FIDELITY
(REGISTERED TRADEMARK)
TARGET TIMELINE
SM
FUNDS - 1999, 2001, 2003
ANNUAL REPORT
JULY 31, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
PERFORMANCE 4 HOW THE FUNDS HAVE DONE OVER TIME.
FUND TALK 15 THE MANAGER'S REVIEW OF THE FUNDS'
PERFORMANCE, STRATEGY AND OUTLOOK.
TARGET TIMELINE 1999 18 INVESTMENT CHANGES
19 INVESTMENTS
24 FINANCIAL STATEMENTS
TARGET TIMELINE 2001 28 INVESTMENT CHANGES
29 INVESTMENTS
33 FINANCIAL STATEMENTS
TARGET TIMELINE 2003 37 INVESTMENT CHANGES
38 INVESTMENTS
42 FINANCIAL STATEMENTS
NOTES 46 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT 50 THE AUDITORS' OPINION.
ACCOUNTANTS
DISTRIBUTIONS 51
PROXY VOTING RESULTS 52
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,
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.
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.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first seven months of 1997, stock and bond markets
experienced the kind of short-term volatility that can affect them
periodically. The stock market rebounded strongly from its early
spring correction to continue on its record-setting pace, as seen by
the roughly 30% year-to-date gain by the Standard & Poor's 500 Index.
The bond market posted moderate returns over the past seven months, as
positive news on the inflation front helped soften the effects of a
hike in short-term interest rates by the Federal Reserve Board in late
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.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
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
FIDELITY TARGET TIMELINE 1999
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. 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). You can also look at a fund's income, as
reflected in its yield, to measure performance. If Fidelity had not
reimbursed certain expenses, the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C>
PERIODS ENDED JULY 31, 1997 PAST 1 LIFE OF
YEAR FUND
FIDELITY TARGET TIMELINE 1999 8.16% 6.45%
LEHMAN BROTHERS AGGREGATE BOND INDEX 10.76% 9.18%
U.S. TREASURY STRIPS (8/15/99 AND 11/15/99) 8.05% 6.54%
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year or since the fund
started on February 8, 1996. 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. You can compare the fund's return to the
Lehman Brothers Aggregate Bond Index - a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at least one year. You can also compare
the fund to the average of the total returns of U.S. Treasury STRIPS
maturing on 8/15/99 and 11/15/99, which reflects the performance of
zero-coupon bonds with maturities similar to the fund's. These
benchmarks include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C>
PERIODS ENDED JULY 31, 1997 PAST 1 LIFE OF
YEAR FUND
FIDELITY TARGET TIMELINE 1999 8.16% 4.32%
LEHMAN BROTHERS AGGREGATE BOND INDEX 10.76% 6.12%
U.S. TREASURY STRIPS (8/15/99 AND 11/15/99) 8.05% 4.37%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show what would have happened if the fund performed at a constant rate
each period.
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19970731 19970812 104945 S00000000000001
Target Timeline 1999 LB Aggregate Bond
FI Avg US TreasStrip 1999
00379 LB001
F0092
1996/02/08 10000.00 10000.00
10000.00
1996/02/29 9843.43 9842.84
9874.78
1996/03/31 9769.72 9774.42
9792.89
1996/04/30 9723.18 9719.45
9739.86
1996/05/31 9708.18 9699.72
9719.35
1996/06/30 9814.54 9829.98
9822.33
1996/07/31 9841.86 9856.88
9859.67
1996/08/31 9849.03 9840.36
9867.47
1996/09/30 9980.40 10011.84
9993.89
1996/10/31 10147.46 10233.62
10160.02
1996/11/30 10271.38 10408.91
10275.65
1996/12/31 10218.33 10312.13
10238.31
1997/01/31 10261.47 10343.70
10282.28
1997/02/28 10277.69 10369.43
10297.30
1997/03/31 10245.55 10254.52
10258.74
1997/04/30 10340.73 10408.03
10356.27
1997/05/31 10416.89 10506.42
10435.14
1997/06/30 10502.40 10631.12
10514.00
1997/07/31 10645.36 10917.81
10653.71
IMATRL PRASUN SHR__CHT 19970731 19970812 104947 R00000000000021
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Target Timeline 1999 on February 8, 1996, when
the fund started. As the chart shows, by July 31, 1997, the value of
the investment would be $10,645 - a 6.45% increase on the initial
investment. For comparison, look at how the Lehman Brothers Aggregate
Bond Index did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 investment would be $10,918 - a
9.18% increase. If $10,000 was put in U.S. Treasury STRIPS (8/15/99
and 11/15/99), it would be valued at $10,654 - a 6.54% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN THE
OPPOSITE DIRECTION OF INTEREST
RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT
INVESTS IN BONDS WILL VARY. THAT
MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN, YOU
MIGHT LOSE MONEY. BUT IF YOU CAN
RIDE OUT THE MARKET'S UPS AND
DOWNS, YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEAR ENDED FEBRUARY 8, 1996
JULY 31, (COMMENCEMENT
1997 OF OPERATIONS) TO
JULY 31,
1996
DIVIDEND RETURN 7.64% 3.12%
CAPITAL APPRECIATION RETURN 0.52% -4.70%
TOTAL RETURN 8.16% -1.58%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the fund. A capital appreciation return reflects both the
amount paid by the fund to shareholders as capital gain distributions
and changes in the fund's share price. Both returns assume the
dividends or gains are reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JULY 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 5.95(CENTS) 35.02(CENTS) 70.17(CENTS)
ANNUALIZED DIVIDEND RATE 7.34% 7.43% 7.34%
30-DAY ANNUALIZED YIELD 6.07% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period.
The annualized dividend rate is based on an average net asset value of
$9.55 over the past one month, $9.51 over the past six months, and
$9.56 over the past one year. The 30-day annualized YIELD is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. If Fidelity had not reimbursed certain expenses, the yield
would have been 5.15%.
FIDELITY TARGET TIMELINE 2001
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. 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). You can also look at a fund's income, as
reflected in its yield, to measure performance. If Fidelity had not
reimbursed certain expenses, the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C>
PERIODS ENDED JULY 31, 1997 PAST 1 LIFE OF
YEAR FUND
FIDELITY TARGET TIMELINE 2001 10.26% 7.08%
LEHMAN BROTHERS AGGREGATE BOND INDEX 10.76% 9.18%
U.S. TREASURY STRIPS (8/15/01 AND 11/15/01) 9.86% 6.08%
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year or since the fund
started on February 8, 1996. 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. You can compare the fund's return to the
Lehman Brothers Aggregate Bond Index - a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at least one year. You can also compare
the fund to the average of the total returns of U.S. Treasury STRIPS
maturing on 8/15/01 and 11/15/01, which reflects the performance of
zero-coupon bonds with maturities similar to the fund's. These
benchmarks include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C>
PERIODS ENDED JULY 31, 1997 PAST 1 LIFE OF
YEAR FUND
FIDELITY TARGET TIMELINE 2001 10.26% 4.74%
LEHMAN BROTHERS AGGREGATE BOND INDEX 10.76% 6.12%
U.S. TREASURY STRIPS (8/15/01 AND 11/15/01) 9.86% 4.07%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show what would have happened if the fund performed at a constant rate
each period.
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19970731 19970812 101116 S00000000000001
Target Timeline 2001 LB Aggregate Bond
FI Avg US TreasStrip 2001
00381 LB001
F0093
1996/02/08 10000.00 10000.00
10000.00
1996/02/29 9763.03 9842.84
9803.00
1996/03/31 9659.03 9774.42
9653.25
1996/04/30 9582.85 9719.45
9550.03
1996/05/31 9558.77 9699.72
9511.57
1996/06/30 9695.97 9829.98
9652.59
1996/07/31 9711.59 9856.88
9655.95
1996/08/31 9687.10 9840.36
9634.38
1996/09/30 9868.61 10011.84
9819.83
1996/10/31 10105.68 10233.62
10057.99
1996/11/30 10290.56 10408.91
10235.42
1996/12/31 10162.27 10312.13
10099.80
1997/01/31 10193.78 10343.70
10142.28
1997/02/28 10199.18 10369.43
10133.48
1997/03/31 10092.01 10254.52
10017.44
1997/04/30 10241.62 10408.03
10154.41
1997/05/31 10328.56 10506.42
10246.14
1997/06/30 10435.11 10631.12
10342.58
1997/07/31 10708.33 10917.81
10608.37
IMATRL PRASUN SHR__CHT 19970731 19970812 101118 R00000000000021
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Target Timeline 2001 on February 8, 1996, when
the fund started. As the chart shows, by July 31, 1997, the value of
the investment would be $10,708 - a 7.08% increase on the initial
investment. For comparison, look at how the Lehman Brothers Aggregate
Bond Index did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 investment would be $10,918 - a
9.18% increase. If $10,000 was put in U.S. Treasury STRIPS (8/15/01
and 11/15/01), it would be valued at $10,608 - a 6.08% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN THE
OPPOSITE DIRECTION OF INTEREST
RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT
INVESTS IN BONDS WILL VARY. THAT
MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN, YOU
MIGHT LOSE MONEY. BUT IF YOU CAN
RIDE OUT THE MARKET'S UPS AND
DOWNS, YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEAR ENDED FEBRUARY 8, 1996
JULY 31, (COMMENCEMENT
1997 OF OPERATIONS) TO
JULY 31,
1996
DIVIDEND RETURN 7.71% 3.12%
CAPITAL APPRECIATION RETURN 2.55% -6.00%
TOTAL RETURN 10.26% -2.88%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the fund. A capital appreciation return reflects both the
amount paid by the fund to shareholders as capital gain distributions
and changes in the fund's share price. Both returns assume the
dividends or capital gains paid by the fund are reinvested, if any.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JULY 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 5.74(CENTS) 34.77(CENTS) 68.96(CENTS)
ANNUALIZED DIVIDEND RATE 7.08% 7.42% 7.27%
30-DAY ANNUALIZED YIELD 6.21% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period.
The annualized dividend rate is based on an average net asset value of
$9.55 over the past one month, $9.45 over the past six months, and
$9.49 over the past one year. The 30-day annualized YIELD is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. If Fidelity had not reimbursed certain expenses, the yield
would have been 5.09%.
FIDELITY TARGET TIMELINE 2003
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. 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). You can also look at a fund's income, as
reflected in its yield, to measure performance. If Fidelity had not
reimbursed certain expenses, the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C>
PERIODS ENDED JULY 31, 1997 PAST 1 LIFE OF
YEAR FUND
FIDELITY TARGET TIMELINE 2003 11.94% 6.87%
LEHMAN BROTHERS AGGREGATE BOND INDEX 10.76% 9.18%
U.S. TREASURY STRIPS (8/15/03 AND 11/15/03) 11.95% 6.48%
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year or since the fund
started on February 8, 1996. 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. You can compare the fund's return to the
Lehman Brothers Aggregate Bond Index - a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at least one year. You can also compare
the fund to the average of the total returns of U.S. Treasury STRIPS
maturing on 8/15/03 and 11/15/03, which reflects the performance of
zero-coupon bonds with maturities similar to the fund's. These
benchmarks include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C>
PERIODS ENDED JULY 31, 1997 PAST 1 LIFE OF
YEAR FUND
FIDELITY TARGET TIMELINE 2003 11.94% 4.59%
LEHMAN BROTHERS AGGREGATE BOND INDEX 10.76% 6.12%
U.S. TREASURY STRIPS (8/15/03 AND 11/15/03) 11.95% 4.33%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show what would have happened if the fund performed at a constant rate
each period.
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19970731 19970813 103609 S00000000000001
Target Timeline 2003 LB Aggregate Bond
FI Avg US TreasStrip 2003
00383 LB001
F0094
1996/02/08 10000.00 10000.00
10000.00
1996/02/29 9693.93 9842.84
9713.95
1996/03/31 9591.28 9774.42
9552.66
1996/04/30 9453.76 9719.45
9394.34
1996/05/31 9397.89 9699.72
9337.04
1996/06/30 9543.44 9829.98
9505.26
1996/07/31 9546.95 9856.88
9511.36
1996/08/31 9499.53 9840.36
9463.94
1996/09/30 9710.09 10011.84
9678.03
1996/10/31 9996.20 10233.62
9996.13
1996/11/30 10250.02 10408.91
10230.13
1996/12/31 10063.50 10312.13
10051.21
1997/01/31 10067.43 10343.70
10055.03
1997/02/28 10076.73 10369.43
10064.96
1997/03/31 9908.59 10254.52
9865.43
1997/04/30 10083.36 10408.03
10037.43
1997/05/31 10173.92 10506.42
10161.32
1997/06/30 10318.60 10631.12
10282.14
1997/07/31 10686.53 10917.81
10647.68
IMATRL PRASUN SHR__CHT 19970731 19970813 103611 R00000000000021
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Target Timeline 2003 on February 8, 1996, when
the fund started. As the chart shows, by July 31, 1997, the value of
the investment would be $10,687 - a 6.87% increase on the initial
investment. For comparison, look at how the Lehman Brothers Aggregate
Bond Index did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 investment would be $10,918 - a
9.18% increase. If $10,000 was put in U.S. Treasury STRIPS (8/15/03
and 11/15/03), it would be valued at $10,648 - a 6.48% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN THE
OPPOSITE DIRECTION OF INTEREST
RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT
INVESTS IN BONDS WILL VARY. THAT
MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN, YOU
MIGHT LOSE MONEY. BUT IF YOU CAN
RIDE OUT THE MARKET'S UPS AND
DOWNS, YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEAR ENDED FEBRUARY 8, 1996
JULY 31, (COMMENCEMENT
1997 OF OPERATIONS) TO
JULY 31,
1996
DIVIDEND RETURN 7.29% 3.07%
CAPITAL APPRECIATION RETURN 4.65% -7.60%
TOTAL RETURN 11.94% -4.53%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the fund. A capital appreciation return reflects both the
amount paid by the fund to shareholders as capital gain distributions
and changes in the fund's share price. Both returns assume the
dividends or capital gains paid by the fund are reinvested, if any.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JULY 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 5.48(CENTS) 31.45(CENTS) 63.36(CENTS)
ANNUALIZED DIVIDEND RATE 6.75% 6.77% 6.75%
30-DAY ANNUALIZED YIELD 6.28% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period.
The annualized dividend rate is based on an average net asset value of
$9.56 over the past one month, $9.37 over the past six months, and
$9.39 over the past one year. The 30-day annualized YIELD is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. If Fidelity had not reimbursed certain expenses, the yield
would have been 5.38%.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A favorable inflation backdrop
steadied fears of higher interest
rates, buoying the U.S. taxable
bond market for the 12 months that
ended July 31, 1997. The Lehman
Brothers Aggregate Bond Index -
a broad measure of the U.S.
taxable bond market - returned
10.76% over the period. For the first
eight months of the period, bonds
suffered from increasing
expectations of economic growth
and inflation. In his February
testimony before Congress,
Federal Reserve Board Chairman
Alan Greenspan indicated that the
Fed was inclined to raise the rate
banks charge each other for
overnight loans - known as the fed
funds target rate - to head off
inflation that might be caused by a
tight labor market. On March 25,
the Fed followed through by raising
the target rate by 0.25% to 5.50%.
However, this move largely had
been priced into the market.
Weakening economic and inflation
signals - combined with the Fed's
shift to a more favorable stance
indicating no intention to raise rates
in the short term - helped spark a
rally in all debt markets from April
through the end of the period.
Relative interest-rate stability
provided a positive setting for
mortgage-backed securities. For
the 12 months that ended July 31,
1997, the Salomon Brothers
Mortgage Index returned 10.60%.
Sustained economic growth, a
surging stock market and demand
from yield-hungry investors helped
corporate bonds, with the Lehman
Brothers Corporate Bond Index
returning 12.55% over the same
period.
An interview with Christine Thompson, Portfolio Manager of Fidelity
Target Timeline Funds 1999, 2001, 2003
Q. HOW DID THE FUNDS PERFORM, CHRISTINE?
A. The funds performed in line with their investment objectives during
the period. For the 12 months that ended July 31, 1997, Target
Timeline 1999, 2001 and 2003 returned 8.16%, 10.26% and 11.94%,
respectively. For the same period, U.S. Treasury STRIPS maturing at
approximately the same time as the funds (August and November 1999,
2001 and 2003) averaged 8.05%, 9.86% and 11.95%, respectively. The
Lehman Brothers Aggregate Bond Index had a 12-month return of 10.76%.
Q. YOU SAID THE FUNDS PERFORMED IN LINE WITH THEIR GOALS. HOW DO YOU
GAUGE THEIR PERFORMANCE?
A. The funds aim to achieve a predictable rate of return for investors
who hold them until maturity and reinvest all distributions. The
portfolios are structured so that their interest-rate sensitivity, and
therefore return patterns, will closely resemble that of a zero-coupon
bond - a security that doesn't make periodic interest payments but
rather is sold at a discount to what its value will be at maturity.
The average annual return earned by such an investment when it is held
to maturity is equal to its yield at the time of purchase. The Target
Timeline funds are managed so that investors' average annual rate of
return is also approximated by the yield on the portfolio at the time
of purchase. With the funds, investors can receive predictable returns
together with the benefits of a mutual fund - meaning that instead of
purchasing a single bond they are investing in a diversified portfolio
for a relatively low initial contribution and low transaction costs.
Q. HOW DO YOU VIEW THE FUNDS' PERFORMANCE RELATIVE TO THE LEHMAN
AGGREGATE BOND INDEX?
A. The funds' investment objective is to control interest-rate
sensitivity over a specified time horizon - namely until each fund's
maturity date. Each fund's duration - which is a measure of
interest-rate sensitivity - is managed to decline over time as the
funds approach their maturity dates. The Lehman Brothers Aggregate
Bond Index, on the other hand, is an indication of the performance of
the overall investment-grade bond market, which by design is
rebalanced monthly to include securities in the marketplace with more
than one year to maturity. Consequently, over time, the funds'
duration characteristics and return patterns may not resemble the
Lehman Brothers Aggregate Bond Index. The index currently has an
average duration of about four-and-a-half years, slightly longer than
the duration of Target Timeline 2001 - the fund whose return for the
recent period most closely resembled that of the index.
Q. THE FUNDS MAINTAINED HEAVY WEIGHTINGS IN CORPORATE BONDS. HOW DID
THOSE INVESTMENTS PERFORM?
A. Corporate bonds performed quite well, based on a narrowing of the
yield spread between the corporate sector and the Treasury sector.
This means that during the period the funds not only benefited from
the additional yield that corporates offer, but also from their
relative price appreciation. Prices move in the opposite direction of
yields, so as yield spreads narrow, the prices of higher-yielding
corporate bonds outperform their lower-yielding counterparts.
Narrowing yield spreads resulted from ongoing economic growth, which
in turn benefited the credit profiles of many issuers of corporate
bonds.
Q. WHAT'S YOUR OUTLOOK FOR THE MARKET?
A. Valuation levels across different sectors in the bond market have
become very compressed. This has made it difficult to fully benefit
the funds' returns by employing the research-based strategies that we
use to identify opportunities in the marketplace. However, history
shows that the market will eventually reprice relative valuations.
Overall, I don't expect any events or economic conditions to cause the
type of companies we've invested in to experience financial
difficulties. I think the market will continue to reward cleanly
structured corporate bonds - such as noncallable securities backed by
high-quality issuers - and U.S. government securities. I am confident
that our strategy of combining credit and structural analysis will
allow the Target Timeline Funds to continue to meet their objectives
in a variety of market environments.
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.
CHRISTINE THOMPSON ON
THE TECHNIQUE USED TO
MANAGE THE TARGET
TIMELINE FUNDS:
"WE EMPLOY A MANAGEMENT
TECHNIQUE CALLED HORIZON
IMMUNIZATION THAT CONTROLS THE
INVESTMENT EXPOSURE TO INTEREST
RATES OVER THE INVESTMENT PERIOD.
SPECIFICALLY, THE FUNDS' PREDICTED
RANGE OF RETURN IS BASED ON THE
PORTFOLIOS' YIELD-TO-MATURITY - A
CALCULATION THAT ASSUMES THAT ALL
INCOME RECEIVED FROM BONDS HELD
IN THE FUNDS WILL BE REINVESTED AT
THE YIELD-TO-MATURITY RATE.
HOWEVER, IN PRACTICE, IF INTEREST
RATES FALL, THE INCOME STREAM FROM
SECURITIES MUST BE REINVESTED AT
LOWER PREVAILING RATES. AT THE SAME
TIME, LOWER INTEREST RATES CAUSE
THE VALUE OF THE UNDERLYING
SECURITIES TO INCREASE. THE KEY TO
THE TECHNIQUE USED IN MANAGING
THESE FUNDS IS TO COMBINE SECURITIES
SO THAT THESE TWO RISKS -
REINVESTMENT AND PRICE RISK - OFFSET
ONE ANOTHER OVER THE LIFE OF THE
INVESTMENT."
FUND FACTS
GOAL: DEFINABLE RETURN
OVER THE LIFE OF THE FUNDS BY
INVESTING MAINLY IN
INVESTMENT-GRADE QUALITY DEBT
SECURITIES WHOSE AVERAGE
DURATION IS APPROXIMATELY
EQUAL TO EACH FUND'S MATURITY
FUND NUMBER: 379 (1999),
381 (2001), 383 (2003)
TRADING SYMBOL: FTTAF (1999),
FTTBF (2001), FTTCF (2003)
START DATE: FEBRUARY 8, 1996
SIZE: AS OF JULY 31, 1997,
MORE THAN $12 MILLION, 1999
FUND; MORE THAN $10 MILLION,
2001 FUND; MORE THAN
$13 MILLION, 2003 FUND
MANAGER: CHRISTINE THOMPSON,
SINCE INCEPTION; MANAGER,
FIDELITY INTERMEDIATE BOND
FUND, SINCE 1995; CO-MANAGER,
FIDELITY GLOBAL BOND FUND,
SINCE FEBRUARY 1996; MANAGER,
FIDELITY U.S. BOND INDEX, SINCE
1990; JOINED FIDELITY IN 1985
(CHECKMARK)
FIDELITY TARGET TIMELINE 1999
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF JULY 31, 1997
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
AAA 11.9 23.3
AA 3.9 3.4
A 47.1 41.1
BAA 33.9 30.3
BA 2.5 1.1
B 0.0 0.0
NOT RATED 0.0 0.0
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. SECURITIES RATED AS "BA" OR BELOW
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING
AGENCIES OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF
ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS OF JULY 31, 1997
6 MONTHS AGO
YEARS 2.3 3.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF JULY 31, 1997
6 MONTHS AGO
YEARS 2.1 2.6
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1997 * AS OF JANUARY 31, 1997 **
CORPORATE BONDS 82.2%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 9.1%
FOREIGN
GOVERNMENT
OBLIGATIONS 2.5%
OTHER 5.5%
SHORT-TERM
INVESTMENTS 0.7%
CORPORATE BONDS 70.8%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 19.8%
FOREIGN
GOVERNMENT
OBLIGATIONS 1.6%
OTHER 7.0%
SHORT-TERM
INVESTMENTS 0.8%
ROW: 1, COL: 1, VALUE: 1.7
ROW: 1, COL: 2, VALUE: 5.5
ROW: 1, COL: 3, VALUE: 3.0
ROW: 1, COL: 4, VALUE: 9.1
ROW: 1, COL: 5, VALUE: 40.2
ROW: 1, COL: 6, VALUE: 40.0
ROW: 1, COL: 1, VALUE: 1.8
ROW: 1, COL: 2, VALUE: 7.0
ROW: 1, COL: 3, VALUE: 2.6
ROW: 1, COL: 4, VALUE: 19.8
ROW: 1, COL: 5, VALUE: 48.8
ROW: 1, COL: 6, VALUE: 20.0
* FOREIGN
INVESTMENTS 15.0%
** FOREIGN
INVESTMENTS 10.9%
FIDELITY TARGET TIMELINE 1999
INVESTMENTS JULY 31, 1997
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 82.2%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
AEROSPACE & DEFENSE - 2.1%
Lockheed Corp. 9 3/8%, 10/15/99 A3 $ 240,000 $ 255,602
BASIC INDUSTRIES - 3.1%
CHEMICALS & PLASTICS - 3.1%
CBI Industries, Inc. 6 1/4%, 6/30/00 A3 365,000 367,174
DURABLES - 2.2%
AUTOS, TIRES, & ACCESSORIES - 1.4%
General Motors Corp. 9 5/8%, 12/1/00 A3 150,000 165,125
CONSUMER ELECTRONICS - 0.8%
Black & Decker Corp. 6 5/8%, 11/15/00 Baa2 100,000 100,838
TOTAL DURABLES 265,963
ENERGY - 8.1%
OIL & GAS - 8.1%
Burlington Resources, Inc. 7.15%, 5/1/99 A3 196,000 199,440
Occidental Petroleum Corp. 6 1/4%, 11/8/00 Baa3 101,000 100,640
Pennzoil Co. 9 5/8%, 11/15/99 Baa3 400,000 427,800
Texas Eastern Transmission Corp.
10 3/8%, 11/15/00 A2 220,000 245,287
973,167
FINANCE - 45.9%
BANKS - 30.9%
Banco Latin Americano 7%, 9/24/99 (a) Baa2 350,000 354,375
Bank of Nova Scotia yankee 9%, 10/1/99 A1 290,000 306,907
Bank South Corp. 10.20%, 6/1/99 A3 200,000 214,000
BanPonce Corp. 6.378%, 4/8/99 A3 150,000 150,083
Chase Manhattan Corp. 10%, 6/15/99 A1 253,000 269,969
First Hawaiian, Inc. 6 1/4%, 8/15/00 Baa1 165,000 164,279
First Interstate Bancorp 8 5/8%, 4/1/99 A2 362,000 376,777
Fleet Financial Group, Inc. 7 5/8%, 12/1/99 A3 75,000 77,215
Florida National Banks, Inc. 9 7/8%, 5/15/99 A2 196,000 208,009
Kansallis-Osake-Pankki 6 3/8%, 8/15/00 A2 250,000 250,108
Korea Development Bank yankee 7%, 7/15/99 A1 200,000 202,860
Midlantic Corp. 9 1/4%, 9/1/99 A2 318,000 336,565
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Republic of NY Corp. 9 3/4%, 12/1/00 A1 $ 125,000 $ 137,830
Shawmut National Corp. 8 5/8%, 12/15/99 A3 200,000 210,104
Signet Banking Corp. 9 5/8%, 6/1/99 Baa2 415,000 438,564
3,697,645
CREDIT & OTHER FINANCE - 11.6%
Aristar, Inc. 7 1/2%, 7/1/99 Baa1 299,000 306,589
Beneficial Corp. 10.10%, 11/27/00 A2 75,000 83,540
Chrysler Financial Corp. 9 1/2%, 12/15/99 A3 383,000 411,480
Greyhound Financial Corp. 6.65%, 1/19/00 Baa1 165,000 166,502
Heller Financial, Inc. 7 7/8%, 11/1/99 A2 105,000 108,626
Southwestern Bell Capital Corp.
6 3/4%, 2/1/00 A2 100,000 101,438
US West Financial Services, Inc.
8.40%, 9/15/99 A2 200,000 208,600
1,386,775
INSURANCE - 3.4%
SunAmerica, Inc. 6.20%, 10/31/99 Baa1 400,000 400,536
TOTAL FINANCE 5,484,956
INDUSTRIAL MACHINERY & EQUIPMENT - 1.0%
POLLUTION CONTROL - 1.0%
WMX Technologies, Inc. 8 1/4%, 11/15/99 A3 110,000 114,985
MEDIA & LEISURE - 3.8%
BROADCASTING - 2.5%
TCI Communication, Inc. 7 1/4%, 6/15/99 Ba1 300,000 304,035
PUBLISHING - 1.3%
News America Holdings, Inc. 7 1/2%, 3/1/00 Baa3 150,000 154,299
TOTAL MEDIA & LEISURE 458,334
NONDURABLES - 4.8%
FOODS - 3.5%
Nabisco, Inc. 8.30%, 4/15/99 Baa1 400,000 412,328
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
NONDURABLES - CONTINUED
TOBACCO - 1.3%
Philip Morris Companies, Inc. 9 1/4%, 2/15/00 A2 $ 150,000 $ 160,215
TOTAL NONDURABLES 572,543
RETAIL & WHOLESALE - 5.7%
GENERAL MERCHANDISE STORES - 5.7%
Dayton Hudson Corp. 10%, 12/1/00 Baa1 340,000 376,176
Dillard Department Stores, Inc.
7 3/8%, 6/15/99 A2 300,000 307,104
683,280
TECHNOLOGY - 2.5%
COMPUTERS & OFFICE EQUIPMENT - 2.5%
Comdisco, Inc. 7 3/4%, 9/1/99 Baa1 294,000 303,667
TRANSPORTATION - 1.1%
RAILROADS - 1.1%
Burlington Northern, Inc. 7.40%, 5/15/99 Baa2 125,000 127,908
UTILITIES - 1.9%
GAS - 1.9%
Arkla, Inc. 8 7/8%, 7/15/99 Baa3 210,000 220,620
TOTAL NONCONVERTIBLE BONDS
(Cost $9,873,776) 9,828,199
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 9.1%
U.S. TREASURY OBLIGATIONS - 5.3%
7 3/4%, 12/31/99 Aaa 99,000 103,378
8 1/2%, 2/15/00 Aaa 495,000 526,477
629,855
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.8%
Financing Corp. stripped principal 0%, 8/8/99 Aaa $ 311,000 $ 276,544
State of Israel (guaranteed by U.S. government
through Agency for International Development)
7 3/4%, 11/15/99 Aaa 175,000 181,676
458,220
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS
(Cost $1,079,245) 1,088,075
FOREIGN GOVERNMENT OBLIGATIONS - 2.5%
Export Development Corp. yankee
8 1/8%, 8/10/99 Aa2 140,000 145,771
Manitoba Province yankee 7.93%, 2/15/00 A1 150,000 156,047
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $307,285) 301,818
SUPRANATIONAL OBLIGATIONS - 5.5%
African Development Bank 9.30%, 7/1/00 Aa1 300,000 324,270
European Investment Bank 10 1/8%, 10/1/00 Aaa 300,000 334,383
TOTAL SUPRANATIONAL OBLIGATIONS
(Cost $659,154) 658,653
CASH EQUIVALENTS - 0.7%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.77%, dated
7/31/97 due 8/1/97 $ 79,013 79,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $11,998,460) $ 11,955,745
LEGEND
1. 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 $354,375 or 2.9%
of net assets.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 62.9% AAA, AA, A 52.6%
Baa 33.9% BBB 43.0%
Ba 2.5% BB 3.7%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
Distribution of investments by country of issue, as a percentage of
total value of investment in securities, is as follows:
United States 85.0%
Multi-National 5.4
Canada 5.0
Panama 2.9
Korea 1.7
TOTAL 100.0%
Purchases and sales of securities, other than short-term securities,
aggregated $12,283,304 and $7,569,533, respectively, of which U.S.
government and government agency obligations aggregated $5,011,560 and
$6,334,192, respectively.
INCOME TAX INFORMATION
At July 31, 1997, the aggregate cost of investment securities for
income tax purposes was $12,003,025. Net unrealized depreciation
aggregated $47,280, of which $43,576 related to appreciated investment
securities and $90,856 related to depreciated investment securities.
The fund intends to elect to defer to its fiscal year ending July 31,
1998 approximately $39,000 of losses recognized during the period
November 1, 1996 to July 31, 1997.
At July 31, 1997, the fund had a capital loss carryforward of
approximately $44,000 all of which will expire on July 31, 2005.
FIDELITY TARGET TIMELINE 1999
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JULY 31, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 11,955,745
AGREEMENTS OF $79,000) (COST $11,998,460) -
SEE ACCOMPANYING SCHEDULE
CASH 28,921
INTEREST RECEIVABLE 226,751
RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 9,150
TOTAL ASSETS 12,220,567
LIABILITIES
DISTRIBUTIONS PAYABLE $ 981
OTHER PAYABLES AND ACCRUED EXPENSES 22,747
TOTAL LIABILITIES 23,728
NET ASSETS $ 12,196,839
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 12,319,350
UNDISTRIBUTED NET INVESTMENT INCOME 7,500
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (87,296)
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (42,715)
NET ASSETS, FOR 1,272,584 SHARES OUTSTANDING $ 12,196,839
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $9.58
SHARE ($12,196,839 (DIVIDED BY) 1,272,584 SHARES)
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1997
INVESTMENT INCOME $ 749,282
INTEREST
EXPENSES
MANAGEMENT FEE $ 42,880
TRANSFER AGENT FEES 20,975
ACCOUNTING FEES AND EXPENSES 60,022
NON-INTERESTED TRUSTEES' COMPENSATION 36
CUSTODIAN FEES AND EXPENSES 1,451
REGISTRATION FEES 34,453
AUDIT 21,086
LEGAL 1,457
MISCELLANEOUS 1,122
TOTAL EXPENSES BEFORE REDUCTIONS 183,482
EXPENSE REDUCTIONS (150,543) 32,939
NET INVESTMENT INCOME 716,343
REALIZED AND UNREALIZED GAIN (LOSS) (52,439)
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 104,719
ON INVESTMENT SECURITIES
NET GAIN (LOSS) 52,280
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 768,623
FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED FEBRUARY 8, 1996
JULY 31, (COMMENCEMENT
1997 OF OPERATIONS) TO
JULY 31,
1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 716,343 $ 150,430
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) (52,439) (34,366)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 104,719 (147,434)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 768,623 (31,370)
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (709,625) (150,140)
SHARE TRANSACTIONS 6,043,900 7,457,120
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 701,715 149,858
COST OF SHARES REDEEMED (1,930,601) (103,717)
REDEMPTION FEES 1,019 57
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 4,816,033 7,503,318
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,875,031 7,321,808
NET ASSETS
BEGINNING OF PERIOD 7,321,808 -
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 12,196,839 $ 7,321,808
INCOME OF $7,500 AND $290, RESPECTIVELY)
OTHER INFORMATION
SHARES
SOLD 632,922 763,594
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 73,491 15,637
REDEEMED (202,177) (10,883)
NET INCREASE (DECREASE) 504,236 768,348
</TABLE>
FINANCIAL HIGHLIGHTS
YEAR ENDED FEBRUARY 8, 1996
JULY 31, (COMMENCEMENT
OF OPERATIONS) TO
JULY 31,
1997 1996
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.530 $ 10.000
INCOME FROM INVESTMENT OPERATIONS .724 D .310
NET INVESTMENT INCOME
NET REALIZED AND UNREALIZED GAIN (LOSS) .027 (.470)
TOTAL FROM INVESTMENT OPERATIONS .751 (.160)
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.702) (.310)
REDEMPTION FEES ADDED TO PAID IN CAPITAL .001 -
NET ASSET VALUE, END OF PERIOD $ 9.580 $ 9.530
TOTAL RETURN B, C 8.16% (1.58)%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 12,197 $ 7,322
RATIO OF EXPENSES TO AVERAGE NET ASSETS .35% E .35% A, E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS .34% F .34% A, F
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 7.38% 6.88% A
PORTFOLIO TURNOVER RATE 80% 118% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F 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 FINANCIAL STATEMENTS).
FIDELITY TARGET TIMELINE 2001
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF JULY 31, 1997
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
AAA 28.9 36.6
AA 7.5 8.5
A 32.2 19.9
BAA 29.4 30.7
BA 0.0 0.0
B 0.0 0.0
NOT RATED 0.0 3.3
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. SECURITIES RATED AS "BA" OR BELOW
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING
AGENCIES OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF
ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS OF JULY 31, 1997
6 MONTHS AGO
YEARS 5.0 5.8
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF JULY 31, 1997
6 MONTHS AGO
YEARS 4.1 4.5
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1997 * AS OF JANUARY 31, 1997 **
CORPORATE BONDS 57.5%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 28.9%
FOREIGN
GOVERNMENT
OBLIGATIONS 7.8%
OTHER 3.8%
SHORT-TERM
INVESTMENTS 2.0%
CORPORATE BONDS 53.9%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 36.6%
FOREIGN
GOVERNMENT
OBLIGATIONS 4.6%
OTHER 3.9%
SHORT-TERM
INVESTMENTS 1.0%
ROW: 1, COL: 1, VALUE: 2.0
ROW: 1, COL: 2, VALUE: 3.8
ROW: 1, COL: 3, VALUE: 7.8
ROW: 1, COL: 4, VALUE: 28.9
ROW: 1, COL: 5, VALUE: 57.5
ROW: 1, COL: 1, VALUE: 1.0
ROW: 1, COL: 2, VALUE: 3.9
ROW: 1, COL: 3, VALUE: 4.6
ROW: 1, COL: 4, VALUE: 36.6
ROW: 1, COL: 5, VALUE: 53.9
* FOREIGN
INVESTMENTS 18.2%
** FOREIGN
INVESTMENTS 12.2%
FIDELITY TARGET TIMELINE 2001
INVESTMENTS JULY 31, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
NONCONVERTIBLE BONDS - 57.5%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
BASIC INDUSTRIES - 2.9%
CHEMICALS & PLASTICS - 2.9%
Praxair, Inc. 6 3/4%, 3/1/03 A3 $ 300,000 $ 304,680
ENERGY - 2.0%
OIL & GAS - 2.0%
Petro-Canada 8.60%, 10/15/01 A3 190,000 205,352
FINANCE - 35.7%
BANKS - 25.9%
Bank of New York Co., Inc.
7 7/8%, 11/15/02 A2 136,000 145,127
BankAmerica Corp. 7 1/2%, 10/15/02 A1 25,000 26,236
BanPonce Financial Corp. 7.30%, 6/5/02 A3 400,000 414,620
Barnett Banks, Inc. 9.83%, 5/30/03 A2 160,000 185,221
Central Fidelity Banks, Inc. 8.15%, 11/15/02 Baa2 200,000 214,100
Huntington Bancshares, Inc. 7 7/8%, 11/15/02 Baa1 100,000 105,888
Integra Financial Corp. 8 1/2%, 5/15/02 A- 350,000 379,565
Kansallis-Osake-Pankki 10%, 5/1/02 A3 255,000 290,909
Korea Development Bank 7.90%, 2/1/02 A1 150,000 157,320
Skandinaviska Enskilda Banken yankee
8.45%, 5/15/02 A3 300,000 324,234
Summit Bancorp. 8 5/8%, 12/10/02 BBB- 250,000 273,563
Wells Fargo & Co. 6 7/8%, 4/15/03 A2 160,000 163,045
2,679,828
CREDIT & OTHER FINANCE - 6.3%
Countrywide Funding Corp. 8 1/4%, 7/15/02 Baa1 250,000 268,405
Finova Capital Corp. 7 1/8%, 5/1/02 Baa1 174,000 178,968
Greyhound Financial Corp. 7.82%, 1/27/03 Baa1 100,000 105,648
Southwestern Bell Capital Corp. 7.36%, 5/1/02 A2 100,000 104,287
657,308
SAVINGS & LOANS - 3.5%
Great Western Financial Corp. 8.60%, 2/1/02 A3 100,000 108,445
Long Island Savings Bank FSB
7%, 6/13/02 Baa3 250,000 255,000
363,445
TOTAL FINANCE 3,700,581
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
RETAIL & WHOLESALE - 6.4%
GENERAL MERCHANDISE STORES - 6.4%
Dayton Hudson Corp.:
9 3/4%, 7/1/02 Baa1 $ 75,000 $ 85,276
6.40%, 2/15/03 Baa1 245,000 244,047
Federated Department Stores, Inc.
8 1/2%, 6/15/03 Baa2 300,000 328,143
657,466
TRANSPORTATION - 3.2%
AIR TRANSPORTATION - 3.2%
Delta Air Lines, Inc. 8 1/2%, 3/15/02 Baa3 311,000 334,272
UTILITIES - 7.3%
GAS - 6.3%
Columbia Gas System, Inc. 6.61%, 11/28/02 Baa1 150,000 151,607
Enron Corp. 9 7/8%, 6/15/03 Baa2 210,000 243,363
Southwest Gas Corp. 9 3/4%, 6/15/02 Baa2 225,000 254,590
649,560
TELEPHONE SERVICES - 1.0%
GTE Corp. 9.10%, 6/1/03 A3 95,000 107,498
TOTAL UTILITIES 757,058
TOTAL NONCONVERTIBLE BONDS
(Cost $5,958,210) 5,959,409
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 28.9%
U.S. TREASURY OBLIGATIONS - 24.8%
6 1/4%, 1/31/02 Aaa 1,135,000 1,150,788
10 3/4%, 2/15/03 Aaa 1,165,000 1,426,577
2,577,365
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 4.1%
Federal Home Loan Bank 6.37%, 6/30/03 Aaa $ 180,000 $ 182,081
Financing Corp. stripped principal 0%, 5/2/01 Aaa 300,000 239,349
421,430
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS
(Cost $2,951,137) 2,998,795
FOREIGN GOVERNMENT OBLIGATIONS - 7.8%
Ireland Republic 7.64%, 1/2/02 Aa1 210,000 219,998
Manitoba Province yankee 8%, 4/15/02 A1 110,000 117,780
Nova Scotia Province yankee
9 3/8%, 7/15/02 A3 275,000 309,342
Ontario Province yankee 7 3/8%, 1/27/03 Aa3 150,000 157,976
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $804,214) 805,096
SUPRANATIONAL OBLIGATIONS - 3.8%
African Development Bank yankee
7.70%, 7/15/02 (Cost $390,137) Aa1 375,000 398,430
CASH EQUIVALENTS - 2.0%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.77%, dated
7/31/97 due 8/1/97 $ 211,034 211,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $10,314,698) $ 10,372,730
LEGEND
2. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 65.0% AAA, AA, A 57.1%
Baa 26.7% BBB 37.7%
Ba 0.0% BB 3.2%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
Distribution of investments by country of issue, as a percentage of
total value of investment in securities, is as follows:
United States 81.8%
Canada 7.6
Multi-National 3.9
Sweden 3.1
Ireland 2.1
Korea 1.5
TOTAL 100.0%
Purchases and sales of securities, other than short-term securities,
aggregated $11,723,595 and $7,817,134, respectively, of which U.S.
government and government agency obligations aggregated $6,766,212 and
$6,771,083, respectively.
INCOME TAX INFORMATION
At July 31, 1997, the aggregate cost of investment securities for
income tax purposes was $10,327,373. Net unrealized appreciation
aggregated $45,357, of which $120,734 related to appreciated
investment securities and $75,377 related to depreciated investment
securities.
The fund intends to elect to defer to its fiscal year ending July 31,
1998 approximately $15,000 of losses recognized during the period
November 1, 1996 to July 31, 1997.
At July 31, 1997, the fund had a capital loss carryforward of
approximately $32,000 all of which will expire on July 31, 2005.
FIDELITY TARGET TIMELINE 2001
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JULY 31, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 10,372,730
AGREEMENTS OF $211,000) (COST $10,314,698) -
SEE ACCOMPANYING SCHEDULE
CASH 59,643
INTEREST RECEIVABLE 176,079
RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 9,050
TOTAL ASSETS 10,617,502
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 210,345
DISTRIBUTIONS PAYABLE 473
OTHER PAYABLES AND ACCRUED EXPENSES 28,980
TOTAL LIABILITIES 239,798
NET ASSETS $ 10,377,704
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 10,376,162
UNDISTRIBUTED NET INVESTMENT INCOME 3,304
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (59,794)
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 58,032
NET ASSETS, FOR 1,076,926 SHARES OUTSTANDING $ 10,377,704
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $9.64
SHARE ($10,377,704 (DIVIDED BY) 1,076,926 SHARES)
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1997
INVESTMENT INCOME $ 629,933
INTEREST
EXPENSES
MANAGEMENT FEE $ 36,434
TRANSFER AGENT FEES 17,676
ACCOUNTING FEES AND EXPENSES 60,018
NON-INTERESTED TRUSTEES' COMPENSATION 38
CUSTODIAN FEES AND EXPENSES 1,189
REGISTRATION FEES 31,406
AUDIT 28,395
LEGAL 1,238
MISCELLANEOUS 1,222
TOTAL EXPENSES BEFORE REDUCTIONS 177,616
EXPENSE REDUCTIONS (149,951) 27,665
NET INVESTMENT INCOME 602,268
REALIZED AND UNREALIZED GAIN (LOSS) (11,778)
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 237,390
ON INVESTMENT SECURITIES
NET GAIN (LOSS) 225,612
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 827,880
FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED FEBRUARY 8, 1996
JULY 31, (COMMENCEMENT
1997 OF OPERATIONS) TO
JULY 31,
1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 602,268 $ 137,284
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) (11,778) (45,932)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 237,390 (179,358)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 827,880 (88,006)
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (601,248) (137,085)
SHARE TRANSACTIONS 4,550,600 6,293,340
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 593,980 137,042
COST OF SHARES REDEEMED (1,174,224) (24,923)
REDEMPTION FEES 341 7
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 3,970,697 6,405,466
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,197,329 6,180,375
NET ASSETS
BEGINNING OF PERIOD 6,180,375 -
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 10,377,704 $ 6,180,375
INCOME OF $3,304 AND $199, RESPECTIVELY)
OTHER INFORMATION
SHARES
SOLD 480,141 645,819
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 62,632 14,488
REDEEMED (123,511) (2,643)
NET INCREASE (DECREASE) 419,262 657,664
</TABLE>
FINANCIAL HIGHLIGHTS
YEAR ENDED FEBRUARY 8, 1996
JULY 31, (COMMENCEMENT
OF OPERATIONS) TO
JULY 31,
1997 1996
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.400 $ 10.000
INCOME FROM INVESTMENT OPERATIONS .690 D .310
NET INVESTMENT INCOME
NET REALIZED AND UNREALIZED GAIN (LOSS) .240 (.600)
TOTAL FROM INVESTMENT OPERATIONS .930 (.290)
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.690) (.310)
NET ASSET VALUE, END OF PERIOD $ 9.640 $ 9.400
TOTAL RETURN B, C 10.26% (2.88)%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 10,378 $ 6,180
RATIO OF EXPENSES TO AVERAGE NET ASSETS .35% E .35% A, E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS .34% F .34% A, F
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 7.31% 6.93% A
PORTFOLIO TURNOVER RATE 97% 93% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F 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 FINANCIAL STATEMENTS).
FIDELITY TARGET TIMELINE 2003
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF JULY 31, 1997
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
AAA 49.3 54.7
AA 5.3 1.6
A 19.3 13.5
BAA 25.1 29.3
BA 0.0 0.0
B 0.0 0.0
NOT RATED 0.0 0.0
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. SECURITIES RATED AS "BA" OR BELOW
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING
AGENCIES OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF
ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS OF JULY 31, 1997
6 MONTHS AGO
YEARS 8.2 9.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF JULY 31, 1997
6 MONTHS AGO
YEARS 6.0 6.5
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1997 * AS OF JANUARY 31, 1997 **
CORPORATE BONDS 53.8%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 43.8%
FOREIGN
GOVERNMENT
OBLIGATIONS 1.4%
SHORT-TERM
INVESTMENTS 1.0%
CORPORATE BONDS 46.4%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 51.1%
FOREIGN
GOVERNMENT
OBLIGATIONS 1.6%
SHORT-TERM
INVESTMENTS 0.9%
ROW: 1, COL: 1, VALUE: 2.0
ROW: 1, COL: 2, VALUE: 2.4
ROW: 1, COL: 3, VALUE: 42.8
ROW: 1, COL: 4, VALUE: 52.8
ROW: 1, COL: 1, VALUE: 1.9
ROW: 1, COL: 2, VALUE: 2.6
ROW: 1, COL: 3, VALUE: 50.1
ROW: 1, COL: 4, VALUE: 45.4
* FOREIGN
INVESTMENTS 12.6%
** FOREIGN
INVESTMENTS 8.1%
FIDELITY TARGET TIMELINE 2003
INVESTMENTS JULY 31, 1997
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 53.8%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
DURABLES - 3.2%
TEXTILES & APPAREL - 3.2%
Levi Strauss & Co. 7%, 11/1/06 (a) Baa2 $ 400,000 $ 409,193
ENERGY - 4.3%
OIL & GAS - 4.3%
Husky Oil Ltd. yankee 7 1/8%, 11/15/06 Baa3 250,000 255,440
Union Oil Co. of California 9 1/8%, 2/15/06 Baa1 265,000 308,918
564,358
FINANCE - 34.2%
BANKS - 23.9%
Bayerische Landesbank Gironzentrale yankee
6 3/8%, 10/15/05 Aaa 200,000 200,132
First Security Corp. 7%, 7/15/05 Baa1 375,000 380,378
First Tennessee National Corp.
6 3/4%, 11/15/05 Baa1 200,000 201,070
First Union Corp. 7 1/2%, 7/15/06 A2 375,000 396,656
Fleet Financial Group, Inc. 7 1/8%, 4/15/06 A3 375,000 386,003
Merita Bank Ltd. yankee 6 1/2%, 1/15/06 A3 150,000 147,582
Midland Bank PLC yankee 7 5/8%, 6/15/06 A1 300,000 318,843
Signet Bank 7.80%, 9/15/06 Baa1 250,000 266,523
Sovran Financial Corp. 9 1/4%, 6/15/06 A1 125,000 146,861
Swiss Bank 6 3/4%, 7/15/05 Aa2 500,000 505,390
Union Planters Corp. 6 3/4%, 11/1/05 Baa2 150,000 149,861
3,099,299
CREDIT & OTHER FINANCE - 6.8%
BCH Cayman Islands Ltd. yankee
7.70%, 7/15/06 A3 130,000 137,090
Bank of Montreal Chicago Branch
6.10%, 9/15/05 A1 125,000 121,031
Secured Finance, Inc. gtd. secured
9.05%, 12/15/04 Aaa 450,000 513,392
Southwestern Bell Capital Corp.
7.13%, 6/1/05 A2 100,000 103,664
875,177
INSURANCE - 1.6%
URC Holdings Corp.
7 7/8%, 6/30/06 (a) Baa2 200,000 213,028
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
FINANCE - CONTINUED
SAVINGS & LOANS - 1.9%
Washington Mutual, Inc. 7 1/4%, 8/15/05 A3 $ 234,000 $ 241,874
TOTAL FINANCE 4,429,378
MEDIA & LEISURE - 1.8%
RESTAURANTS - 1.8%
Darden Restaurants, Inc. 6 3/8%, 2/1/06 Baa1 85,000 81,210
Wendy's International, Inc. 6.35%, 12/15/05 Baa1 150,000 147,296
228,506
NONDURABLES - 3.9%
TOBACCO - 3.9%
Philip Morris Companies, Inc. 7%, 7/15/05 A2 500,000 506,260
RETAIL & WHOLESALE - 3.0%
GENERAL MERCHANDISE STORES - 3.0%
Dayton Hudson Corp. 7 1/2%, 7/15/06 Baa1 375,000 394,849
UTILITIES - 3.4%
GAS - 3.4%
Columbia Gas System, Inc. 6.80%, 11/28/05 Baa1 150,000 151,374
InterNorth, Inc. 9 5/8%, 3/15/06 Baa2 245,000 292,800
444,174
TOTAL NONCONVERTIBLE BONDS
(Cost $6,826,339) 6,976,718
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 43.8%
U.S. TREASURY OBLIGATIONS - 33.6%
10 3/4%, 8/15/05 Aaa 2,505,000 3,245,528
6 7/8%, 5/15/06 Aaa 1,046,000 1,104,022
4,349,550
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 10.2%
Federal Farm Credit Bank:
7.35%, 3/24/05 Aaa $ 150,000 $ 159,539
7.26%, 5/02/05 Aaa 500,000 529,375
Federal Home Loan Mortgage Corporation
8%, 1/26/05 Aaa 100,000 110,109
Financing Corp. stripped principal
0%, 11/11/03 Aaa 770,000 524,547
1,323,570
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS
(Cost $5,560,928) 5,673,120
FOREIGN GOVERNMENT OBLIGATIONS - 1.4%
Ontario Province 6%, 2/21/06
(Cost $172,163) Aa3 185,000 179,911
CASH EQUIVALENTS - 1.0%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.77%, dated
7/31/97 due 8/1/97 $ 134,022 134,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $12,693,430) $ 12,963,749
LEGEND
(a) 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 $622,221
or 4.7% of net assets.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 73.9% AAA, AA, A 64.4%
Baa 25.1% BBB 30.5%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
Distribution of investments by country of issue, as a percentage of
total value of investment in securities, is as follows:
United States 87.4%
United Kingdom 2.4
Canada 4.2
Switzerland 3.9
Finland 1.1
Grand Cayman (U.K. Overseas) 1.0
TOTAL 100.0%
Purchases and sales of securities, other than short-term securities,
aggregated $14,036,652 and $8,480,285, respectively, of which U.S.
government and government agency obligations aggregated $9,213,549 and
$7,778,559, respectively.
INCOME TAX INFORMATION
At July 31, 1997, the aggregate cost of investment securities for
income tax purposes was $12,695,876. Net unrealized appreciation
aggregated $267,873, of which $315,190 related to appreciated
investment securities and $47,317 related to depreciated investment
securities.
The fund intends to elect to defer to its fiscal year ending July 31,
1998 approximately $38,000 of losses recognized during the period
November 1, 1996 to July 31, 1997.
At July 31, 1997, the fund had a capital loss carryforward of
approximately $12,000 all of which will expire on July 31, 2005.
FIDELITY TARGET TIMELINE 2003
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JULY 31, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 12,963,749
AGREEMENTS OF $134,000) (COST $12,693,430) -
SEE ACCOMPANYING SCHEDULE
CASH 18,498
INTEREST RECEIVABLE 248,365
RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 8,367
TOTAL ASSETS 13,238,979
LIABILITIES
DISTRIBUTIONS PAYABLE $ 729
OTHER PAYABLES AND ACCRUED EXPENSES 26,813
TOTAL LIABILITIES 27,542
NET ASSETS $ 13,211,437
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 12,990,750
UNDISTRIBUTED NET INVESTMENT INCOME 1,038
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (50,670)
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 270,319
NET ASSETS, FOR 1,365,643 SHARES OUTSTANDING $ 13,211,437
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $9.67
SHARE ($13,211,437 (DIVIDED BY) 1,365,643 SHARES)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED JULY 31, 1997
INVESTMENT INCOME $ 750,754
INTEREST
EXPENSES
MANAGEMENT FEE $ 44,592
TRANSFER AGENT FEES 23,527
ACCOUNTING FEES AND EXPENSES 60,215
NON-INTERESTED TRUSTEES' COMPENSATION 37
CUSTODIAN FEES AND EXPENSES 1,339
REGISTRATION FEES 34,444
AUDIT 25,119
LEGAL 1,473
MISCELLANEOUS 358
TOTAL EXPENSES BEFORE REDUCTIONS 191,104
EXPENSE REDUCTIONS (155,284) 35,820
NET INVESTMENT INCOME 714,934
REALIZED AND UNREALIZED GAIN (LOSS) 12,474
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 491,377
ON INVESTMENT SECURITIES
NET GAIN (LOSS) 503,851
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,218,785
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED FEBRUARY 8, 1996
JULY 31, (COMMENCEMENT
1997 OF OPERATIONS) TO
JULY 31,
1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 714,934 $ 141,091
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 12,474 (62,841)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 491,377 (221,058)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,218,785 (142,808)
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (714,423) (140,867)
SHARE TRANSACTIONS 10,023,642 7,206,977
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 704,303 140,506
COST OF SHARES REDEEMED (5,000,004) (86,628)
REDEMPTION FEES 1,697 257
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 5,729,638 7,261,112
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 6,234,000 6,977,437
NET ASSETS
BEGINNING OF PERIOD 6,977,437 -
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 13,211,437 $ 6,977,437
INCOME OF $1,038 AND $468, RESPECTIVELY)
OTHER INFORMATION
SHARES
SOLD 1,066,648 749,084
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 74,936 15,058
REDEEMED (530,748) (9,335)
NET INCREASE (DECREASE) 610,836 754,807
</TABLE>
FINANCIAL HIGHLIGHTS
YEAR ENDED FEBRUARY 8, 1996
JULY 31, (COMMENCEMENT
OF OPERATIONS) TO
JULY 31,
1997 1996
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.240 $ 10.000
INCOME FROM INVESTMENT OPERATIONS .634 D .307
NET INVESTMENT INCOME
NET REALIZED AND UNREALIZED GAIN (LOSS) .428 (.762)
TOTAL FROM INVESTMENT OPERATIONS 1.062 (.455)
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.634) (.306)
REDEMPTION FEES ADDED TO PAID IN CAPITAL .002 .001
NET ASSET VALUE, END OF PERIOD $ 9.670 $ 9.240
TOTAL RETURN B, C 11.94% (4.53)%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 13,211 $ 6,977
RATIO OF EXPENSES TO AVERAGE NET ASSETS .35% E .35% A, E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS .34% F .34% A, F
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 6.76% 6.93% A
PORTFOLIO TURNOVER RATE 83% 180% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F 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 FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Target Timeline 1999, Fidelity Target Timeline 2001 and
Fidelity Target Timeline 2003 (the funds) are funds of Fidelity Boston
Street Trust (the trust). 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 Massachusetts business
trust. Each fund is authorized to issue an unlimited number of shares.
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 funds:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Income
receipts and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Purchases and sales of securities are translated into U.S. dollars at
the contractual currency exchange rates established at the time of
each trade.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of forward
currency contracts, disposition of foreign currencies, and the
difference between the amount of net investment income accrued and the
U.S. dollar amount actually received. The effects of changes in
foreign currency exchange rates on investments in securities are
included with the net realized and unrealized gain or loss on
investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, each fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for the fiscal year. The schedules of investments
include information regarding income taxes under the caption "Income
Tax Information."
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME. Interest income, which includes accretion of
original issue 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. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for market discount, capital loss carryforwards and losses
deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in
the following year.
REDEMPTION FEES. Shares held in the fund less than 90 days are subject
to a redemption fee equal to .50% of the proceeds of the redeemed
shares. The fee, which is retained by the fund, is accounted for as an
addition to paid in capital.
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 funds, 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 funds, 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 funds' 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
RESTRICTED SECURITIES. Certain funds are 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, the funds had no investments
in restricted securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities), is included under the caption "Other
Information" at the end of each applicable fund's schedule of
investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
each fund. 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. The annual individual fund fee
rate is .30%. 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. For the period, the management fee was equivalent to
an annual rate of .44% of average net assets for each fund.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the funds' 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 annual rate of .22%, .21% and .22% of the average net
assets of Fidelity Target Timeline 1999, Fidelity Target Timeline 2001
and Fidelity Target Timeline 2003, respectively.
ACCOUNTING FEES. FSC maintains each 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.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .35% of average net assets. For the
period, the reimbursement reduced expenses by $149,653, $148,907 and
$154,212 for Fidelity Target Timeline
5. EXPENSE REDUCTIONS -
CONTINUED
1999, Fidelity Target Timeline 2001 and Fidelity Target Timeline 2003,
respectively.
In addition, certain funds have entered into an arrangement with their
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of each applicable
fund's expenses. During the period, the custodian fees were reduced by
$890, $1,044 and $1,072 for Fidelity Target Timeline 1999, Fidelity
Target Timeline 2001, and Fidelity Target Timeline 2003, respectively
under this arrangement.
6. BENEFICIAL INTEREST.
At the end of the period, FMR and its affiliates were record owners of
more than 5% of the outstanding shares of the following funds:
BENEFICIAL INTEREST
FUND % OWNERSHIP
Fidelity Target Timeline 1999 30.8%
Fidelity Target Timeline 2001 38.1%
Fidelity Target Timeline 2003 28.5%
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Boston Street Trust and the Shareholders
of Fidelity Target Timeline 1999, Fidelity Target Timeline 2001 and
Fidelity Target Timeline 2003:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for Moody's and
Standard & Poor's ratings), and the related statements of operations
and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Fidelity
Target Timeline 1999, Fidelity Target Timeline 2001 and Fidelity
Target Timeline 2003 (funds of Fidelity Boston Street Trust ) at July
31, 1997, the results of their operations for the year then ended, and
the changes in their net assets and the financial highlights for the
periods indicated, in conformity, with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fidelity Boston Street Trust's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of securities at July 31, 1997 by correspondence with the custodian
and the application of alternative auditing procedures where
securities purchased were not yet received by the custodian, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
September 11, 1997
DISTRIBUTIONS
The following percentage of dividends distributed during the fiscal
year were derived from interest on U.S. Government securities that is
generally exempt from state income tax:
Target Timeline 1999 17.06%
Target Timeline 2001 33.12%
Target Timeline 2003 48.26%
The funds will notify shareholders in January 1998 of the applicable
percentage for use in preparing 1997 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on July 16,
1997. The results of votes taken among shareholders on proposals are
listed below.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
SHARES VOTED SHARES VOTED
J. GARY BURKHEAD
AFFIRMATIVE 2,171,764.264 98.810
WITHHELD 26,156.297 1.190
TOTAL 2,197,920.561 100.000
RALPH F. COX
AFFIRMATIVE 2,172,590.985 98.848
WITHHELD 25,329.576 1.152
TOTAL 2,197,920.561 100.000
PHYLLIS BURKE DAVIS
AFFIRMATIVE 2,173,047.442 98.868
WITHHELD 24,873.119 1.132
TOTAL 2,197,920.561 100.000
WILLIAM O. MCCOY
AFFIRMATIVE 2,172,590.985 98.848
WITHHELD 25,329.576 1.152
TOTAL 2,197,920.561 100.000
EDWARD C. JOHNSON 3RD
AFFIRMATIVE 2,172,590.985 98.848
WITHHELD 25,329.576 1.152
TOTAL 2,197,920.561 100.000
E. BRADLEY JONES
AFFIRMATIVE 2,172,590.985 98.848
WITHHELD 25,329.576 1.152
TOTAL 2,197,920.561 100.000
DONALD J. KIRK
AFFIRMATIVE 2,172,590.985 98.848
WITHHELD 25,329.576 1.152
TOTAL 2,197,920.561 100.000
# OF % OF
SHARES VOTED SHARES VOTED
PETER S. LYNCH
AFFIRMATIVE 2,173,047.442 98.868
WITHHELD 24,873.119 1.132
TOTAL 2,197,920.561 100.000
GERALD C. MCDONOUGH
AFFIRMATIVE 2,171,764.264 98.810
WITHHELD 26,156.297 1.190
TOTAL 2,197,920.561 100.000
ROBERT M. GATES
AFFIRMATIVE 2,172,590.985 98.848
WITHHELD 25,329.576 1.152
TOTAL 2,197,920.561 100.000
MARVIN L. MANN
AFFIRMATIVE 2,172,590.985 98.848
WITHHELD 25,329.576 1.152
TOTAL 2,197,920.561 100.000
THOMAS R. WILLIAMS
AFFIRMATIVE 2,171,764.264 98.810
WITHHELD 26,156.297 1.190
TOTAL 2,197,920.561 100.000
PROPOSAL 2
To ratify the selection of Price Waterhouse LLP as independent
accountants of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
AFFIRMATIVE 2,148,151.001 97.736
AGAINST 26,560.069 1.208
ABSTAIN 23,209.491 1.056
TOTAL 2,197,920.561 100.00
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)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
For quotes.*
For account balances and holdings.
To review orders and mutual
fund activity.
To change your PIN.
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)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)
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
155 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
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
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
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc. London, England
Fidelity Management & Research
(Far East) Inc. Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Christine J. Thompson, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
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 *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
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
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income Fund
Ginnie Mae Fund
Global Bond Fund
Government Securities Fund
Intermediate Bond Fund
Investment Grade Bond Fund
New Markets Income Fund
Short-Intermediate Government Fund
Short-Term Bond Fund
Spartan(registered trademark) Ginnie Mae Fund
Spartan Government Income Fund
Spartan High Income Fund
Spartan Investment Grade Bond Fund
Spartan Limited Maturity
Government Fund
Spartan Short-Intermediate Government Fund
Spartan Short-Term Bond Fund
Target Timeline 1999, 2001 & 2003
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)
(registered trademark)
TouchTone Xpress 1-800-544-5555
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* INDEPENDENT TRUSTEES
AUTOMATED LINE FOR QUICKEST SERVICE
