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Fidelity® Defined Maturity Funds

Defined Maturity Funds (DMFs) are an innovative way to invest in municipal bonds. Like Fidelity's other municipal bond funds, DMFs offer professional management, diversification, and seek to provide federally tax-exempt monthly income. They can also be sold at the end of each business day at their net asset value.

Compare traditional municipal bond funds vs. DMFs

Unlike traditional bond funds, a DMF's price sensitivity to changes in interest rates declines gradually over time, approaching zero near maturity. Furthermore, the fund is designed to distribute its net asset value to shareholders in cash shortly after maturity.


Key Features Defined Maturity Funds Traditional municipal bond funds
Professional management
Diversification
Institutional pricing
Liquidity
Tax-exempt income
Declining interest rate sensitivity
 
Maturity date
 
The table lists various features of municipal bond funds and DMFs. Both provide certain benefits and risks that should be considered before investing.

How DMFs work

A DMF invests primarily in investment-grade municipal bonds whose maturities are roughly the same as the maturity of the fund itself. As these bonds move toward maturity, the fund's overall interest rate sensitivity gradually declines since bonds with shorter maturities tend to be less sensitive to interest rate changes. This feature may make DMFs an attractive option for investors with specific time horizons. To take advantage of this expected decline in price sensitivity, investors should consider holding the funds to maturity. Otherwise they may experience more price, or net asset value uncertainty.

A DMF aims to distribute monthly dividends that are exempt from federal income tax. Investors have the option of reinvesting those dividends or receiving them as income. The fund also distributes its net asset value to shareholders in July of the year it matures.

Potential uses for DMFs

Save for a goal
While DMFs do not guarantee a predetermined amount at maturity, they can be a great way to save for future expenses. For instance, you can buy a DMF or a series of DMFs with maturity dates that coincide with your goal.

Help manage the impact of rising rates
Purchasing multiple DMFs of different maturities can be an effective way to create a fixed income "ladder." For example, if rates are rising, you can reinvest the proceeds of a maturing fund into a fund with a higher yield.

Supplement bonds1
If you purchase individual bonds, you may consider adding a DMF to your existing ladder or asset mix to help increase diversification and improve overall liquidity.

What we offer

  • Fidelity® Municipal Income 2017 Fund (FMIFX)
  • Fidelity® Municipal Income 2019 Fund (FMCFX)
  • Fidelity® Municipal Income 2021 Fund (FOCFX)
  • Fidelity® Municipal Income 2023 Fund (FCHPX)

Fund manager insights

1. Individual bond investors do not have to pay the annual expense of mutual funds, and individual bond investors generally have greater control of the credit quality and maturity date of the bonds that they choose to invest in.
In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Any fixed income security sold or redeemed prior to maturity may be subject to loss. Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties.
The municipal market can be affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities.
Defined Maturity Funds are not designed for investors seeking a stable NAV or guaranteed income.
Diversification/Asset Allocation does not ensure a profit or guarantee against loss.
To protect existing shareholders and to ensure orderly liquidation of the DMFs, the funds will close to purchases for new and existing shareholders 12 months prior to their maturity date. As the funds approach their liquidation dates, the fund's securities will mature and the funds may reinvest the proceeds in money market securities with lower yields than the securities previously held by the funds. In addition, the amount of the fund's income distributions will vary over time and the breakdown of returns between fund distributions and liquidation proceeds will not be predictable at the time of your investment, resulting in a gain or loss for tax purposes.
Municipal funds normally seek to earn income and pay dividends that are expected to be exempt from federal income tax. If a fund investor is resident in the state of issuance of the bonds held by the fund, interest dividends may also be exempt from state and local income taxes. Such interest dividends may be subject to federal and/or state alternative minimum taxes. Certain funds normally seek to invest only in municipal securities generating income exempt from both federal income taxes and the federal alternative minimum tax; however, outcomes cannot be guaranteed, and the funds may sometimes generate income subject to these taxes. Fund shareholders may also receive taxable distributions attributable to a fund's sale of municipal bonds. Generally, tax-exempt municipal securities are not appropriate holdings for tax advantaged accounts such as IRAs and 401(k)s.
Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information.  Read it carefully.
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