(2_FIDELITY_LOGOS)
FIDELITY(REGISTERED TRADEMARK)
TARGET TIMELINE SM
FUNDS - 2001, 2003
SEMIANNUAL REPORT
JANUARY 31, 2000
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the funds have done over
time.
FUND TALK 11 The manager's review of the
funds' performance, strategy
and outlook.
TARGET TIMELINE 2001 14 Investment Changes
15 Investments
23 Financial Statements
TARGET TIMELINE 2003 27 Investment Changes
28 Investments
34 Financial Statements
NOTES 38 Notes to the financial
statements.
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 1-800-544-6666 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
While no major Y2K glitches disrupted the financial markets to start
the new year, inflation worries re-emerged to hinder stock performance
throughout January. The S&P 500(Registered trademark) and Dow Jones
Industrial Average each fell approximately 5%, while the
technology-oriented NASDAQ Index dropped more than 3% for the month.
In bond markets, the potential for further rate hikes as a pre-emptive
move against inflation continued to be an obstacle to fixed-income
performance.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. 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 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 fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JANUARY 31, PAST 6 MONTHS PAST 1 YEAR LIFE OF FUND
2000
TARGET TIMELINE 2001 1.44% 1.71% 21.53%
LB Aggregate Bond 0.66% -1.85% 21.45%
U.S. Treasury Strips (8/15/01 1.48% 1.57% 21.14%
and 11/15/01)
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, 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
index of investment-grade fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities,
with maturities of one year or more. 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 reflect
reinvestment of dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JANUARY 31, PAST 1 YEAR LIFE OF FUND
2000
TARGET TIMELINE 2001 1.71% 5.02%
LB Aggregate Bond -1.85% 5.00%
U.S. Treasury Strips (8/15/01 1.57% 4.93%
and 11/15/01)
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
$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 11747.65 11297.19
1998/07/31 11429.77 11772.58 11353.77
1998/08/31 11566.81 11964.19 11610.55
1998/09/30 11833.07 12244.29 11845.80
1998/10/31 11814.33 12179.70 11903.04
1998/11/30 11817.68 12248.68 11848.44
1998/12/31 11883.11 12285.51 11882.81
1999/01/31 11948.70 12373.26 11926.63
1999/02/28 11836.21 12157.22 11790.46
1999/03/31 11939.49 12224.68 11886.14
1999/04/30 11991.61 12263.43 11926.58
1999/05/31 11933.88 12155.51 11873.95
1999/06/30 11961.91 12116.69 11909.00
1999/07/31 11979.78 12065.80 11937.28
1999/08/31 11984.30 12059.67 11964.90
1999/09/30 12068.12 12199.61 12048.47
1999/10/31 12104.15 12244.62 12070.01
1999/11/30 12125.58 12243.77 12098.98
1999/12/31 12152.53 12184.74 12117.15
2000/01/31 12152.60 12144.87 12113.75
IMATRL PRASUN SHR__CHT 20000131 20000211 093441 R00000000000051
</TABLE>
$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 January 31, 2000, the value
of the investment would be $12,153 - a 21.53% 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 $12,145 - a
21.45% increase. If $10,000 was put in U.S. Treasury Strips (8/15/01
and 11/15/01), it would be valued at $12,114 - a 21.14% 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JANUARY 31, YEARS ENDED JULY 31, FEBRUARY 8, 1996
(COMMENCEMENT OF OPERATIONS)
TO JULY 31,
2000 1999 1998 1997 1996
Dividend returns 3.13% 6.68% 6.95% 7.71% 3.12%
Capital returns -1.69% -1.87% -0.21% 2.55% -6.00%
Total returns 1.44% 4.81% 6.74% 10.26% -2.88%
</TABLE>
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 JANUARY 31, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.00(cents) 29.48(cents) 60.91(cents)
Annualized dividend rate 6.33% 6.24% 6.43%
30-day annualized yield 6.63% - -
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of $9.30
over the past one month, $9.37 over the past six months and $9.47 over
the past one year, you can compare the fund's income over these three
periods. The 30-day annualized YIELD is a standard formula for all
bond 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 6.30%.
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 fund expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JANUARY 31, PAST 6 MONTHS PAST 1 YEAR LIFE OF FUND
2000
TARGET TIMELINE 2003 0.41% -2.30% 19.09%
LB Aggregate Bond 0.66% -1.85% 21.45%
U.S. Treasury Strips (8/15/03 0.43% -2.73% 20.18%
and 11/15/03)
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, 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
index of investment-grade fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities,
with maturities of one year or more. 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 reflect
reinvestment of dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JANUARY 31, PAST 1 YEAR LIFE OF FUND
2000
TARGET TIMELINE 2003 -2.30% 4.49%
LB Aggregate Bond -1.85% 5.00%
U.S. Treasury Strips (8/15/03 -2.73% 4.73%
and 11/15/03)
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
$10,000 OVER LIFE OF FUND
Target Timeline 2003 LB Aggregate Bond Avg US TreasStrip 2003
00383 LB001 F0094
1996/02/08 10000.00 10000.00 10000.00
1996/02/29 9693.93 9838.79 9708.73
1996/03/31 9591.28 9769.92 9547.53
1996/04/30 9453.76 9715.21 9389.28
1996/05/31 9397.89 9695.78 9332.02
1996/06/30 9543.44 9825.70 9500.15
1996/07/31 9546.95 9852.23 9506.25
1996/08/31 9499.53 9835.48 9458.85
1996/09/30 9710.09 10006.62 9672.82
1996/10/31 9996.20 10228.77 9990.76
1996/11/30 10250.02 10403.68 10224.62
1996/12/31 10063.50 10306.92 10045.81
1997/01/31 10067.43 10338.87 10049.62
1997/02/28 10076.73 10364.72 10059.55
1997/03/31 9908.59 10249.67 9860.12
1997/04/30 10083.36 10403.42 10032.03
1997/05/31 10173.92 10502.25 10155.86
1997/06/30 10318.60 10627.23 10276.60
1997/07/31 10686.53 10914.16 10641.95
1997/08/31 10537.32 10821.39 10487.54
1997/09/30 10729.76 10981.55 10674.78
1997/10/31 10925.09 11140.78 10878.10
1997/11/30 10951.69 11192.03 10894.91
1997/12/31 11083.92 11305.07 11030.18
1998/01/31 11251.45 11449.77 11256.41
1998/02/28 11231.70 11440.61 11186.85
1998/03/31 11264.21 11479.51 11213.62
1998/04/30 11317.47 11539.21 11270.93
1998/05/31 11419.40 11648.83 11376.38
1998/06/30 11519.78 11747.65 11486.42
1998/07/31 11541.62 11772.58 11520.01
1998/08/31 11705.74 11964.19 11934.30
1998/09/30 12096.03 12244.29 12302.67
1998/10/31 12009.27 12179.70 12298.77
1998/11/30 12028.63 12248.68 12227.72
1998/12/31 12105.52 12285.51 12275.11
1999/01/31 12188.53 12373.26 12356.19
1999/02/28 11907.32 12157.22 12035.93
1999/03/31 12003.47 12224.68 12120.76
1999/04/30 12060.23 12263.43 12162.78
1999/05/31 11893.88 12155.51 11986.98
1999/06/30 11888.26 12116.69 11996.94
1999/07/31 11859.95 12065.80 11967.08
1999/08/31 11831.03 12059.67 11995.38
1999/09/30 11973.07 12199.61 12103.12
1999/10/31 11989.03 12244.62 12108.45
1999/11/30 12003.96 12243.77 12105.39
1999/12/31 11969.49 12184.74 12056.45
2000/01/31 11908.76 12144.87 12018.25
IMATRL PRASUN SHR__CHT 20000131 20000211 093610 R00000000000051
</TABLE>
$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 January 31, 2000, the value
of the investment would be $11,909 - a 19.09% 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 $12,145 - a
21.45% increase. If $10,000 was put in U.S. Treasury Strips (8/15/03
and 11/15/03), it would be valued at $12,018 - a 20.18% 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JANUARY 31, YEARS ENDED JULY 31, FEBRUARY 8, 1996
(COMMENCEMENT OF OPERATIONS)
TO JULY 31,
2000 1999 1998 1997 1996
Dividend returns 3.42% 6.99% 7.17% 7.29% 3.07%
Capital returns -3.01% -4.23% 0.83% 4.65% -7.60%
Total returns 0.41% 2.76% 8.00% 11.94% -4.53%
</TABLE>
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 JANUARY 31, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.38(cents) 31.92(cents) 65.47(cents)
Annualized dividend rate 7.00% 6.89% 6.99%
30-day annualized yield 7.22% - -
DIVIDENDS per share show the income paid by the fund for a set period.
If you annualize this number, based on an average share price of $9.05
over the past one month, $9.19 over the past six months and $9.36 over
the past one year, you can compare the fund's income over these three
periods. The 30-day annualized YIELD is a standard formula for all
bond 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 6.63%.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Persistent concerns about inflation,
a series of interest-rate hikes by the
Federal Reserve Board and a strong
U.S. economy were just three of the
challenges faced by the taxable
bond market in the six-month
period ending January 31, 2000.
All investment-grade spread sectors
outperformed comparable duration
Treasuries during this time frame.
The bellwether 30-year Treasury's
total return fell 3.51%, while the
Lehman Brothers Aggregate Bond
Index, a popular measure of taxable
bond performance, closed the period
up 0.66%. Troubles for 30-year
Treasuries were further compounded
in January when, for the first time
since 1994, the yield curve became
inverted, meaning the long bond
offered a lower yield than shorter
duration Treasuries. Of the spread
sectors, mortgages turned in the
strongest performance, thanks to a
relatively high housing turnover rate
and declining prepayment activity
in the second half of 1999. The
Lehman Brothers Mortgage-Backed
Securities Index posted a 1.13%
six-month return. Corporates also
enjoyed positive performance,
shaking off an excess supply scare
in the summer and riding investors'
strong demand to a 0.52% return
for the period, as measured by
the Lehman Brothers Corporate Bond
Index. Finally, agency securities
benefited from the additional
liquidity provided by issuing
larger-denominated securities in
response to waning Treasury issuance,
helping the Lehman Brothers U.S.
Agency Index to a 0.47% return.
(photograph of Ford O'Neil)
An interview with Ford O'Neil, Portfolio Manager of Fidelity Target
Timeline Funds 2001 and 2003
Q. HOW DID THE FUNDS PERFORM, FORD?
A. They performed in line with expectations. For the six-month period
that ended January 31, 2000, Target Timeline 2001 and 2003 posted
total returns of 1.44% and 0.41%, respectively. For the same period,
U.S. Treasury Strips maturing at approximately the same times as the
funds (August and November 2001 and 2003) averaged 1.48% and 0.43%,
respectively. The Lehman Brothers Aggregate Bond Index had a six-month
return of 0.66%. For the 12-month period that ended January 31, 2000,
Target Timeline 2001 and 2003 returned 1.71% and -2.30%, respectively.
The U.S. Treasury Strips had respective returns of 1.57% and -2.73%
during the same 12-month period, while the Lehman Brothers index
returned -1.85%. The important thing to keep in mind is that it's
difficult to measure these funds on a six- or 12-month time horizon;
instead, they should be measured at maturity.
Q. WHAT HELPED SHAPE PERFORMANCE OVER THE PAST SIX MONTHS?
A. Steadily rising interest rates kept most bonds grounded during the
six-month period. With the help of strong security selection, however,
the funds' significant stake in the investment-grade spread sectors -
namely, corporate bonds and agency securities - lifted us into
positive territory, as each outperformed Treasuries during this time
frame. Our fate was uncertain early on, though, as corporate yield
spreads widened considerably - that is, yields rose as prices fell -
relative to Treasuries due to perceived supply pressures related to
the Y2K changeover. These concerns proved unfounded in September,
spurring a significant reversal during which spreads tightened - a big
plus for the funds. We did see some widening again at the close of the
period, most notably in corporates, but it was primarily at the
long-end of the yield curve. We were able to escape unscathed, for the
most part, since the funds held shorter-duration corporate issues. The
overall spread tightening and yield advantage we garnered over the
course of the period proved essential in keeping fund performance on
par with that of its benchmark.
Q. WHAT SEGMENTS OF THE CORPORATE BOND MARKET HAD THE MOST INFLUENCE
ON PERFORMANCE?
A. The funds' investments in Yankee bonds - or dollar-denominated
foreign government and corporate debt - really helped, benefiting in
large part from our exposure to rebounding Asian economies,
particularly South Korea. Having a stake in strong energy names in
natural gas and electric utilities during the period also proved
beneficial. Within finance, our brokerage holdings provided additional
returns, powered by the bull market. Selected holdings in the
non-cable media sector further contributed to performance. In terms of
disappointments, aerospace and defense holdings suffered from
integration problems related to widespread restructuring activity.
Tobacco issues recoiled in response to further litigation against the
industry.
Q. WHAT STRATEGIES DID YOU PURSUE WITH RESPECT TO THE FUNDS' AGENCY
HOLDINGS?
A. In the midst of waning Treasury issuance, government agencies have
begun making a strong case for assuming "benchmark" status and
becoming the securities of choice. Historically, agencies issued
several small, medium-term notes with many different coupons, and had
to do so at wider spreads. Now, in order to evolve as a global issuer,
agencies are offering fewer, much larger deals. What this does is
create more liquidity for trading in the secondary market, which
narrows spreads and enhances our ability to capture opportunities that
result over time. So, fittingly, we've consolidated the majority of
our smaller, medium-term note positions into a few of these larger
issues.
Q. WHAT'S YOUR OUTLOOK?
A. My outlook remains somewhat cautious, as rates in the short-end of
the yield curve have risen faster than Federal Reserve Board rate
hikes, an indication that there are more increases anticipated in the
near future. It's important to note that even if the overall Fed
policy outlook is negative for rates in the short term, investors
should be mindful of the fact that their expectation should be that
they hold the funds until maturity. The portfolios simply aren't
designed for short-term trading, so investors shouldn't buy them when
rates are high, or sell them when they're low. Just give them time and
let them do the work for you. Regardless of the direction of rates,
I'm still positive on spread products, particularly corporate bonds,
which I feel are still historically cheap and offer potential for
further positive relative price performance.
FORD O'NEIL REVIEWS THE
FUNDS' INVESTMENT OBJECTIVES
AND HOW THEY ARE ACHIEVED:
"Our goal is to generate a predictable
return, slightly greater than the index
net of fees, for buy-and-hold investors
over each fund's lifetime. The funds
attempt to deliver a slight yield
advantage over U.S. Treasury Strips, or
zero-coupon bonds, over the life of
the fund, assuming that they are held
to maturity. They're managed
according to a technique known as
horizon immunization, which requires
that the duration, or overall
interest-rate sensitivity, of the funds
be maintained at a level consistent
with the remaining investment time
horizon. This is achieved by investing
in securities within a very tight
duration range that, in aggregate,
equals the duration of the benchmark.
In order to maximize expected returns
within the constraints imposed, the
funds typically emphasize corporate
bonds. As the time to maturity
shortens, the funds' stake in
corporates generally increases;
shorter duration corporate bonds
generally exhibit less volatility than
longer duration securities, making
them an attractive investment
alternative to similar duration
Treasury and agency securities.
Furthermore, if we can find corporates
with the potential for spread
tightening, we could generate
capital gains from them, thereby
delivering additional value to the
funds."
FUND FACTS
GOAL: definable returns 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: 381 (2001),
383 (2003)
TRADING SYMBOL: FTTBX
(2001), FTARX (2003)
START DATE: February 8, 1996
SIZE: as of January 31,
2000, more than $157
million, 2001 fund; more
than $27 million, 2003 fund
MANAGER: Ford O'Neil, since
1998; manager, various
Fidelity bond funds; joined
Fidelity in 1990
(checkmark)
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
FIDELITY TARGET TIMELINE 2001
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
JANUARY 31, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 42.1 16.9
Aa 10.1 18.5
A 19.3 30.9
Baa 20.9 31.9
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE
USED S&P (registered trademark) RATINGS.
AVERAGE YEARS TO MATURITY AS
OF JANUARY 31, 2000
6 MONTHS AGO
Years 1.7 2.5
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF JANUARY 31, 2000
6 MONTHS AGO
Years 1.5 2.2
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF JANUARY 31, 2000* AS OF JULY 31, 1999 **
Corporate Bonds 45.5% Corporate Bonds 68.8%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 39.8% Obligations 14.9%
Foreign Government Foreign Government
Obligations 4.8% Obligations 10.8%
Other Investments 0.5% Other Investments 2.2%
Short-Term Investments and Short-Term Investments and
Net Other Assets 9.4% Net Other Assets 3.3%
* FOREIGN INVESTMENTS 8.5% ** FOREIGN INVESTMENTS 20.8%
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
Row: 1, Col: 1, Value: 45.5
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 39.8
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 4.8
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.5
Row: 1, Col: 8, Value: 9.4
Row: 1, Col: 1, Value: 68.8
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 14.9
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 10.8
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 2.2
Row: 1, Col: 8, Value: 3.3
FIDELITY TARGET TIMELINE 2001
INVESTMENTS JANUARY 31, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 45.5%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
Lockheed Martin Corp. 6.85% Baa3 $ 700,000 $ 692,468
5/15/01
BASIC INDUSTRIES - 0.9%
CHEMICALS & PLASTICS - 0.8%
Monsanto Co. 5.375% 12/1/01 A2 1,275,000 1,236,559
(b)
PAPER & FOREST PRODUCTS - 0.1%
Fort James Corp. 6.5% 9/15/02 Baa2 250,000 243,325
TOTAL BASIC INDUSTRIES 1,479,884
CONSTRUCTION & REAL ESTATE -
0.7%
REAL ESTATE INVESTMENT TRUSTS
- - 0.7%
Avalon Properties, Inc. Baa1 900,000 883,503
7.375% 9/15/02
Equity Office Properties Baa1 150,000 145,799
Trust 6.375% 1/15/02
1,029,302
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES -
1.5%
TRW, Inc.:
6.45% 6/15/01 Baa1 1,500,000 1,469,220
6.5% 6/1/02 Baa1 950,000 926,184
2,395,404
ENERGY - 1.8%
OIL & GAS - 1.8%
Oryx Energy Co. 10% 4/1/01 Baa1 1,500,000 1,538,835
Petro-Canada yankee 8.6% A3 190,000 193,065
10/15/01
The Coastal Corp. 8.125% Baa2 1,110,000 1,119,590
9/15/02
2,851,490
FINANCE - 25.6%
BANKS - 10.2%
Banc One Corp. 7.25% 8/1/02 A1 500,000 497,735
Bank of New York Co., Inc.:
7.625% 7/15/02 A2 500,000 502,360
7.875% 11/15/02 A2 136,000 137,420
Bank One Corp. 6.4% 8/1/02 Aa3 300,000 292,887
BankAmerica Corp. 7.5% Aa3 25,000 25,045
10/15/02
BanPonce Financial Corp. 7.3% A3 400,000 395,256
6/5/02
Barclays Bank PLC yankee A1 1,000,000 978,360
5.95% 7/15/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Boatmens Bancshares, Inc. Aa3 $ 1,000,000 $ 1,030,360
9.25% 11/1/01
Capital One Bank:
6.28% 2/20/01 Baa2 150,000 148,452
6.76% 7/23/02 Baa2 500,000 484,655
Central Fidelity Banks, Inc. A1 1,200,000 1,219,440
8.15% 11/15/02
Chase Manhattan Corp. 9.75% A1 250,000 259,785
11/1/01
Citicorp 5.625% 2/15/01 Aa3 300,000 295,572
Firstar Corp. 6.35% 7/13/01 A2 1,200,000 1,184,292
Huntington Bancshares, Inc. A3 100,000 100,198
7.875% 11/15/02
Integra Financial Corp. 8.5% A2 350,000 355,975
5/15/02
Kansallis-Osake-Pankki (NY A2 705,000 737,486
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa2 70,000 66,451
7.125% 9/17/01 Baa2 1,090,000 1,073,803
MBNA Corp. 6.963% 9/12/02 Baa2 600,000 587,658
Mellon Financial Co. 9.25% A3 557,000 572,512
8/15/01
National Westminster Bank PLC Aa3 1,250,000 1,284,763
9.45% 5/1/01
NCNB Corp. 9.125% 10/15/01 Aa3 500,000 515,780
Providian National Bank 6.25% Baa3 1,500,000 1,471,335
5/7/01
Summit Bancorp 8.625% 12/10/02 BBB+ 250,000 255,283
US Bank NA:
5.25% 6/4/03 Aa3 250,000 231,090
6.35% 9/28/01 Aa3 1,000,000 984,700
Wells Fargo & Co. 6.875% A1 160,000 157,458
4/15/03
Westpac Banking Corp. 7.875% A1 200,000 201,922
10/15/02
16,048,033
CREDIT & OTHER FINANCE - 10.5%
Aristar, Inc. 7.75% 6/15/01 A3 800,000 803,512
Associates Corp. of North
America:
5.875% 7/15/02 Aa3 250,000 241,708
6.45% 10/15/01 Aa3 725,000 715,561
AT&T Capital Corp. 6.25% A1 1,200,000 1,185,528
5/15/01
Chrysler Financial Corp.:
5.25% 10/22/01 A1 450,000 435,231
5.69% 11/15/01 A1 1,000,000 973,340
6.02% 4/9/01 A1 520,000 513,500
Countrywide Funding Corp. Baa1 1,250,000 1,266,213
8.25% 7/15/02
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Finova Capital Corp. 7.125% Baa1 $ 174,000 $ 171,862
5/1/02
Ford Capital BV yankee 9.5% A1 1,500,000 1,542,810
7/1/01
Ford Motor Credit Co. 5.125% A1 200,000 193,380
10/15/01
General Electric Capital Aaa 2,000,000 1,972,600
Corp. 6.33% 9/17/01
General Motors Acceptance A2 1,000,000 984,770
Corp. 5.95% 4/20/01
Greyhound Financial Corp. Baa1 100,000 100,687
7.82% 1/27/03
Household Finance Corp. 6.93% A2 1,500,000 1,496,715
4/11/01
PNC Funding Corp. 6.95% 9/1/02 A2 2,000,000 1,979,760
Sanwa Business Credit Card, A1 1,000,000 1,002,230
Inc. 7.25% 9/15/01 (b)
Southwestern Bell Capital Aa3 100,000 100,327
Corp. 7.36% 5/1/02
TXU Eastern Funding 6.15% Baa1 200,000 193,310
5/15/02
U.S. West Capital Funding, Baa1 750,000 744,900
Inc. 6.875% 8/15/01 (b)
16,617,944
INSURANCE - 0.8%
Sun America, Inc. 6.58% Baa1 200,000 197,282
1/15/02
Travelers Property Casualty A1 1,000,000 997,490
Corp. 6.75% 4/15/01
1,194,772
SAVINGS & LOANS - 0.4%
Great Western Financial Corp. A3 100,000 101,748
8.6% 2/1/02
Household Bank FSB 6.87% A2 250,000 248,088
5/15/01
Long Island Savings Bank FSB Baa3 250,000 246,533
7% 6/13/02
596,369
SECURITIES INDUSTRY - 3.7%
DLJ, Inc. 6% 12/1/01 A3 1,000,000 973,850
Goldman Sachs Group L.P. 6.2% A1 1,000,000 988,730
2/15/01
Merrill Lynch & Co., Inc. Aa3 1,000,000 970,132
5.71% 1/15/02
Morgan Stanley Dean Witter & Aa3 1,000,000 991,590
Co. 7.125% 1/15/03
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
SECURITIES INDUSTRY - CONTINUED
Morgan Stanley Dean Witter Aa3 $ 1,000,000 $ 991,120
Discover & Co. 6.5% 3/30/01
Salomon Smith Barney Aa3 1,000,000 990,300
Holdings, Inc. 6.65% 7/15/01
5,905,722
TOTAL FINANCE 40,362,840
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.9%
Tyco International Group SA Baa1 1,500,000 1,470,495
yankee 6.125% 6/15/01
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.2%
Continental Cablevision, Inc. Baa2 250,000 253,153
8.5% 9/15/01
NONDURABLES - 1.7%
BEVERAGES - 1.1%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 1,050,000 1,030,670
6.25% 12/15/01 Baa3 650,000 634,725
1,665,395
TOBACCO - 0.6%
Philip Morris Companies, Inc. A2 1,000,000 986,990
7.5% 1/15/02
TOTAL NONDURABLES 2,652,385
RETAIL & WHOLESALE - 2.4%
GENERAL MERCHANDISE STORES -
1.4%
Dayton Hudson Corp.:
6.4% 2/15/03 A3 245,000 237,618
9.75% 7/1/02 A3 390,000 408,950
Federated Department Stores, Baa1 1,600,000 1,620,192
Inc. 8.125% 10/15/02
2,266,760
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 1.0%
Safeway, Inc. 7% 9/15/02 Baa2 $ 1,500,000 $ 1,479,165
TOTAL RETAIL & WHOLESALE 3,745,925
TECHNOLOGY - 0.2%
COMPUTERS & OFFICE EQUIPMENT
- - 0.2%
Comdisco, Inc. 5.95% 4/30/02 Baa1 250,000 239,075
TRANSPORTATION - 0.8%
AIR TRANSPORTATION - 0.2%
Delta Air Lines, Inc. 8.5% Baa3 311,000 313,777
3/15/02
RAILROADS - 0.6%
Norfolk Southern Corp. 6.875% Baa1 1,000,000 993,470
5/1/01
TOTAL TRANSPORTATION 1,307,247
UTILITIES - 8.4%
ELECTRIC UTILITY - 3.4%
Commonwealth Edison Co. Baa1 1,500,000 1,491,900
7.375% 9/15/02
Houston Industries, Inc. Baa1 1,067,000 1,089,492
9.375% 6/1/01
Niagara Mohawk Power Corp. Baa2 385,000 382,875
6.875% 3/1/01
Philadelphia Electric Co.:
5.625% 11/1/01 Baa1 250,000 242,503
7.125% 9/1/02 Baa1 295,000 291,844
7.5% 7/15/02 Baa1 1,000,000 998,390
Texas Utilities Electric Co. A3 850,000 858,874
8.125% 2/1/02
5,355,878
GAS - 3.3%
Columbia Energy Group 6.61% A3 150,000 144,579
11/28/02
El Paso Energy Corp. 6.625% Baa2 1,200,000 1,184,520
7/15/01
Enron Corp.:
6.45% 11/15/01 Baa2 1,325,000 1,300,223
9.875% 6/15/03 Baa2 1,210,000 1,280,894
Southwest Gas Corp. 9.75% Baa2 1,000,000 1,034,660
6/15/02
TransCanada Pipelines Ltd. A2 250,000 247,563
6.77% 4/30/01
5,192,439
TELEPHONE SERVICES - 1.7%
GTE Corp. 9.1% 6/1/03 Baa1 95,000 99,250
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
MCI WorldCom, Inc. 6.125% A3 $ 1,600,000 $ 1,574,784
8/15/01
Pacific Bell 8.7% 6/15/01 Aa3 250,000 254,738
Telecomunicaciones de Puerto Baa2 885,000 855,636
Rico, Inc. 6.15% 5/15/02
2,784,408
TOTAL UTILITIES 13,332,725
TOTAL NONCONVERTIBLE BONDS 71,812,393
(Cost $72,980,674)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 39.8%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 13.6%
Federal Home Loan Bank:
5.875% 8/15/01 Aaa 1,500,000 1,477,500
5.875% 9/17/01 Aaa 20,000,000 19,706,200
Financing Corp. - coupon Aaa 300,000 275,457
STRIPS 0% 5/2/01
TOTAL U.S. GOVERNMENT AGENCY 21,459,157
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
26.2%
U.S. Treasury Bonds 11.625% Aaa 5,000,000 5,608,600
11/15/02
U.S. Treasury Notes:
5.5% 8/31/01 Aaa 30,550,000 30,048,666
7.875% 8/15/01 Aaa 5,630,000 5,733,817
TOTAL U.S. TREASURY 41,391,083
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 62,850,240
GOVERNMENT AGENCY OBLIGATIONS
(Cost $63,768,442)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (C) - 4.7%
Alberta Province yankee Aa2 520,000 522,610
9.25%, 4/1/00
British Columbia Province Aa2 1,000,000 993,500
5.5%, 10/30/00
Canadian Government 6.125% Aa2 400,000 392,200
7/15/02
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (C) - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Irish Republic:
7.64% 1/2/02 Aaa $ 210,000 $ 211,510
yankee 8.625% 4/15/01 Aaa 85,000 86,589
Nova Scotia Province yankee A3 1,275,000 1,324,304
9.375% 7/15/02
Ontario Province yankee:
global 7.75% 6/4/02 Aa3 2,150,000 2,172,296
7.375% 1/27/03 Aa3 150,000 150,207
Province of Manitoba yankee Aa3 400,000 406,508
8% 4/15/02
Province of Quebec 8.69% A2 1,000,000 1,013,420
2/22/01
Swedish Kingdom yankee 0%, Aa1 174,000 159,948
4/1/01
TOTAL FOREIGN GOVERNMENT AND 7,433,092
GOVERNMENT AGENCY OBLIGATIONS
(Cost $7,597,909)
SUPRANATIONAL OBLIGATIONS -
0.6%
African Development Bank Aa1 875,000 883,295
yankee 7.7% 7/15/02 (Cost
$902,477)
</TABLE>
CASH EQUIVALENTS - 7.5%
MATURITY AMOUNT
Investments in repurchase $ 11,819,904 11,818,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.8%,
dated 1/31/00 due 2/1/00
(Cost $11,818,000)
TOTAL INVESTMENT PORTFOLIO - 154,797,020
98.1% (Cost $157,067,502)
NET OTHER ASSETS - 1.9% 3,001,405
NET ASSETS - 100% $ 157,798,425
LEGEND
(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(b) 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 $2,983,689 or 1.9% of net assets.
(c) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
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 71.5% AAA, AA, A 59.4%
Baa 20.7% BBB 19.3%
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%
Purchases and sales of securities, other than short-term securities,
aggregated $155,891,104 and $27,707,682, respectively, of which
long-term U.S. government and government agency obligations aggregated
$85,245,823 and $23,998,414, respectively.
INCOME TAX INFORMATION
At January 31, 2000, the aggregate cost of investment securities for
income tax purposes was $157,067,501. Net unrealized depreciation
aggregated $2,270,481, of which $43,591 related to appreciated
investment securities and $2,314,072 related to depreciated investment
securities.
At July 31, 1999, 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
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 154,797,020
value (including repurchase
agreements of $11,818,000)
(cost $157,067,502) - See
accompanying schedule
Cash 993,471
Receivable for fund shares 430,903
sold
Interest receivable 2,941,456
TOTAL ASSETS 159,162,850
LIABILITIES
Payable for investments $ 993,280
purchased
Payable for fund shares 226,981
redeemed
Distributions payable 61,480
Accrued management fee 8,729
Other payables and accrued 73,955
expenses
TOTAL LIABILITIES 1,364,425
NET ASSETS $ 157,798,425
Net Assets consist of:
Paid in capital $ 160,250,004
Undistributed net investment 3,498
income
Accumulated undistributed net (184,595)
realized gain (loss) on
investments
Net unrealized appreciation (2,270,482)
(depreciation) on investments
NET ASSETS, for 17,006,719 $ 157,798,425
shares outstanding
NET ASSET VALUE, offering $9.28
price and redemption price
per share ($157,798,425
(divided by) 17,006,719
shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31,
2000 (UNAUDITED)
INVESTMENT INCOME $ 3,715,583
Interest
Security lending 7,813
Total income 3,723,396
EXPENSES
Management fee $ 241,496
Transfer agent fees 82,765
Accounting and security 30,671
lending fees
Non-interested trustees' 131
compensation
Custodian fees and expenses 2,521
Registration fees 72,703
Audit 12,269
Legal 3,284
Miscellaneous 43
Total expenses before 445,883
reductions
Expense reductions (248,835) 197,048
NET INVESTMENT INCOME 3,526,348
REALIZED AND UNREALIZED GAIN (138,690)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (1,918,412)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (2,057,102)
NET INCREASE (DECREASE) IN $ 1,469,246
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION
Expense reductions
Custodian credits $ 593
FMR reimbursement 248,242
$ 248,835
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JANUARY 31, YEAR ENDED JULY 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 3,526,348 $ 1,037,235
income
Net realized gain (loss) (138,690) (19,781)
Change in net unrealized (1,918,412) (356,371)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 1,469,246 661,083
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (3,526,305) (1,038,591)
from net investment income
Share transactions Net 155,089,128 7,318,267
proceeds from sales of shares
Reinvestment of distributions 3,259,210 983,793
Cost of shares redeemed (15,947,445) (3,604,403)
NET INCREASE (DECREASE) IN 142,400,893 4,697,657
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
Redemption fees 20,071 1,961
TOTAL INCREASE (DECREASE) 140,363,905 4,322,110
IN NET ASSETS
NET ASSETS
Beginning of period 17,434,520 13,112,410
End of period (including $ 157,798,425 $ 17,434,520
undistributed net investment
income of $3,498 and $3,455,
respectively)
OTHER INFORMATION
Shares
Sold 16,517,761 757,745
Issued in reinvestment of 348,705 102,111
distributions
Redeemed (1,707,504) (374,885)
Net increase (decrease) 15,158,962 484,971
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JANUARY 31, 1999 1998 1997 1996 G
2000
(UNAUDITED)
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.440 $ 9.620 $ 9.640 $ 9.400 $ 10.000
of period
Income from Investment .288 D .634 D .648 D .690 D .310
Operations Net investment
income
Net realized and unrealized (.155) (.178) (.019) .240 (.600)
gain (loss)
Total from investment .133 .456 .629 .930 (.290)
operations
Less Distributions
From net investment income (.295) (.637) (.649) (.690) (.310)
Redemption fees added to .002 .001 .000 .000 .000
paid in capital
Net asset value, end of $ 9.280 $ 9.440 $ 9.620 $ 9.640 $ 9.400
period
TOTAL RETURN B, C 1.44% 4.81% 6.74% 10.26% (2.88)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 157,798 $ 17,435 $ 13,112 $ 10,378 $ 6,180
(000 omitted)
Ratio of expenses to average .35% A, E .35% E .35% E .35% E .35% A, E
net assets
Ratio of expenses to average .35% A .35% .35% .34% F .34% A, F
net assets after expense
reductions
Ratio of net investment 6.24% A 6.60% 6.75% 7.31% 6.93% A
income to average net assets
Portfolio turnover rate 54% A 16% 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.
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.
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 2003
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
JANUARY 31, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 40.1 39.1
Aa 7.8 6.8
A 19.8 20.6
Baa 28.4 32.7
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
AVERAGE YEARS TO MATURITY AS
OF JANUARY 31, 2000
6 MONTHS AGO
Years 4.7 5.2
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF JANUARY 31, 2000
6 MONTHS AGO
Years 3.6 4.1
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF JANUARY 31, 2000 * AS OF JULY 31, 1999 **
Corporate Bonds 50.9% Corporate Bonds 56.1%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 38.0% Obligations 37.5%
Foreign Government and Foreign Government and
Government Agency Government Agency
Obligations 3.8% Obligations 3.5%
Short-Term Investments and Short-Term Investments and
Net Other Assets 7.3% Net Other Assets 2.9%
* FOREIGN INVESTMENTS 11.8% ** FOREIGN INVESTMENTS 12.5%
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
Row: 1, Col: 1, Value: 50.9
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 38.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 3.8
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 7.3
Row: 1, Col: 1, Value: 56.1
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 37.5
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 3.5
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.9
FIDELITY TARGET TIMELINE 2003
INVESTMENTS JANUARY 31, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 50.9%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.7%
DEFENSE ELECTRONICS - 1.7%
Raytheon Co. 6.5% 7/15/05 Baa2 $ 500,000 $ 464,330
BASIC INDUSTRIES - 0.5%
PAPER & FOREST PRODUCTS - 0.5%
Fort James Corp. 6.625% Baa2 150,000 142,970
9/15/04
CONSTRUCTION & REAL ESTATE -
1.7%
REAL ESTATE - 1.0%
Cabot Industrial Property LP Baa2 290,000 276,573
7.125% 5/1/04
REAL ESTATE INVESTMENT TRUSTS
- - 0.7%
Equity Office Properties Baa1 200,000 189,984
Trust 6.5% 1/15/04
TOTAL CONSTRUCTION & REAL 466,557
ESTATE
ENERGY - 1.0%
ENERGY SERVICES - 0.7%
Baker Hughes, Inc. 5.8% A2 200,000 190,820
2/15/03
OIL & GAS - 0.3%
Conoco, Inc. 5.9% 4/15/04 A3 75,000 70,658
TOTAL ENERGY 261,478
FINANCE - 29.0%
BANKS - 16.5%
Bank of Montreal 6.1% 9/15/05 A1 125,000 116,069
Bank One Corp. 7.25% 8/15/04 A1 395,000 388,348
Bayerische Landesbank Aaa 200,000 187,798
Gironzentrale yankee 6.375%
10/15/05
Capital One Bank 6.375% Baa2 250,000 239,265
2/15/03
First National Boston Corp. A2 325,000 326,862
8% 9/15/04
First Security Corp. 7% A3 375,000 357,956
7/15/05
First Tennessee National Baa1 200,000 189,054
Corp. 6.75% 11/15/05
Korea Development Bank:
6.625% 11/21/03 Baa2 10,000 9,493
7.375% 9/17/04 Baa2 225,000 216,844
yankee 6.5% 11/15/02 Baa2 100,000 95,870
Meridian Bank Pennsylvania A1 250,000 241,800
6.625% 3/15/03
Merita Bank Ltd. yankee 6.5% A2 150,000 140,255
1/15/06
Signet Bank 7.8% 9/15/06 A1 250,000 250,120
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Society National Bank 7.25% A1 $ 500,000 $ 487,735
6/1/05
Sovran Financial Corp. 9.25% Aa2 125,000 133,563
6/15/06
St. George Bank Ltd. yankee Baa1 500,000 474,460
7.15% 10/15/05 (b)
Swiss Bank Corp. 6.75% 7/15/05 Aa2 500,000 477,275
Union Planters Corp. 6.75% Baa2 150,000 139,572
11/1/05
4,472,339
CREDIT & OTHER FINANCE - 8.1%
Abbey National PLC 6.69% Aa3 300,000 285,669
10/17/05
Associates Corp. of North Aa3 400,000 377,376
America 5.75% 11/1/03
Finova Capital Corp. 6.12% Baa1 300,000 290,124
5/28/02
Fleet Financial Group, Inc. A3 375,000 362,895
7.125% 4/15/06
PNC Funding Corp. 7.75% 6/1/04 A3 220,000 220,108
Sears Roebuck Acceptance A3 200,000 189,652
Corp. 6% 3/20/03
Southwestern Bell Capital A2 100,000 98,665
Corp. 7.13% 6/1/05
Spieker Properties LP 6.8% Baa2 150,000 142,574
5/1/04
Sprint Capital Corp. 5.7% Baa1 250,000 236,103
11/15/03
2,203,166
INSURANCE - 0.7%
Western National Corp. 7.125% A2 200,000 194,846
2/15/04
SAVINGS & LOANS - 2.6%
Ahmanson (H.F.) & Co. 7.875% Baa1 700,000 698,040
9/1/04
SECURITIES INDUSTRY - 1.1%
Amvescap PLC yankee 6.6% A3 50,000 46,710
5/15/05
Morgan Stanley Dean Witter & Aa3 250,000 247,898
Co. 7.125% 1/15/03
294,608
TOTAL FINANCE 7,862,999
MEDIA & LEISURE - 4.5%
BROADCASTING - 1.1%
Cox Communications, Inc. 6.5% Baa2 200,000 192,954
11/15/02
Time Warner, Inc. 7.75% Baa3 111,000 110,956
6/15/05
303,910
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.7%
Viacom, Inc. 6.75% 1/15/03 Baa3 $ 200,000 $ 195,008
PUBLISHING - 2.7%
News America Holdings, Inc. Baa3 710,000 729,589
8.5% 2/15/05
TOTAL MEDIA & LEISURE 1,228,507
NONDURABLES - 3.0%
BEVERAGES - 0.9%
Seagram JE & Sons, Inc. 6.4% Baa3 250,000 239,050
12/15/03
TOBACCO - 2.1%
Philip Morris Companies, Inc. A2 500,000 472,900
7% 7/15/05
RJ Reynolds Tobacco Holdings, Baa2 100,000 93,071
Inc. 7.375% 5/15/03
565,971
TOTAL NONDURABLES 805,021
RETAIL & WHOLESALE - 1.4%
GENERAL MERCHANDISE STORES -
1.4%
Dayton Hudson Corp. 7.5% A3 375,000 370,511
7/15/06
TRANSPORTATION - 3.9%
AIR TRANSPORTATION - 0.6%
Delta Air Lines, Inc. 8.5% Baa3 174,000 175,554
3/15/02
RAILROADS - 3.3%
Canadian National Railway Co. Baa2 300,000 290,649
7% 3/15/04
Norfolk Southern Corp. 7.875% Baa1 400,000 401,348
2/15/04
Union Pacific 6.34% 11/25/03 Baa3 200,000 189,160
881,157
TOTAL TRANSPORTATION 1,056,711
UTILITIES - 4.2%
ELECTRIC UTILITY - 1.7%
Niagara Mohawk Power Corp. Baa2 200,000 198,052
7.375% 8/1/03
Philadelphia Electric Co. Baa1 270,000 262,626
6.625% 3/1/03
460,678
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
GAS - 2.5%
CMS Panhandle Holding Co. Baa3 $ 100,000 $ 94,050
6.125% 3/15/04
Columbia Energy Group 6.8% A3 150,000 140,031
11/28/05
Enserch Corp. 6.25% 1/1/03 Baa2 190,000 181,568
InterNorth, Inc. 9.625% Baa2 245,000 263,093
3/15/06
678,742
TOTAL UTILITIES 1,139,420
TOTAL NONCONVERTIBLE BONDS 13,798,504
(Cost $14,520,628)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 38.0%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 21.2%
Federal Farm Credit Bank:
7.26% 5/2/05 Aaa 500,000 498,435
7.35% 3/24/05 Aaa 150,000 150,117
Federal Home Loan Bank:
4.96% 10/7/05 Aaa 410,000 364,388
6.25% 8/13/04 Aaa 4,500,000 4,330,524
9.5% 2/25/04 Aaa 150,000 161,649
Freddie Mac 6.875% 1/15/05 Aaa 250,000 246,563
TOTAL U.S. GOVERNMENT AGENCY 5,751,676
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
16.8%
U.S. Treasury Bonds:
10.75% 5/15/03 Aaa 1,700,000 1,893,902
10.75% 8/15/05 Aaa 1,000,000 1,180,780
11.75% 2/15/10 (callable) Aaa 1,225,000 1,476,321
TOTAL U.S. TREASURY 4,551,003
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 10,302,679
GOVERNMENT AGENCY OBLIGATIONS
(Cost $10,761,617)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (C) - 3.8%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Ontario Province 7%, 8/4/05 Aa3 $ 275,000 $ 269,704
Province of Manitoba yankee Aa3 250,000 239,718
6.125% 1/19/04
Saskatchewan Province yankee A2 500,000 507,950
8% 7/15/04
TOTAL FOREIGN GOVERNMENT AND 1,017,372
GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,073,601)
CASH EQUIVALENTS - 3.7%
MATURITY AMOUNT
Investments in repurchase $ 1,009,163 1,009,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.8%,
dated 1/31/00 due 2/1/00
(Cost $1,009,000)
TOTAL INVESTMENT PORTFOLIO - 26,127,555
96.4% (Cost $27,364,846)
NET OTHER ASSETS - 3.6% 967,233
NET ASSETS - 100% $ 27,094,788
</TABLE>
LEGEND
(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(b) 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 $474,460 or 1.8% of net assets.
(c) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
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 67.7% AAA, AA, A 43.8%
Baa 28.4% BBB 30.6%
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
net assets, is as follows:
United States of America 88.2%
Canada 5.3
Switzerland 1.8
Australia 1.8
United Kingdom 1.2
Korea (South) 1.2
Others (individually less 0.5
than 1%)
100.0%
Purchases and sales of securities, other than short-term securities,
aggregated $9,095,093 and $6,251,132, respectively, of which long-term
U.S. government and government agency obligations aggregated
$7,950,987 and $6,177,377, respectively.
INCOME TAX INFORMATION
At January 31, 2000, the aggregate cost of investment securities for
income tax purposes was $27,364,846. Net unrealized depreciation
aggregated $1,237,291, of which $5,879 related to appreciated
investment securities and $1,243,170 related to depreciated investment
securities.
FIDELITY TARGET TIMELINE 2003
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 26,127,555
value (including repurchase
agreements of $1,009,000)
(cost $27,364,846) - See
accompanying schedule
Cash 347
Receivable for fund shares 399,927
sold
Interest receivable 625,141
Receivable from investment 14,462
adviser for expense
reductions
TOTAL ASSETS 27,167,432
LIABILITIES
Payable for fund shares $ 36,430
redeemed
Distributions payable 8,292
Other payables and accrued 27,922
expenses
TOTAL LIABILITIES 72,644
NET ASSETS $ 27,094,788
Net Assets consist of:
Paid in capital $ 28,806,602
Undistributed net investment 7,455
income
Accumulated undistributed net (481,978)
realized gain (loss) on
investments
Net unrealized appreciation (1,237,291)
(depreciation) on investments
NET ASSETS, for 3,007,030 $ 27,094,788
shares outstanding
NET ASSET VALUE, offering $9.01
price and redemption price
per share ($27,094,788
(divided by) 3,007,030
shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31,
2000 (UNAUDITED)
INVESTMENT INCOME $ 922,160
Interest
EXPENSES
Management fee $ 55,131
Transfer agent fees 22,550
Accounting fees and expenses 30,421
Non-interested trustees' 35
compensation
Custodian fees and expenses 1,172
Registration fees 20,793
Audit 16,595
Legal 1,793
Miscellaneous 59
Total expenses before 148,549
reductions
Expense reductions (103,810) 44,739
NET INVESTMENT INCOME 877,421
REALIZED AND UNREALIZED GAIN (438,502)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (324,600)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (763,102)
NET INCREASE (DECREASE) IN $ 114,319
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION
Expense reductions
FMR reimbursement $ 103,810
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JANUARY 31, YEAR ENDED JULY 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 877,421 $ 1,624,346
income
Net realized gain (loss) (438,502) (14,251)
Change in net unrealized (324,600) (1,113,533)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 114,319 496,562
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (883,770) (1,639,211)
From net investment income
From net realized gain - (90,269)
In excess of net realized - (15,284)
gain
TOTAL DISTRIBUTIONS (883,770) (1,744,764)
Share transactions Net 8,758,513 12,280,874
proceeds from sales of shares
Reinvestment of distributions 831,189 1,671,487
Cost of shares redeemed (5,445,301) (8,768,624)
NET INCREASE (DECREASE) IN 4,144,401 5,183,737
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
Redemption fees 3,073 4,022
TOTAL INCREASE (DECREASE) 3,378,023 3,939,557
IN NET ASSETS
NET ASSETS
Beginning of period 23,716,765 19,777,208
End of period (including $ 27,094,788 $ 23,716,765
undistributed net investment
income of $7,455 and
$13,804, respectively)
OTHER INFORMATION
Shares
Sold 955,622 1,260,185
Issued in reinvestment of 90,685 172,491
distributions
Redeemed (593,163) (907,278)
Net increase (decrease) 453,144 525,398
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JANUARY 31, 1999 1998 1997 1996 G
2000
(UNAUDITED)
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.290 $ 9.750 $ 9.670 $ 9.240 $ 10.000
of period
Income from Investment .316 D .677 D .670 D .634 D .307
Operations Net investment
income
Net realized and unrealized (.278) (.404) .078 .428 (.762)
gain (loss)
Total from investment .038 .273 .748 1.062 (.455)
operations
Less Distributions
From net investment income (.319) (.685) (.670) (.634) (.306)
From net realized gain - (.043) - - -
In excess of net realized - (.007) - - -
gain
Total distributions (.319) (.735) (.670) (.634) (.306)
Redemption fees added to .001 .002 .002 .002 .001
paid in capital
Net asset value, end of $ 9.010 $ 9.290 $ 9.750 $ 9.670 $ 9.240
period
TOTAL RETURN B, C .41% 2.76% 8.00% 11.94% (4.53)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 27,095 $ 23,717 $ 19,777 $ 13,211 $ 6,977
(000 omitted)
Ratio of expenses to average .35% A, E .35% E .35% E .35% E .35% A, E
net assets
Ratio of expenses to average .35% A .35% .35% .34% F .34% A, F
net assets after expense
reductions
Ratio of net investment 6.86% A 7.00% 6.92% 6.76% 6.93% A
income to average net assets
Portfolio turnover rate 52% A 18% 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.
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.
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 January 31, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
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 Fidelity
Target Timeline 2001 and Fidelity Target Timeline 2003 are September
30, 2001 and 2003, respectively. On those dates the respective funds
will mature. The funds' Board of Trustees anticipates closing the
funds to new accounts approximately one year prior to the target date
of each fund and expects to liquidate each fund within one month after
the fund's target date. Fidelity Target Timeline 1999 was liquidated
on October 4, 1999. 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 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
sales and excise tax regulations. Fidelity Target Timeline 2003 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
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, Federal Agency,
and other obligations found satisfactory by FMR 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 did not have
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 .0920% 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
fees were equivalent to an annualized rate of .43% of average net
assets for each fund.
SUB-ADVISER FEE. FMR, on behalf of each fund, has entered into a
sub-advisory agreement with Fidelity Investments Money Management,
Inc. (FIMM), a wholly owned subsidiary of FMR. For its services, FIMM
receives a fee from FMR of 50% of the management fee payable to FMR.
The fee is paid prior to any voluntary expense reimbursements which
may be in effect.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the 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 annualized rate of .15% and .18% of the average net
assets of Fidelity Target Timeline 2001 and Fidelity Target Timeline
2003, respectively.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains each fund's
accounting records and administers the security lending program. The
security lending fee is based on the number and duration of lending
transactions. The accounting fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
5. SECURITY LENDING.
Certain funds lend portfolio securities from time to time in order to
earn additional income. Each applicable fund receives collateral (in
the form of U.S. Treasury obligations, letters of credit and/or cash)
against the loaned securities and maintains collateral in an amount
not less than 100% of the market value of the loaned securities during
the period of the loan. The market value of the loaned securities is
determined at the close of business of the funds and any additional
required collateral is delivered to the funds on the next business
day. If the borrower defaults on its obligation to
5. SECURITY LENDING - CONTINUED
return the securities loaned because of insolvency or other reasons, a
fund could experience delays and costs in recovering the securities
loaned or in gaining access to the collateral. At period end there
were no loans outstanding for either fund.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, certain securities lending fees, brokerage
commissions and extraordinary expenses, if any) above an annual rate
of .35% of average net assets.
In addition, through arrangements with the funds' custodian, 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.
7. BENEFICIAL INTEREST.
At the end of the period, FMR and its affiliates were record owners of
15.37% of the outstanding shares of Fidelity Target Timeline 2003.
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 Automated Service Telephone 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)
FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST SM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
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 EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
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 1-800-544-0240 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 75039-5587
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 75039-5587
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
19200 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
8 Montgomery 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
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
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.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Money Management, Inc. (FIMM)
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Stanley N. Griffith,
Assistant Vice President
Ford E. O'Neil, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
* INDEPENDENT TRUSTEES
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
Government Income Fund
High Income Fund
Intermediate Bond Fund
Intermediate Government
Income Fund
International Bond Fund
Investment Grade Bond Fund
New Markets Income Fund
Short-Term Bond Fund
Spartan(registered trademark) Government Income Fund
Spartan Investment Grade Bond Fund
Strategic Income Fund
Target Timeline sm 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
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)
Fidelity Automated Service
Telephone (FAST SM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
