducting shareholder relations, maintaining the
Fund's records and the registration of the Fund's shares under federal and
state laws, developing management and shareholder services for the Fund
and furnishing reports, evaluations and analyses on a variety of subjects
to the Trustees.
For these services, the Fund pays FMR a monthly management fee at
the annual rate of .50% of the average net assets of the Fund throughout
the month. For the fiscal years ended October 31, 1994, 1993, and 1992, ^
FMR received fees amounting to $_________, $2,524,338 ^ and $2,009,696 ^,
respectively, from the Fund.
Effective October 14, 1988, FMR voluntarily agreed to reimburse
the Fund to the extent that its aggregate operating expenses, including
management fees, were in excess of an annual rate of .65% of average net
assets. [During the year ended October 31, ^ 1994, aggregate operating
expenses did not exceed the annual rate of .65% of the Fund's average net
assets.]
In addition to the management fee payable to FMR and the fees
payable to United Missouri ^(see below) the Fund pays all its expenses,
without limitation, including the typesetting, printing and mailing of its
proxy material to shareholders, legal expenses and the fees of the
custodian, auditor and non- interested Trustees. Effective June 1, 1989,
FIIOC has assumed payment of expenses of typesetting, printing and mailing
of Prospectuses and ^ SAIs and reports to existing shareholders. There is
no assurance that such an arrangement will continue beyond the terms of
the Fund's current transfer agent agreement (see "Interests of FMR
Affiliates" below). Other charges paid by the Fund include interest,
taxes, brokerage commissions, the Fund's proportionate share of insurance
premiums and Investment Company Institute dues, and the costs of
registering shares under federal and state securities laws. The Fund is
also liable for such nonrecurring expenses as may arise, including costs
of litigation to which the Fund is a party, and any obligation it may have
to indemnify its officers and Trustees with respect to litigation.
To comply with the California Code of Regulations, FMR will
reimburse the Fund if and to the extent that the Fund's aggregate annual
operating expenses exceed specified percentages of its average net assets.
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<PAGE>
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 the Fund's expenses for purposes of this
regulation, the Fund may exclude interest, taxes, brokerage commissions,
and extraordinary expenses, as well as a portion of its distribution plan
expenses.
SUB-ADVISOR. FMR has entered into a sub-advisory agreement with
FMR Texas ^ pursuant to which FMR Texas has primary responsibility for
providing portfolio investment management services to the Fund.
Under the sub-advisory agreement, FMR pays FMR Texas fees equal
to 50% of the management fee retained by FMR under its ^ Management
Contract with the Fund, after payments by FMR pursuant to the Fund'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 years ended October 31, 1994, 1993, and 1992, ^ FMR paid
FMR Texas fees that amounted to $__________, $553,772, and $430,834 ^,
respectively.
INTEREST OF FMR AFFILIATES
United Missouri is the Fund's custodian and transfer agent.
United Missouri has entered into a sub-contract with FIIOC, an affiliate
of FMR, under the terms of which FIIOC performs the processing activities
associated with providing transfer agent and shareholder servicing
functions for the Fund. Under the sub- contract, FIIOC bears the expense
of typesetting, printing, and mailing prospectuses, statements of
additional information, and all other reports, notices, and statements to
shareholders, except proxy statements. FIIOC also pays all out-of-pocket
expenses associated with transfer agent services. These fees and charges
are subject to annual cost escalation based on postal rate changes and
changes in wage and price levels as measured by the National Consumer
Price Index for Urban Areas.
United Missouri pays FIIOC per account fees and monetary
transactions charges of $65 and $14, respectively, or $60 and $12,
respectively, depending on the nature of services provided.
Prior to February 1992, State Street Bank and Trust Company
(State Street) served as the Fund's custodian and transfer agent and also
sub-contracted with FIIOC to perform the processing activities associated
with providing transfer agent and shareholder servicing functions for the
Fund. FIIOC was compensated by State Street on the same basis as it is
currently compensated by United Missouri (although FIIOC assumed payment
of out-of-pocket expenses).
Transfer agent fees, including reimbursement for out-of- pocket
expenses, paid to FIIOC for the fiscal years ended October 31, 1994, 1993,
and 1992 ^ were $________, $280,752 ^ and $153,873, ^ respectively.
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<PAGE>
United Missouri has an additional sub-contract with Service,
pursuant to which Service performs the calculations necessary to determine
the Fund's ^ NAV and dividends and maintains the Fund's accounting
records. The annual fee rates for these pricing and bookkeeping services
are based on the Fund'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.
Prior to February 1992, State Street sub-contracted with Service
for pricing and bookkeeping services. Service was compensated for these
services by State Street on the same basis as it is currently compensated
by United Missouri.
Pricing and bookkeeping fees, including reimbursement for
out-of-pocket expenses, paid to Service for the fiscal years ended 1994,
1993, and 1992 ^ were $________, $107,107 ^ and $96,167, ^ respectively.
^ United Missouri^ is entitled to reimbursement from ^ FMR for
fees paid to FIIOC or Service, which must bear these costs pursuant to its
Management Contract with the Fund.
The Fund has a distribution agreement with Distributors, a
Massachusetts corporation organized on July 18, 1960. Distributors is a
broker-dealer registered under the Securities Exchange Act of 1934 and is
a member of the National Association of Securities Dealers, Inc. The
distribution agreement calls for Distributors to use all reasonable
efforts, consistent with its other business, to secure purchasers for
shares of the Fund, which are continuously offered at ^ NAV. Promotional
and administrative expenses in connection with the offer and sale of
shares are paid by FMR.
DISTRIBUTION AND SERVICE PLAN
The Trustees of the Fund ^ have adopted a Distribution and
Service Plan (the Plan) ^ 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 Plan prior to its
approval and have determined that there is a reasonable likelihood that
the Plan will benefit the Fund and its shareholders. In particular, the
Trustees voted that payments under the plan may provide additional
incentives to promote the sale of shares of the Fund, which may result in
sales of such shares and an increase in the assets of the Fund.
The ^ Plan ^ requires FMR to make payments to certain third
parties ^(Investment Professionals), other than Distributors, for
assistance in selling shares of the Fund or for providing shareholder
support services. The Plan authorizes FMR to make such payments from its
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<PAGE>
management ^ fees, its past profits or any other source available to it;
provided that such payments cannot exceed the amount of the Fund's
management fee. The maximum amount payable to ^ Investment Professionals
under the Plan, as determined by the Board of Trustees, is currently at
the annual rate of .38% of the average net asset value of the ^ shares of
the Fund to which that ^ Investment Professional is related. The
percentage amount payable varies according to the aggregate dollar level
of assets to which ^ an Investment Professional is related in the Fund, in
U.S. Treasury Portfolio (Initial Shares) or in Money Market Portfolio,
other funds advised by FMR.
^ INVESTMENT PROFESSIONALS. Investment Professionals 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 the
Plan, payments may be made to ^ Investment Professionals with respect to ^
shares to which the ^ Investment Professional is related, that is, shares
owned by shareholders for whom the ^ Investment Professional is the dealer
of record or holder of record, the investment adviser, or a custodian; for
whom the ^ Investment Professional was instrumental in the purchase of
shares; or with whom the ^ investment adviser has a servicing
relationship. Should a shareholder cease to be a client of ^ an
Investment Professional , but continue to hold shares of the Fund, the ^
Investment Professional would no longer be entitled to payments under the
Plan.
Functions of ^ Investment Professionals may include, among other
things, services rendered in the distribution of Fund shares, answering
routine client inquiries regarding the Fund, providing necessary
facilities and personnel to establish and ^ mintain 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 Fund may reasonably request, to the extent the ^
Investment Professional is permitted to do so by applicable statute, rule
or regulation. The Plan also permits ^ Investment Professionals to pay
the costs of advertising, implementing activities under the Plan, and
printing and distributing Prospectuses, ^ SAIs and sales literature to
prospective investors.
The fees to be paid to ^ Investment professionals, 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 Plan or
any related agreements (the Independent Trustees) may at any time and from
time to time decrease the ^ meximum percnetage amount and/or maximum total
amount payable to ^ Investment Professionals with respect to the shares to
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<PAGE>
which they are related, or remove any person as ^ an Investment
Professional. Amounts payable under the Plan are payable to Distributors,
which pays such amounts to the ^ Investment Professionals. A report of
amounts expended under the Plan must be made to the Board of Trustees at
least quarterly.
The ^ Plan, as amended, was last approved by shareholders on
October 23, 1991.
The Glass-Steagall Act ^ generaly 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 a bank from
^ being paid for shareholder servicing and recordkeeping functions as ^
an Investment Professional. Distributors will engage banks as ^
Investment Professionals 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 Fund 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 Fund may execute protfolio transactions
with and purchase securities issued by depository institutions that act as
Investment Professionals. No preference will be shown for the instruments
of depository institutions acting as Investment Professionals under the
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. Daily Tax-Exempt Money Fund is an open- end
management investment company organized as a Delaware business trust.
Originally the Fund was organized as a Massachusetts business trust by a
Declaration of Trust dated July 16, 1982, amended and restated November 1,
1989. The Delaware Trust (established on June 20, 1991) acquired all of
the assets of the Massachusetts trust and succeeded to the latter's name
and operations on December 30,1991 pursuant to a plan approved by ^
shareholders on October 23, 1991. Currently, the Fund is the only
portfolio of the Delaware trust, although the Trust Instrument permits the
Trustees to create additional portfolios.
- 28 -
<PAGE>
SHAREHOLDER AND TRUSTEE LIABILITY. The Fund is a business trust
organized under Delaware law. Delaware law provides that shareholders
shall be entitled to the same limitations of personal liability extended
to stockholders of private corporations for profit. The courts of some
states, however, may decline to apply Delaware law on this point. The
Trust Instrument contains an express disclaimer of shareholder liability
for the debts, liabilities, obligations, and expenses of the Fund and
requires that a disclaimer be given in each contract entered into or
executed by the Fund or the Trustees. The Trust Instrument provides for
indemnification out of the Fund's property of any shareholder or former
shareholder held personally liable for the obligations of the Fund. The
Trust Instrument also provides that the Fund shall, upon request, assume
the defense of any claim made against any shareholder for any act or
obligation of the Fund and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which Delaware law does not
apply, no contractual limitation of liability was in effect, and the Fund
is unable to meet its obligations. FMR believes that, in view of the
above, the risk of personal liability to shareholders is extremely
remote.
The Trust Instrument further provides that the Trustees, if they
have exercised reasonable care, shall not be personally liable to any
person other than the Fund or its shareholders; moreover, the Trustees
shall not be liable for any conduct whatsoever, provided that ^ Trustees
are not protected against any liability to which ^ they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of ^ their
office.
VOTING RIGHTS. The Fund's capital consists of shares of
beneficial interest. The shares have no preemptive or conversion rights;
the voting and dividend rights, the right of redemption, and the privilege
of exchange are described in the Prospectus. Shares are fully paid and
nonassessable, except as set forth under the heading "Shareholder and
Trustee Liability" above. Shareholders representing 10% or more of the
Fund may, as set forth in the Trust Instrument, call meetings of the Fund
for any purpose related to the Fund, ^ including ^ the purpose of voting
on removal of one or more Trustees.
The Fund may be terminated upon the sale of its assets to, or
merger with, another open-end management investment company or series
thereof, or upon liquidation and distribution of its assets. Generally
such terminations must be approved by vote of the holders of a majority of
the outstanding shares of the Fund^ ; 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
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<PAGE>
reorganized, the Fund will continue indefinitely. ^ Under the Trust
Instrument, the Trustees may, without shareholder vote, cause the Fund to
merge or consolidate into one or more Fund partnerships or corporations or
cause the Fund to be incorporated under Delaware law, so long as the
surviving entity is an open-end management investment company that will
succeed to or assume the Fund registration statement. The Fund may also
invest all of its assets in another investment company.
As of ^ November __, 1994, the following owned of record or
beneficially 5% or more of the outstanding shares of the Fund: UPDATE:
[Texas Commerce Bank, N.A., Houston, TX, 16.6%; Barnett Bank of
Jacksonville, N.A., Jacksonville, FL, 10.2%; First National Bank of
Commerce, New Orleans, LA, 7.9%; Bankers Trust Company, New York, NY,
7.6%; and First National Bank of Maryland, Baltimore, MD, 5.24%.]
CUSTODIAN. United Missouri ^, 1010 Grand Avenue, Kansas City,
MO, is custodian of the Fund's assets. 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 Fund's investment policies 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 Trust'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. ^_______________________________________________ serves
as the Fund's independent accountant. The auditor examines financial
statements for the Fund and provides other audit, tax, and related
services.
- 30 -
<PAGE>
APPENDIX
The descriptions that follow are examples of eligible ratings for
the Fund. The Fund may, however, consider the ratings of 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 rated Prime-1 are judged to be of the highest quality.
Their short-term obligations carry the smallest degree of investment risk.
Margins of support for current indebtedness are large or stable with cash
flow and asset protection well assured. Current liquidity provides ample
coverage of near-term liabilities and unused alternative financing
arrangements generally are available. While protective elements may
change over the intermediate or long term, such changes are most unlikely
to impair the fundamentally strong position of short- term obligations.
PRIME-2 - Issuers rated Prime-2 are judged to be high quality and 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 RATINGS OF MUNICIPAL
NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable
rate obligations). This distinction is in recognition of the difference
between short-term credit risk and long-term credit risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements
are critical in short- term ratings, while other factors of major
importance in bond risk, long-term secular trends for example, may be less
important in the short run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support,
or demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
Aaa - Bonds which are rated Aaa are judged to be of the highest quality.
They carry the smallest degree of investment risk and generally are
referred to as "gilt edge." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
- 31 -
<PAGE>
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S 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 ^ STATE AND MUNICIPAL NOTE
RATINGS:
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA--Debt rated AAA has the highest rating assigned by Standard and Poor's
to a debt obligation. Capacity to pay interest and repay principal are
extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in a small
degree.
- 32 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 21 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston, Massachusetts on the 20th day of October 1994.
FIDELITY DAILY TAX-EXEMPT MONEY FUND
By /s/Edward C. Johnson 3d +
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
------------ ------- ------
/s/Edward C. Johnson 3d+ President and Trustee October , 1994
Edward C. Johnson 3d (Principal Executive
Officer)
/s/Gary L. French Treasurer October , 1994
Gary L. French
/s/J. Gary Burkhead Trustee October , 1994
J. Gary Burkhead
/s/Ralph F. Cox * Trustee October , 1994
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee October , 1994
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee October , 1994
Richard J. Flynn
/s/E. Bradley Jones * Trustee October , 1994
E. Bradley Jones
/s/Donald J. Kirk * Trustee October , 1994
Donald J. Kirk
/s/Peter S. Lynch * Trustee October , 1994
Peter S. Lynch
/s/Edward H. Malone * Trustee October , 1994
Edward H. Malone
/s/Marvin L. Mann* Trustee October , 1994
Marvin L. Mann
/s/Gerald C. McDonough* Trustee October , 1994
Gerald C. McDonough
<PAGE>
(Signature) (Title) (Date)
------------ ------- ------
/s/Thomas R. Williams * Trustee October , 1994
Thomas R. Williams
+ Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
* Signature affixed by Dana L. Platt pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
<PAGE>
POWER OF ATTORNEY
-----------------
We, the undersigned Directors, Trustees or General Partners, as
the case may be, of the following investment companies:
Daily Money Fund Fidelity Institutional Tax-Exempt Cash
Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Fidelity Municipal Trust II
Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Fidelity Union Street Trust II
Portfolios
in addition to any other investment company for which Fidelity Management
& Research Company acts as investment adviser and for which the
undersigned individual serves as a Director, Trustee or General Partner
(collectively, the "Funds"), hereby severally constitute and appoint
Arthur J. Brown, Arthur C. Delibert, Robert C. Hacker, Richard M.
Phillips, Dana L. Platt and Stephanie Xupolos, each of them singly, my
true and lawful attorney-in-fact, with full power of substitution, and
with full power to each of them, to sign for me and my name in the
appropriate capacities any Registration Statements of the Funds on Form
N-1A or any successor thereto, any and all subsequent Pre-Effective
Amendments or Post-Effective Amendments to said Registration Statements on
Form N-1A or any successor thereto, any Registration Statements on Form
N-14, and any supplements or other instruments in connection therewith,
and generally to do all such things in my name and behalf in connection
therewith as said attorneys-in-fact deem necessary or appropriate, to
comply with the provisions of the Securities Act of 1933 and Investment
Company Act of 1940, and all related requirements of the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact or their substitutes may do or cause to be done by virtue
hereof.
WITNESS our hands on this twentieth day of October, 1993.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
---------------------- -----------------
Edward C. Johnson 3d Donald J. Kirk
DC-142735.3
<PAGE>
/s/J. Gary Burkhead /s/Peter S. Lynch
------------------- ------------------
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Marvin L. Mann
--------------- -----------------
Ralph F. Cox Marvin L. Mann
/s/Phyllis Burke Davis /s/Edward H. Malone
---------------------- -------------------
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
------------------- ----------------------
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
------------------- ---------------------
E. Bradley Jones Thomas R. Williams
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned President and Director, Trustee or General
Partner, as the case may be, of the following investment companies:
Daily Money Fund Fidelity Institutional Tax-Exempt
Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors
Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Fidelity Municipal Trust II
Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Fidelity Union Street Trust II
Portfolios
in addition to any other investment company for which Fidelity Management
& Research Company acts as investment adviser and for which the
undersigned individual serves as President and Board Member (collectively,
the "Funds"), hereby severally constitute and appoint J. Gary Burkhead, my
true and lawful attorney-in-fact, with full power of substitution, and
with full power to sign for me and in my name in the appropriate capacity
any Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Pre-Effective Amendments or
Post-Effective Amendments to said Registration Statements on Form N-1A or
any successor thereto, any Registration Statements on Form N-14, and any
supplements or other instruments in connection therewith, and generally to
do all such things in my name and behalf in connection therewith as said
attorney-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and Investment Company Act of
1940, and all related requirements of the Securities and Exchange
Commission. I hereby ratify and confirm all that said attorneys-in-fact
or their substitutes may do or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d October 20, 1993
Edward C. Johnson 3d
DC-142734.3
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) ^ Audited financial Statements and financial highlights for the
Fund for the fiscal year ended October 31, ^ 1994 will be filed
by subsequent amendment.
(b) Exhibits:
(1) (a) Trust Instrument for Daily Tax-Exempt Money Fund II,
dated June 20, 1991, ^ is incorporated herein by
reference to Exhibit 1(a) to ^ Post-Effective Amendment
No. ^ 20.
(b) Certificate of Trust for Daily Tax-Exempt Money Fund II,
dated June 20, 1991, is incorporated herein by reference
to Exhibit 1(b) to Post-Effective Amendment No. 17.
(2) (a) ByLaws of the ^ Trust are incorporated herein by
reference to Exhibit 2(a) to Post-Effective Amendment No.
^ 20.
(3) None.
(4) Not applicable.
(5) (a) Form of Management Contract, dated December 30, 1991,
between Daily Tax-Exempt Money Fund II and Fidelity
Management & Research Co. is incorporated herein by
reference to Exhibit 5(a) to Post-Effective Amendment No.
17.
(b) Form of Sub-Advisory Agreement dated December 30, 1991,
between Fidelity Management & Research Co. and FMR Texas
Inc. (with respect to Daily Tax-Exempt Money Fund II) is
incorporated herein by reference to Exhibit 5(b) to
Post-Effective Amendment No. 17.
(6) (a) Form of General Distribution Agreement dated December 30,
1991, between Daily Tax-Exempt Money Fund II and Fidelity
Distributors Corporation is incorporated herein by
reference to Exhibit 6(a) to Post-Effective Amendment No.
17.
(7) Retirement Plan for Non-Interested Person ^ Trustees; Retirement
Plan, Directors or General Partners, effective November 1, 1989,
DC-147358.2 Comparison DC-160830.2 to DC-160830.1
<PAGE>
Daily Tax-Exempt Money Fund
is incorporated herein by reference to Exhibit 7 to
Post-Effective Amendment No. 17.
(8) (a) Custodian Agreement, dated July 18, 1991, between Daily
Tax-Exempt Money Fund and United Missouri Bank, N.A.
^("United Missouri") is incorporated herein by reference
to Exhibit 8(a) to Post-Effective Amendment No. 18.
(9) (a) Amended Transfer Agent Agreement, dated December 30,
1991, between Daily Tax-Exempt Money Fund II, United
Missouri, and Fidelity Management & Research ^ Co. is
incorporated herein by reference to Exhibit 9(a) to
Post-Effective Amendment No. 20.
(b) Schedule A to the Amended Transfer Agent Agreement for
Daily Tax-Exempt Money Fund II, dated January 1, 1993, is
^ incorporated herein ^ by reference to Exhibit 9(b) to
Post-Effective Amendment No. 20.
(c) Form of Appointment of Sub-Transfer Agent for Daily Tax-
Exempt Money Fund II, dated December 30, 1991, is
incorporated herein by reference to Exhibit 9(c) to
Post-Effective Amendment No. 17.
(d) Form of Amended Service Agent Agreement, dated December
30, 1991, between Daily Tax-Exempt Money Fund, United
Missouri, and Fidelity Management & Research Co. is
incorporated herein by reference to Exhibit 9(d) to
Post-Effective Amendment No. 17.
(e) Schedules B and C to the Amended Service Agreement for
Daily Tax-Exempt Money Fund II, dated December 30, 1991,
are ^ incorporated herein ^ by reference to Exhibit 9(e)
to Post-Effective Amendment No. 20.
(f) Form of Appointment of Sub-Servicing Agent for Daily
Tax-Exempt Money Fund II, dated December 30, 1991, is
incorporated herein by reference to Exhibit 9(f) to
Post-Effective Amendment No. 17.
(10) Not applicable.
(11) ^ Not applicable.
(12) None.
(13) None.
- 2 -
<PAGE>
Daily Tax-Exempt Money Fund
(14) Not applicable.
(15) (a) Form of Service Plan pursuant to Rule 12b-1 for Daily
Tax-Exempt Money Market Fund II is incorporated herein by
reference to Exhibit 15(a) to Post-Effective Amendment
No. 17.
(b) Form of Agreement with Qualified Recipients is
incorporated herein by reference to Exhibit 15(b) to
Post-Effective Amendment No. 1.
(16) Schedule for computation of performance quotations is
incorporated herein by reference to Exhibit
16 to Post-Effective Amendment No. 17.
(17) To be filed by subsequent amendment.
Item 25. Persons Controlled by or under Common Control with
Registrant
The Board of Trustees of Registrant is the same as the Board of
Trustees of other funds advised by FMR, each of which has Fidelity
Management and Research Company as its investment adviser. In addition,
the officers of these funds are substantially identical. Nonetheless,
Registrant takes the position that it is not under common control with
these other funds since the power residing in the respective boards and
officers arises as the result of an official position with the respective
funds.
Item 26. Number of Holders of Securities
October 31, ^ 1994
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Daily Tax-Exempt Money Fund [1,505] update
Item 27. Pursuant to Del. Code Ann. title 12 Section 3817, a
Delaware business trust may provide in its governing instrument for the
indemnification of its officers and trustees from and against any and all
claims and demands whatsoever. Article X, Section 10.02 of the
Declaration of Trust states that the Registrant shall indemnify any
present trustee or officer to the fullest extent permitted by law against
liability, and all expenses reasonably incurred by him or her in
connection with any claim, action, suit or proceeding in which he or she
is involved by virtue of his or her service as a trustee, officer, or
both, and against any amount incurred in settlement thereof.
Indemnification will not be provided to a person adjudged by a court or
- 3 -
<PAGE>
Daily Tax-Exempt Money Fund
other adjudicatory body to be liable to the Registrant or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties (collectively, "disabling conduct"), or not
to have acted in good faith in the reasonable ^ belief that his or her
action was in the best interest of the Registrant. In the event of a
settlement, no indemnification may be provided unless there has been a
determination, as specified in the Declaration of Trust, that the officer
or trustee did not engage in disabling conduct.
Pursuant to Section 11 of the Distribution Agreement, the
Registrant agrees to indemnify and hold harmless the Distributor and each
of its directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information, shareholder
reports or other information filed or made public by the Registrant
included a materially misleading statement or omission. However, the
Registrant does not agree to indemnify the Distributor or hold it harmless
to the extent that the statement or omission was made in reliance upon,
and in conformity with, information furnished to the Registrant by or on
behalf of the Distributor. The Registrant does not agree to indemnify the
parties against the liability to which they would be subject by reason of
their own disabling conduct.
Pursuant to the agreement by which Fidelity Service Company
("Service") is appointed sub-transfer agent, the Transfer Agent agrees to
indemnify Service for its losses, claims, damages, liabilities and
expenses to the extent the Transfer Agent is entitled to and receives
indemnification from the Registrant for the same events. Under the
Transfer Agency Agreement, the Registrant agrees to indemnify and hold the
Transfer Agent harmless against any losses, claims, damages, liabilities,
or expenses resulting from:
(1) any claim, demand, action or suit brought by any person
other than the Registrant, which names the Transfer Agent and/or the
Registrant as a party and is not based on and does not result from the
Transfer Agent's willful misfeasance, bad faith, negligence or reckless
disregard of its duties, and arises out of or in connection with the
Transfer Agent's performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent
contributed to by the Transfer Agent's willful misfeasance, bad faith,
negligence or reckless disregard of its duties) which results from the
negligence of the Registrant, or from the Transfer Agent's acting upon an
instruction(s) reasonably believed by it to have been executed or
communicated by any person duly authorized by the Registrant, or as a
result of the Transfer Agent's acting in reliance upon any instrument or
stock certificate reasonably believed by it to have been genuine and
signed, countersigned or executed by the proper person.
- 4 -
<PAGE>
Daily Tax-Exempt Money Fund
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during
the past two fiscal years, the following positions of a substantial
nature.
Chairman of the Executive Committee of FMR;
Edward C. Johnson 3d President and Chief Executive Officer of FMR Corp.;
Chairman of the Board and a Director of FMR, FMR
Corp., FMR Texas Inc.^, Fidelity Management &
Research (U.K.) Inc. and Fidelity Management &
Research (Far East) Inc.; President and Trustee of
funds advised by FMR;
President of FMR; Managing Director of FMR Corp.;
J. Gary Burkhead President and a Director of FMR Texas Inc.^,
Fidelity Management & Research (U.K.) Inc. and
Fidelity Management & Research (Far East) Inc.;
Senior Vice President and Trustee of funds advised
by FMR.
Peter S. Lynch Vice Chairman of FMR (1992).
David Breazzano Vice President of FMR (1993) and of a fund advised
by FMR.
Vice President of FMR (1993) .
Stephan Campbell
Dwight Churchill Vice President of FMR (1993).
Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by FMR;
Corporate Preferred Group Leader.
Will ^ Danoff Vice President of FMR (1993) and of a fund advised
by FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR (1990) and of a fund advised
by FMR.
- 5 -
<PAGE>
Daily Tax-Exempt Money Fund
Larry Domash Vice President of FMR (1993).
Vice President of FMR (1993) and of a fund advised
George Domolky by ^ FMR.
Vice President of FMR.
Robert K. Duby
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of ^ FMR.
Senior Vice President of FMR (1993) and of a fund
Richard B. Fentin advised by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Vice President of FMR ^ and Treasurer of the funds
Gary L. French advised by FMR^. Prior to assuming the position as
Treasurer he was Senior Vice President, Fund
Accounting - Fidelity Accounting & Custody Services
Co.
Vice President of FMR and of funds advised by ^
^ Michael S. Gray FMR.
Vice President of FMR (1993).
Lawrence Greenberg
Vice President of FMR and of a fund advised by FMR.
Barry A. Greenfield
William J. Hayes Senior Vice President of FMR^; Equity Division
Leader.
Vice President of FMR ^ and of funds advised by ^
Robert Haber FMR.
Senior Vice President of FMR (1993).
Richard Haberman
- 6 -
<PAGE>
Daily Tax-Exempt Money Fund
Vice President of FMR ^ and of a fund advised by
Daniel Harmetz FMR.
Ellen S. Heller Vice President of ^ FMR.
Vice President of FMR (1993) and of funds advised
John Hickling by FMR.
Vice President of FMR^; and Director of Technical
Robert F. Hill Research.
Treasurer and Vice President of FMR (1993);
Stephan ^ Jonas Treasurer of FMR Texas Inc. (1993), Fidelity
Management & Research (U.K.) Inc. (1993), and
Fidelity Management & Research (Far East) Inc.
(1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised
by FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High
Income ^ Division Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised
by FMR.
Bradford E. Lewis
Vice President of FMR (1991) and of funds advised
by ^ FMR.
Vice President of FMR (1993).
Malcolm W. McNaught III
- 7 -
<PAGE>
Daily Tax-Exempt Money Fund
Vice President of FMR and Director of Equity
Robert H. Morrison Trading.
Vice President of FMR ^ and of funds advised by ^
David Murphy FMR.
Vice President of FMR (1993).
Andrew Offit
Vice President of FMR (1993).
Judy Pagliuca
Vice President of ^ FMR.
Jacques Perold
Vice President of FMR ^ and of funds advised by ^
Anne Punzak FMR.
Vice President of FMR (1993).
Lee Sandwen
Vice President of FMR (1993) and of a fund.
Patricia A.
Satterthwaite
Vice President of FMR (1993).
Thomas T. Soviero
Vice President of FMR ^ and of funds advised by
Richard A. Spillane FMR; and Director of Equity ^ Research.
Senior Vice President of FMR (1993) and of funds
Robert E. Stansky advised by FMR.
Senior Vice President of FMR (1993); and
Thomas Steffanci Fixed-Income Division ^ Leader.
Vice President of FMR and of funds advised by FMR;
Gary L. Swayze and Tax-Free Fixed- Income Group ^ Leader.
Vice President of FMR (1993).
Thomas Sweeney
- 8 -
<PAGE>
Daily Tax-Exempt Money Fund
Vice President of FMR (1993) and of funds advised
Donald Taylor by FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds
advised by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised
by FMR.
Robert Tucket Vice President of FMR (1993).
Senior Vice President of FMR; Vice President of
George A. Vanderheiden funds advised by FMR; and Growth Group ^ Leader.
Senior Vice President of FMR (1993) and of a fund
Jeffrey Vinik advised by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Senior Vice President (1993), Clerk and General
Arthur S. Loring Counsel of FMR; Vice President, Legal of FMR Corp.;
and Secretary of funds advised by ^ FMR.
(2) FMR TEXAS INC. (FMR Texas)
FMR Texas provides investment advisory services to Fidelity
Management & Research Company. The directors and officers of the
Sub-Adviser have held the following positions of a substantial nature
during the past two fiscal years.
Edward C. Johnson 3d Chairman and Director of FMR Texas; Chairman of
the Executive Committee of FMR; President and
Chief Executive Officer of FMR Corp.; Chairman
of the Board and a Director of FMR, FMR Corp.,
Fidelity Management & Research (Far East) Inc.
and Fidelity Management & Research (U.K.) Inc.;
President and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Texas; President
of FMR; Managing Director of FMR Corp.;
President and a Director of Fidelity Management
& Research (Far East) Inc. and Fidelity
Management & Research (U.K.) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
- 9 -
<PAGE>
Daily Tax-Exempt Money Fund
Senior Vice President of FMR Texas; Money Market
Frederic L. Henning, ^ Division Leader.
Jr.
Vice President of FMR Texas ^(1993).
Robert Auld
Vice President of FMR Texas and of funds advised
Leland Barron by ^ FMR.
Vice President of FMR Texas and of funds advised
Robert Litterst by ^ FMR (1993).
Vice President of FMR Texas.
Thomas D. Maher
Vice President of FMR Texas and of funds advised
Burnell R. Stehman by ^ FMR.
Vice President of FMR Texas and of funds advised
John J. Todd by ^ FMR.
Vice President of FMR Texas and of funds advised
Sarah H. Zenoble by FMR.
Treasurer of FMR Texas Inc.(1993), Fidelity
Steven Jonas Management & Research (U.K.) Inc. ^ (1993),
Fidelity Management & Research (Far East) Inc.
^(1993); Treasurer and Vice President ^ of FMR
(1993).
Secretary of FMR Texas; Clerk of Fidelity
David C. Weinstein Management & Research (U.K.) Inc.; Clerk of
Fidelity Management & Research (Far East) Inc.
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as
distributor for most funds advised by FMR and the
following other funds:
- 10 -
<PAGE>
Daily Tax-Exempt Money Fund
CrestFunds, Inc.^
ARK Funds
(b)
Name^ and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and None
Treasurer
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be
maintained by Section 31a of the 1940 Act and the Rules promulgated
thereunder are maintained by Fidelity Management & Research Company or
Fidelity Service Co., 82 Devonshire Street, Boston, MA 02109, or the
fund's custodian United Missouri Bank, N.A., 1010 Grand Avenue, Kansas
City, MO.
Item 31. Management Services
Not applicable
Item 32. Undertakings
Not applicable
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