SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
(Name of Registrant as Specified In Its Charter)
Daily Money Fund
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant) Arthur S. Loring, Secretary
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee Paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a) (2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of
its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
U.S. TREASURY PORTFOLIO - INITIAL CLASS
U.S. TREASURY PORTFOLIO - CLASS B
MONEY MARKET PORTFOLIO - INITIAL CLASS
FUNDS OF DAILY MONEY FUND
DAILY TAX-EXEMPT MONEY FUND - INITIAL CLASS
A FUND OF DAILY TAX-EXEMPT MONEY FUND
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-843-3001
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of the above funds:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of U.S.
Treasury Portfolio - Initial Class, U.S. Treasury Portfolio - Class B, and
Money Market Portfolio - Initial Class will be held at the office of Daily
Money Fund, 82 Devonshire Street, Boston, Massachusetts 02109 on May 9,
1997, at 9:45 a.m. A Special Meeting of Shareholders of Daily Tax-Exempt
Money Fund will be held at the office of Daily Tax-Exempt Money Fund, 82
Devonshire Street, Boston, Massachusetts 02109 on May 9, 1997 at 10:30 a.m.
The purpose of each Meeting is to consider and act upon the following
proposals, and to transact such other business as may properly come before
each Meeting or any adjournments thereof.
1. To elect a Board of Trustees for Daily Tax-Exempt Money Fund.
2. To ratify the selection of Price Waterhouse LLP as independent
accountants of Daily Tax-Exempt Money Fund.
3. To amend Daily Tax-Exempt Money Fund's Trust Instrument to provide
dollar-based voting rights for shareholders of the trust.
4(a). To approve an amended Management Contract for U.S. Treasury
Portfolio and Money Market Portfolio.
4(b). To approve a new Distribution and Service Plan for Initial Class
shares of U.S. Treasury Portfolio and Money Market Portfolio.
4(c). To approve a new Distribution and Service Plan for Class B Shares of
U.S. Treasury Portfolio.
5(a). To approve an amended Management Contract for Daily Tax-Exempt Money
Fund.
5(b). To approve a new Distribution and Service Plan for Initial Class
Shares of Daily Tax-Exempt Money Fund.
6. To approve an Agreement and Plan providing for the reorganization of
U.S. Treasury Portfolio and Money Market Portfolio from separate series of
one Delaware business trust to another.
7. To amend the fundamental investment limitation concerning
diversification for U.S. Treasury Portfolio and Money Market Portfolio.
8. To amend Daily Tax-Exempt Money Fund's fundamental investment
limitation concerning diversification.
9 . To eliminate the fundamental investment limitation concerning
writing or purchasing put or call options for U.S. Treasury Portfolio and
Money Market Portfolio.
The Board of Trustees has fixed the close of business on March 12, 1997 as
the record date for the determination of the shareholders of each of the
funds and classes, if applicable, entitled to notice of, and to vote at,
such Meeting and any adjournments thereof.
By order of the Board of Trustees,
ARTHUR S. LORING, Secretary
March 12, 1997
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY SHAREHOLDER
WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO INDICATE VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN
THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED
STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE ASK YOUR COOPERATION IN
MAILING YOUR PROXY CARD PROMPTLY, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of assistance
to you and help avoid the time and expense involved in validating your vote
if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it appears
in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual signing.
This can be shown either in the form of the account registration itself or
by the individual executing the proxy card. For example:
REGISTRATION VALID
SIGNATURE
A. 1) ABC Corp. John Smith,
Treasurer
2) ABC Corp. John Smith,
Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins,
Trustee
2) ABC Trust Ann B. Collins,
Trustee
3) Ann B. Collins, Trustee Ann B. Collins,
Trustee
u/t/d 12/28/78
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
PROXY STATEMENT
SPECIAL MEETINGS OF SHAREHOLDERS OF:
DAILY MONEY FUND: U.S. TREASURY PORTFOLIO AND
MONEY MARKET PORTFOLIO
AND
DAILY TAX-EXEMPT MONEY FUND
TO BE HELD ON MAY 9, 1997
This Proxy Statement is furnished in connection with a solicitation of
proxies made by, and on behalf of, the Board of Trustees of Daily Money
Fund to be used at the Special Meeting of Shareholders of U.S. Treasury
Portfolio and Money Market Portfolio (the funds) and at any adjournments
thereof, to be held on May 9, 1997 at 9:45 a.m. at 82 Devonshire Street,
Boston, Massachusetts 02109, the principal executive office of Daily Money
Fund and Fidelity Management & Research Company (FMR), the funds'
investment adviser. This Proxy Statement is also furnished in connection
with a solicitation of proxies made by, and on behalf of, the Board of
Trustees of Daily Tax-Exempt Money Fund to be used at the Special Meeting
of Shareholders of Daily Tax-Exempt Money Fund and at any adjournments
thereof, to be held on May 9, 1997 at 10:30 a.m. at 82 Devonshire Street,
Boston, Massachusetts 02109, the principal executive office of Daily
Tax-Exempt Money Fund and FMR, Daily Tax-Exempt Money Fund's investment
adviser.
The purpose of each Meeting is set forth in the accompanying Notice. The
solicitation is made primarily by the mailing of this Proxy Statement and
the accompanying proxy card on or about March 12, 1997. Supplementary
solicitations may be made by mail, telephone, telegraph, facsimile, or by
personal interview by representatives of a trust. In addition, D. F. King &
Co. may be paid on a per-call basis to solicit shareholders on behalf of
the funds at an anticipated cost of approximately $ 36,500 ;
$ 207,000 ; and $ 15,000 for U.S. Treasury Portfolio, Money
Market Portfolio, and Daily Tax-Exempt Money Fund, respectively. The
expenses in connection with preparing this Proxy Statement and its
enclosures and of all solicitations will be paid by each fund. Each fund
will reimburse brokerage firms and others for their reasonable expenses in
forwarding solicitation material to the beneficial owners of shares. The
principal business address of Fidelity Distributors Corporation (FDC), each
fund's principal underwriter and distribution agent, is 82 Devonshire
Street, Boston, Massachusetts 02109. The principal business address of FMR
Texas, Inc. (FMR Texas), sub - adviser to each fund, is 400 East Las
Colinas Boulevard, Irving, Texas 75039.
If the enclosed proxy card is executed and returned, it may nevertheless
be revoked at any time prior to its use by written notification received by
the trust, by the execution of a later-dated proxy card, or by attending
the applicable Meeting and voting in person.
All proxy cards solicited by the Board of Trustees that are properly
executed and received by the Secretary prior to each Meeting, and which are
not revoked, will be voted at each Meeting. Shares represented by such
proxies will be voted in accordance with the instructions thereon. If no
specification is made on a proxy card, it will be voted FOR the matters
specified on the proxy card. Only proxies that are voted will be counted
towards establishing a quorum. Broker non-votes are not considered voted
for this purpose. Shareholders should note that while votes to ABSTAIN will
count toward establishing a quorum, passage of any proposal being
considered at the Meeting will occur only if a sufficient number of votes
are cast FOR the proposal. Accordingly, votes to ABSTAIN and votes AGAINST
will have the same effect in determining whether the proposal is approved.
The funds may also arrange to have votes recorded by telephone. D.F. King
& Co. may be paid on a per call basis for vote-by-phone solicitations on
behalf of the funds at an anticipated cost of approximately $ 4,600 ;
$ 12,000 ; and $ 3,000 on behalf of U.S. Treasury Portfolio,
Money Market Portfolio, and Daily Tax-Exempt Money Fund, respectively. If
each fund records votes by telephone, it will use procedures designed to
authenticate shareholders' identities, to allow shareholders to authorize
the voting of their shares in accordance with their instructions, and to
confirm that their instructions have been properly recorded. Proxies voted
by telephone may be revoked at any time before they are voted in the same
manner that proxies voted by mail may be revoked.
If a quorum is present at each Meeting, but sufficient votes to approve
one or more of the proposed items are not received, or if other matters
arise requiring shareholder attention, the persons named as proxies may
propose one or more adjournments of each Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative
vote of a majority of those shares present at each Meeting or represented
by proxy. When voting on a proposed adjournment, the persons named as
proxies will vote FOR the proposed adjournment all shares that they are
entitled to vote with respect to each item, unless directed to vote AGAINST
the item, in which case such shares will be voted AGAINST the proposed
adjournment with respect to that item. A shareholder vote may be taken on
one or more of the items in this Proxy Statement prior to such adjournment
if sufficient votes have been received and it is otherwise appropriate.
Shares of each class of each fund issued and outstanding as of
January 31, 1997 are indicated in the following table:
Daily Money Fund
U.S. Treasury Portfolio - Initial Class 1,721,445,637
U.S. Treasury Portfolio - Class B 14,445,707
Money Market Portfolio - Initial Class 2,519,184,923
Daily Tax-Exempt Money Fund
Daily Tax-Exempt Money Fund - Initial Class 474,338,703
To the knowledge of Daily Money Fund ( the t rust ) ,
substantial (5% or more) record ownership of each class of each fund
on January 31, 1997 was as follows: for U.S. Treasury
Portfolio - Initial Class : First Trust, St. Paul, MN, 437,237,411
shares (25.41%); Texas Commerce Bank, N.A, Houston, TX, 330,562,658 shares
(19.21%); and Bank of New York, New York, NY, 109,558,258 shares (6.37%);
U.S. Treasury Portfolio - Class B : Advantage Capital Corp.,
Houston, TX, 1,800,125 shares (12.41%); Ifg Network Securities, Atlanta,
GA, 1,406,659 shares (9.70%); Mariner Financial, Livonia, MI, 847,362
shares (5.84%); PaineWebber Inc., Weehawken, NJ, 775,648 shares (5.35%);
and Intervest International Equity, Colorado Springs, CO, 753,845 shares
(5.20%) ; and for Money Market Portfolio - Initial Class : Lnc
Equity Sales, Fort Wayne, IN, 136,314,711 shares (5.41%) . To the
knowledge of the trust, no other shareholder owned of record or
beneficially more than 5% of the outstanding shares of Class B or
Initial Class each fund on that date.
To the knowledge of the Daily Tax Exempt Money Fund (the trust) ,
substantial (5% or more) record ownership of the fund on January 31, 1997
was as follows : Texas Commerce Bank, N.A., Houston, TX, 88,437,591
shares (18.65%); and Lnc Equity Sales, Fort Wayne, IN, 29,397,616 shares
(6.20%) . To the knowledge of the trust, no other shareholder owned of
record or beneficially more than 5% of the outstanding shares of the
Initial Class fund on that date.
Shareholders of record at the close of business on March 12, 1997
will be entitled to vote at the Meeting. Each such shareholder will be
entitled to one vote for each share held on that date.
FOR A FREE COPY OF EACH FUND'S ANNUAL REPORT FOR THE FISCAL PERIOD ENDED
OCTOBER 31, 1996 CALL 1-800-843-3001 OR WRITE TO FIDELITY DISTRIBUTORS
CORPORATION AT 82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109.
VOTE REQUIRED: A PLURALITY OF ALL VOTES CAST AT THE MEETING BY SHAREHOLDERS
OF DAILY TAX-EXEMPT MONEY FUND IS SUFFICIENT TO APPROVE PROPOSALS 1 AND 2.
APPROVAL OF PROPOSAL 3 REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE
OUTSTANDING VOTING SECURITIES" OF DAILY TAX-EXEMPT MONEY FUND. APPROVAL OF
PROPOSAL 4(B) REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE
OUTSTANDING VOTING SECURITIES" OF INITIAL CLASS OF U.S. TREASURY PORTFOLIO
AND MONEY MARKET PORTFOLIO. APPROVAL OF PROPOSAL 4(C) REQUIRES THE
AFFIRMATIVE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES" OF
CLASS B OF U.S. TREASURY PORTFOLIO. APPROVAL OF PROPOSAL 5(B) REQUIRES A
"MAJORITY OF THE OUTSTANDING VOTING SECURITIES" OF INITIAL CLASS OF DAILY
TAX-EXEMPT MONEY FUND. APPROVAL OF PROPOSALS 4(A), 5(A), AND PROPOSALS 6
THROUGH 9 REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE
OUTSTANDING VOTING SECURITIES" OF THE APPROPRIATE FUNDS. UNDER THE
INVESTMENT COMPANY ACT OF 1940 (THE 1940 ACT), THE VOTE OF A "MAJORITY OF
THE OUTSTANDING VOTING SECURITIES" MEANS THE AFFIRMATIVE VOTE OF THE LESSER
OF (A) 67% OR MORE OF THE VOTING SECURITIES PRESENT AT THE APPLICABLE
MEETING OR REPRESENTED BY PROXY IF THE HOLDERS OF MORE THAN 50% OF THE
OUTSTANDING VOTING SECURITIES ARE PRESENT OR REPRESENTED BY PROXY OR (B)
MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES. BROKER NON-VOTES ARE
NOT CONSIDERED "PRESENT" FOR THIS PURPOSE.
The following tables summarize the proposals applicable to each class of
shares of each fund.
Proposal # Proposal Description Applicable Funds/Classes
1. To elect as Trustees the Daily Tax-Exempt Money
12 nominees presented in Fund - Initial Class
proposal 1.
2. To ratify the selection of Daily Tax-Exempt Money
Price Waterhouse LLP as Fund - Initial Class
independent accountants
of Daily Tax-Exempt
Money Fund.
3. To amend Daily Daily Tax-Exempt Money
Tax-Exempt Money Fund's Fund - Initial Class
Trust Instrument to provide
dollar-based voting rights
for shareholders of the
trust.
4(a). To approve an amended U.S. Treasury Portfolio -
Management Contract for Initial Class
U.S. Treasury Portfolio and U.S. Treasury Portfolio -
Money Market Portfolio. Class B
Money Market Portfolio -
Initial Class
4(b). To approve a new U.S. Treasury Portfolio - Initial
Distribution and Service Class
Plan for Initial Class Money Market Portfolio -
Shares of U.S. Treasury Initial Class
Portfolio and Money
Market Portfolio.
4(c). To approve a new U.S. Treasury Portfolio -
Distribution and Service Class B
Plan for Class B Shares of
U.S. Treasury Portfolio.
5(a). To approve an amended Daily Tax-Exempt Money
Management Contract for Fund - Initial Class
Daily Tax-Exempt Money
Fund.
5(b). To approve a new Daily Tax-Exempt Money Fund
Distribution and Service - Initial Class
Plan for Initial Class
Shares of Daily
Tax-Exempt Money Fund.
Proposal # Proposal Description Applicable Funds/Classes
6. To approve an Agreement U.S. Treasury Portfolio
and Plan providing for the Money Market Portfolio
reorganization of U.S.
Treasury Portfolio and
Money Market Portfolio
from separate series of
one Delaware business
trust to another.
7. To amend the U.S. Treasury Portfolio -
diversification limitation of Initial Class
each of U.S. Treasury U.S. Treasury Portfolio -
Portfolio and Money Class B
Market Portfolio. Money Market Portfolio -
Initial Class
8. To amend Daily Daily Tax-Exempt Money
Tax-Exempt Money Fund's Fund - Initial Class
diversification limitation.
9. To eliminate the U.S. Treasury Portfolio -
fundamental investment Initial Class
limitation against writing or U.S. Treasury Portfolio -
purchasing put or call Class B Money Market
options for U.S. Treasury Portfolio - Initial Class
Portfolio and Money
Market Portfolio.
1. TO ELECT A BOARD OF TRUSTEES FOR DAILY TAX-EXEMPT MONEY FUND.
The purpose of this proposal is to elect a Board of Trustees of Daily
Tax-Exempt Money Fund. Pursuant to the provisions of the Trust Instrument
of Daily Tax-Exempt Money Fund, the Trustees have determined that the
number of Trustees shall be fixed at twelve. It is intended that the
enclosed proxy card will be voted for the election as Trustees of the
twelve nominees listed below, unless such authority has been withheld in
the proxy card.
Except for Robert M. Gates and William O. McCoy, all nominees named below
are currently Trustees of Daily Tax-Exempt Money Fund and have served in
that capacity continuously since originally elected or appointed. Ralph F.
Cox, Phyllis Burke Davis, and Marvin L. Mann were selected by the trust's
Nominating and Administration Committee (see page ) and were
appointed to the Board in November, 1991; December, 1992; and October,
1993, respectively. All other current Trustees were elected by
shareholder s . None of the nominees is related to one another. Those
nominees indicated by an asterisk (*) are "interested persons" of the trust
by virtue of, among other things, their affiliation with either the trust,
the fund's investment adviser (FMR, or the Adviser), or the fund's
distribution agent, FDC. The business address of each nominee who is an
"interested person" is 82 Devonshire Street, Boston, Massachusetts 02109,
and the business address of all other nominees is Fidelity Investments,
P.O. Box 9235, Boston, Massachusetts 02205-9235. Except for Robert M.
Gates, Peter S. Lynch, and William O. McCoy, each of the nominees is
currently a Trustee or General Partner, as the case may be, of 237
other funds advised by FMR or an affiliate. Mr. Lynch is currently a
Trustee or General Partner, as the case may be, of 23 6 other Funds
advised by FMR or an affiliate. Messrs. Gates and McCoy are currently
Trustees or General Partners, as the case may be, of 19 4 other funds
advised by FMR or an affiliate.
In the election of Trustees, those twelve nominees receiving the highest
number of votes cast at the Meeting, providing a quorum is present, shall
be elected.
Nominee Principal Occupation ** Year of
(Age) Election or
Appointmen
t
*J. Gary Burkhead Senior Vice President, is 1986
(55) 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 Management consultant (1994). 1991
(64) 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 Prior to her retirement in 1992
(65) 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.
Robert M. Gates Consultant, author, and lecturer ____
(53) (1993). Mr. Gates was Director
of the Central Intelligence
Agency (CIA) from 1991-1993.
From 1989 to 1991, Mr. Gates
served as Assistant to the
President of the United States
and Deputy National Security
Advisor. Mr. Gates is currently a
Trustee for the Forum for
International Policy, a Board
Member for the Virginia
Neurological Institute, and
a Senior Advisor of the Harvard
Journal of World Affairs. In
addition, Mr. Gates also serves
as a member of the corporate
board for Lucas Varity PLC,
(automotive components and
diesel engines), Charles Stark
Draper Laboratory (non-profit),
NACCO Industries, Inc. (mining
and manufacturing), and TRW
Inc. (original equipment and
replacement products).
*Edward C. Johnson President, is Chairman, Chief 1968
3d Executive Officer and a Director
(66) of FMR Corp.; a Director and
Chairman of the Board and of
the Executive Committee of
FMR; and Chairman and a
Director of FMR Texas Inc.,
Fidelity Management &
Research (U.K.) Inc., and
Fidelity Management &
Research (Far East) Inc.
E. Bradley Jones Prior to his retirement in 1984, 1990
(69) 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 Executive-in-Residence (1995) 1987
(64) 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 Vice Chairman and Director of 1990
(54) 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.
William O. McCoy Vice President of Finance for the ____
(63) 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).
Gerald C. McDonough Chairman of G.M. Management 1989
(68) 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.
Marvin L. Mann Chairman of the Board, 1993
(64) 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 President of The Wales Group, 1989
(68) 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).
_______________
** Except as otherwise indicated, each individual has held the office shown
or other offices in the same company for the last five years.
As of January 31 , 1997, the nominees and officers of the Trust
owned, in the aggregate, less than 1% of the fund's outstanding shares.
If elected, the Trustees will hold office without limit in time except
that (a) any Trustee may resign; (b) any Trustee may be removed by written
instrument, signed by at least two-thirds of the number of Trustees prior
to such removal; (c) any Trustee who requests to be retired or who has
become incapacitated by illness or injury may be retired by written
instrument signed by a majority of the other Trustees; and (d) a Trustee
may be removed at any Special Meeting of shareholders by a two-thirds vote
of the outstanding voting securities of the trust. In case a vacancy shall
for any reason exist, the remaining Trustees will fill such vacancy by
appointing another Trustee, so long as, immediately after such appointment,
at least two-thirds of the Trustees have been elected by shareholders. If,
at any time, less than a majority of the Trustees holding office has been
elected by the shareholders, the Trustees then in office will promptly call
a shareholders' meeting for the purpose of electing a Board of Trustees.
Otherwise, there will normally be no meeting of shareholders for the
purpose of electing Trustees.
During the twelve months ended October 31, 1996, t he trust's Board,
composed of three interested and nine non-interested Trustees, met 11
times . It is expected that the Trustees will meet at least ten times
a year at regularly scheduled meetings.
The trust's Audit Committee is composed entirely of Trustees who are not
interested persons of the trust, FMR or its affiliates and normally meets
four times a year, or as required, prior to meetings of the Board of
Trustees. Currently, Mr. Kirk (Chairman) and Mrs. Davis are members of the
Committee. If elected, it is anticipated that Mr. McCoy will also be a
member of the Committee. This Committee oversees and monitors the financial
reporting process, including recommending to the Board the independent
accountants to be selected for the trust (see Proposal 2), reviewing
internal controls and the auditing function (both internal and external),
reviewing the qualifications of key personnel performing audit work, and
overseeing compliance procedures. During the twelve months ended October
31, 1996, the Committee held four meetings.
The trust's Nominating and Administration Committee is currently composed
of Messrs. McDonough (Chairman), Jones, and Williams. The Committee members
confer periodically and hold meetings as required. The Committee is charged
with the duties of reviewing the composition and compensation of the Board
of Trustees, proposing additional non-interested Trustees, monitoring the
performance of legal counsel employed by the funds and the non-interested
Trustees, and acting as the administrative committee under the Retirement
Plan for non-interested Trustees. During the twelve months ended October
31, 1996, the Committee held four meetings. The Nominating and
Administration Committee will consider nominees recommended by
shareholders. Recommendations should be submitted to the Committee in care
of the Secretary of the Trust. The trust does not have a compensation
committee; such matters are considered by the Nominating and Administration
Committee.
The following table sets forth information describing the compensation of
each current Trustee and Member of the Advisory Board of the fund for his
or her services as trustee or Advisory Board member for the fiscal
year ended October 31, 1996.
COMPENSATION TABLE
Trustees Aggregate Total
Compensation Compensatio
from Daily n
Tax-Exempt from the
Money FundA,B Fund
Complex*,A
J. Gary Burkhead** $ 0 $ 0
Ralph F. Cox 189 137,700
Phyllis Burke Davis 183 134,700
Richard J. Flynn*** 231 168,000
Edward C. Johnson 0 0
3d**
E. Bradley Jones 186 134,700
Donald J. Kirk 187 136,200
Peter S. Lynch** 0 0
William O. McCoy**** 78 85,333
Gerald C. 185 136,200
McDonough
Edward H. Malone*** 185 136,200
Marvin L. Mann 185 134,700
Thomas R. Williams 186 136,200
* Information is as of December 31, 1996 for 235 funds in the complex.
** Interested trustees of the fund are compensated by FMR.
*** Richard J. Flynn and Edward H. Malone served on the Board of Trustees
through December 31, 1996.
**** During the period from May 1, 1996 to the present, William O. McCoy
has served as a Member of the Advisory Board.
A Compensation figures include cash, a pro rata portion of benefits
accrued under the retirement program for the period ended December 30, 1996
and required to be deferred, and may include amounts deferred at the
election of Trustees.
B The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $ 7 ,
Phyllis Burke Davis, $ 7 , Richard J. Flynn, $ 0 , E. Bradley
Jones, $ 7 , Donald J. Kirk, $ 7 , Gerald C. McDonough,
$ 7 , Edward H. Malone, $ 7 , Marvin L. Mann, $ 7 , Thomas
R. Williams, $ 7 , and William O. McCoy, $ 0 .
Under a retirement program adopted in July 1988 and modified in November
1995 and November 1996, each non-interested Trustee who retired before
December 30, 1996 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 became eligible to participate in the program at the end
of the calendar year in which he or she reached age 72, provided that, at
the time of retirement, he or she had served as a Fidelity fund Trustee for
at least five years.
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 fees in accordance with the Plan will have a
negligible effect on the funds' assets, liabilities, and net income per
share, and will not obligate the funds to retain the services of any
Trustee or to pay any particular level of compensation to the Trustee. The
funds may invest in such designated securities under the Plan without
shareholder approval.
As of December 30, 1996, the non-interested Trustees terminated the
retirement program for Trustees who retire after such date. In connection
with the termination of the retirement program, each existing
non-interested Trustee received a credit to his or her Plan account equal
to the present value of the estimated benefits that would have been payable
under the retirement program. The amounts credited to the non-interested
Trustees' Plan accounts are subject to vesting. The termination of the
retirement program and related crediting of estimated benefits to the
Trustees' Plan accounts did not result in a material cost to the funds.
2. TO RATIFY THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT
ACCOUNTANTS OF DAILY TAX-EXEMPT MONEY FUND.
By a vote of the non-interested Trustees, the firm of Price Waterhouse LLP
has been selected as independent accountants for the trust to sign or
certify any financial statements of the trust required by any law or
regulation to be certified by an independent accountant and filed with the
Securities and Exchange Commission (SEC) or any state. Pursuant to the 1940
Act, such selection requires the ratification of shareholders. In addition,
as required by the 1940 Act, the vote of the Trustees is subject to the
right of the trust, by vote of a majority of its outstanding voting
securities at any meeting called for the purpose of voting on such action,
to terminate such employment without penalty. Price Waterhouse LLP has
advised the trust that it has no direct or material indirect ownership
interest in the trust.
The independent accountants examine annual financial statements for the
fund and provide other audit and tax-related services. In recommending the
selection of the trust's accountants, the Audit Committee reviewed the
nature and scope of the services to be provided (including non-audit
services) and whether the performance of such services would affect the
accountants' independence. Representatives of Price Waterhouse LLP are not
expected to be present at the Meeting, but have been given the opportunity
to make a statement if they so desire and will be available should any
matter arise requiring their presence.
3. TO AMEND DAILY TAX-EXEMPT MONEY FUND'S TRUST INSTRUMENT TO PROVIDE
DOLLAR-BASED VOTING RIGHTS FOR SHAREHOLDERS OF THE TRUST.
The Board of Trustees, including a majority of those Trustees who are not
"interested persons" of the trust or FMR (the Independent Trustees), has
approved, and recommends that shareholders of the trust approve a proposal
to amend Article VII, Section 7.01 of the Trust Instrument. The proposed
amendment will be effective immediately upon shareholder approval. The
amendment would provide voting rights based on a shareholder's total dollar
interest in a fund (dollar-based voting), rather than on the number of
shares owned, for all shareholder votes for a fund. As a result, voting
power would be allocated in proportion to the value of each shareholder's
investment.
BACKGROUND. Daily Tax-Exempt Money Fund is a fund of Daily Tax-Exempt
Money Fund an open-end management investment company organized as a
Delaware business trust. Currently, it is the only fund in the trust. If
there were additional funds in the trust, shareholders of each fund would
vote separately on matters concerning only that fund and would vote on a
trust-wide basis on matters that a ffect the trust as a whole, such
as electing trustees or amending the Trust Instrument. Currently, under the
Trust Instrument, each share is entitled to one vote, regardless of the
relative value of the shares of each fund in the trust.
The original intent of the one-share, one-vote provision was to provide
equitable voting rights to all shareholders as required by the 1940 Act. In
the case where a trust has several series or funds, voting rights may
become disproportionate since the net asset value per share (NAV) of the
separate funds generally diverge over time. The Staff of the SEC has issued
a "no-action" letter permitting a trust to seek shareholder approval of a
dollar-based voting system. The proposed amendment will comply with the
conditions stated in the no-action letter.
REASON FOR PROPOSAL. If approved, the amendment would provide a more
equitable distribution of voting rights for certain votes than the
one-share, one-vote system currently in effect. The voting power of each
shareholder would be commensurate with the value of the shareholder's
dollar investment rather than with the number of shares held.
Under the current voting provisions, an investment in a fund with a lower
NAV may have significantly greater voting power than the same dollar amount
invested in a fund with a higher NAV. Currently, since there are only money
market funds in the trust, the proposal will not affect the voting rights
of fund shareholders on votes requiring trust-wide participation since
money market funds are managed to maintain a $1.00 NAV. However, if
additional funds with fluctuating NAVs are added to the trust, relative
voting rights would be changed under the proposal. To illustrate the
potentially disproportionate calculation of voting power currently in
place, the table below shows a hypothetical example of a trust with funds
with fluctuating NAVs.
Fund Net Asset Value $1,000
investment in
terms of
number of
shares
A $ 10.00 100.000
B $ 7.57 132.100
C $ 10.93 91.491
D $ 1.00 1,000.000
For example, Fund D shareholders would have ten times the voting power of
Fund A shareholders, because a $1,000 investment in Fund D would buy ten
times as many shares as a $1,000 investment in Fund A. Accordingly, a
one-share, one-vote system may provide certain shareholders with a
disproportionate ability to affect the vote relative to shareholders of
other funds in the trust. If dollar-based voting had been in effect, each
shareholder would have had 1,000 voting shares. Their voting power would be
proportionate to their economic interest, which FMR believes is a more
equitable result, and which is the result with respect to a typical
corporation where each voting share generally has an equal market price.
As long as there is only one fund in the trust, as in the case of Daily
Tax-Exempt Money Fund, the proposal will not affect the voting rights of
fund shareholders. However, if additional funds are added to the trust in
the future, voting rights would be changed under the proposal. On matters
requiring trust-wide votes where all funds are required to vote,
shareholders who own shares with a lower NAV than other funds in the trust
would be giving other shareholders in the trust more voting "power" than
they currently have. On matters affecting only one fund, only shareholders
of that fund vote on the issue. In this instance, under both the current
Trust Instrument and an amended Trust Instrument, all shareholders of the
fund would have the same voting rights, since the NAV is the same for all
shares in a single fund.
AMENDMENT TO THE TRUST INSTRUMENT. Article VII, Section 7.01 sets forth
the method of calculating voting rights for all shareholder votes for the
trust. If approved, Article VII, Section 7.01 will be amended as follows
(material to be added is in ((double parentheses)) and material to
be deleted is [bracketed]):
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
"Section 7.01. On any matter submitted to a vote of the Shareholders, all
Shares shall be voted by individual Series, except (i) when required by the
1940 Act, Shares shall be voted in the aggregate and not by individual
Series; and (ii) when the Trustees have determined that the matter affects
the interests of one or more Series, then the Shareholders of all such
Series shall be entitled to vote thereon. The Trustees may also determine
that a matter affects only the interests of one or more classes of a
Series, in which case any such matters shall be voted on by such class or
classes. [Each whole Share shall be entitled to one vote as to any matter
on which it is entitled to vote, and each fractional Share shall be
entitled to a proportionate fractional vote.] ((A Shareholder of each
Series shall be entitled to one vote for each dollar of net asset value
(number of shares owned times net asset value per share) of such Series, on
any matter on which such Shareholder is entitled to vote and each
fractional dollar amount shall be entitled to a proportionate fractional
vote. ))There shall be no cumulative voting in the election of Trustees.
Shares may be voted in person or by proxy, or in any manner provided for in
the Bylaws. A proxy may be given in writing. The Bylaws may provide that
proxies may also, or may instead, be given by any electronic or
telecommunications device or in any other manner. Notwithstanding anything
else herein or in the Bylaws, in the event a proposal by anyone other than
the officers or Trustees of the Trust is submitted to a vote of the
Shareholders of one or more Series or of the Trust, or in the event of any
proxy contest or proxy solicitation or proposal in opposition to any
proposal by the officers or Trustees of the Trust, Shares may be voted only
in person or by written proxy. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Trust Instrument or any Bylaws of the Trust to be
taken by Shareholders."
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the trust and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the amended Trust Instrument will
become effective immediately. If the proposal is not approved by the
shareholders of trust, the Trust Instrument will remain unchanged.
4. OVERVIEW OF PROPOSED CHANGES TO THE EXPENSE STRUCTURE FOR U.S.
TREASURY PORTFOLIO AND MONEY MARKET PORTFOLIO.
Proposals 4(a), (b) and (c) recommend changes to the management contracts
and distribution fees of U.S. Treasury Portfolio and Money Market
Portfolio. The proposals are intended to simplify the funds' expense
structures by separating fees paid for portfolio management from fees paid
for distribution and shareholder services. The proposals will have no
current effect on the total expenses paid by the funds.
At present, FMR uses a substantial portion of its management fee to pay
distribution-related costs for the funds. Under the proposals, the funds
would pay separate distribution and service fees that would cover most
distribution-related costs, and the funds' management fees would be reduced
by corresponding amounts. By separating distribution and management fees,
the proposals would make it easier to identify the different types of
services provided to the funds and the fees for those services.
The combined impact of the proposals on the Initial Classes and on Class B
is summarized in the following pages, and explained in more detail in
proposals 4(a), (b) and (c). Proposal 4(c) applies to Class B only.
INITIAL CLASSES. Each fund currently pays FMR a management fee at an
annual rate of 0.50% of the fund's average net assets. For the Initial
Classes, FMR uses part of this management fee to compensate financial
intermediaries (such as broker-dealers or banks) whose clients invest in
the funds. For the funds' most recent fiscal period ended October 31, 1996,
the aggregate payments to intermediaries were equal to annual rates of
0.28% of the assets of U.S. Treasury Portfolio and 0.22% of the assets of
Money Market Portfolio. These costs were borne by FMR and paid for by its
0.50% management fee.
Under the proposals, intermediaries would be compensated primarily from
new 0.25% distribution and service fees rather than from the management
fees. Because FMR would bear less of the cost of compensating
intermediaries, its management fee would be reduced from 0.50% to 0.25%,
offsetting the effect of the new distribution and service fee. As a result,
Initial Class expenses would not change.
The funds also incur other operating expenses, such as transfer agent and
custodian charges, which amounted to annual rates of 0.19% of assets for
U.S. Treasury Portfolio and 0.28% of assets for Money Market Portfolio
during the period. A portion of these charges were borne by FMR under a
voluntary agreement to limit the total operating expenses of the Initial
Classes to 0.65% of assets. Although these expense limits are voluntary on
FMR's part and may be changed without notice, FMR has no current intention
of modifying them.
The following tables summarize the expense structure of the funds for
their latest fiscal period ended October 31, 1996 (a three-month period as
a result of a recent change in the funds' fiscal year) compared to the
expenses the funds would have incurred if the proposed changes had been in
effect. All expenses are expressed as annualized percentages of the funds'
average net assets.
U.S. TREASURY PORTFOLIO - INITIAL CURRENT PROPOSED
CLASS
Management Fee paid by Fund 0.50% 0.25%
Portion paid to Intermediaries 0.28% 0.00%*
Portion retained by FMR 0.22% 0.25%
Distribution and Service Fees Paid by 0.00% 0.25%
Fund
Other Expenses 0.19% 0.19%
Less Expenses Borne by FMR (0.04%) (0.04%)
Total Operating Expenses 0.65% 0.65%
MONEY MARKET PORTFOLIO - INITIAL CURRENT PROPOSED
CLASS
Management Fee paid by Fund 0.50% 0.25%
Portion paid to Intermediaries 0.22% 0.00%*
Portion retained by FMR 0.28% 0.25%
Distribution and Service Fees Paid by 0.00% 0.25%
Fund
Other Expenses 0.28% 0.28%
Less Expenses Borne by FMR (0.13%) (0.13%)
Total Operating Expenses 0.65% 0.65%
* Under certain circumstances, intermediaries may receive additional
distribution or recordkeeping fees from FMR or its affiliates as discussed
in proposal 4(b).
CLASS B. Class B of U.S. Treasury Portfolio currently pays separate
distribution and shareholder service fees in addition to the 0.50%
management fee. The distribution fee equals up to 0.75% of the fund's
assets, and the shareholder service fee equals 0.25% of the fund's assets,
for a total of 1.00%. The shareholder service fee is used primarily to
compensate intermediaries whose clients invest in the fund, while the
distribution fee is used to compensate Fidelity Distributors Corporation
(FDC), the fund's general distributor, for its costs in distributing Class
B shares.
FMR currently pays part of Class B's distribution fee from its management
fee, so that the fund is charged less than the full 1.00% for distribution
and shareholder servicing. The amount paid by FMR for Class B is the same
percentage rate as it pays, in aggregate, to intermediaries for Initial
Class shares of U.S. Treasury Portfolio. Therefore, the net distribution
and shareholder servicing fees charged to the fund for latest fiscal period
amounted to 0.72% (1.00% in total less 0.28% borne by FMR).
Under the proposals, the fund would pay the full 1.00% in distribution and
shareholder service fees, and FMR would reduce its management fee from
0.50% to 0.25%. These changes would have increased the fund's aggregate
fees for management, distribution and shareholder service from 1.22% to
1.25% for the latest fiscal period. However, because FMR has voluntarily
agreed to limit the fund's total operating expenses to 1.40% of its net
assets, the increase would be borne by FMR and would not affect the fund's
total expenses. Although the 1.40% expense limit is voluntary on FMR's part
and may be changed without notice, FMR has no current intention of
modifying it.
The following table summarizes the expense structure of Class B for the
fiscal period ended October 31, 1996 compared to the expenses the fund
would have incurred if the proposed changes had been in effect. All
expenses are expressed as annualized percentages of the fund's average net
assets.
U.S. TREASURY PORTFOLIO - CLASS B CURRENT PROPOSED
Management Fee paid by Fund 0.50% 0.25%
Portion paid to FDC 0.28% 0.00%
Portion retained by FMR 0.22% 0.25%
Distribution and Service Fees Paid by 0.72% 1.00%
Fund
Other Expenses 0.49% 0.49%
Less Expenses Borne by FMR (0.31%)* (0.34%)*
Total Operating Expenses 1.40%* 1.40%*
* FMR's voluntary expense limit was 1.35% during the period. These
figures are adjusted to reflect the 1.40% current limit, which took effect
January 1, 1997.
OTHER CHANGES. Other changes are not expected to have a significant
impact on the funds' operations and are discussed in proposals 4(a), 4(b),
and 4(c).
RELATIONSHIP OF PROPOSALS. The changes to the management contracts and
distribution fees are presented in separate proposals, but are intended to
be implemented together. Unless shareholders approve both the management
contract changes and the new distribution and service plans, neither of the
proposals will be implemented for that portfolio.
Initial Class shareholders should vote on proposals 4(a) and 4(b). Class B
shareholders should vote on Proposals 4(a) and 4(c). For U.S. Treasury
Portfolio, the proposals must be approved by shareholders of both the
Initial Class and Class B to be implemented. U.S. Treasury Portfolio and
Money Market Portfolio will vote separately, however, so the proposals may
be approved for one portfolio and not for the other.
4(A). TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR U.S. TREASURY PORTFOLIO
AND MONEY MARKET PORTFOLIO.
The Board of Trustees, including a majority of the Independent Trustees,
has approved , and recommends that the shareholders of U.S. Treasury
Portfolio and Money Market Portfolio approve, amendments to each fund's
management contract with FMR (the Amended Contract). The Amended Contract
is proposed in conjunction with proposals to adopt new Distribution
and Service Plans for Initial Class and Class B shares. AS A RESULT, THE
AMENDED CONTRACT, WHILE REDUCING THE MANAGEMENT FEE PAID TO FMR BY THE
DAILY MONEY FUNDS, IS NOT EXPECTED TO IMPACT THE EXPENSES OF EACH
FUND.
Copies of each fund's Amended Contract, marked to indicate the proposed
amendments, are attached to this Proxy Statement as Exhibits 1 and 2. The
amendments would reduce the annual management fee rate payable to FMR from
0.50% to 0.25% of the fund's average net assets, and would add provisions
governing FMR's responsibilities with respect to placing portfolio
transactions for each fund. In all other respects the Amended Contract is
substantially identical to the Present Contract (whose terms are discussed
under "Present Management Contract" on page ).
If approved by shareholders, the Amended Contract will take effect on May
31, 1997 (or, if later, the first day of the first month following
approval). The Amended Contract will remain in effect through May 31, 1998,
and thereafter only as long as its continuance is approved at least
annually by (i) the vote, cast in person at a meeting called for the
purpose, of a majority of the Independent Trustees and (ii) the vote of
either a majority a Trustees or a majority of the outstanding shares of
each fund. If the Amended Contract is not approved, the Present Contract
will remain in effect through May 31, 1997 and thereafter subject to the
same requirements for continuance as the Amended Contract.
MODIFICATIONS TO MANAGEMENT FEE. Under the Present Contract, each fund
pays FMR a management fee equal to an annual rate of 0.50% of the fund's
average net assets, calculated and paid monthly. For the Initial Classes,
FMR uses part of this management fee to compensate financial intermediaries
(such as broker-dealers or banks) whose clients invest in the funds for
their distribution and shareholder servicing activities. For Class B of
U.S. Treasury Portfolio, FMR uses part of this management fee to compensate
Fidelity Distributors Corporation (FDC), the fund's general distributor,
for its costs in distributing Class B shares. Under the Amended Contract,
the management fee rate would be reduced to 0.25%. This reduction would be
offset by the addition of a 0.25% distribution and service fee for the
Initial Classes, and a restructuring of the distribution fee arrangements
for Class B of U.S. Treasury Portfolio. For more information, please see
proposals 4(b) and 4(c).
The following table compares each fund's management fee under the terms of
the Present Contract for the three-month fiscal period ended October 31,
1996 to the management fee that would have been payable under the Amended
Contract if it had been in effect during that period.
Present Amended Difference
Contract Contract
U.S. Treasury $2,327,773 $1,163,887 (50%)
Portfolio
Money Market $3,212,443 $1,606,221 (50%)
Portfolio
Currently, FMR voluntarily limits the total operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) of the funds to annual rates of 0.65% of average net assets for
the Initial Classes and 1.40% of average net assets for Class B. Although
these voluntary expense limits may be terminated at any time without prior
notice to shareholders, FMR has no current intention of doing so.
TRANSACTIONS WITH BROKER-DEALERS. Each fund may execute portfolio
transactions with broker-dealers that provide research and execution
services to the fund or other accounts over which FMR or its affiliates
exercise investment discretion. The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff based upon the quality of research
and execution services provided. If FMR grants investment management
authority to a sub-adviser pursuant to a sub-advisory agreement, the
sub-adviser would be authorized to place orders for the purchase and
sale of portfolio securities, and would do so in accordance with the
policies described below.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to each fund and to its other clients, and conversely, such
research provided by broker-dealers that execute transaction orders
on behalf of other FMR clients may be useful to FMR in carrying out its
obligations to each fund. The receipt of such research has not reduced
FMR's normal independent research activities; however, it enables FMR to
avoid additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to each
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
Each fund has already been authorized by the Board of Trustees, consistent
with the federal securities laws and the rules and regulations of the
Securities and Exchange Commission, to place portfolio transactions through
broker-dealers that are affiliated with FMR and through
broker-dealers that provide research. The Amended Contract expressly
recognizes this authority.
REASONS FOR THE PROPOSAL. FMR recommended the proposed amendment, in
conjunction with the accompanying Initial Class and Class B Distribution
and Service Plan proposals (Proposals 4(b) and 4(c)), to the Board of
Trustees in order to simplify the expense structure of each fund. The
Amended Contract provides for a more straightforward fee structure, making
the expenses of the funds more transparent . The proposed amendments
are meant to clarify the expenses of each fund and are not expected
to impact shareholder expenses or compensation to intermediaries.
For a comparison of the current and proposed expense structure, please
refer to the information beginning on page .
Based on data provided by Lipper Analytical Services, Inc. (Lipper), an
independent service that monitors the mutual fund industry, the median
management fee rate for retail taxable money market funds and classes prior
to any reimbursement arrangements was approximately 0.45% as of December
31, 1996. This comparative group comprises 534 funds and classes, including
General Purpose, U.S. Treasury and U.S. Government money market funds. This
median rate is 0.20% higher than the fee rate proposed under the Amended
Contract. The median total expense rate for these funds and classes (after
reimbursements) was approximately 0.69% for the same period. The total
operating expenses of the Initial Class (0.65%) are below the median and
the total operating expenses of Class B of U.S. Treasury Portfolio (1.40%)
are above the median.
MATTERS CONSIDERED BY THE BOARD. The mutual funds for which the members of
the Board of Trustees serve as Trustees are referred to herein as the
"Fidelity funds." The Board of Trustees meets eleven times a year. The
Board of Trustees, including the Independent Trustees, believe s that
matters bearing on the appropriateness of each fund's management fees are
considered at most, if not all, of their meetings. While the full Board of
Trustees or the Independent Trustees, as appropriate, act on all major
matters, a significant portion of the activities of the Board of Trustees
(including certain of those described herein) are conducted through
committees. The Independent Trustees meet frequently in executive session
and are advised by independent legal counsel selected by the Independent
Trustees.
The Amended Contract was approved by the Board of Trustees of each fund,
including all of the Independent Trustees, on December 19, 1996. The Board
of Trustees consider s and approve s twice every year portfolio
transactions with broker-dealers that provide research services to
each fund. The Board of Trustees received materials relating to the Amended
Contract in advance of the meeting at which the Amended Contract was
considered, and had the opportunity to ask questions and request further
information in connection with such consideration.
INFORMATION RECEIVED BY THE BOARD. In connection with their monthly
meetings Trustees receive materials specifically relating to the Amended
Contract. These materials include: (i) information on the investment
performance of each fund, a peer group of funds and an appropriate index or
combination of indices, (ii) sales and redemption data, (iii) the economic
outlook and the general investment outlook in the markets in which each
fund invests, and (iv) notable changes in each fund's investments. The
Board of Trustees and the Independent Trustees also consider periodically
other material facts such as (1) FMR's financial condition, (2)
arrangements in respect of the distribution of the fund's shares, (3) the
procedures employed to determine the value of each fund's assets, (4) the
allocation of each fund's brokerage, if any, including allocations to
brokers affiliated with FMR, (5) FMR's management of the relationships with
each fund's custodian and subcustodians, and (6) the resources devoted to
and the record of compliance with each fund's investment policies and
restrictions and with policies on personal securities transactions.
In considering the Amended Contract, the Board of Trustees and the
Independent Trustees did not identify any single factor as all-important or
controlling, and the foregoing summary does not detail all of the matters
considered. Matters considered by the Board of Trustees and the Independent
Trustees include the following:
INVESTMENT COMPLIANCE AND PERFORMANCE. The Board of Trustees and the
Independent Trustees considered whether each fund has operated within its
investment objective and its record of compliance with its investment
restrictions. They also reviewed monthly each fund's investment performance
as well as the performance of a peer group of mutual funds, and the
performance of an appropriate index or combination of indices.
FMR'S PERSONNEL AND METHODS. The Board of Trustees and the Independent
Trustees annually review a report detailing the background of each fund's
portfolio manager, and each fund's investment objective and discipline. The
Independent Trustees have also had discussions with senior management of
FMR responsible for investment operations, and the senior management of
Fidelity's money market group. Among other things they considered the size,
education and experience of FMR's investment staff, its use of technology,
and FMR's approach to recruiting, training and retaining portfolio managers
and other research, advisory and management personnel.
NATURE AND QUALITY OF OTHER SERVICES. The Board of Trustees and the
Independent Trustees considered the nature, quality, cost and extent of
administrative and shareholder services performed by FMR and affiliated
companies, both under the Amended Contract and under separate agreements
covering transfer agency functions and pricing, bookkeeping and securities
lending services, if any. The Board of Trustees and the Independent
Trustees have also considered the nature and extent of FMR's supervision of
third party service providers, principally custodians and subcustodians.
EXPENSES. The Board of Trustees and the Independent Trustees considered
each fund's expense ratio and expense ratios of a peer group of funds. They
also considered the amount and nature of fees paid by shareholders, if any.
PROFITABILITY. The Board of Trustees and the Independent Trustees
considered the level of FMR's profits in respect of the management of the
Fidelity funds, including each fund. This consideration included an
extensive review of FMR's methodology in allocating its costs to the
management of each fund. The Board of Trustees and the Independent Trustees
have concluded that the cost allocation methodology employed by FMR has a
reasonable basis and is appropriate in light of all of the circumstances.
They considered the profits realized by FMR in connection with the
operation of each fund and whether the amount of profit is a fair
entrepreneurial profit for the management of each fund. They also
considered the profits realized from non-fund businesses which may benefit
from or be related to each fund's business. The Board of Trustees and the
Independent Trustees also considered FMR's profit margins in comparison
with available industry data, both accounting for and ignoring marketing
expenses.
OTHER BENEFITS TO FMR. The Board of Trustees and the Independent Trustees
also considered the character and amount of fees paid by each fund and each
fund's shareholders for services provided by FMR and its affiliates,
including fees for services such as transfer agency, fund accounting
and direct shareholder services. They also considered the allocation of
fund brokerage to brokers affiliated with FMR and the receipt of sales
loads and payments under Rule 12b-1 plans in respect of certain of the
Fidelity funds. The Board of Trustees and the Independent Trustees also
considered the revenues and profitability of FMR businesses other than its
mutual fund business, including FMR's retail brokerage, correspondent
brokerage, capital markets, trust, investment advisory, pension record
keeping, credit card, insurance, publishing, real estate, international
research and investment funds, and others. The Board of Trustees and the
Independent Trustees considered the intangible benefits that accrue to FMR
and its affiliates by virtue of their relationship with each fund.
OTHER BENEFITS TO SHAREHOLDERS. The Board of Trustees and the Independent
Trustees considered the benefit to shareholders of investing in a fund that
is part of a large family of funds offering a variety of investment
disciplines and providing for a large variety of fund and shareholder
services.
CONCLUSION. Based on their evaluation of all material factors and assisted
by the advice of independent counsel, the Trustees, including the
Independent Trustees, concluded that the proposed modifications to the
management fee structure, that is , the reduction of the management
fee rate from 0.50% to 0.25% of each fund's average net assets in
conjunction with the proposed changes to the Distribution and Service Plans
presented in separate proposals, is in the best interest of each fund's
shareholders. The Board of Trustees, including the Independent Trustees,
voted to approve the submission of the Amended Contract to shareholders of
each fund and recommends that shareholders of each fund vote FOR the
Amended Contract.
Approval of the Amended Contract for U.S. Treasury Portfolio is contingent
upon shareholder approval of the proposed new Distribution and Service Plan
for Initial Class shares of U.S. Treasury Portfolio and the proposed new
Distribution and Service Plan for Class B shares of U.S. Treasury
Portfolio.
Initial Class and Class B of U.S. Treasury Portfolio are managed under
a single management contract. Votes of Initial Class and Class B
shareholders will be counted together, as a single fund, in determining
whether the Amended Contract is approved for U.S. Treasury Portfolio as a
whole.
Approval of the proposed Amended Contract for Money Market Portfolio is
contingent upon shareholder approval of the proposed new Distribution and
Service Plan for Initial Class shares of Money Market Portfolio.
4(B). TO APPROVE A NEW DISTRIBUTION AND SERVICE PLAN FOR U.S. TREASURY
PORTFOLIO AND MONEY MARKET PORTFOLIO INITIAL CLASS SHARES.
The Board of Trustees, including a majority of the Independent Trustees,
has approved, and recommends that shareholders approve, a new Distribution
and Service Plan for Initial Class shares of each fund. Each New Initial
Class Plan must be approved by a "majority of the outstanding voting
securities," (as defined in the 1940 Act) of the Initial Class shareholders
of U.S. Treasury Portfolio and Money Market Portfolio, respectively.
Copies of each fund's New Initial Class Plan are attached to this Proxy
Statement as Exhibits 3 and 4.
Rule 12b-1 (the Rule), promulgated by the SEC under the 1940 Act, provides
that in order for an investment company ( i.e ., a mutual fund) to act
as a distributor of its shares, a written plan "describing all material
aspects of the proposed financing of distribution" must be adopted by the
company. Under the Rule, an investment company is deemed to be acting as a
distributor of its shares if it engages "directly or indirectly in
financing any activity which is primarily intended to result in the sale of
shares issued by such company, including, but not necessarily limited to,
advertising, compensation of underwriters, dealers, and sales personnel,
the printing and mailing of prospectuses to other than current
shareholders, and the printing and mailing of sales literature."
THE CURRENT INITIAL CLASS PLAN. The Trustees, as provided for by the Rule,
have approved the Current Initial Class Plan. Under each fund's Current
Initial Class Plan, FMR may make payments out of its resources, including
management fees, to pay or reimburse FDC for payments made to
intermediaries, such as banks or broker-dealers, for their services in
connection with the distribution and servicing of Initial Class shares.
Currently, the Trustees have authorized FDC to compensate intermediaries
that 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 intermediaries that maintain
aggregate assets of $50,000 or more at an annual rate o f 0.25% of
average net assets maintained. Each fund's Current Initial Class Plan
authorizes FMR to make payments from its management fee, its past profits,
or any other source available to it to reimburse FDC for payments made to
intermediaries that assist or have assisted in selling Initial Class
shares of a fund or that provide shareholder support
services.
Although the Current Initial Class Plan contemplates that FMR and
FDC may engage in various distribution activities, it does not require them
to perform any specific type of distribution activity or to incur any
specific level of expense for such activities. The Current Initial Class
Plans for U.S. Treasury Portfolio and Money Market Portfolio were last
approved by Initial Class shareholders of each fund on March 24, 1993 and
were approved by Daily Money Fund as sole shareholder of each fund's
Initial Class shares in connection with a reorganization transaction
on September 29, 1993.
THE NEW INITIAL CLASS PLAN. Pursuant to the New Initial Class Plan for
each fund, Initial Class will pay FDC a distribution fee at an an
annual rate of 0.25% of the assets of each class, payable monthly based
on average daily net assets throughout the month; provided that, for any
period during which the total of such fee and all other expenses of the
fund or class, would exceed the gross income of the fund or class, such fee
shall be reduced by such excess. FDC may pay all or a portion of such
fee to intermediaries as distribution or service fees pursuant to
agreements with intermediaries. To the extent the distribution fee is not
paid to intermediaries, FDC may retain the fee as compensation
for its services in distribut ing Initial Class shares.
In addition, the New Initial Class Plan also recognizes that FMR may use
its management fee revenue, as well as its past profits or its resources
from any other source, to make payment to FDC for expenses incurred in
connection with the distribution of Initial Class shares; FDC may use all
or any portion of such payments received from FMR to compensate
intermediaries in connection with the distribution of Initial Class shares;
such payments shall not exceed on an annual basis the management fee set
forth in the management contract.
The compensation paid to intermediaries would be unaffected by the
proposal. During the latest fiscal period, Initial Class intermediaries
generally were compensated at annual rates equal to between 0.20% and 0.40%
of the assets their clients invested in the funds. Effective January 1,
1997, these rates were changed to 0.25% for most intermediaries, and 0.40%
for intermediaries that maintain an average balance of $10 million or more
in a single omnibus account. Intermediaries that received fees higher than
0.25% under the prior fee schedule may continue to receive the higher rate
for up to one year from January 1, 1997. Under the proposals, any
compensation in excess of the 0.25% distribution and service fee would be
borne directly or indirectly by FMR or an affiliate.
Independent of the New Initial Class Plan, intermediaries that maintain an
average balance of $10 million or more in a single omnibus account may
receive an additional recordkeeping fee of up to 0.15% of the assets they
maintain, for total compensation of 0.40%. The recordkeeping fee will be
paid by FMR or its affiliates, will not be paid for distribution services
and will be considered a servicing expense by FMR.
The addition of the 0.25% distribution and service fee is not expected to
impact fund expenses and will be offset by the proposed reduction in
the funds' management fee rate from 0.50% to 0.25% (see Proposal 4(a)). For
a comparison of expenses under the current and proposed expense
structure , please refer to the information beginning on page .
If approved by shareholders, the New Initial Class Plan will continue in
effect as long as its continuance is specifically approved at least
annually by a majority of the Board of Trustees, including a majority of
the Independent Trustees, cast in person at a meeting called for the
purpose of voting on the Plan. The Plan requires that the Trustees receive,
at least quarterly, a written report as to the amounts expended during the
quarter by FMR, or FDC, in connection with financing any activity primarily
intended to result in the sale of shares issued by the fund and the
purposes for which such expenditures were made.
TRUSTEE CONSIDERATION. In determining to recommend the adoption of the New
Initial Class Plan, the trustees considered a variety of factors and were
advised by counsel who are not counsel to FMR or FDC. The Trustees, FDC and
FMR believe that the implementation of the New Initial Class Plan would
facilitate maintaining or increasing each funds' asset base , which in
turn may prove beneficial to each fund and its shareholders by spreading
fixed costs over a larger asset base and making additional monies available
for investing. Positive cash flow affords portfolio management a greater
ability to diversify investments and minimizes the need to sell securities
to meet redemptions. In addition, since Initial Class is dependent
primarily on investment professionals for sales of its shares, the ongoing
payment to investment professionals who have sold shares (by reallowance of
the distribution fee) should provide incentives to offer better and
continuous services to current shareholders. Investment professionals also
allow investors access to investment alternatives to which they might
otherwise not have been exposed.
The Board recognized that a greater level of fund assets benefits FMR by
increasing its management fee revenues. The Board believes that revenues
received by FMR contribute to its continuing ability to attract and retain
a high caliber of investment and other personnel and to develop and
implement new systems for providing services and information to
shareholders. The Board considers this to be an important benefit to each
fund.
CONCLUSION. The Board of Trustees recommends that shareholders vote FOR
approval of the New Initial Class Plan. If Initial Class shareholders vote
to approve the New Initial Class Plan, it will be effective on May 31,
1997 or the first day of the month following shareholder approval. If
approved concurrently by shareholders, the Amended Management Contract and
the New Initial Class Plan are not expected to impact current Initial Class
shareholder expenses.
Approval of the proposed New Initial Class Plan for U.S. Treasury
Portfolio is contingent upon shareholder approval of the proposed amended
Management Contract for U.S. Treasury Portfolio, and on approval of a new
Distribution and Service Plan for Class B shares of U.S. Treasury
Portfolio.
Approval of the proposed New Initial Class Plan for Money Market Portfolio
is contingent upon shareholder approval of the proposed A mended
Management Contract for Money Market Portfolio.
4(C). TO APPROVE A NEW DISTRIBUTION AND SERVICE PLAN FOR CLASS B SHARES OF
U.S. TREASURY PORTFOLIO.
The Board of Trustees, including a majority of the Independent Trustees,
has approved, and recommends that Class B shareholders of U.S. Treasury
Portfolio approve, a new Class B Distribution and Service Plan. The New
Class B Plan must be approved by a "majority of the outstanding voting
securities " (as defined in the 1940 Act) of the Class B
shareholders.
A copy of the New Class B Plan is attached to this Proxy Statement as
Exhibit 5.
Rule 12b-1 (the Rule), promulgated by the SEC under the 1940 Act, provides
that in order for an investment company ( i.e . a mutual fund) to act
as a distributor of its shares, a written plan "describing all material
aspects of the proposed financing of distribution" must be adopted by the
company. Under the Rule, an investment company is deemed to be acting as a
distributor of its shares if it engages "directly or indirectly in
financing any activity which is primarily intended to result in the sale of
shares issued by such company, including, but not necessarily limited to,
advertising, compensation of underwriters, dealers, and sales personnel,
the printing and mailing of prospectuses to other than current
shareholders, and the printing and mailing of sales literature."
THE CURRENT CLASS B PLAN. The Trustees, as provided for by the Rule, have
approved a Distribution and Service Plan for Class B (the Current Class B
Plan). Pursuant to the Current Class B Plan, Class B pays FDC a
distribution fee at an annual rate of 0.75% of its average net assets,
reduced by the amount of any distribution fee paid to FDC by FMR. FMR
currently makes such payments to FDC for Class B at the same percentage
rate as for Initial Class shares of U.S. Treasury Portfolio. For the fiscal
period ended October 31, 1996, FMR paid FDC distribution fees equal to
0.28% (annualized) of Class B's assets, which reduced the distribution fee
payable by the fund. Class B also pays FDC a shareholder service
fee at an annual rate of 0.25% of its average net assets with which FDC
compensates intermediaries for personal service and/or the maintenance of
shareholder accounts. FDC may pay all or a portion of such fee to
securities dealers or other intermediaries as distribution or service fees
pursuant to agreements with intermediaries. To the extent the fee is not
paid to such intermediaries, FDC could use the fee for its expenses
incurred in the distribution of Class B shares. The Plan also provides that
to the extent that each fund's payment of management fees to FMR might be
considered to constitute the "indirect" financing of activities
" primarily intended to result in the sale of shares," such payment
is expressly authorized.
Although the Plan contemplates that FMR and FDC may engage in various
distribution activities, it does not require them to perform any specific
type of distribution activity or to incur any specific level of expense for
such activities. The Current Class B Plan was last approved by FMR as sole
shareholder of the class on May 9, 1994.
THE NEW CLASS B PLAN. The New Class B Plan is substantially
identical to the Current Class B Plan with the exception of (i) the
deletion of the provision permitting a portion of the distribution fee to
be paid out of the management fee paid to FMR by the fund , (ii) the
recognition that FMR may make payment to FDC for expenses incurred in
connection with the distribution of Initial Class shares, and
(ii i ) the addition of a standard provision for Distribution and
Service Plans of money market funds sold through intermediaries that
provides that for any period during which the total of the distribution fee
and all other expenses of the fund or class would exceed the gross income
of the fund or class, the distribution fee shall be reduced by such excess.
The additional provision provides protection to shareholders of the fund
by reducing the distribution fee if total expenses (including the
distribution fee) would exceed the gross income of the fund or class. With
the exception of (i i i) above, the New Class B Plan conforms to the
standard Distribution and Service Plan approved for Class B shares of the
Fidelity Advisor Funds. Under the New Class B Distribution and Service
Plan, Class B would bear the expense of the 0.75% distribution fee and the
0.25% service fee whereas under the Current Class B Plan, FMR
p ay s a portion of this fee . The New Class B Plan is
not intended to impact shareholder expenses, and the modification to the
distribution fee structure is expected to be substantially offset by
the 0.25% decrease in the fund's management fee under the Amended
Management Contract. U.S. Treasury Portfolio - Class B is used as
the money market alternative to the Advisor Fund product line and the New
Class B Plan conforms to the standard structure for Advisor Class B shares.
For a comparison of the current and proposed expense structure ,
please refer to the information beginning on page .
If approved by shareholders, the New Class B Plan will continue in effect
as long as its continuance is specifically approved at least annually by a
majority of the Board of Trustees, including a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on
the Plan. The Plan requires that the Trustees receive, at least quarterly,
a written report as to the amounts expended during the quarter by FMR or
FDC, in connection with financing any activity primarily intended to result
in the sale of shares issued by the fund and the purposes for which such
expenditures were made.
TRUSTEE CONSIDERATION. In determining to recommend the approval of the New
Class B Plan, the Trustees considered a variety of factors and were advised
by counsel who are not counsel to FMR or FDC. The Trustees, FDC and FMR
believe that the implementation of the New Class B Plan would facilitate
maintaining or increasing the fund's asset base which in turn may prove
beneficial to the fund and its shareholders by spreading fixed costs over a
larger asset base and making additional monies available for investing.
Positive cash flow affords portfolio management a greater ability to
diversify investments and minimizes the need to sell securities to meet
redemptions. In addition, since C lass B is dependent
primarily on investment professionals for sales of its shares, the ongoing
payment to investment professionals who have sold shares (by reallowance of
the distribution fee) should provide incentives to offer better and
continuous services to current shareholders. Investment professionals also
allow investors access to investment alternatives to which they might
otherwise not have been exposed.
The Board recognized that a greater level of fund assets benefits FMR by
increasing its management fee revenues. The Board believes that revenues
received by FMR contribute to its continuing ability to attract and retain
a high caliber of investment and other personnel and to develop and
implement new systems for providing services and information to
shareholders. The Board considers this to be an important benefit to each
fund.
CONCLUSION. The Board of Trustees recommends that shareholders vote FOR
approval of New Class B Plan. If Class B shareholders approve the New Class
B Plan, the New Class B Plan will become effective on May 31, 1997
or the first day of the month following shareholder approval. If
approved concurrently by shareholders, the Amended Management Contract and
the New Class B Plan are not expected to impact current shareholder
expenses.
Approval of the proposed New Class B Plan is contingent upon shareholder
approval of the proposed A mended Management Contract for U.S.
Treasury Portfolio and upon shareholder approval of the proposed New
Initial Class Distribution and Service Plan for U.S. Treasury Portfolio.
5. OVERVIEW OF PROPOSED CHANGES TO THE EXPENSE STRUCTURE FOR DAILY
TAX-EXEMPT MONEY FUND.
Proposals 5(a) and (b) recommend changes to the management contract and
distribution fee of Daily Tax-Exempt Money Fund. The proposals are intended
to simplify the fund's expense structure by separating fees paid for
portfolio management from fees paid for distribution and shareholder
services. The proposals will have no current effect on the fund's total
expenses.
At present, FMR uses a substantial portion of its management fee to pay
distribution-related costs for the fund. Under the proposals, the fund
would pay a separate distribution and service fee that would cover most
distribution-related costs, and the fund's management fee would be reduced
by a corresponding amount. By separating distribution and management fees,
the proposals would make it easier to identify the different types of
services provided to the fund and the fees for those services.
The combined impact of the proposals is summarized in the following pages,
and explained in more detail in proposals 5(a) and (b).
EXPENSE STRUCTURE. The fund currently pays FMR a management fee at
an annual rate of 0.50% of the fund's average net assets. FMR uses part of
this management fee to compensate financial intermediaries (such as
broker-dealers or banks) whose clients invest in the fund. For the fund's
most recent fiscal year ended October 31, 1996, the aggregate payment to
intermediaries was equal to 0.26% of the fund's assets. This cost was borne
by FMR and paid for by its 0.50% management fee.
Under the proposals, intermediaries would be compensated primarily from a
new 0.25% distribution and service fee rather than from the management fee.
Because FMR would bear less of the cost of compensating intermediaries, its
management fee would be reduced from 0.50% to 0.25%, offsetting the effect
of the new distribution and service fee. As a result, the fund's expenses
would not change.
The fund also incurs other operating expenses, such as transfer agent and
custodian charges, which amounted to 0.25% of assets for the fiscal year. A
portion of these charges were borne by FMR under a voluntary agreement to
limit the fund's total operating expenses to 0.65% of assets. Although this
expense limit is voluntary on FMR's part and may be changed without notice,
FMR has no current intention of modifying it.
The following table summarizes the expense structure of the fund for its
latest fiscal year ended October 31, 1996 compared to the expenses the fund
would have incurred if the proposed changes had been in effect. All
expenses are expressed as percentages of the fund's average net assets.
DAILY TAX-EXEMPT MONEY FUND CURRENT PROPOSED
Management Fee paid by Fund 0.50% 0.25%
Portion paid to Intermediaries 0.26% 0.00%*
P ortion retained by FMR 0.24% 0.25%
Distribution an d Service Fees Paid by 0.00% 0.25%
Fund
O ther Exp enses 0.25% 0.25%
Le ss Expens es Borne by FMR (0.10%) (0.10%)
Total Operat in g Expenses 0.65% 0.65%
* Under certain circumstances, intermediaries may receive additional
distribution or recordkeeping fees from FMR or its affiliates as discussed
in proposal 5(b).
OTHER CHANGES. Other changes are not expected to have a significant
impact on the fund's operations and are discussed in proposals 5(a) and
5(b ).
R ELATIONSHIP OF PROPOSALS. The changes to the management contract and
distribution fees are presented in separate proposals, but are intended to
be implemented together. Unless shareholders approve both the management
contract changes (proposal 5(a)) and the new distribution and service plan
(proposal 5(b)), neither proposal will be implemented.
5(A). TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR DAILY TAX-EXEMPT MONEY
FUND.
The Board of Trustees, including a majority of the Independent Trustees,
has appr oved, an d recommends that the shareholders of Daily
Tax-Exempt Money Fund approve, amendments to the fund's management contract
with FMR (the Amended Contr act). The Amended Contract is proposed in
conjunction with a proposal approving a new Distribution and Service Plans
for the fund. AS A RESULT, THE AMENDED CONTRACT, WHILE REDUCING THE
MANAGEMENT FEE PAID TO FMR BY THE FUND, IS NOT EXPECTED TO IM PACT THE
OVERALL EXPENSES OF THE FUND.
C opies of the fund's Amended Contract, marked to indicate the proposed
amendments, is attached to this Proxy Statement as Exhibit 6. The
amendments would reduce the annual management fee rate payable to FMR from
0.50% to 0.25% of the fund's average net assets, and would add provisions
governing FMR's responsibilities with respect to placing portfolio
transactions for the fund. In all other respects the Amended Contract is
substantially identical to the Present Contract (whose terms are discussed
under "Present Management Contract" on page ).
If approved by shareholders, the Amended Contract will take effect on May
31, 1997 (or, if later, the first day of the first month following
approval). The Amended Contract will remain in effect through May 31, 1998,
and thereafter only as long as its continuance is approved at least
annually by (i) the vote, cast in person at a meeting called for the
purpose, of a majority of the Independent Trustees and (ii) the vote of
either a majority a Trustees or a majority of the outstanding shares of the
fund. If the Amended Contract is not approved, the Present Contract will
remain in effect through May 31, 1997 and thereafter subject to the same
requirements for continuance as the Amended Contract.
MODIFICATIONS TO MANAGEMENT FEE. Under the Present Contract, the
fund pays FMR a management fee equal to an annual rate of 0.50% of the
fund's average net assets, calculated and paid monthly. FMR uses part of
this management fee to compensate financial intermediaries (such as
broker-dealers or banks) whose clients invest in the fund for their
distribution and shareholder servicing activities. Under the Amended
Contract, the management fee rate would be reduced to 0.25%. This reduction
would be offset by the addition of a 0.25% distribution and service fee.
For more information, please see proposal 5(b).
The following table compares the fund's management fee under the terms of
the Present Contract for the fiscal year ended October 31, 1996 to the
management fee that would have been payable under the Amended Contract if
it had been in effect during that period.
PRESENT AMENDED DIFFERENCE
CONTRACT CONTRACT
Daily $2,607,230 $1,303,615 (50%)
Tax-Exempt
Mone y Fund
Currently, FMR voluntarily limits the total operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses) of the
fund to an annual rate of 0.65% of average net assets. Although the
voluntary expense limit may be terminated at any time without prior notice
to shareholders, FMR has no current intention of doing so.
TRANSACTIONS WITH BROKERS-DEALERS. The fund may execute portfolio
transactions with broker-d eale rs that provide research and execution
services to the fund or other accounts over which FMR or its affiliates
exercise investment discretion. The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff based upon the quality of research
and execution services provided. If FMR grants investment management
authority to a sub-adviser pursuant to a sub-advisory agreement, the
sub-adviser would be author ized to place orders for the purchase and
sale of portfolio securities, and would do so in accordance with the
policies described below.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund and to its other clients, and conversely, such
research provided by broker-dealers t hat execut e transaction orders
on behalf of other FMR clients may be useful to FMR in carrying out its
obligations to the fund. The receipt of such research has not reduced FMR's
normal independent research activities; however, it enables FMR to avoid
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to each
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
The fund has already been authorized by the Board of Trustees, consistent
with the federal securities laws and the rules and regulations of the
Securities and Exchange Commission, to p lace p ortfolio transactions
through broker-dealers that are affiliated with FMR and through
broker-dealers that provide research. The Amended Contract expressly
recognizes this authority.
REASONS FOR THE PROPOSAL. FMR recommended the proposed amendment, in
conjunction with the accompanying Distribution and Service Plan proposal
(Proposal 5(b)), to the Board of Trustees in order to simplify the expense
structure of the fund. The Amended Contract provides for a more
straightforward fee structure, making the expenses of the fund more
transparent. The proposed amendments are meant to clarify the expenses of
the fund and are not expected to impact shareholder expenses or
compensation to intermediaries. For a comparison of the current and
proposed expense structure, please refer to the information beginning on
page .
Based on data provided by Lipper Analytical Services, Inc. (Lipper), an
independent service that monitors the mutual fund industry, the median
management fee rate for retail municipal money market funds and classes
prior to any reimbursement arrangements was approximately 0.50% as of
December 31, 1996. This comparative group comprises 363 funds and classes,
including federal and state tax-free money market funds. This median rate
is 0.25% higher than the fee rate proposed under the Amended Contract. The
median total expense rate for these funds and classes (after
reimbursements) was approximately 0.60% for the same period. The total
operating expenses of the fund (0.65%) are above the median.
MATTERS CONSIDERED BY THE BOARD. The mutual funds for which the members of
the Board of Trustees serve as Trustees are referred to herein as the
"Fidelity funds." The Board of Trustees meets eleven times a year. The
Board of Trustees, including the Independent Trustees, believes that
matters bearing on the appropriateness of the fund's management fees are
considered at most, if not all, of their meetings. While the full Board of
Trustees or the Independent Trustees, as appropriate, act on all major
matters, a significant portion of the activities of the Board of Trustees
(including certain of those described herein) are conducted through
committees. The Independent Trustees meet frequently in executive session
and are advised by independent legal counsel selected by the Independent
Trustees.
The Amended Contract was approved by the Board of Trustees of the fund,
including all of th e Independent Trustees, on December 19, 1996. The
Board of Trustees considers and approves twice every year portfolio
transactions with broker-dealers that provide research services to the
fund. The Board of Trustees received materials relating to the Amended
Contract in advance of the meeting at which the Amended Contract was
considered, and had the opportunity to ask questions and request further
information in connection with such consideration.
INFORMATION RECEIVED BY THE BOARD. In connection with their monthly
meetings Trustees receive materials specifically relating to the Amended
Contract. These materials include: (i) information on the investment
performance of the fund, a peer group of funds and an appropriate index or
combination of indices, (ii) sales and redemption data, (iii) the economic
outlook and the general investment outlook in the markets in which the fund
invests, and (iv) notable changes in the fund's investments. The Board of
Trustees and the Independent Trustees also consider periodically other
material facts such as (1) FMR's financial condition, (2) arrangements in
respect of the distribution of the fund's shares, (3) the procedures
employed to determine the value of the fund's assets, (4) the allocation of
the fund's brokerage, if any, including allocations to brokers affiliated
with FMR, (5) FMR's management of the relationships with the fund's
custodian and subcustodians, and (6) the resources devoted to and the
record of compliance with the fund's investment policies and restrictions
and with policies on personal securities transactions.
In considering the Amended Contract, the Board of Trustees and the
Independent Trustees did not identify any single factor as all-important or
controlling, and the foregoing summary does not detail all of the matters
considered. Matters considered by the Board of Trustees and the Independent
Trustees include the following:
INVESTMENT COMPLIANCE AND PERFORMANCE. The Board of Trustees and the
Independent Trustees considered whether the fund has operated within its
investment objective and its record of compliance with its investment
restrictions. They also reviewed monthly the fund's investment performance
as well as the performance of a peer group of mutual funds, and the
performance of an appropriate index or combination of indices.
FMR'S PERSONNEL AND METHODS. The Board of Trustees and the Independent
Trustees annually review a report detailing the background of the fund's
portfolio manager, and the fund's investment objective and discipline. The
Independent Trustees have also had discussions with senior management of
FMR responsible for investment operations, and the senior management of
Fidelity's money market group. Among other things they considered the size,
education and experience of FMR's investment staff, its use of technology,
and FMR's approach to recruiting, training and retaining portfolio managers
and other research, advisory and management personnel.
NATURE AND QUALITY OF OTHER SERVICES. The Board of Trustees and the
Independent Trustees considered the nature, quality, cost and extent of
administrative and shareholder services performed by FMR and affiliated
companies, both under the Amended Contract and under separate agreements
covering transfer agency functions and pricing, bookkeeping and securities
lending services, if any. The Board of Trustees and the Independent
Trustees have also considered the nature and extent of FMR's supervision of
third party service providers, principally custodians and subcustodians.
EXPENSES. The Board of Trustees and the Independent Trustees considered
the fund's expense ratio and expense ratios of a peer group of funds. They
also considered the amount and nature of fees paid by shareholders, if any.
PROFITABILITY. The Board of Trustees and the Independent Trustees
considered the level of FMR's profits in respect of the management of the
Fidelity funds, including the fund. This consideration included an
extensive review of FMR's methodology in allocating its costs to the
management of the fund. The Board of Trustees and the Independent Trustees
have concluded that the cost allocation methodology employed by FMR has a
reasonable basis and is appropriate in light of all of the circumstances.
They considered the profits realized by FMR in connection with the
operation of the fund and whether the amount of profit is a fair
entrepreneurial profit for the management of the fund. They also considered
the profits realized from non-fund businesses which may benefit from or be
related to the fund's business. The Board of Trustees and the Independent
Trustees also considered FMR's profit margins in comparison with available
industry data, both accounting for and ignoring marketing expenses.
OTHER BENEFITS TO FMR. The Board of Trustees and the Independent Trustees
also considered the character and amount of fees paid by the fund and the
fund's shareholders for services provided by FMR and its affiliates,
including fees for services such as transfer agency, fund accounting and
direct shareholder services. They also considered the allocation of fund
brokerage to brokers affiliated with FMR and the receipt of sales loads and
payments under Rule 12b-1 plans in respect of certain of the Fidelity
funds. The Board of Trustees and the Independent Trustees also considered
the revenues and profitability of FMR businesses other than its mutual fund
business, including FMR's retail brokerage, correspondent brokerage,
capital markets, trust, investment advisory, pension record keeping, credit
card, insurance, publishing, real estate, international research and
investment funds, and others. The Board of Trustees and the Independent
Trustees considered the intangible benefits that accrue to FMR and its
affiliates by virtue of their relationship with the fund.
OTHER BENEFITS TO SHAREHOLDERS. The Board of Trustees and the Independent
Trustees considered the benefit to shareholders of investing in a fund that
is part of a large family of funds offering a variety of investment
disciplines and providing for a large variety of fund and shareholder
services.
CONCLUSION. Based on their evaluation of all material factors and assisted
by the advice of independent counsel, the Trustees, including the
Independent Trustees, concluded that the proposed modifications to the
management fee structure, that is, the reduction of the management fee rate
from 0.50% to 0.25% of the fund's average net assets in conjunction with
the proposed changes to the Distribution and Service Plan presented in a
separate proposal, is in the best interest of the fund's shareholders. The
Board of Trustees, including the Independent Trustees, voted to approve the
submission of the Amended Contract to shareholders of the fund and
recommends that shareholders of the fund vote FOR the Amended Contract.
Approval of the proposed Amended Contract is contingent upon shareholder
approval of the proposed new Distribution and Service Plan.
5(B). TO APPROVE A NEW DISTRIBUTION AND SERVICE PLAN FOR INITIAL CLASS
SHARES OF DAILY TAX-EXEMPT MONEY FUND.
The Board of Trustees, including a majority of the Independent Trustees
has approved, and recommends that shareholders approve, a new Distribution
and Service Plan for the fund (the New Initial Class Plan). The New Initial
Class Plan must be approved by a "majority of the outstanding voting
securities," (as defined in the 1940 Act) of shareholders of Daily
Tax-Exempt Money Fund.
A copy of the New Initial Class Plan is attached to this Proxy Statement
as Exhibit 7.
Rule 12b-1 (the Rule), promulgated by the SEC under the 1940 Act, provides
that in o rde r for an investment company (i.e., a mutual fund) to act
as a distributor of its shares, a written plan "describing all material
aspects of the proposed financing of distribution" must be adopted by the
company. Under the Rule, an investment company is deemed to be acting as a
distributor of its shares if it engages "directly or indirectly in
financing any activity which is primarily intended to result in the sale of
shares issued by such company, including, but not necessarily limited to,
advertising, compensation of underwriters, dealers, and sales personnel,
the printing and mailing of prospectuses to other than current
shareholders, and the printing and mailing of sales literature."
THE CURRENT INITIAL CLASS PLAN. The Trustees, as provided for by the Rule,
have approved the Current Initial Class Plan. Under the fund's Plan, FMR
may make payments
out of its resources, including management fees, to pay or reimburse FDC,
for payments made to intermediaries, such as banks or broker-dealers, for
their services in connection with the distribution and servicing of Initial
Class shares. Currently, the Trustees have authorized FDC to compensate
intermediaries 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 intermediaries who maintain
aggregate assets of $50,000 or more at an annual rate or 0.25% of average
net assets maintained. The fund's Current Initial Class Plan authorizes FMR
to make payments from its management fee, its past profits, or any other
source available to it to reimburse FDC for payments made to intermediaries
that assist or have assisted in selling Initial Class shares of the fund or
that provide shareholder support services.
Although the Curren t Initial Class Plan contemplates that FMR and
FDC may engage in various distribution activities, it does not require them
to perform any specific type of distribution activity or to incur any
specific level of expense for such activities. The Current Initial Class
Plan for Daily Tax-Exempt Money Fund was last approved by Initial Class
shareholders of the fund on October 19, 1991 and was approved by Daily
Tax-Exempt Money Fund as sole shareholder of the Initial Class in
connection with a reorganization transaction on December 20, 1991.
T HE NEW INITIAL CLASS PLAN. Pursuant to the New Initial Class Plan for
the fund, Initial Class will pay FDC a distribution fee at an an annual
rate of 0.25% of the assets of the fund, payable monthly based on average
daily net assets throughout the month; provided that, for any period during
which the total of such fee and all other expenses of the fund or class,
would exceed the gross income of the fund or class, such fee shall be
reduced by such excess. FDC may pay all or a portion of such fee to
intermediaries as distribution or service fees pursuant to agreements with
intermediaries. To the extent the distribution fee is not paid to
intermediaries, FDC may retain the fee as compensation for its services in
distributing Initial Class shares. In addition, the New Initial Class Plan
also recognizes that FMR may use its management fee revenue, as well as its
past profits or its resources from any other source, to make payment to FDC
for expenses incurred in connection with the distribution of Initial Class
shares; FDC may use all or any portion of such payments received from FMR
to compensate intermediaries in connection with the distribution of Initial
Class shares; such payments shall not exceed on an annual basis the
management fee set forth in the management contract.
The compensation paid to intermediaries would be unaffected by the
proposal. During the latest fiscal year, Initial Class intermediaries
generally were compensated at annual rates equal to between 0.20% and 0.40%
of the assets their clients invested in the fund. Effective January 1,
1997, these rates were changed to 0.25% for most intermediaries, and 0.40%
for intermediaries that maintain an average balance of $10 million or more
in a single omnibus account. Intermediaries that received fees higher than
0.25% under the prior fee schedule may continue to receive the higher rate
for up to one year from January 1, 1997. Under the proposal, any
compensation in excess of the 0.25% distribution and service fee would be
borne directly or indirectly by FMR or an affiliate.
Independent of the New Initial Class Plan, intermediaries that maintain an
average balance of $10 million or more in a single omnibus account may
receive an additional recordkeeping fee of up to 0.15% of the assets they
maintain, for total compensation of 0.40%. The recordkeeping fee will be
paid by FMR or its affiliates, will not be paid for distribution services
and will be considered a servicing expense by FMR.
Th e addition of the 0.25% distribution and service fee is not
expected to impact fund expenses and will be offset by the proposed
reduction in the fund's management fee rate from 0.50% to 0.25% (see
Proposal 5(a)). For a comparison of expenses under the current and proposed
expense structure, please refer to the information beginning on page
.
If approved by shareholders, the New Initial Class Plan will continue in
effect as long as its continuance is specifically approved at least
annually by a majority of the Board of Trustees, including a majority of
the Independent Trustees, cast in person at a meeting called for the
purpose of voting on the Plan. The Plan requires that the Trustees receive,
at least quarterly, a written report as to the amounts expended during the
quarter by FMR, or FDC, in connection with financing any activity primarily
intended to result in the sale of shares issued by the fund and the
purposes for which such expenditures were made.
TRUSTEE CONSIDERATION. In determining to recommend the adoption of the New
Initial Class Plan, the trustees considered a variety of factors and were
advised by counsel who are not counsel to FMR or FDC. The Trustees, FDC and
FMR believe that the implementation of the New Initial Class Plan would
facilitate maintaining or increasing the fun d's asset base, which in
turn may prove beneficial to the fund and its shareholders by spreading
fixed costs over a larger asset base and making additional monies available
for investing. Positive cash flow affords portfolio management a greater
ability to diversify investments and minimizes the need to sell securities
to meet redemptions. In addition, since Initial Class is dependent
primarily on investment professionals for sales of its shares, the ongoing
payment to investment professionals who have sold shares (by reallowance of
the distribution fee) should provide incentives to offer better and
continuous services to current shareholders. Investment professionals also
allow investors access to investment alternatives to which they might
otherwise not have been exposed.
The Board recognized that a greater level of fund assets benefits FMR by
increasing its management fee revenues. The Board believes that revenues
received by FMR contribute to its continuing ability to attract and retain
a high caliber of investment and other personnel and to develop and
implement new systems for providing services and information to
shareholders. The Board considers this to be an important benefit to the
fund.
CONCLUSION. The Board of Trustees recommends that shareholders vote FOR
approval of the New Initial Class Plan. If Initial Class shareholders vote
to approve the New Initial Class Plan, it will be effective on May 31, 1997
or the first day of the month following shareholder approval. If approved
concurrently by shareholders, the Amended Management Contract and the New
Initial Class Plan are not expected to impact current Initial Class
shareholder expenses.
Approval of the proposed New Initial Class Plan is contingent upon
shareholder approval of the proposed amended Management Contract.
6. TO APPROVE AN AGREEMENT AND PLAN PROVIDING FOR THE REORGANIZATION OF
U.S. TREASURY PORTFOLIO AND MONEY MARKET PORTFOLIO FROM A SEPARATE SERIES
OF ONE DELAWARE BUSINESS TRUST TO ANOTHER.
The Board of Trustees, including a majority of the Independent Trustees,
has approved an Agreement and Plan of Reorganization (the Plan of
Reorganization) in the form attached to this Proxy Statement as Exhibit 8.
The Plan of Reorganization provides for a reorganization of each of U.S.
Treasury Portfolio and Money Market Portfolio (the Funds) from a separate
series of Daily Money Fund (DMF), a Delaware business trust, to a newly
established, separate series of Daily Tax-Exempt Money Fund (the
Trust), also a Delaware business trust (the Reorganization). THE PROPOSED
CHANGE WILL HAVE NO MATERIAL EFFECT ON SHAREHOLDERS OR THE MANAGEMENT OF
EACH FUND.
The investment objective, policies, and limitations of the Funds will not
change except as approved by shareholders and as described in this Proxy
Statement. Separate series of the Trust will carry on the business of each
Fund following the Reorganization (the Series). These Series, which have
not yet commenced business operations, will have investment objectives,
policies, and limitations identical to those of each Fund (except as they
may be modified pursuant to a vote of the shareholders as proposed in this
Proxy Statement). Each Series will have the same class structure as its
corresponding fund. Since both DMF and the Trust are Delaware business
trusts, organized under substantially similar Trust Instruments, the rights
of the security holders of each Fund under state law and the governing
documents are expected to remain unchanged after the Reorganization (except
as the Trust Instrument may be amended to provide for dollar-based voting
pursuant to a vote of the shareholders of the Trust as proposed in this
Proxy Statement) nor will the Reorganization affect the operation of the
Funds in a material manner. The same individuals serve as Trustees of both
trusts except that Messrs. McCoy and Gates , who are candidates for
election as trustees of the Trust, are currently Trustees of DMF and
Members of the Advisory Board of the Trust. Both trusts are authorized to
issue an unlimited number of shares of beneficial interest, and each Trust
Instrument permits the Trustees to create one or more additional series or
funds. The T rust's fiscal year will be the same as that of the
Funds, although the Trustees may change the fiscal year at their
discretion.
FMR, each Fund's investment adviser, will be responsible for the
investment management of each Series, subject to the supervision of the
Board of Trustees, under management contracts identical to the contracts
currently in effect between FMR and each Fund (the Present Management
Contracts) (except as they may be modified pursuant to a vote of the
shareholders of each fund as proposed in this proxy statement); similarly,
FMR Texas, each Fund's sub-adviser, will have primary responsibility for
providing portfolio investment advisory services to each Series under
Sub-Advisory Agreements substantially identical to the agreements currently
in effect between FMR Texas and FMR (the Present Sub-Advisory Agreements).
The Funds' distribution agent, FDC, will distribute shares of each Series
under General Distribution Agreements identical to the contracts currently
in effect between FDC and each Fund.
REASON FOR THE PROPOSED REORGANIZATION. Each Fund is presently organized
as a series of DMF, which has six series of shares or funds. The Board of
Trustees unanimously recommend s reorganization of U.S. Treasury
Portfolio and Money Market Portfolio to separate series of the Trust which
will succeed to the business of each Fund. Moving the Funds from DMF to the
Trust will consolidate and streamline the production and mailing of certain
financial reports and legal documents. The proposed change will have no
material effect on shareholders or the management of each Fund.
The Plan of Reorganization was approved by the Board of Trustees of DMF,
including all of the Trustees who are not interested persons of FMR, on
December 19, 1996. The Board of Trustees recommend s that each Fund's
shareholders vote FOR the approval of the Plan of Reorganization described
below. Such a vote encompasses approval of the reorganization of
each Fund to separate series of the Trust; temporary waiver of certain
investment limitations of each Fund to permit the Reorganization (see
"Temporary Waiver of Investment Restrictions" on page ); and authorization
of DMF, as sole shareholder of the Series or class, as appropriate, to
approve (i) a Management Contract for each Series between the Trust and
FMR, (ii) the Sub-Advisory Agreements between FMR and FMR Texas, with
respect to each Series and (iii) the Distribution and Service Plans for
Initial Class shares of U.S. Treasury Portfolio, Class B shares of U.S.
Treasury Portfolio, and Initial Class shares of Money Market Portfolio,
under Rule 12b-1, substantially identical to the contracts or Plans, as the
case may be, currently in effect with each Fund or class (except as the
Management Contracts may be modified or the Distribution and Service Plans
may be approved pursuant to a vote of the shareholders of the fund or
class, as the case may be, as proposed in this Proxy Statement). If
shareholders of each Fund do not approve the Plan of Reorganization, each
Fund or class will continue to operate as a series of DMF.
SUMMARY OF THE PLAN OF REORGANIZATION. The following discussion summarizes
the important terms of the Plan of Reorganization. This summary is
qualified in its entirety by reference to the Plan of Reorganization
itself, which is attached as Exhibit 8 to this Proxy Statement.
On the Closing Date of the Reorganization (defined below), each Fund will
transfer all of its assets to its corresponding Series, a series of
shares of the Trust established for the purpose of effecting the
Reorganization, in exchange for the assumption by each Series of all of the
liabilities of each Fund and the issuance of shares of beneficial interest
of the corresponding classes of the Series (Trust Series Shares) equal to
the number of Fund shares outstanding on the Closing Date. Immediately
thereafter, each Fund will distribute one Trust Series Share of the
applicable class for each Fund share (the Fund Shares) held by the
shareholder on the Closing Date to each Fund shareholder, in liquidation of
such Fund Shares. Immediately after this distribution of the Trust Series
Shares, each Fund will be terminated and, as soon as practicable
thereafter, will be wound up and liquidated. UPON COMPLETION OF THE
REORGANIZATION, EACH FUND SHAREHOLDER WILL BE THE OWNER OF FULL AND
FRACTIONAL TRUST SERIES SHARES EQUAL IN NUMBER, DENOMINATION, AND AGGREGATE
NET ASSET VALUE TO HIS OR HER FUND SHARES.
The Plan of Reorganization authorizes DMF as the then sole initial
shareholder of each Series or class, as appropriate, to approve (i) the
Management Contract with FMR for each Series (the New Management
Contracts), (ii) the Sub-Advisory Agreements between FMR and FMR Texas with
respect to each Series (the New Sub-Advisory Agreements), and (iii) the
Distribution and Service Plans for Initial Class shares of U.S. Treasury
Portfolio, Class B shares of U.S. Treasury Portfolio, and Initial Class
shares of Money Market Portfolio, (the New Plans) under Rule 12b-1 with
respect to each Series, identical to the contracts or Plans, as the case
may be, currently in effect with each Fund or class (except as the
Management Contracts may be modified or the Distribution and Service Plans
may be adopted pursuant to a vote of the shareholders of the fund or class,
as the case may be, as proposed in this Proxy Statement).
The Trust's Board of Trustees will hold office without limit in time
except that (a) any Trustee may resign; (b) any Trustee may be removed by
written instrument signed by at least two-thirds of the number of Trustees
prior to removal; (c) any Trustee who requests in writing to be retired by
written instrument signed by a majority of the other Trustees or who is
unable to serve due to physical or mental incapacity by reason of disease
or otherwise, death, or for any other reason, may be retired; and (d) a
Trustee may be removed at any Special Meeting of the shareholders by a vote
of two-thirds of the outstanding shares of the Trust. In case a vacancy
shall for any reason exist, the remaining Trustees will fill such vacancy
by appointing another Trustee, so long as, immediately after such
appointment, at least two-thirds of the Trustees have been elected by
shareholders. If, at any time, less than a majority of the Trustees holding
office has been elected by shareholders, the Trustees then in office will
promptly call a shareholders' meeting for the purpose of electing a Board
of Trustees. Otherwise, there will normally be no meeting of shareholders
for the purpose of electing Trustees.
The New Management Contracts, the New Sub-Advisory Agreements, and the New
Plans will take effect on the Closing Date. The New Management Contracts,
the New Sub-Advisory Agreements, and the New Plans will continue in force
until May 31, 199 8 . Each agreement will continue in force thereafter
from year to year so long as its continuance is approved at least annually
(i) by the vote of a majority of the Trustees who are not "interested
persons" of the Trust, FMR or FMR Texas, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by vote of a majority
of the Trustees or by the vote of a majority of the outstanding shares of
each Series. The New Plans will continue in effect only if approved
annually by a vote of the Trustees and of those Trustees who are not
interested persons, cast in person at a meeting called for that purpose.
The New Management Contracts and New Sub-Advisory Agreements each will be
terminable without penalty on sixty days' written notice either by the
Trust, FMR, or FMR Texas, as the case may be, and will terminate
automatically in the event of its assignment. The New Plans will be
terminable at any time without penalty by a vote of a majority of the
Independent Trustees or a majority of the outstanding voting shares of the
applicable class.
Assuming the Plan of Reorganization is approved, it is currently
contemplated that the Reorganization will become effective at the close of
business on May 30, 1997 (the Closing Date). However, the Reorganization
may become effective at such other date as the parties may agree in
writing.
The obligations of DMF and the Trust under the Plan of Reorganization are
subject to various conditions as stated therein. Notwithstanding the
approval of the Plan of Reorganization by Fund shareholders, the Plan of
Reorganization may be terminated or amended at any time prior to the
Reorganization by action of the Trustees to provide against unforeseen
events, if (1) there is a material breach by the other party of any
representation, warranty, or agreement contained in the Plan of
Reorganization to be performed at or prior to the Closing Date or (2) it
reasonably appears that a party will not or cannot meet a condition of the
Plan of Reorganization. Either trust may at any time waive compliance with
any of the covenants and conditions contained in, or may amend, the Plan of
Reorganization, provided that such waiver or amendment does not materially
adversely affect the interests of Fund shareholders.
CONTINUATION OF FUND SHAREHOLDER ACCOUNTS AND PLANS. The Trust's transfer
agent will establish an account for each Series' shareholders containing
the appropriate number and denominations of Trust Series Shares to be
received by each holder of Fund Shares under the Plan of Reorganization.
Such accounts will be identical in all material respects to the accounts
currently maintained by each Fund's transfer agent for each Fund's
shareholders.
EXPENSES. Each Fund and each Series shall be responsible for all of its
respective expenses of the Reorganization, estimated at $ 88,500 and
$ 506,000 in the aggregate for U.S. Treasury Portfolio and Money
Market Portfolio, respectively.
TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS. Certain fundamental
investment restrictions of the Funds, which prohibit each Fund from
acquiring more than a stated percentage of ownership of another company,
might be construed as restricting each Fund's ability to carry out the
Reorganization. By approving the Plan of Reorganization, each Fund's
shareholders will be agreeing to waive, only for the purpose of the
Reorganization, those fundamental investment restrictions that could
prohibit or otherwise impede the transaction.
TAX CONSEQUENCES OF THE REORGANIZATION. Each trust has received an opinion
from its counsel, Kirkpatrick & Lockhart LLP, that the
Reorganization will constitute a tax-free reorganization within the meaning
of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended.
Accordingly, no gain or loss will be recognized for federal income tax
purposes by each Fund, each Series, or the Funds' shareholders upon (1) the
transfer of each Fund's assets to its corresponding Series in
exchange solely for the Trust Series Shares and the assumption by the Trust
on behalf of each Series of each Fund's liabilities or (2) the distribution
of Trust Series Shares to each Fund's shareholders in liquidation of their
Fund Shares. The opinion further provides, among other things, that (a) the
basis for federal income tax purposes of the Trust Series Shares to be
received by each Fund shareholder will be the same as that of his or her
Fund Shares immediately prior to the Reorganization; and (b) each Fund
shareholder's holding period for his or her Trust Series Shares will
include the Fund shareholder's holding period for his or her Fund Shares,
provided that said Fund Shares were held as capital assets on the date of
the exchange.
CONCLUSION. The Board of Trustees has concluded that the proposed Plan of
Reorganization to reorganize each Fund into a separate series of a
Delaware business trust is in the best interest of each Fund's
shareholders. The Trustees recommend that each Fund's shareholders vote FOR
the approval of the Plan of Reorganization as described above. Such a vote
encompasses approval of the reorganization of each Fund to a separate
series of a Delaware business trust; temporary waiver of certain investment
limitations of each Fund to permit the Reorganization (see "Temporary
Waiver of Investment Restrictions" on page ); authorization of DMF, as sole
shareholder of each Series, or class, as appropriate, to approve (i) a
Management Contract for each Series between the Trust and FMR, (ii) a
Sub-Advisory Agreement for each Series between FMR and FMR Texas, and (iii)
Distribution and Service Plans for Initial Class shares of U.S. Treasury
Portfolio, Class B shares of U.S. Treasury Portfolio, and Initial Class
shares of Money Market Portfolio under Rule 12b-1, substantially identical
to the contract or Plan, as the case may be, currently in effect for each
Fund or class (except as the Management Contracts may be modified or the
Distribution and Service Plans may be approved pursuant to a vote of the
shareholders of the fund or class, as the case may be, as proposed in this
Proxy Statement). If approved, the Plan of Reorganization will take effect
on the Closing Date. If the Plan of Reorganization is not approved each
Fund will continue to operate as a fund of DMF.
7. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
DIVERSIFICATION FOR U.S. TREASURY PORTFOLIO AND MONEY MARKET PORTFOLIO.
U.S. Treasury Portfolio's current fundamental investment limitation
concerning diversification is as follows:
"The fund may not 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."
Money Market Portfolio's current fundamental investment limitation
concerning diversification is as follows:
"The fund may not 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."
The Trustees recommend that shareholders of U.S. Treasury Portfolio and
Money Market Portfolio vote to replace each fund's current fundamental
investment limitation with the following amended fundamental investment
limitation governing diversification:
"The fund may not 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, or
securities of other investment companies) 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."
The proposed fundamental limitation concerning diversification is the
limitation imposed by the 1940 Act for diversified investment companies.
The amended fundamental diversification limit differs from the current
limitation in three ways. First, the amended limitation allows each fund to
invest up to 25% of its assets in a single issuer rather than the 10%
currently permitted. However, SEC regulations applicable to money market
funds limit investment in the securities of a single issuer (other than
U.S. Government securities) to no more than 5% of a fund's total assets
except that a fund may invest up to 25% of its total assets in the
securities of a single issuer for up to three business days. Second, the
amended limitation excludes investment companies from the restrictions
entirely thereby allowing each fund to invest without limit in securities
of other investment companies. Pursuant to an order of exemption granted by
the SEC, U.S. Treasury Portfolio and Money Market Portfolio may invest up
to 25% of total assets in non-publicly offered money market funds (the
Central Funds) managed by FMR or an affiliate of FMR. The Central Funds do
not currently pay investment advisory, management, or transfer agent fees,
but do pay minimal fees for services such as custodian, auditor, and
Independent Trustee fees. Although taxable money market funds such as U.S.
Treasury Portfolio and Money Market Portfolio expect to continue to invest
in money market securities directly rather than through the Central Funds,
FMR believes that U.S. Treasury Portfolio and Money Market Portfolio will
benefit by having the Central Funds available as an investment alternative
on a contingency basis without having to incur the cost of a shareholder
meeting. Third, the amended limitation restricts the U.S. Treasury
Portfolio's investments to no more than 10% of the voting securities of an
issuer with respect to 25% of its assets. Since money market securities are
not generally voting securities, this change is not expected to have any
impact on each fund or its investments.
If the new fundamental limit is adopted as proposed, the Board of Trustees
intend to adopt the following non-fundamental diversification limitation
for each fund:
"The fund does not currently intend to purchase a securit y
(other than securities issued or guaranteed by the U.S. g overnment
or any of its agencies or instrumentalities) if , as a result, more
than 5% of its total assets would be invested in securities of a single
issuer; provided that the fund may invest up to 25% 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
a n exemptive order granted by the SEC.)"
The non-fundamental limitation reflects the limitations imposed by
regulations applicable to taxable money market funds and the SEC exemptive
order discussed above. U.S. Treasury Portfolio and Money Market Portfolio
intend to interpret the fundamental and non-fundamental limitations in
accordance with SEC regulations applicable to money market funds.
If the proposal is approved, the amended fundamental diversification
limitation cannot be changed without the approval of shareholders and the
non-fundamental limitation cannot be changed without the approval of the
Board of Trustees.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit U.S. Treasury Portfolio and Money Market Portfolio
and their shareholders. The Trustees recommend voting FOR the proposal. The
amended fundamental diversification limitation, upon shareholder approval,
will become effective immediately. If the proposal is not approved by the
shareholders of each fund, each fund's current fundamental diversification
limitation will remain unchanged.
8. TO AMEND DAILY TAX-EXEMPT MONEY FUND'S FUNDAMENTAL INVESTMENT LIMITATION
CONCERNING DIVERSIFICATION.
The Trustees recommend that the shareholders of Daily Tax-Exempt Money
Fund vote to amend the fund's current fundamental investment limitation by
adding the text in the ((double parentheses)) below to the fund's
fundamental investment limitation:
"The fund may not 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, ((or
securities of other investment companies))), 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."
The proposed fundamental limitation concerning diversification is the
limitation imposed by the 1940 Act for diversified investment
companies. The amended fundamental diversification limitation makes one
change from the current limitation, it would permit the fund to invest
without limit in the securities of other investment companies. Pursuant to
an order of exemption granted by the SEC, the fund may invest up to 25% of
total assets in non-publicly offered money market funds (the Central Funds)
managed by FMR or an affiliate of FMR. The Central Funds do not currently
pay investment advisory, management, or transfer agent fees, but do pay
minimal fees for services such as custodian, auditor, and Independent
Trustee fees. Although tax-exempt money market funds such as the fund
expect to continue to invest in money market securities directly rather
than through the Central Funds, FMR believes that the fund will benefit by
having the Central Funds available as an investment alternative on a
contingency basis, without having to incur the cost of a shareholder
meeting.
The SEC has proposed amendments to the regulations applicable to national
tax-exempt money market funds that may limit investment in the securities
of a single issuer (other than U.S. Government securities) to no more than
5% of a fund's total assets except that a fund may invest up to 25% of its
total assets in the securities of a single issuer for up to three business
days. If the proposed amendments are adopted, it is expected that the
Trustees of the fund would adopt a non-fundamental investment limitation to
conform to the amendments. Pursuant to the order of exemption referred
to above, the fund may continue to invest for cash management purposes up
to 25% of total assets in the Central Funds managed by FMR or an affiliate
of FMR.
Daily Tax-Exempt Money Fund intends to interpret the fundamental
limitation in accordance with SEC regulations applicable to money market
funds.
If the proposal is approved, the amended fundamental diversification
limitation cannot be changed without the approval of shareholders.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit Daily Tax-Exempt Money Fund and its shareholders.
The Trustees recommend voting FOR the proposal. The amended fundamental
diversification limitation, upon shareholder approval, will become
effective immediately. If the proposal is not approved by the shareholders
of the fund, the fund's current fundamental diversification limitation will
remain unchanged.
9 . TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION AGAINST
WRITING OR PURCHASING PUT OR CALL OPTIONS FOR U.S. TREASURY PORTFOLIO AND
MONEY MARKET PORTFOLIO.
U.S. Treasury Portfolio's and Money Market Portfolio's fundamental
investment limitation on put and call options states that each fund may not
"write or purchase any put or call options".
The Trustees recommend that shareholders of each fund vote to eliminate
the above fundamental investment limitation. The Trustees believe that each
fund's current limitation unnecessarily restricts each fund from taking
advantage of potential investment opportunities and techniques that are
consistent with regulatory requirements for money market funds and
each fund's investment objective and policies , and believe that each
fund would benefit from having the additional investment
flexibility.
FMR has no current intention of implementing any strategies involving
exchange-traded options contracts. However, some of the funds' investments
may include demand or "put" features, which can provide additional
liquidity or protection against loss by providing the fund with the
ability to require the issuer or a third-party to purchase the security at
the fund's request prior to maturity . In addition, each fund may from
time to time enter into agreements with option-like features, such as
standby commitments or other instruments conveying the right or obligation
to buy or sell securities at a future date. These types of transactions
may provide opportunities that would not otherwise be available to a fund.
The investment strategies discussed above are explicitly permitted under
Rule 2a-7 of the 1940 Act, which sets forth investment restrictions for
money market funds. These restrictions are designed to enable money market
funds to maintain a $1.00 share price. Each fund's current fundamental
investment limitation is more restrictive than that which is permitted
under the Rule. Any strategies used by the funds must, of course, be in
accordance with both the federal requirements applicable to money market
funds, and each fund's investment objective and policies. Approval of
the proposal would allow FMR to develop and implement additional strategies
in the future, without the need to seek further shareholder approval and
without incurring any cost to the funds associated with holding a
shareholder meeting .
The funds' current non-fundamental investment limitation will remain
unchanged as follows:
"The Fund does not currently intend to purchase or sell futures
contracts 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 ."
CONCLUSION. The Board of Trustees has determined that it is in the best
interest of shareholders to eliminate each fund's fundamental limitation
concerning investments in put or call options. Accordingly, the Trustees
recommend that shareholders of each fund vote FOR the proposal. If the
proposal is not approved by shareholders of each fund, each Fund's current
fundamental limitation will remain unchanged.
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting.
However, if any other matters properly come before the Meeting, it is the
intention that proxies that do not contain specific instructions to the
contrary will be voted on such matters in accordance with the judgment of
the persons therein designated.
PRESENT MANAGEMENT CONTRACT
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 and all Trustees who are "interested
persons" of each trust or of FMR, and all personnel of each fund or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of each 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. Services provided by affiliates of FMR will continue under
the proposed management contract described in proposals 4(a) and 5(a).
In addition to the management fee payable to FMR, Daily Tax-Exempt Money
Fund reimburses UMB Bank, n.a. (UMB) for its services as the fund's
custodian and transfer agent. Although Daily Tax-Exempt Money 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 trust, on behalf of
the fund has entered into a revised transfer agent agreement with UMB,
pursuant to which UMB bears the costs of providing these services to
existing shareholders. Other expenses paid by Daily Tax-Exempt Money Fund
include interest, taxes, brokerage commissions, and the fund's
proportionate share of insurance premiums and Investment Company Institute
dues. The 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 the trust's officers and Trustees with
respect to litigation.
UMB has entered into a sub-contract with Fidelity Service Company, Inc.
(FSC), an affiliate of FMR, under the terms of which FSC performs the
processing activities associated with providing transfer agent and
shareholder servicing functions for the fund. Under the sub-contract, FSC
bears the expense of typesetting, printing, and mailing prospectuses,
statements of additional information, and all other reports, notices, and
statements to shareholders, except proxy statements. FSC also pays all
out-of-pocket expenses associated with transfer agent services. Transfer
agent fees and pricing and bookkeeping fees, including reimbursement for
out-of-pocket expenses, paid to FSC by UMB on behalf of Daily Tax-Exempt
Money Fund for the fiscal year ended October 31, 1996 were $1,040,082.
In addition to the management fee payable to FMR, U.S. Treasury Portfolio
and Money Market Portfolio pay transfer agent fees to Fidelity Investments
Institutional Operations Company, Inc. (FIIOC), and pricing and bookkeeping
fees to FSC, affiliates of FMR. Although each fund's current management
contract provides that each fund will pay for typesetting, printing, and
mailing prospectuses, statements of additional information, notices and
reports to shareholders, the trust, on behalf of each fund has entered into
a revised transfer agent agreement with FIIOC, pursuant to which FIIOC
bears the costs of providing these services to existing shareholders of the
applicable classes. Other expenses paid by U.S. Treasury Portfolio and
Money Market Portfolio include interest, taxes, brokerage commissions, and
each fund's proportionate share of insurance premiums and Investment
Company Institute dues. U.S. Treasury Portfolio and Money Market Portfolio
are also liable for such non-recurring expenses as may arise, including
costs of any litigation to which each fund may be a party, and any
obligation it may have to indemnify its officers and Trustees with respect
to litigation.
Transfer agent fees and pricing and bookkeeping fees, including
reimbursement for out-of-pocket expenses, paid to FIIOC and FSC by U.S.
Treasury Portfolio and Money Market Portfolio for the fiscal period ended
October 31, 1996 amounted to $845,328 and $1,715,568, respectively.
Each fund also 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. Each distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of the fund, which are continuously offered
at net asset value per share. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
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 for U.S. Treasury Portfolio and Money Market Portfolio
were approved by Daily Money Fund as sole shareholder of each fund on
September 29, 1993, pursuant to an Agreement and Plan of Conversion
approved by shareholders of each fund on March 24, 1993. The management
contract for Daily Tax-Exempt Money Fund was approved by Daily Tax-Exempt
Money Fund as sole shareholder of the fund on December 20, 1991, pursuant
to an Agreement and Plan of Conversion approved by shareholders of the fund
on October 23, 1991.
FMR may, from time to time, voluntarily reimburse all or a portion of each
fund'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 fund's total returns and yield and repayment of
the reimbursement by each fund will lower its total returns and yield.
During the fiscal period ended October 31, 1996, FMR voluntarily agreed,
subject to revision or termination, to reimburse U.S. Treasury Portfolio
- - Initial Class, Money Market Portfolio - Initial Class, Daily
Tax-Exempt Money Fund - Initial Class, and U.S. Treasury
Portfolio - Class B to the extent that their aggregate operating
expenses, including management fees (but excluding interest, taxes,
brokerage commissions, and extraordinary expenses), were in excess of an
annual rate of 0.65%, 0.65%, 0.65%, and 1.35% of average net assets,
respectively. If this reimbursement had not been in effect, for the fiscal
year ended October 31, 1996, FMR would have received fees amounting to
$2,607,230, on behalf of Daily Tax-Exempt Money Fund, which would have been
equivalent to 0.50% of Daily Tax-Exempt Money Fund's average net assets and
for the fiscal period ended October 31, 1996, FMR would have received fees
amounting to $2,293,828; $3,212,443; and $33,945, respectively, which would
have been equivalent to annualized rates of 0.50%, 0.50%, and
0.50% of average net assets of U.S. Treasury Portfolio -
Initial Class, Money Market Portfolio - Initial Class, and U.S.
Treasury Portfolio - Class B , respectively.
ACTIVITIES AND MANAGEMENT OF FMR
FMR, a corporation organized in 1946, serves as investment adviser to a
number of investment companies. Information concerning the advisory fees,
net assets, and total expenses of funds with investment objectives similar
to U.S. Treasury Portfolio, and Money Market Portfolio, and advised by FMR
is contained in the Table of Average Net Assets and Expense Ratios in
Exhibit 9 beginning on page . Information concerning the advisory
fees, net assets, and total expenses of funds with investment objectives
similar to Daily Tax-Exempt Money Fund, and advised by FMR is contained in
the Table of Average Net Assets and Expense Ratios in Exhibit 10 beginning
on page .
FMR, its officers and directors, its affiliated companies, and the
Trustees, from time to time have transactions with various banks, including
the custodian banks for certain of the funds advised by FMR. Those
transactions that have occurred to date have included 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.
The Directors of FMR are Edward C. Johnson 3d, Chairman of the Board; J.
Gary Burkhead, President; and Peter S. Lynch, Vice Chairman. Each of the
Directors is also a Trustee of the trust. Messrs. Johnson 3d, Burkhead,
John H. Costello, Arthur S. Loring, Thomas D. Maher, Kenneth A. Rathgeber,
Leonard M. Rush, Leland C. Barron, Robert K. Duby, Thomas J. Simpson, Scott
A. Orr, and Ms. Sarah H. Zenoble, are currently officers of the trust and
officers and employees of FMR or FMR Corp. With the exception of Mr.
Costello, Mr. Maher, Mr. Rathgeber, Mr. Rush, and Mr. Simpson all of
these persons are stockholders of FMR Corp. The principal business address
of each of the Directors of FMR is 82 Devonshire Street, Boston,
Massachusetts 02109.
All of the stock of FMR is owned by its parent company, FMR Corp., 82
Devonshire Street, Boston, Massachusetts 02109, which was organized on
October 31, 1972. Members of Mr. Edward C. Johnson 3d's family are the
predominant owners of a class of shares of common stock, representing
approximately 49% of the voting power of FMR Corp., and, therefore, under
the 1940 Act may be deemed to form a controlling group with respect to FMR
Corp.
During the period November 1, 1995 through January 31, 1997, no
transactions were entered into by Trustees and nominees as Trustee of
either trust involving more than 1% of the voting common, non-voting
common and equivalent stock, or preferred stock of FMR Corp.
ACTIVITIES AND MANAGEMENT OF FMR TEXAS
FMR Texas is a wholly owned subsidiary of FMR formed in 1989 to provide
portfolio management services to Fidelity's money market funds and
investment advice with respect to money market instruments.
Funds with investment objectives similar to U.S. Treasury Portfolio and
Money Market Portfolio, for which FMR has entered into a sub-advisory
agreement with FMR Texas, and the net assets of each of these funds, are
indicated in the Table of Average Net Assets and Expense Ratios in Exhibit
9 beginning on page . Funds with investment objectives similar to
Daily Tax-Exempt Money Fund, for which FMR has entered into a sub-advisory
agreement with FMR Texas, and the net assets of each of these funds, are
indicated in the Table of Average Net Assets and Expense Ratios in Exhibit
10 beginning on page .
The Directors of FMR Texas are Edward C. Johnson 3d, Chairman, and J. Gary
Burkhead, President. Mr. Johnson 3d also is President and a Trustee of
each trust and of other funds advised by FMR; Chairman, Chief
Executive Officer, President, and a Director of FMR Corp.; Chairman of the
Board and of the Executive Committee of FMR; a Director of FMR; and
Chairman and Director of Fidelity Management & Research (U.K.) Inc. and
Fidelity Management & Research (Far East) Inc. In addition, Mr. Burkhead is
Senior Vice President and a Trustee of the trust and of other funds advised
by FMR; a Director of FMR Corp.; President and Director of FMR; and
President and Director of FMR U.K. and FMR Far East. Each of the Directors
is a stockholder of FMR Corp. The principal business address of the
Directors is 82 Devonshire Street, Boston, Massachusetts 02109.
SUB-ADVISORY AGREEMENTS
FMR has entered into sub-advisory agreement s with FMR Texas Inc.
(FMR Texas) pursuant to which FMR Texas has primary responsibility for
providing portfolio investment management services to each fund. U.S.
Treasury Portfolio's sub-advisory agreement, dated September 30, 1993 was
approved by Daily Money Fund as sole shareholder of the fund on September
29, 1993 pursuant to an Agreement and Plan of Conversion approved by
shareholders of the fund on March 24, 1993. Money Market Portfolio's
sub-advisory agreement, dated September 30, 1993 was approved by Daily
Money Fund as sole shareholder of the fund on September 29, 1993 pursuant
to an Agreement and Plan of Conversion approved by shareholders of the fund
on March 24, 1993. Daily Tax-Exempt Money Fund's sub-advisory agreement,
dated December 30, 1991, was approved by Daily Tax-Exempt Money Fund as
sole shareholder of the fund on December 20, 1991, pursuant to an Agreement
and Plan of Conversion approved by shareholders of the fund on October 23,
1991. The terms of U.S. Treasury Portfolio's and Money Market Portfolio's
current sub-advisory agreements with FMR Texas duplicate those of their
previous sub-advisory agreements, which were each dated October 1, 1990.
The terms of Daily Tax-Exempt Money Fund's current sub-advisory agreement
with FMR Texas duplicate those of its previous agreement, which was dated
November 1, 1989.
Under the sub-advisory agreements, FMR pays FMR Texas fees equal to 50% of
the management fee 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. For the
fiscal year ended October 31, 1996, FMR paid FMR Texas a fee of $1,303,615
on behalf of Daily Tax-Exempt Money Fund. For the fiscal period
ended October 31, 1996, FMR paid FMR Texas fees of $1,163,887 and
$1,606,221 on behalf of U.S. Treasury Portfolio and Money Market Portfolio,
respectively.
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 fund's
management contract.
On behalf of U.S. Treasury Portfolio and Money Market Portfolio, FMR may
place agency transactions with Fidelity Brokerage Services, Inc. (FBSI) and
Fidelity Brokerage Services (FBS), subsidiaries of FMR Corp., if the
commissions are fair, reasonable, and comparable to commissions charged by
non-affiliated, qualified brokerage firms for similar services.
On behalf of Daily Tax-Exempt Money Fund, FMR may place agency
transactions with FBSI, if the commissions are fair, reasonable, and
comparable to commissions charged by non-affiliated, qualified brokerage
firms for similar services.
For the fiscal year ended October 31, 1996 Daily Tax-Exempt Money
Fund paid no brokerage commissions to affiliated brokers. For the fiscal
period ended October 31, 1996, and the fiscal year ended July 31, 1996,
U.S. Treasury Portfolio and Money Market Portfolio paid no brokerage
commissions to affiliated brokers.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
The trust does not hold annual shareholder meetings. Shareholders wishing
to submit proposals for inclusion in a proxy statement for a subsequent
shareholder meeting should send their written proposals to the Secretary of
the Trust, 82 Devonshire Street, Boston, Massachusetts 02109.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the trust s , in care of Fidelity Investments
Institutional Operations Company, Inc., 82 Devonshire Street, Boston,
Massachusetts 02109, whether other persons are beneficial owners of shares
for which proxies are being solicited and, if so, the number of copies of
the Proxy Statement and Annual Reports you wish to receive in order to
supply copies to the beneficial owners of the respective shares.
EXHIBIT 1
The language to be added to the current contract is in ((double
parentheses)); the language to be deleted is set forth in
[brackets].
FORM OF
MANAGEMENT CONTRACT
BETWEEN
DAILY MONEY FUND
U.S. TREASURY PORTFOLIO
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
[ AGREEMENT ] ((Amendment)) made this [30th] ____ day of
[September 1993]_________________, by and between Daily Money Fund, a
Delaware business trust which may issue one or more series of shares of
beneficial interest (hereinafter called the "Fund"), on behalf of U.S.
Treasury Portfolio (hereinafter called the "Portfolio"), and Fidelity
Management & Research Company, a Massachusetts corporation (hereinafter
called the "Adviser") ((as set forth in its entirety below)) .
((Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, and the Adviser
hereby consent, pursuant to Paragraph 6 of the existing Management Contract
dated September 30, 1993 to an amendment of said Contract in the manner set
forth below. The Amended Management Contract shall, when executed by duly
authorized officers of the Fund and Adviser, take effect on ________ or the
first day of the month following approval)).
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Portfolio; and shall pay the salaries and
fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio[s] are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of [each]((the)) Portfolio's shares
under federal and state law; and (vii) investigating the development of and
developing and implementing, if appropriate, management and shareholder
services designed to enhance the value or convenience of the Portfolio as
an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(((c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or dealers
selected by the Adviser, which may include brokers or dealers affiliated
with the Adviser. The Adviser shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the Portfolio
and at commission rates which are reasonable in relation to the benefits
received. In selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other accounts
over which the Adviser or its affiliates exercise investment discretion.
The Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Adviser and its affiliates have with respect to
accounts over which they exercise investment discretion. The Trustees of
the Fund shall periodically review the commissions paid by the Portfolio to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.))
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. For the services and facilities to be furnished hereunder, the Adviser
shall receive a management fee payable monthly as soon as practicable after
the last day of each month and equivalent to an annual rate of [.50%].((25%
))of the average daily net assets of the Portfolio.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until [May 31,
1994] ((May 31, 1998)) and indefinitely thereafter, but only so long as
the continuance after such date shall be specifically approved at least
annually by vote of the Trustees of the Fund or by vote of a majority of
the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or "interested persons" of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment of
any penalty, by action of its Trustees or Board of Directors, as the case
may be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Trust Instrument and
agrees that the obligations assumed by the Fund pursuant to this Contract
shall be limited in all cases to the Portfolio and its assets, and the
Adviser shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Portfolio or any other Portfolio of
the Fund. In addition, the Adviser shall not seek satisfaction of any such
obligation from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Trust Instrument are separate and distinct from those of any and all other
Portfolios.
8. This contract shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
[Signatures Lines Omitted]
EXHIBIT 2
The language to be added to the current contract is in ((double
parentheses)); the language to be deleted is set forth in [brackets].
FORM OF
MANAGEMENT CONTRACT
BETWEEN
DAILY MONEY FUND
MONEY MARKET PORTFOLIO
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
[ AGREEMENT ] ((Amendment)) made this [30th]____ day of
[September 1993]___________, by and between Daily Money Fund, a Delaware
business trust which may issue one or more series of shares of beneficial
interest (hereinafter called the "Fund"), on behalf of Money Market
Portfolio (hereinafter called the "Portfolio"), and Fidelity Management &
Research Company, a Massachusetts corporation (hereinafter called the
"Adviser") ((as set forth in its entirety below .))
((Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, and the Adviser
hereby consent, pursuant to Paragraph 6 of the existing Management Contract
dated September 30, 1993 to an amendment of said Contract in the manner set
forth below. The Amended Management Contract shall, when executed by duly
authorized officers of the Fund and Adviser, take effect on ________ or the
first day of the month following approval.))
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Portfolio; and shall pay the salaries and
fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio[s] are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of [each]((the)) Portfolio's shares
under federal and state law; and (vii) investigating the development of and
developing and implementing, if appropriate, management and shareholder
services designed to enhance the value or convenience of the Portfolio as
an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(((c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or dealers
selected by the Adviser, which may include brokers or dealers affiliated
with the Adviser. The Adviser shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the Portfolio
and at commission rates which are reasonable in relation to the benefits
received. In selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other accounts
over which the Adviser or its affiliates exercise investment discretion.
The Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Adviser and its affiliates have with respect to
accounts over which they exercise investment discretion. The Trustees of
the Fund shall periodically review the commissions paid by the Portfolio to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.))
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. For the services and facilities to be furnished hereunder, the Adviser
shall receive a management fee payable monthly as soon as practicable after
the last day of each month and equivalent to an annual rate of [.50%]
((.25%)) of the average daily net assets of the Portfolio.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until [May 31,
1994] ((May 31, 1998)) and indefinitely thereafter, but only so long as the
continuance after such date shall be specifically approved at least
annually by vote of the Trustees of the Fund or by vote of a majority of
the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or "interested persons" of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment of
any penalty, by action of its Trustees or Board of Directors, as the case
may be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Trust Instrument and
agrees that the obligations assumed by the Fund pursuant to this Contract
shall be limited in all cases to the Portfolio and its assets, and the
Adviser shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Portfolio or any other Portfolio of
the Fund. In addition, the Adviser shall not seek satisfaction of any such
obligation from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Trust Instrument are separate and distinct from those of any and all other
Portfolios.
8. This contract shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
[Signature Lines Omitted]
EXHIBIT 3
FORM OF
DISTRIBUTION AND SERVICE PLAN
DAILY MONEY FUND: U.S. TREASURY PORTFOLIO
INITIAL CLASS
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") for the Initial Class shares (the
"Initial Class"), a class of shares of U.S. Treasury Portfolio (the
"Fund"), a series of Daily Money Fund (the "Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor"),
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are required
to include nor are limited to, the following:
(1) formulation and implementation of marketing and promotional
activities, such as mail promotions and television, radio, newspaper,
magazine and other mass media advertising;
(2) preparation, printing and distribution of sales literature;
(3) preparation, printing and distribution of prospectuses of the Fund
and reports to recipients other than existing shareholders of the Fund;
(4) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Distributor may from time to
time, deem advisable;
(5) making payments to securities dealers and others engaged in the sales
of Shares or who engage in shareholder support services ("Investment
Professionals"); and
(6) providing training, marketing and support to Investment Professionals
with respect to the sale of Shares.
3. In consideration for the services provided and the expenses incurred by
the Distributor pursuant to the General Distribution Agreement and
paragraph 2 hereof, all with respect to Initial Class shares, Initial Class
of the Fund shall pay to the Distributor a fee at the annual rate of up to
0.25% of average daily net assets of Initial Class throughout the month, or
such lesser amount as may be established from time to time by the Trustees
of the Trust, as specified in paragraph 6 of this Plan; provided that, for
any period during which the total of such fee and all other expenses of the
Fund (or of Initial Class), would exceed the gross income of the Fund (or
of Initial Class), such fee shall be reduced by such excess. Such fee shall
be computed and paid monthly. The determination of daily net assets shall
be made at the close of business each day throughout the month and computed
in the manner specified in the Fund's then current Prospectus for the
determination of the net asset value of shares of Initial Class, but shall
exclude assets attributable to any other Class of the Fund. The Distributor
may, but may not be required to, use all or any portion of the fee received
pursuant to the Plan to compensate Investment Professionals who have
engaged in the sale of Initial Class Shares or in shareholder
support services with respect to Initial Class Shares pursuant to
agreements with the Distributor, or to pay any of the expenses associated
with other activities authorized under paragraph 2 thereof.
4. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management & Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to make payment to the Distributor for expenses incurred in
connection with the distribution of Initial Class Shares, including the
activities referred to in paragraphs 2 and 3 hereof. To the extent that the
payment of management fees by the Fund to the Adviser should be deemed to
be indirect financing of any activity primarily intended to result in the
sale of Initial Class Shares within the meaning of Rule 12b-1, then such
payment shall be deemed to be authorized by this Plan. In addition to
the payments made under paragraph 3, the Distributor may use all or any
portion of the payments received from the Adviser pursuant to this
paragraph to compensate Investment Professionals in connection with the
distribution of Initial Class Shares; such payments shall not exceed on an
annual basis the management fee set forth in the Management Contract.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities" (as defined in the Act) of Initial Class,
this Plan having been approved by a vote of a majority of the Trustees of
the Trust, including a majority of Trustees who are not "interested
persons" of the Trust (as defined in the Act) and who have no direct or
indirect financial interest in the operation of this Plan or in any
agreement related to the Plan (the "Independent Trustees"), cast in person
at a meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect until May 31, 1998, and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to increase materially the fee
provided for in paragraph 3 hereof, or any amendment of the Management
Contract to increase the amount to be paid by the Fund thereunder, shall be
effective only upon approval by a vote of a majority of the outstanding
voting securities of Initial Class, in the case of the Plan, or upon
approval by a vote of a majority of the outstanding voting securities of
the Fund, in the case of the Management Contract, and (b) any material
amendment of this Plan shall be effective only upon approval in the manner
provided in the first sentence of this paragraph 6.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Class.
8. During the existence of this Plan, the Trust shall require the Adviser
and/or the Distributor to provide the Trust, for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report of the
amounts expended in connection with financing any activity primarily
intended to result in the sale of Initial Class Shares (making estimates of
such costs where necessary or desirable) and the purposes for which such
expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of Initial Class Shares.
10. Consistent with the limitation of shareholder liability as set forth
in the Trust's Trust Instrument, any obligation assumed by Initial Class
pursuant to this Plan or any agreement related to this Plan shall be
limited in all cases to Initial Class and its assets and shall not
constitute an obligation of any shareholder of the Trust or of any other
class of the Fund, series of the Trust or class of such series.
11. If any provision of the Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
EXHIBIT 4
FORM OF
DISTRIBUTION AND SERVICE PLAN
DAILY MONEY FUND: MONEY MARKET PORTFOLIO
INITIAL CLASS
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") for the Initial Class shares (the
"Initial Class"), a class of shares of Money Market Portfolio (the "Fund"),
a series of Daily Money Fund (the "Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor"),
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are required
to include nor are limited to, the following:
(1) formulation and implementation of marketing and promotional
activities, such as mail promotions and television, radio, newspaper,
magazine and other mass media advertising;
(2) preparation, printing and distribution of sales literature;
(3) preparation, printing and distribution of prospectuses of the Fund
and reports to recipients other than existing shareholders of the Fund;
(4) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Distributor may from time to
time, deem advisable;
(5) making payments to securities dealers and others engaged in the sales
of Shares or who engage in shareholder support services ("Investment
Professionals"); and
(6) providing training, marketing and support to Investment Professionals
with respect to the sale of Shares.
3. In consideration for the services provided and the expenses incurred by
the Distributor pursuant to the General Distribution Agreement and
paragraph 2 hereof, all with respect to Initial Class shares, Initial Class
of the Fund shall pay to the Distributor a fee at the annual rate of up to
0.25% of average daily net assets of Initial Class throughout the month, or
such lesser amount as may be established from time to time by the Trustees
of the Trust, as specified in paragraph 6 of this Plan; provided that, for
any period during which the total of such fee and all other expenses of the
Fund (or of Initial Class), would exceed the gross income of the Fund (or
of Initial Class), such fee shall be reduced by such excess. Such fee shall
be computed and paid monthly. The determination of daily net assets shall
be made at the close of business each day throughout the month and computed
in the manner specified in the Fund's then current Prospectus for the
determination of the net asset value of shares of Initial Class, but shall
exclude assets attributable to any other Class of the Fund. The Distributor
may, but may not be required to, use all or any portion of the fee received
pursuant to
the Plan to compensate Investment Professionals who have engaged in the
sale of Initial Class Shares or in shareholder support services with
respect to Initial Class Shares pursuant to agreements with the
Distributor, or to pay any of the expenses associated with other activities
authorized under paragraph 2 thereof.
4. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management & Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to make payment to the Distributor for expenses incurred in
connection with the distribution of Initial Class Shares, including the
activities referred to in paragraphs 2 and 3 hereof. To the extent that the
payment of management fees by the Fund to the Adviser should be deemed to
be indirect financing of any activity primarily intended to result in the
sale of Initial Class Shares within the meaning of Rule 12b-1, then such
payment shall be deemed to be authorized by this Plan. In addition to
the payments made under paragraph 3, the Distributor may use all or any
portion of the payments received from the Adviser pursuant to this
paragraph to compensate Investment Professionals in connection with the
distribution of Initial Class Shares; such payments shall not exceed on an
annual basis the management fee set forth in the Management Contract.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities" (as defined in the Act) of Initial Class,
this Plan having been approved by a vote of a majority of the Trustees of
the Trust, including a majority of Trustees who are not "interested
persons" of the Trust (as defined in the Act) and who have no direct or
indirect financial interest in the operation of this Plan or in any
agreement related to the Plan (the "Independent Trustees"), cast in person
at a meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect until May 31, 1998, and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to increase materially the fee
provided for in paragraph 3 hereof, or any amendment of the Management
Contract to increase the amount to be paid by the Fund thereunder, shall be
effective only upon approval by a vote of a majority of the outstanding
voting securities of Initial Class, in the case of the Plan, or upon
approval by a vote of a majority of the outstanding voting securities of
the Fund, in the case of the Management Contract, and (b) any material
amendment of this Plan shall be effective only upon approval in the manner
provided in the first sentence of this paragraph 6.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Class.
8. During the existence of this Plan, the Trust shall require the Adviser
and/or the Distributor to provide the Trust, for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report of the
amounts expended in connection with financing any activity primarily
intended to result in the sale of Initial Class Shares (making estimates of
such costs where necessary or desirable) and the purposes for which such
expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of Initial Class Shares.
10. Consistent with the limitation of shareholder liability as set forth
in the Trust's Trust Instrument, any obligation assumed by Initial Class
pursuant to this Plan or any agreement related to this Plan shall be
limited in all cases to Initial Class and its assets and shall not
constitute an obligation of any shareholder of the Trust or of any other
class of the Fund, series of the Trust or class of such series.
11. If any provision of the Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
EXHIBIT 5
FORM OF
DISTRIBUTION AND SERVICE PLAN
DAILY MONEY FUND: U.S. TREASURY PORTFOLIO
CLASS B
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") for Class B shares of U.S. Treasury
Portfolio ("Class B"), a class of shares of U.S. Treasury Portfolio (the
"Fund"), a series of Daily Money Fund (the "Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor")
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers of the Fund's shares of beneficial
interest (the "shares"). Such efforts may include, but neither are required
to include nor are limited to, the following: (1) formulation and
implementation of marketing and promotional activities, such as mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses of
the Fund and reports to recipients other than existing shareholders of the
Fund; (4) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Distributor may, from time to
time, deem advisable; (5) making payments to securities dealers and others
engaged in the sale of shares or who engage in shareholder support services
("Investment Professionals"); and (6) providing training, marketing and
support to Investment Professionals with respect to the sale of shares.
3. In accordance with such terms as the Trustees may, from time to time
establish, and in conjunction with its services under the General
Distribution Agreement with respect to shares of Class B ("Class B
Shares"), the Distributor is hereby specifically authorized to make
payments to Investment Professionals in connection with the sale of the
Class B Shares. Such payments may be paid as a percentage of the dollar
amount of purchases of Class B Shares attributable to a particular
Investment Professional, or may take such other form as may be approved by
the Trustees.
4. In consideration for the services provided and the expenses incurred by
the Distributor pursuant to the General Distribution Agreement and to
paragraphs 2 and 3 hereof, all with respect to Class B Shares:
(a) Class B shall pay to the Distributor a monthly distribution fee at
the annual rate of 0.75% (or such lesser amount as the Trustees may, from
time to time, determine) of the average daily net assets of Class B
throughout the month ; provided that, for any period during which the
total of such fee and all other expenses of the fund (or of Class B), would
exceed the gross income of the Fund (or of Class B) such fee shall be
reduced by such excess. The determination of daily net assets shall be made
at the close of business each day throughout the month and computed in the
manner specified in the Fund's then current Prospectus for the
determination of the net asset value of Class B Shares, but shall exclude
assets attributable to any other class of shares of the Fund. The
Distributor may, but shall not be required to, use all or any portion of
the distribution fee received pursuant to the Plan to compensate Investment
Professionals who have engaged in the sale of Class B Shares or in
shareholder support services with respect to Class B Shares pursuant to
agreements with the Distributor, or to pay any of the expenses associated
with other activities authorized under paragraphs 2 and 3 hereof; and
(b) In addition, the Plan recognizes that the Distributor may, in
accordance with such terms as the Trustees may from time to time establish,
receive all or a portion of any sales charges, including contingent
deferred sales charges, which may be imposed upon the sale or redemption of
Class B Shares.
5. Separate from any payments made as described in paragraph 4 hereof,
Class B shall also pay to the Distributor a service fee at the annual rate
of 0.25% (or such lesser amount as the Trustees may, from time to time,
determine) of the average daily net assets of Class B throughout the month.
The determination of daily net assets shall be made at the close of
business each day throughout the month and computed in the manner specified
in the Fund's then current Prospectus for the determination of the net
asset value of Class B Shares, but shall exclude assets attributable to any
other class of shares of the Fund. In accordance with such terms as the
Trustees may from time to time establish, the Distributor may use all [or a
portion] of such service fees to compensate Investment Professionals for
personal service and/or the maintenance of shareholder accounts or for
other services for which "service fees" lawfully may be paid in accordance
with applicable rules and regulations.
6. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management & Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to make payment to the Distributor for expenses incurred in
connection with the distribution of Class B Shares, including the
activities referred to in paragraphs 2 and 3 hereof. To the extent that the
payment of management fees by the Fund to the Adviser should be deemed to
be indirect financing of any activity primarily intended to result in the
sale of Class B Shares within the meaning of Rule 12b-1, then such payment
shall be deemed to be authorized by this Plan.
7. This Plan shall become effective upon the first business day of the
month following approval by "a vote of at least a majority of the
outstanding voting securities" (as defined in the Act) of Class B, this
Plan having been approved by a vote of a majority of the Trustees of the
Trust, including a majority of Trustees who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related
to the Plan (the "Independent Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan.
8. This Plan shall, unless terminated as hereinafter provided, remain in
effect until May 31, 1998, and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting
called for the purpose of voting on this Plan. This Plan may be amended at
any time by the Board of Trustees, provided that (a) any amendment to
increase materially the fee provided for in paragraphs 4 or 5 hereof or any
amendment of the Management Contract to increase the amount to be paid by
the Fund thereunder shall be effective only upon approval by a vote of a
majority of the outstanding voting securities of Class B in the case of
this Plan, or upon approval by a vote of the majority of the outstanding
voting securities of the Fund, in the case of the Management Contract, and
(b) any material amendment of this Plan shall be effective only upon
approval in the manner provided in the first sentence of this paragraph 8.
9. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of Class B.
10. During the existence of this Plan, the Trust shall require the Adviser
and/or the Distributor to provide the Trust, for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report of the
amounts expended in connection with financing any activity primarily
intended to result in the sale of Class B Shares (making estimates of such
costs where necessary or desirable) and the purposes for which such
expenditures were made.
11. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of Class B Shares.
12. Consistent with the limitation of shareholder liability as set forth
in the Trust's Trust Instrument, any obligation assumed by Class B pursuant
to this Plan and any agreement related to this Plan shall be limited in all
cases to Class B and its assets and shall not constitute an obligation of
any shareholder of the Trust or of any other class of the Fund, series of
the Trust or class of such series.
13. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
EXHIBIT 6
The language to be added to the current contract is in ((double
parentheses)); the language to be deleted is set forth in [brackets].
FORM OF
MANAGEMENT CONTRACT
BETWEEN
DAILY TAX-EXEMPT MONEY FUND [II]AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
[ AGREEMENT ] ((Amendment)) made this [30th] ____ day of
[December, 1991] ____________, by and between Daily Tax-Exempt Money Fund
II, a Delaware business trust, which may issue one or more series of shares
of beneficial interest (hereinafter called the "Fund") on behalf of its
existing series of shares of beneficial interest (hereinafter called the
"Portfolio"), and Fidelity Management & Research Company, a Massachusetts
corporation (hereinafter called the "Adviser") (( as set forth in its
entirety below .))
((Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, and the Adviser
hereby consent, pursuant to Paragraph 6 of the existing Management Contract
dated December 30, 1991 to an amendment of said Contract in the manner set
forth below. The Amended Management Contract shall, when executed by duly
authorized officers of the Fund and Adviser, take effect on ________ or the
first day of the month following approval.))
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Portfolio; and shall pay the salaries and
fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations: (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(((c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or dealers
selected by the Adviser, which may include brokers or dealers affiliated
with the Adviser. The Adviser shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the Portfolio
and at commission rates which are reasonable in relation to the benefits
received. In selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other accounts
over which the Adviser or its affiliates exercise investment discretion.
The Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Adviser and its affiliates have with respect to
accounts over which they exercise investment discretion. The Trustees of
the Fund shall periodically review the commissions paid by the Portfolio to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.))
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. For the services and facilities to be furnished hereunder, the Adviser
shall receive a management fee payable monthly as soon as practicable after
the last day of each month and equivalent to an annual rate of
[.50%]((.25%)) of average daily net assets of the Fund.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for Fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until [June 30,
1992] ((May 31, 1998)) and indefinitely thereafter, but only so long as the
continuance after such date shall be specifically approved at least
annually by vote of the Trustees of the Fund or by vote of a majority of
the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or "interested persons" of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without payment of any
penalty, by action of its Trustees or Board of Directors, as the case may
be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Trust Instrument and
agrees that the obligations assumed by the Fund pursuant to this Contract
shall be limited in all cases to the Portfolio and its assets, and the
Adviser shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Portfolio or any other Portfolios of
the Fund. In addition, the Adviser shall not seek satisfaction of any such
obligation from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Trust Instrument are separate and distinct from those of any and all other
Portfolios.
8. This contract shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
[Signature Lines Omitted]
EXHIBIT 7
FORM OF DISTRIBUTION
AND SERVICE PLAN
DAILY TAX-EXEMPT MONEY FUND
INITIAL CLASS
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") for the Initial Class shares (the
"Initial Class"), a class of shares of Daily Tax-Exempt Money Fund
Portfolio (the "Fund"), a series of Daily Tax-Exempt Money Fund (the
"Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor"),
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are required
to include nor are limited to, the following:
(1) formulation and implementation of marketing and promotional
activities, such as mail promotions and television, radio, newspaper,
magazine and other mass media advertising;
(2) preparation, printing and distribution of sales literature;
(3) preparation, printing and distribution of prospectuses of the Fund
and reports to recipients other than existing shareholders of the Fund;
(4) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Distributor may from time to
time, deem advisable;
(5) making payments to securities dealers and others engaged in the sales
of Shares or who engage in shareholder support services ("Investment
Professionals"); and
(6) providing training, marketing and support to Investment Professionals
with respect to the sale of Shares.
3. In consideration for the services provided and the expenses incurred by
the Distributor pursuant to the General Distribution Agreement and
paragraph 2 hereof, all with respect to Initial Class shares, Initial Class
of the Fund shall pay to the Distributor a fee at the annual rate of up to
0.25% of average daily net assets of Initial Class throughout the month, or
such lesser amount as may be established from time to time by the Trustees
of the Trust, as specified in paragraph 6 of this Plan; provided that, for
any period during which the total of such fee and all other expenses of the
Fund (or of Initial Class), would exceed the gross income of the Fund (or
of Initial Class), such fee shall be reduced by such excess. Such fee shall
be computed and paid monthly. The determination of daily net assets shall
be made at the close of business each day throughout the month and computed
in the manner specified in the Fund's then current Prospectus for the
determination of the net asset value of shares of Initial Class, but shall
exclude assets attributable to any other Class of the Fund. The Distributor
may, but may not be required to, use
all or any portion of the fee received pursuant to the Plan to compensate
Investment Professionals who have engaged in the sale of Initial Class
Shares or in shareholder support services with respect to Initial Class
Shares pursuant to agreements with the Distributor, or to pay any of the
expenses associated with other activities authorized under paragraph 2
thereof.
4. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management & Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to make payment to the Distributor for expenses incurred in
connection with the distribution of Initial Class Shares, including the
activities referred to in paragraphs 2 and 3 hereof. To the extent that the
payment of management fees by the Fund to the Adviser should be deemed to
be indirect financing of any activity primarily intended to result in the
sale of Initial Class Shares within the meaning of Rule 12b-1, then such
payment shall be deemed to be authorized by this Plan. In addition to
the payments made under paragraph 3, the Distributor may use all or any
portion of the payments received from the Adviser pursuant to this
paragraph to compensate Investment Professionals in connection with the
distribution of Initial Class Shares; such payments shall not exceed on an
annual basis the management fee set forth in the Management Contract.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities" (as defined in the Act) of Initial Class,
this Plan having been approved by a vote of a majority of the Trustees of
the Trust, including a majority of Trustees who are not "interested
persons" of the Trust (as defined in the Act) and who have no direct or
indirect financial interest in the operation of this Plan or in any
agreement related to the Plan (the "Independent Trustees"), cast in person
at a meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect until May 31, 1998, and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to increase materially the fee
provided for in paragraph 3 hereof, or any amendment of the Management
Contract to increase the amount to be paid by the Fund thereunder, shall be
effective only upon approval by a vote of a majority of the outstanding
voting securities of Initial Class, in the case of the Plan, or upon
approval by a vote of a majority of the outstanding voting securities of
the Fund, in the case of the Management Contract, and (b) any material
amendment of this Plan shall be effective only upon approval in the manner
provided in the first sentence of this paragraph 6.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Class.
8. During the existence of this Plan, the Trust shall require the Adviser
and/or the Distributor to provide the Trust, for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report of the
amounts expended in connection with financing any activity primarily
intended to result in the sale of Initial Class Shares (making estimates of
such costs where necessary or desirable) and the purposes for which such
expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of Initial Class Shares.
10. Consistent with the limitation of shareholder liability as set forth
in the Trust's Trust Instrument, any obligation assumed by Initial Class
pursuant to this Plan or any agreement related to this Plan shall be
limited in all cases to Initial Class and its assets and shall not
constitute an obligation of any shareholder of the Trust or of any other
class of the Fund, series of the Trust or class of such series.
11. If any provision of the Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
EXHIBIT 8
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as of
the ___ day of _________ 199_, by and between U.S. Treasury Portfolio and
Money Market Portfolio, each a separate series of Daily Money Fund
(DMF) , and Daily Tax-Exempt Money Fund (the Trust) . E ach
of DMF and the Trust is a business trust duly formed under the laws of
the State of Delaware. Throughout this Agreement, references to "the Fund"
include each of U.S. Treasury Portfolio and Money Market Portfolio.
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended (the Code). The reorganization will
comprise: (a) the transfer of all of the assets of the Fund to a series of
the Trust (the Series) solely in exchange for shares of beneficial interest
of the applicable class of the Series (the Trust Series Shares) and the
assumption by the Series of of the Fund's liabilities; and (b) the
constructive distribution of such Trust Series Shares of the applicable
classes of the Fund to its shareholders (Fund Shareholder) in complete
liquidation and termination of the Fund in exchange for all of the Fund's
outstanding shares of the corresponding classes (Fund Shares). The Fund
shall receive shares of the applicable classes of the Series equal to the
number and class of Fund Shares on the Closing Date (as defined below).
Immediately thereafter, the Fund shall then distribute to each Fund
Shareholder one Trust Series Share for each Fund Share held by the
shareholder on the Closing Date. The foregoing transactions are referred to
herein as the "Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE FUND
DMF on behalf of the Fund represents and warrants as follows:
(a) The Fund is a series of DMF, a business trust duly formed, validly
existing, and in good standing under the laws of the State of Delaware and
has the power to own all of its properties and assets and to carry out its
obligations under this Agreement. It has all necessary federal, state, and
local authorizations to carry out its business as now being conducted and
to carry out this Agreement;
(b) The Fund is duly registered as an open-end management investment
company under the Investment Company Act of 1940 (the 1940 Act), as
amended, or is a series of a registrant and such registration is in full
force and effect;
(c) The Fund is not in, and the execution, delivery and performance of
this Agreement will not result in, violation of any provision of the
Restated Trust Instrument or the Fund's Bylaws, or, to the Fund's
knowledge, of any agreement, indenture, instrument, contract, lease or
other undertaking to which the Fund is a party or by which the Fund is
bound or result in the acceleration of any obligation or the imposition of
any penalty under any agreement, judgment or decree to which the Fund is a
party or is bound;
(d) The Fund has no material contracts or other commitments (other than
this Agreement) that will not be terminated without liability to the Fund
on or prior to the Closing Date;
(e) To the Fund's knowledge, no material legal, administrative, or other
proceeding or investigation of, or before, any court or governmental body
presently is pending or threatened against the Fund or any of its
properties or assets which assert liability on the part of the Fund, except
as previously disclosed in writing to the Trust. The Fund knows of no facts
that might form the basis for the institution of such proceedings;
(f) The Fund has filed or will file all federal and state tax returns
which, to the knowledge of the Fund's officers, are required to be filed by
the Fund and has paid or will pay all federal and state taxes shown to be
due on said returns or provision shall have been made for the payment
thereof, and, to the best of the Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to
such returns;
(g) All of the issued and outstanding shares of the Fund are, and at the
Closing Date will be, duly and validly issued and outstanding and fully
paid and nonassessable as a matter of Delaware law (except as disclosed in
the Fund's Statement of Additional Information), and have been offered for
sale in conformity with all applicable federal securities laws. All of the
issued and outstanding shares of the Fund will, at the Closing Date, be
held by the persons and in the amounts as certified in accordance with the
provisions of this Agreement;
(h) The information to be furnished by the Fund for use in applications
for orders, registration statements, proxy materials and other documents
which may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete and shall comply in all material
respects with federal securities and other laws and regulations thereunder
applicable thereto;
(i) At both the Valuation Time (as defined in Section 4) and the Closing
Date (as defined in Section 6), the Fund will have the full right, power,
and authority to sell, assign, transfer, and deliver its portfolio
securities and any other assets of the Fund to be transferred to the Series
pursuant to this Agreement. At the Closing Date, subject only to the
delivery of the Fund's portfolio securities and any such other assets as
contemplated by this Agreement, the Series will acquire the Fund's
portfolio securities and any such other assets subject to no encumbrances,
liens, or security interests (except for those that may arise in the
ordinary course and are disclosed to the Series) and without any
restrictions upon the transfer thereof;
(j) The execution, delivery, and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of the Fund, and this Agreement constitutes a valid and
binding obligation of the Fund enforceable in accordance with its terms,
subject to shareholder approval;
(k) To the best of the knowledge of the Fund's management, there is no
plan or intention by the Fund's shareholders to sell, exchange or otherwise
dispose of any of the Trust Series Shares to be received in the
Reorganization;
(l) The Fund shares are widely held and may be purchased and redeemed upon
request;
(m) No consideration other than Trust Series Shares will be issued in
exchange for the Fund Shares in the Reorganization;
(n) Immediately following consummation of the Reorganization, the Fund
Shareholders will own all of the Trust Series Shares and will own such
shares solely by reason of their ownership of the Fund Shares immediately
prior to the Reorganization;
(o) Immediately following the consummation of the Reorganization, the
Trust will hold on behalf of the Series the same assets and be subject to
the same liabilities that the Fund held or was subject to immediately prior
thereto, except for assets used to pay expenses incurred in connection with
the Reorganization. Assets used to pay expenses and all distributions
(except for distributions and redemptions arising in the ordinary course of
the Fund's business as an open-end investment company) made by the Fund
immediately preceding the Reorganization will, in the aggregate, constitute
less than 1% of the net assets of the Fund;
(p) At the time of the Reorganization, the Fund will not have outstanding
any warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in the Fund;
(q) There is no intercompany indebtedness between the Series and the Fund
that was issued, acquired or that will be settled at a discount;
(r) The Fund's liabilities to be assumed by the Series in the
Reorganization were incurred by the Fund in the ordinary course of its
business and are associated with the assets to be transferred;
(s) The Fund's shareholders each will pay their own expenses, if any,
incurred in connection with the Reorganization;
(t) The fair market value of the Fund's assets to be transferred by the
Fund to the Series will equal or exceed the Fund's liabilities to be
assumed by the Series plus the liabilities to which the transferred assets
are subject;
(u) The Fund is a regulated investment company as defined in Section 851
of the Internal Revenue Code of 1986, as amended;
(v) At the time of the Reorganization, the Fund is not under the
jurisdiction of a court in a proceeding under Title 11 of the United States
Code or similar case within the meaning of Section 368(a)(3)(A) of the
Code;
(w) To the Fund's knowledge, no consent, approval, authorization, or order
of any court or governmental authority is required for the consummation by
the Fund of the transactions contemplated by this Agreement, except such as
have been obtained under the Securities Act of 1933 (the 1933 Act), the
Securities Exchange Act of 1934 (the 1934 Act), and the 1940 Act;
(x) The Fund has no known liabilities of a material nature, contingent or
otherwise, other than those shown as belonging to it on its statement of
assets and liabilities as of December 20, 1996 and those incurred in the
ordinary course of the Fund's business as an investment company since
December 20, 1996; and
(y) The Fund will be liquidated immediately after the Reorganization.
2. REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants as follows:
(a) The Trust is a business trust duly formed, validly existing, and in
good standing under the laws of the State of Delaware. It has all necessary
federal, state, and local authorizations to carry out its business as now
being conducted and to carry out this Agreement;
(b) The Trust is duly registered as an open-end management investment
company under the 1940 Act, and the Series is a duly established and
designated series of the Trust;
(c) The Trust is not in, and the execution, delivery and performance of
this Agreement will not result in, violation of any provision of the
Amended and Restated Trust Instrument or the Trust's Bylaws, or, to the
Trust's knowledge, of any agreement, indenture, instrument, contract, lease
or other undertaking to which the Trust is a party or by which the Trust is
bound or result in the acceleration of any obligation or the imposition of
any penalty under any agreement, judgment or decree to which the Trust is a
party or is bound;
(d) To the Trust's knowledge, no material legal, administrative, or other
proceeding or investigation of, or before, any court or governmental body
presently is pending or threatened against the Trust or any of its
properties or assets which assert liability on the part of the Trust,
except as previously disclosed in writing to the Trust. The Trust knows of
no facts that might form the basis for the institution of such proceedings;
(e) The Trust intends for the Series to be a regulated investment company,
under Section 851 of the Code;
(f) Prior to the Closing Date, there shall be no issued and outstanding
Trust Series Shares or any other securities issued by the Series (except
for the one share of each class that may be issued to FMR); Trust Series
Shares issued in connection with the transactions contemplated herein will
be, duly and validly issued and outstanding, fully paid and non-assessable
under Delaware law on the Closing Date;
(g) The execution, delivery, and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of the Trust, and, upon its proper execution, this
Agreement will constitute a valid and binding obligation of the Trust
enforceable against the Series in accordance with its terms;
(h) The Trust Series Shares at the Closing will have been duly authorized
and, when so issued and delivered, will be duly and validly issued shares
of the Series, fully paid and non-assessable under Delaware law.
(i) The fair market value of the Trust Series Shares to be received by the
Fund Shareholders will be equal to the fair market value of their Fund
Shares constructively surrendered in exchange therefor;
(j) The Trust has no plan or intention on behalf of the Series to issue
additional Trust Series Shares following the Reorganization except for
issuance of shares arising in the ordinary course of the business of the
Series as the series of an open-end investment company;
(k) The Trust has no plan or intention to reacquire the Trust Series
Shares issued to the Fund Shareholders pursuant to the Reorganization other
than through redemptions arising in the ordinary course of the business of
the Series as a series of an open-end investment company;
(l) Following the Reorganization, the Trust, on behalf of the Series, will
continue the Fund's historic business;
(m) The Trust has no plan or intention to sell or otherwise dispose of any
of the Fund's assets to be acquired by the Series in the Reorganization,
except for dispositions made in the ordinary course of its business and
dispositions necessary to maintain the status of the Series as a regulated
investment company under Section 851 of the Code;
(n) The information to be furnished by the Trust with respect to the
Series for use in applications for orders, registration statements, proxy
materials and other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete and shall
comply in all material respects with federal securities and other laws and
regulations applicable thereto;
(o) The Trust, on behalf of the Series, shall use all reasonable efforts
to obtain the approvals and authorizations required by the 1933 Act and the
1940 Act as it may deem appropriate in order to operate after the Closing
Date; and
(p) To the Trust's knowledge, no consent, approval, authorization, or
order of any court or governmental authority is required for the
consummation by the Series of the transactions contemplated by this
Agreement, except such as have been obtained under the 1933 Act, the 1934
Act, and the 1940 Act.
3. REORGANIZATION
(a) Subject to the requisite approval of the shareholders of the Fund and
to the other terms and conditions contained herein, the Fund agrees to
assign, convey, transfer, and deliver to the Series established by the
Trust solely for the purpose of acquiring all of the assets of the Fund,
which Series has not issued any Trust Series Shares (except for one share
of each class that may be issued to FMR) or commenced operations, on the
Closing Date all of the assets of the Fund of any kind and nature existing
on the Closing Date. The Series agrees in exchange therefor (1) to assume
all of the Fund's liabilities existing on or after the Closing Date,
whether or not determinable on the Closing Date, and (2) to issue and
deliver to the Fund the number of full and fractional Trust Series Shares
of the applicable classes equal to the value and number of full and
fractional shares the corresponding classes of the Fund outstanding at the
time of the closing, as described in paragraph 6, on the Closing Date
provided for in Section 6(a).
(b) The assets of the Fund to be acquired by the Series and allocated
thereto shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest or dividends receivables),
claims, choses in action, and other property owned by the Fund, and any
deferred or prepaid expenses shown as an asset on the books of the Fund on
the Closing Date. The Fund will pay or cause to be paid to the Series any
dividend or interest payments received by it on or after the Closing Date
with respect to the assets transferred to the Series hereunder, and the
Series will retain any dividend or interest payments received by it after
the Valuation Time (as defined in Section 4) with respect to the assets
transferred hereunder without regard to the payment date thereof.
(c) Immediately upon delivery to the Fund of the Trust Series Shares, the
individual Trustees of DMF or any officer duly authorized by them, on DMF's
behalf as the then sole shareholder of the Series, shall (1) elect as
trustees of the Trust (Trustees) the persons who are elected pursuant to
Proposal 1 in the proxy statement distributed in connection with the
Special Meeting of Fund Shareholders (Proxy Statement) in the same manner
that Fund Shareholders so vote; (2) approve (i) a Management Contract
between the Trust on behalf of the Series and FMR, (ii) a Sub-Advisory
Agreement between FMR and FMR Texas Inc., (iii) Distribution and Service
Plans under Rule 12b-1 under the 1940 Act between the Trust on behalf of
each class of the Series and Fidelity Distributors Corporation (FDC)
substantively identical to the plans and contracts currently in effect with
the Fund or classes, except as to the parties to such plan or contract,
(iv) the independent accountants who currently serve in that capacity for
the Fund, and (v) the adoption of revised fundamental policies described in
Proposals 7 through 12 of the Proxy Statement. The Management Contract may
be modified and new Distribution and Service Plans may be approved pursuant
to a vote of shareholders of the fund or class, as the case may be, as
proposed in this proxy statement.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable (the Liquidation Date), the Fund will
constructively distribute the Trust Series Shares of the applicable class
pro rata in proportion to their respective shares of beneficial interest of
the corresponding classes of the Fund to Fund Shareholders of record
determined as of the Valuation Time on the Closing Date in accordance with
the Fund's Trust Instrument, in liquidation of such Fund. Such distribution
will be accomplished by the Fund's transfer agent opening accounts on the
share records of the Series in the names of such Fund Shareholders and
transferring the Trust Series Shares of the applicable classes thereto.
Each Fund Shareholder's account shall be credited with the respective pro
rata number of full and fractional (rounded to the third decimal place)
Trust Series Shares of the applicable classes due that shareholder. All
outstanding Fund Shares, including any represented by certificates, shall
simultaneously be canceled on the Fund's share transfer records. The Series
shall not issue certificates representing Trust Series Shares in connection
with such distribution.
(e) Immediately after the distribution of the Trust Series Shares as set
forth in Section 3(d), the Fund shall be liquidated and terminated and any
such further actions shall be taken in connection therewith as required by
applicable law.
(f) Any transfer taxes payable upon issuance of Trust Series Shares in a
name other than that of the registered holder on the Fund's books of the
Fund Shares constructively exchanged for the Trust Series Shares shall be
paid by the person to whom such Trust Series Shares are to be issued, as a
condition of such transfer.
(g) Any reporting responsibility of the Fund is and shall remain the
responsibility of the Fund up to and including the date on which it is
liquidated.
4. VALUATION
(a) The valuation time shall be 4:00 p.m. Eastern time on the Closing Date
(the Valuation Time).
(b) The value of the Fund's net assets to be acquired by the Series
hereunder shall be the net asset value computed as of the Valuation Time,
using the valuation procedures set forth in the Fund's then current
Prospectus and Statement of Additional Information.
(c) The number, value, class, and denomination of full and fractional
Trust Series Shares to be issued in exchange for the Fund's net assets
shall be equal to the number, value, class, and denomination of full and
fractional Fund Shares outstanding on the Closing Date.
(d) All computations pursuant to this Section shall be made by Fidelity
Service Company, Inc., an affiliate of FMR Corp., in accordance with its
regular practice as pricing agent for the Fund.
5. FEES; EXPENSES
(a) The Trust and the Fund each represent that there is no person who
dealt with it who by reason of such dealings is entitled to any broker's or
finder's fees or commissions arising out of the transactions contemplated
hereby.
(b) The Fund shall be responsible for all expenses, fees and other
charges, subject to FMR's voluntary expense limitation, if applicable.
6. CLOSING DATE
(a) The transfer of the Fund's assets in exchange for the assumption by
the Series of the Fund's liabilities and the issuance of Trust Series
Shares, as described above, together with related acts necessary to
consummate the same, (the Closing), unless otherwise provided herein, shall
occur at the principal office of DMF and the Trust, 82 Devonshire Street,
Boston, Massachusetts, on May 30 , 1997, or at such other place or
oth er date as the parties may agree in writing (the Closing Date).
All acts taking place at the Closing shall be deemed to take place
simultaneously as of the Valuation Time or at such other time and/or place
as the parties may agree.
(b) In the event that, on the Closing Date: (i) any of the markets for
securities held by the Fund are closed to trading, or (ii) trading thereon
is restricted, or (iii) trading or reporting of trading on said markets or
elsewhere is disrupted, all so that accurate appraisal of the total net
asset value of the Fund is impracticable, the Closing Date shall be
postponed until the first business day after the day when such trading
shall have been fully resumed and reporting shall have been restored, or
such other date as the parties may agree.
(c) The Fund shall deliver at the Closing a certificate of an authorized
officer stating that it has notified The Bank of New York as
custodian for the Fund, of the Fund's reorganization to a series of the
Trust.
(d) Fidelity Investments Institutional Operations Company, Inc., as
transfer agent for the Fund, shall deliver at the Closing a certificate as
to the conversion on its books and records of each Fund Shareholder account
to an account as a holder of Trust Series Shares. The Trust shall issue and
deliver a confirmation to the Fund evidencing the Trust Series Shares to be
credited on the Closing Date or provide evidence satisfactory to the Fund
that such Trust Series Shares have been credited to the Fund's account on
the books of the Trust. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, stock certificates, receipts
or other documents as such other party or its counsel may reasonably
request.
7. SHAREHOLDER MEETING AND TERMINATION OF THE FUND
(a) The Fund agrees to call a meeting of its shareholders (the
Shareholder's Meeting) to consider and act upon this Agreement and to take
all other action necessary to obtain approval of the transactions
contemplated hereby.
(b) The Fund agrees that as soon as reasonably practicable after
distribution of the Trust Series Shares, the Fund shall be liquidated and
terminated as a series of DMF pursuant to its Restated Trust Instrument,
any further actions shall be taken in connection therewith as required by
applicable law, and on and after the Closing Date the Fund shall not
conduct any business except in connection with its liquidation and
termination.
8. CONDITIONS TO OBLIGATIONS OF THE TRUST
The obligations of the Trust hereunder shall be subject to the following
conditions:
(a) That the Fund furnishes to the Trust a statement, dated as of the
Closing Date, signed by an officer of DMF, certifying that as of the
Valuation Time and the Closing Date all representations and warranties of
the Fund made in this Agreement are true and correct in all material
respects and that the Fund has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to such dates;
(b) That the Fund furnishes the Trust with copies of the resolutions,
certified by an officer of DMF, evidencing the adoption of this Agreement
and the approval of the transactions contemplated herein by the requisite
vote of the holders of the outstanding shares of beneficial interest of the
Fund;
(c) That the Fund shall deliver to the Trust at the Closing a statement of
its assets and liabilities, together with a certificate as to the aggregate
asset value of the Fund's portfolio securities, all as of the Valuation
Time, certified on the Fund's behalf by its Treasurer or Assistant
Treasurer;
(d) That the Fund's custodian shall deliver to the Trust a certificate
identifying the assets of the Fund held by such custodian as of the
Valuation Time on the Closing Date and stating that at the Valuation Time:
(i) the assets held by the custodian will be transferred to the Series;
(ii) the Fund's assets have been duly endorsed in proper form for transfer
in such condition as to constitute good delivery thereof; and (iii) to the
best of the custodian's knowledge, all necessary taxes in conjunction with
the delivery of the assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has
been made;
(e) That the Fund's transfer agent shall deliver to the Trust at the
Closing a certificate setting forth the number and class of shares of the
Fund outstanding as of the Valuation Time and the name and address of each
holder of record of any such shares and the number and class of shares held
of record by each such shareholder;
(f) That the Fund calls a Shareholder's Meeting to consider and act upon
this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby;
(g) That the Fund delivers to the Trust a certificate of an officer of
DMF, dated the Closing Date, that there has been no material adverse change
in the Fund's financial position since October 31, 1996, other than changes
in the market value of its portfolio securities, or changes due to net
redemptions of its shares, dividends paid, or losses from operations; and
(h) That all of the issued and outstanding shares of beneficial interest
of the Fund shall have been offered for sale and sold in conformity with
all applicable state securities laws and, to the extent that any audit of
the records of the Fund or its transfer agent by the Trust or its agents
shall have revealed otherwise, the Fund shall have taken all actions that
in the opinion of the Trust are necessary to remedy any prior failure on
the part of the Fund to have offered for sale and sold such shares in
conformity with such laws.
9. CONDITIONS TO OBLIGATIONS OF THE FUND
The obligations of the Fund hereunder shall be subject to the following
conditions:
(a) That the Trust shall have executed and delivered to the Fund an
Assumption of Liabilities, certified by an officer of the Trust, dated as
of the Closing Date pursuant to which Trust on behalf of the Series will
assume all of the liabilities of the Fund existing at the Valuation Time in
connection with the transactions contemplated by this Agreement;
(b) That the Trust furnishes to the Fund a statement, dated as of the
Closing Date, signed by an officer of Trust, certifying that as of the
Valuation Time and the Closing Date all representations and warranties of
the Series made in this Agreement are true and correct in all material
respects, and the Trust has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or prior to
such dates; and
(c) That the Fund shall have received an opinion of Kirkpatrick & Lockhart
LLP, counsel to the Fund and the Trust, to the effect that the Trust Series
Shares are duly authorized and upon delivery to the Fund as provided in
this Agreement will be validly issued and will be fully paid and
nonassessable under Delaware law.
10. CONDITIONS TO OBLIGATIONS OF THE FUND AND THE TRUST
The obligations of the Fund and the Trust hereunder shall be subject to
the following conditions:
(a) That this Agreement shall have been adopted and the transactions
contemplated herein shall have been approved by the requisite vote of the
holders of the outstanding shares of beneficial interest of the Fund;
(b) That all consents of other parties and all other consents, orders, and
permits of federal, state, and local regulatory authorities (including
those of the Commission and of state blue sky and securities authorities,
including "no action" positions of such federal or state authorities)
deemed necessary by the Trust or the Fund to permit consummation, in all
material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order, or permit
would not involve a risk of a material adverse effect on the assets or
properties of the Trust or the Fund, provided that either party hereto may
for itself waive any of such conditions;
(c) That all proceedings taken by either the Fund or the Series in
connection with the transactions contemplated by this Agreement and all
documents incidental thereto shall be satisfactory in form and substance to
it and its counsel, Kirkpatrick & Lockhart LLP;
(d) That the Trust shall have taken all necessary action so that the
Series shall be a series of a registered open-end investment company under
the 1940 Act immediately after the closing.
(e) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement;
(f) That the Trust and the Fund shall have received an opinion of
Kirkpatrick & Lockhart LLP satisfactory to the Trust and the Fund that for
federal income tax purposes:
(i) The Reorganization will be a reorganization under Section
368(a)(1)(F) of the Code, and the Fund and the Series will each be parties
to the Reorganization under section 368(b) of the Code;
(ii) No gain or loss will be recognized by the Fund upon the transfer of
all of its assets to the Series in exchange solely for the Trust Series
Shares of the applicable classes and the assumption of the Fund's
liabilities followed by the distribution of the Trust Series Shares to the
shareholders of the corresponding classes of the Fund in liquidation of the
Fund;
(iii) No gain or loss will be recognized by the Series on the receipt of
the Fund's assets in exchange solely for the Trust Series Shares and the
assumption of the Fund's liabilities;
(iv) The basis of the Fund's assets in the hands of the Series will be
the same as the basis of such assets in the Fund's hands immediately prior
to the Reorganization;
(v) The Series' holding period in the assets to be received from the Fund
will include the Fund's holding period in such assets;
(vi) A Fund Shareholder will recognize no gain or loss on the exchange of
his or her shares of beneficial interest in the Fund for the Trust Series
Shares in the Reorganization;
(vii) A Fund Shareholder's basis in the Trust Series Shares to be
received by him or her will be the same as his or her basis in the Fund
Shares exchanged therefor;
(viii) A Fund Shareholder's holding period for his or her Trust Series
Shares will include the holding period of the Fund Shares exchanged,
provided that those Fund Shares were held as capital assets on the date of
the Reorganization.
Notwithstanding anything herein to the contrary, neither the Fund nor the
Trust may waive the conditions set forth in this subsection 10(f).
11. COVENANTS OF THE FUND AND THE TRUST
(a) The Fund covenants to operate its business in the ordinary course
between the date hereof and the Closing Date, it being understood that such
ordinary course of business will include the payment of customary dividends
and distributions.
(b) The Fund covenants that the Trust Series Shares are not being acquired
for the purpose of making any distribution thereof, other than in
accordance with the terms of this Agreement.
(c) The Fund covenants that it will assist the Trust in obtaining such
information as the Trust reasonably requests concerning the beneficial
ownership of Fund Shares.
(d) The Fund covenants that its liquidation and termination will be
effected in the manner provided in its Restated Trust Instrument in
accordance with applicable law and, after the Closing Date, the Fund will
not conduct any business except in connection with its liquidation and
termination.
12. TERMINATION; WAIVER
(a) The Trust and the Fund may terminate this Agreement by mutual
agreement. In addition, either the Trust or the Fund may at its option
terminate this Agreement at or prior to the Closing Date because:
(i) Of a material breach by the other of any representation, warranty, or
agreement contained herein to be performed at or prior to the Closing Date;
or
(ii) A condition herein expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears that it
will not or cannot be met.
(b) In the event of any such termination, there shall be no liability for
damages on the part of the Trust or the Fund, or their respective Trustees
or officers.
13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES
(a) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the subject matter hereof,
constitutes the only understanding with respect to such subject matter, may
not be changed except by a letter of agreement signed by each party hereto
and shall be construed in accordance with and governed by the laws of the
State of Delaware.
(b) This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the respective
President, any Vice President, or Treasurer of the Series or the Fund;
provided, however, that following the shareholders' meeting called by the
Fund pursuant to Section 7 of this Agreement, no such amendment may have
the effect of changing the provisions for determining the number of the
Series Shares to be received by the Fund shareholders under this Agreement
to the detriment of such shareholders without their further approval.
(c) Either Fund may waive any condition to its obligations hereunder,
provided that such waiver does not have any material adverse effect on the
interests of such Fund's shareholders.
The representations, warranties, and covenants contained in the Agreement,
or in any document delivered pursuant hereto or in connection herewith,
shall survive the consummation of the transactions contemplated hereunder.
14. TRUST INSTRUMENTS
Copies of the Trust Instrument of the Trust and DMF, are on file with the
Secretary of State of the State of Delaware, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust and
DMF as trustees and not individually and that the obligations of the Fund
and the Series under this instrument are not binding upon any of such
Fund's or Trust's Trustees, officers, or shareholders individually but are
binding only upon the assets and property of such Fund or Series. The Fund
and the Trust each agrees that its obligations hereunder apply only to such
Fund and the Series, respectively, and not to its shareholders individually
or to the Trustees of such Fund or Series.
15. ASSIGNMENT
This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
of any rights or obligations hereunder shall be made by any party without
the written consent of the other party. Nothing herein expressed or implied
is intended or shall be construed to confer upon or give any person, firm,
or corporation other than the parties hereto and their respective
successors and assigns any rights or remedies under or by reason of this
Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized officer.
[signature lines omitted]
EXHIBIT 9
FUNDS ADVISED BY FMR - TABLE OF AVERAGE NET ASSETS AND EXPENSE RATIOS (A)
INVESTMENT FISCAL AVERAGE RATIO OF NET
OBJECTIVE AND FUND YEAR END (A) NET ASSETS ADVISORY FEES
(MILLIONS)(B) TO AVERAGE
NET ASSETS
PAID
TO FMR (C)
TAXABLE MONEY MARKET ((yen))
Select Money Market 2/28/96 $ 654.4 0.24%
Institutional Cash:
Treasury:
Class I 3/31/96 5,719.5 0.20
Class II 3/31/96** 80.6 0.20(dagger)
Class III 3/31/96 918.2 0.20
Government:
Class I 3/31/96 3,376.0 0.20
Class II 3/31/96** 0.1 0.20(dagger)
Class III 3/31/96 76.9 0.20
Domestic:
Class I 3/31/96 921.3 0.20
Class II 3/31/96** 0.2 0.20(dagger)
Class III 3/31/96 40.6 0.20
Money Market:
Class I 3/31/96 6,467.4 0.18*
Class II 3/31/96** 38.5 0.18(dagger)*
Class III 3/31/96 185.6 0.18*
Daily Money Fund: Treasury Only:
Class I 3/31/96 1,278.0 0.20*
Class II 3/31/96** 2.1 0.20(dagger)*
Class III 3/31/96** 49.2 0.20(dagger)*
Money Market Trust: Rated Money
Market:
Class I 3/31/96 291.4 0.20*
Class II 3/31/96** 2.3 0.20(dagger)*
Class III 3/31/96** 0.5 0.20(dagger)*
Spartan Money Market 4/30/96 8,292.3 0.45
Spartan U.S. Government Money 4/30/96 750.3 0.45
Market
Spartan U.S. Treasury Money Market 4/30/96 1,782.9 0.45
The North Carolina Capital 6/30/96 1,823.0 0.36
Management Trust: Cash Portfolio
Daily Money Fund: Capital Reserves:
Money Market 7/31/96 1,098.7 0.33*
U.S. Government Money Market 7/31/96 206.8 0.30*
Daily Income Trust 8/31/96 $ 2,305.8 0.32%
Money Market Trust:
Retirement Government 8/31/96 2,395.2 0.37*
Money Market
Retirement Money Market 8/31/96 4,824.4 0.37*
Daily Money Fund:
Money Market 10/31/96# 2,549.0 0.50(dagger)
U.S. Treasury:
Initial Class 10/31/96# 1,820.1 0.50(dagger)
Class B 10/31/96# 26.9 0.50(dagger)
Cash Reserves 11/30/96 19,276.0 0.21
U.S. Government Reserves 11/30/96 1,190.0 0.21
Variable Insurance Products Fund:
Money Market 12/31/96 935.3 0.21
Variable Insurance Products Fund III:
Money Market 12/31/96 32.6 0.21
(a) All fund data are as of the fiscal year end noted.
(b) Average net assets are computed on the basis of average net assets of
each fund or class at the close of business on each business day throughout
its fiscal period.
(c) Reflects reductions for any expense reimbursement paid by or due from
FMR pursuant to voluntary or state expense limitations. Funds so affected
are indicated by an (*).
(dagger) Annualized
# Year end changed
** Less than a complete fiscal year
((yen)) Fidelity Management & Research Company has entered into a
sub-advisory agreement with FMR Texas Inc., with respect to each fund.
EXHIBIT 10
FUNDS ADVISED BY FMR - TABLE OF AVERAGE NET ASSETS AND EXPENSE RATIOS (A)
INVESTMENT FISCAL AVERAGE RATIO OF NET
OBJECTIVE AND FUND YEAR END (A) NET ASSETS ADVISORY FEES
(MILLIONS)(B) TO AVERAGE
NET ASSETS
PAID
TO FMR (C)
MUNICIPAL MONEY MARKET ((yen))
Massachusetts Municipal Money 1/31/96 $ 779.7 0.40%
Market
New York Municipal Money Market 1/31/96 760.8 0.40
Spartan Massachusetts Municipal 1/31/96 461.4 0.50
Money Market
Spartan New York Municipal
Money Market 1/31/96 605.1 0.50
California Municipal Money Market 2/29/96 730.8 0.40
Spartan California Municipal Money 2/29/96 1,256.0 0.31*
Market
Institutional Tax-Exempt Cash
Portfolios:
Tax-Exempt:
Class I 3/31/96 1,940.2 0.19*
Class II 3/31/96** 0.6 0.20(dagger)*
Class III 3/31/96** 2.6 0.20(dagger)*
Daily Money Fund: Capital Reserves:
Municipal Money Market 7/31/96 131.6 0.29*
Spartan Arizona Municipal Money 8/31/96 66.9 0.22*
Market
Spartan Municipal Money Market 8/31/96 2,280.1 0.39*
Daily Tax-Exempt Money 10/31/96 521.4 0.39*
Municipal Money Market 10/31/96 3,673.6 0.30
Spartan New Jersey Municipal 10/31/96 491.1 0.35*
Money Market
Connecticut Municipal Money Market 11/30/96 330.7 0.40
New Jersey Municipal Money Market 11/30/96 436.4 0.40
Spartan Connecticut Municipal
Money Market 11/30/96 180.9 0.50
Spartan Florida Municipal Money 11/30/96 391.7 0.50
Market
Michigan Municipal Money Market 12/31/96 235.5 0.40
Ohio Municipal Money Market 12/31/96 311.8 0.40
Spartan Pennsylvania Municipal
Money Market 12/31/96 237.1 0.50
(a) All data are as of the fiscal year end noted.
(b) Average net assets are computed on the basis of average net assets of
each fund or class at the close of business on each business day throughout
its fiscal period.
(c) Reflects reductions for any expense reimbursement paid by or due from
FMR pursuant to voluntary or state expense limitations. Funds so affected
are indicated by an (*).
(dagger) Annualized
** Less than a complete fiscal year
((yen)) Fidelity Management & Research Company has entered into a
sub-advisory agreement with FMR Texas Inc., with respect to each fund.
DMF-pxs-0397 CUSIP#233809201/FUND#058
CUSIP#233816107/FUND#084
CUSIP#233809102/FUND#083
CUSIP#233809706/FUND#658
Vote this proxy card TODAY! Your prompt response will
save U.S. Treasury Portfolio - Initial Class the expense of additional
mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- --------------------------------------------------------------------------
- --------------------
DAILY MONEY FUND: U.S. TREASURY PORTFOLIO - INITIAL CLASS
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d, Arthur S. Loring, and Gerald C. McDonough or any one or more of
them, attorneys, with full power of substitution, to vote all shares of
Daily Money Fund as indicated above which the undersigned is entitled to
vote at the Special Meeting of Shareholders of the fund to be held at the
office of the trust at 82 Devonshire St., Boston, MA 02109, on May 9, 1997
at 9:45 a.m. and at any adjournments thereof. All powers may be exercised
by a majority of said proxy holders or substitutes voting or acting or, if
only one votes and acts, then by that one. This Proxy shall be voted on
the proposals described in the Proxy Statement as specified on the reverse
side. Receipt of the Notice of the Meeting and the accompanying Proxy
Statement is hereby acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1997
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
(cusip # 233809201/fund# 058 HH)
Please refer to the Proxy Statement discussion of each of these matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
- --------------------------------------------------------------------------
- --------------------
1. To approve an amended Management Contract for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 1.
fund . Approval of Proposal 1 is contingent upon (i)
approval of Proposal 2; (ii) approval by the fund's
Class B shareholders of an amended Management
Contract for the fund; and (iii) approval by the fund's
Class B shareholders of a new Distribution and Service
Plan for Class B shares of the fund.
2. To approve a new Distribution and Service Plan for FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
Initial Class shares of the fund. Approval of Proposal 2
is contingent upon (i) approval of Proposal 1; (ii)
approval by the fund's Class B shareholders of an
amended Management Contract for the fund; and (iii)
approval by the fund's Class B shareholders of a new
Distribution and Service Plan for Class B shares of the
fund.
3. To approve an Agreement and Plan providing for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
reorganization of the fund from a separate series of one
Delaware business trust to another.
4. To amend the fundamental limitation concerning FOR [ ] AGAINST [ ] ABSTAIN [ ] 4.
diversification for the fund.
5. To eliminate the fundamental investment limitation FOR [ ] AGAINST [ ] ABSTAIN [ ] 5.
concerning writing or purchasing put or call options
for the fund.
DMFTI-PXC-0397 cusip
#233809201/fund # 058 H
Vote this proxy card TODAY! Your prompt response will
save U.S. Treasury Portfolio - Class B the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- --------------------------------------------------------------------------
- --------------------
DAILY MONEY FUND: U.S. TREASURY PORTFOLIO - CLASS B
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d, Arthur S. Loring, and Gerald C. McDonough or any one or more of
them, attorneys, with full power of substitution, to vote all shares of
Daily Money Fund as indicated above which the undersigned is entitled to
vote at the Special Meeting of Shareholders of the fund to be held at the
office of the trust at 82 Devonshire St., Boston, MA 02109, on May 9, 1997
at 9:45 a.m. and at any adjournments thereof. All powers may be exercised
by a majority of said proxy holders or substitutes voting or acting or, if
only one votes and acts, then by that one. This Proxy shall be voted on
the proposals described in the Proxy Statement as specified on the reverse
side. Receipt of the Notice of the Meeting and the accompanying Proxy
Statement is hereby acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1997
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
(cusip #233809706/fund# 658 HH)
Please refer to the Proxy Statement discussion of each of these matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
- --------------------------------------------------------------------------
- --------------------
1. To approve an amended Management Contract for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 1.
fund. Approval of Proposal 1 is contingent upon (i)
approval of Proposal 2; (ii) approval by Initial Class
shareholders of the fund of an amended Management
Contract for the fund; and (iii) approval by the fund's
Initial Class shareholders of a new Distribution and
Service Plan for Initial Class shares of the fund.
2. To approve a new Distribution and Service Plan for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
fund. Approval of Proposal 2 is contingent upon (i)
approval of Proposal 1; (ii) approval by Initial Class
shareholders of the fund of an amended Management
Contract for the fund; and (iii) approval by the fund's
Initial Class shareholders of a new Distribution and
Service Plan for Initial Class shares of the fund.
3. To approve an Agreement and Plan providing for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
reorganization of the fund from a separate series of one
Delaware business trust to another.
4. To amend the fundamental limitation concerning FOR [ ] AGAINST [ ] ABSTAIN [ ] 4.
diversification for the fund.
5. To eliminate the fundamental investment limitation FOR [ ] AGAINST [ ] ABSTAIN [ ] 5.
concerning writing or purchasing put or call options
for the fund.
DMFTB-PXC-0397 cusip #233809706/658 H
Vote this proxy card TODAY! Your prompt response will
save Money Market Portfolio - Initial Class the expense of additional
mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- --------------------------------------------------------------------------
- --------------------
DAILY MONEY FUND: MONEY MARKET PORTFOLIO - INITIAL CLASS
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d, Arthur S. Loring, and Gerald C. McDonough or any one or more of
them, attorneys, with full power of substitution, to vote all shares of
Daily Money Fund as indicated above which the undersigned is entitled to
vote at the Special Meeting of Shareholders of the fund to be held at the
office of the trust at 82 Devonshire St., Boston, MA 02109, on May 9, 1997
at 9:45 a.m. and at any adjournments thereof. All powers may be exercised
by a majority of said proxy holders or substitutes voting or acting or, if
only one votes and acts, then by that one. This Proxy shall be voted on
the proposals described in the Proxy Statement as specified on the reverse
side. Receipt of the Notice of the Meeting and the accompanying Proxy
Statement is hereby acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1997
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
(cusip #233809102/fund# 083 HH)
Please refer to the Proxy Statement discussion of each of these matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
- --------------------------------------------------------------------------
- --------------------
1. To approve an amended Management Contract for FOR [ ] AGAINST [ ] ABSTAIN [ ] 1.
Money Market Portfolio.
2. To approve a new Distribution and Service Plan for FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
Initial Class shares of Money Market Portfolio.
3. To approve an Agreement and Plan providing for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
reorganization of Money Market Portfolio from a
separate series of one Delaware business trust to
another.
4. To amend the fundamental limitation concerning FOR [ ] AGAINST [ ] ABSTAIN [ ] 4.
diversification for Money Market Portfolio.
5. To eliminate the fundamental investment limitation FOR [ ] AGAINST [ ] ABSTAIN [ ] 5.
concerning writing or purchasing put or call options
for Money Market Portfolio.
DMFMM-PXC-0397 cusip #
233809102/fund#083 H
IMPORTANT PROXY MATERIALS...
PLEASE CAST YOUR VOTE NOW!
Dear Daily Money Funds Shareholder:
On May 9, 1997, a special shareholder meeting of the following Daily Money
Funds will be held:
(solid bullet) (solid bullet)Money Market Portfolio (Initial Class)
(solid bullet) U.S. Treasury Portfolio (Initial Class and Class B)
(solid bullet) Daily Tax-Exempt Money Fund (Initial Class)
THIS PACKAGE CONTAINS A SEPARATE VOTING CARD FOR EACH CLASS OF EACH FUND
YOU OWN. IF THERE IS MORE THAN ONE CARD IN YOUR PACKAGE, IT IS IMPORTANT
THAT YOU VOTE EACH CARD.
The matters to be discussed are important, and directly affect your
investment. As a shareholder, you cast one vote for each share and
fractional votes for fractional shares of each fund you own. YOU MAY THINK
YOUR VOTE IS INSIGNIFICANT, BUT EVERY VOTE IS EXTREMELY IMPORTANT. We must
continue sending requests to vote until a majority of the shares are voted
prior to the meeting. Additional mailings are expensive, and these costs
are charged directly to the funds.
The enclosed Proxy Statement details the proposals under consideration. A
list of each issue can be found on the first page of the Proxy Statement.
In addition, we have attached a Q&A to assist you in understanding the
proposals that may require your vote. After you have read the material,
please cast your vote promptly by signing and returning the enclosed proxy
card(s). It is important that you sign your proxy card exactly as your
name appears in the registration of the proxy card. A postage-paid
envelope has been provided. Your time will be well spent, and you will
help save the cost of additional mailings.
These proposals have been carefully considered by each fund's Board of
Trustees, which is responsible for protecting your interests as a
shareholder. THE BOARD OF TRUSTEES BELIEVES THESE PROPOSALS ARE FAIR AND
REASONABLE, AND RECOMMENDS THAT YOU APPROVE THEM. If you have any
questions about any of the proposals, please do not hesitate to contact
Fidelity Client Services at 800-843-3001.
Remember, this is your opportunity to voice your opinion on matters
affecting your funds. YOUR PARTICIPATION IS EXTREMELY IMPORTANT NO MATTER
HOW MANY OR HOW FEW SHARES YOU OWN.
Thank you. We appreciate your prompt attention.
Sincerely,
/s/ Edward C. Johnson 3d
Edward C. Johnson 3d
Chairman and Chief Executive Officer
IMPORTANT INFORMATION TO
HELP YOU UNDERSTAND THE
PROPOSALS THAT YOU
ARE BEING ASKED TO VOTE ON.
PLEASE READ THE FULL TEXT OF THIS PROXY STATEMENT. BELOW IS A BRIEF
OVERVIEW OF THE MATTERS TO BE VOTED UPON. YOUR VOTE IS IMPORTANT. IF YOU
HAVE ANY QUESTIONS REGARDING THE PROPOSALS PLEASE CALL CLIENT SERVICES AT
800-843-3001. WE APPRECIATE YOU PLACING YOUR TRUST IN THE DAILY MONEY
FUNDS AND LOOK FORWARD TO HELPING YOU ACHIEVE YOUR FINANCIAL GOALS.
Q. WHAT PROPOSALS AM I BEING ASKED TO VOTE ON?
A. If you are a shareholder in the following fund(s), you will be asked to
vote on the indicated proposals:
DAILY TAX-EXEMPT MONEY FUND (INITIAL CLASS)
(solid bullet) To elect a Board of Trustees.
(solid bullet) To ratify the selection of Price Waterhouse LLP as
independent accountants of the fund.
(solid bullet) To approve an amended Management Contract for the fund.
(solid bullet) To approve a new Distribution and Service Plan for Initial
Class shares of the fund.
(solid bullet) To amend the fundamental investment limitation concerning
diversification for the fund.
(solid bullet) To amend the fund's Trust Instrument to provide dollar-based
voting rights for shareholders of the
trust.
MONEY MARKET PORTFOLIO (INITIAL CLASS)
(solid bullet) To approve an amended Management Contract for the fund.
(solid bullet) To approve a new Distribution and Service Plan for Initial
Class shares of the fund.
(solid bullet) To amend the fundamental investment limitation concerning
diversification for the fund.
(solid bullet) To approve an Agreement and Plan providing for the
reorganization of U.S. Treasury Portfolio
and Money Market Portfolio from separate series of one Delaware business
trust to another.
(solid bullet) To eliminate the fundamental investment limitation
concerning writing or purchasing put or call
options for the fund.
(solid bullet)U.S. TREASURY PORTFOLIO (INITIAL CLASS)
(solid bullet) To approve an amended Management Contract for the fund.
(solid bullet) To approve a new Distribution and Service Plan for Initial
Class shares of the fund.
(solid bullet) To amend the fundamental investment limitation concerning
diversification for the fund.
(solid bullet) To approve an Agreement and Plan providing for the
reorganization of U.S. Treasury Portfolio
and Money Market Portfolio from separate series of one Delaware business
trust to another.
(solid bullet) To eliminate the fundamental investment limitation
concerning writing or purchasing put or call
options for the fund.
(solid bullet)U.S. TREASURY PORTFOLIO (CLASS B)
(solid bullet) To approve an amended Management Contract for the fund.
(solid bullet) To approve a new Distribution and Service Plan for Class B
shares of the fund.
(solid bullet) To amend the fundamental investment limitation concerning
diversification for the fund.
(solid bullet) To approve an Agreement and Plan providing for the
reorganization of U.S. Treasury Portfolio
and Money Market Portfolio from separate series of one Delaware business
trust to another.
(solid bullet) To eliminate the fundamental investment limitation
concerning writing or purchasing put or call
options for the fund.
Q. WHY ARE U.S. TREASURY PORTFOLIO, MONEY MARKET PORTFOLIO, AND DAILY
TAX-EXEMPT MONEY FUND EACH PROPOSING TO ADOPT AN AMENDED MANAGEMENT
CONTRACT?
A. In conjunction with proposals to adopt new Distribution and Service
Plans for the Initial Classes of each fund and Class B of U.S. Treasury
Portfolio, amendments to each fund's management contract are proposed to
simplify the expense structure of each fund. The amended management
contracts provide for a more straightforward fee structure, making the
expenses of each fund more transparent, and easier to understand.
Q. WHY ARE THE INITIAL CLASSES OF EACH FUND AND CLASS B OF U.S. TREASURY
PORTFOLIO PROPOSING THE ADOPTION OF NEW DISTRIBUTION AND SERVICE PLANS?
A. In conjunction with proposals to amend each fund's Management Contract,
the principal reason the new Distribution and Service Plans are being
proposed is to simplify the expense and compensation structure of each
fund. The new Distribution and Service Plans provide for a more
straightforward fee structure, making the expenses of each fund more
transparent, and easier to understand.
Q. WHY ARE U.S. TREASURY PORTFOLIO AND MONEY MARKET PORTFOLIO
REORGANIZING FROM ONE DELAWARE BUSINESS TRUST TO ANOTHER?
A. Each Fund is presently organized as a series of Daily Money Fund (DMF),
a Delaware business trust, which has six series of shares or funds. The
Board of Trustees unanimously recommends reorganization of U.S. Treasury
Portfolio and Money Market Portfolio to separate series of Daily Tax-Exempt
Money Fund (the Trust) which will succeed to the business of each Fund.
Moving the Funds from DMF to the Trust will consolidate and streamline
production and mailing of shareholder reports and legal documents. The
proposed change will have no material effect on shareholders or management
of the fund.
Q. WITH RESPECT TO THE PROPOSAL REGARDING EACH FUND'S FUNDAMENTAL
INVESTMENT LIMITATION CONCERNING DIVERSIFICATION, WILL THIS AMENDMENT
AFFECT MY FUND'S INVESTMENT OBJECTIVE?
A. No. The Board of Trustees believes that these proposals are in the best
interest of each fund's shareholders, and will not affect each fund's
investment philosophy.
Q. WHY ARE U.S. TREASURY PORTFOLIO AND MONEY MARKET PORTFOLIO PROPOSING TO
ELIMINATE EACH FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING WRITING
OR PURCHASING PUT OR CALL OPTIONS FOR THE FUND?
A. The Board of Trustees believes that each fund's current limitation
unnecessarily restricts each fund from taking advantage of potential
investment opportunities and techniques that are consistent with each
fund's investment objective, and believes that this proposal is in the best
interest of each fund's shareholders.
Q. WHAT IS MEANT BY DOLLAR-BASED VOTING RIGHTS, AND WHY IS IT BEING
PROPOSED FOR DAILY TAX-EXEMPT MONEY FUND?
A. The proposed amendment would provide a more equitable distribution of
voting rights for certain votes than the one-share, one-vote system
currently in effect. The voting power of each shareholder would be
measured by the value of the shareholder's dollar investment rather than
with the number of shares held. Currently, since there are only money
market funds in the Trust, which are managed to maintain a stable $1.00
NAV, this proposed change will not affect the voting rights of fund
shareholders on votes requiring trust-wide participation. Please see the
Proxy Statement for more detail.
Q. WHAT ABOUT THE OTHER PROPOSALS IN THIS PROXY?
A. The other proposals that require your vote have been unanimously
approved by each fund's Board of Trustees. Proposals regarding the
election of a new Board of Trustees and the ratification of the selection
of Price Waterhouse LLP as independent accountants for Daily Tax-Exempt
Money Fund are explained clearly in the funds' Proxy Statement. If you have
any questions regarding these, or any of the aforementioned proposals,
please call Fidelity Client Services at 800-843-3001.
Q. HAS MY FUND'S BOARD OF TRUSTEES APPROVED THE PROPOSALS?
A. Yes. The Board of Trustees of each fund has unanimously approved all of
the proposals, and recommends that you vote to approve each one.
Q. HOW DO I VOTE MY SHARES?
A. You can vote your shares by completing and signing the enclosed proxy
card(s), and mailing them in the enclosed postage paid envelope. If you
need any assistance, or have any questions regarding the proposals or how
to vote your shares, please call Fidelity Client Services at
800-843-3001.