FIDELITY
(REGISTERED TRADEMARK)
TARGET TIMELINE
SM
FUNDS - 1999, 2001, 2003
ANNUAL REPORT
JULY 31, 1998
CONTENTS
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
PERFORMANCE 4 HOW THE FUNDS HAVE DONE OVER TIME.
FUND TALK 15 THE MANAGERS' 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
43 FINANCIAL STATEMENTS
NOTES 47 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT 50 THE AUDITORS' OPINION.
ACCOUNTANTS
DISTRIBUTIONS 51
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUNDS 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 FUNDS 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:
So far, 1998 has been a year of considerable volatility in the U.S.
stock and bond markets. In the first quarter, the U.S. stock market
soared as inflation and interest rates remained stable, while the
economy maintained strong growth. By summer, however, investors began
to exercise caution relative to the troublesome Asian economic climate
and reports of concerns about corporate earnings domestically. Market
volatility and low interest rates were also the main stories in the
bond market, with many investors moving assets to highly rated U.S.
Treasuries.
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 and dividends would
have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 LIFE OF
YEAR FUND
TARGET TIMELINE 1999 6.14% 12.99%
LB AGGREGATE BOND 7.87% 17.73%
US TREASURY STRIPS (8/15/99 AND 11/15/99) 6.15% 12.85%
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 US 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
PERIODS ENDED JULY 31, 1998 PAST 1 LIFE OF
YEAR FUND
TARGET TIMELINE 1999 6.14% 5.05%
LB AGGREGATE BOND 7.87% 6.81%
US TREASURY STRIPS (8/15/99 AND 11/15/99) 6.15% 5.00%
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 year.
$10,000 OVER LIFE OF FUND
Target Timeline 1999 LB Aggregate Bond
Avg US TreasStrip 1999
00379 LB001
F0092
1996/02/08 10000.00 10000.00
10000.00
1996/02/29 9843.43 9838.79
9854.02
1996/03/31 9769.72 9769.92
9772.31
1996/04/30 9723.18 9715.21
9719.40
1996/05/31 9708.18 9695.78
9698.92
1996/06/30 9814.54 9825.70
9801.69
1996/07/31 9841.86 9852.23
9838.95
1996/08/31 9849.03 9835.48
9846.73
1996/09/30 9980.40 10006.62
9972.89
1996/10/31 10147.46 10228.77
10138.67
1996/11/30 10271.38 10403.68
10254.06
1996/12/31 10218.33 10306.92
10216.80
1997/01/31 10261.47 10338.87
10260.67
1997/02/28 10277.69 10364.72
10275.66
1997/03/31 10245.55 10249.67
10237.18
1997/04/30 10340.73 10403.42
10334.51
1997/05/31 10416.89 10502.25
10413.21
1997/06/30 10502.40 10627.23
10491.90
1997/07/31 10645.36 10914.16
10631.33
1997/08/31 10644.63 10821.39
10629.48
1997/09/30 10731.20 10981.55
10717.82
1997/10/31 10820.68 11140.78
10806.15
1997/11/30 10840.11 11192.03
10824.79
1997/12/31 10906.08 11305.07
10898.70
1998/01/31 11018.13 11449.77
11006.86
1998/02/28 11032.85 11440.61
11014.65
1998/03/31 11077.20 11479.51
11059.71
1998/04/30 11131.38 11539.21
11117.36
1998/05/31 11187.82 11648.83
11175.04
1998/06/30 11241.97 11747.84
11230.90
1998/07/31 11298.77 11772.51
11284.96
IMATRL PRASUN SHR__CHT 19980731 19980811 141220 R00000000000033
$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, 1998, the value of
the investment would be $11,299 a 12.99% 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 $11,773 - a
17.73% increase. If $10,000 was put in US Treasury Strips (8/15/99 and
11/15/99), it would be valued at $11,285 - a 12.85% 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
YEARS ENDED JULY 31, FEBRUARY 8, 1996
(COMMENCEMENT
OF OPERATIONS) TO
JULY 31,
1998 1997 1996
DIVIDEND RETURNS 7.39% 7.64% 3.12%
CAPITAL RETURNS -1.25% 0.52% -4.70%
TOTAL RETURNS 6.14% 8.16% -1.58%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED JULY 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 5.79(CENTS) 33.94(CENTS) 68.86(CENTS)
ANNUALIZED DIVIDEND RATE 7.20% 7.20% 7.23%
30-DAY ANNUALIZED YIELD 5.63% - -
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
$9.47 over the past one month, $9.50 over the past six months, and
$9.52 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 4.75%.
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 and dividends would
have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 LIFE OF
YEAR FUND
TARGET TIMELINE 2001 6.74% 14.30%
LB AGGREGATE BOND 7.87% 17.73%
US TREASURY STRIPS (8/15/01 AND 11/15/01) 7.13% 13.54%
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 US 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
PERIODS ENDED JULY 31, 1998 PAST 1 LIFE OF
YEAR FUND
TARGET TIMELINE 2001 6.74% 5.54%
LB AGGREGATE BOND 7.87% 6.81%
US TREASURY STRIPS (8/15/01 AND 11/15/01) 7.13% 5.26%
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 year.
$10,000 OVER LIFE OF FUND
Target Timeline 2001 LB Aggregate Bond
Avg US TreasStrip 2001
00381 LB001
F0093
1996/02/08 10000.00 10000.00
10000.00
1996/02/29 9763.03 9838.79
9793.77
1996/03/31 9659.03 9769.92
9644.16
1996/04/30 9582.85 9715.21
9541.04
1996/05/31 9558.77 9695.78
9502.61
1996/06/30 9695.97 9825.70
9643.50
1996/07/31 9711.59 9852.23
9646.86
1996/08/31 9687.10 9835.48
9625.31
1996/09/30 9868.61 10006.62
9810.59
1996/10/31 10105.68 10228.77
10048.52
1996/11/30 10290.56 10403.68
10225.78
1996/12/31 10162.27 10306.92
10090.29
1997/01/31 10193.78 10338.87
10132.73
1997/02/28 10199.18 10364.72
10123.94
1997/03/31 10092.01 10249.67
10008.01
1997/04/30 10241.62 10403.42
10144.85
1997/05/31 10328.56 10502.25
10236.50
1997/06/30 10435.11 10627.23
10332.84
1997/07/31 10708.33 10914.16
10598.38
1997/08/31 10615.90 10821.39
10508.74
1997/09/30 10755.43 10981.55
10650.93
1997/10/31 10886.16 11140.78
10800.54
1997/11/30 10890.55 11192.03
10803.23
1997/12/31 10998.62 11305.07
10907.70
1998/01/31 11174.41 11449.77
11089.66
1998/02/28 11138.91 11440.61
11053.93
1998/03/31 11178.45 11479.51
11084.93
1998/04/30 11227.63 11539.21
11136.81
1998/05/31 11314.08 11648.83
11224.42
1998/06/30 11387.71 11747.84
11297.19
1998/07/31 11429.77 11772.51
11353.77
IMATRL PRASUN SHR__CHT 19980731 19980811 160126 R00000000000033
$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, 1998, the value of
the investment would be $11,430 - a 14.30% 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 $11,773 - a
17.73% increase. If $10,000 was put in US Treasury Strips (8/15/01 and
11/15/01), it would be valued at $11,354 - a 13.54% 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
YEARS ENDED JULY 31, FEBRUARY 8, 1996
(COMMENCEMENT
OF OPERATIONS) TO
JULY 31,
1998 1997 1996
DIVIDEND RETURNS 6.95% 7.71% 3.12%
CAPITAL RETURNS -0.21% 2.55% -6.00%
TOTAL RETURNS 6.74% 10.26% -2.88%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED JULY 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 5.56(CENTS) 31.79(CENTS) 64.86(CENTS)
ANNUALIZED DIVIDEND RATE 6.79% 6.65% 6.74%
30-DAY ANNUALIZED YIELD 5.70% - -
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
$9.64 over the past one month, $9.64 over the past six months, and
$9.62 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 4.78%.
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 and dividends would
have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 LIFE OF
YEAR FUND
TARGET TIMELINE 2003 8.00% 15.42%
LB AGGREGATE BOND 7.87% 17.73%
US TREASURY STRIPS (8/15/03 AND 11/15/03) 8.25% 15.20%
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 US 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
PERIODS ENDED JULY 31, 1998 PAST 1 LIFE OF
YEAR FUND
TARGET TIMELINE 2003 8.00% 5.96%
LB AGGREGATE BOND 7.87% 6.81%
US TREASURY STRIPS (8/15/03 AND 11/15/03) 8.25% 5.88%
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 year.
$10,000 OVER LIFE OF FUND
Target Timeline 2003 Avg US TreasStrip 2003
LB Aggregate Bond
00383 F0094
LB001
1996/02/08 10000.00 10000.00
10000.00
1996/02/29 9693.93 9708.73
9838.79
1996/03/31 9591.28 9547.53
9769.92
1996/04/30 9453.76 9389.28
9715.21
1996/05/31 9397.89 9332.02
9695.78
1996/06/30 9543.44 9500.15
9825.70
1996/07/31 9546.95 9506.25
9852.23
1996/08/31 9499.53 9458.85
9835.48
1996/09/30 9710.09 9672.82
10006.62
1996/10/31 9996.20 9990.76
10228.77
1996/11/30 10250.02 10224.62
10403.68
1996/12/31 10063.50 10045.81
10306.92
1997/01/31 10067.43 10049.62
10338.87
1997/02/28 10076.73 10059.55
10364.72
1997/03/31 9908.59 9860.12
10249.67
1997/04/30 10083.36 10032.03
10403.42
1997/05/31 10173.92 10155.86
10502.25
1997/06/30 10318.60 10276.60
10627.23
1997/07/31 10686.53 10641.95
10914.16
1997/08/31 10537.32 10487.54
10821.39
1997/09/30 10729.76 10674.78
10981.55
1997/10/31 10925.09 10878.10
11140.78
1997/11/30 10951.69 10894.91
11192.03
1997/12/31 11083.92 11030.18
11305.07
1998/01/31 11251.45 11256.41
11449.77
1998/02/28 11231.70 11186.85
11440.61
1998/03/31 11264.21 11213.62
11479.51
1998/04/30 11317.47 11270.93
11539.21
1998/05/31 11419.40 11376.38
11648.83
1998/06/30 11519.78 11486.42
11747.84
1998/07/31 11541.62 11520.01
11772.51
IMATRL PRASUN SHR__CHT 19980731 19980813 132724 R00000000000033
$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, 1998, the value of
the investment would be $11,542 - a 15.42% 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 $11,773 - a
17.73% increase. If $10,000 was put in US Treasury Strips (8/15/03 and
11/15/03), it would be valued at $11,520 - a 15.20% 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
YEARS ENDED JULY 31, FEBRUARY 8, 1996
(COMMENCEMENT
OF OPERATIONS) TO
JULY 31,
1998 1997 1996
DIVIDEND RETURNS 7.17% 7.29% 3.07%
CAPITAL RETURNS 0.83% 4.65% -7.60%
TOTAL RETURNS 8.00% 11.94% -4.53%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED JULY 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 5.86(CENTS) 33.90(CENTS) 67.00(CENTS)
ANNUALIZED DIVIDEND RATE 7.05% 7.00% 6.90%
30-DAY ANNUALIZED YIELD 5.77% - -
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
$9.78 over the past one month, $9.77 over the past six months, and
$9.71 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 5.08%.
FUND TALK: THE MANAGERS' OVERVIEW
MARKET RECAP
Investors worldwide flocked to the
perceived safe haven of U.S.
bonds amid a sharp sell-off in
Russian bonds, weakness in
overseas markets and concerns
about U.S. corporate profits. The
Lehman Brothers Aggregate Bond
Index - a broad gauge of the U.S.
taxable bond market - returned
7.87% during the 12-month period
that ended July 31, 1998. In the
fourth quarter of 1997 and the first
half of 1998, global market
volatility and low interest rates
were the main stories behind bond
market performance. As investors
moved assets from stocks and
riskier bonds to highly rated
corporate bonds and U.S.
Treasuries, bond yields - which
move in the opposite direction of
bond prices - fell to their lowest
levels in decades. The yield on
the benchmark 30-year bond fell
to 5.70% from 6.50% during the
period. The Lehman Brothers
Corporate Bond Index returned
7.35% for the past 12 months as
corporate bond investors
benefited from domestic
economic stability and high
demand for yield. The period
ended on a positive note for bonds
when the National Association of
Purchasing Management's July
index fell to 49.1, below the 49.8
reading expected. A reading above
50 indicates an expansion in the
manufacturing economy, while one
below 50 points to a contraction.
The report also indicated there
were no new signs of inflationary
pressure. Since inflation erodes
the value of fixed-income holdings
such as bonds, this was positive
news for bond investors.
NOTE TO SHAREHOLDERS: Effective July 13, 1998, Ford O'Neil became
Portfolio Manager of Fidelity Target Timeline Funds 1999, 2001 and
2003. The following is an interview with Christine Thompson, who
managed the funds during most of the period covered by this report,
and Ford O'Neil, who gives his outlook and discusses his investment
approach.
Q. HOW DID THE FUNDS PERFORM, CHRISTINE?
C.T. The funds performed in line with their investment objective. For
the 12-month period that ended July 31, 1998, Target Timeline 1999,
2001 and 2003 had total returns of 6.14%, 6.74% and 8.00%,
respectively. For the same period, U.S. Treasury Strips maturing at
approximately the same times as the funds (August and November 1999,
2001 and 2003) averaged 6.15%, 7.13% and 8.25%, respectively. The
Lehman Brothers Aggregate Bond Index had a 12-month return of 7.87%.
Q. HOW ARE THE FUNDS STRUCTURED TO PERFORM IN LINE WITH THEIR GOALS?
C.T. The portfolios are structured so that their interest-rate
sensitivity, and therefore their return patterns, will closely
resemble that of a zero-coupon bond. A "zero" as it is known, is a
security that doesn't make periodic interest payments like most bonds.
Rather, it is sold at a discount to what its value will be at
maturity. The average annual rate of return for a zero will
approximate its yield at the time of purchase when it is held to
maturity. Likewise, Target Timeline funds are managed so that
investors' average annual rate of return is also approximately the
yield on the portfolios at the time of purchase.
Q. HOW DOES THE MANAGEMENT OF THE FUNDS MAKE THEM DIFFER FROM THE
LEHMAN BROTHERS AGGREGATE BOND INDEX?
C.T. Over time, the funds' duration characteristics - which measure
their interest-rate sensitivity - may not resemble the Lehman Brothers
Aggregate Bond Index. The investment objective of the funds is to
control interest-rate sensitivity over a specific period of time,
which is each fund's maturity date. Each fund's duration is managed to
decline over time as the funds near maturity. In contrast, the Lehman
Brothers Aggregate Bond Index measures the performance of the overall
investment-grade bond market. Unlike the funds, the index is
rebalanced monthly to include securities with more than one year to
maturity.
Q. HOW DID CORPORATE BONDS - WHICH MADE UP THE BULK OF ALL THREE FUNDS
- - PERFORM OVER THE PAST YEAR?
C.T. In the early months of the period, corporate bonds performed
quite well relative to U.S. Treasuries. During that time, the yield
spread between the corporate sector and the Treasury sector narrowed,
meaning that the yield advantage of corporate securities over
Treasuries diminished. As those spreads narrowed, the funds benefited
not only from the additional yield that corporates still provided, but
also from their price appreciation relative to Treasuries. But
beginning last October, the spread relationship between corporate
bonds and Treasury securities was more volatile. During periods over
the past nine months when investors cheered news that a strong U.S.
economy would continue to boost corporate profitability, the spread
relationship further narrowed. Conversely, when economic turmoil in
Asia dominated investor sentiment, spreads widened and corporates
underperformed their Treasury counterparts. In those periods,
investors became worried that corporate profitability could be
curtailed. However, the yield advantage corporates offered throughout
the year helped them to outpace Treasuries.
Q. TURNING TO YOU FORD, WHAT'S YOUR OUTLOOK?
F.O. Compared to a year ago, the spread - or the difference in yield
- - between U.S. Treasuries and comparable corporate bonds has widened.
I expect that given the economic challenges many areas of the globe
now face, spreads will remain wide and valuation levels will also
remain noticeably differentiated. With that in mind, I believe
Fidelity's credit and qualitative research teams can uncover
undervalued securities which can help the funds' returns.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
FORD O'NEIL ON THE TECHNIQUE
USED TO MANAGE THE TARGET
TIMELINE FUNDS:
"Target Timeline funds employ an
investment technique known as
`horizon immunization.' That
strategy offsets two countervailing
risks - reinvestment risk and price
risk. Here's how it works: The funds'
predicted range of returns are based
on their yield-to-maturity - a
calculation that assumes that all
income received from the funds'
bond holdings will be reinvested at
the yield-to-maturity rate. In theory,
at least, that strategy works out
well. In practice, however, falling
interest rates usually mean that
the income stream from the funds'
holdings must be reinvested at
lower prevailing rates. On the
other hand, lower interest rates
cause the value of the underlying
securities to increase. The goal of
horizon immunization is to identify
a combination of securities so that
these reinvestment and price risks
offset one another over the life of
the investment."
(solid bullet) Fidelity anticipates closing
Target Timeline 1999 to new
accounts as of the close of business
on September 25, 1998. Current
shareholders will be able to make
additional purchases in their
existing accounts.
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: FTTAX (1999),
FTTBX (2001), FTARX (2003)
START DATE: February 8, 1996
SIZE: as of July 31, 1998,
more than $14 million, 1999
fund; more than $13 million,
2001 fund; more than
$19 million, 2003 fund
MANAGER: Ford O'Neil, since
July 1998; manager, Fidelity
Intermediate Bond Fund, since
July 1998; joined Fidelity
in 1990
(checkmark)
FIDELITY TARGET TIMELINE 1999
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF JULY 31, 1998
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
AAA 16.0 21.2
AA 6.0 3.6
A 55.2 47.1
BAA 21.7 22.8
BA 0.0 2.3
</TABLE>
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, 1998
6 MONTHS AGO
YEARS 1.3 1.8
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, 1998
6 MONTHS AGO
YEARS 1.2 1.6
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, 1998 * AS OF JANUARY 31, 1998 **
CORPORATE BONDS 74.0%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 13.7%
FOREIGN GOVERNMENT
OBLIGATIONS 4.8%
OTHER 6.4%
SHORT-TERM
INVESTMENTS 1.1%
CORPORATE BONDS 71.1%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 18.6%
FOREIGN GOVERNMENT
OBLIGATIONS 2.3%
OTHER 5.0%
SHORT-TERM
INVESTMENTS 3.0%
ROW: 1, COL: 1, VALUE: 1.6
ROW: 1, COL: 2, VALUE: 6.4
ROW: 1, COL: 3, VALUE: 4.8
ROW: 1, COL: 4, VALUE: 13.7
ROW: 1, COL: 5, VALUE: 73.5
ROW: 1, COL: 1, VALUE: 3.0
ROW: 1, COL: 2, VALUE: 5.0
ROW: 1, COL: 3, VALUE: 2.3
ROW: 1, COL: 4, VALUE: 18.6
ROW: 1, COL: 5, VALUE: 71.09999999999999
* FOREIGN INVESTMENTS 17.1%
** FOREIGN INVESTMENTS 11.5%
FIDELITY TARGET TIMELINE 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
INVESTMENTS JULY 31, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
NONCONVERTIBLE BONDS - 74.0%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (B) AMOUNT
BASIC INDUSTRIES - 2.6%
CHEMICALS & PLASTICS - 2.6%
CBI Industries, Inc. 6.25% 6/30/00 A3 $ 365,000 $ 366,887
DURABLES - 0.7%
CONSUMER ELECTRONICS - 0.7%
Black & Decker Corp. 6.625% 11/15/00 Baa2 100,000 101,250
ENERGY - 4.2%
OIL & GAS - 4.2%
Burlington Resources, Inc. 7.15% 5/1/99 A3 246,000 248,303
Occidental Petroleum Corp. 6.25% 11/8/00 Baa3 101,000 101,505
Texas Eastern Transmission Corp. 10.375% A2 220,000 239,620
11/15/00
589,428
FINANCE - 49.5%
BANKS - 33.7%
Banco LatinAmericano de Exporaciones SA 7% Baa2 350,000 353,213
9/24/99 (a)
Bank of Nova Scotia 9% 10/1/99 A1 500,000 516,950
Bank South Corp. 10.2% 6/1/99 A1 200,000 206,898
BanPonce Corp. 6.378% 4/8/99 A3 150,000 150,284
Chase Manhattan Corp. 10% 6/15/99 A1 253,000 261,825
Citicorp 9.75% 8/1/99 A1 225,000 233,044
First Hawaiian, Inc. 6.25% 8/15/00 Baa1 165,000 164,602
First Interstate Bancorp 8.625% 4/1/99 A2 362,000 368,259
First Security Corp. 7.875% 10/15/99 A3 450,000 460,125
Florida National Banks, Inc. 9.875% 5/15/99 A2 376,000 387,141
Kansallis-Osake-Pankki 6.375% 8/15/00 A2 250,000 251,990
KeyCorp. 7.43% 3/28/00 A1 150,000 153,263
Midlantic Corp. 9.25% 9/1/99 A2 318,000 328,583
Republic of New York Corp. 9.75% 12/1/00 A1 125,000 135,248
Shawmut National Corp. 8.625% 12/15/99 A3 497,000 513,669
St. George Bank Ltd. yankee 6.875% 4/1/99 (a) A3 200,000 201,224
4,686,318
CREDIT & OTHER FINANCE - 11.4%
Aristar, Inc. 7.5% 7/1/99 Baa1 549,000 556,686
Beneficial Corp. 10.1% 11/27/00 A2 75,000 81,502
Chrysler Financial Corp. 9.5% 12/15/99 A2 383,000 400,442
Greyhound Financial Corp. 6.65% 1/19/00 Baa1 165,000 166,739
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (B) AMOUNT
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Heller Financial, Inc. 7.875% 11/1/99 A3 $ 275,000 $ 280,959
Southwestern Bell Capital Corp. 6.75% 2/1/00 A2 100,000 101,428
1,587,756
INSURANCE - 4.4%
SunAmerica, Inc. 6.2% 10/31/99 Baa1 400,000 400,756
Travelers Property Casualty Corp. 6.75% 9/1/99 A2 205,000 206,687
607,443
TOTAL FINANCE 6,881,517
MEDIA & LEISURE - 3.8%
BROADCASTING - 2.2%
TCI Communications, Inc. 7.25% 6/15/99 Baa3 300,000 303,162
ENTERTAINMENT - 1.6%
Disney (Walt) Co. 6.25% 6/21/99 A2 225,000 225,646
TOTAL MEDIA & LEISURE 528,808
NONDURABLES - 2.0%
TOBACCO - 2.0%
Philip Morris Companies, Inc. 9.25% 2/15/00 A2 270,000 281,880
RETAIL & WHOLESALE - 2.7%
GENERAL MERCHANDISE STORES - 2.7%
Dayton Hudson Corp. 10% 12/1/00 A3 340,000 369,077
TECHNOLOGY - 2.2%
COMPUTERS & OFFICE EQUIPMENT - 2.2%
Comdisco, Inc. 7.75% 9/1/99 Baa1 294,000 299,380
TRANSPORTATION - 2.5%
AIR TRANSPORTATION - 1.6%
Delta Air Lines, Inc. 9.875% 5/15/00 Baa3 215,000 228,386
RAILROADS - 0.9%
Burlington Northern, Inc. 7.4% 5/15/99 Baa2 125,000 126,351
TOTAL TRANSPORTATION 354,737
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (B) AMOUNT
UTILITIES - 3.8%
GAS - 3.8%
Arkla, Inc. 8.875% 7/15/99 Baa1 $ 210,000 $ 215,744
Sonat, Inc. 9.5% 8/15/99 A3 300,000 310,548
526,292
TOTAL NONCONVERTIBLE BONDS 10,299,256
(Cost $10,460,856)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 13.7%
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.4%
Financing Corp. stripped principal 0% 8/8/99 Aaa 311,000 293,920
State of Israel (guaranteed by U.S. Government Aaa 175,000 179,398
through Agency for International Development)
7.75% 11/15/99
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 473,318
U.S. TREASURY OBLIGATIONS - 10.3%
U.S. Treasury Notes:
6% 8/15/99 Aaa 880,000 884,257
8.5% 2/15/00 Aaa 525,000 547,638
TOTAL U.S. TREASURY OBLIGATIONS 1,431,895
TOTAL U.S. GOVERNMENT AND GOVERNMENT 1,905,213
AGENCY OBLIGATIONS
(Cost $1,894,765)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 4.8%
Export Development Corp. yankee 8.125% Aa2 500,000 511,250
8/10/99
Manitoba Province 7.93% 2/15/00 A1 150,000 154,371
TOTAL FOREIGN GOVERNMENT AND 665,621
GOVERNMENT AGENCY OBLIGATIONS
(Cost $680,065)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SUPRANATIONAL OBLIGATIONS - 4.6%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (B) AMOUNT
African Development Bank 9.3% 7/1/00 Aa1 $ 300,000 $ 317,628
European Investment Bank 10.125% 10/1/00 Aaa 300,000 325,182
TOTAL SUPRANATIONAL OBLIGATIONS 642,810
(Cost $659,154)
</TABLE>
CERTIFICATES OF DEPOSIT - 1.8%
First National Bank of Maryland A1 250,000 249,787
6.05% 10/28/99 (Cost $249,613)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 1.1%
MATURITY
AMOUNT
Investments in repurchase agreements (U.S. Treasury $ 148,069 148,000
obligations), in a joint trading account at 5.62%, dated
7/31/98 due 8/3/98
TOTAL INVESTMENT IN SECURITIES - 100% $ 13,910,687
(Cost $14,092,453)
</TABLE>
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 $554,437 or 3.9% of net assets.
(b) 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 investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 77.2% AAA, AA, A 68.2%
Baa 21.7% BBB 30.7%
Distribution of investments by country of issue, as a percentage of
total value of investments in securities, is as follows:
% OF FUND'S INVESTMENTS
United States of America 82.9%
Canada 8.5
Multi-National 7.2
Australia 1.4
TOTAL 100.0%
Purchases and sales of securities, other than short-term securities,
aggregated $7,574,809 and $5,530,402, respectively, of which U.S.
government and government agency obligations aggregated $3,267,353 and
$2,457,742, respectively.
INCOME TAX INFORMATION
At July 31, 1998, the aggregate cost of investment securities for
income tax purposes was $14,092,952. Net unrealized depreciation
aggregated $182,265, of which $28,591 related to appreciated
investment securities and $210,856 related to depreciated investment
securities.
The fund intends to elect to defer to its fiscal year ending July 31,
1999 approximately $25,000 of losses recognized during the period
November 1, 1997 to July 31, 1998.
At July 31, 1998, the fund had a capital loss carryforward of
approximately $86,000 of which $44,000 and $42,000 will expire on July
31, 2005 and 2006, respectively.
FIDELITY TARGET TIMELINE 1999
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 13,910,687
AGREEMENTS OF $148,000) (COST $14,092,453) -
SEE ACCOMPANYING SCHEDULE
CASH 257
RECEIVABLE FOR FUND SHARES SOLD 2,956
INTEREST RECEIVABLE 295,041
RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 6,614
TOTAL ASSETS 14,215,555
LIABILITIES
PAYABLE FOR FUND SHARES REDEEMED $ 732
DISTRIBUTIONS PAYABLE 557
OTHER PAYABLES AND ACCRUED EXPENSES 7,487
TOTAL LIABILITIES 8,776
NET ASSETS $ 14,206,779
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 14,491,779
UNDISTRIBUTED NET INVESTMENT INCOME 8,112
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (111,346)
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (181,766)
NET ASSETS, FOR 1,501,009 SHARES OUTSTANDING $ 14,206,779
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $9.46
SHARE ($14,206,779 (DIVIDED BY) 1,501,009 SHARES)
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998
INVESTMENT INCOME $ 993,817
INTEREST
EXPENSES
MANAGEMENT FEE $ 57,103
TRANSFER AGENT FEES 25,298
ACCOUNTING FEES AND EXPENSES 60,024
NON-INTERESTED TRUSTEES' COMPENSATION 49
CUSTODIAN FEES AND EXPENSES 1,202
REGISTRATION FEES 16,173
AUDIT 35,409
LEGAL 1,607
REPORTS TO SHAREHOLDERS 1,847
MISCELLANEOUS 301
TOTAL EXPENSES BEFORE REDUCTIONS 199,013
EXPENSE REDUCTIONS (153,283) 45,730
NET INVESTMENT INCOME 948,087
REALIZED AND UNREALIZED GAIN (LOSS) (24,050)
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (139,051)
ON INVESTMENT SECURITIES
NET GAIN (LOSS) (163,101)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 784,986
FROM OPERATIONS
OTHER INFORMATION
EXPENSE REDUCTIONS $ 130
CUSTODIAN CREDITS
FMR REIMBURSEMENT 153,153
$ 153,283
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1998 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 948,087 $ 716,343
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) (24,050) (52,439)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (139,051) 104,719
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 784,986 768,623
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (947,475) (709,625)
SHARE TRANSACTIONS 4,112,241 6,043,900
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 931,263 701,715
COST OF SHARES REDEEMED (2,871,463) (1,930,601)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM 2,172,041 4,815,014
SHARE TRANSACTIONS
REDEMPTION FEES 388 1,019
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,009,940 4,875,031
NET ASSETS
BEGINNING OF PERIOD 12,196,839 7,321,808
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 14,206,779 $ 12,196,839
INCOME OF $8,112 AND $7,500, RESPECTIVELY)
OTHER INFORMATION
SHARES
SOLD 432,026 632,922
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 97,918 73,491
REDEEMED (301,519) (202,177)
NET INCREASE (DECREASE) 228,425 504,236
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31,
1998 1997 1996 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.580 $ 9.530 $ 10.000
INCOME FROM INVESTMENT OPERATIONS .687 D .724 D .310
NET INVESTMENT INCOME
NET REALIZED AND UNREALIZED GAIN (LOSS) (.118) .027 (.470)
TOTAL FROM INVESTMENT OPERATIONS .569 .751 (.160)
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.689) (.702) (.310)
REDEMPTION FEES ADDED TO PAID IN CAPITAL .000 .001 .000
NET ASSET VALUE, END OF PERIOD $ 9.460 $ 9.580 $ 9.530
TOTAL RETURN B, C 6.14% 8.16% (1.58)%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 14,207 $ 12,197 $ 7,322
RATIO OF EXPENSES TO AVERAGE NET ASSETS .35% E .35% E .35% A, E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER .35% .34% F .34% A, F
EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 7.24% 7.38% 6.88% A
PORTFOLIO TURNOVER RATE 43% 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.
G FOR THE PERIOD FEBRUARY 8, 1996 (COMMENCEMENT OF OPERATIONS) TO JULY
31, 1996.
FIDELITY TARGET TIMELINE 2001
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF JULY 31, 1998
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
AAA 25.1 26.9
AA 10.6 11.3
A 38.6 31.1
BAA 24.1 29.3
</TABLE>
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, 1998
6 MONTHS AGO
YEARS 3.7 4.4
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, 1998
6 MONTHS AGO
YEARS 3.1 3.6
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, 1998 * AS OF JANUARY 31, 1998 **
CORPORATE BONDS 59.0%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 22.7%
FOREIGN GOVERNMENT
OBLIGATIONS 13.6%
OTHER 3.1%
SHORT-TERM
INVESTMENTS 1.6%
CORPORATE BONDS 56.8%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 26.9%
FOREIGN GOVERNMENT
OBLIGATIONS 11.5%
OTHER 3.4%
SHORT-TERM
INVESTMENTS 1.4%
ROW: 1, COL: 1, VALUE: 1.6
ROW: 1, COL: 2, VALUE: 3.1
ROW: 1, COL: 3, VALUE: 13.6
ROW: 1, COL: 4, VALUE: 22.7
ROW: 1, COL: 5, VALUE: 59.0
ROW: 1, COL: 1, VALUE: 1.4
ROW: 1, COL: 2, VALUE: 3.4
ROW: 1, COL: 3, VALUE: 11.5
ROW: 1, COL: 4, VALUE: 26.9
ROW: 1, COL: 5, VALUE: 56.8
* FOREIGN INVESTMENTS 24.7%
** FOREIGN INVESTMENTS 19.2%
FIDELITY TARGET TIMELINE 2001
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
INVESTMENTS JULY 31, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
NONCONVERTIBLE BONDS - 59.0%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT
BASIC INDUSTRIES - 2.4%
CHEMICALS & PLASTICS - 2.4%
Praxair, Inc. 6.75% 3/1/03 A3 $ 300,000 $ 305,031
ENERGY - 1.6%
OIL & GAS - 1.6%
Petro-Canada, Inc. yankee 8.6% 10/15/01 A3 190,000 202,973
FINANCE - 36.3%
BANKS - 24.8%
Bank of New York, Inc. 7.875% 11/15/02 A2 136,000 145,079
BankAmerica Corp. 7.5% 10/15/02 A1 25,000 26,258
BanPonce Financial Corp. 7.3% 6/5/02 A3 400,000 413,788
Barclays Bank PLC yankee 5.95% 7/15/01 A1 100,000 99,861
Barnett Banks, Inc. 9.83% 5/30/03 A2 160,000 184,846
Capital One Bank 6.28% 2/20/01 Baa3 150,000 150,299
Central Fidelity Banks, Inc. 8.15% 11/15/02 A1 200,000 215,182
Huntington Bancshares, Inc. 7.875% 11/15/02 Baa1 100,000 105,855
Integra Financial Corp. 8.5% 5/15/02 A2 350,000 375,326
Kansallis-Osake-Pankki 10% 5/1/02 A3 355,000 399,187
Skandinaviska Enskilda Banken yankee 8.45% A3 300,000 321,729
5/15/02
Society National Bank 7.85% 11/1/02 A1 300,000 319,095
Summit Bancorp 8.625% 12/10/02 BBB+ 250,000 272,093
Wells Fargo & Co. 6.875% 4/15/03 A2 160,000 164,437
3,193,035
CREDIT & OTHER FINANCE - 7.1%
Associates Corp. of North America 5.875% Aa3 250,000 248,470
7/15/02
Countrywide Funding Corp. 8.25% 7/15/02 Baa1 250,000 266,613
Finova Capital Corp. 7.125% 5/1/02 Baa1 174,000 179,060
Greyhound Financial Corp. 7.82% 1/27/03 Baa1 100,000 106,841
Southwestern Bell Capital Corp. 7.36% 5/1/02 A2 100,000 104,922
905,906
INSURANCE - 1.6%
Sun America, Inc. 6.58% 1/15/02 Baa1 200,000 203,546
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT
FINANCE - CONTINUED
SAVINGS & LOANS - 2.8%
Great Western Financial Corp. 8.6% 2/1/02 A3 $ 100,000 $ 107,247
Long Island Savings Bank FSB 7% 6/13/02 Baa3 250,000 257,063
364,310
TOTAL FINANCE 4,666,797
RETAIL & WHOLESALE - 8.7%
GENERAL MERCHANDISE STORES - 8.7%
Dayton Hudson Corp.:
6.4% 2/15/03 A3 245,000 247,867
9.75% 7/1/02 A3 75,000 84,178
Federated Department Stores, Inc. 8.125% Baa2 400,000 424,460
10/15/02
Penney (J.C.), Inc. 7.25% 4/1/02 A2 350,000 362,313
1,118,818
TRANSPORTATION - 2.6%
AIR TRANSPORTATION - 2.6%
Delta Air Lines, Inc. 8.5% 3/15/02 Baa3 311,000 332,114
UTILITIES - 7.4%
ELECTRIC UTILITY - 1.6%
Philadelphia Electric Co. 7.125% 9/1/02 Baa1 205,000 211,212
GAS - 5.0%
Columbia Gas System, Inc. 6.61% 11/28/02 A3 150,000 151,616
Enron Corp. 9.875% 6/15/03 Baa2 210,000 240,066
Southwest Gas Corp. 9.75% 6/15/02 Baa2 225,000 251,514
643,196
TELEPHONE SERVICES - 0.8%
GTE Corp. 9.1% 6/1/03 Baa1 95,000 106,008
TOTAL UTILITIES 960,416
TOTAL NONCONVERTIBLE BONDS 7,586,149
(Cost $7,611,820)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 22.7%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (A) AMOUNT
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.0%
Financing Corp. stripped principal 0% 5/2/01 Aaa $ 300,000 $ 257,421
U.S. TREASURY OBLIGATIONS - 20.7%
U.S. Treasury Notes 7.875% 8/15/01 Aaa 2,500,000 2,660,145
TOTAL U.S. GOVERNMENT AND GOVERNMENT 2,917,566
AGENCY OBLIGATIONS
(Cost $2,901,077)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 13.6%
Canadian Government 6.125% 7/15/02 Aa2 400,000 404,760
Irish Republic:
7.64% 1/2/02 Aaa 210,000 220,809
yankee 8.625% 4/15/01 Aaa 85,000 90,593
Manitoba Province yankee 8% 4/15/02 A1 400,000 425,936
Nova Scotia Province yankee 9.375% 7/15/02 A3 275,000 306,457
Ontario Province yankee 7.375% 1/27/03 Aa3 150,000 157,923
Swedish Kingdom yankee 0% 4/1/01 Aa2 174,000 149,412
TOTAL FOREIGN GOVERNMENT AND 1,755,890
GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,749,043)
</TABLE>
SUPRANATIONAL OBLIGATIONS - 3.1%
African Development Bank yankee 7.7% Aa1 375,000 396,773
7/15/02 (Cost $390,137)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 1.6%
MATURITY
AMOUNT
Investments in repurchase agreements (U.S. Treasury $ 212,100 212,001
obligations), in a joint trading account at 5.62%, dated
7/31/98 due 8/3/98
TOTAL INVESTMENT IN SECURITIES - 100% $ 12,868,379
(Cost $12,864,078)
</TABLE>
LEGEND
(a) 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 investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 74.2% AAA, AA, A 68.3%
Baa 22.0% BBB 30.0%
Distribution of investments by country of issue, as a percentage of
total value of investments in securities, is as follows:
% OF FUND'S INVESTMENTS
United States of America 75.3%
Canada 11.6
Sweden 3.7
Finland 3.1
Multi-National 3.1
Ireland 2.4
United Kingdom 0.8
TOTAL 100.0%
Purchases and sales of securities, other than short-term securities,
aggregated $7,859,567 and $5,354,002, respectively, of which U.S.
government and government agency obligations aggregated $5,324,066 and
$4,878,715, respectively.
INCOME TAX INFORMATION
At July 31, 1998, the aggregate cost of investment securities for
income tax purposes was $12,864,078. Net unrealized appreciation
aggregated $4,301, of which $94,466 related to appreciated investment
securities and $90,165 related to depreciated investment securities.
At July 31, 1998, the fund had a capital loss carryforward of
approximately $26,000 all of which will expire on July 31, 2005.
FIDELITY TARGET TIMELINE 2001
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 12,868,379
AGREEMENTS OF $212,001) (COST $12,864,078) -
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR FUND SHARES SOLD 4,070
INTEREST RECEIVABLE 252,125
RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 2,548
TOTAL ASSETS 13,127,122
LIABILITIES
PAYABLE FOR FUND SHARES REDEEMED $ 2,000
DISTRIBUTIONS PAYABLE 1,074
OTHER PAYABLES AND ACCRUED EXPENSES 11,638
TOTAL LIABILITIES 14,712
NET ASSETS $ 13,112,410
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 13,129,421
UNDISTRIBUTED NET INVESTMENT INCOME 4,621
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (25,933)
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 4,301
NET ASSETS, FOR 1,362,786 SHARES OUTSTANDING $ 13,112,410
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $9.62
SHARE ($13,112,410 (DIVIDED BY) 1,362,786 SHARES)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998
INVESTMENT INCOME $ 830,810
INTEREST
EXPENSES
MANAGEMENT FEE $ 51,036
TRANSFER AGENT FEES 22,197
ACCOUNTING FEES AND EXPENSES 60,021
NON-INTERESTED TRUSTEES' COMPENSATION 43
CUSTODIAN FEES AND EXPENSES 1,260
REGISTRATION FEES 16,546
AUDIT 29,711
LEGAL 1,368
REPORTS TO SHAREHOLDERS 1,583
MISCELLANEOUS 293
TOTAL EXPENSES BEFORE REDUCTIONS 184,058
EXPENSE REDUCTIONS (143,099) 40,959
NET INVESTMENT INCOME 789,851
REALIZED AND UNREALIZED GAIN (LOSS) 35,186
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON (53,731)
INVESTMENT SECURITIES
NET GAIN (LOSS) (18,545)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 771,306
OPERATIONS
OTHER INFORMATION
EXPENSE REDUCTIONS $ 24
CUSTODIAN CREDITS
FMR REIMBURSEMENT 143,075
$ 143,099
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1998 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 789,851 $ 602,268
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 35,186 (11,778)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (53,731) 237,390
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 771,306 827,880
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (789,859) (601,248)
SHARE TRANSACTIONS 3,790,981 4,550,600
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 777,361 593,980
COST OF SHARES REDEEMED (1,815,356) (1,174,224)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,752,986 3,970,356
FROM SHARE TRANSACTIONS
REDEMPTION FEES 273 341
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,734,706 4,197,329
NET ASSETS
BEGINNING OF PERIOD 10,377,704 6,180,375
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 13,112,410 $ 10,377,704
INCOME OF $4,621 AND $3,304, RESPECTIVELY)
OTHER INFORMATION
SHARES
SOLD 393,791 480,141
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 80,843 62,632
REDEEMED (188,774) (123,511)
NET INCREASE (DECREASE) 285,860 419,262
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31,
1998 1997 1996 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.640 $ 9.400 $ 10.000
INCOME FROM INVESTMENT OPERATIONS .648 D .690 D .310
NET INVESTMENT INCOME
NET REALIZED AND UNREALIZED GAIN (LOSS) (.019) .240 (.600)
TOTAL FROM INVESTMENT OPERATIONS .629 .930 (.290)
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.649) (.690) (.310)
REDEMPTION FEES ADDED TO PAID IN CAPITAL .000 .000 .000
NET ASSET VALUE, END OF PERIOD $ 9.620 $ 9.640 $ 9.400
TOTAL RETURN B, C 6.74% 10.26% (2.88)%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 13,112 $ 10,378 $ 6,180
RATIO OF EXPENSES TO AVERAGE NET ASSETS .35% E .35% E .35% A, E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER .35% .34% F .34% A, F
EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 6.75% 7.31% 6.93% A
PORTFOLIO TURNOVER RATE 47% 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.
G FOR THE PERIOD FEBRUARY 8, 1996 (COMMENCEMENT OF OPERATIONS) TO JULY
31, 1996.
TARGET TIMELINE 2003
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF JULY 31, 1998
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
AAA 41.1 48.8
AA 5.8 6.3
A 23.5 15.5
BAA 28.3 25.0
BA 0.0 0.7
</TABLE>
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, 1998
6 MONTHS AGO
YEARS 6.5 7.2
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, 1998
6 MONTHS AGO
YEARS 5.0 5.5
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, 1998 * AS OF JANUARY 31, 1998 **
CORPORATE BONDS 54.3%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 40.1%
FOREIGN GOVERNMENT
OBLIGATIONS 4.3%
SHORT-TERM
INVESTMENTS 1.3%
CORPORATE BONDS 43.9%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 47.7%
FOREIGN GOVERNMENT
OBLIGATIONS 4.7%
SHORT-TERM
INVESTMENTS 3.7%
ROW: 1, COL: 1, VALUE: 54.3
ROW: 1, COL: 2, VALUE: 40.1
ROW: 1, COL: 3, VALUE: 4.3
ROW: 1, COL: 4, VALUE: 1.1
ROW: 1, COL: 5, VALUE: 0.0
ROW: 1, COL: 1, VALUE: 43.9
ROW: 1, COL: 2, VALUE: 47.7
ROW: 1, COL: 3, VALUE: 4.7
ROW: 1, COL: 4, VALUE: 3.7
ROW: 1, COL: 5, VALUE: 0.0
* FOREIGN INVESTMENTS 14.3%
** FOREIGN INVESTMENTS 14.2%
FIDELITY TARGET TIMELINE 2003
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
INVESTMENTS JULY 31, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
NONCONVERTIBLE BONDS - 54.3%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (B) AMOUNT
AEROSPACE & DEFENSE - 2.6%
DEFENSE ELECTRONICS - 2.6%
Raytheon Co. 6.5% 7/15/05 Baa1 $ 500,000 $ 505,790
BASIC INDUSTRIES - 1.0%
CHEMICALS & PLASTICS - 1.0%
Praxair, Inc. 6.15% 4/15/03 A3 200,000 198,724
DURABLES - 2.1%
TEXTILES & APPAREL - 2.1%
Levi Strauss & Co. 7% 11/1/06 (a) Baa2 400,000 401,000
FINANCE - 31.0%
BANKS - 19.4%
Bayerische Landesbank Girozentrale yankee Aaa 200,000 203,134
6.375% 10/15/05
BankBoston, NA 8% 9/15/04 A2 325,000 351,276
First Security Corp. 7% 7/15/05 Baa1 375,000 389,550
First Tennessee National Corp. 6.75% 11/15/05 Baa1 200,000 205,744
Merita Bank Ltd. yankee 6.5% 1/15/06 A3 150,000 149,550
Midland Bank PLC yankee 7.625% 6/15/06 Aa3 300,000 320,472
Signet Bank 7.8% 9/15/06 A1 250,000 273,165
Society National Bank 7.25% 6/1/05 A1 500,000 528,200
Sovran Financial Corp. 9.25% 6/15/06 A1 125,000 147,990
St. George Bank Ltd. yankee 7.15% Baa1 500,000 517,195
10/15/05 (a)
Swiss Bank Corp. 6.75% 7/15/05 Aa1 500,000 513,020
Union Planters Corp. 6.75% 11/1/05 Baa2 150,000 152,112
3,751,408
CREDIT & OTHER FINANCE - 6.6%
Bank of Montreal 6.1% 9/15/05 A1 125,000 123,173
First Chicago NBD Corp. 7.25% 8/15/04 A2 395,000 414,327
Fleet Financial Group, Inc. 7.125% 4/15/06 A3 375,000 392,644
PNC Funding Corp. 7.75% 6/1/04 A3 220,000 235,332
Southwestern Bell Capital Corp. 7.13% 6/1/05 A2 100,000 105,546
1,271,022
INSURANCE - 1.1%
URC Holdings Corp. 7.875% 6/30/06 (a) Baa2 200,000 212,950
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (B) AMOUNT
FINANCE - CONTINUED
SAVINGS & LOANS - 3.9%
Ahmanson (H.F.) & Co. 7.875% 9/1/04 Baa2 $ 700,000 $ 757,974
TOTAL FINANCE 5,993,354
MEDIA & LEISURE - 3.8%
BROADCASTING - 0.6%
Time Warner, Inc. 7.75% 6/15/05 Baa3 111,000 118,945
PUBLISHING - 2.0%
News America Holdings, Inc. 8.5% 2/15/05 Baa3 350,000 386,344
RESTAURANTS - 1.2%
Darden Restaurants, Inc. 6.375% 2/1/06 Baa1 85,000 81,227
Wendy's International, Inc. 6.35% 12/15/05 Baa1 150,000 148,250
229,477
TOTAL MEDIA & LEISURE 734,766
NONDURABLES - 2.6%
TOBACCO - 2.6%
Philip Morris Companies, Inc. 7% 7/15/05 A2 500,000 512,630
RETAIL & WHOLESALE - 2.1%
GENERAL MERCHANDISE STORES - 2.1%
Dayton Hudson Corp. 7.5% 7/15/06 A3 375,000 401,306
TRANSPORTATION - 4.8%
AIR TRANSPORTATION - 1.0%
Delta Air Lines, Inc. 8.5% 3/15/02 Baa3 174,000 185,813
RAILROADS - 3.8%
Canadian National Railway Co. 7% 3/15/04 Baa2 300,000 308,682
Norfolk Southern Corp. 7.875% 2/15/04 Baa1 400,000 429,472
738,154
TOTAL TRANSPORTATION 923,967
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (B) AMOUNT
UTILITIES - 4.3%
GAS - 2.3%
Columbia Gas System, Inc. 6.8% 11/28/05 A3 $ 150,000 $ 153,876
InterNorth, Inc. 9.625% 3/15/06 Baa2 245,000 291,947
445,823
TELEPHONE SERVICES - 2.0%
MCI Communications Corp. 7.5% 8/20/04 Baa2 360,000 379,289
TOTAL UTILITIES 825,112
TOTAL NONCONVERTIBLE BONDS 10,496,649
(Cost $10,275,611)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 40.1%
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.4%
Fannie Mae 7.375% 3/28/05 Aaa 400,000 433,436
Federal Farm Credit Bank:
7.26% 5/2/05 Aaa 500,000 539,610
7.35% 3/24/05 Aaa 150,000 162,468
Federal Home Loan Bank 9.5% 2/25/04 Aaa 150,000 176,204
Freddie Mac 8% 1/26/05 Aaa 100,000 111,687
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 1,423,405
U.S. TREASURY OBLIGATIONS - 32.7%
U.S. Treasury Bonds:
10.75% 8/15/05 Aaa 1,870,000 2,421,948
11.625% 11/15/04 Aaa 1,795,000 2,361,538
11.875% 11/15/03 Aaa 1,200,000 1,540,128
TOTAL U.S. TREASURY OBLIGATIONS 6,323,614
TOTAL U.S. GOVERNMENT AND GOVERNMENT 7,747,019
AGENCY OBLIGATIONS
(Cost $7,768,944)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 4.3%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (B) AMOUNT
Ontario Province 7% 8/4/05 Aa3 $ 275,000 $ 289,715
Saskatchewan Province yankee 8% 7/15/04 A3 500,000 544,700
TOTAL FOREIGN GOVERNMENT AND 834,415
GOVERNMENT AGENCY OBLIGATIONS
(Cost $832,686)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 1.3%
MATURITY
AMOUNT
Investments in repurchase agreements (U.S. Treasury $ 254,119 254,000
obligations), in a joint trading account at 5.62%, dated
7/31/98 due 8/3/98
TOTAL INVESTMENT IN SECURITIES - 100% $ 19,332,083
(Cost $19,131,241)
</TABLE>
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 $1,131,145 or 5.7% of net assets.
(b) 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 investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 70.4% AAA, AA, A 62.1%
Baa 28.3% BBB 32.4%
Distribution of investments by country of issue, as a percentage of
total value of investments in securities, is as follows:
% OF FUND'S INVESTMENTS
United States of America 85.7%
Canada 6.6
Australia 2.7
Switzerland 2.6
United Kingdom 1.6
Finland 0.8
TOTAL 100.0%
Purchases and sales of securities, other than short-term securities,
aggregated $16,906,010 and $10,775,803, respectively, of which U.S.
government and government agency obligations aggregated $10,422,129
and $8,363,821, respectively.
INCOME TAX INFORMATION
At July 31, 1998, the aggregate cost of investment securities for
income tax purposes was $19,144,075. Net unrealized appreciation
aggregated $188,008, of which $267,909 related to appreciated
investment securities and $79,901 related to depreciated investment
securities.
The fund hereby designates approximately $9,500 as a capital gain
dividend for the purpose of the dividend paid deduction.
FIDELITY TARGET TIMELINE 2003
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 19,332,083
AGREEMENTS OF $254,000) (COST $19,131,241) -
SEE ACCOMPANYING SCHEDULE
CASH 280
RECEIVABLE FOR FUND SHARES SOLD 61,160
INTEREST RECEIVABLE 393,515
RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 939
TOTAL ASSETS 19,787,977
LIABILITIES
DISTRIBUTIONS PAYABLE $ 1,313
OTHER PAYABLES AND ACCRUED EXPENSES 9,456
TOTAL LIABILITIES 10,769
NET ASSETS $ 19,777,208
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 19,454,945
UNDISTRIBUTED NET INVESTMENT INCOME 28,669
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) 92,752
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 200,842
NET ASSETS, FOR 2,028,488 SHARES OUTSTANDING $ 19,777,208
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $9.75
SHARE ($19,777,208 (DIVIDED BY) 2,028,488 SHARES)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998
INVESTMENT INCOME $ 1,195,802
INTEREST
EXPENSES
MANAGEMENT FEE $ 71,666
TRANSFER AGENT FEES 30,960
ACCOUNTING FEES AND EXPENSES 60,240
NON-INTERESTED TRUSTEES' COMPENSATION 60
CUSTODIAN FEES AND EXPENSES 1,476
REGISTRATION FEES 20,158
AUDIT 31,388
LEGAL 1,743
REPORTS TO SHAREHOLDERS 1,842
MISCELLANEOUS 131
TOTAL EXPENSES BEFORE REDUCTIONS 219,664
EXPENSE REDUCTIONS (162,308) 57,356
NET INVESTMENT INCOME 1,138,446
REALIZED AND UNREALIZED GAIN (LOSS) 170,856
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON (69,477)
INVESTMENT SECURITIES
NET GAIN (LOSS) 101,379
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,239,825
FROM OPERATIONS
OTHER INFORMATION
EXPENSE REDUCTIONS $ 205
CUSTODIAN CREDITS
FMR REIMBURSEMENT 162,103
$ 162,308
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1998 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 1,138,446 $ 714,934
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 170,856 12,474
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (69,477) 491,377
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,239,825 1,218,785
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (1,138,249) (714,423)
SHARE TRANSACTIONS 11,946,066 10,023,642
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 1,120,445 704,303
COST OF SHARES REDEEMED (6,605,867) (5,000,004)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 6,460,644 5,727,941
FROM SHARE TRANSACTIONS
REDEMPTION FEES 3,551 1,697
TOTAL INCREASE (DECREASE) IN NET ASSETS 6,565,771 6,234,000
NET ASSETS
BEGINNING OF PERIOD 13,211,437 6,977,437
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 19,777,208 $ 13,211,437
INCOME OF $28,669 AND $1,038, RESPECTIVELY)
OTHER INFORMATION
SHARES
SOLD 1,226,446 1,066,648
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 115,195 74,936
REDEEMED (678,796) (530,748)
NET INCREASE (DECREASE) 662,845 610,836
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31,
1998 1997 1996 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.670 $ 9.240 $ 10.000
INCOME FROM INVESTMENT OPERATIONS .670 D .634 D .307
NET INVESTMENT INCOME
NET REALIZED AND UNREALIZED GAIN (LOSS) .078 .428 (.762)
TOTAL FROM INVESTMENT OPERATIONS .748 1.062 (.455)
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.670) (.634) (.306)
REDEMPTION FEES ADDED TO PAID IN CAPITAL .002 .002 .001
NET ASSET VALUE, END OF PERIOD $ 9.750 $ 9.670 $ 9.240
TOTAL RETURN B, C 8.00% 11.94% (4.53)%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 19,777 $ 13,211 $ 6,977
RATIO OF EXPENSES TO AVERAGE NET ASSETS .35%E .35%E .35% A, E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER .35% .34%F .34% A, F
EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 6.92% 6.76% 6.93% A
PORTFOLIO TURNOVER RATE 67% 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.
G FOR THE PERIOD FEBRUARY 8, 1996 (COMMENCEMENT OF OPERATIONS) TO JULY
31, 1996.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1998
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, 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 require management to make certain
estimates and assumptions at the date of the financial statements. The
target dates for Target Timeline 1999, Target Timeline 2001 and Target
Timeline 2003 are September 30, 1999, 2001 and 2003, respectively. On
those dates, the respective funds will mature. Target Timeline 1999 is
expected to close to new accounts as of the close of business of the
New York Stock Exchange on September 25, 1998. Current shareholders of
Target Timeline 1999 will be able to continue to purchase shares in
accounts existing on that date. The funds' Board of Trustees
anticipates closing Target Timeline 2001 and Target Timeline 2003 to
new accounts approximately one year prior to the target date of each
fund and expect to liquidate each fund within one month after the
fund's target date. 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.
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."
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
among 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS -
CONTINUED
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 and excise tax regulations. The
fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
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.
SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in the funds less
than 90 days are subject to a short-term trading fee equal to .50% of
the proceeds of the redeemed shares. The fee, which is retained by the
funds, 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.
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 .19% of the average net assets of each
fund.
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.
In addition, certain funds have entered into arrangements with their
custodian and transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of each
applicable fund's expenses. For the period, the reductions under these
arrangements are shown under the caption "Other Information" on each
applicable fund's Statement of Operations.
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 28.02%
Fidelity Target Timeline 2001 32.21%
Fidelity Target Timeline 2003 20.71%
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, 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, 1998, and the results of their operations, 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, 1998 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 10, 1998
DISTRIBUTIONS
The Board of Trustees of Fidelity Target Timeline 2003 voted to pay on
September 8, 1998, to shareholders of record at the opening of
business on September 4, 1998, a distribution of $.05 per share
derived from capital gains realized from sales of portfolio
securities.
The following percentages of the dividends distributed during the
fiscal year were derived from interest on U.S. Government securities
which is generally exempt from state income tax:
Target Timeline 1999 8.16%
Target Timeline 2001 24.60%
Target Timeline 2003 45.48%
The funds will notify shareholders in January 1999 of the applicable
percentages for use in preparing 1998 income tax returns.
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 Xpress(registered trademark) provides 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.
(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.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_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 500
Merrimack, NH 03054-0500
(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 500
Merrimack, NH 03054-0500
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
48 West Putnam Avenue
Greenwich, CT
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
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
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
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
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
OREGON
16850 SW 72 Avenue
Tigard, 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
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
Eric D. Roiter, 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
Marvin L. Mann *
William O. McCoy *
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
* INDEPENDENT TRUSTEES
CUSTODIAN
Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income Fund
Ginnie Mae Fund
Government Securities Fund
High Income Fund
Intermediate Bond Fund
Intermediate Government
Income 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 Investment Grade Bond Fund
Spartan Short-Intermediate Government Fund
Spartan Short-Term Bond Fund
Strategic Income Fund
Target Timeline 1999, 2001 & 2003
SM
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(registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
