SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-78458)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 26 [X]
and
REGISTRATION STATEMENT (No. 811-3518)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [X]
Daily Tax-Exempt Money Fund
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-570-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b).
(X ) on (December 20, 1996) pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
( ) on ( ) pursuant to paragraph (a)(1) of Rule 485.
( ) 75 days after filing pursuant to paragraph (a)(2).
( ) on ( ) pursuant to paragraph (a)(2) 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 on December 18, 1996.
DAILY MONEY FUNDS
U.S. TREASURY PORTFOLIO - INITIAL CLASS
MONEY MARKET PORTFOLIO - INITIAL CLASS
DAILY TAX-EXEMPT MONEY MARKET FUND - INITIAL CLASS
CROSS REFERENCE SHEET
Form N-1A Item Number
Part A Prospectus Caption
1 Cover Page
2 Expenses
3 a Financial Highlights
b *
c Performance
d Performance
4 a(i) Charter
(ii) Investment Principles and Risks; Securities and Investment
Practices
b Securities and Investment Practices
c Who May Want To Invest; Investment Principals and Risks; Securities and
Investment Practices
5 a Charter
b(i) Cover Page; FMR and Its Affiliates
b(ii) FMR and Its Affiliates; Charter; Breakdown of Expenses
b(iii) Expenses; Breakdown of Expenses
c,d Cover Page; Charter; Breakdown of
Expenses; FMR and Its Affiliates
e Expenses
f Expenses
g Expenses; FMR and Its Affiliates
5A *
6 a(i) Charter
a(ii) How to Buy Shares; How to Sell Shares; Investor Services;
Transaction Details; Exchange Restrictions
a(iii) *
b FMR and Its Affiliates
c Exchange Restrictions
d Cover Page; Charter
e Cover Page; How to Buy Shares; How to Sell Shares; Investor Services;
Exchange Restrictions
f,g Dividends, Capital Gains, and Taxes
7 a Charter; Cover Page
b How to Buy Shares; Transaction Details
c How to Buy Shares; Transaction Details
d How to Buy Shares
e Transaction Details
f Expenses; Breakdown of Expenses
8 How to Sell Shares; Investor Services; Transaction Details; Exchange
Restrictions
9 *
*Not Applicable
DAILY MONEY FUNDS
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a copy of
a fund's most recent financial report and portfolio listing or a copy of
the Statement of Additional Information (SAI) dated December 20, 1996. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
available along with other related materials on the SEC's Internet Web site
(http:/www.sec.gov). The SAI is incorporated herein by reference (legally
forms a part of the prospectus). For a free copy of either document,
c ontact Fidelity Client Services at 1-800-843-3001, or your
investment professional.
INVESTMENTS IN THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT A FUND WILL MAINTAIN A
STABLE $1.00 SHARE PRICE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
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.
DMFI-pro-1296
U.S. TREASURY PORTFOLIO - INITIAL CLASS
(fund number 058)
MONEY MARKET PORTFOLIO - INITIAL CLASS
(fund number 083)
DAILY TAX-EXEMPT MONEY FUND - INITIAL CLASS
(fund number 084)
PROSPECTUS
DATED DECEMBER 20, 1996
AND
ANNUAL REPORT S
FOR THE PERIOD ENDING
OCTOBER 31, 1996(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
PROSPECTUS
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KEY FACTS WHO MAY WANT TO INVEST
EXPENSES Initial Class's yearly operating expenses.
FINANCIAL HIGHLIGHTS A summary of each fund's
financial data.
PERFORMANCE
THE FUNDS IN DETAIL CHARTER How each fund is organized.
INVESTMENT PRINCIPLES AND RISKS Each fund's overall
approach to investing.
BREAKDOWN OF EXPENSES How operating costs are
calculated and what they include.
YOUR ACCOUNT TYPES OF ACCOUNTS Different ways to set up your
account, including tax-sheltered retirement plans.
HOW TO BUY SHARES Opening an account and making
additional investments.
HOW TO SELL SHARES Taking money out and closing your
account.
INVESTOR SERVICES Services to help you manage your
account.
SHAREHOLDER AND ACCOUNT POLICIES DIVIDENDS, CAPITAL GAINS, AND TAXES
TRANSACTION DETAILS Share price calculations and the
timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
ANNUAL REPORT
U.S. TREASURY PORTFOLIO
INVESTMENTS A-1 A complete list of the fund's investments with their
market values.
FINANCIAL STATEMENTS A-2 Statements of assets and liabilities, operations, and
changes in net assets.
MONEY MARKET PORTFOLIO
INVESTMENTS A-7 A complete list of the fund's investments with their
market values.
FINANCIAL STATEMENTS A-11 Statements of assets and liabilities, operations, and
changes in net assets.
DAILY TAX-EXEMPT MONEY FUND
INVESTMENTS A-15 A complete list of the fund's investments with their
market values.
FINANCIAL STATEMENTS A-24 Statements of assets and liabilities, operations, and
changes in net assets.
NOTES A-28 Notes to the financial statements.
REPORT OF INDEPENDENT ACCOUNTANTS A-32 The auditor's opinion.
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
Each fund offers investors a convenient way to invest in a professionally
managed portfolio of money market instruments.
Each fund is designed for investors who would like to earn current income
while preserving the value of their investment.
The rate of income will vary from day to day, generally reflecting
short-term interest rates.
Each fund is managed to keep its share price stable at $1.00. U.S. Treasury
Portfolio offers an added measure of safety with its focus on U.S. Treasury
securities.
These funds do not constitute a balanced investment plan. However, because
they emphasize stability, they could be well-suited for a portion of your
investments. Each fund offers free checkwriting to give you easy access to
your money.
U.S. Treasury Portfolio is composed of two classes of shares. Both
class es of the fund ha ve a common investment objective and
investment portfolio. Initial Class shares do not have a sales charge, but
do pay a distribution fee. Class B shares do not have a front-end sales
charge, but do have a contingent deferred sales charge (CDSC) and pay a
distribution fee and a shareholder service fee. Class B shares may be
purchased directly only in connection with the Fidelity Advisor Systematic
Exchange Program for the purpose of exchanging into Class B of the Fidelity
Advisor funds. Because Initial Class shares do not have a sales charge,
have a lower distribution fee and do not have a shareholder service fee,
Initial Class shares are expected to have a higher total return than Class
B shares. You may obtain more information about Class B shares, which are
not offered through this prospectus, from your investment professional or
by calling Fidelity Client Services at 1-800-843-3001.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you ma y pay when you
buy or sell Initial Class shares of a fund.
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Maximum sales charge on purchases and reinvested distributions None
Maximum deferred sales charge None
Redemption fee None
Exchange fee None
</TABLE>
ANNUAL OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to Fidelity Management & Research Company
(FMR). Each fund also incurs other expenses for services such as
maintaining shareholder records and furnishing shareholder statements and
financial reports.
12b-1 fees are paid by FMR from its management fee, its past profits or
other source, to the distributor for services and expenses in connection
with the distribution of Initial Class shares. Long-term shareholders may
pay more than the economic equivalent of the maximum sales charges
permitted by the National Association of Securities Dealers, Inc., due to
12b-1 fees.
Initial class's expenses are factored into its share price or dividends and
are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page ).
The following figures are based on historical expenses of the Initial Class
of each fund , and are calculated as a percentage of average net
assets of the Initial Class of each fund.
U.S. TREASURY PORTFOLIO - INITIAL CLASS
Management fee* 0.22
%
12b-1 fee (Distribution Fee) 0.28
%
Other expenses (after reimbursement) 0.15
%
Total operating expenses 0.65
%
MONEY MARKET PORTFOLIO - INITIAL CLASS
Management fee* 0.28
%
12b-1 fee (Distribution Fee) 0.22
%
Other expenses (after reimbursement) 0.15
%
Total operating expenses 0.65
%
DAILY TAX-EXEMPT MONEY FUND - INITIAL CLASS
Management fee* 0.24
%
12b-1 fee (Distribution Fee) 0.26
%
Other expenses (after reimbursement) 0.15
%
Total operating expenses 0.65
%
* THE RATE FOR MANAGEMENT FEES REPRESENTS THE NET RATE RETAINED BY FMR
AFTER PAYMENT MADE TO THE DISTRIBUTOR. THE MANAGEMENT FEE BEFORE PAYMENTS
MADE TO THE DISTRIBUTOR BY FMR IS 0.50%.
EXPENSE TABLE EXAMPLE: You would pay the following expenses on a $1,000
investment in Initial Class shares, assuming a 5% annual return and full
redemption at the end of each time period:
<TABLE>
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<S> <C> <C> <C> <C>
1 3 5 10
Year Years Years Years
U.S. Treasury Portfolio $ 7 $ 21 $ 36 $ 81
Money Market Portfolio $ 7 $ 21 $ 36 $ 81
Daily Tax-Exempt Money
Fund $ 7 $ 21 $ 36 $ 81
</TABLE>
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Initial Class of each fund to the
extent that total operating expenses exceed 0.65 % of its average net
assets. If these agreements were not in effect , other expenses and
total operating expenses, as a percentage of average net assets, of
Initial Class of each fund would have been, 0.19 % and
0.69 % for U.S. Treasury Portfolio; 0.28 % and 0.78% for
Money Market Portfolio; and 0.25 % and 0.75 % for Daily
Tax-Exempt Money Fund. Expenses eligible for reimbursement do not include
interest, taxes, brokerage commissions, and extraordinary expenses.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow and each fund's financial
statements are included in the funds' Annual Report and have been
audited by Coopers & Lybrand L.L.P. or Price Waterhouse LLP ( Daily
Tax-Exempt Money Fund only) . Their reports on the financial
statements and financial highlights are included in the Annual Report. The
financial statements, the financial highlights, and the reports are
attached.
U.S. TREASURY PORTFOLIO - INITIAL CLASS
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Selected Per-Share Data and
Ratios
Years ended July 31 1996A 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
Income from
Investment Operations
Net interest income .012 .049 .049 .029 .027 .042 .065 .079 .083 .063 .057
Less Distributions
From net interest (.012) (.049) (.049) (.029) (.027) (.042) (.065) (.079) (.083) (.063) (.057)
income
Net asset value,
end of $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
period
Total returnB 1.19% 5.06% 5.02% 2.89% 2.78% 4.25% 6.69% 8.24% 8.64% 6.45% 5.81%
Net assets, end of $ 1,801 $ 1,801 $ 1,828 $ 2,025 $ 2,949 $ 3,094 $ 1,702 $ 1,177 $ 994 $ 320 $ 240
period
(In millions)
Ratio of expenses to .65%C, .65%C .65%C .60% .57% .59% .59% .59% .64% .64% .58%
average D
net assets
Ratio of net
interest 4.66% 4.94% 4.89% 2.81% 2.73% 4.14% 6.42% 7.91% 8.47% 6.26% 5.67%
income to
average net D
assets
</TABLE>
A THREE MONTHS ENDED OCTOBER 31, 1996
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL
RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING
THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
C FMR AGREED TO REIMBURSE A PORTION OF THE CLASS'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT THE CLASS'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
D ANNUALIZED
MONEY MARKET PORTFOLIO - INITIAL CLASS
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Selected Per-Share Data and
Ratios
Years ended
July 31 1996A 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
Income from .012 .050 .050 .029 .028 .041 .067 .080 .085 .066 .057
Investment Operations
Net interest income
Less Distributions(.012) (.050) (.050) (.029) (.028) (.041) (.067) (.080) (.085) (.066) (.057)
From net interest
income
Net asset value,
end of $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
period
Total returnB 1.22% 5.13% 5.16% 2.98% 2.82% 4.21% 6.90% 8.34% 8.81% 6.81% 5.87%
Net assets,
end of $ 2,663 $ 2,581 $ 2,139 $ 1,525 $ 1,451 $ 1,531 $ 1,714 $ 1,350 $ 894 $ 561 $ 441
period
(In millions)
Ratio of
expenses to .65%C, .65%C .65%C .65%C .61% .59% .60% .61% .64%C .66% .62%
average D
net assets
Ratio of
net interest 4.85% 5.00% 5.11% 2.96% 2.76% 4.19% 6.61% 7.99% 8.56% 6.57% 5.78%
income D
to average net assets
</TABLE>
A THREE MONTHS ENDED OCTOBER 31, 1996
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL
RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING
THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
C FMR AGREED TO REIMBURSE A PORTION OF THE CLASS'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT THE CLASS'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
D ANNUALIZED
DAILY TAX-EXEMPT MONEY FUND - INITIAL CLASS
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and
Ratios
Years ended
October 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
31
Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
Income from .030 .033 .022 .021 .029 .044 .053 .056 .045 .039
Investment Operations
Net interest income
Less
Distributions (.030) (.033) (.022) (.021) (.029) (.044) (.053) (.056) (.045) (.039)
From net interest
income
Net asset value,
end of $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
period
Total returnA 3.02% 3.36% 2.21% 2.11% 2.93% 4.46% 5.38% 5.72% 4.55% 3.93%
Net assets,
end of $ 500,09 $ 559,17 $ 454,25 $ 538,75 $ 484,99 $ 304,14 $ 259,38 $ 203,51 $ 212,02 $ 288,27
period 4 3 9 6 9 7 1 3 9 9
(In millions)
Ratio of
expenses to .65%B .65%B .65%B .61% .63% .65%B .65%B .64%B .70%B .63%
average
net assets
Ratio of
net interest 2.98% 3.31% 2.17% 2.09% 2.86% 4.29% 5.32% 5.64% 4.37% 3.87%
income to average net
assets
</TABLE>
A TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
B FMR AGREED TO REIMBURSE A PORTION OF THE CLASS'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT THE CLASS'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
PERFORMANCE
Money market fund performance can be measured as TOTAL RETURN or YIELD.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given period,
assuming reinvestment of any dividends and capital gains. A CUMULATIVE
TOTAL RETURN reflects actual performance over a stated period of time. An
AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
returns smooth out variations in performance; they are not the same as
actual year-by-year results.
Average annual and cumulative total returns usually will include the
effect of paying the maximum applicable sales charge.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. When a yield
assumes that income earned is reinvested, it is called an EFFECTIVE YIELD.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
SEVEN-DAY YIELD illustrates the income earned by an investment in a money
market fund over a recent seven-day period. Since money market funds
maintain a stable $1.00 share price, current seven-day yields are the most
common illustration of money market fund performance.
The funds' performance and holdings are detailed twice a year in financial
reports, which are sent to all shareholders. For current performance call
Fidelity Client Services at 1-800-843-3001.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. U.S. Treasury Portfolio and Money
Market Portfolio are diversified funds of Daily Money Fund, and Daily
Tax-Exempt Money Fund is a diversified fund of Daily Tax-Exempt Money Fund.
Both trusts are open-end management investment companies. Daily Money Fund
was organized as a Delaware business trust on September 29, 1993. Daily
Tax-Exempt Money Fund was organized as a Delaware business trust on
December 30, 1991. There is a remote possibility that one fund might become
liable for a misstatement in the prospectus about another fund.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review the funds' performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
The transfer agent will mail proxy materials in advance, including a voting
card and information about the proposals to be voted on. You are entitled
to one vote for each share you own.
Separate votes are taken by each class of shares, fund, or trust, if a
matter affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The funds employ various Fidelity
companies to perform activities required for their operation.
The funds are managed by FMR, which handles their business affairs. FMR
Texas Inc. (FMR Texas), located in Irving, Texas, has primary
responsibility for providing investment management services.
As of October 31 , 1 9 96 , FMR advised funds having
approximately 27 million shareholder accounts with a total value of
more than $ 415 billion.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Investments Institutional Operations Company
(FIIOC) performs transfer agent servicing functions for the Initial Class
shares of each fund.
FMR Corp. is the ultimate parent company of FMR and FMR Texas. Members of
the Edward C. Johnson 3d family are the predominant owners of a class of
shares of common stock representing approximately 49% of the voting power
of FMR Corp. Under the Investment Company Act of 1940 (the 1940 Act),
control of a company is presumed where one individual or group of
individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form a
controlling group with respect to FMR Corp.
As of November 29, 1996, approximately 25.44% of U.S. Treasury
Portfolio's total outstanding shares were held by First Trust of St. Paul,
MN.
UMB Bank, n.a. (UMB) is Daily Tax-Exempt Money Fund's transfer agent,
although it employs FIIOC to perform these functions for Initial Class of
the fund. UMB is located at 1010 Grand Avenue, Kansas City, Missouri.
To carry out the funds' transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that a fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
EACH FUND'S INVESTMENT APPROACH
When you sell your shares, they should be worth the same amount as when you
bought them. Of course, there is no guarantee that the funds will maintain
a stable $1.00 share price. The funds follow industry-standard guidelines
on the quality , maturity , and diversification of their
investments, which are designed to help maintain a stable $1.00 share
price. The funds will purchase only high-quality securities that FMR
believes present minimal credit risks and will observe maturity
restrictions on securities they buy. In general, securities with longer
maturities are more vulnerable to price changes, although they may provide
higher yields. It is possible that a major change in interest rates or a
default on the funds' investments could cause their share prices (and the
value of your investment) to change.
The funds earn income at current money market rates. Each fund stresses
preservation of capital, liquidity, and income (tax-free income in the case
of Daily Tax-Exempt Money Fund) and does not seek the higher yields or
capital appreciation that more aggressive investments may provide. Each
fund's yield will vary from day to day and generally reflects current
short-term interest rates and other market conditions. It is important to
note that neither the funds nor their yields are guaranteed by the U.S.
Government.
U.S. TREASURY PORTFOLIO seeks to obtain as high a level of current income
as is consistent with the preservation of capital and liquidity.
The fund invests only in U.S. Treasury securities and repurchase agreements
for these securities. The fund does not enter into reverse repurchase
agreements.
MONEY MARKET PORTFOLIO seeks to obtain as high a level of current income as
is consistent with the preservation of capital and liquidity.
The fund invests only in U.S. dollar-denominated money market securities of
domestic and foreign issuers rated in the highest rating category by at
least two nationally recognized rating services, U.S. Government
securities, and repurchase agreements. The fund also may enter into reverse
repurchase agreements.
DAILY TAX-EXEMPT seeks to provide individual and institutional investors
with as high a level of current income, exempt from federal income taxes,
as is consistent with a portfolio of high quality, short-term municipal
obligations selected on the basis of liquidity and stability of principal.
The fund, under normal conditions, invests in U.S. dollar denominated
high-quality short-term municipal securities of all types. The fund
normally invests so that at least 80% of its income distributions is free
from federal income tax. The fund does not currently intend to purchase
municipal securities subject to the federal alternative minimum tax. The
fund may invest any portion of its assets in industrial revenue bonds
(IRBs) backed by private issuers.
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 uninvested cash or
to invest more than normally permitted in federally taxable obligations for
temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of each fund's limitations and more detailed information
about each fund's investments are contained in the funds' SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments
is not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with a fund's investment
objective and policies and that doing so will help a fund achieve its goal.
Fund holdings are detailed in each fund's financial reports, which are sent
to shareholders twice a year. For a free SAI o r financial
repor t, call Fidelity Client Services at 1-800-843-3001 or your
investment professional.
MONEY MARKET SECURITIES are high-quality, short-term instruments issued by
the U.S. Government, corporations, financial institutions, municipalities,
local and state governments, and other entities. These securities may carry
fixed, variable, or floating interest rates. Some money market securities
employ a trust or similar structure to modify the maturity, price
characteristics, or quality of financial assets so that they are eligible
investments for money market funds. If the structure does not perform as
intended, adverse tax or investment consequences may result.
U.S. TREASURY MONEY MARKET SECURITIES are short-term debt obligations
issued by the U.S. Treasury and include bills , notes , and
bonds. U.S. Treasury securities are backed by the full faith and credit of
the United States.
U.S. GOVERNMENT MONEY MARKET SECURITIES are short-term debt instruments
issued or guaranteed by the U.S. Treasury or by an agency or
instrumentality of the U.S. Government. Not all U.S. Government securities
are backed by the full faith and credit of the United States. For example,
U.S. Government securities such as those issued by the Federal National
Mortgage Association are supported by the instrumentality's right to borrow
money from the U.S. Treasury under certain circumstances. Other U.S.
Government securities, such as those issued by the Federal Farm Credit
Banks Funding Corporation, are supported only by the credit of the entity
that issued them.
MUNICIPAL SECURITIES are issued to raise money for a variety of public or
private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities. They
may be issued in anticipation of future revenues, and may be backed by the
full taxing power of a municipality, the revenues from a specific project,
or the credit of a private organization. The value of some or all municipal
securities may be affected by uncertainties in the municipal market related
to legislation or litigation involving the taxation of municipal securities
or the rights of municipal securities holders. A fund may own a municipal
security directly or through a participation interest.
CREDIT AND LIQUIDITY SUPPORT. I ssuers may employ various forms of
credit and liquidity enhancement, including letters of credit, guarantees,
puts and demand features, and insurance, provided by foreign or domestic
entities such as banks and other financial institutions. These
arr angements expose a fund to the credit risk of the entity
providing the credit or liquidity support. Changes in the credit quality of
the provider could affect the value of the security and a fund's share
price.
FOREIGN EXPOSURE. Securities issued by foreign entities, including
foreign governments, corporations, and banks, and securities issued by U.S.
entities with substantial foreign operations may involve additional risks
and considerations. Likewise, securities for which foreign entities provide
credit or liquidity support may involve different risks than those
supported by domestic entities. Extensive public information about the
foreign entity may not be available, and unfavorable political, economic,
or governmental developments in the foreign country involved could affect
the repayment of principal or payment of interest.
ASSET-BACKED SECURITIES include interests in pools of mortgages, loans,
receivables, or other assets. Payment of principal and interest may be
largely dependent upon the cash flows generated by the assets backing the
securities.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. These interest rate adjustments are designed to help
stabilize the security's price.
STRIPPED SECURITIES are the separate income or principal components of a
debt security. The risks associated with stripped securities are similar to
those of other money market securities, although stripped securities may be
more volatile. U.S. Treasury securities that have been stripped by a
Federal Reserve Bank are obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
temporarily transfers possession of a portfolio instrument to another party
in return for cash. This could increase the risk of fluctuation in the
fund's yield or in the market value of its assets.
OTHER MONEY MARKET SECURITIES may include commercial paper, certificates of
deposit, bankers' acceptances, and time deposits.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include obligations of U.S. territories and
possessions such as Guam, the Virgin Islands, and Puerto Rico, and their
political subdivisions and public corporations.
PUT FEATURES entitle the holder to put (sell back) a security to the issuer
or another party. In exchange for this benefit, a fund may accept a lower
interest rate. The credit quality of the investment may be affected by the
creditworthiness of the put provider. Demand features, standby commitments,
and tender options are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities, may be
subject to legal restrictions. Difficulty in selling securities may result
in a loss or may be costly to a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period.
FINANCIAL SERVICES INDUSTRY. Companies in the financial services industry
are subject to various risks related to that industry, such as government
regulation, changes in interest rates, and exposure on loans, including
loans to foreign borrowers. If a fund invests substantially in this
industry, its performance may be affected by conditions affecting the
industry.
RESTRICTIONS: Money Market Portfolio will invest more than 25% of its total
assets in the financial services industry.
CASH MANAGEMENT. A fund may invest in money market securities, in a
pooled account of repurchase agreements, and in a money market fund
available only to funds and accounts managed by FMR or its affiliates,
whose goal is to seek a high level of current income (exempt from federal
income tax in the case of a tax-free money market fund) while maintaining a
stable $1.00 share price. A major change in interest rates or a default on
the money market fund's investments could cause its share price to change.
RESTRICTION: Daily Tax-Exempt Money Fund will not invest in a money market
fund. Daily Tax-Exempt Money Fund does not currently intend to invest in a
pooled account of repurchase agreements. U.S. Treasury Portfolio and Money
Market Portfolio do not currently intend to invest in a money market
fund.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type.
RESTRICTIONS: Money Market Portfolio may not invest more than 5% of its
total assets in any one issuer, except that the fund may invest up to 10%
of its total assets in the highest quality securities of a single issuer
for up to three business days.
With respect to 75% of its total assets, Daily Tax-Exempt Money Fund may
not purchase a security if, as a result, more than 5% of its total assets
would be invested in the securities of a single issuer.
These limitations do not apply to U.S. Government securities.
Daily Tax-Exempt Money Fund may invest more than 25% of its total assets in
tax-free securities that finance similar types of projects.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements, and may make additional
investments while borrowings are outstanding.
RESTRICTIONS: Money Market Portfolio may borrow only for temporary or
emergency purposes, or engage in reverse repurchase agreements, but not in
an amount exceeding 331/3% of its total assets. Each of U.S. Treasury
Portfolio and Daily Tax-Exempt Money Fund may borrow only for temporary or
emergency purposes, but not in an amount exceeding 331/3% of its total
assets.
LENDING A fund may lend money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a fund's
total assets. U.S. Treasury Portfolio and Daily Tax-Exempt Money Fund do
not lend money to other funds advised by FMR.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
Each of U.S. Treasury Portfolio and Money Market Portfolio seeks to obtain
as high a level of current income as is consistent with the preservation of
capital and liquidity.
Daily Tax-Exempt Money Fund seeks to provide individual and institutional
investors with as high a level of current income, exempt from federal
income taxes, as is consistent with a portfolio of high quality, short-term
municipal obligations selected on the basis of liquidity and stability of
principal. The fund normally invests so that at least 80% of its income
distributions is free from federal income tax.
With respect to 75% of its total assets, Daily Tax-Exempt Money Fund may
not purchase a security if, as a result, more than 5% of its total assets
would be invested in the securities of a single issuer.
Money Market Portfolio will invest more than 25% of its total assets in the
financial services industry.
Money Market Portfolio may borrow only for temporary or emergency purposes,
or engage in reverse repurchase agreements, but not in an amount exceeding
331/3% of its total assets. Daily Tax-Exempt Money Fund may borrow only for
temporary or emergency purposes, but not in an amount exceeding 331/3% of
its total assets.
Loans, in the aggregate, may not exceed 331/3% of a fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of each class's assets are reflected in that
class's share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to an affiliate who provides
assistance with these services. Each fund also pays OTHER EXPENSES, which
are explained on page .
MANAGEMENT FEE
Each fund pays FMR a monthly management fee at an annual rate of 0.50% of
its average net assets.
FMR HAS A SUB-ADVISORY AGREEMENT with FMR Texas, which has primary
responsibility for providing investment management for the funds, while FMR
retains responsibility for providing the funds with other management
services. FMR pays FMR Texas 50% of its management fee (before expense
reimbursements but after payments made by FMR pursuant to each Initial
Class's Distribution and Service Plan) for these services. For the
three month period ended October 31, 1996, FMR paid FMR Texas
0.11 % of U.S. Treasury Portfolio's and 0.14 % of Money Market
Portfolio 's average net assets. For the fiscal year ended October 31,
1996, FMR paid FMR Texas 0.12 % of Daily Tax-Exempt Money Fund's average
net assets .
OTHER EXPENSES
While the management fee is a significant component of each fund's annual
operating costs, the funds have other expenses as well.
FIIOC performs certain transfer agency, dividend disbursing and
shareholder services for Initial Class shares of U.S. Treasury Portfolio
and Money Market Portfolio (the Taxable Funds). Fidelity Service Co. (FSC)
calculates the NAV and dividends for each Taxable Fund, and maintains the
general accounting records for each Taxable Fund.
For the three month period ended October 31, 1996, fees paid by
Initial Class shares of U.S. Treasury Portfolio and Money Market
Portfolio to FIIOC amounted to 0.17 % and 0.26% of its
average net assets , respectively , and fees paid by each Taxable Fund
to FSC amounted to 0.01 % of its average net assets.
UMB has entered into a sub-arrangement with FIIOC. FIIOC performs transfer
agency, dividend disbursing and shareholder services for the Initial Class
shares of Daily Tax-Exempt Money Fund. UMB has also entered into a
sub-arrangement with FSC. FSC calculates the NAV and dividends for Initial
Class shares of Daily Tax-Exempt Money Fund, and maintains the fund's
general accounting records. All of the fees are paid to FIIOC and FSC by
UMB, which is reimbursed by Initial Class or the fund, as appropriate, for
such payments.
For the fiscal year ended October 31, 1996, fees paid by UMB to
FIIOC on behalf of Initial Class of Daily Tax-Exempt Money Fund
amounted to 0.18 % of average net assets, and fees paid by UMB to FSC
on behalf of the fund amounted to 0.02 % of its average net assets.
Initial Class shares of the fund s have adopted a DISTRIBUTION
AND SERVICE PLAN. The P lan s recognize that FMR will make
payments out of its resources, including management fees, to pay or
reimburse FDC for payments made to third parties, such as banks or
broker-dealers, for their services in connection with the distribution and
servicing of Initial Class shares.
Pursuant to the Plans, the Board of Trustees has authorized FDC to
compensate third parties who maintain an average monthly balance of $10
million or more in a single omnibus account at an annual rate of 0.40% of
average net assets maintained, and to compensate all other third parties
who maintain aggregate assets of $50,000 or more at an annual rate of 0.25%
of average net assets maintained.
Third parties that were compensated at amounts exceeding 0.25% under the
schedule in effect prior to January 1, 1997 that do not yet maintain
omnibus accounts may be compensated at the prior compensation rates for up
to one year from January 1, 1997.
For the fiscal period ended October 31, 1996, FMR paid FDC monthly
at an annual rate of 0.28 % of Initial Class's average net assets
throughout the month.
Each fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity.
YOUR ACCOUNT
TYPES OF ACCOUNTS
If you invest through an investment professional, your investment
professional, including a broker-dealer or financial institution, may
charge you a transaction fee with respect to the purchase and sale of fund
shares. Read your investment professional's program materials in
conjunction with this prospectus for additional service features or fees
that may apply. Certain features of the funds, such as minimum initial or
subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed at right .
The account guidelines that follow may not apply to certain funds or to
certain retirement accounts. For instance, municipal funds are not
available for purchase in retirement accounts. If you are investing
through a retirement account or if your employer offers a fund through a
retirement program, you may be subject to additional fees. For more
information, please refer to your program materials, contact your employer,
or call your retirement benefits number or Fidelity Client Services at
1-800-843-3001 or your investment professional directly, as
appropriate.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT (THE FOLLOWING OPTIONS ARE AVAILABLE ONLY FOR TAXABLE FUNDS)
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(solid bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal
age under 701/2 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(solid bullet) 401(K) PLANS allow employees of corporations of all sizes to
contribute a percentage of their wages on a tax-deferred basis. These
accounts need to be established by the trustee of the plan.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA). Contact your investment
professional.
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your investment professional.
HOW TO BUY SHARES
EACH CLASS'S SHARE PRICE, called NAV, is calculated every business day. The
funds are managed to keep share prices stable at $1.00.
Shares are purchased at the next NAV calculated after your order is
received and accepted. NAV is normally calculated at the times indicated in
the table below.
NAV Calculation Times
Fund (Eastern Time)
U.S. Treasury Portfolio 2:00 p.m. and 4:00 p.m.
Money Market Portfolio 2:00 p.m. and 4:00 p.m.
Daily Tax-Exempt Money Fund 12:00 noon and 4:00 p.m.
It is the responsibility of your investment professional to transmit
your order to buy shares to Fidelity before the close of business on the
day you place your order.
Share certificates are not available for Initial Class.
IF YOU ARE NEW TO FIDELITY, an initial investment must be preceded or
accompanied by a completed, signed application, which should be forwarded
to:
Fidelity Investments
P.O. Box 770002
Cincinnati, OH 45277-0081
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Place an order and wire money into your account,
(small solid bullet) Open your account by exchanging from Class A or
Class T of a Fidelity Advisor fund or from another Fidelity fund, or
(small solid bullet) Contact your investment professional or call
Fidelity Client Services .
BY MAIL. You or your investment professional must send a check payable to
the fund in which you plan to invest. When making subsequent investments by
check, please write your fund account number on the check. All investments
by check should be sent to the above address.
BY WIRE. You must sign up for the wire feature before using it. For wiring
information and instructions, you should call the investment professional
through which you trade or if you trade directly through Fidelity, call
Fidelity Client Services. There is no fee imposed by the funds for wire
purchases. However, if you buy shares through an investment professional,
the investment professional may impose a fee for wire purchases.
Fidelity Client Services:
Nationwide 1-800-843-3001
Shareholders of record as of the times indicated in the table below will be
entitled to dividends declared that day.
Dividend Times
Fund (Eastern Time)
U.S. Treasury Portfolio 2:00 p.m.
Money Market Portfolio 2:00 p.m.
Daily Tax-Exempt Money Fund 12:00 noon
Shares purchased after the times indicated in the table above will begin to
earn income dividends on the following business day.
Your wire must be received and accepted by the transfer agent at the
applicable fund's designated wire bank .
You are advised to wire funds as early in the day as possible, and to
provide advance notice to Fidelity Client Services for large purchases.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $1,000
For Fidelity retirement accounts $500
TO ADD TO AN ACCOUNT $250
For Fidelity retirement accounts $100
Through regular investment plans* $100
MINIMUM BALANCE $500
* FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted. NAV is
normally calculated at the times indicated in the table on page .
It is the responsibility of your investment professional to transmit
your order to redeem shares to Fidelity before the close of business on the
day you place your order.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be made
in writing, except for exchanges to Class A or Class T shares of a
Fidelity Advisor fund or shares of other Fidelity funds, which can be
requested by phone or in writing.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, please leave at least
$500 worth of shares in the account to keep it open.
BY TELEPHONE. Redemption requests may be made by calling Fidelity Client
Services at 1-800-843-3001.
BY MAIL. Send a letter of instruction with signature guarantee(s) to the
address on page . The letter should specify the name of the fund,
the number of shares to be sold, name, account numbers, address, and should
include the additional requirements listed below that apply to each
particular account.
<TABLE>
<CAPTION>
<S> <C>
TYPE OF REGISTRATION REQUIREMENTS
Individual, Joint Tenants, Letter of instruction signed by all person(s)
Sole Proprietorship, Custodial, (Uniform Gifts or required to sign for the account exactly as it is
Transfers to Minors Act), General Partners registered, accompanied by signature
guarantee(s).
Corporations, Associations Letter of instruction and a corporate resolution,
signed by person(s) required to sign for the
account accompanied by signature guarantee(s).
Trusts A letter of instruction signed by the Trustee(s) with
signature guarantee(s). (If the Trustee's name is
not registered on the account, also provide a copy
of the trust document, certified within the last 60
days.)
</TABLE>
If you do not fall into any of these registration categories (i.e.,
executors, administrators, conservators, or guardians) you should call your
investment professional or Fidelity Client Services for further
instructions.
BY WIRE. Redemptions may be made by calling Fidelity Client Services at
1-800-843-3001.
You must designate on your account application the U.S. commercial bank
account(s) into which you wish the redemption proceeds to be deposited.
Fidelity Client Services will then notify you that this feature has been
activated and that you may request wire redemptions.
You may change the bank account(s) designated to receive redemption
proceeds at any time prior to making a redemption request. You should send
a letter of instruction, including a signature guarantee, to Fidelity
Client Services at the address shown on page .
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
There is no fee imposed by the funds for wiring of redemption proceeds.
However, if you sell shares through an investment professional, the
investment professional may impose a fee for wire redemptions.
Redemption proceeds will be wired via the Federal Reserve Wire System to
your bank account of record. If your redemption request is received and
accepted by the transfer agent before the times indicated in the
"Dividend Times" table on page , redemption proceeds will normally be
wired on that day. If your redemption request is received and
accepted by the transfer agent after the times indicated in the
"Dividend Times" table on page , redemption proceeds will normally be
wired on the following business day.
A fund reserves the right to take up to seven days to pay you if making
immediate payment would adversely affect the fund.
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited number
of checks. The minimum amount for a check is $500. Do not, however, try to
close out your account by check.
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available Monday through Friday,
8:30 a.m. to 6:00 p.m. Eastern time.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except a reinvestment, that affects your account balance or your account
registration)
(small solid bullet) Account statements (monthly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed, even if you have more than one account in a
fund. Call your investment professional or Fidelity Client Services
if you need additional copies of financial reports, prospectuses , or
historical account information.
SUB-ACCOUNTING AND SPECIAL SERVICES. Special processing has been arranged
with FIIOC for institutions that wish to open multiple accounts (a master
account and sub-accounts). You may be required to enter into a separate
agreement with FIIOC. Charges for these services, if any, will be
determined based on the level of services to be rendered.
One easy way to pursue your financial goals is to invest money regularly.
The funds offer a convenient service that lets you transfer money between
fund accounts, automatically. While regular investment plans do not
guarantee a profit and will not protect you against loss in a declining
market, they can be an excellent way to invest for retirement, a home,
educational expenses, and other long-term financial goals. Certain
restrictions apply for retirement accounts. Call your investment
professional for more information.
REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, (small solid bullet) To establish, call your investment professional after
semi-annually, or both accounts are opened.
annually (small solid bullet) To change the amount or frequency of your
investment, contact your investment professional
directly or, if you purchased your shares through a
broker-dealer or insurance representative, call
1-800-522-7297. If you purchased your shares
through a bank representative, call 1-800-843-3001.
(small solid bullet) The account from which the exchanges are to be
processed must have a minimum balance of
$10,000. The account into which the exchange is
being processed must have a minimum of $1,000.
(small solid bullet) Both accounts must have the same registrations
and taxpayer ID numbers.
(small solid bullet) Call at least 2 business days prior to your next
scheduled exchange date.
</TABLE>
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains, if any, to shareholders each year. Income dividends are
declared daily and paid monthly.
Income dividends declared are accrued daily throughout the month and are
normally distributed on the first business day of the following month.
Based on prior approval of each fund, dividends relating to Initial Class
shares redeemed during the month can be distributed on the day of
redemption. Each fund reserves the right to limit this service.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. Initial Class offers two options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions, if
any, will be automatically reinvested in additional shares of the same
class of the fund. If you do not indicate a choice on your application, you
will be assigned this option.
2. CASH OPTION. You will be sent a check or wire for your dividend
and capital gain distributions, if any.
For retirement accounts, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
Dividends will be reinvested at each fund's Initial Class NAV on the last
day of the month. Capital gain distributions, if any, will be reinvested at
the NAV as of the record date of the distribution. The mailing of
distribution checks will begin within seven days.
TAXES
As with any investment, you should consider how an investment in the funds
could affect you. Below are some of the funds' tax implications.
TAXES ON DISTRIBUTIONS. Interest income that Daily Tax-Exempt Money Fund
earns is distributed to shareholders as income dividends. Interest that is
federally tax-free remains tax-free when it is distributed. Distributions
from the Taxable Funds, however, are subject to federal income tax and may
also be subject to state or local taxes. If you live outside the United
States, your distributions from these funds could also be taxed by the
country in which you reside.
For federal tax purposes, income and short-term capital gain distributions
from each Taxable Fund are taxed as dividends; long-term capital gain
distributions, if any, are taxed as long-term capital gains.
For shareholders of Daily Tax-Exempt Money Fund, gain on the sale of
tax-free bonds results in taxable distributions. Short-term capital gains
and a portion of the gain on bonds purchased at market discount are taxed
as dividends; long-term capital gain distributions, if any, are taxed as
long-term capital gains.
Mutual fund dividends from U.S. Government securities are generally free
from state and local income taxes. However, particular states may limit
this benefit, and some types of securities, such as repurchase agreements
and some agency-backed securities, may not qualify for the benefit. In
addition, some states may impose intangible property taxes. You should
consult your own tax adviser for details and up-to-date information on the
tax laws in your state.
For the three month period ended October 31, 1996, 18.96 % of
U.S. Treasury Portfolio's and 6.68 % of Money Market's income
distributions were derived from interest on U.S. Government securities,
which is generally exempt from state income tax.
Distributions are taxable when they are paid, whether you take them in cash
or reinvest them. However, distributions declared in December and paid in
January are taxable as if they were paid on December 31.
Every January, Fidelity will send you and the IRS a statement showing the
taxable distributions paid to you in the previous year.
A portion of Daily Tax-Exempt Money Fund's dividends may be free from state
or local taxes. Income from investments in your state are often tax-free to
you. Each year, Fidelity will send you a breakdown of your fund's income
from each state to help you calculate your taxes.
During the fiscal year ended October 31, 1996, 100 % of Daily
Tax-Exempt Money Fund's income dividends was free from federal income tax.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, a fund may
have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
EACH FUND IS OPEN FOR BUSINESS and its NAV is normally calculated each day
that both the Federal Reserve Bank of New York (New York Fed) (for the
Taxable F unds) or the Federal Reserve Bank of Kansas City (Kansas
City Fed) (for Daily Tax-Exempt Money Fund) and the New York Stock Exchange
(NYSE) are open. The following holiday closings have been scheduled for
199 7 : New Year's Day, Martin Luther King's Birthday, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus
Day, Veterans Day, Thanksgiving Day, and Christmas Day. Although FMR
expects the same holiday schedule to be observed in the future, the New
York Fed, the Kansas City Fed, or the NYSE may modify its holiday schedule
at any time. On any day that the New York Fed, the Kansas City Fed, or the
NYSE closes early, the principal government securities markets close early
(such as on days in advance of holidays generally observed by participants
in such markets), or as permitted by the SEC, the right is reserved to
advance the time on that day by which purchase and redemption orders must
be received.
To the extent that portfolio securities are traded in other markets on days
when the New York Fed, the Kansas City Fed, or the NYSE is closed, each
class's NAV may be affected on days when investors do not have access to
the fund to purchase or redeem shares. Certain Fidelity funds may follow
different holiday closing schedules.
A CLASS'S NAV is the value of a single share. The NAV of Initial Class of
each fund is computed by adding Initial Class's pro rata share of the value
of the fund's investments, cash, and other assets, subtracting Initial
Class's pro rata share of the value of the fund's liabilities, subtracting
the liabilities allocated to Initial Class, and dividing the result by the
number of Initial Class shares of that fund that are outstanding. Each fund
values its portfolio securities on the basis of amortized cost. This method
minimizes the effect of changes in a security's market value and helps each
fund maintain a stable $1.00 share price.
THE OFFERING PRICE (price to buy one share) and REDEMPTION PRICE (price to
sell one share) of Initial Class shares are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the transfer
may only be liable for losses resulting from unauthorized transactions if
they do not follow reasonable procedures designed to verify the identity of
the caller. Fidelity and the transfer agent will request personalized
security codes or other information, and may also record calls. You should
verify the accuracy of the confirmation statements immediately after
receipt. If you do not want the ability to redeem and exchange by
telephone, call the transfer agent for instructions. Additional
documentation may be required from corporations, associations, and certain
fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV calculated after your order is received and accepted. Note the
following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) The funds do not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees a fund or the
transfer agent has incurred.
Shareholders of record as of the times indicated in the "Dividend
Times" table on page will be entitled to dividends declared that day.
Shares purchased after the times indicated in the "Dividend Times"
table on page begin to earn income dividends on the following business
day.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your order is received and accepted. Note the
following:
(small solid bullet) Shares redeemed before the times indicated in the
"Dividend Times" table on page do not receive the dividend declared
on the day of redemption. Shares redeemed after the times indicated in the
"Dividend Times" table on page do receive the dividend declared on
the day of redemption.
(small solid bullet) A fund may withhold redemption proceeds until it is
reasonably assured that investments credited to your account have been
received and collected.
(small solid bullet) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
When the NYSE or the New York Fed (for the Taxable Funds) or the Kansas
City Fed (for Daily Tax-Exempt Money Fund) is closed (or when trading is
restricted) for any reason other than its customary weekend or holiday
closings, or under any emergency circumstances as determined by the SEC to
merit such action, a fund may suspend redemption or postpone payment dates.
In cases of suspension of the right of redemption, the request for
redemption may either be withdrawn or payment may be made based on the NAV
next determined after the termination of the suspension.
IF YOUR ACCOUNT BALANCE FALLS BELOW $500 due to redemption, the account may
be closed and the proceeds may be mailed or wired to your address or bank
account of record, as applicable. You will be given 30 days' notice that
your account will be closed unless it is increased to the minimum.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
EXCHANGE RESTRICTIONS
As a shareholder you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds.
If you have purchased Initial Class shares of a fund in connection with the
Fidelity Advisor funds program, your Initial Class shares may be exchanged
only for Class A or Class T shares , as applicable, of
Fidelity Advisor funds or Initial Class shares of any other fund offered
through this prospectus. Other shareholders may not exchange Initial Class
shares of a fund for Class A or Class T shares of Fidelity Advisor
funds.
An exchange involves the redemption of all or a portion of the shares of
one fund and the purchase of shares of another fund.
BY TELEPHONE. Exchanges may be requested on any day a fund is open for
business by calling Fidelity Client Services at 1-800-843-3001 between 8:30
a.m. and the times indicated in the table on page .
BY MAIL. You may exchange shares on any business day by submitting written
instructions with an authorized signature which is on file for that
account. Written requests for exchanges should contain the fund name, class
name, account number, the number of shares to be redeemed, and the name of
the fund to be purchased. Written requests for exchange should be mailed to
Fidelity Client Services at the address on page .
WHEN YOU PLACE AN ORDER TO EXCHANGE SHARES, Initial Class shares will be
redeemed at the next determined NAV after your order is received and
accepted. Shares of the fund to be acquired will be purchased at its next
NAV calculated after redemption proceeds are made available. You should
note that, under certain circumstances, a fund may take up to seven days to
make redemption proceeds available for the exchange purchase of shares of
another fund. In addition, please note the following:
(small solid bullet) Exchanges will not be permitted until a completed and
signed account application is on file.
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the percentage difference between that fund's sales charge and any
sales charge you have already paid in connection with the shares you are
exchanging.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Currently, there is no limit on the number of
exchanges out of a fund, nor are there any administrative or redemption
fees applicable to exchanges out of a fund.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
No dealer, sales representative, or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds. This Prospectus and the related SAI do not
constitute an offer by the funds to sell or to buy shares of the funds to
any person to whom it is unlawful to make such offer.
DAILY MONEY FUNDS
U.S. TREASURY PORTFOLIO - INITIAL CLASS
MONEY MARKET PORTFOLIO - INITIAL CLASS
DAILY TAX-EXEMPT MONEY FUND - INITIAL CLASS
CROSS REFERENCE SHEET
Form N-1A Item Number
Part B Statement of Additional Information
10 a,b Cover Page
11 Table of Contents
12 *
13 a,b,c Investment Policies and Limitations
d *
14 a,b,c Trustees and Officers
15 a *
b Description of the Trust
c Trustees and Officers
16 a(i) FMR
a(ii) Trustees and Officers
a(iii),b Management Contracts
c *
d Management Contracts
e *
f Distribution and Service Plans
g *
h Description of the Trust
i Contracts with FMR Affiliates
17 a Portfolio Transactions
b *
c Portfolio Transactions
d,e *
18 a Description of the Trust
b *
19 a Additional Purchase, Exchange, and
Redemption Information
b Valuation
c *
20 Distributions and Taxes
21 a(i,ii) Contracts with FMR Affiliates;
Distribution and Service Plans
a(iii),b,c *
22 Performance
23 Financial Statements for the fiscal
period ended July 31, 1996 are
incorporated herein by reference.
_______________
*Not Applicable
DAILY MONEY FUNDS: INITIAL CLASS
U.S. TREASURY PORTFOLIO, MONEY MARKET PORTFOLIO, AND DAILY TAX-EXEMPT MONEY
FUND
U.S. Treasury Portfolio and Money Market Portfolio are series of Daily
Money Fund and Daily Tax-Exempt Money Fund is a series of Daily Tax-Exempt
Money Fund.
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 20, 1996
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectus for
Initial Class shares (dated December 20, 1996). Please retain this document
for future reference. The funds' financial statements and financial
highlights, included in the Annual Report, for the fiscal year ended
October 31, 1996, are incorporated herein by reference. To obtain an
additional copy of the Prospectus and the Annual Report, please call
Fidelity Client Services at 1-800-843-3001.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation
Performance
Additional Purchase, Exchange, and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Contracts with FMR Affiliates
Distribution and Service Plans
Description of the Trusts
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
SUB-ADVISER
FMR Texas Inc. (FMR Texas)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT FOR U.S. TREASURY PORTFOLIO AND MONEY MARKET PORTFOLIO (THE
TAXABLE FUNDS)
Fidelity Investments Institutional Operations Company (FIIOC)
TRANSFER AGENT FOR DAILY TAX-EXEMPT MONEY FUND
UMB Bank, n.a. (UMB)
DMFI-ptb-1296
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with a fund's investment policies and
limitations.
A fund's fundamental investment policies and limitations cannot be changed
without approval by a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940 ( the 1940 Act)) of the
fund. However, except for the fundamental investment limitations listed
below, the investment policies and limitations described in this SAI are
not fundamental and may be changed without shareholder approval.
INVESTMENT LIMITATIONS OF U.S. TREASURY PORTFOLIO
THE FOLLOWING ARE U.S. TREASURY PORTFOLIO'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued or
guaranteed as to principal and interest by the government of the United
States, its agencies or instrumentalities) if as a result (a) more than 5%
of its total assets would be invested in the securities of such issuer;
provided, however, that with respect to 25% of its total assets 10% of its
assets may be invested in the securities of an issuer;
(2) issue senior securities except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may (i) borrow money for temporary
or emergency purposes (not for leveraging or investment) and (ii) engage in
reverse repurchase agreements for any purpose; provided that (i) and (ii)
in combination do not exceed 33 1/3% of the fund's total assets (including
the amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed this amount will be reduced within three
days (not including Sundays and holidays) to the extent necessary to comply
with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments;
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements; or
(9) write or purchase any put or call options.
(10) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objectives, policies and limitations as the fund.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL:
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) Subject to revision upon 60 days' notice to shareholders, the
fund does not currently intend to purchase securities on margin, except
that the fund may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments in connection
with futures contracts and options on futures contracts shall not
constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party. The fund will not purchase any security while borrowings
(excluding reverse repurchase agreements) representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(vi) The fund does not currently intend to make loans, but this limitation
does not apply to purchases of debt securities or to repurchase agreements.
(vii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the Securities and Exchange Commission
( SEC ) .
(viii) 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.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (viii), pass-through entities and other special
purposes vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
INVESTMENT LIMITATIONS OF MONEY MARKET PORTFOLIO
THE FOLLOWING ARE MONEY MARKET PORTFOLIO'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued or
guaranteed as to principal and interest by the government of the United
States, its agencies or instrumentalities) if as a result (a) more than 5%
of its total assets would be invested in the securities of such issuer,
provided, however, that with respect to 25% of its total assets 10% of its
assets may be invested in the securities of an issuer; 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) borrow money, except that the fund may (i) borrow money for temporary
or emergency purposes (not for leveraging or investment) and (ii) engage in
reverse repurchase agreements for any purpose; provided that (i) and (ii)
in combination do not exceed 33 1/3% of the fund's total assets (including
the amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed this amount will be reduced within three
days (not including Sundays and holidays) to the extent necessary to comply
with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry, except that the fund will
invest more than 25% of its total assets in the financial services
industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments;
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements;
(9) write or purchase any put or call options; or
(10) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objectives, policies and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to purchase a security (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 5% of its total
assets would be invested in the securities of a single issuer; provided
that the fund may invest up to 10% of its total assets in the first tier
securities of a single issuer for up to three business days. (This limit
does not apply to securities of other open-end investment companies managed
by FMR or a successor or affiliate purchased pursuant to an exemptive order
granted by the SEC.)
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) Subject to revision upon 60 days notice to shareholders, t he
fund does not currently intend to purchase securities on margin, except
that the fund may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments in connection
with futures contracts and options on futures contracts shall not
constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party. The fund will not purchase any security while borrowings
(excluding reverse repurchase agreements) representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(vii) The fund does not currently intend to lend assets other than
securities to other parties, except by lending money (up to 10% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser. (This limitation
does not apply to purchases of debt securities or to repurchase
agreements.)
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments pr political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust 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.
(xii) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (ix), pass-through entities and other special
purposes vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
INVESTMENT LIMITATIONS OF DAILY TAX-EXEMPT MONEY FUND
THE FOLLOWING ARE DAILY TAX-EXEMPT MONEY 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,
(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 exceeding 33 1/3% of the value
of its total assets (including the amount borrowed) less liabilities (other
than borrowings). Any borrowings that come to exceed the 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 from the issuer, or
from an underwriter for an issuer, may be deemed 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
limitation 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 objective, policies, and limitations as the fund.
For purposes of limitation (1), certain securities subject to credit
guarantees or puts from third parties are not considered securities of
their issuer in accordance with industry standard requirements for money
market funds. For purposes of limitations (1) and (7), FMR identifies the
issuer of a security depending on its terms and conditions. In the case of
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 or other entity is guaranteeing the security.
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 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 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 invest in interests in real
estate investment trusts that are not readily marketable, or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(iv) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(v) 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.
(vi) The fund does not currently intend to (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(vii) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments pr 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.
(viii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust 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.
(ix) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (vii), pass-through entities and other special
purposes vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the funds' policies on quality and maturity, see the section entitled
"Quality and Maturity" on page .
SHAREHOLDER NOTICE. U.S. Treasury Portfolio invests only in U.S.
Treasury securities and repurchase agreements for those securities. This
operating policy may be changed only upon 90 days notice to shareholders.
Each of U.S. Treasury Portfolio and Money Market Portfolio do not intend to
purchase futures contracts or options on futures contracts. This operating
policy may be changed only upon approval by the Board of Trustees and 60
days.
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related risks.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that doing so will help the fund achieve its goal.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the 1940 Act. These transactions may include
repurchase agreements with custodian banks; short-term obligations of, and
repurchase agreements with, the 50 largest U.S. banks (measured by
deposits); municipal securities; U.S. Government securities with affiliated
financial institutions that are primary dealers in these securities;
short-term currency transactions; and short-term borrowings. In accordance
with exemptive orders issued by the Securities and Exchange Commission
(SEC), the Board of Trustees has established and periodically reviews
procedures applicable to transactions involving affiliated financial
institutions.
ASSET-BACKED SECURITIES include pools of mortgages, loans, receivables, or
other assets. Payment of principal and interest may be largely dependent
upon the cash flows generated by the assets backing the securities and, in
certain cases, supported by letters of credit, surety bonds, or other
credit enhancements. The value of asset-backed securities may also be
affected by the creditworthiness of the servicing agent for the pool, the
originator of the loans or receivables, or the entities providing the
credit support.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security. Typically, no
interest accrues to the purchaser until the security is delivered.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the fund could miss
a favorable price or yield opportunity, or could suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
DOMESTIC AND FOREIGN ISSUERS. Investments may be made in U.S.
dollar-denominated time deposits, certificates of deposit, and bankers'
acceptances of U.S. banks and their branches located outside of the United
States, U.S. branches and agencies of foreign banks, and foreign branches
of foreign banks. A fund may also invest in U.S. dollar-denominated
securities issued or guaranteed by other U.S. or foreign issuers, including
U.S. and foreign corporations or other business organizations, foreign
governments, foreign government agencies or instrumentalities, and U.S. and
foreign financial institutions, including savings and loan institutions,
insurance companies, mortgage bankers, and real estate investment trusts,
as well as banks.
The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental
regulation. Payment of interest and principal on these obligations may also
be affected by governmental action in the country of domicile of the branch
(generally referred to as sovereign risk). In addition, evidence of
ownership of portfolio securities may be held outside of the United States
and a fund may be subject to the risks associated with the holding of such
property overseas. Various provisions of federal law governing the
establishment and operation of U.S. branches do not apply to foreign
branches of U.S. banks.
Obligations of U.S. branches and agencies of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation, as well as by governmental action in the country in which the
foreign bank has its head office.
Obligations of foreign issuers involve certain additional risks. These
risks may include future unfavorable political and economic developments,
withholding taxes, seizures of foreign deposits, currency controls,
interest limitations, or other governmental restrictions that might affect
payment of principal or interest, or the ability to honor a credit
commitment. Additionally, there may be less public information available
about foreign entities. Foreign issuers may be subject to less governmental
regulation and supervision than U.S. issuers. Foreign issuers also
generally are not bound by uniform accounting, auditing, and financial
reporting requirements comparable to those applicable to U.S. issuers.
FEDERALLY TAXABLE OBLIGATIONS. Under normal conditions, Daily Tax-Exempt
Money Fund does not intend to invest in securities whose interest is
federally taxable. However, from time to time on a temporary basis, the
fund may invest a portion of its assets in fixed-income obligations whose
interest is subject to federal income tax.
Should Daily Tax-Exempt Money Fund invest in federally taxable obligations,
it would purchase securities that, in FMR's judgment, are of high quality.
These obligations would include those issued or guaranteed by the U.S.
Government or its agencies or instrumentalities and repurchase agreements
backed by such obligations.
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 Daily Tax-Exempt Money 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.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
Investments currently considered by the funds to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days. Also, FMR may determine some restricted
securities, municipal lease obligations, and time deposits to be illiquid.
In the absence of market quotations, illiquid investments are valued for
purposes of monitoring amortized cost valuation at fair value as determined
in good faith by a committee appointed by the Board of Trustees. If through
a change in values, net assets, or other circumstances, a 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.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive order
issued by the SEC, each fund has received permission to lend money to, and
borrow money from, other funds advised by FMR or its affiliates. U.S.
Treasury Portfolio and Daily Tax-Exempt Money Fund currently intend to
participate in this program only as borrowers. A fund will borrow through
the program only when the costs are equal to or lower than the cost of bank
loans. Interfund loans and borrowings normally extend overnight, but can
have a maximum duration of seven days. Loans may be called on one day's
notice. A fund will lend through the program only when the returns are
higher than those available from an investment in repurchase agreements. A
fund may have to borrow from a bank at a higher interest rate if an
interfund loan is called or not renewed. Any delay in repayment to a
lending fund could result in a lost investment opportunity or additional
borrowing costs.
MONEY MARKET SECURITIES are high-quality, short-term obligations. Some
money market securities employ a trust or other similar structure to modify
the maturity, price characteristics, or quality of financial assets. For
example, put features can be used to modify the maturity of a security, or
interest rate adjustment features can be used to enhance price stability.
If the structure does not perform as intended, adverse tax or investment
consequences may result. Neither the Internal Revenue Service (IRS) nor any
other regulatory authority has ruled definitively on certain legal issues
presented by structured securities. Future tax or other regulatory
determinations could adversely affect the value, liquidity, or tax
treatment of the income received from these securities or the nature and
timing of distributions made by the funds.
MUNICIPAL LEASES and participation interests therein may take the form of a
lease, an installment purchase, or a conditional sale contract and are
issued by state and local governments and authorities to acquire land or a
wide variety of equipment and facilities. Generally, the funds will not
hold such obligations directly as a lessor of the property, but will
purchase a participation interest in a municipal obligation from a bank or
other third party. A participation interest gives a fund a specified,
undivided interest in the obligation in proportion to its purchased
interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
MUNICIPAL MARKET DISRUPTION RISK. The value of municipal securities may be
affected by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders in the event of a bankruptcy. Municipal
bankruptcies are relatively rare, and certain provisions of the U.S.
Bankruptcy Code governing such bankruptcies are unclear and remain
untested. Further, the application of state law to municipal issuers could
produce varying results among the states or among municipal securities
issuers within a state. These legal uncertainties could affect the
municipal securities market generally, certain specific segments of the
market, or the relative credit quality of particular securities. Any of
these effects could have a significant impact on the prices of some or all
of the municipal securities held by a fund, making it more difficult for
the fund to maintain a stable net asset value per share.
MUNICIPAL SECTORS:
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open transmission
access to any electricity supplier, although it is not presently known to
what extent competition will evolve. Other risks include: (a) the
availability and cost of fuel, (b) the availability and cost of capital,
(c) the effects of conservation on energy demand, (d) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (e) timely and sufficient rate
increases, and (f) opposition to nuclear power.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They generally are
secured by the revenues derived from mortgages purchased with the proceeds
of the bond issue. It is extremely difficult to predict the supply of
available mortgages to be purchased with the proceeds of an issue or the
future cash flow from the underlying mortgages. Consequently, there are
risks that proceeds will exceed supply, resulting in early retirement of
bonds, or that homeowner repayments will create an irregular cash flow.
Many factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current laws
and regulations.
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student loans.
Bonds issued to supply educational institutions with funds are subject to
the risk of unanticipated revenue decline, primarily the result of
decreasing student enrollment or decreasing state and federal funding.
Among the factors that may lead to declining or insufficient revenues are
restrictions on students' ability to pay tuition, availability of state and
federal funding, and general economic conditions. Student loan revenue
bonds are generally offered by state (or substate) authorities or
commissions and are backed by pools of student loans. Underlying student
loans may be guaranteed by state guarantee agencies and may be subject to
reimbursement by the United States Department of Education through its
guaranteed student loan program. Others may be private, uninsured loans
made to parents or students which are supported by reserves or other forms
of credit enhancement. Recoveries of principal due to loan defaults may be
applied to redemption of bonds or may be used to re-lend, depending on
program latitude and demand for loans. Cash flows supporting student loan
revenue bonds are impacted by numerous factors, including the rate of
student loan defaults, seasoning of the loan portfolio, and student
repayment deferral during periods of forbearance. Other risks associated
with student loan revenue bonds include potential changes in federal
legislation regarding student loan revenue bonds, state guarantee agency
reimbursement and continued federal interest and other program subsidies
currently in effect.
WATER AND SEWER. Water and sewer revenue bonds are often considered to have
relatively secure credit as a result of their issuer's importance, monopoly
status, and generally unimpeded ability to raise rates. Despite this, lack
of water supply due to insufficient rain, run-off, or snow pack is a
concern that has led to past defaults. Further, public resistance to rate
increases, costly environmental litigation, and Federal environmental
mandates are challenges faced by issuers of water and sewer bonds.
TRANSPORTATION. Transportation debt may be issued to finance the
construction of airports, toll roads, highways, or other transit
facilities. Airport bonds are dependent on the general stability of the
airline industry and on the stability of a specific carrier who uses the
airport as a hub. Air traffic generally follows broader economic trends and
is also affected by the price and availability of fuel. Toll road bonds are
also affected by the cost and availability of fuel as well as toll levels,
the presence of competing roads, and the general economic health of an
area. Fuel costs and availability also affect other transportation-related
securities, as does the presence of alternate forms of transportation, such
as public transportation.
PUT FEATURES entitle the holder to sell a security back to the issuer or a
third party at any time or at specified intervals. They are subject to the
risk that the put provider is unable to honor the put feature (purchase the
security). Put providers often support their ability to buy securities on
demand by obtaining letters of credit or other guarantees from other
entities. Demand features, standby commitments, and tender options are
types of put features.
QUALITY AND MATURITY. Pursuant to procedures adopted by the Board of
Trustees, the funds may purchase only high-quality securities that FMR
believes present minimal credit risks. To be considered high-quality, a
security must be rated in accordance with applicable rules in one of the
two highest categories for short-term securities by at least two nationally
recognized rating services (or by one, if only one rating service has rated
the security); or, if unrated, judged to be of equivalent quality by FMR.
High-quality securities are divided into "first tier" and "second tier"
securities. First tier securities are those deemed to be in the highest
rating category (e.g., Standard & Poor's A-1 or SP-1), and second tier
securities are those deemed to be in the second highest rating category
(e.g., Standard & Poor's A-2 or SP-2). Split-rated securities may be
determined to be either first or second tier based on applicable
regulations.
The Taxable funds may not invest more than 5% of its total assets in
second tier securities. In addition, the Taxable funds may not
invest more than 1% of its total assets or $1 million (whichever is
greater) in the second tier securities of a single issuer.
Each fund currently intends to limit its investments to securities with
remaining maturities of 397 days or less, and to maintain a dollar-weighted
average maturity of 90 days or less. When determining the maturity of a
security, a fund may look to an interest rate reset or demand feature.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. To protect a fund
from the risk that the original seller will not fulfill its obligation, the
securities are held in an account of the fund at a bank, marked-to-market
daily, and maintained at a value at least equal to the sale price plus the
accrued incremental amount. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the possibility
that the value of the underlying security will be less than the resale
price, as well as delays and costs to a fund in connection with bankruptcy
proceedings), it is a fund's current policy to engage in repurchase
agreement transactions with parties whose creditworthiness has been
reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a 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 it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security. However, in general, each fund anticipates holding restricted
securities to maturity or selling them in an exempt transaction.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement. A
fund will enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of the fund's assets and may be
viewed as a form of leverage.
SHORT SALES "AGAINST THE BOX." A fund may sell securities short when it
owns or has the right to obtain securities equivalent in kind or amount to
the securities sold short. Short sales could be used to protect the net
asset value per share of the fund in anticipation of increased interest
rates, without sacrificing the current yield of the securities sold short.
If a fund enters into a short sale against the box, it will be required to
set aside securities equivalent in kind and amount to the securities sold
short (or securities convertible or exchangeable into such securities) and
will be required to hold such securities while the short sale is
outstanding. The fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining, and closing short sales
against the box.
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. FMR may rely on its evaluation of
the credit of a bank or other entity in determining whether to purchase a
security supported by a letter of credit guarantee, put or demand
feature, insurance or other source of credit or liquidity. In
evaluating the credit of a foreign bank or other foreign entities, FMR will
consider whether adequate public information about the entity is available
and whether the entity may be subject to unfavorable political or economic
developments, currency controls, or other government restrictions that
might affect its ability to honor its commitment.
STRIPPED GOVERNMENT SECURITIES. Stripped government securities are created
by separating the income and principal components of a U.S. Government
security and selling them separately. STRIPS (Separate Trading of
Registered Interest and Principal of Securities) are created when the
coupon payments and the principal payment are stripped from an outstanding
Treasury security by a Federal Reserve Bank.
Privately stripped government securities are created when a dealer deposits
a U.S. Treasury security or other U.S. Government security with a custodian
for safekeeping. The custodian issues separate receipts for the coupon
payments and principal payment, which the dealer then sells. Proprietary
receipts, such as Certificates of Accrual on Treasury Securities (CATS) and
Treasury Investment Growth Receipts (TIGRS), and generic receipts, such as
Treasury Receipts (TRs), are privately stripped U.S. Treasury securities.
Because the SEC does not consider privately stripped government securities
to be U.S. Government securities for purposes of Rule 2a-7, a fund must
evaluate them as it would non-government securities pursuant to regulatory
guidelines applicable to all money market funds.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments of
the interest rate paid on the security. Variable rate securities provide
for a specified periodic adjustment in the interest rate, while floating
rate securities have interest rates that change whenever there is a change
in a designated benchmark rate. Some variable or floating rate securities
have put features.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the
management contract. FMR has granted investment management authority to the
sub-adviser (see the section entitled "Management Contracts"), and 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 a
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 considers various relevant factors, including, but not
limited to, the size and type of the transaction; the nature and character
of the markets for the security to be purchased or sold; the execution
efficiency, settlement capability, and financial condition of the
broker-dealer firm; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any commissions.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; and the availability of
securities or the purchasers or sellers of securities. In addition, such
broker-dealers may furnish analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy,
and performance of accounts; effect securities transactions, and perform
functions incidental thereto (such as clearance and settlement). FMR
maintains a listing of broker-dealers who provide such services on a
regular basis. However, as many transactions on behalf of the funds are
placed with broker-dealers (including broker-dealers on the list) without
regard to the furnishing of such services, it is not possible to estimate
the proportion of such transactions directed to such broker-dealers solely
because such services were provided. The selection of such broker-dealers
generally is made by FMR (to the extent possible consistent with execution
considerations) based upon the quality of research and execution services
provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
each fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the funds and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds, or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services. From September 1992
through December 1994, FBS operated under the name Fidelity Brokerage
Services Limited, Inc. (FBSL). As of January 1995, FBSL was converted to an
unlimited liability company and assumed the name FBS. Prior to September 4,
1992, FBSL operated under the name Fidelity Portfolio Services, Ltd. (FPSL)
as a wholly owned subsidiary of Fidelity International Limited (FIL).
Edward C. Johnson 3d is Chairman of FIL. Mr. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family own,
directly or indirectly, more than 25% of the voting common stock of
FIL.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
Each fund's Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the funds and review the commissions paid by each fund over
representative periods of time to determine if they are reasonable in
relation to the benefits to the fund.
For the fiscal years ended October 31, 1996, 1995, and 1994, Daily
Tax-Exempt Money Fund paid no brokerage commissions. For the fiscal
period ended October 31, 1996, and the fiscal years ended July
31, 1996, 1995, and 1994, U.S. Treasury Portfolio and Money Market
Portfolio paid no brokerage commissions.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of the funds to participate in volume transactions
will produce better executions and prices for the funds. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION
Fidelity Service Company (FSC) normally determines a class's net
asset value per share (NAV) at 2:00 p.m. and 4:00 p.m. Eastern time for
U.S. Treasury Portfolio and Money Market Portfolio , and at 12:00 noon
and 4:00 p.m. Eastern time for Daily Tax-Exempt Money Fund . The
valuation of portfolio securities is determined as of these times for the
purpose of computing each class's NAV.
Portfolio securities and other assets are valued on the basis of amortized
cost. This technique involves initially valuing an instrument at its cost
as adjusted for amortization of premium or accretion of discount rather
than its current market value. The amortized cost value of an instrument
may be higher or lower than the price a fund would receive if it sold the
instrument.
During periods of declining interest rates, a class's yield based on
amortized cost valuation may be higher than would result if the class
fund used market valuations to determine its NAV. The converse would
apply during periods of rising interest rates.
Valuing each fund's investments on the basis of amortized cost and use of
the term "money market fund" are permitted pursuant to Rule 2a-7 under the
1940 Act. Each fund must adhere to certain conditions under Rule 2a-7, as
summarized in the section entitled "Quality and Maturity" on page .
The Board of Trustees oversees FMR's adherence to the provisions of Rule
2a-7 and has established procedures designed to stabilize each
class 's NAV at $1.00. At such intervals as they deem appropriate,
the Trustees consider the extent to which NAV calculated by using market
valuations would deviate from $1.00 per share. If the Trustees believe that
a deviation from a 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.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. Each class's yield and total return
fluctuate in response to market conditions and other factors.
YIELD CALCULATIONS. To compute a class'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. A 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 funds may quote
yields in advertising based on any historical seven-day period. Yields for
Initial Class of the funds are calculated on the same basis as other money
market funds, as required by applicable regulations.
Yield information may be useful in reviewing a class's performance and in
providing a basis for comparison with other investment alternatives.
However, each class'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 a
class's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the class's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
A class's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment before taxes to equal the class's tax-free
yield. Tax-equivalent yields are calculated by dividing a class's yield by
the result of one minus a stated federal income tax rate. If only a
portion of a class'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 199 7 . 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 7 %. Of course, no
assurance can be given that a class will achieve any specific tax-exempt
yield. While Daily Tax-Exempt Money Fund invests principally in obligations
whose interest is exempt from federal income tax, other income received by
the funds may be taxable.
EXPECTED+ 1997 TAX RATES AND TAX-EQUIVALENT YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federal If individual tax-exempt yield is:
Taxable Income* Marginal 2% 3% 4% 5% 6% 7%
Single Return Joint Return Rate** Then taxable-equivalent yield is:
$ 0 - $ 24,650 $ 0- $ 41,200 15.0% 2.35% 3.53% 4.71% 5.88% 7.06% 8.24%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 28.0% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72%
$ 59,750-$ 124,650 $ 99,601-$ 151,750 31.0% 2.90% 4.35% 5.80% 7.25% 8.70% 10.14%
$ 124,651-$ 271,050 $ 151,750-$ 271,050 36.0% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94%
$ 271,050+ $ 271,050+ 39.6% 3.31% 4.97% 6.62% 8.28% 9.93% 11.59%
</TABLE>
+ The 1997 tax rates are not expected to be materially different from
the expected 1997 tax rates as shown above.
* 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 increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Daily Tax-Exempt Money Fund may invest a portion of its assets in
obligations that are subject to federal income tax. When a fund invests in
these obligations, its tax-equivalent yields will be lower. In the table
above, tax-equivalent yields are calculated assuming investments are 100%
federally tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a class's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the class's NAV over a
stated period. Average annual total returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in a
class over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of
growth or decline in value had been constant over the period. For example,
a cumulative total return of 100% over ten years would produce an average
annual total return of 7.18%, which is the steady annual rate of return
that would equal 100% growth on a compounded basis in ten years. While
average annual total returns are a convenient means of comparing investment
alternatives, investors should realize that a class's performance is not
constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to the actual
year-to-year performance of the class.
In addition to average annual total returns, a fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
HISTORICAL FUND RESULTS. The following table shows 7-day yields and total
returns for Initial Class of each fund and tax-equivalent yield for Initial
Class of Daily Tax-Exempt Money Fund for the period ended October 31, 1996.
The tax-equivalent yield is based on a 36 % federal income tax rate.
Note that each fund may invest in securities whose income is subject to the
federal alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
Seven-Day Tax- One Five Ten One Five Ten
Yield Equivalent Year Years Years Year Years Years
Yield
U.S. Treasury 4.72 % N/A 4.92% 3.97% 5.54 % 4.92 % 21.50 % 71.50 %
Portfolio - Initial
Class
Money Market 4.83 % N/A 5.01% 4.04% 5.66 % 5.01 % 21.87 % 73.47 %
Portfolio - Initial
Class
Daily
Tax-Exempt 3.02 % 4.72 % 3.02% 2.73% 3.76 % 3.02 % 14.39 % 44.64 %
Money Fund -
Initial Class
</TABLE>
Note: If FMR had not reimbursed certain fund expenses during these periods,
the funds' total returns would have been lower and yields would have been:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
7-day Yield Tax-Equivalent Yield
U.S. Treasury Portfolio - Initial Class 4.68% N/A
Money Market Portfolio - Initial Class 4.70% N/A
Daily Tax-Exempt Money Fund - Initial Class 2.92% 4.56%
</TABLE>
The following tables show the income and capital elements of each fund's
Initial Class cumulative total return. The table compares each fund's
Initial Class return to the record of the Standard & Poor's 500 Index (S&P
500), the Dow Jones Industrial Average (DJIA), and the cost of living as
measured by the Consumer Price Index (CPI), over the same period. The CPI
information is as of the month end closest to the initial investment date
for each fund. The S&P 500 and DJIA comparisons are provided to show how
each fund's Initial Class total return compared to the record of a broad
unmanaged index of common stocks and a narrower set of stocks of major
industrial companies, respectively, over the same period. Because each fund
invests in short-term fixed-income securities, common stocks represent a
different type of investment from the funds. Common stocks generally offer
greater growth potential than the funds, but generally experience greater
price volatility, which means greater potential for loss. In addition,
common stocks generally provide lower income than fixed-income investments
such as the funds. The S&P 500 and DJIA returns are based on the prices of
unmanaged groups of stocks and, unlike each funds' Initial Class returns,
do not include the effect of brokerage commissions or other costs of
investing.
The following tables show the growth in value of a hypothetical $10,000
investment in Initial Class of each fund during the 10-year period ended
October 31, 1996, assuming all distributions were reinvested. The figures
below reflect the fluctuating interest rates of the specified periods and
should not be considered representative of the dividend income or capital
gain or loss that could be realized from an investment in a class today.
Tax consequences of different investments have not been factored into the
figures below.
U.S. TREASURY PORTFOLIO - INITIAL CLASS
HISTORICAL FUND RESULTS
During the 10- year period ended October 31, 1996, a hypothetical
$10,000 investment in Initial Class of U.S. Treasury Portfolio would
have grown to $ 17,150.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1996 $ 10,000 $ 7,150 $ 0 $ 17,150 $ 39,291 $ 43,713 $ 14,352
1995 $ 10,000 $ 6,345 $ 0 $ 16,345 $ 31,662 $ 33,740 $ 13,935
1994 $ 10,000 $ 5,517 $ 0 $ 15,517 $ 25,041 $ 27,043 $ 13,554
1993 $ 10,000 $ 5,028 $ 0 $ 15,028 $ 24,109 $ 24,786 $ 13,209
1992 $ 10,000 $ 4,633 $ 0 $ 14,633 $ 20,974 $ 21,104 $ 12,856
1991 $ 10,000 $ 4,116 $ 0 $ 14,116 $ 19,071 $ 19,495 $ 12,457
1990 $ 10,000 $ 3,311 $ 0 $ 13,311 $ 14,284 $ 14,987 $ 12,103
1989 $ 10,000 $ 2,325 $ 0 $ 12,325 $ 15,441 $ 15,617 $ 11,387
1988 $ 10,000 $ 1,315 $ 0 $ 11,315 $ 12,216 $ 12,225 $ 10,898
1987 $ 10,000 $ 597 $ 0 $ 10,597 $ 10,641 $ 10,943 $ 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of U.S. Treasury Portfolio on October 31, 1987, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to
$ 17,150. If distributions had not been reinvested, the amount of
distributions earned from the class fund over time would have been
smaller, and cash payments for the period would have amounted to
$ 5,408 . The class did not distribute any capital gains during
the period.
MONEY MARKET PORTFOLIO - INITIAL CLASS
HISTORICAL FUND RESULTS
During the ten year period ended October 31, 1996, a hypothetical $10,000
investment in Initial Class of Money Market would have grown to
$ 17,347.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1996 $ 10,000 $ 7,347 $ 0 $ 17,347 $ 39,291 $ 43,713 $ 14,352
1995 $ 10,000 $ 6,519 $ 0 $ 16,519 $ 31,662 $ 33,740 $ 13,935
1994 $ 10,000 $ 5,666 $ 0 $ 15,666 $ 25,041 $ 27,043 $ 13,554
1993 $ 10,000 $ 5,151 $ 0 $ 15,151 $ 24,109 $ 24,786 $ 13,209
1992 $ 10,000 $ 4,747 $ 0 $ 14,747 $ 20,974 $ 21,104 $ 12,856
1991 $ 10,000 $ 4,233 $ 0 $ 14,233 $ 19,071 $ 19,495 $ 12,457
1990 $ 10,000 $ 3,393 $ 0 $ 13,393 $ 14,284 $ 14,987 $ 12,103
1989 $ 10,000 $ 2,389 $ 0 $ 12,389 $ 15,441 $ 15,617 $ 11,387
1988 $ 10,000 $ 1,361 $ 0 $ 11,361 $ 12,216 $ 12,225 $ 10,898
1987 $ 10,000 $ 611 $ 0 $ 10,611 $ 10,641 $ 10,943 $ 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Money Market Portfolio on October 31, 1987, the net amount
invested in Initial Class shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distribution for the period covered
(their cash value at the time they were reinvested), amounted to
$ 17,347 . If distributions had not been reinvested, the amount of
distributions earned from the class fund over time would have been
smaller, and cash payments for the period would have amounted to $ 5,522
for dividends . The fund did not distribute any capital gains during the
period.
DAILY TAX-EXEMPT MONEY FUND - INITIAL CLASS
HISTORICAL FUND RESULTS
During the 10- year period ended October 31, 1996, a hypothetical
$10,000 investment in Initial Class of Daily Tax-Exempt Money Fund would
have grown to 14,464.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1996 $ 10,000 $ 4,464 $ 0 $ 14,464 $ 39,291 $ 43,713 $ 14,352
1995 $ 10,000 $ 4,039 $ 0 $ 14,039 $ 10,641 $ 33,740 $ 13,935
1994 $ 10,000 $ 3,583 $ 0 $ 13,583 $ 31,662 $ 27,043 $ 13,554
1993 $ 10,000 $ 3,289 $ 0 $ 13,289 $ 25,041 $ 24,786 $ 13,209
1992 $ 10,000 $ 3,015 $ 0 $ 13,015 $ 24,109 $ 21,104 $ 12,856
1991 $ 10,000 $ 2,644 $ 0 $ 12,644 $ 20,974 $ 19,495 $ 12,457
1990 $ 10,000 $ 2,104 $ 0 $ 12,104 $ 19,071 $ 14,987 $ 12,103
1989 $ 10,000 $ 1,486 $ 0 $ 11,486 $ 14,284 $ 15,617 $ 11,387
1988 $ 10,000 $ 865 $ 0 $ 10,865 $ 15,441 $ 12,225 $ 10,898
1987 $ 10,000 $ 393 $ 0 $ 10,393 $ 12,216 $ 10,943 $ 10,453
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in Initial
Class of Daily Tax- Exempt Money Fund on October 31, 1987, the net
amount invested in Initial Class shares was $10,000. The cost of the
initial investment ($10,000) together with the aggregate cost of reinvested
dividends for the period covered (their cash value at the time they were
reinvested) amounted to $ 14,464 . If distributions had not been
reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $ 3,697 for dividends . The fund did not distribute any
capital gains during the period.
PERFORMANCE COMPARISONS. A fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as
mutual fund rankings prepared by Lipper Analytical Services, Inc. (Lipper),
an independent service located in Summit, New Jersey that monitors the
performance of mutual funds. Generally, Lipper rankings are based on total
return, assume reinvestment of distributions, do not take sales charges or
redemption fees into consideration, and are prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to the
mutual fund rankings, a fund's performance may be compared to 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 available from stock mutual
funds.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, a fund
may offer greater liquidity or higher potential returns than CDs, a 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 in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC Financial Data, Inc. of
Ashland, Massachusetts. These averages assume reinvestment of
distributions. IBC MONEY FUND REPORT AVERAGES(trademark)/All-Taxable, which
is reported in IBC's MONEY FUND REPORT(registered trademark), covers over
814 taxable money market funds; IBC MONEY FUND REPORT
AVERAGES(trademark)/Government, which is reported in IBC's MONEY FUND
REPORT(registered trademark), covers over 228 government money market
funds; and IBC MONEY FUND REPORT AVERAGES(trademark)/All Tax-Free, which is
reported in IBC's MONEY FUND REPORT(registered trademark), covers over 410
tax-free money market funds.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include other Fidelity funds; retirement investing;
brokerage products and services; model portfolios or allocations; 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 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.
A fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
As of October 31, 1996, FMR advised over $ 28 billion in tax-free
fund assets, $ 93 billion in money market fund assets, $ 289
billion in equity fund assets, $ 59 billion in international fund
assets, and $ 24 billion in Spartan fund assets. The funds may
reference the growth and variety of money market mutual funds and the
adviser's innovation and participation in the industry. The equity funds
under management figure represents the largest amount of equity fund assets
under management by a mutual fund investment adviser in the United States,
making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
In addition to performance rankings, each class may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A class's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing a class's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 (the Rule) under the 1940 Act, each fund is
required to give shareholders at least 60 days' notice prior to terminating
or modifying its exchange privilege. Under the Rule, the 60-day
notification requirement may be waived if (i) the only effect of a
modification would be to reduce or eliminate an administrative fee,
redemption fee or deferred sales charge ordinarily payable at the time of
exchange, or (ii) a fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or a fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DIVIDENDS. Because each fund's income is primarily derived from interest,
dividends from the fund generally will not qualify for the
dividends-received deduction available to corporate shareholders. A portion
of each fund's dividends derived from certain U.S. Government obligations
may be exempt from state and local taxation.
To the extent that each fund's income is designated as federally tax-exempt
interest, the daily dividends declared by the fund are also federally
tax-exempt. Short-term capital gains are distributed as dividend income,
but do not qualify for the dividends-received deduction. These gains will
be taxed as ordinary income.
Each fund will send each shareholder a notice in January describing the tax
status of dividend and capital gain distributions (if any) for the prior
year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
Daily Tax-Exempt Money Fund purchases municipal securities whose interest
FMR believes is free from federal income tax. Generally, issuers or other
parties have entered into covenants requiring continuing compliance with
federal tax requirements to preserve the tax-free status of interest
payments over the life of the security. If at any time the covenants are
not complied with, or if the IRS determines that the issuer did not comply
with relevant tax requirements, interest payments from a security could
become federally taxable retroactive to the date the security was issued.
For certain types of structured securities, the tax status of the
pass-through of tax-free income may also be based on the federal tax
treatment of the structure.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of Daily Tax-Exempt Money Fund's policy
of investing so that at least 80% of its income distribution is free from
federal income tax. Interest from private activity securities is a tax
preference item for the purposes of determining whether a taxpayer is
subject to the AMT and the amount of AMT to be paid, if any. Private
activity securities issued after August 7, 1986 to benefit a private or
industrial user or to finance a private facility are affected by this rule.
A portion of the gain on bonds purchased with market discount after April
30, 1993 and short-term capital gains distributed by the fund are taxable
to shareholders as dividends, not as capital gains. Dividend distributions
resulting from a recharacterization of gain from the sale of bonds
purchased with market discount after April 30, 1993 are not considered
income for the purposes of Daily Tax-Exempt Money Fund's policy of
investing so that at least 80% of its income distribution is free from
federal income tax. Daily Tax-Exempt Money Fund may distribute any net
realized short-term capital gains and taxable market discount once a year
or more often, as necessary, to maintain its net asset value at $1.00 per
share.
It is the current position of the staff of the SEC that a fund that uses
the term "tax-exempt" in its name may not derive more than 20% of its
income from municipal obligations that pay interest that is a preference
item for purposes of the AMT. According to this position, at least 80% of
Daily Tax-Exempt Money Fund's income would have to be exempt from the AMT
as well as from federal income taxes.
Corporate investors should note that a tax preference item for the purposes
of the corporate AMT is 75% of the amount by which adjusted current
earnings (which includes tax-exempt interest) exceeds the alternative
minimum taxable income of the corporation. If a shareholder receives an
exempt-interest dividend and sells shares at a loss after holding them for
a period of six months or less, the loss will be disallowed to the extent
of the amount of the exempt-interest dividend.
CAPITAL GAIN DISTRIBUTIONS. Each fund may distribute any net realized
short-term capital gains once a year or more often as necessary, to
maintain its net asset value at $1.00 per share. U.S. Treasury Portfolio
and Money Market Portfolio do not anticipate earning long-term capital
gains on securities held by each fund. Daily Tax-Exempt Money Fund does not
anticipate distributing long-term capital gains.
As of the fiscal period ended October 31, 1996, U.S. Treasury Portfolio had
capital loss carryforwards aggregating approximately $ 421,000 . The
loss carryforward for U.S. Treasury Portfolio, will expire on October 31,
2001 , is available to offset future capital gains.
As of the fiscal period ended October 31, 1996, Money Market
Portfolio had capital loss carryforwards aggregating approximately
$ 764,000 . The loss carryforward for Money Market Portfolio, of which
$ 7,000, $125,000, $584,000, and $48,000 will expire on October 31,
2000, 2001, 2002, and 2003, respectively , is available to offset
future capital gains.
As of the fiscal period ended October 31, 1996, Daily Tax-Exempt
Money Fund had capital loss carryforwards aggregating approximately
$ 98,000 . The loss carryforward for Daily Tax-Exempt Money Fund,
of which $24,000 and $74,000 will expire on October 31, 2000 and
2004, respectively , is available to offset future capital gains.
STATE AND LOCAL TAX ISSUES. For mutual funds organized as business trusts,
state law provides for a pass-through of the state and local income tax
exemption afforded to direct owners of U.S. Government securities. Some
states limit this to mutual funds that invest a certain amount in U.S.
Government securities, and some types of securities, such as repurchase
agreements and some agency backed securities, may not qualify for this
benefit. The tax treatment of your dividend distributions from a fund will
be the same as if you directly owned your proportionate share of the U.S.
Government securities in the fund's portfolio. Because the income earned on
most U.S. Government securities in which a fund invests is exempt from
state and local income taxes, the portion of your dividends from the fund
attributable to these securities will also be free from income taxes. The
exemption from state and local income taxation does not preclude states
from assessing other taxes on the ownership of U.S. Government securities.
In a number of states, corporate franchise (income) tax laws do not exempt
interest earned on U.S. Government securities whether such securities are
held directly or through a fund.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments may
also impose taxes on other payments or gains with respect to foreign
securities. If, at the close of its fiscal year, more than 50% of a fund's
total assets are invested in securities of foreign issuers, the fund may
elect to pass through foreign taxes paid and thereby allow shareholders to
take a credit or deduction on their individual tax returns.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis.
Each fund is treated as a separate entity from the other funds of its
respective Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether a fund is suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two classes.
Class B is held predominantly by members of the Edward C. Johnson 3d family
and is entitled to 49% of the vote on any matter acted upon by the voting
common stock. Class A is held predominantly by non-Johnson family member
employees of FMR Corp. and its affiliates and is entitled to 51% of the
vote on any such matter. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Under the 1940 Act, control of a company is presumed where
one individual or group of individuals owns more than 25% of the voting
stock of that company. Therefore, through their ownership of voting common
stock and the execution of the shareholders' voting agreement, members of
the Johnson family may be deemed, under the 1940 Act, to 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: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees , Members of the Advisory Board, and executive officers
of the trust are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the last
five years. Trustees and officers elected or appointed to each trust prior
to the conversion from series of Massachusetts business trusts served in
identical capacities. All persons named as Trustees and Members of the
Advisory Board also serve in similar capacities for other funds advised
by FMR. The business address of each Trustee and officer who is an
"interested person" (as defined in the 1940 Act) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The business
address of all the other Trustees and Members of the Advisory Board
is Fidelity Investments, P.O. Box 9235, Boston, Massachusetts 02205-9235.
Those Trustees who are "interested persons" by virtue of their affiliation
with either the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (66), 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., Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD (55), Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX (64), Trustee (1991), is a management consultant (1994). Prior
to February 1994, he was President of Greenhill Petroleum Corporation
(petroleum exploration and production). 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), CH2M Hill Companies (engineering), Rio Grande,
Inc. (oil and gas production), and Daniel Industries (petroleum measurement
equipment manufacturer). In addition, he is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS (64), 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), 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 (72), Trustee and Chairman of the non-interested Trustees,
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 Trustee of College of the Holy Cross and Old
Sturbridge Village, Inc., and he previously served as a Director of
Mechanics Bank (1971-1995).
E. BRADLEY JONES (68), Trustee. Prior to his retirement in 1984, Mr. Jones
was Chairman and Chief Executive Officer of LTV Steel Company. He is a
Director of TRW Inc. (original equipment and replacement products),
Cleveland-Cliffs Inc (mining), Consolidated Rail Corporation, Birmingham
Steel Corporation, and RPM, Inc. (manufacturer of chemical products), and
he previously served as a Director of NACCO Industries, Inc. (mining and
marketing, 1985-1995) and Hyster-Yale Materials Handling, Inc. (1985-1995).
In addition, he serves as a Trustee of First Union Real Estate Investments,
a Trustee and member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK (63), Trustee, is Executive-in-Residence (1995) at Columbia
University Graduate School of Business and a financial consultant. From
1987 to January 1995, Mr. Kirk was a Professor at Columbia University
Graduate School of Business. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and he previously served as a Director of
Valuation Research Corp. (appraisals and valuations, 1993-1995). In
addition, he serves as Chairman of the Board of Directors of the National
Arts Stabilization Fund, Chairman of the Board of Trustees of the Greenwich
Hospital Association, a Member of the Public Oversight Board of the
American Institute of Certified Public Accountants' SEC Practice Section
(1995), and as a Public Governor of the National Association of Securities
Dealers, Inc. (1996).
*PETER S. LYNCH (53), Trustee, is Vice Chairman and Director of FMR (1992).
Prior to May 31, 1990, he was a Director of FMR and Executive Vice
President of FMR (a position he held until March 31, 1991); Vice President
of Fidelity Magellan Fund and FMR Growth Group Leader; and Managing
Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity
Investments Corporate Services (1991-1992). He is a Director of W.R. Grace
& Co. (chemicals) 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.
GERALD C. McDONOUGH (67), Trustee and Vice-Chairman of the non-interested
Trustees, 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 Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration),
Commercial Intertech Corp. (hydraulic systems, building systems, and metal
products, 1992), CUNO, Inc. (liquid and gas filtration products, 1996), and
Associated Estates Realty Corporation (a real estate investment trust,
1993). Mr. McDonough served as a Director of ACME-Cleveland Corp. (metal
working, telecommunications, and electronic products) from 1987-1996.
EDWARD H. MALONE (71), Trustee. Prior to his retirement in 1985, Mr. Malone
was Chairman, General Electric Investment Corporation and a Vice President
of General Electric Company. He is a Director of Allegheny Power Systems,
Inc. (electric utility), General Re Corporation (reinsurance) and Mattel
Inc. (toy manufacturer). In addition, he serves as a Trustee of 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 (63), 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.
THOMAS R. WILLIAMS (68), Trustee, is President of The Wales Group, Inc.
(management and financial advisory services). Prior to retiring in 1987,
Mr. Williams served as Chairman of the Board of First Wachovia Corporation
(bank holding company), and Chairman and Chief Executive Officer of The
First National Bank of Atlanta and First Atlanta Corporation (bank holding
company). He is currently a Director of BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company (electric
utility), Gerber Alley & Associates, Inc. (computer software), National
Life Insurance Company of Vermont, American Software, Inc., and AppleSouth,
Inc. (restaurants, 1992).
WILLIAM O. McCOY (63), Member of the Advisory Board (1996), is the Vice
President of Finance for the University of North Carolina (16-school
system, 1995). Prior to his retirement in December 1994, Mr. McCoy was Vice
Chairman of the Board of BellSouth Corporation (telecommunications) and
President of BellSouth Enterprises. He is currently a Director of Liberty
Corporation (holding company), Weeks Corporation of Atlanta (real estate,
1994), and Carolina Power and Light Company (electric utility, 1996).
Previously, he was a Director of First American Corporation (bank holding
company, 1979-1996). In addition, Mr. McCoy serves as a member of the Board
of Visitors for the University of North Carolina at Chapel Hill (1994) and
for the Kenan Flager Business School (University of North Carolina at
Chapel Hill).
SARAH H. ZENOBLE (47), Vice President, is Vice President of Fidelity's
money market funds (1996) and Vice President of FMR Texas Inc.
LELAND C. BARRON (37), Vice President of U.S. Treasury Portfolio (1991), is
Vice President of other funds advised by FMR and an employee of FMR Texas
Inc.
ROBERT K. DUBY (50), Vice President of Money Market Portfolio (1996), is
Vice President of other funds advised by FMR and an employee of FMR Texas
Inc.
SCOTT A. ORR (34), Vice President of Daily Tax-Exempt Money Fund (1995), is
Vice President of other funds advised by FMR and an employee of FMR Texas
Inc.
ARTHUR S. LORING (49), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
KENNETH A. RATHGEBER (49), Treasurer (1995), is Treasurer of the Fidelity
funds and is an employee of FMR (1995). Before joining FMR, Mr. Rathgeber
was a Vice President of Goldman Sachs & Co. (1978-1995), where he served in
various positions, including Vice President of Proprietary Accounting
(1988-1992), Global Co-Controller (1992-1994), and Chief Operations Officer
of Goldman Sachs (Asia) LLC (1994-1995).
THOMAS D. MAHER (51), Assistant Vice President, is Assistant Vice President
of Fidelity's money market funds and Vice President and Associate General
Counsel of FMR Texas Inc.
JOHN H. COSTELLO (50), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (50), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994) and Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993).
THOMAS J. SIMPSON (38), Assistant Treasurer (1996), is Assistant Treasurer
of Fidelity's money market funds and an employee of FMR (1996). Prior to
joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty
Investment Services (1987-1995).
The following table sets forth information describing the compensation of
each current Trustee or Member of the Advisory Board of each fund
for his or her services as trustee for the fiscal period ended
October 31, 1996.
COMPENSATION TABLE
Aggregate Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J. Gary Ralph Phyllis Richard Edward C. E. Donald Peter Gerald C. Edward Marvin Thomas William
Burkhead** F. Cox Burke J. Johnson Bradley J. Kirk S. McDonough H. L. Mann R. O.
Davis Flynn 3d** Jones Lynch** Malone Williams MCCoy
U.S.
Treasury $ 0 $688 $672 $882 $ 0 $681 $687 $0 $678 $672 $672 $687 $315
Portfolio
Money Market 0 857 834 1,098 0 844 853 0 842 856 839 852 400
Portfolio
Daily 0 182 176 231 0 179 180 0 178 178 178 180 78
Tax-Exempt
Money Fund
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Trustees Pension or Estimated Annual Total
Retirement Benefits Upon Compensation
Benefits Accrued Retirement from from the Fund
as Part of Fund the Fund Complex* Complex*
Expenses from the
Fund Complex*
J. Gary Burkhead** $ 0 $ 0 $ 0
Ralph F. Cox 5,200 52,000 128,000
Phyllis Burke Davis 5,200 52,000 125,000
Richard J. Flynn 0 52,000 160,500
Edward C. Johnson 3d** 0 0 0
E. Bradley Jones 5,200 49,400 128,000
Donald J. Kirk 5,200 52,000 129,500
Peter S. Lynch** 0 0 0
Gerald C. McDonough 5,200 52,000 128,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 128,000
Thomas R. Williams 5,200 52,000 125,000
Williams O. McCoy N/A N/A 0
</TABLE>
* Information is as of December 31, 1995 for 219 funds in the complex.
** Interested trustees of the fund are compensated by FMR.
*** For the fiscal period ended October 31, 1996, the non-interested
trustees' aggregate compensation from Money M a rket Portfolio
to Edward H. Malone include d accrued deferred compensation of
$782.
The non-interested Trustees may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of a Deferred
Compensation Plan (the Plan). Under the Plan, compensation deferred by a
Trustee is periodically adjusted as though an equivalent amount had been
invested and reinvested in shares of one or more funds in the complex
designated by such Trustee (designated securities). The amount paid to the
Trustee under the Plan will be determined based upon the performance of
such investments. Deferral of Trustees' fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate the fund to retain the services of
any Trustee or to pay any particular level of compensation to the Trustee.
Each fund may invest in such designated securities under the Plan without
shareholder approval.
Under a retirement program adopted in July 1988 and modified in November
1995, each non-interested Trustee may receive payments from a Fidelity fund
during his or her lifetime based on his or her basic trustee fees and
length of service. The obligation of a fund to make such payments is
neither secured nor funded. A Trustee becomes eligible to participate in
the program at the end of the calender year in which he or she reaches age
72, provided that, at the time of retirement, he or she has served as a
Fidelity fund Trustee for at least five years. Currently, Messrs. Ralph S.
Saul, William R. Spaulding, Bertram H. Witham, and David L. Yunich, all
former non-interested Trustees, receive retirement benefits under the
program.
As of November 29, 1996, the Trustees, Members of the Advisory Board, and
officers of each fund owned, in the aggregate, less than 1% of each fund's
total outstanding shares.
As of November 29, 1996, the following owned of record or beneficially 5%
or more of outstanding shares of the funds: Advantage Capital Corp.,
Houston, TX - 31.54% of Class B shares of U.S. Treasury Portfolio; First
Trust, St. Paul, MN - 25.73% of Initial Class shares of U.S. Treasury
Portfolio; Texas Commerce Bank, N.A., Houston, TX - 22.56% of Initial Class
shares of Daily Tax-Exempt Money Fund and 17.67% of Initial Class shares of
U.S. Treasury Portfolio; Ifg Network Securities, Atlanta, GA - 6.95% of
Initial Class shares of U.S. Treasury Portfolio; and Los Equity Sales
Corp., Ft. Wayne, IN - 5.69% of Initial Class shares of Daily Tax-Exempt
Money Fund.
A shareholder owning of record or beneficially more than 25% of a fund's
outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other shareholders.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides each fund with all necessary
office facilities and personnel for servicing each fund's investments,
compensates all officers of each fund, all Trustees who are "interested
persons" of the trusts or of FMR, and all personnel of each fund or FMR for
performing services relating to research, statistical , and
investment activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of each fund. These services include providing facilities
for maintaining each fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with each fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining each
fund's records and the registration of each fund's shares under federal and
state laws; developing management and shareholder services for each fund;
and furnishing reports, evaluations, and analyses on a variety of subjects
to the Trustees.
In addition to the management fee payable to FMR and the fees payable to
UMB, FIIOC, and FSC, each fund or class thereof, as applicable, pays all of
its expenses, without limitation, that are not assumed by those parties.
Each fund pays for the typesetting, printing, and mailing of its proxy
materials to shareholders, legal expenses, and the fees of the custodian,
auditor and non-interested Trustees. Although each fund's current
management contract provides that the fund will pay for typesetting,
printing, and mailing prospectuses, statements of additional information,
notices and reports to shareholders, the trusts, on behalf of each fund,
have entered into revised transfer agent agreements with FIIOC and UMB, as
applicable, pursuant to which FIIOC or UMB bears the costs of providing
these services to existing shareholders of the applicable classes. Other
expenses paid by each fund include interest, taxes, brokerage commissions,
each fund's proportionate share of insurance premiums and Investment
Company Institute dues, and the costs of registering shares under federal
and state securities laws. Each fund is also liable for such non-recurring
expenses as may arise, including costs of any litigation to which the fund
may be a party, and any obligation it may have to indemnify its officers
and Trustees with respect to litigation.
FMR is each fund's manager pursuant to management contracts dated September
30, 1993 for U.S. Treasury Portfolio and Money Market Portfolio; and
December 30, 1991 for Daily Tax-Exempt Money Fund. The management contracts
were approved by shareholders of U.S. Treasury Portfolio and Money Market
Portfolio on March 24, 1993 and shareholders of Daily Tax-Exempt Money Fund
on October 23, 1991.
For the services of FMR under each contract, each fund pays FMR a monthly
management fee at the annual rate of 0.50% of average net assets throughout
the month. Fees received by FMR for the last three fiscal years are
shown in the table below.
Fund Fiscal Year Ended Management Fees Paid to FMR
U.S. Treasury Portfolio 10/31/96* $ 2,327,773
7/31/96 10,004,781
7/31/95 9,784,211
7/31/94 13,343,263
Money Market Portfolio 10/31/96* 3,212,443
7/31/96 12,172,452
7/31/95 9,232,796
7/31/94 7,553,008
Tax-Exempt 10/31/96 2,607,230
10/31/95 2,432,962
10/31/94 2,592,124
* For the period August 1, 1996 through October 31, 1996. The fiscal
year - end of U.S. Treasury Portfolio and Money Market Portfolio
changed from July 31 to October 31 in October 1996.
FMR may, from time to time, voluntarily reimburse all or a portion of
Initial Class's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses. FMR retains the ability to
be repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase each class's total returns and yield and repayment of
the reimbursement by each class will lower its total returns and yield.
To comply with the California Code of Regulations, FMR will reimburse each
fund if and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating each fund's expenses for purposes of this regulation, each
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its distribution plan expenses and
custodian fees attributable to investment in foreign securities.
SUB-ADVISER. FMR has entered into a sub-advisory agreement with FMR Texas
pursuant to which FMR Texas has primary responsibility for providing
portfolio investment management services to each fund.
Under the sub-advisory agreements, dated September 30, 1993 for U.S.
Treasury Portfolio and Money Market Portfolio and approved by shareholders
on March 24, 1993 and dated December 30, 1991 for Daily Tax-Exempt Money
Fund and approved by shareholders on October 23, 1991, FMR pays FMR Texas
fees equal to 50% of the management fees payable to FMR under its
management contract with each fund , after payments by FMR pursuant to
each fund's 12b-1 plan, if any. The fees paid to FMR Texas are not
reduced by any voluntary or mandatory expense reimbursements that may be in
effect from time to time. The following table shows fees FMR
paid to FMR Texas on behalf of each fund :
Fund Fiscal Year Ended Fees Paid to FMR Texas by FMR
U.S. Treasury Portfolio 10/31/96* $ 521,771
7/31/96 2,098,350
7/31/95 1,886,692
7/31/94 2,367,209
Money Market Portfolio 10/31/96* 900,563
7/31/96 3,398,817
7/31/95 2,556,301
7/31/94 1,884,963
Tax-Exempt 10/31/96 627,565
10/31/95 582,239
10/31/94 594,149
* For the period August 1, 1996 through October 31, 1996. The fiscal
year - end of U.S. Treasury Portfolio and Money Market Portfolio
changed from July 31 to October 31 in October 1996.
CONTRACTS WITH FMR AFFILIATES
FIIOC, an affiliate of FMR, is the transfer, dividend disbursing, and
shareholder servicing agent for Initial Class shares of U.S. Treasury
Portfolio and Money Market Portfolio.
Under this arrangement and effective through December 31, 1996, FIIOC
receives an annual account fee and an asset based fee each based on account
size and fund type for each retail account and certain institutional
accounts. With respect to certain institutional retirement accounts, FIIOC
receives an annual account fee and an asset based fee based on account type
or fund type. These annual account fees are subject to increase based on
postal rate change. Effective January 1, 1997 FIIOC receives an annual
asset-based fee. This fee is subject to increase based on postal rate
changes.
UMB is the transfer agent for Initial Class shares of Daily Tax-Exempt
Money Fund. UMB has entered into a sub-contract with FIIOC under the terms
of which FIIOC performs the processing activities associated with providing
transfer agent and shareholder servicing functions for INitial Class shares
of Daily Tax-Exempt Money Fund.
For accounts that FIIOC maintains on behalf of UMB, FIIOC receives all such
fees.
FIIOC bears the expense of typesetting, printing, and mailing prospectuses,
statements of additional information, and all other reports, notices, and
statements to shareholders, with the exception of proxy statements. Also,
FIIOC pays out-of-pocket expenses associated with transfer agent services.
FSC, an affiliate of FMR, performs the calculations necessary to determine
NAV and dividends for Initial Class shares of U.S. Treasury Portfolio and
Money Market Portfolio and maintains accounting records for U.S. Treasury
Portfolio and Money Market Portfolio. UMB has a sub-contract with FSC,
under the terms of which FSC performs the calculations necessary to
determine NAV and dividends for Initial Class shares of Daily Tax-Exempt
Money Fund and maintains the accounting records for Daily Tax-Exempt Money
Fund. The annual fee rates for pricing and bookkeeping services are based
on on each fund's average net assets, specifically, .0175% of the first
$500 million of average net assets and .0075% of average net assets in
excess of $500 million. The fee is limited to a minimum of $40,000 and a
maximum of $800,000 per year.
Transfer agent fees and pricing and bookkeeping fees for Daily Tax-Exempt
Money Fund are paid to FIIOC and FSC, respectively, by UMB which is
entitled to reimbursement from Initial Class or the fund, as applicable,
for these expenses.
Pricing and bookkeeping fees, including reimbursement for out-of-pocket
expenses, paid to FSC for the past three fiscal years were as follows:
Fund Fiscal Year Ended Fees Paid to FSC
U.S. Treasury Portfolio 10/31/96* $ 47,493
7/31/96 200,897
7/31/95 196,883
7/31/94 250,737
Money Market Portfolio 10/31/96* 60,667
7/31/96 233,579
7/31/95 188,697
7/31/94 163,480
Tax-Exempt 10/31/96 107,140
10/31/95 102,002
10/31/94 102,238
* For the period August 1, 1996 through October 31, 1996. The fiscal
year - end of U.S. Treasury Portfolio and Money Market Portfolio
changed from July 31 to October 31 in October 1996.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreements call
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for Initial Class shares of each 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 PLANS
The Trustees have approved a Distribution and Service Plan on behalf of
Initial Class of the funds (the Plans) 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
primarily intended to result in the sale of shares of a fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, allow Initial Class of the funds and
FMR to incur certain expenses that might be considered to constitute
indirect payment by the funds of distribution expenses.
Under each Plan, if the payment of management fees by the funds to FMR is
deemed to be indirect financing by the funds of the distribution of their
shares, such payment is authorized by the Plans. Each Plan specifically
recognizes that FMR may use its management fee revenue, as well as its past
profits, or its other resources to pay expenses associated with the sale of
Initial Class shares. This may include reimbursing FDC for payments made to
third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of Initial Class shares. The
Trustees have authorized such payments.
Under the Initial Class Plans, payments made by FMR to FDC during the
three month period ended October 31, 1996 were $1,284,231 for U.S. Treasury
Portfolio and $1,411,317 for Money Market Portfolio, for the fiscal year
ended July 31, 1996 were $5,808,081 for U.S. Treasury Portfolio and
$5,374,819 for Money Market Portfolio, and for the fiscal year ended
October 31, 1996 were $1,352,100 for Daily Tax-Exempt Money Fund.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and have
determined that there is a reasonable likelihood that the Plan will benefit
Initial Class of the applicable fund and its shareholders. In particular,
the Trustees noted that each Plan does not authorize payments by Initial
Class of each fund other than those made to FMR under its management
contract with the fund. To the extent that each Plan gives FMR and FDC
greater flexibility in connection with the distribution of shares of Class
I of each fund, additional sales of fund shares may result. Furthermore,
certain shareholder support services may be provided more effectively under
the Plans by local entities with whom shareholders have other
relationships.
The Plans were approved by Initial Class shareholders of U.S. Treasury
Portfolio and Money Market Portfolio on March 24, 1993, and by Initial
Class shareholders of Daily Tax-Exempt Money Fund on October 19, 1991. Each
Plan was approved by shareholders, in connection with a reorganization
transaction on September 29, 1993 for U.S. Treasury Portfolio and Money
Market Portfolio and December 20, 1991 for Daily Tax-Exempt Money Fund,
pursuant to an Agreement and Plan of Conversion.
Each Plan allows FDC to make payments to certain third parties with whom
FDC has entered into written Service Contracts and who assist or have
assisted in selling Initial Class shares of the fund or who provide
shareholder support services (investment professionals), for assistance in
selling Initial Class shares of the fund or for providing shareholder
support services. Each Plan authorizes FMR to make payments from its
management fee, its past profits or any other source available to it, to
reimburse FDC for these payments to investment professionals, provided that
such payments cannot exceed the amount of the management fee. The maximum
amount payable to investment professionals under each Plan, as determined
by the Board of Trustees, is currently at the annual rate of up to 0.40% of
the average net asset value of the applicable class for shareholder support
or distribution services.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed
herein, and banks and other financial institutions may be required to
register as dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plans.
No preference for the instruments of such depository institutions will be
shown in the selection of investments.
DESCRIPTION OF THE TRUSTS
TRUST ORGANIZATION. U.S. Treasury Portfolio and Money Market Portfolio are
funds of Daily Money Fund, an open-end management investment company
originally organized as a Massachusetts business trust on June 7, 1982,
pursuant to a Declaration of Trust that was amended and restated on
September 1, 1989. On September 29, 1993, the trust was converted to a
Delaware business trust pursuant to an agreement approved by shareholders
on March 24, 1993. The Delaware trust, which was organized on June 20, 1991
under the name Daily Money Fund II, succeeded to the name Daily Money Fund
on July 14, 1995. Currently, there are six funds of the trust: Treasury
Only, U.S. Treasury Portfolio, Money Market Portfolio, Capital Reserves:
U.S. Government Portfolio, Capital Reserves: Money Market Portfolio, and
Capital Reserves: Municipal Money Market Portfolio. The Trust Instrument
permits the Trustees to create additional funds.
Daily Tax-Exempt Money Fund is a fund of Daily Tax-Exempt Money Fund, an
open-end management investment company originally organized as a
Massachusetts business trust on July 16, 1982, pursuant to a Declaration of
Trust that was amended and restated on November 1, 1989. On December 30,
1991, the trust was converted to a Delaware business trust pursuant to an
agreement approved by shareholders on October 23, 1991. The Delaware trust,
which was organized on June 20, 1991 under the name Daily Tax-Exempt Money
Fund II, succeeded to the name Daily Tax-Exempt Money Fund on December 30,
1991. Currently, Daily Tax-Exempt Money Fund is the only fund of the trust.
The Trust Instrument permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to a fund, the
right of the trust or fund to use the identifying name "Fidelity" may be
withdrawn. There is a remote possibility that one fund might become liable
for any misstatement in its prospectus or statement of additional
information about another fund.
The assets of the trusts received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trusts are to
be allocated in proportion to the asset value of the respective funds,
except where allocations of direct expense can otherwise be fairly made.
The officers of the trusts, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of a trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Each trust is a business trust organized
under Delaware law. Delaware law provides that shareholders shall be
entitled to the same limitations of personal liability extended to
stockholders of private corporations for profit. The courts of some states,
however, may decline to apply Delaware law on this point. The Trust
Instruments contain an express disclaimer of shareholder liability for the
debts, liabilities, obligations, and expenses of the trusts and require
that a disclaimer be given in each contract entered into or executed by the
trust or the Trustees. The Trust Instruments provide for indemnification
out of each fund's property of any shareholder or former shareholder held
personally liable for the obligations of the fund. The Trust Instruments
also provide that each fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the fund
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply, no contractual
limitation of liability was in effect, and the fund is unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is extremely remote.
The Trust Instruments further provide that the Trustees, if they have
exercised reasonable care, shall not be personally liable to any person
other than the trust or its shareholders; moreover, the Trustees shall not
be liable for any conduct whatsoever, provided that 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. Claims
asserted against one class of shares may subject holders of another class
of shares to certain liabilities.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. The Initial Class 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
non-assessable, except as set forth under the heading "Shareholder and
Trustee Liability" above. Shareholders representing 10% or more of a trust,
fund, or class may, as set forth in each of the Trust Instruments, call
meetings of the trust, fund, or class, for any purpose related to the
trust, fund, or class, as the case may be, including, in the case of a
meeting of the entire trust, the purpose of voting on removal of one or
more Trustees.
Any trust or 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 trust or fund; however, the Trustees may, without
prior shareholder approval, change the form of organization of the trust by
merger, consolidation, or incorporation. If not so terminated or
reorganized , the trust and its funds will continue indefinitely.
Under the Trust Instruments, the Trustees may, without shareholder vote,
cause a trust to merge or consolidate into one or more trusts,
partnerships, or corporations, or cause the trust to be incorporated under
Delaware law, so long as the surviving entity is an open-end management
investment company that will succeed to or assume the trust's registration
statement. Each fund may invest all of its assets in another investment
company.
CUSTODIAN. The Bank of New York, 110 Washington Street, New York, New York,
is custodian of the assets of the Taxable funds. UMB Bank, n.a., 1010 Grand
Avenue, Kansas City, Missouri, is custodian of the assets of Daily
Tax-Exempt Money Fund. Each custodian is responsible for the safekeeping of
a fund's assets and the appointment of any subcustodian banks and clearing
agencies. A custodian takes no part in determining the investment policies
of a fund or in deciding which securities are purchased or sold by a fund.
However, a fund may invest in obligations of its custodian and may purchase
securities from or sell securities to its custodian. The Chase Manhattan
Bank, headquartered in New York, also may serve as a special purpose
custodian of certain assets of the Taxable funds in connection with
repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and the Board of
Trustees may, from time to time, conduct transactions with various banks,
including banks serving as custodians for certain 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.
AUDITORS. Coopers & Lybrand L.L.P. serves as the Taxable funds'
independent accountant. Price Waterhouse LLP serves as Daily
Tax-Exempt Money Fund's independent accountant. The auditors examine
financial statements for the funds and provide other audit, tax, and
related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the fiscal
year ended October 31, 1996 are included in the fund's Annual Report, which
is a separate report supplied with this Statement of Additional
Information. Each fund's financial statements and financial highlights are
incorporated herein by reference.
APPENDIX
The descriptions that follow are examples of eligible ratings for the
funds. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations when
determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE COMMERCIAL PAPER RATINGS:
Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following
characteristics:
Leading market positions in well established industries.
High rates of return on funds employed.
Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
Broad margins in earning coverage of fixed financial charges and with high
internal cash generation.
Well established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earning 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 alternate
liquidity is maintained.
DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS:
A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with
the numbers 1, 2, and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+)
sign designation.
A-2 - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements and Financial Highlights, included in the Annual
Report for Daily Tax-Exempt Money Fund for the fiscal year ended October
31, 1996 are incorporated by reference into the fund's Statement of
Additional Information and were filed on December 18, 1996 for Daily
Tax-Exempt Money Fund (811-3518) pursuant to Rule 30d-1 under the
Investment Company Act of 1940 and are incorporated herein by reference.
(b) Exhibits:
(1) (a) Trust Instrument for Daily Tax-Exempt Money Fund II, dated June 20,
1991 was electronically filed and 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, was electronically filed and is incorporated herein by reference to
Exhibit 1(b) to Post-Effective Amendment No. 17.
(c) Certificate of Amendment of Daily Tax-Exempt Money Fund II to Daily
Tax-Exempt Money Fund, dated January 29, 1992 is electronically filed
herein as Exhibit 1(c).
(2) (a) ByLaws of the Trust effective June 20, 1991 were electronically
filed and are incorporated herein by reference to Exhibit 2(a) to Fidelity
Union Street Trust II's Post-Effective Amendment No. 17.
(3) Not applicable.
(4) Not applicable.
(5) (a) Management Contract, dated December 30, 1991, between Daily
Tax-Exempt Money Fund II and Fidelity Management & Research Co. was
electronically filed and is incorporated herein by reference to Exhibit
5(a) to Post-Effective Amendment No. 25.
(b) 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) was electronically filed and is incorporated
herein by reference to Exhibit 5(b) to Post-Effective Amendment No. 25.
(6) (a) General Distribution Agreement dated December 30, 1991, between
Daily Tax-Exempt Money Fund II and Fidelity Distributors Corporation was
electronically filed and is incorporated herein by reference to Exhibit
6(a) to Post-Effective Amendment No. 25.
(b) Service Contract between Fidelity Distributors Corporation and
"Qualified Recipients" with respect to shares of Daily Tax-Exempt Money
Fund was electronically filed and is incorporated herein by reference to
Exhibit 6(b) to Post-Effective Amendment No. 25.
(c) Service Contract (Administrative and Recordkeeping Services Only)
between Fidelity Distributors Corporation and "Qualified Recipients" with
respect to shares of Daily Tax-Exempt Money Fund was electronically filed
and is incorporated herein by reference to Exhibit 6(c) to Post-Effective
Amendment No. 25.
(d) Amendments to the General Distribution Agreement between Daily
Tax-Exempt Money Fund II on behalf of Daily Tax-Exempt Money Fund and
Fidelity Distributors Corporation, dated March 14, 1996 and July 15, 1996,
was electronically filed and is incorporated herein by reference to Exhibit
6(a) of Fidelity Court Street Trust's Post-Effective Amendment No. 61 (File
No. 2-58774).
(e) Amendment to the General Distribution Agreement between Daily
Tax-Exempt Money Fund II on behalf of Daily Tax-Exempt Money Fund and
Fidelity Distributors Corporation, dated October 1, 1996, was
electronically filed and is incorporated herein by reference to Exhibit
6(g) of Daily Money Fund's Post-Effective Amendment No. 40 (File No.
2-77909).
(7) Retirement Plan for Non-Interested Person Trustees' Retirement Plan,
Directors or General Partners, effective November 1, 1989, was
electronically filed and is incorporated herein by reference to Exhibit 7
to Union Street's Post-Effective Amendment No. 87.
(8) (a) Custodian Agreement, Appendix B, and Appendix C, dated December 1,
1994, between UMB Bank, n.a. and Daily Tax-Exempt Money Fund on behalf of
Daily Tax-Exempt Money Fund was electronically filed and is incorporated
herein by reference to Exhibit 8 to Fidelity California Municipal Trust's
Post-Effective Amendment No. 28 (File No. 2-83367).
(b) Appendix A, dated October 17, 1996, to the Custodian Agreement, dated
December 1, 1994, between UMB Bank, n.a. and Daily Tax-Exempt Money Fund on
behalf of Daily Tax-Exempt Money Fund was electronically filed and is
incorporated herein by reference to Exhibit 8(a) to Fidelity Court Street
Trust's Post-Effective Amendment No. 61 (File No. 2-58774).
(9) (a) Transfer Agent Agreement dated December 30, 1991, between Daily
Tax-Exempt Money Fund II and United Missouri was electronically filed and
is incorporated herein by reference to Exhibit 9(a) to Post-Effective
Amendment No. 20.
(b) Schedule A to the Transfer Agent Agreement for Daily Tax-Exempt Money
Fund, dated January 1, 1993 was electronically filed and is incorporated
herein by reference as Exhibit 9(b) to Post-Effective Amendment No. 20.
(c) Appointment of Sub-Transfer Agent for Daily Tax-Exempt Money Fund II,
dated December 30, 1991, was electronically filed and is incorporated
herein by reference to Exhibit 9(c) to Post-Effective Amendment No. 25.
(d) Service Agent Agreement, dated December 30, 1991, between Daily
Tax-Exempt Money Fund II, United Missouri, and Fidelity Management &
Research Co. was electronically filed and is incorporated herein by
reference to Exhibit 9(d) to Post-Effective Amendment No. 20.
(e) Schedules B and C to the Service Agreement for Daily Tax-Exempt Money
Fund, dated March 12, 1992 and December 31, 1991, respectively, were
electronically filed and are incorporated herein by reference to Exhibit
9(e) to Post Effective Amendment No. 20.
(f) Appointment of Sub-Servicing Agent for Daily Tax-Exempt Money Fund II,
dated December 30, 1991, is electronically filed herein as Exhibit 9(f).
(10) Not applicable.
(11) Consent of Price Waterhouse LLP is electronically filed herein as
Exhibit 11.
(12) None.
(13) None.
(14) (a) Fidelity Individual Retirement Account, as currently in effect,
was electronically filed and is incorporated herein by reference to Exhibit
14(a) to Union Street Trust's Post-Effective Amendment No. 87.
(b) Portfolio Advisory Services Individual Retirement Account, as
currently in effect, was electronically filed and is incorporated herein by
reference as Exhibit 14(i) to Union Street Trust's Post-Effective Amendment
No. 87.
(c) National Financial Services Corporation Individual Retirement Account,
as currently in effect, was electronically filed and is incorporated herein
by reference to Exhibit 14(h) to Union Street Trust's Post-Effective
Amendment No. 87.
(d) National Financial Services Defined Contribution Plan, as currently in
effect, was electronically filed and is incorporated herein by reference to
Exhibit 14(k) to Union Street's Trust Post-Effective Amendment No. 87.
(e) Fidelity Institutional Individual Retirement Account Custodian
Agreement and Disclosure Statement, as currently in effect, was
electronically filed and is incorporated herein by reference to Exhibit
14(d) to Union Street Trust's Post-Effective Amendment No. 87.
(f) Fidelity Advisor Funds Individual Retirement Account Custodial
Agreement Disclosure Statement in effect as of January 1, 1994 was filed
electronically and is incorporated herein by reference to Exhibit 14(b) to
Advisor Series I Post-Effective Amendment No. 22.
(g) Plymouth Defined Contribution Plan, as currently in effect, was
electronically filed and is incorporated herein by reference to Exhibit
14(o) to Commonwealth Trust's Post-Effective Amendment No. 57.
(15) (a) Service Plan pursuant to Rule 12b-1 for Daily Tax-Exempt Money
Fund II was electronically filed and is incorporated herein by reference to
Exhibit 15(a) to Post-Effective Amendment No. 25.
(16) Schedule for computation of performance quotations was electronically
filed and is incorporated herein by reference to Exhibit 16 to
Post-Effective Amendment No. 25.
(17) A Financial Data Schedule is electronically filed herein as Exhibit
17.
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 as of November 30, 1996
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Daily Tax-Exempt Money Fund 11,337
Item 27. Indemnification
Pursuant to Del. Code Ann. title 12 (sub-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 Trust
Instrument 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 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 Trust
Instrument, 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 any liability to which they would be subject by reason of their own
disabling conduct.
Pursuant to the agreement by which Fidelity Service Co. ("Service") is
appointed sub-transfer agent, the Transfer Agent agrees to indemnify
Service for Service's losses, claims, damages, liabilities and expenses
(including reasonable counsel fees and expenses) (losses) to the extent
that the Transfer Agent is entitled to and receives indemnification from
the Portfolio 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 (including reasonable
counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, including by a shareholder 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 or negligence or
reckless disregard of 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 or negligence or
reckless disregard of duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any 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 advice reasonably believed by the Transfer
Agent to have been given by counsel for 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.
Pursuant to the agreement by which Fidelity Investments Institutional
Operations Company ("FIIOC") is appointed sub-transfer agent, the Transfer
Agent agrees to indemnify FIIOC for FIIOC's losses, claims, damages,
liabilities and expenses (including reasonable counsel fees and expenses)
(losses) to the extent that the Transfer Agent is entitled to and receives
indemnification from the Portfolio 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 (including reasonable counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, including by a shareholder 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 or negligence or
reckless disregard of 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 or negligence or
reckless disregard of duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any 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 advice reasonably believed by the Transfer
Agent to have been given by counsel for 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.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
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.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR;
President and Chief Executive Officer of FMR Corp.;
Chairman of the Board and Director of FMR, FMR
Corp., FMR Texas Inc., FMR (U.K.) Inc., and FMR
(Far East) Inc.; Chairman of the Board and
Representative Director of Fidelity Investments Japan
Limited; President and Trustee of funds advised by
FMR.
J. Gary Burkhead President and Director of FMR, FMR Texas Inc., FMR
(U.K.) Inc., and FMR (Far East) Inc.; Managing
Director of FMR Corp.; Senior Vice President and
Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman of the Board and Director of FMR.
Marta Amieva Vice President of FMR.
Dwight D. Churchill Vice President of FMR.
John D. Crumrine Assistant Treasurer of FMR, FMR (U.K.) Inc., FMR
(Far East) Inc., and FMR Texas Inc.; Vice President
and Treasurer of FMR Corp.
William Danoff Vice President of FMR and of a fund advised by FMR.
Scott E. DeSano Vice President of FMR.
Craig P. Dinsell Vice President of FMR.
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
George C. Domolky Vice President of FMR.
Larry A. Domash Vice President of FMR.
Bettina Doulton Vice President of FMR and of funds advised by FMR.
Margaret L. Eagle Vice President of FMR and a fund advised by FMR.
Richard B. Fentin Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Gregory Fraser Vice President of FMR and of a fund advised by FMR.
Jay Freedman Assistant Clerk of FMR; Clerk of FMR Corp., FMR
(U.K.) Inc., and FMR (Far East) Inc.; Secretary of
FMR Texas Inc.
Robert Gervis Vice President of FMR.
David L. Glancy Vice President of FMR and of a fund advised by FMR.
Kevin E. Grant Vice President of FMR and of funds advised by FMR.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
Boyce I. Greer Vice President of FMR.
Bart Grenier Vice President of FMR.
Robert Haber Vice President of FMR.
Richard C. Habermann Senior Vice President of FMR; Vice President of funds
advised by FMR.
William J. Hayes Senior Vice President of FMR; Vice President of
Equity funds advised by FMR.
Richard Hazlewood Vice President of FMR and of a fund advised by FMR.
Fred L. Henning Jr. Senior Vice President of FMR; Vice President of
Fixed-Income funds advised by FMR.
John R. Hickling Vice President of FMR and of a fund advised by FMR.
Robert F. Hill Vice President of FMR; Director of Technical
Research.
Curt Hollingsworth Vice President of FMR and of funds advised by FMR.
Abigail P. Johnson Vice President of FMR and of a fund advised by FMR.
Stephen P. Jonas Vice President of FMR; Treasurer of FMR, FMR
(U.K.) Inc., FMR (Far East) Inc., and FMR Texas Inc.
David B. Jones Vice President of FMR.
Steven Kaye Vice President of FMR and of a fund advised by FMR.
Francis V. Knox Vice President of FMR; Compliance Officer of FMR
(U.K.) Inc.
David P. Kurrasch Vice President of FMR.
Robert A. Lawrence Senior Vice President of FMR; Vice President of High
Income funds advised by FMR.
Alan Leifer Vice President of FMR.
Harris Leviton Vice President of FMR and of a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Arthur S. Loring Senior Vice President, Clerk, and General Counsel of
FMR; Vice President/Legal, and Assistant Clerk of
FMR Corp.; Secretary of funds advised by FMR.
Richard R. Mace Jr. Vice President of FMR and of funds advised by FMR.
Malcolm W. MacNaught II Vice President of FMR and of a fund advised by FMR.
Robert H. Morrison Vice President of FMR; Director of Equity Trading.
David L. Murphy Vice President of FMR and of funds advised by FMR.
Andrew S. Offit Vice President of FMR and of a fund advised by FMR.
Jacques Perold Vice President of FMR.
Brian S. Posner Vice President of FMR and of a fund advised by FMR.
Anne Punzak Vice President of FMR.
Kenneth A. Rathgeber Vice President of FMR; Treasurer of funds advised by
FMR.
Lee H. Sandwen Vice President of FMR.
Patricia A. Satterthwaite Vice President of FMR and of a fund advised by FMR.
Thomas T. Soviero Vice President of FMR and of a fund advised by FMR.
Richard Spillane Vice President of FMR; Senior Vice President and
Director of Operations and Compliance of FMR (U.K.)
Inc.
Robert E. Stansky Senior Vice President of FMR; Vice President of a
fund advised by FMR.
Thomas Sweeney Vice President of FMR and of a fund advised by FMR.
Beth F. Terrana Senior Vice President of FMR; Vice President of a
fund advised by FMR.
Yoko Tilley Vice President of FMR.
Joel C. Tillinghast Vice President of FMR and of a fund advised by FMR.
Robert Tuckett Vice President of FMR.
Jennifer Uhrig Vice President of FMR and of a fund advised by FMR.
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR.
</TABLE>
(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 of the Board and Director of FMR
Texas, FMR, FMR Corp., FMR (Far East) Inc.,
and FMR (U.K.) Inc.; Chairman of the
Executive Committee of FMR; President and
Chief Executive Officer of FMR Corp.;
Chairman of the Board and Representative
Director of Fidelity Investments Japan Limited;
President and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Texas, FMR,
FMR (Far East) Inc., and FMR (U.K.) Inc.;
Managing Director of FMR Corp.; Senior Vice
President and Trustee of funds advised by FMR.
Robert H. Auld Vice President of FMR Texas.
Leland C. Barron Vice President of FMR Texas and of funds
advised by FMR.
Robert K. Duby Vice President of FMR Texas and of funds
advised by FMR.
Robert Litterst Vice President of FMR Texas and of funds
advised by FMR.
Thomas D. Maher Vice President of FMR Texas and Assistant Vice
President of Money Market funds advised by
FMR.
Scott A. Orr Vice President of FMR Texas and of funds
advised by FMR.
Burnell R. Stehman Vice President of FMR Texas and of funds
advised by FMR.
John J. Todd Vice President of FMR Texas and of funds
advised by FMR.
Sarah H. Zenoble Vice President of FMR Texas and of Money
Market funds advised by FMR.
Stephen P. Jonas Treasurer of FMR Texas, FMR (U.K.) Inc.,
FMR (Far East) Inc., and FMR; Vice President
of FMR.
John D. Crumrine Assistant Treasurer of FMR Texas, FMR (U.K.)
Inc., FMR (Far East) Inc., and FMR; Vice
President and Treasurer of FMR Corp.
Jay Freedman Secretary of FMR Texas; Clerk of FMR (U.K.)
Inc., FMR (Far East) Inc., and FMR Corp.;
Assistant Clerk of FMR.
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR.
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Michael Mlinac Director None
Mark Peterson Director None
Neal Litvack President None
Arthur S. Loring Vice President and Clerk Secretary
Caron Ketchum Treasurer and Controller None
Gary Greenstein Assistant Treasurer None
Jay Freedman Assistant Clerk None
Linda Holland Compliance Officer None
* 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 UMB
Bank, n.a., 1010 Grand Avenue, Kansas City, MO.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for the effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 26 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston, and Commonwealth of Massachusetts, on the 16th day
of 1996.
DAILY TAX-EXEMPT MONEY FUND
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d President and Trustee December 16, 1996
Edward C. Johnson 3d (Principal Executive Officer)
/s/Kenneth A. Rathgeber *** Treasurer December 16, 1996
Kenneth A. Rathgeber
/s/J. Gary Burkhead * Trustee December 16, 1996
J. Gary Burkhead
/s/Ralph F. Cox * Trustee December 16, 1996
Ralph F. Cox
/s/Phyllis Burke Davis ** Trustee December 16, 1996
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee December 16, 1996
Richard J. Flynn
/s/E. Bradley Jones ** Trustee December 16, 1996
E. Bradley Jones
/s/Donald J. Kirk * Trustee December 16, 1996
Donald J. Kirk
/s/Peter S. Lynch ** Trustee December 16, 1996
Peter S. Lynch
/s/Edward H. Malone * Trustee December 16, 1996
Edward H. Malone
/s/Marvin L. Mann * Trustee December 16, 1996
Marvin L. Mann
/s/Gerald C. McDonough * Trustee December 16, 1996
Gerald C. McDonough
/s/Thomas R. Williams * Trustee December 16, 1996
Thomas R. Williams
</TABLE>
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated October 17, 1996 and filed herewith.
** Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated December 15, 1994 and filed herewith.
*** Signature affixed by John H. Costello pursuant to a power of attorney
dated October 17, 1996 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
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 Trust II Fidelity Municipal Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Portfolios Fidelity Union Street Trust II
</TABLE>
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 A. Djinis, 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 fifteenth day of December, 1994.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/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
POWER OF ATTORNEY
I, the undersigned Treasurer and principal financial and accounting
officer of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Money Market Trust
Fidelity Aberdeen Street Trust Fidelity Municipal Trust II
Fidelity Beacon Street Trust Fidelity New York Municipal Trust II
Fidelity California Municipal Trust II Fidelity Phillips Street Trust
Fidelity Court Street Trust II Fidelity Revere Street Trust
Fidelity Hereford Street Trust Fidelity Union Street Trust II
Fidelity Institutional Cash Portfolios
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company or an affiliate acts as investment adviser and for which the
undersigned individuals serves as Treasurer and principal financial and
accounting officer (collectively, the "Funds"), hereby severally constitute
and appoint John H. Costello and John E. Ferris each of them singly, my
true and lawful attorneys-in-fact, with full power of substitution, and
with full power to each of them to sign for me and in my name in the
appropriate capacity, any Registration Statements of the Funds on Form
N-1A, Form N-8A or any successor thereto, any and all subsequent
Amendments, 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 the 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/Kenneth A. Rathgeber October 17, 1996
Kenneth A. Rathgeber
POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Money Market Trust
Fidelity Aberdeen Street Trust Fidelity Municipal Trust II
Fidelity Beacon Street Trust Fidelity New York Municipal Trust II
Fidelity California Municipal Trust II Fidelity Phillips Street Trust
Fidelity Court Street Trust II Fidelity Revere Street Trust
Fidelity Hereford Street Trust Fidelity Union Street Trust II
Fidelity Institutional Cash Portfolios
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company or an affiliateacts as investment adviser and for which the
undersigned individuals serve as Directors, Trustees or General Partners
(collectively, the "Funds"), hereby severally constitute and appoint Arthur
J. Brown, Arthur C. Delibert, Stephanie A. Djinis, Robert C. Hacker, Thomas
M. Leahey, Richard M. Phillips and Dana L. Platt, each of them singly, our
true and lawful attorneys-in-fact, with full power of substitution, and
with full power to each of them, to sign for us and in our names in the
appropriate capacities, any Registration Statements of the Funds on Form
N-1A, Form N-8A, or any successor thereto, any and all subsequent
Amendments, 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
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and the Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this seventeenth day of October, 1996.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead ___________________
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Gerald C. McDonough
Ralph F. Cox Gerald C. McDonough
___________________ /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Marvin L. Mann
Richard J. Flynn Marvin L. Mann
___________________ /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this
Post-Effective Amendment No. 26 to the registration statement on Form N-1A
(the Registration Statement) of our report dated December 10, 1996,
relating to the financial statements and financial highlights appearing in
the October 31, 1996 Annual Report to Shareholders of Daily Tax-Exempt
Money Fund, which are also incorporated by reference into the Registration
Statement.
We also consent to the references to us under the headings "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Dallas, Texas
December 16, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000704207
<NAME> Daily Tax-Exempt Money Fund
<SERIES>
<NUMBER> 11
<NAME> Daily Tax-Exempt Money Fund
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> oct-31-1996
<PERIOD-END> oct-31-1996
<INVESTMENTS-AT-COST> 498,480
<INVESTMENTS-AT-VALUE> 498,480
<RECEIVABLES> 3,737
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 502,223
<PAYABLE-FOR-SECURITIES> 1,200
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 929
<TOTAL-LIABILITIES> 2,129
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 500,192
<SHARES-COMMON-STOCK> 500,192
<SHARES-COMMON-PRIOR> 559,197
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (98)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 500,094
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18,925
<OTHER-INCOME> 0
<EXPENSES-NET> 3,385
<NET-INVESTMENT-INCOME> 15,540
<REALIZED-GAINS-CURRENT> (74)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 15,466
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15,540
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,958,241
<NUMBER-OF-SHARES-REDEEMED> 2,030,852
<SHARES-REINVESTED> 13,606
<NET-CHANGE-IN-ASSETS> (59,079)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (23)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,607
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,933
<AVERAGE-NET-ASSETS> 521,446
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .030
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .030
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
