U.S. Government and Government Agency Obligations - 5.7%
Principal
Amount (a)
Value ($)
U.S. Treasury Obligations - 5.7%
U.S. Treasury Bonds 3.25% 5/15/42 (e)(f)
1,500,000
1,331,250
U.S. Treasury Notes:
1.25% 9/30/28 (e)
12,000,000
10,214,531
1.5% 2/29/24
13,500,000
12,982,146
2.625% 2/15/29 (e)
220,000
202,718
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS
(Cost $27,046,540)
24,730,645
Foreign Government and Government Agency Obligations - 8.7%
Principal
Amount (a)
Value ($)
Germany - 4.9%
German Federal Republic:
0% 8/15/31
EUR
660,000
539,070
0% 2/15/32 (Reg. S)
EUR
3,250,000
2,628,460
0% 5/15/35 (Reg. S)
EUR
17,105,000
12,686,062
1.25% 8/15/48
EUR
6,140,000
5,022,055
TOTAL GERMANY
20,875,647
United Kingdom - 3.8%
United Kingdom, Great Britain and Northern Ireland:
1% 4/22/24(Reg. S)
GBP
4,355,000
4,628,429
2.25% 9/7/23
GBP
10,645,000
11,689,561
TOTAL UNITED KINGDOM
16,317,990
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS
(Cost $51,130,212)
37,193,637
Preferred Securities - 26.9%
Principal
Amount (a)
Value ($)
Australia - 1.6%
QBE Insurance Group Ltd.:
5.25% (Reg. S) (b)(d)
4,360,000
3,830,013
5.875% (b)(c)(d)
3,305,000
3,063,603
TOTAL AUSTRALIA
6,893,616
Canada - 0.6%
Bank of Nova Scotia:
4.65% (b)(d)
2,015,000
1,727,066
4.9% (b)(d)
1,180,000
1,053,409
TOTAL CANADA
2,780,475
Finland - 0.2%
Citycon Oyj 4.496% (Reg. S) (b)(d)
EUR
970,000
685,893
France - 4.0%
BNP Paribas SA 6.625% (Reg. S) (b)(d)
2,505,000
2,313,994
Electricite de France SA:
5.25% (Reg. S) (b)(d)
10,105,000
9,448,175
5.625% (Reg. S) (b)(d)
1,490,000
1,339,138
Societe Generale 7.875% (Reg. S) (b)(d)
1,310,000
1,255,963
Veolia Environnement SA 2% (Reg. S) (b)(d)
EUR
3,900,000
2,962,201
TOTAL FRANCE
17,319,471
Germany - 2.3%
Bayer AG 2.375% 11/12/79 (Reg. S) (b)
EUR
11,800,000
10,017,826
Ireland - 0.5%
AIB Group PLC 6.25% (Reg. S) (b)(d)
EUR
2,195,000
1,941,553
Italy - 0.2%
Enel SpA 2.25% (Reg. S) (b)(d)
EUR
1,110,000
875,724
Luxembourg - 2.7%
Aroundtown SA 3.375% (Reg. S) (b)(d)
EUR
7,800,000
4,968,854
CPI Property Group SA 3.75% (Reg. S) (b)(d)
EUR
3,520,000
1,983,621
Grand City Properties SA 1.5% (Reg. S) (b)(d)
EUR
6,900,000
4,748,951
TOTAL LUXEMBOURG
11,701,426
Netherlands - 7.2%
AerCap Holdings NV 5.875% 10/10/79 (b)
3,800,000
3,392,089
AT Securities BV 5.25% (Reg. S) (b)(d)
6,500,000
5,497,440
ELM BV for Firmenich International SA 3.75% (Reg. S) (b)(d)
EUR
1,070,000
959,518
Stichting AK Rabobank Certificaten 6.5% (Reg. S) (b)(d)(g)
EUR
1,225,075
1,098,581
Telefonica Europe BV:
2.625% (Reg. S) (b)(d)
EUR
1,100,000
1,054,122
3.875% (Reg. S) (b)(d)
EUR
1,900,000
1,624,678
Volkswagen International Finance NV:
3.748% (Reg. S) (b)(d)
EUR
800,000
658,703
3.875% (Reg. S) (b)(d)
EUR
5,900,000
4,664,520
4.625% (Reg. S) (b)(d)
EUR
13,000,000
11,929,580
TOTAL NETHERLANDS
30,879,231
Spain - 0.5%
Banco Bilbao Vizcaya Argentaria SA 5.875% (Reg. S) (b)(d)
EUR
2,200,000
1,969,645
Sweden - 1.0%
Heimstaden Bostad AB 3.248% (Reg. S) (b)(d)
EUR
4,990,000
3,505,230
Samhallsbyggnadsbolaget I Norden AB 2.624% (Reg. S) (b)(d)
EUR
2,145,000
909,205
TOTAL SWEDEN
4,414,435
Switzerland - 2.2%
Credit Suisse Group AG 7.5% (Reg. S) (b)(d)
9,515,000
8,741,906
UBS Group AG 7% (Reg. S) (b)(d)
500,000
475,090
TOTAL SWITZERLAND
9,216,996
United Kingdom - 3.9%
Barclays PLC:
5.875% (Reg. S) (b)(d)
GBP
1,550,000
1,436,442
7.125% (b)(d)
GBP
200,000
193,163
8.875% (b)(d)
GBP
900,000
910,668
British American Tobacco PLC 3% (Reg. S) (b)(d)
EUR
9,200,000
6,608,416
HSBC Holdings PLC 6.375% (b)(d)
2,660,000
2,396,527
Lloyds Banking Group PLC 5.125% (b)(d)
GBP
280,000
260,665
National Express Group PLC 4.25% (Reg. S) (b)(d)
GBP
890,000
777,096
SSE PLC:
3.74% (Reg. S) (b)(d)
GBP
2,000,000
1,913,990
4% (Reg. S) (b)(d)
EUR
2,500,000
2,137,734
TOTAL UNITED KINGDOM
16,634,701
TOTAL PREFERRED SECURITIES
(Cost $159,665,562)
115,330,992
Money Market Funds - 8.6%
Shares
Value ($)
Fidelity Cash Central Fund 3.10% (h)
(Cost $36,912,785)
36,905,404
36,912,785
Purchased Swaptions - 0.1%
Expiration
Date
Notional
Amount (a)
Value ($)
Put Options - 0.1%
Option with an exercise rate of 6.00% on a credit default swap with BNP Paribas S.A. to buy protection on the 5-Year iTraxx Europe Crossover Series 37 Index expiring June 2027, paying 5% quarterly.
(Cost $507,666)
10/19/22
EUR
22,600,000
320,348
TOTAL INVESTMENT IN SECURITIES - 98.7%
(Cost $569,213,916)
423,114,613
NET OTHER ASSETS (LIABILITIES) - 1.3%
5,449,013
NET ASSETS - 100.0%
428,563,626
Futures Contracts
Number
of contracts
Expiration
Date
Notional
Amount ($)
Value ($)
Unrealized
Appreciation/
(Depreciation) ($)
Purchased
Bond Index Contracts
ASX 10 Year Treasury Bond Index Contracts (Australia)
35
Dec 2022
2,621,975
(72,098)
(72,098)
Eurex Euro-Bund Contracts (Germany)
23
Dec 2022
3,121,724
(104,091)
(104,091)
Eurex Euro-Buxl 30 Year Bond Contracts (Germany)
6
Dec 2022
862,287
(52,977)
(52,977)
TME 10 Year Canadian Note Contracts (Canada)
160
Dec 2022
14,315,271
(132,549)
(132,549)
TOTAL BOND INDEX CONTRACTS
(361,715)
Treasury Contracts
CBOT 2-Year U.S. Treasury Note Contracts (United States)
235
Dec 2022
48,266,797
(858,378)
(858,378)
CBOT 5-Year U.S. Treasury Note Contracts (United States)
395
Dec 2022
42,465,586
(1,797,651)
(1,797,651)
CBOT Long Term U.S. Treasury Bond Contracts (United States)
390
Dec 2022
49,298,438
(5,226,872)
(5,226,872)
TOTAL TREASURY CONTRACTS
(7,882,901)
TOTAL PURCHASED
(8,244,616)
Sold
Bond Index Contracts
Eurex Euro-Bobl Contracts (Germany)
66
Dec 2022
7,745,825
174,618
174,618
ICE Long Gilt Contracts (United Kingdom)
87
Dec 2022
9,364,282
1,255,427
1,255,427
TOTAL SOLD
1,430,045
TOTAL FUTURES CONTRACTS
(6,814,571)
The notional amount of futures purchased as a percentage of Net Assets is 37.5%
The notional amount of futures sold as a percentage of Net Assets is 4.0%
Forward Foreign Currency Contracts
Currency
Purchased
Currency
Sold
Counterparty
Settlement
Date
Unrealized
Appreciation/
(Depreciation) ($)
GBP
11,872,000
USD
13,244,641
Goldman Sachs Bank USA
10/03/22
11,041
USD
212,952
CAD
292,000
Goldman Sachs Bank USA
10/03/22
1,565
USD
1,199,554
GBP
1,084,000
State Street Bank and Trust Co
10/03/22
(10,786)
USD
154,470,000
EUR
151,304,261
JPMorgan Chase Bank, N.A.
10/28/22
5,931,157
AUD
251,000
USD
162,931
JPMorgan Chase Bank, N.A.
11/18/22
(2,278)
CAD
231,000
USD
168,462
Goldman Sachs Bank USA
11/18/22
(1,239)
EUR
1,138,000
USD
1,117,675
BNP Paribas S.A.
11/18/22
1,210
EUR
286,000
USD
279,036
Brown Brothers Harriman & Co
11/18/22
2,161
EUR
7,907,000
USD
7,779,539
Citibank, N. A.
11/18/22
(5,349)
EUR
360,000
USD
349,703
HSBC Bank
11/18/22
4,251
EUR
881,000
USD
850,676
JPMorgan Chase Bank, N.A.
11/18/22
15,526
EUR
293,000
USD
284,209
State Street Bank and Trust Co
11/18/22
3,870
EUR
536,000
USD
537,566
State Street Bank and Trust Co
11/18/22
(10,569)
GBP
295,000
USD
320,694
Brown Brothers Harriman & Co
11/18/22
8,927
GBP
208,000
USD
239,307
Brown Brothers Harriman & Co
11/18/22
(6,896)
GBP
208,000
USD
237,530
Brown Brothers Harriman & Co
11/18/22
(5,119)
GBP
4,458,000
USD
5,056,598
Brown Brothers Harriman & Co
11/18/22
(75,407)
GBP
487,000
USD
549,547
Brown Brothers Harriman & Co
11/18/22
(5,393)
GBP
635,000
USD
687,982
HSBC Bank
11/18/22
21,541
GBP
775,000
USD
836,272
JPMorgan Chase Bank, N.A.
11/18/22
29,682
GBP
1,854,000
USD
2,052,951
State Street Bank and Trust Co
11/18/22
18,635
USD
221,171
AUD
342,000
JPMorgan Chase Bank, N.A.
11/18/22
2,274
USD
330,332
CAD
429,000
HSBC Bank
11/18/22
19,774
USD
148,617
CAD
204,000
JPMorgan Chase Bank, N.A.
11/18/22
940
USD
52,684,362
EUR
51,801,000
Goldman Sachs Bank USA
11/18/22
1,753,438
USD
444,949
EUR
443,000
Goldman Sachs Bank USA
11/18/22
9,390
USD
308,560
GBP
266,000
Brown Brothers Harriman & Co
11/18/22
11,342
USD
11,584,623
GBP
10,377,000
Goldman Sachs Bank USA
11/18/22
(10,221)
USD
82,370,622
GBP
70,319,000
JPMorgan Chase Bank, N.A.
11/18/22
3,798,984
TOTAL FORWARD FOREIGN CURRENCY CONTRACTS
11,512,451
Unrealized Appreciation
11,645,708
Unrealized Depreciation
(133,257)
Credit Default Swaps
Underlying Reference
Maturity
Date
Clearinghouse /
Counterparty
Fixed
Payment
Received/
(Paid)
Payment
Frequency
Notional
Amount(1)
Value ($)
Upfront
Premium
Received/
(Paid) ($)
Unrealized
Appreciation/
(Depreciation) ($)
Buy Protection
Intesa Sanpaolo SpA
Dec 2026
JPMorgan Chase Bank, N.A.
(1%)
Quarterly
EUR
4,800,000
62,845
105,873
168,718
TOTAL CREDIT DEFAULT SWAPS
62,845
105,873
168,718
(1)Notional amount is stated in U.S. Dollars unless otherwise noted
Currency Abbreviations
AUD
-
Australian dollar
CAD
-
Canadian dollar
EUR
-
European Monetary Unit
GBP
-
British pound sterling
USD
-
U.S. dollar
Categorizations in the Schedule of Investments are based on country or territory of incorporation.
Legend
(a)
Amount is stated in United States dollars unless otherwise noted.
(b)
Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end.
(c)
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 end of the period, the value of these securities amounted to $16,058,208 or 3.7% of net assets.
(d)
Security is perpetual in nature with no stated maturity date.
(e)
Security or a portion of the security was pledged to cover margin requirements for futures contracts. At period end, the value of securities pledged amounted to $3,294,480.
(f)
Security or a portion of the security has been segregated as collateral for open forward foreign currency contracts. At period end, the value of securities pledged amounted to $309,738.
(g)
Coupon is indexed to a floating interest rate which may be multiplied by a specified factor and/or subject to caps or floors.
(h)
Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
Affiliated Central Funds
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
Affiliate
Value,
beginning
of period ($)
Purchases ($)
Sales
Proceeds ($)
Dividend
Income ($)
Realized
Gain (loss) ($)
Change in
Unrealized
appreciation
(depreciation) ($)
Value,
end
of period ($)
%ownership,
end
of period
Fidelity Cash Central Fund 3.10%
41,502,042
167,246,919
171,836,176
262,055
-
-
36,912,785
0.1%
Fidelity Securities Lending Cash Central Fund 3.10%
-
13,265,964
13,265,964
15,319
-
-
-
0.0%
Total
41,502,042
180,512,883
185,102,140
277,374
-
-
36,912,785
Amounts in the income column in the above table include any capital gain distributions from underlying funds.
Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Investment Valuation
Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. Securities transactions are accounted for as of trade date. The Board of Directors (the Board) has designated the Fund's investment adviser as the valuation designee responsible for the fair valuation function and performing fair value determinations as needed. The investment adviser has established a Fair Value Committee (the Committee) to carry out the day-to-day fair valuation responsibilities and has adopted policies and procedures to govern the fair valuation process and the activities of the Committee. In accordance with these fair valuation policies and procedures, which have been approved by the Board, the Fund attempts to obtain prices from one or more third party pricing services or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with the policies and procedures. Factors used in determining fair value vary by investment type and may include market or investment specific events, transaction data, estimated cash flows, and market observations of comparable investments. The frequency that the fair valuation procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee manages the Fund's fair valuation practices and maintains the fair valuation policies and procedures. The Fund's investment adviser reports to the Board information regarding the fair valuation process and related material matters.
The inputs to valuation techniques used to value investments are categorized into a disclosure hierarchy consisting of three levels as shown below:
Level 1 - Unadjusted quoted prices in active markets for identical investments
Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
Level 3 - unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing services or from brokers who make markets in such securities.Nonconvertible Bonds, U.S. Government and Government Agency Obligations, Foreign Government and Government Agency Obligations and Preferred Securities are valued by pricing services who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing services. For foreign debt securities, when significant market or security specific events arise, valuations may be determined in good faith in accordance with procedures adopted by the Board. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Swaps are marked-to-market daily based on valuations from third party pricing services, registered derivatives clearing organizations (clearinghouses) or broker-supplied valuations. These pricing sources may utilize inputs such as interest rate curves, credit spread curves, default possibilities and recovery rates. When independent prices are unavailable or unreliable, swaps may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing services. Swaps are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
The U.S. dollar value of forward foreign currency contracts is determined using currency exchange rates supplied by a pricing service and are categorized as Level 2 in the hierarchy.
Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded and are categorized as Level 1 in the hierarchy.
Options traded over-the-counter are valued using service or broker-supplied valuations and are categorized as Level 2 in the hierarchy.
Investments in any open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Derivative Instruments
Risk Exposures and the Use of Derivative Instruments: The Fund's investment objectives allow the Fund to enter into various types of derivative contracts. Derivatives are investments whose value is primarily derived from underlying assets, indices or reference rates and may be transacted on an exchange or over-the-counter (OTC). Derivatives may involve a future commitment to buy or sell a specified asset based on specified terms, to exchange future cash flows at periodic intervals based on a notional principal amount, or for one party to make one or more payments upon the occurrence of specified events in exchange for periodic payments from the other party.
The Fund used derivatives to increase returns, to gain exposure to certain types of assets and/or to manage exposure to certain risks as defined below. The success of any strategy involving derivatives depends on analysis of numerous economic factors, and if the strategies for investment do not work as intended, the Fund may not achieve its objectives.
The Fund's use of derivatives increased or decreased its exposure to the following risk(s):
Credit Risk - Credit risk relates to the ability of the issuer of a financial instrument to make further principal or interest payments on an obligation or commitment that it has to the Fund.
Foreign Exchange Risk - Foreign exchange rate risk relates to fluctuations in the value of an asset or liability due to changes in currency exchange rates.
Interest Rate Risk - Interest rate risk relates to the fluctuations in the value of interest-bearing securities due to changes in the prevailing levels of market interest rates.
The Fund is also exposed to additional risks from investing in derivatives, such as liquidity risk and counterparty credit risk. Liquidity risk is the risk that the Fund will be unable to close out the derivative in the open market in a timely manner. Counterparty credit risk is the risk that the counterparty will not be able to fulfill its obligation to the Fund.
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain OTC derivatives, the Fund attempts to reduce its exposure to counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement with each of its counterparties. The ISDA Master Agreement gives the Fund the right to terminate all transactions traded under such agreement upon the deterioration in the credit quality of the counterparty beyond specified levels. The ISDA Master Agreement gives each party the right, upon an event of default by the other party or a termination of the agreement, to close out all transactions traded under such agreement and to net the amounts owed under each transaction to one net payable by one party to the other. To mitigate counterparty credit risk on bi-lateral OTC derivatives, the Fund receives collateral in the form of cash or securities once the Fund's net unrealized appreciation on outstanding derivative contracts under an ISDA Master Agreement exceeds certain applicable thresholds, subject to certain minimum transfer provisions. The collateral received is held in segregated accounts with the Fund's custodian bank in accordance with the collateral agreements entered into between the Fund, the counterparty and the Fund's custodian bank. The Fund could experience delays and costs in gaining access to the collateral even though it is held by the Fund's custodian bank. The Fund's maximum risk of loss from counterparty credit risk related to bi-lateral OTC derivatives is generally the aggregate unrealized appreciation and unpaid counterparty payments in excess of any collateral pledged by the counterparty to the Fund. For OTC written options with upfront premiums received, the Fund is obligated to perform and therefore does not have counterparty risk. For OTC written options with premiums to be received at a future date, the maximum risk of loss from counterparty credit risk is the amount of the premium in excess of any collateral pledged by the counterparty. The Fund may be required to pledge collateral for the benefit of the counterparties on bi-lateral OTC derivatives in an amount not less than each counterparty's unrealized appreciation on outstanding derivative contracts, subject to certain minimum transfer provisions, and any such pledged collateral is identified in the Schedule of Investments. Exchange-traded contracts are not covered by the ISDA Master Agreement; however counterparty credit risk related to these contracts may be mitigated by the protection provided by the exchange on which they trade. Counterparty credit risk related to centrally cleared OTC swaps may be mitigated by the protection provided by the clearinghouse.
Investing in derivatives may involve greater risks than investing in the underlying assets directly and, to varying degrees, may involve risk of loss in excess of any initial investment and collateral received. In addition, there may be the risk that the change in value of the derivative contract does not correspond to the change in value of the underlying instrument.
Forward Foreign Currency Contracts: Forward foreign currency contracts represent obligations to purchase or sell foreign currency on a specified future date at a price fixed at the time the contracts are entered into.
The Fund used forward foreign currency contracts to facilitate transactions in foreign-denominated securities and to manage exposure to certain foreign currencies.
Open forward foreign currency contracts at period end are presented in the Schedule of Investments under the caption "Forward Foreign Currency Contracts." The contract amount and unrealized appreciation (depreciation) reflects each contract's exposure to the underlying currency at period end.
Futures Contracts: A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a specified price at a specified future date.
The Fund used futures contracts to manage its exposure to the bond market and fluctuations in interest rates.
Open futures contracts at period end are presented in the Schedule of Investments under the caption "Futures Contracts". The underlying face amount at value reflects each contract's exposure to the underlying instrument or index at period end. Any securities and/or cash deposited to meet initial margin requirements are identified in the Schedule of Investments.
Options: Options give the purchaser the right, but not the obligation, to buy (call) or sell (put) an underlying security or financial instrument at an agreed exercise or strike price between or on certain dates. Options obligate the seller (writer) to buy (put) or sell (call) an underlying instrument at the exercise or strike price or cash settle an underlying derivative instrument if the holder exercises the option on or before the expiration date.
The Fund used OTC options, such as swaptions, which are options where the underlying instrument is a swap, to manage its exposure to fluctuations in interest rates and/or potential credit events.
Open options at period end are presented in the Schedule of Investments under the captions "Purchased Options," "Purchased Swaptions," "Written Options" and "Written Swaptions." Writing puts and buying calls tend to increase exposure to the underlying instrument while buying puts and writing calls tend to decrease exposure to the underlying instrument. For purchased options, risk of loss is limited to the premium paid, and for written options, risk of loss is the change in value in excess of the premium received.
Swaps: A swap is a contract between two parties to exchange future cash flows at periodic intervals based on a notional principal amount.
A bi-lateral OTC swap is a transaction between a fund and a dealer counterparty where cash flows are exchanged between the two parties for the life of the swap.
Credit Default Swaps: Credit default swaps enable the Fund to buy or sell protection against specified credit events on a single-name issuer or a traded credit index. Under the terms of a credit default swap the buyer of protection (buyer) receives credit protection in exchange for making periodic payments to the seller of protection (seller) based on a fixed percentage applied to a notional principal amount. In return for these payments, the seller will be required to make a payment upon the occurrence of one or more specified credit events. The Fund enters into credit default swaps as a seller to gain credit exposure to an issuer and/or as a buyer to obtain a measure of protection against defaults of an issuer. Periodic payments are made over the life of the contract by the buyer provided that no credit event occurs. For credit default swaps on most corporate and sovereign issuers, credit events include bankruptcy, failure to pay or repudiation/moratorium. For credit default swaps on corporate or sovereign issuers, the obligation that may be put to the seller is not limited to the specific reference obligation described in the Schedule of Investments. For credit default swaps on asset-backed securities, a credit event may be triggered by events such as failure to pay principal, maturity extension, rating downgrade or write-down. For credit default swaps on asset-backed securities, the reference obligation described represents the security that may be put to the seller. For credit default swaps on a traded credit index, a specified credit event may affect all or individual underlying securities included in the index. Typically, the value of each credit default swap and credit rating disclosed for each reference obligation in the Schedule of Investments, where the Fund is the seller, can be used as measures of the current payment/performance risk of the swap. As the value of the swap changes as a positive or negative percentage of the total notional amount, the payment/performance risk may decrease or increase, respectively. In addition to these measures, FMR monitors a variety of factors including cash flow assumptions, market activity and market sentiment as part of its ongoing process of assessing payment/ performance risk.
Open swaps at period end are included in the Schedule of Investments under the caption Credit Default Swaps, Interest Rate Swaps and/or Total Return Swaps, as applicable.
For additional information on the Fund's significant accounting policies, please refer to the Fund's most recent semiannual or annual shareholder report.
The fund's schedule of investments as of the date on the cover of this report has not been audited. This report is provided for the general information of the fund's shareholders. For more information regarding the fund and its holdings, please see the fund's most recent prospectus and annual report.
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