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Fidelity Defined Maturity Funds

A series of 5 diversified mutual funds, each with a defined maturity date.

Key features

Expense Ratio Per Fund Minimum Investment Per Fund
0.40% $10,000

Key Points

  • Provide professional management and ongoing credit surveillance of holdings
  • Offer diversification at a relatively low minimum investment
  • Have price volatility that declines as the funds approach maturity
  • Distribute net assets to investors at maturity
  • Provide daily liquidity at the current NAV
  • Benefit from professionally negotiated bond prices

Potential Uses

  • Income: An investor may withdraw distributions throughout the life of the fund
    • Investor receives federally tax-exempt income
    • At fund's maturity date, investor receives net asset value
  • Re-Investment: An investor may reinvest distributions throughout the life of the fund
    • Investor maximizes fund's potential payout at maturity
    • At fund's maturity date, investor receives compounded net asset value
  • Laddering: An investor may purchase 2 or more funds to mimic a "bond ladder" experience
    • Allows investors to structure a diversified, risk-monitored investment over a 10-year period
    • Investors can match fund maturities with specific financial goals

May be suitable for investors who

  • Have high taxable incomes and need professionally managed tax-exempt investment options
  • Need an income stream for cash flow needs
  • Prefer the ease of investing in funds vs. building an individual bond ladder
  • Need an investment with declining price volatility as it approaches maturity
  • Need a diversified municipal bond investment at a lower investment minimum than building bond ladders

DMFs offer an alternative option to bonds and bond funds

Key points

  • DMFs and bond funds provide professional management.
  • DMFs and bond funds provide diversification at a relatively low minimum investment.*
  • DMFs and bond funds benefit from institutional pricing on trades.
  • DMFs and bond funds provide daily liquidity at the current NAV, while individual bond liquidity varies depending on the bond.
  • Individual bonds have a maturity date; similarly, DMFs have a defined end date.
  • The price volatility of DMFs is designed to decline as they approach maturity.
  • Unlike individual bonds, bond funds and DMFs do not return a specific amount.
  • Individual bonds allow investors to set up more predictable income streams.
  • DMFs and bond funds have transaction costs to buy and sell.
General Attributes
Investment products
Muni Bond Fund DMF Individual Muni Bond
Professional management green_check green_check
Diversification green_check green_check

Within the fund's maturity range

Multiple bonds needed

Institutional pricing green_check green_check
Daily liquidity green_check

At current NAV

green_check

At current NAV

Varies
depending on the bond

Maturity/end date green_check green_check
Declining price volatility toward maturity green_check green_check
Return of par value green_check

Assuming no defaults

Fixed coupons green_check

The table lists various features of individual bonds, municipal bond funds, and DMFs. All three provide certain benefits and risks that should be considered before investing.

Named by Morningstar among The Best New Funds of 2011

Each fund invests primarily in investment grade municipal bonds with similar maturity dates, which the fund generally holds to maturity. As a result, the interest rate sensitivity (and, thus, price volatility) of each fund is designed to fall gradually over time as maturity approaches.

For as long as you own them, the funds distribute federally tax-free monthly dividends that you can reinvest or withdraw. At maturity, the funds liquidate and distribute net assets to shareholders.

Why Fidelity

Our award winning municipal income team manages over $25 billion in assets. With an average of 13 years of industry experience, the team includes 3 portfolio managers, research analysts and associates, credit and quantitative analysts, and traders who specialize in the municipal market. We perform all of our own credit analysis, looking closely at every bond we invest in.

Awards include:

Morningstar Fixed Income Manager of the Year (2003) nominee, 2002, 2008, and 2011; nominee for Fixed Income Manager of the Decade (2010).

Kiplinger's Top 25 Best Mutual Funds (2009) - Fidelity's Intermediate Muni Income Fund is the only municipal fund on the list.

Lipper Fund Awards (2011) - Fidelity Maryland Municipal Income Fund (SMDMX): Best Fund over 10 years - Maryland Municipal Debt Funds (out of 20), Fidelity Massachusetts Municipal Income Fund (FDMMX): Best Fund over 10 years - Massachusetts Municipal Debt Funds (out of 31), Fidelity Minnesota Municipal Income Fund (FIMIX): Best Fund over 5 years - Minnesota Municipal Debt Funds (out of 34).

Things to keep in mind

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.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties.

The municipal market is volatile and can be significantly 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.

To protect existing shareholders and to ensure orderly liquidation of the funds, 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. Although money market funds seek to maintain a stable NAV of a $1.00 per share, this is not guaranteed and they may in fact lose money.

As the fund approaches its liquidation date, the fund's securities will mature and the fund may reinvest the proceeds in money market securities with lower yields than the securities previously held by the fund. 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. A portion of fund distributions may be subject to state or federal income taxes, AMT, or taxable as capital gains.

Questions?

*DMFs have a minimum investment of $10,000 per fund; similarly, traditional bond funds may also have fund minimums.
**Views and opinions expressed may not reflect those of Fidelity Investments. These comments should not be viewed as a recommendation for or against any particular security or trading strategy. Views and opinions are subject to change at any time based on market and other conditions.
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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