-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TYWHMrj21/d+1P6YV0mzw0YmGVkidsVS2F+AZZiYqCpg0fsAXNyobtKV/2QJa55G 1nyH73cw8L1oHnDY5sp6vg== 0000278001-97-000010.txt : 19970714 0000278001-97-000010.hdr.sgml : 19970714 ACCESSION NUMBER: 0000278001-97-000010 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970711 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY PHILLIPS STREET TRUST CENTRAL INDEX KEY: 0000278001 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042667982 STATE OF INCORPORATION: MA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02890 FILM NUMBER: 97639327 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 2142816360 MAIL ADDRESS: STREET 1: FIDLEITY INVESTMENTS MAILZONE DW4B STREET 2: P.O. BOX 650471 CITY: DALLAS STATE: TX ZIP: 75265-0471 FORMER COMPANY: FORMER CONFORMED NAME: FIDELITY CASH RESERVES DATE OF NAME CHANGE: 19930122 N-30D 1 FIDELITY (registered trademark) U.S. GOVERNMENT RESERVES SEMIANNUAL REPORT MAY 31, 1997 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 8 A summary of major shifts in the fund's investments over the past six months and one year. INVESTMENTS 9 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 12 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 16 Notes to the financial statements. To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: Through the first five months of 1997, stock and bond markets experienced the kind of short-term volatility that can affect them from time to time. After climbing steadily upward for more than two years, stock prices saw a sharp correction in late March and early April. Returns in the bond market were essentially stagnant as the Federal Reserve Board implemented a long-expected increase in short-term interest rates at the end of March. While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs. First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation. Second, you can further manage your investing risk through diversification. A stock mutual fund, for instance, is already diversified, because it invests in many different companies. You can increase your diversification further by investing in a number of different stock funds, or in such other investment categories as bonds. You should also keep money you'll need in the near future in a more stable investment. Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. If you have questions, please call us at 1-800-544-8888. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE To measure a money market fund's performance, you can look at either total return or yield. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Yield measures the income paid by a fund. Since a money market fund tries to maintain a $1 share price, yield is an important measure of performance. CUMULATIVE TOTAL RETURNS PERIODS ENDED MAY 31, 1997 PAST 6 PAST 1 PAST 5 PAST 10 MONTHS YEAR YEARS YEARS Fidelity U.S. Government Reserves 2.54% 5.11% 22.89% 71.45% Government Money Market Funds Average 2.43% 4.91% 22.21% 69.98% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. To measure how the fund's performance stacked up against its peers, you can compare it to the government money market funds average, which reflects the performance of mutual funds with similar objectives tracked by IBC Financial Data, Inc. The past six months average represents a peer group of 417 mutual funds. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED MAY 31, 1997 PAST 1 PAST 5 PAST 10 YEAR YEARS YEARS Fidelity U.S. Government Reserves 5.11% 4.21% 5.54% Government Money Market Funds Average 4.91% 4.09% 5.44% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual cumulative return and show you what would have happened if the fund had performed at a constant rate each year. YIELDS 6/3/97 2/25/97 12/3/96 9/3/96 5/28/96 Fidelity U.S. Government 5.22% 4.95% 4.98% 4.97% 4.92% Reserves Government Money 4.93% 4.62% 4.73% 4.66% 4.57% Market Funds Average 5/28/97 2/26/97 12/4/96 8/28/96 5/29/96 2.66% 2.63% 2.63% 2.68% 2.66% MMDA Row: 1, Col: 1, Value: 5.22 Row: 1, Col: 2, Value: 4.930000000000001 Row: 1, Col: 3, Value: 2.66 Row: 2, Col: 1, Value: 4.95 Row: 2, Col: 2, Value: 4.619999999999999 Row: 2, Col: 3, Value: 2.63 Row: 3, Col: 1, Value: 4.98 Row: 3, Col: 2, Value: 4.73 Row: 3, Col: 3, Value: 2.63 Row: 4, Col: 1, Value: 4.970000000000001 Row: 4, Col: 2, Value: 4.659999999999999 Row: 4, Col: 3, Value: 2.68 Row: 5, Col: 1, Value: 4.92 Row: 5, Col: 2, Value: 4.57 Row: 5, Col: 3, Value: 2.66 6% - 5% - 4% - 3% - 2% - 1% - 0% Fidelity U.S. Government Reserves Government Money Market Funds Average MMDA YIELD refers to the income paid by the fund over a given period. Yields for money market funds are usually for seven-day periods, expressed as annual percentage rates. A yield that assumes income earned is reinvested or compounded is called an effective yield. The chart above shows the fund's current seven-day yield at quarterly intervals over the past year. You can compare these yields to the government money market funds average and the bank money market deposit account (MMDA) average . Figures for the government money market funds average are from IBC Financial Data, Inc. The MMDA average is supplied by BANK RATE MONITOR(Trademark). A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT PAST RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE. COMPARING PERFORMANCE There are some important differences between a bank money market deposit account (MMDA) and a money market fund. First, the U.S. government neither insures nor guarantees a money market fund. In fact, there is no assurance that a money market fund will maintain a $1 share price. Second, a money market fund returns to its shareholders income earned by the fund's investments after expenses. This is in contrast to banks, which set their MMDA rates periodically based on current interest rates, competitors' rates, and internal criteria. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Robert Litterst became Portfolio Manager of Fidelity U.S. Government Reserves on April 1, 1997. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE OVER THE PAST SIX MONTHS, BOB? A. Although it took some time to translate into action, the Federal Reserve Board had adopted and maintained a bias toward raising short-term interest rates since its July 1996 Federal Open Market Committee meeting. This inclination stemmed from the Fed's desire to slow the economy and head off potential inflation. After slowing in the third quarter of 1996, the economy began to pick up in the fourth quarter. That strength continued through the first quarter of 1997. Testifying before Congress in February, Fed Chairman Alan Greenspan indicated that the Fed might make a pre-emptive strike against inflation - raising interest rates before statistics showed any significant increase in prices - because demand was expanding very rapidly and was raising the risk of future inflation. The Fed followed through in March, raising the rate banks charge each other for overnight loans - known as the fed funds rate - by 0.25% to 5.50%. At its May meeting, however, the Fed chose to keep rates unchanged for two main reasons. First, early signs showed economic growth slowing from its first-quarter pace. Second, broad inflation indices remained well-behaved, showing that inflation was very calm. By not moving in May, the Fed appeared to shift from a pre-emptive stance to a more reactive one, where concrete signs of strengthening demand or rising price pressures may be required for the Fed to act again. Q. HOW WAS THE FUND MANAGED DURING THIS PERIOD? A. For most of the period, the fund tended to have a shorter average maturity than its peers. That was primarily because the fund took a neutral approach to the outlook for interest rates. In addition, up to 54% of the fund was invested in variable rate instruments. The yield on these investments is reset periodically to reflect moves in rates in the short-term market. They tend to reduce the average maturity of the fund, but were attractive because they offered a yield advantage. The fund's position in these securities fell to about 25% at the end of the period because the supply was limited and the pricing less attractive. More recently, I've used a barbell strategy - concentrating the fund on either end of the maturity spectrum - investing in overnight to one-month securities on the one hand and on agency issues with maturities of one year on the other. The one-year notes were attractively valued because they priced in more Fed increases than I felt would occur. The very short-term securities help to balance the maturity of the portfolio and serve a defensive purpose that will benefit shareholders if the Fed raises rates again. Q. HOW DID THE FUND PERFORM? A. On May 31, 1997, the fund's seven-day yield was 5.21%, compared to 4.93% six months ago. The fund's total return for the six months that ended May 31, 1997, was 2.54%, compared to the average total return of 2.43% for the government money market funds average tracked by IBC Financial Data, Inc. Q. WHAT'S YOUR OUTLOOK? A. It's more uncertain than in the recent past. Signs of slowing economic activity have reduced market expectations for further Fed tightening, but opinions are decidedly mixed. Those who favor additional upward adjustments point to terrific fundamentals underlying the consumer sector that should support strong growth going forward. Those who favor keeping rates where they are point to softer data in the second quarter and extremely favorable inflation statistics. Most economists expect economic growth to match or exceed the economy's trend rate - currently estimated at about 2.3% - for the remainder of the year. If this forecast is realized and leads to rising price pressures, the Fed probably will raise rates at least once more in the months ahead. If the second quarter slowdown persists, the Fed likely will leave policy on hold. At this point, the Fed seems to be content to respond to incoming data pertaining to demand, inflation and labor market conditions. This data should shape the course of policy in the months to come. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: income and a stable $1 share price by investing in high quality short-term money market securities issued by the U.S. government for government agencies FUND NUMBER: 050 START DATE: November 3, 1981 TRADING SYMBOL: FGRXX SIZE: as of May 31, 1997, more than $1.2 billion MANGER: Robert Litterst, since April 1997; manager, several Fidelity and Spartan taxable money market funds; joined Fidelity in 1991 (checkmark) INVESTMENT CHANGES MATURITY DIVERSIFICATION DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS 5/31/97 11/30/96 5/31/96 0 - 30 67 65 72 31 - 90 15 20 17 91 - 180 5 10 5 181 - 397 13 5 6 WEIGHTED AVERAGE MATURITY 5/31/97 11/30/96 5/31/96 Fidelity U.S. Government Reserves 61 days 40 days 42 days Government Money Market Funds Average * 47 days 48 days 49 days ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF MAY 31, 1997 AS OF NOVEMBER 30, 1996 Row: 1, Col: 1, Value: 53.0 Row: 1, Col: 2, Value: 3.0 Row: 1, Col: 3, Value: 44.0 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 1, Value: 60.0 Row: 1, Col: 2, Value: 9.0 Row: 1, Col: 3, Value: 31.0 Row: 1, Col: 4, Value: 0.0 Federal agency issues 53% U.S. Treasury obligations 3% Repurchase agreements 44% Federal agency issues 60% U.S. Treasury obligations 9% Repurchase agreements 31% * SOURCE: IBC'S MONEY FUND REPORT (registered trademark) INVESTMENTS MAY 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investments in Securities FEDERAL AGENCIES - 52.9% DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 2.3% 4/1/98 6.01% $ 14,000 $ 13,978 4/1/98 6.05 14,000 13,972 27,950 FEDERAL FARM CREDIT BANK - DISCOUNT NOTES - 2.1% 7/28/97 5.41 25,610 25,396 FEDERAL HOME LOAN BANK - AGENCY COUPONS - 10.7% 6/2/97 5.60(a) 42,000 41,989 6/19/97 5.46(a) 25,000 24,985 6/28/97 5.61(a) 24,000 23,995 3/18/98 5.88 35,000 35,000 6/11/98 5.96 3,500 3,498 129,467 FEDERAL HOME LOAN BANK - DISCOUNT NOTES - 1.6% 8/20/97 5.40 5,000 4,942 10/30/97 5.79 15,000 14,646 19,588 FEDERAL HOME LOAN MORTGAGE CORP. - AGENCY COUPONS - 2.8% 3/17/98 5.79 12,000 11,986 4/8/98 6.04 12,000 11,973 4/29/98 6.02 9,550 9,472 33,431 FEDERAL HOME LOAN MORTGAGE CORP. - DISCOUNT NOTES - 7.1% 7/3/97 5.61 7,000 6,966 7/9/97 5.56 8,500 8,451 7/18/97 5.56 38,390 38,115 8/7/97 5.61 32,000 31,670 85,202 FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS - 20.1% 6/2/97 5.58 (a) 14,000 14,047 6/2/97 5.59 (a) 19,000 19,063 6/2/97 5.67 (a) 45,000 44,989 6/3/97 5.63 (a) 15,000 14,997 6/4/97 5.60 (a) 28,000 27,990 6/9/97 5.46 (a) 23,000 22,990 6/12/97 5.42 (a) 9,000 8,998 6/13/97 5.46 (a) 10,000 9,995 FEDERAL AGENCIES - CONTINUED DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS - CONTINUED 8/1/97 5.73% (a) $ 28,000 $ 27,997 3/18/98 5.91 11,000 10,976 4/15/98 6.06 14,000 13,986 4/17/98 6.11 13,000 12,980 5/21/98 5.96 14,000 13,980 242,988 FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 6.2% 6/13/97 5.35 14,000 13,976 6/17/97 5.37 11,000 10,974 7/17/97 5.56 4,000 3,972 7/28/97 5.35 7,000 6,942 7/30/97 5.41 15,000 14,870 8/7/97 5.61 6,000 5,938 10/14/97 5.60 7,000 6,856 10/24/97 5.78 4,300 4,203 10/30/97 5.78 7,000 6,835 74,566 TOTAL FEDERAL AGENCIES 638,588 U.S. TREASURY OBLIGATIONS - 2.9% U.S. TREASURY BILLS - 0.8% 3/5/98 5.68 10,000 9,585 U.S. TREASURY NOTES - 2.1% 11/15/97 5.46 25,000 25,187 TOTAL U.S. TREASURY OBLIGATIONS 34,772 MEDIUM-TERM NOTES (A)(B) - 0.2% Export-Import Bank, U.S. (as guarantor for K.A. Leasing, Ltd.) 6/15/97 5.75 2,777 2,777 REPURCHASE AGREEMENTS - 44.0% MATURITY AMOUNT VALUE (NOTE 1) (000S) (000S) In a joint trading account (Notes 2 and 3): (U.S. Government Obligations) dated 5/30/97 due 6/2/97 At 5.60% $ 343,900 $ 343,740 (U.S. Government Obligations) dated 4/3/97 due 6/2/97 At 5.59% 35,326 35,000 (U.S. Government Obligations) dated 5/27/97 due 6/2/97 At 5.53% 45,041 45,000 (U.S. Government Obligations) dated 5/2/97 due 6/4/97 At 5.55% 15,076 15,000 (U.S. Government Obligations) dated 5/5/97 due 6/4/97 At 5.57% 52,241 52,000 (U.S. Government Obligations) dated 5/8/97 due 6/9/97 At 5.60% 22,110 22,000 (U.S. Government Obligations) dated 5/16/97 due 6/16/97 At 5.60% 19,092 19,000 TOTAL REPURCHASE AGREEMENTS 531,740 TOTAL INVESTMENTS - 100% $ 1,207,877 Total Cost for Income Tax Purposes $ 1,207,877 LEGEND 1. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the next interest rate reset date or, when applicable, the final maturity date. 2. Restricted securities - investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST (000) Export-Import Bank U.S. (as Guarantor for K.A. Leasing, Ltd.) 7/29/94 $ 2,777 INCOME TAX INFORMATION At November 30, 1996, the fund had a capital loss carryforward of approximately $85,000 of which $19,000 and $66,000 will expire on November 30, 2001 and 2003, respectively. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) MAY 31, 1997 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 1,207,877 agreements of $531,740) - See accompanying schedule Receivable for investments sold 9,589 Interest receivable 4,289 TOTAL ASSETS 1,221,755 LIABILITIES Payable for investments purchased $ 3,498 Share transactions in process 162 Distributions payable 168 Accrued management fee 225 Other payables and accrued expenses 323 TOTAL LIABILITIES 4,376 NET ASSETS $ 1,217,379 Net Assets consist of: Paid in capital $ 1,217,386 Accumulated net realized gain (loss) on investments (7) NET ASSETS, for 1,217,822 shares outstanding $ 1,217,379 NET ASSET VALUE, offering price and redemption price per $1.00 share ($1,217,379 (divided by) 1,217,822 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED) INTEREST INCOME $ 33,233 EXPENSES Management fee $ 1,225 Transfer agent fees 1,504 Accounting fees and expenses 71 Non-interested trustees' compensation 4 Custodian fees and expenses 7 Registration fees 49 Audit 8 Legal 3 Miscellaneous 6 Total expenses before reductions 2,877 Expense reductions (45) 2,832 NET INTEREST INCOME 30,401 NET REALIZED GAIN (LOSS) ON INVESTMENTS 18 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 30,419
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED MAY 31, NOVEMBER 30, 1997 1996 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 30,401 $ 59,722 Net interest income Net realized gain (loss) 18 12 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 30,419 59,734 FROM OPERATIONS Distributions to shareholders from net interest income (30,401) (59,722) Share transactions at net asset value of $1.00 per share 811,385 1,718,909 Proceeds from sales of shares Reinvestment of distributions from net interest income 29,052 56,628 Cost of shares redeemed (865,783) (1,720,835) NET INCREASE (DECREASE) IN NET ASSETS AND SHARES (25,346) 54,702 RESULTING FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS (25,328) 54,714 NET ASSETS Beginning of period 1,242,707 1,187,993 End of period $ 1,217,379 $ 1,242,707
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED TWO MONTHS YEARS ENDED ENDED NOVEMBER 30, ENDED SEPTEMBER 30, MAY 31, NOVEMBER 30, 1997 1996 1995 1994 1994 1993 1992
(UNAUDITED)
SELECTED PER-SHARE DATA Net asset value, beginning $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 of period Income from Investment Operations .025 .050 .055 .008 .033 .025 .039 Net interest income Less Distributions From net interest income (.025) (050) (.055) (.008) (.033) (.025) (.039) Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 TOTAL RETURN B 2.54% 5.12% 5.60% .78% 3.32% 2.57% 3.95% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 1,217 $ 1,243 $ 1,188 $ 1,130 $ 1,060 $ 1,043 $ 1,292 Ratio of expenses to average net assets .48% A .51% .55% .36% A, C .51% .73% .73% Ratio of expenses to average net assets after .47% A, D .50% .55% .36% A .51% .73% .73% expense reductions D Ratio of net interest income to average net assets 5.05% A 5.02% 5.43% 4.77% A 3.27% 2.57% 3.88%
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO THE FINANCIAL STATEMENTS). C FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF NOTES TO THE FINANCIAL STATEMENTS). NOTES TO FINANCIAL STATEMENTS For the period ended May 31, 1997 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity U.S. Government Reserves (the fund) is a fund of Fidelity Phillips Street Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Delaware business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein, securities are valued initially at cost and thereafter assume a constant amortization to maturity of any discount or premium. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INTEREST INCOME. Interest income, which includes amortization of premium and accretion of discount, is accrued as earned. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid monthly from net interest income. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. 2. OPERATING POLICIES - CONTINUED REVERSE REPURCHASE AGREEMENTS. At all times that a reverse repurchase agreement is outstanding, the fund identifies cash and liquid securities as segregated in its custodian records with a value at least equal to its obligation under the agreement. RESTRICTED SECURITIES. The fund is permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. At the end of the period, restricted securities (excluding 144A issues) amounted to $2,777,000 or 0.2% of net assets. 3. JOINT TRADING ACCOUNT. At the end of the period, the fund had 20% or more of its total investments in repurchase agreements through a joint trading account. These repurchase agreements were with entities whose creditworthiness has been reviewed and found satisfactory by FMR. The maturity values of the joint trading account investments are shown in the schedule of investments.The investments in repurchase agreements through the joint trading account are summarized as follows: SUMMARY OF JOINT TRADING DATED APRIL 3, 1997 TO JUNE 2, 1997 AT 5.59% Number of dealers or banks 1 Maximum amount with one dealer or bank 100% Aggregate principal amount of agreements $250,000,000 Aggregate maturity amount of agreements $252,329,167 Aggregate market value of transferred assets $259,780,982 Coupon rates of transferred assets 4.75% to 12.00% Maturity dates of transferred assets 8/1/97 to 3/1/25 DATED MAY 27, 1997 TO JUNE 2, 1997 AT 5.53% Number of dealers or banks 1 Maximum amount with one dealer or bank 100% Aggregate principal amount of agreements $185,000,000 Aggregate maturity amount of agreements $185,170,508 Aggregate market value of transferred assets $190,726,388 Coupon rates of transferred assets 5.75% to 10.00% Maturity dates of transferred assets 2/1/17 to 2/1/35 3. JOINT TRADING ACCOUNT - CONTINUED SUMMARY OF JOINT TRADING - CONTINUED DATED MAY 30, 1997 TO JUNE 2, 1997 AT 5.60% Number of dealers or banks 5 Maximum amount with one dealer or bank 28.8% Aggregate principal amount of agreements $1,389,006,000 Aggregate maturity amount of agreements $1,389,654,203 Aggregate market value of transferred assets $1,431,419,723 Coupon rates of transferred assets 5.00% to 13.25% Maturity dates of transferred assets 6/1/97 to 6/1/27 DATED MAY 2, 1997 TO JUNE 4, 1997 AT 5.55% Number of dealers or banks 1 Maximum amount with one dealer or bank 100% Aggregate principal amount of agreements $100,000,000 Aggregate maturity amount of agreements $100,508,750 Aggregate market value of transferred assets $103,005,756 Coupon rates of transferred assets 4.38% to 7.78% Maturity dates of transferred assets 8/1/03 to 5/1/36 DATED MAY 5, 1997 TO JUNE 4, 1997 AT 5.57% Number of dealers or banks 1 Maximum amount with one dealer or bank 100% Aggregate principal amount of agreements $200,000,000 Aggregate maturity amount of agreements $200,928,333 Aggregate market value of transferred assets $207,442,596 Coupon rates of transferred assets 5.75% to 13.00% Maturity dates of transferred assets 7/1/00 to 2/1/35 DATED MAY 8, 1997 TO JUNE 9, 1997 AT 5.60% Number of dealers or banks 1 Maximum amount with one dealer or bank 100% Aggregate principal amount of agreements $200,000,000 Aggregate maturity amount of agreements $200,995,556 Aggregate market value of transferred assets $205,658,921 Coupon rates of transferred assets 5.75% to 11.00% Maturity dates of transferred assets 10/1/99 to 4/15/42 3. JOINT TRADING ACCOUNT - CONTINUED SUMMARY OF JOINT TRADING - CONTINUED DATED MAY 16, 1997 TO JUNE 16, 1997 AT 5.60% Number of dealers or banks 1 Maximum amount with one dealer or bank 100% Aggregate principal amount of agreements $280,000,000 Aggregate maturity amount of agreements $281,350,222 Aggregate market value of transferred assets $288,400,001 Coupon rates of transferred assets 6.09% to 7.97% Maturity dates of transferred assets 2/1/24 to 5/1/35 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly fee that is calculated by multiplying the sum of two components, a group fee rate plus a fixed individual fund fee rate, applied to the average net assets of the fund and adding an income-based fee. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .1100% to .3700% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The individual fund fee rate is .03%. The income-based fee is added only when the fund's gross yield exceeds 5%. At that time the income-based fee would equal 6% of that portion of the fund's gross income that represents a gross yield of more than 5% per year. The maximum income-based component is 0.24% (annualized) of average net assets. For the period, the management fee was equivalent to an annualized rate of .20% of average net assets. SUB-ADVISER FEE. As the fund's investment sub-adviser, FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the management fee payable to FMR. The fee is paid prior to any voluntary expense reimbursements which may be in effect. TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized rate of .25% of average net assets. ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. 5. EXPENSE REDUCTIONS. The fund has entered into an arrangement with its transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's expenses. During the period, the fund's transfer agent fees were reduced by $45,000 under this arrangement. MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity TouchTone Xpressprovides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC)TOUCHTONE XPRESS 1-800-544-5555 PRESS For mutual fund and brokerage trading. 1 For quotes.* 2 For account balances and holdings. 3 To review orders and mutual fund activity. 4 To change your PIN. 5 To speak to a Fidelity representative. * 0 BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (PHONE_GRAPHIC)(PHONE_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call Fidelity at 1-800-544-7272 for significant savings on Web access from internetMCI. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC) FIDELITY ON-LINE XPRESS+ TM Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 815 East Birch Street Brea, CA 851 East Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 950 Northgate Drive San Rafael, CA 1400 Civic Drive Walnut Creek, CA 6300 Canoga Avenue Woodland Hills, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT 29 South Main Street West Hartford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 1907 West State Road 434 Longwood, FL 4001 Tamiami Trail, North Naples, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 1502 N. Westshore Blvd. Tampa, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Street Chicago, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL 3232 Lake Avenue Wilmette, IL INDIANA 4729 East 82nd Street Indianapolis, IN LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 29155 Northwestern Hwy. Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 150 Essex Street Millburn, NJ 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ NEW YORK 1055 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX 19740 IH 45 North Spring, TX UTAH 215 South State Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1900 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA (registered trademark) INVESTMENT SUB-ADVISER FMR Texas Inc. Irving, TX OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Sarah H. Zenoble, Vice President Robert Litterst, Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer Thomas D. Maher, Assistant Vice President John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer Thomas J. Simpson, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Robert M. Gates * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch William O. McCoy * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA CUSTODIAN Bank of New York New York, NY * INDEPENDENT TRUSTEES FIDELITY'S TAXABLE MONEY MARKET FUNDS Fidelity Cash Reserves Fidelity Daily Income Trust Fidelity U.S. Government Reserves Spartan(registered trademark) Money Market Fund Spartan U.S. Government Money Market Fund Spartan U.S. Treasury Money Market Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) TouchTone Xpress 1-800-544-5555 SM AUTOMATED LINE FOR QUICKEST SERVICE FIDELITY (registered trademark) CASH RESERVES SEMIANNUAL REPORT MAY 31, 1997 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 8 A summary of major shifts in the fund's investments over the past six months and one year. INVESTMENTS 9 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 21 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 25 Notes to the financial statements. REPORT OF INDEPENDENT 27 The auditors' opinion. ACCOUNTANTS To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: Through the first five months of 1997, stock and bond markets experienced the kind of short-term volatility that can affect them from time to time. After climbing steadily upward for more than two years, stock prices saw a sharp correction in late March and early April. Returns in the bond market were essentially stagnant as the Federal Reserve Board implemented a long-expected increase in short-term interest rates at the end of March. While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs. First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation. Second, you can further manage your investing risk through diversification. A stock mutual fund, for instance, is already diversified, because it invests in many different companies. You can increase your diversification further by investing in a number of different stock funds, or in such other investment categories as bonds. You should also keep money you'll need in the near future in a more stable investment. Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. If you have questions, please call us at 1-800-544-8888. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE To measure a money market fund's performance, you can look at either total return or yield. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Yield measures the income paid by a fund. Since a money market fund tries to maintain a $1 share price, yield is an important measure of performance. CUMULATIVE TOTAL RETURNS PERIODS ENDED MAY 31, 1997 PAST 6 PAST 1 PAST 5 PAST 10 MONTHS YEAR YEARS YEARS Fidelity Cash Reserves 2.56% 5.18% 23.81% 74.81% All Taxable Money Market Funds Average 2.46% 4.96% 22.43% 71.92% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. To measure how the fund's performance stacked up against its peers, you can compare it to the all taxable money market funds average, which reflects the performance of mutual funds with similar objectives tracked by IBC Financial Data, Inc. The past six months average represents a peer group of 849 mutual funds. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED MAY 31, 1997 PAST 1 PAST 5 PAST 10 YEAR YEARS YEARS Fidelity Cash Reserves 5.18% 4.36% 5.74% All Taxable Money Market Funds Average 4.96% 4.13% 5.51% AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. YIELDS 6/3/97 2/25/97 12/03/96 9/3/96 5/28/96 5.25% 5.04% 5.00% 4.96% 4.96% Fidelity Cash Reserves All Taxable Money 5.00% 4.80% 4.88% 4.83% 4.74% Market Funds Average 5/28/97 2/26/97 12/4/96 8/28/96 5/29/96 2.66% 2.63% 2.63% 2.68% 2.66% MMDA Row: 1, Col: 1, Value: 5.25 Row: 1, Col: 2, Value: 5.0 Row: 1, Col: 3, Value: 2.66 Row: 2, Col: 1, Value: 5.04 Row: 2, Col: 2, Value: 4.8 Row: 2, Col: 3, Value: 2.63 Row: 3, Col: 1, Value: 5.0 Row: 3, Col: 2, Value: 4.88 Row: 3, Col: 3, Value: 2.63 Row: 4, Col: 1, Value: 4.96 Row: 4, Col: 2, Value: 4.83 Row: 4, Col: 3, Value: 2.68 Row: 5, Col: 1, Value: 4.96 Row: 5, Col: 2, Value: 4.74 Row: 5, Col: 3, Value: 2.66 6% - 5% - 4% - 3% - 2% - 1% - 0% Fidelity Cash Reserves All Taxable Money Market Funds Average MMDA YIELD refers to the income paid by the fund over a given period. Yields for money market funds are usually for seven-day periods, expressed as annual percentage rates. A yield that assumes income earned is reinvested or compounded is called an effective yield. The chart above shows the fund's current seven-day yield at quarterly intervals over the past year. You can compare these yields to the all taxable money market funds average and the bank money market deposit account (MMDA) average. Figures for the all taxable money market funds average are from IBC Financial Data, Inc. The MMDA average is supplied by BANK RATE MONITOR.(Trademark) A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT PAST RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE. COMPARING PERFORMANCE There are some important differences between a bank money market deposit account (MMDA) and a money market fund. First, the U.S. Government neither insures nor guarantees a money market fund. In fact, there is no assurance that a money fund will maintain a $1 share price. Second, a money market fund returns to its shareholders income earned by the fund's investments after expenses. This is in contrast to banks, which set their MMDA rates periodically based on current interest rates, competitors' rates, and internal criteria. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: John Todd became Portfolio Manager of Fidelity Cash Reserves on April 1, 1997. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE OVER THE PAST SIX MONTHS, JOHN? A. As we progressed through the fourth quarter of 1996, it became evident that the Federal Reserve Board was in the midst of a monetary experiment. By that I mean that the Fed was allowing the economy to grow at a faster rate without intervening to slow it by raising short-term interest rates - as long as the inflation outlook remained positive. Through the first quarter of 1997, we saw the economic momentum that had developed in the fourth quarter continue to build. Q. HOW DID THE FED RESPOND? A. In testimony before both houses of Congress in the first quarter, Fed Chairman Alan Greenspan repeatedly warned of the risk of inflation picking up if the Fed failed to respond to an economy growing at too rapid a pace. Growth in real gross domestic product (GDP) - meaning stated growth minus inflation - in the first quarter was unusually strong at an annual rate of 5.8% and marked the first time in three years the GDP grew in excess of 3% in back-to-back quarters. Given this momentum in the economy, the Fed chose to raise the rate banks charge each other for overnight loans - known as the fed funds rate - by 0.25% to 5.50% at its March meeting. However, the consensus forecast and early evidence suggest that growth in the second quarter will slow dramatically from the torrid first quarter pace. The Fed apparently agreed and chose not to continue to raise rates at its late May meeting and appears to be in a holding pattern for now. Some believe that the Fed has abandoned the notion of being pre-emptive and will only respond to actual evidence of inflation rather than trying to respond to underlying inflationary pressures. Q. WHAT KIND OF STRATEGY DID THE FUND PURSUE? A. During the fourth quarter of 1996, it appeared prices in money market securities prematurely reflected an interest rate increase. As a result, the fund was managed with a longer average maturity than most of its peers, in the mid-60 days. Because of Greenspan's testimony during the first quarter of 1997, the fund's maturity was brought in shorter than other funds - at about 50 days. Once the market adjusted to the new, higher rate level, and expectations of further Fed interest rate increases were built into the yield curve, the fund's maturity was extended. That's because many longer-maturity instruments were attractively valued because their prices and yields reflected a much more aggressive Fed interest rate posture than we felt was likely. For the time being, I continue to run the fund with a longer average maturity than its peers. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on May 31, 1997, was 5.25%, compared to 5.00% six months ago. For the six months that ended May 31, 1997, the fund had a total return of 2.56%, compared to 2.46% for the all taxable money market funds average, according to IBC Financial Data, Inc. Q. WHAT'S YOUR OUTLOOK? A. While I believe it's likely the Fed will continue to raise interest rates, I don't believe it will do so as aggressively as 1994 and early 1995, when it raised the fed funds rate seven times for a total of 3%. There are distinct differences between 1994 and the current environment. First, real short-term rates - meaning stated short-term rates minus inflation - are at 3% currently, the same level at which the Fed stopped raising rates in 1995. Second, in 1994 the dollar was weak, whereas it has been quite strong over the past 12 to 18 months. A strong dollar has a dampening effect on the economy because it makes American products more expensive, with overseas demand for American goods suffering as a result. Third, inflation is not expected to come on strong. Taken together, these factors offer a real contrast between today's interest rate environment and that of 1994/1995. While that period saw one of the more dramatic interest rate cycles in some time, the present situation is less severe. In addition, the fact that the Fed did not raise rates again in May in part reflects the intense pressure brought to bear on it both by politicians and corporate leaders in an environment where inflation seemed to be contained. Accordingly, I believe interest rates likely will go up, but not to the same extent as 1994 and early 1995. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: income and a stable $1 share price by investing in high quality, short-term money market securities of all types START DATE: May 10, 1979 FUND NUMBER: 055 TRADING SYMBOL: FDRXX SIZE: as of May 31, 1997, more than $22.7 billion MANAGER: John Todd, since April 1997; manager, Spartan Money Market Fund, since 1989; Fidelity Select Money Market Portfolio, since 1991; short-term and money market investments for the Fidelity Asset Manager funds, since 1996; joined Fidelity in 1981 (checkmark) INVESTMENT CHANGES MATURITY DIVERSIFICATION DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS 5/31/97 11/30/96 5/31/96 0 - 30 49 44 41 31 - 90 29 27 41 91 - 180 10 25 12 181 - 397 12 4 6 WEIGHTED AVERAGE MATURITY 5/31/97 11/30/96 5/31/96 Fidelity Cash Reserves 67 days 62 days 62 days All Taxable Money Market Funds Average* 52 days 53 days 52 days ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF MAY 31, 1997 AS OF NOVEMBER 30, 1996 Row: 1, Col: 1, Value: 62.0 Row: 1, Col: 2, Value: 32.0 Row: 1, Col: 3, Value: 6.0 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 1, Value: 48.0 Row: 1, Col: 2, Value: 32.0 Row: 1, Col: 3, Value: 15.0 Row: 1, Col: 4, Value: 5.0 Bank CDs, BAs, TDs, and notes 62% Commercial paper 32% Government securities 6% Other 0% Bank CDs, BAs, TDs, and notes 48% Commercial paper 32% Government securities 15% Other 5% * SOURCE: IBC'S MONEY FUND REPORT (registered trademark) INVESTMENTS MAY 31, 1997 Showing Percentage of Total Value of Investments in Securities CERTIFICATES OF DEPOSIT - 41.6% DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) DOMESTIC CERTIFICATES OF DEPOSIT - 1.7% Chase Manhattan Bank (USA) 7/28/97 5.55% $ 75,000 $ 75,000 CoreStates Bank 6/10/97 5.66 (a) 20,000 19,997 6/11/97 5.66 (a) 25,000 25,000 Mellon Bank, N.A. 6/2/97 5.55 25,000 25,000 Morgan Guaranty Trust, NY 8/12/97 5.80 100,000 99,986 3/19/98 5.95 118,750 118,714 3/20/98 6.00 45,000 44,979 408,676 CHICAGO BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 1.2% ABN-AMRO Bank 6/27/97 5.55 45,000 45,000 12/23/97 5.70 100,000 99,973 3/19/98 6.00 45,000 44,993 Bank of Montreal 6/24/97 5.38 80,000 80,000 269,966 PORTLAND BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 0.6% Bank of Nova Scotia 6/10/97 6.02 12,000 12,000 4/1/98 6.20 117,000 116,944 128,944 SAN FRANCISCO BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 0.9% Banque Nationale de Paris 6/3/97 5.56 105,000 105,000 6/30/97 5.55 105,000 105,001 210,001 NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 28.4% ABN-AMRO Bank 9/10/97 6.10 50,000 49,997 Australia & New Zealand Banking 6/18/97 5.53 50,000 50,000 Bank of Tokyo - Mitsubishi Ltd. 6/3/97 5.53 120,000 120,000 6/4/97 5.53 17,000 17,000 CERTIFICATES OF DEPOSIT - CONTINUED DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - CONTINUED Bank of Tokyo - Mitsubishi Ltd. - continued 7/10/97 5.83% $ 76,000 $ 76,000 8/6/97 5.85 66,000 66,000 8/13/97 5.82 31,000 31,000 8/27/97 5.75 117,000 117,000 8/29/97 5.79 43,000 43,000 Banque Nationale de Paris 6/2/97 5.55 35,000 35,000 6/2/97 5.60 150,000 150,000 7/1/97 5.60 42,000 42,000 9/30/97 5.85 55,000 55,000 Barclays Bank, PLC 6/2/97 5.54 175,000 175,000 1/16/98 5.80 28,000 27,988 Barclays U.S. Funding Corp. 6/27/97 5.55 100,000 100,000 Bayerische Hypotheken - und Weschel 6/23/97 5.55 221,000 221,000 Bayerische Landesbank Girozentrale 9/29/97 5.85 50,000 49,971 2/10/98 5.93 60,000 59,876 Bayerische Vereinsbank A.G. 6/18/97 5.37 163,000 163,000 Caisse Nationale de Credit Agricole 6/16/97 5.50 90,000 90,000 7/21/97 5.60 270,000 270,000 11/13/97 5.86 42,000 42,000 Canadian Imperial Bank of Commerce 6/23/97 5.55 140,000 140,000 Commerzbank, Germany 6/2/97 5.56 70,000 70,000 6/27/97 5.55 128,000 128,000 Den Danske Bank A/S 6/9/97 5.50 25,000 25,000 7/23/97 5.56 25,000 25,000 Deutsche Bank, Germany 9/10/97 6.10 15,000 15,000 10/28/97 5.70 34,000 33,982 1/28/98 5.80 30,000 29,995 4/10/98 6.25 100,000 99,959 4/15/98 6.30 70,000 69,977 Dresdner Bank, A.G., Germany 7/2/97 5.56 70,000 70,000 Landesbank Hessen - Thuringen 7/18/97 5.50 50,000 50,025 9/5/97 6.20 150,000 150,004 4/1/98 6.25 70,000 69,933 CERTIFICATES OF DEPOSIT - CONTINUED DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - CONTINUED National Westminster Bank, PLC 6/17/97 5.50% $ 100,000 $ 100,000 8/5/97 5.50 100,000 100,000 10/14/97 5.94 200,000 200,000 12/19/97 5.92 30,000 29,990 3/3/98 5.80 140,000 139,970 Rabobank Nederland, N.V. 3/20/98 6.00 115,000 114,974 3/20/98 6.10 5,000 4,995 3/24/98 6.05 65,000 64,970 4/10/98 6.25 65,000 64,973 4/10/98 6.26 60,000 59,971 Royal Bank of Canada 8/13/97 5.80 50,000 49,993 8/18/97 5.80 130,000 129,989 3/3/98 5.82 150,000 149,978 Sanwa Bank, Ltd. 6/23/97 5.64 150,000 150,000 7/10/97 5.81 62,000 62,000 8/1/97 5.85 58,000 58,000 8/27/97 5.75 25,000 25,000 Societe Generale, France 6/11/97 5.42 110,000 110,000 7/25/97 5.55 135,000 135,000 7/28/97 5.55 100,000 100,000 8/7/97 5.52 230,000 230,000 11/12/97 5.90 115,000 115,000 12/1/97 5.90 30,000 30,000 Sumitomo Bank, Ltd. 6/6/97 5.58 30,000 30,000 6/23/97 5.83 64,000 64,000 7/29/97 5.75 43,000 43,000 8/4/97 5.75 42,000 42,000 Swiss Bank Corp. 6/23/97 5.49 100,000 100,000 7/21/97 5.62 80,000 80,000 7/22/97 5.53 75,000 75,000 8/4/97 5.50 225,000 225,000 12/22/97 5.96 135,000 135,000 12/22/97 5.99 158,000 158,000 12/30/97 6.04 100,000 100,000 2/27/98 5.88 45,000 45,000 Westdeutsche Landesbank Girozentrale 6/9/97 5.57 130,000 130,000 6/9/97 5.58 170,000 170,000 CERTIFICATES OF DEPOSIT - CONTINUED DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - CONTINUED Westpac Banking Corp. 6/17/97 5.50% $ 25,000 $ 25,000 6,674,510 LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 8.8% ABN-AMRO Bank 6/9/97 5.50 39,000 39,000 Abbey National, Treasury Services, PLC 7/22/97 5.60 151,000 151,000 7/24/97 5.40 55,000 55,009 8/20/97 5.44 140,000 140,000 3/4/98 5.87 100,000 100,000 Banco Santander SA 6/30/97 5.57 40,000 40,000 Bank of Nova Scotia 6/30/97 5.55 200,000 200,000 7/23/97 5.60 85,000 85,000 Barclays Bank, PLC 6/5/97 5.56 30,000 30,000 6/23/97 5.55 285,000 285,004 6/27/97 5.55 55,000 55,000 Bayerische Landesbank Girozentrale 6/23/97 5.50 50,000 50,000 Berliner Handels - und Frankfurter Bank 6/4/97 5.45 75,000 75,000 Commerzbank, Germany 6/23/97 5.51 10,000 10,000 Deutsche Bank, Germany 7/2/97 5.56 210,000 210,003 National Westminster Bank, PLC 6/24/97 5.55 16,000 16,000 Royal Bank of Scotland, PLC 8/7/97 5.50 20,000 20,000 Toronto-Dominion Bank 10/6/97 5.88 35,000 35,000 11/24/97 5.85 140,000 140,000 3/3/98 5.87 130,000 130,000 Union Bank of Switzerland 6/16/97 5.60 105,000 104,999 6/19/97 5.60 100,000 100,000 2,071,015 TOTAL CERTIFICATES OF DEPOSIT 9,763,112 COMMERCIAL PAPER - 31.7% DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) ABN-AMRO North America Finance, Inc. 6/19/97 5.50% $ 80,000 $ 79,786 AC Acquisition Holding Company 6/13/97 5.64 60,000 59,888 7/7/97 5.60 10,000 9,944 7/8/97 5.60 58,902 58,565 7/9/97 5.60 20,000 19,883 Abbey National, North America 8/11/97 5.42 74,000 73,229 8/12/97 5.42 35,000 34,630 American Home Products 6/12/97 5.64 20,000 19,966 Asset Securitization Coop. Corp. 6/18/97 5.63 50,000 49,868 Associates Corp. of North America 6/26/97 5.80 135,000 134,464 BBL North America, Inc. 6/2/97 5.57 125,000 124,981 B.B.V. Finance (Delaware), Inc. 7/29/97 5.52 50,000 49,567 10/8/97 5.88 60,000 58,772 BHF Finance (Delaware), Inc. 6/2/97 5.45 10,000 9,999 BMW US Capital Corp. 6/24/97 5.58 45,000 44,840 6/26/97 5.58 50,000 49,807 Bank of New York Company, Inc. 6/2/97 5.57 23,000 22,996 Bear Stearns Cos., Inc. 7/9/97 5.60 64,000 63,624 7/10/97 5.61 43,000 42,741 7/14/97 5.62 73,000 72,514 CIT Group Holdings, Inc. 7/14/97 5.59 110,000 109,271 Caisse d'Amortissement de la Dette Sociale 6/3/97 6.01 255,000 254,919 6/20/97 5.50 100,000 99,717 Caisse des Depots et Consignations 6/18/97 5.63 200,000 199,471 6/25/97 5.54 70,000 69,742 Chase Manhattan Corp. 12/1/97 5.85 110,000 106,824 Chrysler Financial Corporation 6/16/97 5.65 42,000 41,902 6/23/97 5.75 42,000 41,853 Citibank Credit Card Master Trust I (Dakota Certificate Program) 6/6/97 5.60 41,000 40,968 6/16/97 5.57 16,000 15,963 6/17/97 5.65 18,000 17,955 COMMERCIAL PAPER - CONTINUED DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) Citibank Credit Card Master Trust I (Dakota Certificate Program) - continued 6/17/97 5.66% $ 20,000 $ 19,950 6/24/97 5.57 25,000 24,911 Commerzbank U.S. Finance, Inc. 6/24/97 5.56 97,200 96,857 Commonwealth Bank of Australia 6/23/97 5.55 70,000 69,764 10/1/97 5.87 32,114 31,494 CoreStates Capital Corp. 6/2/97 5.62 (a) 15,000 15,000 6/4/97 5.61 (a) 15,000 15,000 Cregem North America, Inc. 6/27/97 5.39 10,000 9,962 Delaware Funding Corporation 6/2/97 5.63 50,000 49,992 Den Danske Corp., Inc. 7/21/97 5.40 25,000 24,817 7/21/97 5.62 100,000 99,226 11/12/97 5.87 50,000 48,702 Eiger Capital Corp. 6/16/97 5.62 57,844 57,709 6/17/97 5.61 40,000 39,901 6/25/97 5.57 114,000 113,579 Enterprise Funding Corp. 6/3/97 5.60 30,000 29,991 6/16/97 5.61 30,000 29,930 7/7/97 5.58 34,855 34,662 7/10/97 5.62 26,000 25,843 7/10/97 5.63 14,000 13,915 Fina Oil and Chemical Company 6/20/97 5.61 25,000 24,926 6/23/97 5.57 10,000 9,966 Fleet Funding Corporation 7/10/97 5.59 12,406 12,331 Ford Motor Credit Corp. 7/10/97 5.58 200,000 198,800 7/11/97 5.58 130,000 129,200 7/21/97 5.62 185,000 183,569 7/23/97 5.61 146,000 144,828 11/5/97 5.87 30,000 29,254 11/10/97 5.87 100,000 97,435 GTE Corp. 6/11/97 5.62 25,000 24,961 Generale Bank 7/30/97 5.53 50,000 49,559 General Electric Capital Corp. 6/2/97 5.68 170,000 169,973 7/7/97 5.59 175,000 174,029 7/21/97 5.61 67,000 66,483 COMMERCIAL PAPER - CONTINUED DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) General Electric Capital Corp. - continued 7/28/97 5.52% $ 100,000 $ 99,150 7/29/97 5.52 75,000 74,351 9/22/97 5.80 146,000 143,415 11/17/97 5.82 145,000 141,147 12/1/97 5.85 110,000 106,824 1/22/98 6.12 90,000 86,563 1/28/98 5.95 110,000 105,805 General Motors Acceptance Corp. 6/23/97 5.62 150,000 149,499 6/30/97 5.62 65,000 64,714 8/27/97 5.50 78,000 76,992 10/14/97 6.00 195,000 190,744 10/14/97 6.01 28,000 27,388 10/16/97 6.01 21,000 20,535 10/20/97 6.03 60,000 58,626 10/29/97 6.02 45,000 43,904 11/3/97 6.02 62,000 60,442 11/10/97 6.02 150,000 146,058 11/12/97 6.02 42,000 40,884 Goldman Sachs Group, L.P. (The) 1/23/98 6.09 40,000 38,471 1/26/98 6.10 105,000 100,936 Household Finance Corp. 7/7/97 5.62 35,000 34,805 Merrill Lynch & Co., Inc. 6/18/97 5.42 50,000 49,875 7/28/97 5.54 50,000 49,573 8/18/97 5.79 66,000 65,185 Morgan Stanley Group, Inc. 6/12/97 5.60 90,000 89,847 7/23/97 5.64 120,000 119,033 NationsBank Corp. 7/28/97 5.53 20,000 19,830 Nationwide Building Society 7/31/97 5.55 100,000 99,100 New Center Asset Trust 11/7/97 5.89 20,000 19,495 Norfolk Southern Corp. 6/3/97 5.74 24,000 23,992 6/9/97 5.75 16,000 15,980 6/9/97 5.77 28,000 27,964 6/11/97 5.82 10,900 10,882 6/12/97 5.77 18,000 17,968 6/12/97 5.82 8,100 8,086 PHH Corp. 7/14/97 5.63 22,000 21,853 COMMERCIAL PAPER - CONTINUED DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) Preferred Receivables Funding Corp. 6/2/97 5.61% $ 30,000 $ 29,995 6/11/97 5.64 25,800 25,760 Royal Bank of Canada 7/23/97 5.40 30,000 29,771 Santander Finance (Delaware), Inc. 6/24/97 5.43 15,000 14,949 Sears Roebuck Acceptance Corp. 7/10/97 5.63 40,000 39,758 Textron, Inc. 6/10/97 5.75 25,000 24,964 6/23/97 5.70 5,000 4,983 6/23/97 5.71 2,000 1,993 6/23/97 5.73 5,000 4,983 Toronto-Dominion Holdings USA, Inc. 6/13/97 5.50 30,000 29,946 Transamerica Finance Corp. 6/19/97 5.57 22,000 21,939 Triple A One Funding Corp. 6/3/97 5.60 22,000 21,993 6/16/97 5.61 105,080 104,836 Unifunding, Inc. 6/6/97 5.60 40,000 39,969 6/11/97 5.56 85,000 84,869 Westdeutsche Landesbank Girozentrale 6/23/97 5.56 188,000 187,365 Westpac Capital Corp. 6/3/97 5.44 50,000 49,985 12/1/97 5.87 35,000 33,991 TOTAL COMMERCIAL PAPER 7,447,133 FEDERAL AGENCIES - 5.7% FEDERAL HOME LOAN BANK - AGENCY COUPONS (A) - 0.4% 6/4/97 5.44 85,000 84,962 FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS (A) - 5.3% 6/2/97 5.59 125,000 125,416 6/2/97 5.67 360,000 359,914 6/3/97 5.63 82,000 81,982 6/9/97 5.46 280,000 279,873 6/13/97 5.46 200,000 199,900 8/1/97 5.73 210,000 209,978 1,257,063 TOTAL FEDERAL AGENCIES 1,342,025 BANK NOTES - 7.2% DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) Bank of America National Trust & Savings Assoc. 6/19/97 5.50% $ 200,000 $ 200,000 6/23/97 5.55 60,000 60,000 Bank of New York, NY 3/3/98 5.85 40,000 39,986 Bank of Scotland Treasury Services 8/7/97 5.18 (a) 250,000 250,000 Bank One Columbus OH, NA 6/3/97 5.63 (a) 170,000 169,879 Boatmen's First National Bank of Kansas City 6/3/97 5.64 (a) 25,000 25,000 Comerica Bank 3/27/98 6.20 95,000 94,852 First National Bank of Boston 6/11/97 5.59 40,000 40,000 6/26/97 5.56 50,000 50,000 Harris Trust & Savings Bank, Chicago 6/2/97 5.55 75,000 75,000 6/26/97 5.55 50,000 50,000 Huntington National Bank 9/30/97 5.50 30,000 30,021 Key Bank, NA 6/2/97 5.67 (a) 50,000 49,997 6/2/97 5.70 (a) 50,000 49,978 6/12/97 5.71 (a) 70,000 69,958 Key Bank of New York 6/2/97 5.68 (a) 104,000 103,988 LaSalle National Bank 9/8/97 6.12 25,000 25,000 9/10/97 6.15 25,000 25,000 NBD Bank, NA (Michigan) 3/2/98 5.82 60,000 59,987 National City Bank 7/2/97 5.57 65,000 64,942 PNC Bank, NA 6/11/97 5.65 (a) 85,000 84,972 6/27/97 5.65 (a) 66,000 65,962 TOTAL BANK NOTES 1,684,522 MASTER NOTES (A) - 2.5% Goldman Sachs Group, L.P. (The) 8/5/97 5.82 100,000 100,000 J.P. Morgan Securities 6/2/97 5.81 314,000 314,000 MASTER NOTES (A) - CONTINUED DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) Norwest Corp. 6/2/97 5.69% $ 126,000 $ 126,000 Suntrust Banks, Inc. 6/2/97 5.64 40,000 40,000 TOTAL MASTER NOTES 580,000 MEDIUM-TERM NOTES (A) - 3.4% Beneficial Corp. 6/5/97 5.47 50,000 50,006 CIT Group Holdings, Inc. 6/2/97 5.71 50,000 49,994 Commonwealth Life Insurance Co. (c) 6/2/97 5.86 50,000 50,000 General Motors Acceptance Corp. 6/2/97 5.73 40,000 39,994 7/21/97 5.69 50,000 50,032 8/1/97 5.82 100,000 100,000 Merrill Lynch & Co., Inc. 6/4/97 5.67 42,000 41,992 6/18/97 5.69 83,000 82,997 Morgan Stanley Group, Inc. 6/2/97 5.70 95,000 95,000 Norwest Corp. 7/22/97 5.86 118,000 118,000 Pacific Mutual Life Insurance Co. (c) 6/9/97 5.62 44,000 44,000 Transamerica Life Insurance and Annuity Co. (c) 6/2/97 5.72 20,000 20,000 6/16/97 5.63 65,000 65,000 TOTAL MEDIUM-TERM NOTES 807,015 SHORT-TERM NOTES (A) - 3.7% CSA Funding - C 6/6/97 5.76 6,000 6,000 Capital One Funding Corp. (1996-D) 6/6/97 5.66 24,790 24,790 Capital One Funding Corp. (1996-F) 6/6/97 5.66 42,019 42,019 Capital One Funding Corp. (1996-G) 6/6/97 5.66 9,823 9,823 Capital One Funding Corp. (1996-H) 6/6/97 5.66 19,800 19,800 SHORT-TERM NOTES (A) - CONTINUED DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1) DATE TIME OF PURCHASE (000S) (000S) Liquid Asset Backed Securities Trust (1996 - 1) (b) 6/15/97 5.72% $ 91,000 $ 91,000 Liquid Asset Backed Securities Trust (1996 - 2) (b) 6/2/97 5.72 134,000 134,000 SMM Trust (1996-B) (b) 6/4/97 5.74 63,000 63,000 SMM Trust (1996-P) (b) 6/16/97 5.72 130,000 130,000 SMM Trust (1997-I) (b) 6/30/97 5.69 75,000 75,000 SMM Trust (1997-V) (b) 6/26/97 5.69 141,000 141,000 SMM Trust (1997-W) (b) 6/16/97 5.69 125,000 125,000 TOTAL SHORT-TERM NOTES 861,432 TIME DEPOSITS - 4.2% Bank of Tokyo - Mitsubishi Ltd. 6/30/97 5.69 42,000 42,000 7/3/97 5.69 85,000 85,000 Chase Manhattan Bank 6/2/97 5.63 150,000 150,000 6/5/97 5.63 200,000 200,000 Deutsche Bank, Germany 6/2/97 5.66 250,000 250,000 Sumitomo Bank, Ltd. 6/4/97 5.72 107,000 107,000 6/9/97 5.73 32,000 32,000 6/18/97 5.75 120,000 120,000 TOTAL TIME DEPOSITS 986,000 REPURCHASE AGREEMENTS - 00.0% MATURITY AMOUNT (000S) In a joint trading account (U.S. Treasury Obligations) dated 5/30/97 due 6/2/97 At 5.55% $ 590 590 TOTAL INVESTMENTS - 100% $ 23,471,829 Total Cost for Income Tax Purposes $ 23,471,829 LEGEND 1. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the next interest rate reset date or, when applicable, the final maturity date. 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $759,000,000 or 3.3% of net assets. 3. Restricted security; subject to resale restrictions. INCOME TAX INFORMATION At November 30, 1996, the fund had a capital loss carryforward of approximately $2,304,000 of which $510,000, $1,634,000 and $160,000 will expire on November 30, 2001, 2002 and 2004, respectively. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) MAY 31, 1997 ASSETS Investment in securities, at value (including repurchase $ 23,471,829 agreements of $590) - See accompanying schedule Cash 31 Interest receivable 148,900 TOTAL ASSETS 23,620,760 LIABILITIES Payable for investments purchased $ 814,940 Share transactions in process 55,738 Distributions payable 2,848 Accrued management fee 4,155 Other payables and accrued expenses 5,242 TOTAL LIABILITIES 882,923 NET ASSETS $ 22,737,837 Net Assets consist of: Paid in capital $ 22,738,842 Accumulated net realized gain (loss) on investments (1,005) NET ASSETS, for 22,738,842 shares outstanding $ 22,737,837 NET ASSET VALUE, offering price and redemption price per $1.00 share ($22,737,837 (divided by) 22,738,842 shares)
STATEMENT OF OPERATIONS AMOUNTS IN THOUSANDS SIX MONTHS ENDED MAY 31, 1997 INTEREST INCOME $ 617,032 EXPENSES Management fee $ 22,888 Transfer agent fees 27,997 Accounting fees and expenses 406 Non-interested trustees' compensation 67 Custodian fees and expenses 183 Registration fees 36 Legal 15 Miscellaneous 3 Total expenses before reductions 51,595 Expense reductions (174) 51,421 NET INTEREST INCOME 565,611 NET REALIZED GAIN (LOSS) ON INVESTMENTS 70 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 565,681 STATEMENT OF CHANGES IN NET ASSETS AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED NOVEMBER 30, MAY 31, 1996 1997
INCREASE (DECREASE) IN NET ASSETS Operations $ 565,611 $ 975,537 Net interest income Net realized gain (loss) 70 (160) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 565,681 975,377 FROM OPERATIONS Distributions to shareholders from net interest income (565,611) (975,537) Share transactions at net asset value of $1.00 per share 23,441,954 36,638,550 Proceeds from sales of shares Reinvestment of distributions from net interest income 545,214 948,155 Cost of shares redeemed (22,489,999) (34,777,730) NET INCREASE (DECREASE) IN NET ASSETS AND SHARES 1,497,169 2,808,975 RESULTING FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 1,497,239 2,808,815 NET ASSETS Beginning of period 21,240,598 18,431,783 End of period $ 22,737,837 $ 21,240,598
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED NOVEMBER 30, ENDED MAY 31,
1997 1996 1995 1994 1993 1992 SELECTED PER-SHARE DATA Net asset value, beginning $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 of period Income from Investment .025 .051 .055 .037 .029 .038 Operations Net interest income Less Distributions From net interest income (.025) (.051) (.055) (.037) (.029) (.038) Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 TOTAL RETURN B 2.56% 5.18 5.67 3.74 2.97 3.90 % % % % % RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 22,738 $ 21,241 $ 18,432 $ 14,529 $ 10,314 $ 10,040 (in millions) Ratio of expenses to average .47% A .51 .55 .52 .48 .48 net assets % % % % % Ratio of net interest income to 5.13% A 5.06 5.50 3.76 2.92 3.86 average net assets % % % % %
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. NOTES TO FINANCIAL STATEMENTS For the period ended May 31, 1997 6. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Cash Reserves (the fund) is a fund of Fidelity Phillips Street Trust(the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Delaware business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein, securities are valued initially at cost and thereafter assume a constant amortization to maturity of any discount or premium. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INTEREST INCOME. Interest income, which includes amortization of premium and accretion of discount, is accrued as earned. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid monthly from net interest income. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 7. OPERATING POLICIES. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. 8. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly fee that is calculated by multiplying the sum of two components, a group fee rate plus a fixed individual fund fee rate, applied to the average net assets of the fund and adding an income-based fee. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .1100% to .3700% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The individual fund fee rate is .03%. The income-based fee is added only when the fund's gross yield exceeds 5%. At that time the income-based fee would equal 6% of that portion of the fund's gross income that represents a gross yield of more than 5% per year. The maximum income-based component is 0.24% (annualized)of average net assets. For the period, the management fee was equivalent to an annualized rate of .21% of average net assets. SUB-ADVISER FEE. As the fund's investment sub-adviser, FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the management fee payable to FMR. The fee is paid prior to any voluntary expense reimbursements which may be in effect. TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized rate of .25% of average net assets. ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. 9. EXPENSE REDUCTIONS. The fund has entered into an arrangement with its transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's expenses. During the period, the fund's transfer agent fees were reduced by $174,000. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Phillips Street Trust and the Shareholders of Fidelity Cash Reserves: We have audited the accompanying statement of assets and liabilities of Fidelity Phillips Street Trust: Fidelity Cash Reserves, including the schedule of portfolio investments, as of May 31, 1997, and the related statement of operations for the six months then ended, the statements of changes in net assets for the six months then ended and for the year ended November 30, 1996, and the financial highlights for the six months ended May 31, 1997 and for each of the five years in the period ended November 30, 1996. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 1997 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Phillips Street Trust: Fidelity Cash Reserves as of May 31, 1997, the results of its operations for the six months then ended, the changes in its net assets for the six months then ended and for the year ended November 30, 1996, and the financial highlights for the six months ended May 31, 1997 and for each of the five years in the period ended November 30, 1996, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Dallas, Texas June 25, 1997 MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity TouchTone Xpressprovides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC)TOUCHTONE XPRESS 1-800-544-5555 PRESS For mutual fund and brokerage trading. 1 For quotes.* 2 For account balances and holdings. 3 To review orders and mutual fund activity. 4 To change your PIN. 5 To speak to a Fidelity representative. * 0 BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (PHONE_GRAPHIC)(PHONE_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call Fidelity at 1-800-544-7272 for significant savings on Web access from internetMCI. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC) FIDELITY ON-LINE XPRESS+ TM Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 2300 Litton Lane - KH1A Hebron, KY 41048 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6I 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6R 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 815 East Birch Street Brea, CA 851 East Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 950 Northgate Drive San Rafael, CA 1400 Civic Drive Walnut Creek, CA 6300 Canoga Avenue Woodland Hills, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT 29 South Main Street West Hartford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 1907 West State Road 434 Longwood, FL 4001 Tamiami Trail, North Naples, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 1502 N. Westshore Blvd. Tampa, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Street Chicago, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL 3232 Lake Avenue Wilmette, IL INDIANA 4729 East 82nd Street Indianapolis, IN LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 29155 Northwestern Hwy. Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 150 Essex Street Millburn, NJ 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ NEW YORK 1055 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX 19740 IH 45 North Spring, TX UTAH 215 South State Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1900 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER (registered trademark) Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISER FMR Texas Inc. Irving, TX OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Sarah H. Zenoble, Vice President John Todd, Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer Thomas D. Maher, Assistant Vice President John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer Thomas J. Simpson, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Robert M. Gates * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch William O. McCoy * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA * INDEPENDENT TRUSTEES CUSTODIAN The Bank of New York New York, NY FIDELITY'S TAXABLE MONEY MARKET FUNDS Fidelity Cash Reserves Fidelity Daily Income Trust Fidelity U.S. Government Reserves Spartan(registered trademark) Money Market Fund Spartan U.S. Government Money Market Fund Spartan U.S. Treasury Money Market Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemption 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) TouchTone Xpress 1-800-544-5555 SM AUTOMATED LINE FOR QUICKEST SERVICE -----END PRIVACY-ENHANCED MESSAGE-----