UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4085
Fidelity Income Fund
(Exact name of registrant as specified in charter)
245 Summer St., Boston, Massachusetts 02210
(Address of principal executive offices) (Zip code)
Scott C. Goebel, Secretary
245 Summer St.
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-563-7000
Date of fiscal year end: | July 31 |
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Date of reporting period: | July 31, 2013 |
This report on Form N-CSR relates solely to the Registrant's Fidelity GNMA Fund and Fidelity Ultra-Short Bond Fund series (each, a "Fund" and collectively, the "Funds").
Item 1. Reports to Stockholders
Fidelity® GNMA Fund
Annual Report
July 31, 2013
(Fidelity Cover Art)
Contents
Performance | How the fund has done over time. | |
Management's Discussion of Fund Performance | The Portfolio Managers' review of fund performance and strategy. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm |
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Trustees and Officers |
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Distributions |
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To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov. You may also call 1-800-544-8544 to request a free copy of the proxy voting guidelines.
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 LLC or an affiliated company. © 2013 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.advisor.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund's distributions from dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2013 | Past 1 | Past 5 | Past 10 |
Fidelity® GNMA Fund | -2.57% | 5.30% | 4.87% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® GNMA Fund on July 31, 2003. The chart shows how the value of your investment would have changed, and also shows how the Barclays® GNMA Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Market Recap: A steep late-spring sell-off pushed U.S. taxable investment-grade bonds into the red for the 12 months ending July 31, 2013, amid the prospect of higher interest rates. The Barclays® U.S. Aggregate Bond Index returned -1.91% for the period, with most of the damage in May and June, in response to signals from the Federal Reserve that it could begin to taper its stimulative bond-buying programs prior to year-end. The bond market suffered significant investor outflows, causing the sell-off to feed upon itself. Prior to that, "quantitative easing" had provided a positive tone for the market. Shifting expectations for global economic growth also influenced the market, with comparatively strong data in May and June tempering investor demand for bonds. Among sectors that comprise the index, U.S. Treasuries and mortgage-backed securities - widely viewed as most vulnerable to a cessation of government-bond-buying programs - fared worst, returning -2.72% and -1.98%, respectively, while government-agency securities returned -1.18%. Corporate bonds delivered sluggish performance (-1%), hurt by rising interest rates and investors' aversion to riskier assets at period end. Thanks largely to their higher yields and solid first-half appreciation, commercial mortgage- backed securities fared best, rising 2.54%.
Comments from William Irving and Franco Castagliuolo, Lead Portfolio Manager and Co-Portfolio Manager, respectively, of Fidelity® GNMA Fund: For the year, the fund returned -2.57%, while the Barclays GNMA Index returned -3.02%. Despite increased uncertainty and volatility in the GNMA market, we continued to adhere to our disciplined investment approach, attempting to exploit market inefficiencies based on our top-down research and seeking to identify attractively priced securities. We kept the fund's duration - a measure of its sensitivity to interest rates - in line with the benchmark. To do so, we occasionally used interest-rate swaps, which allowed us to manage the fund's duration without selling securities that we deemed to be attractively priced. Although the fund's return was disappointing on an absolute basis, our investment approach helped the fund outpace the index. Throughout much of the period, our decision to overweight GNMA securities that were insulated from from faster prepayments was a plus, as these securities generally outperformed the market overall. However, this focus on prepayment-resistant securities put the fund at a distinct disadvantage in May, June and July, when prepayment-resistant securities underperformed. Importantly, the fund's duration had lengthened significantly by the end of the period, as a result of higher interest rates and thus, slower prepayments.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2013 to July 31, 2013).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| Annualized | Beginning | Ending | Expenses Paid |
Actual | .45% | $ 1,000.00 | $ 974.50 | $ 2.20 |
Hypothetical A |
| $ 1,000.00 | $ 1,022.56 | $ 2.26 |
A 5% return per year before expenses
B Annualized expense ratio reflects expenses net of applicable fee waivers.
* Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annual Report
Investment Changes (Unaudited)
Coupon Distribution as of July 31, 2013 | ||
| % of fund's investments | % of fund's investments |
Zero coupon bonds | 0.0 | 0.4 |
0.01 - 0.99% | 4.2 | 4.8 |
1 - 1.99% | 0.0 † | 0.0 † |
2 - 2.99% | 1.8 | 1.0 |
3 - 3.99% | 27.4 | 18.6 |
4 - 4.99% | 28.1 | 35.1 |
5 - 5.99% | 18.5 | 21.4 |
6 - 6.99% | 4.8 | 7.2 |
7% and over | 1.1 | 1.1 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Weighted Average Maturity as of July 31, 2013 | ||
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| 6 months ago |
Years | 4.7 | 3.8* |
This is a weighted average of all the maturities of the securities held in a fund. Weighted Average Maturity (WAM) can be used as a measure of sensitivity to interest rate changes and market changes. Generally, the longer the maturity, the greater the sensitivity to such changes. WAM is based on the dollar-weighted average length of time until principal payments must be paid. Depending on the types of securities held in a fund, certain maturity shortening devices (e.g., demand features, interest rate resets, and call options) may be taken into account when calculating the WAM. |
* Amount has been restated to reflect adjustments to the maturities of certain securities used in the calculation of the WAM. |
Duration as of July 31, 2013 | ||
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| 6 months ago |
Years | 5.8 | 3.1 |
Duration is a measure of a security's price sensitivity to changes in interest rates. Duration differs from maturity in that it considers a security's interest payments in addition to the amount of time until the security reaches maturity, and also takes into account certain maturity shortening features (e.g., demand features, interest rate resets, and call options) when applicable. Securities with longer durations generally tend to be more sensitive to interest rate changes than securities with shorter durations. A fund with a longer average duration generally can be expected to be more sensitive to interest rate changes than a fund with a shorter average duration. |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2013** | As of January 31, 2013*** | ||||||
![]() | Mortgage |
| ![]() | Mortgage |
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![]() | CMOs and Other Mortgage Related Securities 16.0% |
| ![]() | CMOs and Other Mortgage Related Securities 15.0% |
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![]() | U.S. |
| ![]() | U.S. |
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![]() | Short-Term |
| ![]() | Short-Term |
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** GNMA Securities | 112.5% |
| *** GNMA Securities | 105.2% |
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** Futures and Swaps | (3.7)% |
| *** Futures and Swaps | (2.1)% |
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† Amount represents less than 0.1%
†† Includes NCUA Guaranteed Notes
††† Short-Term Investments and Net Other Assets (Liabilities) are not included in the pie chart.
Percentages in the above tables are adjusted for the effect of TBA Sale Commitments. |
Annual Report
Investments July 31, 2013
Showing Percentage of Net Assets
U.S. Government and Government Agency Obligations - 0.7% | ||||
| Principal Amount (000s) | Value (000s) | ||
Other Government Related - 0.7% | ||||
National Credit Union Administration Guaranteed Notes: | ||||
Series 2010-A1 Class A, 0.5433% 12/7/20 (NCUA Guaranteed) (c) | $ 10,778 | $ 10,789 | ||
Series 2010-R2 Class 1A, 0.5633% 11/6/17 (NCUA Guaranteed) (c) | 20,860 | 20,808 | ||
Series 2011-R1 Class 1A, 0.6448% 1/8/20 (NCUA Guaranteed) (c) | 18,580 | 18,679 | ||
Series 2011-R4 Class 1A, 0.5733% 3/6/20 (NCUA Guaranteed) (c) | 9,386 | 9,420 | ||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $59,615) | 59,696 | |||
U.S. Government Agency - Mortgage Securities - 106.8% | ||||
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Fannie Mae - 2.6% | ||||
2.01% 2/1/33 (c) | 109 | 113 | ||
2.035% 3/1/35 (c) | 114 | 119 | ||
2.039% 12/1/34 (c) | 117 | 122 | ||
2.05% 9/1/33 (c) | 1,224 | 1,282 | ||
2.054% 10/1/33 (c) | 66 | 69 | ||
2.065% 7/1/35 (c) | 44 | 46 | ||
2.175% 3/1/35 (c) | 19 | 19 | ||
2.35% 7/1/36 (c) | 295 | 311 | ||
2.397% 3/1/36 (c) | 573 | 609 | ||
2.528% 10/1/33 (c) | 122 | 129 | ||
2.546% 1/1/35 (c) | 609 | 643 | ||
2.594% 3/1/33 (c) | 291 | 307 | ||
2.597% 9/1/34 (c) | 680 | 726 | ||
2.605% 7/1/34 (c) | 74 | 78 | ||
2.608% 7/1/34 (c) | 1,148 | 1,223 | ||
2.614% 6/1/47 (c) | 374 | 399 | ||
2.634% 11/1/36 (c) | 603 | 644 | ||
2.733% 8/1/35 (c) | 762 | 813 | ||
2.785% 5/1/35 (c) | 816 | 868 | ||
3.045% 8/1/35 (c) | 1,749 | 1,874 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value (000s) | ||
Fannie Mae - continued | ||||
4% 10/1/25 | $ 496 | $ 525 | ||
4% 8/1/43 (a) | 68,300 | 70,984 | ||
4% 8/1/43 (a) | 23,400 | 24,320 | ||
4.5% 8/1/43 (a) | 100,000 | 105,984 | ||
5.5% 12/1/17 to 3/1/20 | 1,452 | 1,543 | ||
6.5% 10/1/17 | 97 | 105 | ||
7% 11/1/16 to 3/1/17 | 491 | 528 | ||
7.5% 2/1/14 to 4/1/17 | 116 | 123 | ||
8.5% 12/1/27 | 109 | 129 | ||
9.5% 9/1/30 | 15 | 17 | ||
10.25% 10/1/18 | 4 | 4 | ||
11.5% 2/1/15 | 3 | 3 | ||
12.5% 10/1/15 to 7/1/16 | 7 | 7 | ||
| 214,666 | |||
Freddie Mac - 0.3% | ||||
2.105% 12/1/35 (c) | 575 | 604 | ||
2.167% 6/1/33 (c) | 658 | 690 | ||
2.229% 3/1/37 (c) | 95 | 99 | ||
2.369% 12/1/35 (c) | 4,824 | 5,109 | ||
2.375% 5/1/37 (c) | 157 | 167 | ||
2.403% 6/1/33 (c) | 1,960 | 2,075 | ||
2.432% 10/1/35 (c) | 577 | 611 | ||
2.48% 10/1/36 (c) | 782 | 833 | ||
2.53% 11/1/35 (c) | 557 | 582 | ||
2.565% 3/1/35 (c) | 2,987 | 3,183 | ||
2.629% 4/1/36 (c) | 693 | 743 | ||
2.641% 7/1/35 (c) | 544 | 570 | ||
2.784% 6/1/33 (c) | 1,829 | 1,956 | ||
2.985% 8/1/34 (c) | 224 | 239 | ||
3.023% 3/1/33 (c) | 20 | 21 | ||
5.5% 7/1/24 to 1/1/25 | 2,088 | 2,270 | ||
8.5% 10/1/18 to 6/1/25 | 21 | 25 | ||
9% 7/1/18 to 3/1/20 | 2 | 2 | ||
9.5% 7/1/30 | 51 | 57 | ||
10% 4/1/15 to 7/1/18 | 30 | 33 | ||
10.25% 11/1/16 | 3 | 3 | ||
12% 6/1/15 | 2 | 2 | ||
12.5% 5/1/15 | 3 | 3 | ||
13% 5/1/14 to 11/1/14 | 0* | 0* | ||
13.5% 9/1/14 | 0* | 0* | ||
| 19,877 | |||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Ginnie Mae - 103.9% | ||||
2.5% 2/20/41 to 2/15/43 | $ 181,022 | $ 167,764 | ||
3% 4/20/27 to 7/15/43 | 342,018 | 336,889 | ||
3% 6/15/43 | 26 | 26 | ||
3% 6/15/43 | 55 | 54 | ||
3% 8/1/43 (a) | 130,000 | 127,390 | ||
3% 8/1/43 (a) | 379,300 | 371,625 | ||
3% 8/1/43 (a) | 252,100 | 246,999 | ||
3% 8/1/43 (a) | 182,900 | 179,199 | ||
3.5% 4/15/25 to 7/15/43 | 629,483 | 643,846 | ||
3.5% 3/15/42 | 378 | 386 | ||
3.5% 8/1/43 (a) | 350,000 | 356,562 | ||
3.5% 8/1/43 (a) | 280,900 | 286,167 | ||
3.5% 8/1/43 (a) | 175,000 | 178,281 | ||
3.5% 8/1/43 (a) | 175,000 | 178,281 | ||
4% 12/15/24 to 5/15/42 (b) | 1,048,066 | 1,099,229 | ||
4% 8/1/43 (a) | 94,900 | 99,119 | ||
4% 8/1/43 (a) | 54,550 | 56,975 | ||
4% 8/1/43 (a) | 35,000 | 36,556 | ||
4% 8/1/43 (a) | 32,100 | 33,527 | ||
4% 8/1/43 (a) | 28,100 | 29,349 | ||
4% 8/1/43 (a) | 1,800 | 1,880 | ||
4% 8/1/43 (a) | 42,200 | 44,076 | ||
4% 8/1/43 (a) | 68,300 | 71,336 | ||
4% 8/1/43 (a) | 68,300 | 71,336 | ||
4% 8/1/43 (a) | 23,400 | 24,440 | ||
4% 8/1/43 (a) | 15,600 | 16,293 | ||
4% 8/1/43 (a) | 68,400 | 71,441 | ||
4% 8/1/43 (a) | 100,000 | 104,445 | ||
4.3% 8/20/61 (f) | 10,715 | 11,597 | ||
4.497% 1/20/62 (f) | 8,443 | 9,242 | ||
4.5% 3/15/25 to 3/15/42 | 1,580,930 | 1,690,425 | ||
4.5% 8/1/43 (a) | 20,300 | 21,550 | ||
4.564% 11/20/61 (f) | 9,866 | 10,802 | ||
4.616% 1/20/62 (f) | 8,666 | 9,464 | ||
4.649% 2/20/62 (f) | 7,020 | 7,722 | ||
4.682% 2/20/62 (f) | 9,406 | 10,353 | ||
4.875% 9/15/39 to 12/15/39 | 17,503 | 18,855 | ||
5% 8/15/18 to 9/15/41 | 915,320 | 995,553 | ||
5% 11/15/38 | 967 | 1,045 | ||
5% 12/15/38 | 15 | 17 | ||
5% 4/15/39 | 17 | 19 | ||
5% 10/15/40 | 332 | 359 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Ginnie Mae - continued | ||||
5.35% 4/20/29 to 12/20/30 | $ 22,466 | $ 24,758 | ||
5.391% 11/20/59 (f) | 66,341 | 72,381 | ||
5.5% 12/20/18 to 3/20/40 | 240,690 | 265,049 | ||
6% 8/15/17 to 5/15/39 | 326,119 | 365,282 | ||
6.45% 10/15/31 to 11/15/32 | 1,000 | 1,134 | ||
6.5% 5/15/23 to 1/15/39 | 45,537 | 52,198 | ||
7% 12/20/16 to 9/20/34 | 38,929 | 44,797 | ||
7.25% 9/15/27 | 54 | 62 | ||
7.395% 6/20/25 to 11/20/27 | 999 | 1,154 | ||
7.5% 5/15/17 to 9/20/32 | 16,164 | 18,762 | ||
8% 8/15/18 to 9/15/31 | 4,276 | 5,001 | ||
8.5% 5/15/16 to 2/15/31 | 800 | 880 | ||
9% 5/15/14 to 5/15/30 | 542 | 618 | ||
9.5% 12/20/15 to 4/20/17 | 100 | 106 | ||
10.5% 1/15/14 to 10/15/18 | 99 | 107 | ||
13% 9/15/13 to 1/15/15 | 2 | 2 | ||
13.5% 1/15/15 | 1 | 1 | ||
| 8,472,766 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $8,717,112) | 8,707,309 | |||
Collateralized Mortgage Obligations - 16.0% | ||||
| ||||
U.S. Government Agency - 16.0% | ||||
Fannie Mae: | ||||
floater Series 2008-76 Class EF, 0.69% 9/25/23 (c) | 3,328 | 3,344 | ||
planned amortization class Series G93-32 Class PJ, 6.75% 9/25/23 | 4,865 | 5,578 | ||
sequential payer Series 2010-50 Class FA, 0.54% 1/25/24 (c) | 1,388 | 1,393 | ||
Series 2003-39 Class IA, 5.5% 10/25/22 (c)(d) | 198 | 5 | ||
Fannie Mae Stripped Mortgage-Backed Securities: | ||||
Series 331 Class 12, 6.5% 2/1/33 (d) | 773 | 138 | ||
Series 339 Class 5, 5.5% 8/1/33 (d) | 1,074 | 144 | ||
Series 343 Class 16, 5.5% 5/1/34 (d) | 858 | 122 | ||
Freddie Mac: | ||||
floater planned amortization class Series 3153 Class FX, 0.541% 5/15/36 (c) | 9,479 | 9,490 | ||
planned amortization class: | ||||
Series 2220 Class PD, 8% 3/15/30 | 1,451 | 1,714 | ||
Series 40 Class K, 6.5% 8/17/24 | 542 | 614 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Freddie Mac: - continued | ||||
sequential payer: | ||||
Series 2204 Class N, 7.5% 12/20/29 | $ 2,949 | $ 3,475 | ||
Series 2601 Class TI, 5.5% 10/15/22 (d) | 680 | 16 | ||
Ginnie Mae guaranteed Multi-family REMIC pass-thru securities sequential payer Series 2002-71 Class Z, 5.5% 10/20/32 | 15,588 | 17,332 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
floater: | ||||
Series 2001-22 Class FM, 0.5415% 5/20/31 (c) | 285 | 286 | ||
Series 2002-41 Class HF, 0.5919% 6/16/32 (c) | 298 | 300 | ||
Series 2007-37 Class TS, 6.4981% 6/16/37 (c)(d)(e) | 4,148 | 774 | ||
Series 2008-51 Class FE, 0.9419% 6/16/38 (c) | 932 | 945 | ||
Series 2008-57 Class AF, 0.7715% 7/20/38 (c) | 3,583 | 3,626 | ||
Series 2010-130 Class KF, 0.8419% 10/16/40 (c) | 6,836 | 6,938 | ||
Series 2010-H03 Class FA, 0.7444% 3/20/60 (c)(f) | 35,425 | 35,290 | ||
Series 2010-H17 Class FA, 0.5244% 7/20/60 (c)(f) | 20,493 | 20,226 | ||
Series 2010-H18 Class AF, 0.494% 9/20/60 (c)(f) | 21,889 | 21,614 | ||
Series 2010-H19 Class FG, 0.494% 8/20/60 (c)(f) | 28,931 | 28,576 | ||
Series 2010-H27 Series FA, 0.574% 12/20/60 (c)(f) | 7,488 | 7,420 | ||
Series 2011-H05 Class FA, 0.694% 12/20/60 (c)(f) | 14,068 | 14,025 | ||
Series 2011-H07 Class FA, 0.694% 2/20/61 (c)(f) | 5,414 | 5,398 | ||
Series 2011-H12 Class FA, 0.684% 2/20/61 (c)(f) | 31,246 | 31,137 | ||
Series 2011-H13 Class FA, 0.694% 4/20/61 (c)(f) | 12,560 | 12,522 | ||
Series 2011-H14: | ||||
Class FB, 0.694% 5/20/61 (c)(f) | 14,221 | 14,173 | ||
Class FC, 0.694% 5/20/61 (c)(f) | 13,779 | 13,735 | ||
Series 2011-H17 Class FA, 0.724% 6/20/61 (c)(f) | 18,950 | 18,895 | ||
Series 2011-H21 Class FA, 0.794% 10/20/61 (c)(f) | 21,101 | 21,128 | ||
Series 2012-H01 Class FA, 0.894% 11/20/61 (c)(f) | 17,809 | 17,914 | ||
Series 2012-H03 Class FA, 0.894% 1/20/62 (c)(f) | 11,059 | 11,125 | ||
Series 2012-H06 Class FA, 0.824% 1/20/62 (c)(f) | 17,651 | 17,698 | ||
Series 2012-H07 Class FA, 0.824% 3/20/62 (c)(f) | 10,259 | 10,285 | ||
Series 2012-H26, Class CA, 0.724% 7/20/60 (c)(f) | 47,191 | 47,391 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass-thru certificates: - continued | ||||
planned amortization class: | ||||
Series 1993-13 Class PD, 6% 5/20/29 | $ 5,496 | $ 6,134 | ||
Series 2002-50 Class PE, 6% 7/20/32 | 6,651 | 7,447 | ||
Series 2003-54 Class UE, 5% 6/20/33 | 31,040 | 34,121 | ||
Series 2003-70 Class LE, 5% 7/20/32 | 20,273 | 21,167 | ||
Series 2004-19 Class DP, 5.5% 3/20/34 | 1,668 | 1,767 | ||
Series 2004-64 Class KE, 5.5% 12/20/33 | 10,414 | 11,029 | ||
Series 2005-24 Class TC, 5.5% 3/20/35 | 5,403 | 6,118 | ||
Series 2005-54 Class BM, 5% 7/20/35 | 8,887 | 8,987 | ||
Series 2005-57 Class PB, 5.5% 7/20/35 | 5,673 | 6,404 | ||
Series 2006-50 Class JC, 5% 6/20/36 | 9,132 | 10,023 | ||
Series 2007-2 Class PC, 5.5% 6/20/35 | 21,510 | 23,189 | ||
Series 2008-28 Class PC, 5.5% 4/20/34 | 18,652 | 21,072 | ||
Series 2010-117 Class E, 3% 10/20/39 | 10,076 | 9,682 | ||
Series 2011-136 Class WI, 4.5% 5/20/40 (d) | 7,212 | 1,410 | ||
Series 2011-52 Class PA, 4.25% 2/16/41 | 51,807 | 55,517 | ||
sequential payer: | ||||
Series 1998-23 Class ZB, 6.5% 6/20/28 | 2,686 | 3,097 | ||
Series 2001-33 Class SD, 7.8585% 7/20/31 (c)(d)(e) | 602 | 141 | ||
Series 2001-40 Class Z, 6% 8/20/31 | 2,585 | 2,860 | ||
Series 2001-49 Class Z, 7% 10/16/31 | 1,301 | 1,504 | ||
Series 2002-18 Class ZB, 6% 3/20/32 | 2,540 | 2,834 | ||
Series 2002-24 Class SK, 7.7581% 4/16/32 (c)(d)(e) | 1,500 | 358 | ||
Series 2002-29: | ||||
Class SK, 8.25% 5/20/32 (c)(e) | 154 | 169 | ||
Class Z, 6.5% 5/16/32 | 3,520 | 4,049 | ||
Series 2002-33 Class ZJ, 6.5% 5/20/32 | 2,288 | 2,642 | ||
Series 2002-42 Class ZA, 6% 6/20/32 | 1,673 | 1,870 | ||
Series 2002-43 Class Z, 6.5% 6/20/32 | 4,299 | 4,959 | ||
Series 2002-45 Class Z, 6% 6/20/32 | 941 | 1,056 | ||
Series 2002-49 Class ZA, 6.5% 7/20/32 | 14,692 | 16,969 | ||
Series 2003-75 Class ZA, 5.5% 9/20/33 | 6,206 | 6,859 | ||
Series 2004-24 Class ZM, 5% 4/20/34 | 9,075 | 10,204 | ||
Series 2004-46 Class BZ, 6% 6/20/34 | 7,600 | 8,471 | ||
Series 2004-65 Class VE, 5.5% 7/20/15 | 1,347 | 1,406 | ||
Series 2004-86 Class G, 6% 10/20/34 | 6,273 | 7,380 | ||
Series 2005-28 Class AJ, 5.5% 4/20/35 | 19,841 | 21,478 | ||
Series 2005-47 Class ZY, 6% 6/20/35 | 6,489 | 7,885 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass-thru certificates: - continued | ||||
sequential payer: | ||||
Series 2005-6 Class EX, 5.5% 11/20/34 | $ 1,001 | $ 1,162 | ||
Series 2005-82 Class JV, 5% 6/20/35 | 3,500 | 3,884 | ||
Series 2008-17 Class BN, 5% 2/20/38 | 16,643 | 17,958 | ||
Series 2009-61 Class AZ, 5.5% 8/20/39 | 77,446 | 82,978 | ||
Series 2010-45 Class TB, 5% 4/16/40 | 107,314 | 117,186 | ||
Series 2011-29 Class BV, 5% 5/20/40 | 10,483 | 11,740 | ||
Series 1998-2 Class SA, 8.3081% 1/16/28 (c)(d) | 818 | 184 | ||
Series 1999-34 Class SC, 8.4081% 9/16/19 (c)(d)(e) | 727 | 78 | ||
Series 1999-40 Class SE, 8.7581% 11/16/29 (c)(d)(e) | 1,352 | 156 | ||
Series 1999-43: | ||||
Class SJ, 7.8081% 11/16/29 (c)(d)(e) | 4,577 | 670 | ||
Class UN, 7.8081% 11/16/29 (c)(d) | 2,441 | 304 | ||
Series 1999-45 Class SC, 8.4081% 12/16/29 (c)(d) | 3,119 | 315 | ||
Series 1999-46 Class SJ, 8.3581% 12/16/29 (c)(d) | 1,551 | 287 | ||
Series 2000-35 Class SA, 7.7581% 12/16/26 (c)(d)(e) | 3,111 | 671 | ||
Series 2000-36 Class S, 7.7581% 11/16/30 (c)(d) | 2,429 | 510 | ||
Series 2000-8: | ||||
Class SA, 8.2581% 1/16/30 (c)(d)(e) | 843 | 94 | ||
Class SB, 8.2581% 1/16/30 (c)(d) | 2,845 | 514 | ||
Series 2001-3 Class S, 7.9081% 2/16/31 (c)(d) | 313 | 66 | ||
Series 2001-36: | ||||
Class SB, 7.9081% 12/16/23 (c)(d)(e) | 1,402 | 270 | ||
Class SP, 8.5581% 9/16/26 (c)(d) | 1,051 | 196 | ||
Series 2001-38 Class SB, 7.3881% 8/16/31 (c)(d)(e) | 753 | 157 | ||
Series 2001-41 Class SG, 8.5581% 9/16/31 (c)(d) | 417 | 73 | ||
Series 2001-46 Class SB, 7.9581% 5/16/23 (c)(d) | 751 | 100 | ||
Series 2001-49: | ||||
Class SC, 7.4081% 12/16/25 (c)(d)(e) | 1,822 | 326 | ||
Class SL, 7.4081% 5/16/30 (c)(d)(e) | 1,994 | 393 | ||
Class SV, 8.0581% 12/16/28 (c)(d)(e) | 1,872 | 217 | ||
Series 2001-50: | ||||
Class SD, 8.0085% 11/20/31 (c)(d)(e) | 1,290 | 294 | ||
Class ST, 7.5081% 8/16/27 (c)(d)(e) | 347 | 72 | ||
Class SV, 9.1081% 9/16/27 (c)(d) | 2,911 | 526 | ||
Series 2001-65 Class SV, 7.9085% 2/20/29 (c)(d)(e) | 3,010 | 688 | ||
Series 2002-21 Class SV, 7.9081% 3/16/32 (c)(d)(e) | 3,960 | 853 | ||
Series 2002-5 Class SP, 7.2581% 1/16/32 (c)(d)(e) | 806 | 157 | ||
Series 2003-23 Class S, 6.3581% 12/16/29 (c)(d)(e) | 3,760 | 635 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass-thru certificates: - continued | ||||
Series 2003-42 Class SH, 6.3585% 5/20/33 (c)(d)(e) | $ 1,527 | $ 278 | ||
Series 2003-92 Class SN, 6.2381% 10/16/33 (c)(d)(e) | 9,402 | 1,471 | ||
Series 2004-32 Class GS, 6.3081% 5/16/34 (c)(d)(e) | 1,084 | 207 | ||
Series 2004-59 Class SC, 7.0081% 8/16/34 (c)(d) | 6,468 | 1,279 | ||
Series 2004-73 Class AL, 7.0081% 8/17/34 (c)(d)(e) | 2,167 | 349 | ||
Series 2005-13 Class SA, 6.6085% 2/20/35 (c)(d)(e) | 15,520 | 2,404 | ||
Series 2005-6 Class EY, 5.5% 11/20/33 | 1,016 | 1,194 | ||
Series 2005-82 Class NS, 6.1085% 7/20/34 (c)(d) | 15,919 | 2,256 | ||
Series 2006-13 Class DS, 10.8127% 3/20/36 (c)(e) | 15,571 | 17,586 | ||
Series 2007-35 Class SC, 39.0484% 6/16/37 (c)(e) | 4,784 | 8,890 | ||
Series 2008-15 Class CI, 6.2985% 2/20/38 (c)(d) | 8,303 | 1,082 | ||
Series 2008-60 Class SH, 5.9581% 7/16/38 (c)(d)(e) | 5,408 | 855 | ||
Series 2008-88 Class BZ, 5.5% 5/20/33 | 46,064 | 50,900 | ||
Series 2009-13 Class E, 4.5% 3/16/39 | 11,935 | 12,688 | ||
Series 2009-42 Class AY, 5% 6/16/37 | 7,985 | 8,682 | ||
Series 2009-76 Class SB, 5.9081% 9/16/39 (c)(d)(e) | 33,917 | 5,054 | ||
Series 2010-167 Class KW, 5% 9/20/36 | 22,004 | 22,878 | ||
Series 2010-H10 Class FA, 0.5244% 5/20/60 (c)(f) | 13,185 | 13,014 | ||
Series 2010-H12 Class PT, 5.47% 11/20/59 (f) | 14,142 | 15,321 | ||
Series 2010-H23 Class PT, 5.4259% 10/20/60 (c)(f) | 73,082 | 81,755 | ||
Series 2011-13 Class S, 5.7581% 1/16/41 (c)(d) | 29,668 | 4,722 | ||
Series 2011-52 Class HI, 7% 4/16/41 (d) | 1,556 | 411 | ||
Series 2012-64: | ||||
Class IA, 5.5% 5/16/42 (d) | 19,814 | 3,090 | ||
Class KB, 3.408% 5/20/41 (c) | 6,699 | 7,475 | ||
Series 2012-76 Class GS, 6.5081% 6/16/42 (c)(d)(e) | 6,783 | 1,104 | ||
Series 2013-116: | ||||
Class PT, 3.5% 12/31/49 (a) | 44,333 | 44,777 | ||
Class SA, 5.9073% 9/15/39 (a)(c)(d)(e) | 88,667 | 14,020 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $1,282,351) | 1,302,500 | |||
Commercial Mortgage Securities - 0.0% | ||||
| Principal Amount (000s) | Value (000s) | ||
Fannie Mae Series 1998-M3 Class IB, 0.7% 1/17/38 (c)(d) | $ 1,135 | $ 16 | ||
Ginnie Mae guaranteed Multi-family REMIC pass-thru securities: | ||||
sequential payer Series 2001-58 Class X, 0.4902% 9/16/41 (c)(d) | 14,398 | 109 | ||
Series 2001-12 Class X, 0.643% 7/16/40 (c)(d) | 7,803 | 150 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
sequential payer Series 2002-81 Class IO, 0.5879% 9/16/42 (c)(d) | 24,534 | 360 | ||
Series 2002-62 Class IO, 1.2186% 8/16/42 (c)(d) | 10,902 | 246 | ||
Series 2002-85 Class X, 0.8102% 3/16/42 (c)(d) | 6,643 | 173 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $12,962) | 1,054 |
Cash Equivalents - 8.7% | |||
Maturity Amount (000s) |
| ||
Investments in repurchase agreements in a joint trading account at 0.07%, dated 7/31/13 due 8/1/13 (Collateralized by U.S. Government Obligations) # | $ 708,857 |
| |
TOTAL INVESTMENT PORTFOLIO - 132.2% (Cost $10,780,896) | 10,779,415 | ||
NET OTHER ASSETS (LIABILITIES) - (32.2)% | (2,625,020) | ||
NET ASSETS - 100% | $ 8,154,395 | ||
TBA Sale Commitments | |||
| Principal Amount (000s) | Value (000s) | |
Fannie Mae | |||
4% 8/1/43 | $ (68,300) | $ (70,984) | |
4% 8/1/43 | (23,400) | (24,320) | |
4.5% 8/1/43 | (100,000) | (105,981) | |
TOTAL FANNIE MAE | (201,285) | ||
Ginnie Mae | |||
3% 8/1/43 | (2,200) | (2,156) | |
3% 8/1/43 | (3,000) | (2,940) | |
3.5% 8/1/43 | (2,600) | (2,649) | |
3.5% 8/1/43 | (3,500) | (3,565) | |
3.5% 8/1/43 | (4,000) | (4,075) | |
4% 8/1/43 | (54,550) | (56,975) | |
4% 8/1/43 | (2,000) | (2,089) | |
4% 8/1/43 | (17,000) | (17,756) | |
4% 8/1/43 | (2,600) | (2,721) | |
4% 8/1/43 | (100,000) | (104,656) | |
4% 9/1/43 | (32,100) | (33,448) | |
4% 9/1/43 | (28,100) | (29,280) | |
4.5% 8/1/43 | (2,900) | (3,079) | |
4.5% 8/1/43 | (12,000) | (12,739) | |
4.5% 8/1/43 | (3,800) | (4,054) | |
4.5% 8/1/43 | (100,000) | (106,688) | |
4.5% 8/1/43 | (100,000) | (106,688) | |
4.5% 8/1/43 | (100,000) | (106,688) | |
5% 8/1/43 | (2,100) | (2,266) | |
5% 8/1/43 | (5,600) | (6,043) | |
TOTAL GINNIE MAE | (610,555) | ||
TOTAL TBA SALE COMMITMENTS (Proceeds $810,504) | $ (811,840) |
Swaps |
Interest Rate Swaps |
Clearinghouse/Counterparty(1) | Expiration Date | Notional Amount | Payment Received | Payment Paid | Value (000s) | Upfront Premium Received/ | Unrealized Appreciation/(Depreciation) (000s) | |
| ||||||||
CME | Jun. 2015 | $ 70,310 | 3-month LIBOR | 0.47% | $ (44) | $ 0 | $ (44) | |
CME | Jun. 2018 | 103,263 | 3-month LIBOR | 1.31% | 838 | 0 | 838 | |
CME | Jul. 2023 | 124,099 | 3-month LIBOR | 2.4% | 4,041 | 0 | 4,041 | |
CME | Jun. 2043 | 1,727 | 3-month LIBOR | 3.25% | 120 | 0 | 120 | |
TOTAL INTEREST RATE SWAPS | $ 4,955 | $ 0 | $ 4,955 |
|
(1) Swaps with CME Group (CME) are centrally cleared over-the-counter (OTC) swaps. |
|
(2) Any premiums for centrally cleared OTC swaps are recorded periodically throughout the term of the swap to variation margin and included in unrealized appreciation (depreciation). |
Legend |
(a) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(b) Security or a portion of the security was pledged to cover margin requirements for centrally cleared OTC swaps. At period end, the value of securities pledged amounted to $8,522,000. |
(c) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
(d) Security represents right to receive monthly interest payments on an underlying pool of mortgages or assets. Principal shown is the outstanding par amount of the pool as of the end of the period. |
(e) Coupon is inversely indexed to a floating interest rate multiplied by a specified factor. The price may be considerably more volatile than the price of a comparable fixed rate security. |
(f) Represents an investment in an underlying pool of reverse mortgages which typically do not require regular principal and interest payments as repayment is deferred until a maturity event. |
* Amount represents less than $1,000.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Investments - continued
# Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement / Counterparty | Value |
$708,856,000 due 8/01/13 at 0.07% | |
BNP Paribas Securities Corp. | $ 176 |
Commerz Markets LLC | 391,071 |
Credit Suisse Securities (USA) LLC | 70,580 |
Deutsche Bank Securities, Inc. | 70,580 |
Mizuho Securities USA, Inc. | 176,449 |
| $ 708,856 |
Other Information |
All investments and derivative instruments are categorized as Level 2 under the Fair Value Hierarchy. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements. |
Value of Derivative Instruments |
The following table is a summary of the Fund's value of derivative instruments by primary risk exposure as of July 31, 2013. For additional information on derivative instruments, please refer to the Derivative Instruments section in the accompanying Notes to Financial Statements. |
Primary Risk Exposure / | Value | |
| Asset | Liability |
Interest Rate Risk | ||
Swaps (a) | $ 4,999 | $ (44) |
Total Value of Derivatives | $ 4,999 | $ (44) |
(a) For centrally cleared OTC swaps, reflects gross cumulative appreciation (depreciation) as presented in the Schedule of Investments. For centrally cleared OTC swaps, only the period end receivable or payable for daily variation margin and net unrealized appreciation (depreciation) are presented in the Statement of Assets and Liabilities. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amount) | July 31, 2013 | |
|
|
|
Assets | ||
Investment in securities, at value (including repurchase agreements of $708,856) - See accompanying schedule: Unaffiliated issuers (cost $10,780,896) |
| $ 10,779,415 |
Cash |
| 1,826 |
Receivable for investments sold |
| 262,131 |
Delayed delivery |
| 4,709 |
Receivable for TBA sale commitments |
| 810,504 |
Receivable for fund shares sold | 2,466 | |
Interest receivable | 29,987 | |
Other receivables | 1,310 | |
Total assets | 11,892,348 | |
|
|
|
Liabilities | ||
Payable for investments purchased | $ 35,504 | |
Delayed delivery | 2,867,205 | |
TBA sale commitments, at value | 811,840 | |
Payable for fund shares redeemed | 17,921 | |
Distributions payable | 942 | |
Accrued management fee | 2,182 | |
Payable for daily variation margin for derivative instruments | 100 | |
Other affiliated payables | 952 | |
Other payables and accrued expenses | 1,307 | |
Total liabilities | 3,737,953 | |
|
|
|
Net Assets | $ 8,154,395 | |
Net Assets consist of: |
| |
Paid in capital | $ 8,254,230 | |
Distributions in excess of net investment income | (23,382) | |
Accumulated undistributed net realized gain (loss) on investments | (78,591) | |
Net unrealized appreciation (depreciation) on investments | 2,138 | |
Net Assets, for 721,406 shares outstanding | $ 8,154,395 | |
Net Asset Value, offering price and redemption price per share ($8,154,395 ÷ 721,406 shares) | $ 11.30 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Amounts in thousands | Year ended July 31, 2013 | |
|
|
|
Investment Income |
|
|
Interest |
| $ 241,610 |
|
|
|
Expenses | ||
Management fee | $ 32,360 | |
Transfer agent fees | 10,299 | |
Fund wide operations fee | 3,647 | |
Independent trustees' compensation | 40 | |
Miscellaneous | 29 | |
Total expenses before reductions | 46,375 | |
Expense reductions | (35) | 46,340 |
Net investment income (loss) | 195,270 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | (41,579) | |
Swaps | (1,032) |
|
Total net realized gain (loss) |
| (42,611) |
Change in net unrealized appreciation (depreciation) on: Investment securities | (405,258) | |
Swaps | 7,929 | |
Delayed delivery commitments | (1,492) |
|
Total change in net unrealized appreciation (depreciation) |
| (398,821) |
Net gain (loss) | (441,432) | |
Net increase (decrease) in net assets resulting from operations | $ (246,162) |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income (loss) | $ 195,270 | $ 263,049 |
Net realized gain (loss) | (42,611) | 186,563 |
Change in net unrealized appreciation (depreciation) | (398,821) | 84,676 |
Net increase (decrease) in net assets resulting | (246,162) | 534,288 |
Distributions to shareholders from net investment income | (191,777) | (263,677) |
Distributions to shareholders from net realized gain | (152,546) | (107,415) |
Total distributions | (344,323) | (371,092) |
Share transactions | 2,405,879 | 4,746,704 |
Reinvestment of distributions | 312,800 | 336,665 |
Cost of shares redeemed | (4,723,232) | (2,522,253) |
Net increase (decrease) in net assets resulting from share transactions | (2,004,553) | 2,561,116 |
Total increase (decrease) in net assets | (2,595,038) | 2,724,312 |
|
|
|
Net Assets | ||
Beginning of period | 10,749,433 | 8,025,121 |
End of period (including distributions in excess of net investment income of $23,382 and distributions in excess of net investment income of $26,714, respectively) | $ 8,154,395 | $ 10,749,433 |
Other Information Shares | ||
Sold | 204,291 | 399,649 |
Issued in reinvestment of distributions | 26,563 | 28,338 |
Redeemed | (406,461) | (212,320) |
Net increase (decrease) | (175,607) | 215,667 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 11.98 | $ 11.78 | $ 11.91 | $ 11.37 | $ 10.86 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) B | .222 | .326 | .376 | .337 | .497 |
Net realized and unrealized gain (loss) | (.520) | .348 | .196 | .660 | .533 |
Total from investment operations | (.298) | .674 | .572 | .997 | 1.030 |
Distributions from net investment income | (.216) | (.330) | (.378) | (.342) | (.520) |
Distributions from net realized gain | (.166) | (.144) | (.324) | (.115) | - |
Total distributions | (.382) | (.474) | (.702) | (.457) | (.520) |
Net asset value, end of period | $ 11.30 | $ 11.98 | $ 11.78 | $ 11.91 | $ 11.37 |
Total Return A | (2.57)% | 5.83% | 5.04% | 8.97% | 9.69% |
Ratios to Average Net Assets C |
|
|
|
|
|
Expenses before reductions | .45% | .45% | .45% | .45% | .45% |
Expenses net of fee waivers, if any | .45% | .45% | .45% | .45% | .45% |
Expenses net of all reductions | .45% | .45% | .45% | .45% | .45% |
Net investment income (loss) | 1.90% | 2.75% | 3.24% | 2.92% | 4.47% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (in millions) | $ 8,154 | $ 10,749 | $ 8,025 | $ 8,252 | $ 6,582 |
Portfolio turnover rate | 363% | 263% | 367% | 540% | 464% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the Fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the Fund during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the Fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2013
(Amounts in thousands except percentages)
1. Organization.
Fidelity GNMA Fund (the Fund) is a fund of Fidelity Income Fund (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
2. Significant Accounting Policies.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. In accordance with valuation policies and procedures approved by the Board of Trustees (the Board), the Fund attempts to obtain prices from one or more third party pricing vendors 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 Fidelity Management & Research Company (FMR) Fair Value Committee (the Committee), in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events, changes in interest rates and credit quality. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and is responsible for approving and reporting to the Board all fair value determinations.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
Level 1 - 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)
Annual Report
2. Significant Accounting Policies - continued
Investment Valuation - continued
Valuation techniques used to value the Fund's investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. For U.S. government and government agency obligations, pricing vendors utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type as well as broker-supplied prices. For collateralized mortgage obligations, commercial mortgage securities and U.S. government agency mortgage securities, pricing vendors utilize matrix pricing which considers prepayment speed assumptions, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity and type as well as broker-supplied prices. Swaps are marked-to-market daily based on valuations from third party pricing vendors, 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, debt securities and swaps may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities and swaps are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Short-term securities with remaining maturities of sixty days or less may be valued at amortized cost, which approximates fair value, and are categorized as Level 2 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and net asset value (NAV) include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.
Expenses. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
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Notes to Financial Statements - continued
(Amounts in thousands except percentages)
2. Significant Accounting Policies - continued
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), independent Trustees may elect to defer receipt of a portion of their annual compensation. Deferred amounts are invested in a cross-section of Fidelity funds, are marked-to-market and remain in the Fund until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting payable to the Trustees are included in the accompanying Statement of Assets and Liabilities.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for income taxes is required. As of July 31, 2013, the Fund did not have any unrecognized tax benefits in the financial statements; nor is the Fund aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. A fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction.
Dividends are declared and recorded daily and paid monthly from net investment income. Distributions from realized gains, if any, are declared and recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. In addition, the Fund claimed a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to swaps, market discount, deferred trustees compensation, financing transactions and losses deferred due to wash sales and excise tax regulations.
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:
Gross unrealized appreciation | $ 138,262 |
Gross unrealized depreciation | (158,055) |
Net unrealized appreciation (depreciation) on securities and other investments | $ (19,793) |
Tax Cost | $ 10,799,208 |
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2. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The Fund intends to elect to defer to its fiscal year ending July 31, 2014 approximately $120,363 of capital losses recognized during the period November 1, 2012 to July 31, 2013.
The tax-based components of distributable earnings as of period end were as follows:
Undistributed long-term capital gain | $ 46,810 |
Net unrealized appreciation (depreciation) | $ (21,129) |
The tax character of distributions paid was as follows:
| July 31, 2013 | July 31, 2012 |
Ordinary Income | $ 293,802 | $ 325,983 |
Long-term Capital Gains | 50,521 | 45,109 |
Total | $ 344,323 | $ 371,092 |
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements may be collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Delayed Delivery Transactions and When-Issued Securities. During the period, the Fund transacted in securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The securities purchased on a delayed delivery or when-issued basis are identified as such in the Fund's Schedule of Investments. The Fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.
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Notes to Financial Statements - continued
(Amounts in thousands except percentages)
2. Significant Accounting Policies - continued
To-Be-Announced (TBA) Securities and Mortgage Dollar Rolls. During the period, the Fund transacted in TBA securities that involved buying or selling mortgage-backed securities (MBS) on a forward commitment basis. A TBA transaction typically does not designate the actual security to be delivered and only includes an approximate principal amount; however delivered securities must meet specified terms defined by industry guidelines, including issuer, rate and current principal amount outstanding on underlying mortgage pools. The Fund may enter into a TBA transaction with the intent to take possession of or deliver the underlying MBS, or the Fund may elect to extend the settlement by entering into either a mortgage or reverse mortgage dollar roll. Mortgage dollar rolls are transactions where a fund sells TBA securities and simultaneously agrees to repurchase MBS on a later date at a lower price and with the same counterparty. Reverse mortgage dollar rolls involve the purchase and simultaneous agreement to sell TBA securities on a later date at a lower price. Transactions in mortgage dollar rolls and reverse mortgage dollar rolls are accounted for as purchases and sales and may result in an increase to the Fund's portfolio turnover rate.
Purchases and sales of TBA securities involve risks similar to those discussed above for delayed delivery and when-issued securities. Also, if the counterparty in a mortgage dollar roll or a reverse mortgage dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. Additionally, when a fund sells TBA securities without already owning or having the right to obtain the deliverable securities (an uncovered forward commitment to sell), it incurs a risk of loss because it could have to purchase the securities at a price that is higher than the price at which it sold them. A fund may be unable to purchase the deliverable securities if the corresponding market is illiquid.
TBA securities subject to a forward commitment to sell at period end are included at the end of the Fund's Schedule of Investments under the caption "TBA Sale Commitments." The proceeds and value of these commitments are reflected in the Fund's Statement of Assets and Liabilities as Receivable for TBA sale commitments and TBA sale commitments, at value, respectively.
New Accounting Pronouncement. The Financial Accounting Standards Board issued in December 2011, Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities, and in January 2013, Accounting Standards Update No. 2013-1 Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. These updates create new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management expects that the impact of the update's adoption will be limited to additional financial statement disclosures as applicable.
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3. Derivative Instruments.
Risk Exposures and the Use of Derivative Instruments. The Fund's investment objective allows the Fund to enter into various types of derivative contracts, including options and swaps. 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 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:
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 such as options and bi-lateral swaps, 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 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
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Notes to Financial Statements - continued
(Amounts in thousands except percentages)
3. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
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. 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. 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 and amounts recognized in the Statement of Assets and Liabilities. 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.
Net Realized Gain (Loss) and Change in Net Unrealized Appreciation (Depreciation) on Derivatives. The table below, which reflects the impacts of derivatives on the financial performance of the Fund, summarizes the net realized gain (loss) and change in net unrealized appreciation (depreciation) for derivatives during the period as presented in the Statement of Operations.
Primary Risk Exposure / Derivative Type | Net Realized Gain (Loss) | Change in Net Unrealized Appreciation (Depreciation) |
Interest Rate Risk |
|
|
Purchased Options | $ 3,910 | $ - |
Swaps | (1,032) | 7,929 |
Totals (a) | $ 2,878 | $ 7,929 |
(a) A summary of the value of derivatives by primary risk exposure as of period end, is included at the end of the Schedule of Investments and is representative of activity for the period.
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.
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3. Derivative Instruments - continued
Options - continued
Upon entering into an options contract, a fund will pay or receive a premium. Premiums paid on purchased options are reflected as cost of investments and premiums received on written options are reflected as a liability on the Statement of Assets and Liabilities. Certain options may be purchased or written with premiums to be paid or received on a future date. Options are valued daily and any unrealized appreciation (depreciation) is reflected on the Statement of Assets and Liabilities. When an option is exercised, the cost or proceeds of the underlying instrument purchased or sold is adjusted by the amount of the premium. When an option is closed the Fund will realize a gain or loss depending on whether the proceeds or amount paid for the closing sale transaction is greater or less than the premium received or paid. When an option expires, gains and losses are realized to the extent of premiums received and paid, respectively. The net realized and unrealized gains (losses) on purchased options are included on the Statement of Operations in net realized gain (loss) and change in net unrealized appreciation (depreciation) on investment securities. The net realized gain (loss) and change in net unrealized appreciation (depreciation) on written options are reflected separately on the Statement of Operations.
Any open options at period end are presented in the Schedule of Investments under the captions "Purchased Options," "Purchased Swaptions," "Written Options" and "Written Swaptions," as applicable.
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. A centrally cleared OTC swap is a transaction executed between a fund and a dealer counterparty, then cleared by a futures commission merchant (FCM) through a clearinghouse. Once cleared, the clearinghouse serves as a central counterparty, with whom a fund exchanges cash flows for the life of the transaction, similar to transactions in futures contracts.
Bi-lateral OTC swaps are marked-to-market daily and changes in value are reflected in the Statement of Assets and Liabilities in the bi-lateral OTC swaps at value line items. Any upfront premiums paid or received upon entering a bi-lateral OTC swap to compensate for differences between stated terms of the swap and prevailing market conditions (e.g. credit spreads, interest rates or other factors) are recorded in net unrealized
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Notes to Financial Statements - continued
(Amounts in thousands except percentages)
3. Derivative Instruments - continued
Swaps - continued
appreciation (depreciation) in the Statement of Assets and Liabilities and amortized to realized gain or (loss) ratably over the term of the swap. Any unamortized upfront premiums are presented in the Schedule of Investments.
Centrally cleared OTC swaps require a fund to deposit either cash or securities (initial margin) with the FCM, at the instruction of and for the benefit of the clearinghouse. Securities deposited to meet initial margin requirements are identified in the Schedule of Investments. Centrally cleared OTC swaps are marked-to-market daily and subsequent payments (variation margin) are made or received depending on the daily fluctuations in the value of the swaps and are recorded as unrealized appreciation or (depreciation). These daily payments, if any, are included in receivable or payable for daily variation margin for derivative instruments in the Statement of Assets and Liabilities. Any premiums for centrally cleared OTC swaps are recorded periodically throughout the term of the swap to variation margin and included in unrealized appreciation (depreciation) in the Statement of Assets and Liabilities. Any premiums are recognized as realized gain (loss) upon termination or maturity of the swap.
For both bi-lateral and centrally cleared OTC swaps, payments are exchanged at specified intervals, accrued daily commencing with the effective date of the contract and recorded as realized gain or (loss). Realized gain or (loss) is also recorded in the event of an early termination of a swap. The net realized gain (loss) and change in net unrealized appreciation (depreciation) on swaps during the period is included in the Statement of Operations.
Any open swaps at period end are included in the Schedule of Investments under the caption "Swaps."
Interest Rate Swaps. Interest rate swaps are agreements between counterparties to exchange cash flows, one based on a fixed rate, and the other on a floating rate. The Fund entered into interest rate swaps to manage its exposure to interest rate changes. Changes in interest rates can have an effect on both the value of bond holdings as well as the amount of interest income earned. In general, the value of bonds can fall when interest rates rise and can rise when interest rates fall.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and an annualized group fee rate that averaged .11% during the period. The group fee rate is based upon the average net assets of all the
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4. Fees and Other Transactions with Affiliates - continued
Management Fee - continued
mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .31% of the Fund's average net assets.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the Fund's transfer, dividend disbursing and shareholder servicing agent. FIIOC receives an asset-based fee of .10% of the Fund's average net assets. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements.
Fund Wide Operations Fee. Pursuant to the Fund Wide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, compensation of the independent Trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent Trustees. For the period, the FWOE fee was equivalent to an annual rate of .04% of average net assets.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $25 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
Through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's management fee. During the period, these credits reduced the Fund's management fee by $31.
In addition, FMR reimbursed a portion of the Fund's operating expenses during the period in the amount of $4.
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Notes to Financial Statements - continued
(Amounts in thousands except percentages)
7. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity GNMA Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity GNMA Fund (a fund of Fidelity Income Fund) at July 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity GNMA Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 16, 2013
Annual Report
Trustees and Officers
The Trustees and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, oversee management of the risks associated with such activities and contractual arrangements, and review the fund's performance. Except for Elizabeth S. Acton and James C. Curvey, each of the Trustees oversees 221 Fidelity funds. Ms. Acton oversees 203 Fidelity funds and Mr. Curvey oversees 387 Fidelity funds.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person of the trust and the fund (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the month in which his or her 75th birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers hold office without limit in time, except that any officer may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
Experience, Skills, Attributes, and Qualifications of the Fund's Trustees. The Governance and Nominating Committee has adopted a statement of policy that describes the experience, qualifications, attributes, and skills that are necessary and desirable for potential Independent Trustee candidates (Statement of Policy). The Board believes that each Trustee satisfied at the time he or she was initially elected or appointed a Trustee, and continues to satisfy, the standards contemplated by the Statement of Policy. The Governance and Nominating Committee also engages professional search firms to help identify potential Independent Trustee candidates who have the experience, qualifications, attributes, and skills consistent with the Statement of Policy. From time to time, additional criteria based on the composition and skills of the current Independent Trustees, as well as experience or skills that may be appropriate in light of future changes to board composition, business conditions, and regulatory or other developments, have also been considered by the professional search firms and the Governance and Nominating Committee. In addition, the Board takes into account the Trustees' commitment and participation in Board and committee meetings, as well as their leadership of standing and ad hoc committees throughout their tenure.
In determining that a particular Trustee was and continues to be qualified to serve as a Trustee, the Board has considered a variety of criteria, none of which, in isolation, was controlling. The Board believes that, collectively, the Trustees have balanced and diverse experience, qualifications, attributes, and skills, which allow the Board to operate effectively in governing the fund and protecting the interests of shareholders. Information about the specific experience, skills, attributes, and qualifications of each Trustee, which in each case led to the Board's conclusion that the Trustee should serve (or continue to serve) as a trustee of the fund, is provided below.
Annual Report
Board Structure and Oversight Function. Abigail P. Johnson is an interested person (as defined in the 1940 Act) and currently serves as Chairman. The Trustees have determined that an interested Chairman is appropriate and benefits shareholders because an interested Chairman has a personal and professional stake in the quality and continuity of services provided to the fund. Independent Trustees exercise their informed business judgment to appoint an individual of their choosing to serve as Chairman, regardless of whether the Trustee happens to be independent or a member of management. The Independent Trustees have determined that they can act independently and effectively without having an Independent Trustee serve as Chairman and that a key structural component for assuring that they are in a position to do so is for the Independent Trustees to constitute a substantial majority for the Board. The Independent Trustees also regularly meet in executive session. Albert R. Gamper, Jr. serves as Chairman of the Independent Trustees and as such (i) acts as a liaison between the Independent Trustees and management with respect to matters important to the Independent Trustees and (ii) with management prepares agendas for Board meetings.
Fidelity funds are overseen by different Boards of Trustees. The fund's Board oversees Fidelity's investment-grade bond, money market, and asset allocation funds and another Board oversees Fidelity's equity and high income funds. The asset allocation funds may invest in Fidelity funds that are overseen by such other Board. The use of separate Boards, each with its own committee structure, allows the Trustees of each group of Fidelity funds to focus on the unique issues of the funds they oversee, including common research, investment, and operational issues. On occasion, the separate Boards establish joint committees to address issues of overlapping consequences for the Fidelity funds overseen by each Board.
The Trustees operate using a system of committees to facilitate the timely and efficient consideration of all matters of importance to the Trustees, the fund, and fund shareholders and to facilitate compliance with legal and regulatory requirements and oversight of the fund's activities and associated risks. The Board, acting through its committees, has charged FMR and its affiliates with (i) identifying events or circumstances the occurrence of which could have demonstrably adverse effects on the fund's business and/or reputation; (ii) implementing processes and controls to lessen the possibility that such events or circumstances occur or to mitigate the effects of such events or circumstances if they do occur; and (iii) creating and maintaining a system designed to evaluate continuously business and market conditions in order to facilitate the identification and implementation processes described in (i) and (ii) above. Because the day-to-day operations and activities of the fund are carried out by or through FMR, its affiliates, and other service providers, the fund's exposure to risks is mitigated but not eliminated by the processes overseen by the Trustees. While each of the Board's committees has responsibility for overseeing different aspects of the fund's activities, oversight is exercised primarily through the Operations and Audit Committees. In addition, an ad hoc Board committee of Independent Trustees has worked with FMR to enhance the Board's oversight of investment and financial risks, legal and regulatory risks, technology risks, and operational risks, including the development of additional risk reporting to the Board. Appropriate personnel, including but not limited to the fund's Chief Compliance Officer (CCO), FMR's internal auditor, the independent accountants, the fund's Treasurer and portfolio management personnel, make periodic reports to the Board's committees, as appropriate, including an annual review of FMR's risk management program for the Fidelity funds. The responsibilities of each standing committee, including their oversight responsibilities, are described further under "Standing Committees of the Fund's Trustees."
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Trustees and Officers - continued
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+ | |
Abigail P. Johnson (1961) | |
| Year of Election or Appointment: 2009 Ms. Johnson is Trustee and Chairman of the Board of Trustees of certain Trusts. Ms. Johnson serves as President of Fidelity Financial Services (2012-present) and President of Personal, Workplace and Institutional Services (2005-present). Ms. Johnson is Chairman and Director of FMR Co., Inc. (2011-present), Chairman and Director of FMR (2011-present), and the Vice Chairman and Director (2007-present) of FMR LLC. Previously, Ms. Johnson served as President and a Director of FMR (2001-2005), a Trustee of other investment companies advised by FMR, Fidelity Investments Money Management, Inc., and FMR Co., Inc. (2001-2005), Senior Vice President of the Fidelity funds (2001-2005), and managed a number of Fidelity funds. Ms. Abigail P. Johnson and Mr. Arthur E. Johnson are not related. |
James C. Curvey (1935) | |
| Year of Election or Appointment: 2007 Mr. Curvey also serves as Trustee (2007-present) of other investment companies advised by FMR. Mr. Curvey is a Director of Fidelity Investments Money Management, Inc. (2009-present), Director of Fidelity Research & Analysis Co. (2009-present) and Director of FMR and FMR Co., Inc. (2007-present). Mr. Curvey is also Vice Chairman (2007-present) and Director of FMR LLC. In addition, Mr. Curvey serves as an Overseer for the Boston Symphony Orchestra and a member of the Trustees of Villanova University. Previously, Mr. Curvey was the Vice Chairman (2006-2007) and Director (2000-2007) of FMR Corp. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
+ The information above includes each Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Trustee's qualifications to serve as a Trustee, which led to the conclusion that each Trustee should serve as a Trustee for the fund.
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+ | |
Elizabeth S. Acton (1951) | |
| Year of Election or Appointment: 2013 Ms. Acton is Trustee of certain Trusts. Prior to her retirement in April 2012, Ms. Acton was Executive Vice President, Finance (November 2011-April 2012), Executive Vice President, Chief Financial Officer (April 2002-November 2011), and Treasurer (May 2004-May 2005) of Comerica Incorporated (financial services). Prior to joining Comerica, Ms. Acton held a variety of positions at Ford Motor Company (1983-2002), including Vice President and Treasurer (2000-2002) and Executive Vice President and Chief Financial Officer of Ford Motor Credit Company (1998-2000). Ms. Acton currently serves as a member of the Board of Directors and Audit and Finance Committees of Beazer Homes USA, Inc. (homebuilding, 2012-present). |
Albert R. Gamper, Jr. (1942) | |
| Year of Election or Appointment: 2006 Mr. Gamper is Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2012-present). Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (2002-2003). Mr. Gamper currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2000-present), a member of the Board of Trustees, Rutgers University (2004-present), and Chairman of the Board of Barnabas Health Care System. Previously, Mr. Gamper served as Vice Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2011-2012) and as Chairman of the Board of Governors, Rutgers University (2004-2007). |
Robert F. Gartland (1951) | |
| Year of Election or Appointment: 2010 Mr. Gartland is Chairman and an investor in Gartland and Mellina Group Corp. (consulting, 2009-present). Previously, Mr. Gartland served as a partner and investor of Vietnam Partners LLC (investments and consulting, 2008-2011). Prior to his retirement, Mr. Gartland held a variety of positions at Morgan Stanley (financial services, 1979-2007) including Managing Director (1987-2007). |
Arthur E. Johnson (1947) | |
| Year of Election or Appointment: 2008 Mr. Johnson serves as a member of the Board of Directors of Eaton Corporation (diversified power management, 2009-present), AGL Resources, Inc. (holding company, 2002-present) and Booz Allen Hamilton (management consulting, 2011-present). Prior to his retirement, Mr. Johnson served as Senior Vice President of Corporate Strategic Development of Lockheed Martin Corporation (defense contractor, 1999-2009). He previously served on the Board of Directors of IKON Office Solutions, Inc. (1999-2008) and Delta Airlines (2005-2007). Mr. Arthur E. Johnson is not related to Ms. Abigail P. Johnson. |
Michael E. Kenneally (1954) | |
| Year of Election or Appointment: 2009 Mr. Kenneally served as a Member of the Advisory Board for certain Fidelity Fixed Income and Asset Allocation Funds before joining the Board of Trustees (2008-2009). Prior to his retirement, Mr. Kenneally served as Chairman and Global Chief Executive Officer of Credit Suisse Asset Management. Before joining Credit Suisse, he was an Executive Vice President and Chief Investment Officer for Bank of America Corporation. Earlier roles at Bank of America included Director of Research, Senior Portfolio Manager and Research Analyst, and Mr. Kenneally was awarded the Chartered Financial Analyst (CFA) designation in 1991. |
James H. Keyes (1940) | |
| Year of Election or Appointment: 2007 Mr. Keyes serves as a member of the Board and Non-Executive Chairman of Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, since 2002). Previously, Mr. Keyes served as a member of the Board of Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-2013). Prior to his retirement, Mr. Keyes served as Chairman and Chief Executive Officer of Johnson Controls (automotive, building, and energy, 1998-2002) and as a member of the Board of LSI Logic Corporation (semiconductor technologies, 1984-2008). |
Marie L. Knowles (1946) | |
| Year of Election or Appointment: 2001 Ms. Knowles is Vice Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2012-present). Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. Ms. Knowles currently serves as a Director and Chairman of the Audit Committee of McKesson Corporation (healthcare service, since 2002). Ms. Knowles is a member of the Board of the Catalina Island Conservancy and of the Santa Catalina Island Company (2009-present). She also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. Previously, Ms. Knowles served as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994-2007), URS Corporation (engineering and construction, 2000-2003) and America West (airline, 1999-2002). |
Kenneth L. Wolfe (1939) | |
| Year of Election or Appointment: 2005 Prior to his retirement, Mr. Wolfe served as Chairman and a Director (2007-2009) and Chairman and Chief Executive Officer (1994-2001) of Hershey Foods Corporation. He also served as a member of the Boards of Adelphia Communications Corporation (telecommunications, 2003-2006), Bausch & Lomb, Inc. (medical/pharmaceutical, 1993-2007), and Revlon, Inc. (personal care products, 2004-2009). Mr. Wolfe previously served as Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2008-2012). |
+ The information above includes each Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Trustee's qualifications to serve as a Trustee, which led to the conclusion that each Trustee should serve as a Trustee for the fund.
Executive Officers:
Correspondence intended for each executive officer may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.
Name, Year of Birth; Principal Occupation | |
Stephanie J. Dorsey (1969) | |
| Year of Election or Appointment: 2013 President and Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Ms. Dorsey also serves as Treasurer and Chief Financial Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2013-present), Assistant Treasurer of other Fidelity funds (2010-present), and is an employee of Fidelity Investments (2008-present). Previously, Ms. Dorsey served as Deputy Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2008-2013), Treasurer (2004-2008) of the JPMorgan Mutual Funds and Vice President (2004-2008) of JPMorgan Chase Bank. |
Charles S. Morrison (1960) | |
| Year of Election or Appointment: 2012 Vice President of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Morrison also serves as President, Fixed Income and is an employee of Fidelity Investments. Previously, Mr. Morrison served as Vice President of Fidelity's Money Market Funds (2005-2009), President, Money Market Group Leader of FMR (2009), and Senior Vice President, Money Market Group of FMR (2004-2009). Mr. Morrison also served as Vice President of Fidelity's Bond Funds (2002-2005), certain Balanced Funds (2002-2005), and certain Asset Allocation Funds (2002-2007), and as Senior Vice President (2002-2005) of Fidelity's Fixed Income Division. |
Robert P. Brown (1963) | |
| Year of Election or Appointment: 2012 Vice President of Fidelity's Bond Funds. Mr. Brown also serves as Executive Vice President of Fidelity Investments Money Management, Inc. (2010-present), President, Bond Group of FMR (2011-present), Director and Managing Director, Research of Fidelity Management & Research (U.K.) Inc. (2008-present) and is an employee of Fidelity Investments. Previously, Mr. Brown served as President, Money Market Group of FMR (2010-2011) and Vice President of Fidelity's Money Market Funds (2010-2012). |
Scott C. Goebel (1968) | |
| Year of Election or Appointment: 2008 Secretary and Chief Legal Officer (CLO) of the Fidelity funds. Mr. Goebel also serves as Secretary of Fidelity Investments Money Management, Inc. (FIMM) (2010-present) and Fidelity Research and Analysis Company (FRAC) (2010-present); Secretary and CLO of The North Carolina Capital Management Trust: Cash and Term Portfolios (2008-present); General Counsel, Secretary, and Senior Vice President of FMR (2008-present) and FMR Co., Inc. (2008-present); employed by FMR LLC or an affiliate (2001-present); Chief Legal Officer of Fidelity Management & Research (Hong Kong) Limited (2008-present) and Assistant Secretary of Fidelity Management & Research (Japan) Inc. (2008-present), and Fidelity Management & Research (U.K.) Inc. (2008-present). Previously, Mr. Goebel served as Assistant Secretary of FIMM (2008-2010), FRAC (2008-2010), and the Funds (2007-2008) and as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (2005-2007). |
Marc Bryant (1966) | |
| Year of Election or Appointment: 2013 Assistant Secretary of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Bryant also serves as Secretary and Chief Legal Officer of other Fidelity funds (2010-present) and Senior Vice President and Deputy General Counsel of Fidelity Investments. Prior to joining Fidelity Investments, Mr. Bryant served as a Senior Vice President and the Head of Global Retail Legal for AllianceBernstein L.P. (2006-2010), and as the General Counsel for ProFund Advisors LLC (2001-2006). |
Elizabeth Paige Baumann (1968) | |
| Year of Election or Appointment: 2012 Anti-Money Laundering (AML) Officer of the Fidelity funds. Ms. Baumann also serves as AML Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2012-present), Chief AML Officer of FMR LLC (2012-present), and is an employee of Fidelity Investments. Previously, Ms. Baumann served as Vice President and Deputy Anti-Money Laundering Officer (2007-2012). |
Christine Reynolds (1958) | |
| Year of Election or Appointment: 2008 Chief Financial Officer of the Fidelity funds. Ms. Reynolds became President of Fidelity Pricing and Cash Management Services (FPCMS) in August 2008. Ms. Reynolds served as Chief Operating Officer of FPCMS (2007-2008). Previously, Ms. Reynolds served as President, Treasurer, and Anti-Money Laundering officer of the Fidelity funds (2004-2007). |
Michael H. Whitaker (1967) | |
| Year of Election or Appointment: 2008 Chief Compliance Officer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Whitaker also serves as Chief Compliance Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2008-present). Mr. Whitaker is an employee of Fidelity Investments (2007-present). Prior to joining Fidelity Investments, Mr. Whitaker worked at MFS Investment Management where he served as Senior Vice President and Chief Compliance Officer (2004-2006), and Assistant General Counsel. |
Joseph F. Zambello (1957) | |
| Year of Election or Appointment: 2011 Deputy Treasurer of the Fidelity funds. Mr. Zambello is an employee of Fidelity Investments. Previously, Mr. Zambello served as Vice President of FMR's Program Management Group (2009-2011) and Vice President of the Transfer Agent Oversight Group (2005-2009). |
Stephen Sadoski (1971) | |
| Year of Election or Appointment: 2013 Deputy Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Sadoski also serves as Deputy Treasurer of other Fidelity funds (2012-present) and is an employee of Fidelity Investments (2012-present). Previously, Mr. Sadoski served as Assistant Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2012-2013), an assistant chief accountant in the Division of Investment Management of the Securities and Exchange Commission (SEC) (2009-2012) and as a senior manager at Deloitte & Touche LLP (1997-2009). |
Adrien E. Deberghes (1967) | |
| Year of Election or Appointment: 2010 Assistant Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Deberghes also serves as Vice President and Assistant Treasurer (2011-present) and Deputy Treasurer (2008-present) of other Fidelity funds, and is an employee of Fidelity Investments (2008-present). Previously, Mr. Deberghes served as Senior Vice President of Mutual Fund Administration at State Street Corporation (2007-2008), Senior Director of Mutual Fund Administration at Investors Bank & Trust (2005-2007), and Director of Finance for Dunkin' Brands (2000-2005). |
Kenneth B. Robins (1969) | |
| Year of Election or Appointment: 2009 Assistant Treasurer of the Fidelity Fixed Income and Asset Allocation Funds. Mr. Robins also serves as President and Treasurer of other Fidelity funds (2008-present) and is an employee of Fidelity Investments (2004-present). Mr. Robins serves as Executive Vice President of Fidelity Investments Money Management, Inc. (FIMM) (2013-present). Previously, Mr. Robins served as Deputy Treasurer of the Fidelity funds (2005-2008) and Treasurer and Chief Financial Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2006-2008). |
Gary W. Ryan (1958) | |
| Year of Election or Appointment: 2005 Assistant Treasurer of the Fidelity funds. Mr. Ryan is an employee of Fidelity Investments. Previously, Mr. Ryan served as Vice President of Fund Reporting in Fidelity Pricing and Cash Management Services (FPCMS) (1999-2005). |
Jonathan Davis (1968) | |
| Year of Election or Appointment: 2010 Assistant Treasurer of the Fidelity funds. Mr. Davis is also Assistant Treasurer of Fidelity Rutland Square Trust II and Fidelity Commonwealth Trust II. Mr. Davis is an employee of Fidelity Investments. Previously, Mr. Davis served as Vice President and Associate General Counsel of FMR LLC (2003-2010). |
Annual Report
Distributions (Unaudited)
The Board of Trustees of Fidelity GNMA Fund voted to pay on September 9, 2013, to shareholders of record at the opening of business on September 6, 2013, a distribution of $0.072 per share derived from capital gains realized from sales of portfolio securities.
The fund hereby designates as a capital gain dividend with respect to the taxable year ended July 31, 2013, $56,745,341, or, if subsequently determined to be different, the net capital gain of such year.
The fund designates $93,940,553 of distributions paid during the period January 1, 2013 to July 31, 2013 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.
The fund will notify shareholders in January 2014 of amounts for use in preparing 2013 income tax returns.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Management & Research (U.K.) Inc.
Fidelity Investments
Money Management, Inc.
Fidelity Management & Research
(Hong Kong) Limited
Fidelity Management & Research
(Japan) Inc.
General Distributor
Fidelity Distributors Corporation
Smithfield, RI
Transfer and Service Agents
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
The Bank of New York Mellon
New York, NY
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®)
1-800-544-5555
Automated line for quickest service
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
245 Summer St., Boston, MA 02210
www.fidelity.com
MOG-UANN-0913 1.930525.102
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor®
Ultra-Short Bond
Fund - Class A and Class T
Annual Report
July 31, 2013
(Fidelity Cover Art)
Class A and Class T
are classes of
Fidelity® Ultra-Short Bond Fund
Contents
Performance | How the fund has done over time. | |
Management's Discussion of Fund Performance | The Portfolio Manager's review of fund performance and strategy. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm |
| |
Trustees and Officers |
| |
Distributions |
|
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
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 LLC or an affiliated company. © 2013 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.advisor.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' distributions from dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2013 | Past 1 | Past 5 | Past 10 |
Class A (incl. 1.50% sales charge) A | -0.99% | 0.06% | -0.30% |
Class T (incl. 1.50% sales charge) B | -1.03% | 0.02% | -0.32% |
A Class A shares bear a 0.15% 12b-1 fee. The initial offering of Class A shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Fidelity® Ultra- Short Bond Fund, the original class of the fund, which does not bear a 12b-1 fee. Had Class A shares' 12b-1 fee been reflected, returns prior to June 16, 2004 would have been lower.
B Class T shares bear a 0.15% 12b-1 fee. The initial offering of Class T shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Fidelity® Ultra- Short Bond Fund, the original class of the fund, which does not bear a 12b-1 fee. Had Class T shares' 12b-1 fee been reflected, returns prior to June 16, 2004 would have been lower.
Annual Report
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Advisor® Ultra-Short Bond Fund - Class A on July 31, 2003, and the current 1.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the Barclays® 6 Month Swap Index performed over the same period. The initial offering of Class A took place on June 16, 2004. See the previous page for additional information regarding the performance of Class A.
Annual Report
Management's Discussion of Fund Performance
Market Recap: A steep late-spring sell-off pushed U.S. taxable investment-grade bonds into the red for the 12 months ending July 31, 2013, amid the prospect of higher interest rates. The Barclays® U.S. Aggregate Bond Index returned -1.91% for the period, with most of the damage in May and June, in response to signals from the Federal Reserve that it could begin to taper its stimulative bond-buying programs prior to year-end. The bond market suffered significant investor outflows, causing the sell-off to feed upon itself. Prior to that, "quantitative easing" had provided a positive tone for the market. Shifting expectations for global economic growth also influenced the market, with comparatively strong data in May and June tempering investor demand for bonds. Among sectors that comprise the index, U.S. Treasuries and mortgage-backed securities - widely viewed as most vulnerable to a cessation of government-bond-buying programs - fared worst, returning -2.72% and -1.98%, respectively, while government-agency securities returned -1.18%. Corporate bonds delivered sluggish performance (-1%), hurt by rising interest rates and investors' aversion to riskier assets at period end. Thanks largely to their higher yields and solid first-half appreciation, commercial mortgage- backed securities fared best, rising 2.54%.
Comments from Robert Galusza, Portfolio Manager of Fidelity Advisor® Ultra-Short Bond Fund: For the year, the fund's Class A and Class T shares rose 0.52% and 0.48%, respectively (excluding sales charges), outpacing the 0.27% return of the Barclays® 6 Month Swap Index. During the period, I continued to emphasize corporate credit, while deemphasizing U.S. government securities. The biggest contributors were corporate bonds issued by banks and other types of financial institutions. Corporate securities in a variety of industrials groups also aided performance. Within securitized sectors, asset-backed securities derived from car loans provided a further boost to results, as did a small position in commercial mortgage-backed securities. Among the fund's government-related holdings, collateralized mortgage obligations (CMOs) structured from government-backed mortgages helped the fund's return. On the downside, the fund's yield-curve positioning modestly detracted. In order to access certain securities, I held some with maturities that were longer than that of the benchmark. However, with short-term yield spreads slightly widening during the period, these bonds underperformed. As the period progressed, I notably reduced the fund's allocations to CMOs and government-agency bonds because I felt their valuations had become less attractive.
Comments from Robert Galusza, Portfolio Manager of Fidelity Advisor® Ultra-Short Bond Fund: For the year, the fund's Institutional Class shares rose 0.65%, outpacing the 0.27% gain of the Barclays® 6 Month Swap Index. During the period, I continued to emphasize corporate credit, while deemphasizing U.S. government securities. The biggest contributors were corporate bonds issued by banks and other types of financial institutions. Corporate securities in a variety of industrials groups also aided performance. Within securitized sectors, asset-backed securities derived from car loans provided a further boost to results, as did a small position in commercial mortgage-backed securities. Among the fund's government-related holdings, collateralized mortgage obligations (CMOs) structured from government-backed mortgages helped the fund's return. On the downside, the fund's yield-curve positioning modestly detracted. In order to access certain securities, I held some with maturities that were longer than that of the benchmark. However, with short-term yield spreads slightly widening during the period, these bonds underperformed. As the period progressed, I notably reduced the fund's allocations to CMOs and government-agency bonds because I felt their valuations had become less attractive.
Annual Report
Note to shareholders: The fund was closed to new accounts on August 2, 2013, in anticipation of a possible merger or liquidation.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, redemption fees and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2013 to July 31, 2013).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annual Report
| Annualized | Beginning | Ending | Expenses Paid |
Class A | .65% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,000.40 | $ 3.22 |
HypotheticalA |
| $ 1,000.00 | $ 1,021.57 | $ 3.26 |
Class T | .70% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,000.30 | $ 3.47 |
HypotheticalA |
| $ 1,000.00 | $ 1,021.32 | $ 3.51 |
Ultra-Short Bond | .45% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,001.40 | $ 2.23 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.56 | $ 2.26 |
Institutional Class | .52% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,001.00 | $ 2.58 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.22 | $ 2.61 |
A 5% return per year before expenses
B Annualized expense ratio reflects expenses net of applicable fee waivers.
* Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annual Report
Investment Changes (Unaudited)
Quality Diversification (% of fund's net assets) | |||||||
As of July 31, 2013 | As of January 31, 2013 | ||||||
![]() | U.S. Government |
| ![]() | U.S. Government |
| ||
![]() | AAA 23.6% |
| ![]() | AAA 22.9% |
| ||
![]() | AA 13.5% |
| ![]() | AA 14.8% |
| ||
![]() | A 29.9% |
| ![]() | A 25.8% |
| ||
![]() | BBB 15.1% |
| ![]() | BBB 18.0% |
| ||
![]() | BB and Below † 0.0% |
| ![]() | BB and Below † 0.0% |
| ||
![]() | Not Rated † 0.0% |
| ![]() | Not Rated 0.2% |
| ||
![]() | Short-Term |
| ![]() | Short-Term |
|
We have used ratings from Moody's Investors Service, Inc. Where Moody's® ratings are not available, we have used S&P® ratings. All ratings are as of the date indicated and do not reflect subsequent changes. Securities rated BB or below were rated investment grade at the time of acquisition. |
Weighted Average Maturity as of July 31, 2013 | ||
|
| 6 months ago |
Years | 1.4 | 1.5 |
This is a weighted average of all the maturities of the securities held in a fund. Weighted Average Maturity (WAM) can be used as a measure of sensitivity to interest rate changes and market changes. Generally, the longer the maturity, the greater the sensitivity to such changes. WAM is based on the dollar-weighted average length of time until principal payments must be paid. Depending on the types of securities held in a fund, certain maturity shortening devices (e.g., demand features, interest rate resets, and call options) may be taken into account when calculating the WAM. |
Duration as of July 31, 2013 | ||
|
| 6 months ago |
Years | 0.4 | 0.3 |
Duration is a measure of a security's price sensitivity to changes in interest rates. Duration differs from maturity in that it considers a security's interest payments in addition to the amount of time until the security reaches maturity, and also takes into account certain maturity shortening features (e.g., demand features, interest rate resets, and call options) when applicable. Securities with longer durations generally tend to be more sensitive to interest rate changes than securities with shorter durations. A fund with a longer average duration generally can be expected to be more sensitive to interest rate changes than a fund with a shorter average duration. |
† Amount represents less than 0.1%
Annual Report
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2013* | As of January 31, 2013** | ||||||
![]() | Corporate Bonds 57.5% |
| ![]() | Corporate Bonds 57.4% |
| ||
![]() | U.S. Government |
| ![]() | U.S. Government |
| ||
![]() | Asset-Backed |
| ![]() | Asset-Backed |
| ||
![]() | CMOs and Other |
| ![]() | CMOs and Other |
| ||
![]() | Municipal Bonds 0.8% |
| ![]() | Municipal Bonds 1.0% |
| ||
![]() | Short-Term |
| ![]() | Short-Term |
| ||
* Foreign investments | 18.0% |
| ** Foreign investments | 17.7% |
|
Annual Report
Investments July 31, 2013
Showing Percentage of Net Assets
Nonconvertible Bonds - 57.5% | ||||
| Principal Amount | Value | ||
CONSUMER DISCRETIONARY - 2.7% | ||||
Automobiles - 1.9% | ||||
Daimler Finance North America LLC: | ||||
0.8699% 1/9/15 (c)(d) | $ 2,000,000 | $ 2,006,580 | ||
1.0486% 4/10/14 (c)(d) | 1,250,000 | 1,254,426 | ||
Volkswagen International Finance NV: | ||||
0.8741% 11/20/14 (c)(d) | 2,000,000 | 2,006,980 | ||
0.884% 4/1/14 (c)(d) | 2,500,000 | 2,503,453 | ||
| 7,771,439 | |||
Media - 0.8% | ||||
NBCUniversal Enterprise, Inc. 0.8051% 4/15/16 (c)(d) | 3,000,000 | 3,007,035 | ||
NBCUniversal Media LLC 3.65% 4/30/15 | 354,000 | 371,654 | ||
| 3,378,689 | |||
TOTAL CONSUMER DISCRETIONARY | 11,150,128 | |||
CONSUMER STAPLES - 2.2% | ||||
Beverages - 0.6% | ||||
PepsiCo, Inc. 0.4828% 2/26/16 (d) | 2,500,000 | 2,501,283 | ||
Food & Staples Retailing - 0.7% | ||||
Walgreen Co. 0.7723% 3/13/14 (d) | 3,000,000 | 3,004,596 | ||
Food Products - 0.9% | ||||
General Mills, Inc.: | ||||
0.5638% 1/29/16 (d) | 609,000 | 608,700 | ||
0.6241% 5/16/14 (d) | 2,475,000 | 2,479,522 | ||
Kellogg Co. 0.5051% 2/13/15 (d) | 522,000 | 522,241 | ||
| 3,610,463 | |||
TOTAL CONSUMER STAPLES | 9,116,342 | |||
ENERGY - 1.7% | ||||
Energy Equipment & Services - 0.3% | ||||
Cameron International Corp. 1.2047% 6/2/14 (d) | 1,226,000 | 1,231,837 | ||
Oil, Gas & Consumable Fuels - 1.4% | ||||
Petrobras Global Finance BV 1.8941% 5/20/16 (d) | 1,000,000 | 985,000 | ||
Total Capital Canada Ltd. 0.6481% 1/15/16 (d) | 3,000,000 | 3,019,911 | ||
TransCanada PipeLines Ltd. 0.9531% 6/30/16 (d) | 1,916,000 | 1,924,804 | ||
| 5,929,715 | |||
TOTAL ENERGY | 7,161,552 | |||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
FINANCIALS - 40.5% | ||||
Capital Markets - 8.0% | ||||
Goldman Sachs Group, Inc.: | ||||
0.7226% 3/22/16 (d) | $ 5,000,000 | $ 4,943,200 | ||
0.8756% 9/29/14 (d) | 1,000,000 | 1,000,600 | ||
HSBC Bank PLC 1.0676% 1/17/14 (c)(d) | 3,000,000 | 3,011,418 | ||
JPMorgan Chase & Co.: | ||||
0.8928% 2/26/16 (d) | 2,000,000 | 2,001,040 | ||
0.9281% 10/15/15 (d) | 8,951,000 | 8,973,374 | ||
Merrill Lynch & Co., Inc. 0.7281% 1/15/15 (d) | 3,500,000 | 3,491,551 | ||
Morgan Stanley: | ||||
1.2233% 12/19/14 (d) | 2,500,000 | 2,501,950 | ||
1.5228% 2/25/16 (d) | 2,500,000 | 2,513,835 | ||
The Bank of New York Mellon Corp.: | ||||
0.4947% 10/23/15 (d) | 1,000,000 | 1,001,643 | ||
0.5338% 7/28/14 (d) | 2,000,000 | 2,004,236 | ||
UBS AG Stamford Branch 1.2638% 1/28/14 (d) | 1,722,000 | 1,730,083 | ||
| 33,172,930 | |||
Commercial Banks - 18.1% | ||||
ABN AMRO Bank NV 2.035% 1/30/14 (c)(d) | 2,000,000 | 2,014,100 | ||
ANZ Banking Group Ltd. 0.465% 5/7/15 (c)(d) | 1,000,000 | 999,652 | ||
Bank of Montreal 0.7452% 9/11/15 (d) | 2,400,000 | 2,409,336 | ||
Bank of Nova Scotia 1.3091% 1/12/15 (d) | 1,000,000 | 1,011,309 | ||
Bank of Tokyo-Mitsubishi UFJ Ltd. 0.7228% 2/26/16 (c)(d) | 2,000,000 | 2,003,058 | ||
Barclays Bank PLC 1.3081% 1/13/14 (d) | 3,500,000 | 3,514,837 | ||
BB&T Corp. 0.9638% 4/28/14 (d) | 2,000,000 | 2,004,406 | ||
BNP Paribas 1.1686% 1/10/14 (d) | 1,000,000 | 1,002,641 | ||
Capital One NA 0.7226% 3/22/16 (d) | 1,000,000 | 997,160 | ||
Commonwealth Bank of Australia: | ||||
1.0033% 3/17/14 (c)(d) | 2,500,000 | 2,510,573 | ||
1.0728% 9/18/15 (c)(d) | 1,000,000 | 1,008,994 | ||
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 0.7528% 3/18/16 (d) | 3,030,000 | 3,041,859 | ||
Credit Suisse New York Branch: | ||||
1.2281% 1/14/14 (d) | 2,500,000 | 2,509,653 | ||
2.2% 1/14/14 | 1,000,000 | 1,007,745 | ||
Danske Bank A/S 1.3181% 4/14/14 (c)(d) | 500,000 | 502,188 | ||
Fifth Third Bank 0.6828% 2/26/16 (d) | 2,000,000 | 1,995,479 | ||
KeyBank NA 5.8% 7/1/14 | 2,000,000 | 2,090,844 | ||
National Australia Bank Ltd. 0.5662% 1/22/15 (c)(d) | 1,500,000 | 1,502,519 | ||
Nordea Bank AB 0.7351% 5/13/16 (c)(d) | 1,500,000 | 1,501,653 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
FINANCIALS - continued | ||||
Commercial Banks - continued | ||||
PNC Bank NA 0.5738% 1/28/16 (d) | $ 2,000,000 | $ 1,996,228 | ||
PNC Funding Corp. 0.466% 1/31/14 (d) | 2,000,000 | 2,000,086 | ||
Rabobank (Netherlands) NV 0.6181% 4/14/14 (d) | 3,250,000 | 3,257,920 | ||
Royal Bank of Canada: | ||||
0.4738% 4/29/15 (d) | 2,000,000 | 1,998,966 | ||
0.6443% 3/8/16 (d) | 2,500,000 | 2,503,248 | ||
Royal Bank of Scotland Group PLC 2.55% 9/18/15 | 1,000,000 | 1,020,703 | ||
Societe Generale 2.2% 9/14/13 (c) | 1,122,000 | 1,123,797 | ||
Sumitomo Mitsui Banking Corp. 1.2162% 7/22/14 (c)(d) | 3,801,000 | 3,827,542 | ||
SunTrust Banks, Inc. 0.574% 4/1/15 (d) | 2,509,000 | 2,484,432 | ||
Svenska Handelsbanken AB 0.7218% 3/21/16 (d) | 2,000,000 | 2,005,246 | ||
The Toronto Dominion Bank: | ||||
0.4531% 5/1/15 (d) | 500,000 | 500,087 | ||
0.5681% 7/14/14 (d) | 2,000,000 | 2,005,616 | ||
U.S. Bank NA 0.5481% 10/14/14 (d) | 1,510,000 | 1,512,875 | ||
Union Bank NA 1.224% 6/6/14 (d) | 2,480,000 | 2,493,474 | ||
Wachovia Bank NA 0.6531% 11/3/14 (d) | 3,500,000 | 3,505,205 | ||
Wells Fargo Bank NA: | ||||
0.4841% 5/16/16 (d) | 4,000,000 | 3,951,980 | ||
0.5364% 7/20/15 (d) | 2,000,000 | 1,999,634 | ||
Westpac Banking Corp.: | ||||
1.0056% 3/31/14 (c)(d) | 1,000,000 | 1,004,426 | ||
1.0328% 9/25/15 (d) | 2,000,000 | 2,019,836 | ||
| 74,839,307 | |||
Consumer Finance - 7.9% | ||||
American Express Credit Corp.: | ||||
0.7251% 11/13/15 (d) | 3,995,000 | 3,995,943 | ||
1.3742% 6/12/15 (d) | 1,000,000 | 1,014,384 | ||
American Honda Finance Corp.: | ||||
0.6478% 5/26/16 (c)(d) | 2,000,000 | 1,999,172 | ||
0.7251% 5/8/14 (c)(d) | 2,000,000 | 2,005,182 | ||
Capital One Financial Corp.: | ||||
0.9131% 11/6/15 (d) | 1,500,000 | 1,501,674 | ||
1.4181% 7/15/14 (d) | 5,040,000 | 5,073,496 | ||
Caterpillar Financial Services Corp.: | ||||
0.5128% 2/26/16 (d) | 1,063,000 | 1,063,017 | ||
0.6251% 2/9/15 (d) | 2,000,000 | 2,008,142 | ||
Ford Motor Credit Co. LLC 1.5251% 5/9/16 (d) | 1,000,000 | 1,002,163 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
General Electric Capital Corp.: | ||||
0.8709% 1/8/16 (d) | $ 2,000,000 | $ 2,005,918 | ||
0.9191% 7/12/16 (d) | 1,000,000 | 1,001,167 | ||
1.1209% 1/7/14 (d) | 5,000,000 | 5,018,230 | ||
HSBC Finance Corp. 0.5181% 1/15/14 (d) | 800,000 | 799,841 | ||
John Deere Capital Corp. 0.3391% 1/12/15 (d) | 2,000,000 | 1,999,170 | ||
Toyota Motor Credit Corp. 0.4436% 11/21/14 (d) | 2,000,000 | 2,001,330 | ||
| 32,488,829 | |||
Diversified Financial Services - 4.4% | ||||
Bank of America Corp. 1.8191% 7/11/14 (d) | 2,500,000 | 2,527,360 | ||
BP Capital Markets PLC 0.8752% 3/11/14 (d) | 2,000,000 | 2,006,396 | ||
Citigroup, Inc.: | ||||
0.5531% 11/5/14 (d) | 2,500,000 | 2,493,475 | ||
1.064% 4/1/16 (d) | 3,000,000 | 3,007,134 | ||
1.7181% 1/13/14 (d) | 3,341,000 | 3,357,020 | ||
MetLife Institutional Funding II 0.6409% 1/6/15 (c)(d) | 5,000,000 | 5,016,675 | ||
| 18,408,060 | |||
Insurance - 1.8% | ||||
American International Group, Inc. 3% 3/20/15 | 3,000,000 | 3,095,469 | ||
Monumental Global Funding III 0.4681% 1/15/14 (c)(d) | 2,000,000 | 2,001,296 | ||
Principal Life Global Funding II: | ||||
0.6428% 5/27/16 (c)(d) | 1,000,000 | 1,001,118 | ||
0.8949% 7/9/14 (c)(d) | 1,500,000 | 1,506,219 | ||
| 7,604,102 | |||
Real Estate Management & Development - 0.3% | ||||
Liberty Property LP 5.65% 8/15/14 | 1,000,000 | 1,046,234 | ||
TOTAL FINANCIALS | 167,559,462 | |||
HEALTH CARE - 2.1% | ||||
Health Care Providers & Services - 0.7% | ||||
UnitedHealth Group, Inc. 0.3978% 8/28/14 (d) | 3,000,000 | 3,000,216 | ||
Pharmaceuticals - 1.4% | ||||
AbbVie, Inc.: | ||||
1.0331% 11/6/15 (c)(d) | 3,000,000 | 3,027,507 | ||
1.2% 11/6/15 (c) | 500,000 | 501,855 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
HEALTH CARE - continued | ||||
Pharmaceuticals - continued | ||||
Teva Pharmaceutical Finance Co. BV 1.1751% 11/8/13 (d) | $ 1,250,000 | $ 1,252,676 | ||
Teva Pharmaceutical Finance III BV 0.7718% 3/21/14 (d) | 1,000,000 | 1,002,124 | ||
| 5,784,162 | |||
TOTAL HEALTH CARE | 8,784,378 | |||
INDUSTRIALS - 0.2% | ||||
Electrical Equipment - 0.2% | ||||
Eaton Corp. 0.6033% 6/16/14 (d) | 945,000 | 946,933 | ||
INFORMATION TECHNOLOGY - 0.5% | ||||
Office Electronics - 0.5% | ||||
Xerox Corp. 1.0941% 5/16/14 (d) | 2,195,000 | 2,194,996 | ||
MATERIALS - 1.5% | ||||
Metals & Mining - 1.5% | ||||
Rio Tinto Finance (U.S.A.) PLC: | ||||
0.8233% 6/19/15 (d) | 3,500,000 | 3,503,269 | ||
1.1133% 6/17/16 (d) | 2,500,000 | 2,500,718 | ||
| 6,003,987 | |||
TELECOMMUNICATION SERVICES - 3.7% | ||||
Diversified Telecommunication Services - 3.0% | ||||
AT&T, Inc. 0.6601% 2/12/16 (d) | 3,000,000 | 3,008,646 | ||
BellSouth Corp. 4.117% 4/26/21 (c)(d) | 2,000,000 | 2,048,608 | ||
British Telecommunications PLC: | ||||
1.3973% 12/20/13 (d) | 1,445,000 | 1,450,128 | ||
2% 6/22/15 | 2,000,000 | 2,038,558 | ||
Verizon Communications, Inc. 0.474% 3/6/15 (c)(d) | 3,590,000 | 3,585,516 | ||
| 12,131,456 | |||
Wireless Telecommunication Services - 0.7% | ||||
Vodafone Group PLC 0.6591% 2/19/16 (d) | 3,000,000 | 2,998,902 | ||
TOTAL TELECOMMUNICATION SERVICES | 15,130,358 | |||
UTILITIES - 2.4% | ||||
Electric Utilities - 1.2% | ||||
Appalachian Power Co. 0.6491% 8/16/13 (d) | 1,937,000 | 1,937,169 | ||
Cleveland Electric Illuminating Co. 5.65% 12/15/13 | 348,000 | 354,294 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
Duke Energy Corp. 3.95% 9/15/14 | $ 431,000 | $ 446,167 | ||
NextEra Energy Capital Holdings, Inc. 1.611% 6/1/14 | 527,000 | 531,032 | ||
Northeast Utilities 1.0223% 9/20/13 (d) | 810,000 | 810,666 | ||
Pennsylvania Electric Co. 5.125% 4/1/14 | 1,000,000 | 1,027,669 | ||
| 5,106,997 | |||
Multi-Utilities - 1.2% | ||||
Sempra Energy 1.0333% 3/15/14 (d) | 4,822,000 | 4,835,323 | ||
TOTAL UTILITIES | 9,942,320 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $237,442,431) |
| |||
U.S. Government Agency Obligations - 1.0% | ||||
| ||||
Fannie Mae 0.875% 8/28/14 | 4,000,000 |
| ||
U.S. Government Agency - Mortgage Securities - 1.1% | ||||
| ||||
Fannie Mae - 1.1% | ||||
2.388% 7/1/35 (d) | 628,469 | 665,194 | ||
2.426% 6/1/35 (d) | 829,208 | 878,919 | ||
2.429% 12/1/34 (d) | 397,265 | 418,689 | ||
2.492% 11/1/34 (d) | 418,357 | 444,853 | ||
2.496% 2/1/34 (d) | 207,295 | 215,656 | ||
2.512% 6/1/35 (d) | 324,130 | 340,077 | ||
2.625% 10/1/35 (d) | 823,319 | 871,640 | ||
2.663% 11/1/34 (d) | 385,292 | 407,644 | ||
2.752% 7/1/34 (d) | 392,282 | 417,737 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $4,495,389) |
| |||
Asset-Backed Securities - 22.0% | ||||
| ||||
Ally Auto Receivables Trust: | ||||
Series 2010-4 Class A4, 1.35% 12/15/15 | 450,000 | 451,739 | ||
Series 2012-2 Class A3, 0.74% 4/15/16 | 2,000,000 | 2,002,092 | ||
Asset-Backed Securities - continued | ||||
| Principal Amount | Value | ||
Ally Auto Receivables Trust: - continued | ||||
Series 2012-SN1: | ||||
Class A2, 0.51% 12/22/14 | $ 738,487 | $ 738,022 | ||
Class A3, 0.57% 8/20/15 | 2,400,000 | 2,396,753 | ||
Series 2013-SN1 Class A2, 0.52% 5/20/15 | 2,000,000 | 1,997,486 | ||
Ally Master Owner Trust: | ||||
Series 2011-1 Class A1, 1.061% 1/15/16 (d) | 3,290,000 | 3,297,972 | ||
Series 2011-3 Class A2, 1.81% 5/15/16 | 220,000 | 221,820 | ||
Series 2012-2 Class A, 0.691% 3/15/16 (d) | 1,000,000 | 1,002,174 | ||
Series 2012-3 Class A2, 1.21% 6/15/17 | 2,000,000 | 2,007,548 | ||
Series 2013-1 Class A1, 0.641% 2/15/18 (d) | 2,000,000 | 1,987,303 | ||
AmeriCredit Auto Receivables Trust: | ||||
Series 2011-5 Class A2, 1.19% 8/8/15 | 18,499 | 18,511 | ||
Series 2012-1 Class A2, 0.91% 10/8/15 | 296,233 | 296,433 | ||
Series 2012-2: | ||||
Class A2, 0.76% 10/8/15 | 1,043,953 | 1,044,487 | ||
Class A3, 1.05% 10/11/16 | 400,000 | 400,634 | ||
Series 2012-5 Class A2, 0.51% 1/8/16 | 892,168 | 891,737 | ||
Series 2013-3 Class A2, 0.68% 10/11/16 | 500,000 | 499,748 | ||
BMW Floorplan Master Owner Trust Series 2012-1A Class A, 0.5925% 9/15/17 (c)(d) | 2,260,000 | 2,259,837 | ||
BMW Vehicle Lease Trust Series 2012-1 Class A2, 0.59% 6/20/14 | 238,643 | 238,677 | ||
Capital One Multi-Asset Execution Trust Series 2013-A2 Class A2, 0.3725% 2/15/19 (d) | 5,000,000 | 4,976,536 | ||
Carmax Auto Owner Trust Series 2012-3 Class A2, 0.43% 9/15/15 | 1,483,891 | 1,483,519 | ||
CIT Equipment Collateral Series 2012-VT1: | ||||
Class A2, 0.85% 5/20/14 (c) | 624,351 | 624,503 | ||
Class A3, 1.1% 8/22/16 (c) | 482,003 | 483,022 | ||
Citibank Credit Card Issuance Trust Series 2013-A1 Class A1, 0.2905% 4/24/17 (d) | 5,000,000 | 4,989,762 | ||
CNH Equipment Trust: | ||||
Series 2012-D Class A2, 0.51% 4/15/16 | 1,000,000 | 999,124 | ||
Series 2013-B Class A2, 0.44% 10/17/16 | 1,000,000 | 997,375 | ||
Discover Card Master Trust: | ||||
Series 2012-A2 Class A2, 0.341% 10/17/16 (d) | 1,000,000 | 999,298 | ||
Series 2012-A5 Class A5, 0.3925% 1/16/18 (d) | 5,000,000 | 4,991,181 | ||
Fannie Mae Series 2004-T5: | ||||
Class AB1, 0.6471% 5/28/35 (d) | 80,751 | 75,634 | ||
Class AB3, 0.9235% 5/28/35 (d) | 32,052 | 29,223 | ||
Ford Credit Auto Lease Trust Series 2012-A: | ||||
Class A2, 0.63% 4/15/14 | 277,741 | 277,733 | ||
Asset-Backed Securities - continued | ||||
| Principal Amount | Value | ||
Ford Credit Auto Lease Trust Series 2012-A: - continued | ||||
Class A4, 1.03% 4/15/15 | $ 800,000 | $ 804,003 | ||
Ford Credit Auto Owner Trust Series 2012-D Class A2, 0.4% 9/15/15 | 726,209 | 725,943 | ||
Ford Credit Floorplan Master Owner Trust: | ||||
Series 2010-5 Class A1, 1.5% 9/15/15 | 240,000 | 240,276 | ||
Series 2012-1 Class A, 0.661% 1/15/16 (d) | 5,000,000 | 5,003,960 | ||
Series 2012-4 Class A1, 0.74% 9/15/16 | 1,085,000 | 1,084,557 | ||
Series 2013-3Q Class A2, 0.4925% 6/15/17 (d) | 500,000 | 499,062 | ||
Fremont Home Loan Trust Series 2005-A Class M4, 1.21% 1/25/35 (d) | 125,000 | 29,217 | ||
GE Capital Credit Card Master Note Trust: | ||||
Series 2012-1 Class A, 1.03% 1/15/18 | 857,000 | 861,287 | ||
Series 2012-4 Class A, 0.491% 6/15/18 (d) | 5,000,000 | 4,996,622 | ||
GE Equipment Small Ticket LLC Series 2012-1A Class A2, 0.85% 11/21/14 (c) | 301,359 | 301,584 | ||
GE Equipment Transportation LLC Series 2012-2 Class A3, 0.62% 7/25/16 | 1,604,000 | 1,599,745 | ||
Home Equity Asset Trust Series 2003-5 Class A2, 0.89% 12/25/33 (d) | 10,566 | 9,387 | ||
Hyundai Auto Lease Securitization Trust: | ||||
Series 2012-A Class A3, 0.92% 8/17/15 (c) | 1,500,000 | 1,503,163 | ||
Series 2013-A Class A2, 0.51% 9/15/15 (c) | 3,000,000 | 2,995,888 | ||
Hyundai Auto Receivables Trust Series 2013-B Class A2, 0.52% 3/15/16 | 1,840,000 | 1,839,686 | ||
Hyundai Floorplan Master Owner Trust Series 2013-1A Class A, 0.5425% 5/15/18 (c)(d) | 580,000 | 576,767 | ||
John Deere Owner Trust: | ||||
Series 2011-A Class A4, 1.96% 4/16/18 | 404,000 | 408,253 | ||
Series 2012-A Class A2, 0.59% 6/16/14 | 16,845 | 16,845 | ||
Series 2012-B Class A2, 0.43% 2/17/15 | 1,296,713 | 1,296,471 | ||
Mercedes-Benz Auto Lease Trust Series 2013-A Class A2, 0.39% 6/15/15 | 2,000,000 | 1,996,630 | ||
Mercedes-Benz Master Owner Trust Series 2012-BA Class A, 0.461% 11/15/16 (c)(d) | 2,370,000 | 2,365,112 | ||
Merrill Lynch Mortgage Investors Trust Series 2004-HE2 Class A1B, 0.66% 8/25/35 (d) | 20,366 | 19,559 | ||
Morgan Stanley ABS Capital I Trust Series 2004-HE6 Class A2, 0.87% 8/25/34 (d) | 65,756 | 64,193 | ||
Nissan Auto Lease Trust Series 2013-A Class A2A, 0.45% 9/15/15 | 3,000,000 | 2,991,832 | ||
Nissan Master Owner Trust Receivables: | ||||
Series 2012-A Class A, 0.6625% 5/15/17 (d) | 2,250,000 | 2,246,758 | ||
Series 2013-A Class A, 0.4925% 2/15/18 (d) | 1,000,000 | 996,925 | ||
Asset-Backed Securities - continued | ||||
| Principal Amount | Value | ||
Ocala Funding LLC Series 2006-1A Class A, 1.5915% 3/20/11 (b)(c)(d) | $ 965,000 | $ 0 | ||
Park Place Securities, Inc. Series 2004-WCW1 Class M4, 1.64% 9/25/34 (d) | 435,000 | 132,221 | ||
Porsche Innovative Lease Owner Trust Series 2012-1 Class A2, 0.44% 2/23/15 (c) | 633,518 | 633,144 | ||
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-HE1 Class A, 0.99% 4/25/33 (d) | 1,451 | 1,350 | ||
Santander Drive Auto Receivables Trust: | ||||
Series 2011-4 Class A2, 1.37% 3/16/15 | 26,418 | 26,436 | ||
Series 2012-1 Class A2, 1.25% 4/15/15 | 424,188 | 424,589 | ||
Series 2012-2 Class A2, 0.91% 5/15/15 | 154,776 | 154,822 | ||
Series 2012-3 Class A2, 0.83% 4/15/15 | 308,275 | 308,357 | ||
Series 2013-1 Class A2, 0.48% 2/16/16 | 680,684 | 680,168 | ||
Series 2013-2 Class A2, 0.47% 3/15/16 | 1,000,000 | 998,992 | ||
Series 2013-3 Class A2, 0.55% 9/15/16 | 2,000,000 | 1,997,935 | ||
SLM Student Loan Trust: | ||||
Series 2012-6 Class A1, 0.35% 2/27/17 (d) | 1,163,401 | 1,161,623 | ||
Series 2012-7 Class A2, 0.47% 9/25/19 (d) | 1,000,000 | 995,765 | ||
Series 2013-1 Class A2, 0.44% 9/25/19 (d) | 2,000,000 | 1,984,855 | ||
Terwin Mortgage Trust Series 2003-4HE Class A1, 1.05% 9/25/34 (d) | 21,802 | 20,225 | ||
World Omni Auto Lease Securitization Trust Series 2012-A Class A2, 0.71% 1/15/15 | 736,092 | 736,218 | ||
World Omni Auto Receivables Trust: | ||||
Series 2012-A Class A2, 0.52% 6/15/15 | 694,700 | 694,761 | ||
Series 2013-A Class A2, 0.43% 5/16/16 | 2,000,000 | 1,999,372 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $92,628,217) |
| |||
Collateralized Mortgage Obligations - 9.3% | ||||
| ||||
Private Sponsor - 0.5% | ||||
Arran Residential Mortgages Funding PLC floater Series 2011-1A Class A1C, 1.4741% 11/19/47 (c)(d) | 20,421 | 20,428 | ||
Granite Master Issuer PLC floater Series 2006-1A Class A5, 0.3315% 12/20/54 (c)(d) | 571,716 | 558,281 | ||
Granite Mortgages Series 2003-2 Class 1A3, 0.7662% 7/20/43 (d) | 441,021 | 433,262 | ||
Granite Mortgages PLC floater: | ||||
Series 2003-3 Class 1A3, 0.6662% 1/20/44 (d) | 37,046 | 36,357 | ||
Series 2004-1 Class 2A1, 0.5923% 3/20/44 (d) | 679,580 | 665,979 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount | Value | ||
Private Sponsor - continued | ||||
Granite Mortgages PLC floater: - continued | ||||
Series 2004-3 Class 2A1, 0.5523% 9/20/44 (d) | $ 250,662 | $ 245,903 | ||
GSR Mortgage Loan Trust floater Series 2004-11 Class 2A1, 0.523% 12/25/34 (d) | 170,111 | 162,848 | ||
TOTAL PRIVATE SPONSOR | 2,123,058 | |||
U.S. Government Agency - 8.8% | ||||
Fannie Mae: | ||||
floater: | ||||
Series 2003-31 Class FM, 0.69% 4/25/33 (d) | 1,134,056 | 1,147,333 | ||
Series 2006-33 Class CF, 0.49% 5/25/36 (d) | 133,405 | 133,603 | ||
Series 2008-76 Class EF, 0.69% 9/25/23 (d) | 35,361 | 35,535 | ||
Series 2010-86 Class FE, 0.64% 8/25/25 (d) | 207,128 | 208,649 | ||
floater planned amortization class: | ||||
Series 2004-52 Class PF 0.64% 12/25/33 (d) | 2,639,821 | 2,656,888 | ||
Series 2005-90 Class FC, 0.44% 10/25/35 (d) | 155,206 | 155,538 | ||
pass-thru certificates Series 2012-127 Class DH, 4% 11/25/27 | 418,044 | 445,162 | ||
sequential payer: | ||||
Series 2005-47 Class HA, 4.5% 7/25/19 | 153,064 | 153,963 | ||
Series 2009-69 Class EA, 5% 10/25/36 | 513,472 | 515,507 | ||
Series 2011-16 Class FB, 0.34% 3/25/31 (d) | 1,672,487 | 1,674,509 | ||
sequential payer floater: | ||||
Series 2005-74 Class DF, 0.54% 7/25/35 (d) | 3,748,684 | 3,758,490 | ||
Series 2005-83 Class FP, 0.52% 10/25/35 (d) | 5,025,079 | 5,029,773 | ||
Series 2011-23 Class AB, 2.75% 6/25/20 | 119,242 | 122,395 | ||
Freddie Mac: | ||||
floater: | ||||
Series 2711 Class FC, 1.091% 2/15/33 (d) | 319,964 | 325,635 | ||
Series 3346 Class FA, 0.421% 2/15/19 (d) | 2,933,260 | 2,935,222 | ||
Series 3879 Class AF, 0.621% 6/15/41 (d) | 482,060 | 484,222 | ||
floater planned amortization class: | ||||
Series 2953 Class LF, 0.491% 12/15/34 (d) | 1,886,106 | 1,889,434 | ||
Series 3102 Class FD, 0.491% 1/15/36 (d) | 429,118 | 430,499 | ||
Series 3117 Class JF, 0.491% 2/15/36 (d) | 168,763 | 169,144 | ||
Series 4020 Class EF 0.641% 2/15/42 (d) | 3,319,431 | 3,318,405 | ||
Series 4057 Class EF, 0.541% 12/15/41 (d) | 2,675,892 | 2,680,258 | ||
floater sequential payer: | ||||
Series 2828 Class TF, 0.641% 10/15/30 (d) | 728,231 | 731,838 | ||
Series 3046 Class F, 0.561% 3/15/33 (d) | 1,642,844 | 1,639,218 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount | Value | ||
U.S. Government Agency - continued | ||||
Freddie Mac: - continued | ||||
planned amortization class: | ||||
Series 2836 Class PX, 4% 5/15/18 | $ 593,330 | $ 598,906 | ||
Series 3081 Class CP 5.5% 10/15/34 | 404,205 | 414,706 | ||
Series 3792 Class DF, 0.591% 11/15/40 (d) | 699,264 | 701,675 | ||
sequential payer: | ||||
Series 2582 Class CG, 4% 11/15/17 | 105,058 | 105,448 | ||
Series 2924 Class DA, 4.5% 2/15/19 | 137,071 | 137,895 | ||
Series 3573 Class LC, 1.85% 8/15/14 | 173,047 | 173,294 | ||
Series 3659 Class EJ 3% 6/15/18 | 490,818 | 502,323 | ||
Series 3696 Class AE, 1.2% 7/15/15 | 181,183 | 181,805 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
floater: | ||||
Series 2009-108 Class CF, 0.7919% 11/16/39 (d) | 199,294 | 201,076 | ||
Series 2009-116 Class KF, 0.7219% 12/16/39 (d) | 175,131 | 176,358 | ||
Series 2009-127 Class FA, 0.7415% 9/20/38 (d) | 225,280 | 226,839 | ||
Series 2010-9 Class FA, 0.7119% 1/16/40 (d) | 263,015 | 264,706 | ||
Series 2012-149 Class LF, 0.4415% 12/20/42 (d) | 353,264 | 352,363 | ||
Series 2013-37 Class F, 0.4615% 3/20/43 (d) | 245,897 | 245,599 | ||
floater planned amortization class Series 2004-80 Class FM, 0.4915% 7/20/34 (d) | 895,309 | 896,527 | ||
floater sequential payer Series 2010-120 Class FB 0.4915% 9/20/35 (d) | 236,014 | 236,766 | ||
planned amortization class: | ||||
Series 2010-112 Class PM, 3.25% 9/20/33 | 89,160 | 90,464 | ||
Series 2010-99 Class PT, 3.5% 8/20/33 | 118,842 | 121,031 | ||
TOTAL U.S. GOVERNMENT AGENCY | 36,269,001 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $38,477,774) |
| |||
Commercial Mortgage Securities - 1.3% | ||||
| ||||
Banc of America REMIC Trust Series 2012-CLRN Class A1, 1.341% 8/15/29 (c)(d) | 560,000 | 560,587 | ||
Del Coronado Trust floater Series 2013-HDC Class A, 0.993% 3/15/26 (c)(d) | 500,000 | 498,386 | ||
Extended Stay America Trust floater Series 2013-ESFL: | ||||
Class A1FL, 0.9948% 12/5/31 (c)(d) | 270,000 | 269,735 | ||
Class A2FL, 0.8948% 12/5/31 (c)(d) | 350,000 | 347,264 | ||
Commercial Mortgage Securities - continued | ||||
| Principal Amount | Value | ||
GMAC Commercial Mortgage Securities, Inc. sequential payer Series 2003-C2 Class A2, 5.6369% 5/10/40 (d) | $ 5,293 | $ 5,290 | ||
GS Mortgage Securities Corp. II floater Series 2007-EOP: | ||||
Class A2, 1.2601% 3/6/20 (c)(d) | 205,268 | 205,663 | ||
Class C, 2.0056% 3/6/20 (c)(d) | 300,000 | 300,793 | ||
GS Mortgage Securities Corp. Trust Series 2013-KYO Class A, 1.0448% 11/8/29 (c)(d) | 560,000 | 555,132 | ||
GS Mortgage Securities Trust: | ||||
sequential payer Series 2006-GG8 Class A2, 5.479% 11/10/39 | 17,129 | 17,211 | ||
Series 2011-GC5 Class A1, 1.468% 8/10/44 (d) | 145,444 | 146,434 | ||
Series 2012-GC6 Class A1, 1.282% 1/10/45 | 71,780 | 71,959 | ||
JPMorgan Chase Commercial Mortgage Securities Corp.: | ||||
floater Series 2011-CCHP Class A, 2.6% 7/15/28 (c)(d) | 211,756 | 211,348 | ||
Series 2003-CB7 Class A4, 4.879% 1/12/38 (d) | 49,676 | 50,011 | ||
Series 2012-C6 Class A1, 1.0305% 5/15/45 | 225,266 | 224,640 | ||
JPMorgan Chase Commercial Mortgage Securities Trust: | ||||
floater Series 2013-FL3 Class A1, 0.991% 4/15/28 (c)(d) | 530,000 | 526,743 | ||
sequential payer: | ||||
Series 2005-LDP5 Class A2, 5.198% 12/15/44 | 112,405 | 112,907 | ||
Series 2007-LD11 Class A2, 5.9877% 6/15/49 (d) | 122,271 | 125,293 | ||
Morgan Stanley Capital I Trust floater: | ||||
Series 2006-XLF Class C, 1.391% 7/15/19 (c)(d) | 247,826 | 173,478 | ||
Series 2007-XLFA: | ||||
Class A2, 0.293% 10/15/20 (c)(d) | 209,560 | 208,065 | ||
Class B, 0.323% 10/15/20 (c)(d) | 440,000 | 436,056 | ||
Morgan Stanley Dean Witter Capital I Trust sequential payer Series 2003-T11 Class A4, 5.15% 6/13/41 | 5,450 | 5,446 | ||
Wachovia Bank Commercial Mortgage Trust floater Series 2006-WL7A Class A2, 0.3125% 9/15/21 (c)(d) | 213,697 | 213,108 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $5,648,842) |
| |||
Municipal Securities - 0.8% | ||||
| Principal Amount | Value | ||
Illinois Gen. Oblig. Series 2010: | ||||
4.071% 1/1/14 | $ 1,940,000 | $ 1,963,707 | ||
4.421% 1/1/15 | 1,375,000 | 1,430,440 | ||
TOTAL MUNICIPAL SECURITIES (Cost $3,397,460) |
| |||
Certificates of Deposit - 0.3% | ||||
| ||||
Bank of Nova Scotia yankee 0.7751% 2/10/14 (d) | 1,000,000 |
| ||
Commercial Paper - 0.2% | ||||
| ||||
Vodafone Group PLC yankee 0.77% 12/30/13 | 1,000,000 |
|
Money Market Funds - 6.6% | |||
Shares |
| ||
Fidelity Cash Central Fund, 0.11% (a) | 27,475,112 |
| |
TOTAL INVESTMENT PORTFOLIO - 100.1% (Cost $415,589,687) | 414,312,802 | ||
NET OTHER ASSETS (LIABILITIES) - (0.1)% | (486,935) | ||
NET ASSETS - 100% | $ 413,825,867 |
Legend |
(a) 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, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request. |
(b) Non-income producing - Security is in default. |
(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 $71,309,629 or 17.2% of net assets. |
(d) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 12,674 |
Other Information |
The following is a summary of the inputs used, as of July 31, 2013, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements. |
Valuation Inputs at Reporting Date: | ||||
Description | Total | Level 1 | Level 2 | Level 3 |
Investments in Securities: | ||||
Corporate Bonds | $ 237,990,456 | $ - | $ 237,990,456 | $ - |
U.S. Government and Government Agency Obligations | 4,029,616 | - | 4,029,616 | - |
U.S. Government Agency - Mortgage Securities | 4,660,409 | - | 4,660,409 | - |
Asset-Backed Securities | 91,104,441 | - | 91,028,807 | 75,634 |
Collateralized Mortgage Obligations | 38,392,059 | - | 38,392,059 | - |
Commercial Mortgage Securities | 5,265,549 | - | 5,092,071 | 173,478 |
Municipal Securities | 3,394,147 | - | 3,394,147 | - |
Certificates of Deposit | 1,002,757 | - | 1,002,757 | - |
Commercial Paper | 998,256 | - | 998,256 | - |
Money Market Funds | 27,475,112 | 27,475,112 | - | - |
Total Investments in Securities: | $ 414,312,802 | $ 27,475,112 | $ 386,588,578 | $ 249,112 |
Distribution of investments by country or territory of incorporation, as a percentage of total net assets, is as follows. (Unaudited) |
United States of America | 82.0% |
United Kingdom | 6.1% |
Canada | 3.7% |
Netherlands | 2.6% |
Australia | 2.1% |
Japan | 1.4% |
Others (Individually Less Than 1%) | 2.1% |
| 100.0% |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
| July 31, 2013 | |
|
|
|
Assets | ||
Investment in securities, at value - See accompanying schedule: Unaffiliated issuers (cost $388,114,575) | $ 386,837,690 |
|
Fidelity Central Funds (cost $27,475,112) | 27,475,112 |
|
Total Investments (cost $415,589,687) |
| $ 414,312,802 |
Receivable for investments sold | 131,435 | |
Receivable for fund shares sold | 916,534 | |
Interest receivable | 440,541 | |
Distributions receivable from Fidelity Central Funds | 1,586 | |
Receivable from investment adviser for expense reductions | 81 | |
Other receivables | 1 | |
Total assets | 415,802,980 | |
|
|
|
Liabilities | ||
Payable to custodian bank | $ 1,772 | |
Payable for investments purchased | 1,672,395 | |
Payable for fund shares redeemed | 145,671 | |
Distributions payable | 2,582 | |
Accrued management fee | 104,999 | |
Distribution and service plan fees payable | 2,664 | |
Other affiliated payables | 47,030 | |
Total liabilities | 1,977,113 | |
|
|
|
Net Assets | $ 413,825,867 | |
Net Assets consist of: |
| |
Paid in capital | $ 541,515,615 | |
Undistributed net investment income | 257,392 | |
Accumulated undistributed net realized gain (loss) on investments | (126,670,255) | |
Net unrealized appreciation (depreciation) on investments | (1,276,885) | |
Net Assets | $ 413,825,867 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
| July 31, 2013 | |
|
|
|
Calculation of Maximum Offering Price Class A: | $ 8.24 | |
|
|
|
Maximum offering price per share (100/98.50 of $8.24) | $ 8.37 | |
Class T: | $ 8.24 | |
|
|
|
Maximum offering price per share (100/98.50 of $8.24) | $ 8.37 | |
Ultra-Short Bond: | $ 8.24 | |
|
|
|
Institutional Class: | $ 8.24 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
| Year ended July 31, 2013 | |
|
|
|
Investment Income |
|
|
Interest |
| $ 3,011,429 |
Income from Fidelity Central Funds |
| 12,674 |
Total income |
| 3,024,103 |
|
|
|
Expenses | ||
Management fee | $ 1,107,863 | |
Transfer agent fees | 370,418 | |
Distribution and service plan fees | 27,623 | |
Fund wide operations fee | 125,313 | |
Independent trustees' compensation | 1,292 | |
Miscellaneous | 811 | |
Total expenses before reductions | 1,633,320 | |
Expense reductions | (1,993) | 1,631,327 |
Net investment income (loss) | 1,392,776 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 464,089 | |
Futures contracts | 17,414 | |
Total net realized gain (loss) |
| 481,503 |
Change in net unrealized appreciation (depreciation) on: Investment securities | 317,368 | |
Futures contracts | (17,098) | |
Total change in net unrealized appreciation (depreciation) |
| 300,270 |
Net gain (loss) | 781,773 | |
Net increase (decrease) in net assets resulting from operations | $ 2,174,549 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income (loss) | $ 1,392,776 | $ 1,324,555 |
Net realized gain (loss) | 481,503 | (161,606) |
Change in net unrealized appreciation (depreciation) | 300,270 | 577,855 |
Net increase (decrease) in net assets resulting | 2,174,549 | 1,740,804 |
Distributions to shareholders from net investment income | (1,172,776) | (1,226,234) |
Share transactions - net increase (decrease) | 87,110,349 | 65,951,070 |
Redemption fees | 11,859 | 17,158 |
Total increase (decrease) in net assets | 88,123,981 | 66,482,798 |
|
|
|
Net Assets | ||
Beginning of period | 325,701,886 | 259,219,088 |
End of period (including undistributed net investment income of $257,392 and undistributed net investment income of $36,211, respectively) | $ 413,825,867 | $ 325,701,886 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) C | .017 | .023 | .013 | .047 | .091 |
Net realized and unrealized gain (loss) | .025 | .007 | .051 | .040 | (.167) |
Total from investment operations | .042 | .030 | .064 | .087 | (.076) |
Distributions from net investment income | (.012) | (.020) | (.015) | (.047) | (.071) |
Tax return of capital | - | - | - | - | (.003) |
Total distributions | (.012) | (.020) | (.015) | (.047) | (.074) |
Redemption fees added to paid in capital C | - G | - G | .001 | - G | - G |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A, B | .52% | .36% | .80% | 1.08% | (.92)% |
Ratios to Average Net Assets D, F |
|
|
|
|
|
Expenses before reductions | .65% | .66% | .63% | .64% | .68% |
Expenses net of fee waivers, if any | .65% | .66% | .63% | .64% | .68% |
Expenses net of all reductions | .65% | .66% | .63% | .64% | .67% |
Net investment income (loss) | .20% | .28% | .16% | .58% | 1.13% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 18,620 | $ 15,635 | $ 12,242 | $ 18,129 | $ 8,033 |
Portfolio turnover rate E | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
E Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
G Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) C | .013 | .019 | .009 | .044 | .090 |
Net realized and unrealized gain (loss) | .026 | .007 | .052 | .040 | (.168) |
Total from investment operations | .039 | .026 | .061 | .084 | (.078) |
Distributions from net investment income | (.009) | (.016) | (.012) | (.044) | (.069) |
Tax return of capital | - | - | - | - | (.003) |
Total distributions | (.009) | (.016) | (.012) | (.044) | (.072) |
Redemption fees added to paid in capital C | - G | - G | .001 | - G | - G |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A, B | .48% | .32% | .76% | 1.03% | (.94)% |
Ratios to Average Net Assets D, F |
|
|
|
|
|
Expenses before reductions | .75% | .72% | .68% | .68% | .69% |
Expenses net of fee waivers, if any | .70% | .70% | .68% | .68% | .69% |
Expenses net of all reductions | .70% | .70% | .68% | .68% | .69% |
Net investment income (loss) | .16% | .23% | .12% | .54% | 1.11% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 3,542 | $ 3,312 | $ 4,811 | $ 5,334 | $ 3,114 |
Portfolio turnover rate E | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
E Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
G Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Ultra-Short Bond
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) B | .034 | .040 | .028 | .063 | .111 |
Net realized and unrealized gain (loss) | .025 | .006 | .051 | .040 | (.169) |
Total from investment operations | .059 | .046 | .079 | .103 | (.058) |
Distributions from net investment income | (.029) | (.036) | (.030) | (.063) | (.088) |
Tax return of capital | - | - | - | - | (.004) |
Total distributions | (.029) | (.036) | (.030) | (.063) | (.092) |
Redemption fees added to paid in capital B | - F | - F | .001 | - F | - F |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A | .72% | .57% | .99% | 1.27% | (.70)% |
Ratios to Average Net Assets C, E |
|
|
|
|
|
Expenses before reductions | .45% | .45% | .45% | .45% | .45% |
Expenses net of fee waivers, if any | .45% | .45% | .45% | .45% | .45% |
Expenses net of all reductions | .45% | .45% | .45% | .45% | .44% |
Net investment income (loss) | .41% | .48% | .34% | .77% | 1.36% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 384,116 | $ 291,005 | $ 239,921 | $ 239,266 | $ 217,282 |
Portfolio turnover rate D | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Calculated based on average shares outstanding during the period.
C Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
D Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) B | .029 | .037 | .025 | .057 | .102 |
Net realized and unrealized gain (loss) | .025 | .009 | .051 | .040 | (.168) |
Total from investment operations | .054 | .046 | .076 | .097 | (.066) |
Distributions from net investment income | (.024) | (.036) | (.027) | (.057) | (.081) |
Tax return of capital | - | - | - | - | (.003) |
Total distributions | (.024) | (.036) | (.027) | (.057) | (.084) |
Redemption fees added to paid in capital B | - F | - F | .001 | - F | - F |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A | .65% | .56% | .95% | 1.20% | (.80)% |
Ratios to Average Net Assets C, E |
|
|
|
|
|
Expenses before reductions | .51% | .48% | .49% | .52% | .58% |
Expenses net of fee waivers, if any | .51% | .48% | .49% | .52% | .55% |
Expenses net of all reductions | .51% | .48% | .49% | .52% | .54% |
Net investment income (loss) | .35% | .45% | .31% | .70% | 1.26% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 7,548 | $ 15,750 | $ 2,245 | $ 1,206 | $ 623 |
Portfolio turnover rate D | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Calculated based on average shares outstanding during the period.
C Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
D Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2013
1. Organization.
Fidelity Ultra-Short Bond Fund (the Fund) is a fund of Fidelity Income Fund (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The Fund offers Class A, Class T, Ultra-Short Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Effective after the close of business on August 2, 2013, the Fund was closed to new accounts with certain exceptions. Each class has exclusive voting rights with respect to matters that affect that class.
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds held as of period end, if any, as an investment of the Fund, but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
The Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC website or upon request.
3. Significant Accounting Policies.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. In accordance with valuation policies and procedures approved by the Board of Trustees (the Board), the Fund attempts to obtain prices from
Annual Report
3. Significant Accounting Policies - continued
Investment Valuation - continued
one or more third party pricing vendors 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 FMR Fair Value Committee (the Committee), in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events, changes in interest rates and credit quality. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and is responsible for approving and reporting to the Board all fair value determinations.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
Level 1 - 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 the Fund's investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. For corporate bonds, municipal securities, U.S. government and government agency obligations, commercial paper and certificates of deposit, pricing vendors utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type as well as broker-supplied prices. For asset backed securities, collateralized mortgage obligations, commercial mortgage securities and U.S. government agency mortgage securities, pricing vendors utilize matrix pricing which considers prepayment speed assumptions, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity and type as well as 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 vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Annual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Investment Valuation - continued
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level, as of July 31, 2013, is included at the end of the Fund's Schedule of Investments.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Interest income and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions may also differ by class. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for income taxes is required. As of July 31, 2013, the Fund did not have any unrecognized tax benefits in the financial statements; nor is the Fund aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. A fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed.
Annual Report
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction.
Dividends are declared and recorded daily and paid monthly from net investment income. Distributions from realized gains, if any, are declared and recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to futures contracts, market discount, premium on debt securities, capital loss carryforwards and losses deferred due to excise tax regulations.
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:
Gross unrealized appreciation | $ 1,052,039 |
Gross unrealized depreciation | (2,144,418) |
Net unrealized appreciation (depreciation) on securities and other investments | $ (1,092,379) |
|
|
Tax Cost | $ 415,405,181 |
The tax-based components of distributable earnings as of period end were as follows:
Undistributed ordinary income | $ 72,886 |
Capital loss carryforward | $ (126,670,255) |
Net unrealized appreciation (depreciation) | $ (1,092,379) |
Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. Under the Regulated Investment Company Modernization Act of 2010 (the Act), the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital losses are required to be used prior to any losses that expire.
Annual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The capital loss carryforward information presented below, including any applicable limitation, is estimated as of fiscal period end and is subject to adjustment.
Fiscal year of expiration |
|
2014 | $ (1,917,431) |
2015 | (518,690) |
2016 | (12,186,304) |
2017 | (97,397,499) |
2018 | (9,829,719) |
2019 | (3,765,717) |
Total with expiration | (125,615,360) |
No expiration |
|
Long-term | (1,054,895) |
Total capital loss carryforward | $ (126,670,255) |
The tax character of distributions paid was as follows:
| July 31, 2013 | July 31, 2012 |
Ordinary Income | $ 1,172,776 | $ 1,226,234 |
Short-Term Trading (Redemption) Fees. Shares held by investors in the Fund less than 60 days may have been subject to a redemption fee equal to .25% of the net asset value of shares redeemed. All redemption fees, which reduce the proceeds of the shareholder redemption, are retained by the Fund and accounted for as an addition to paid in capital.
Restricted Securities. The Fund may 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. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
New Accounting Pronouncement. The Financial Accounting Standards Board issued in December 2011, Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities, and in January 2013, Accounting Standards Update No. 2013-1 Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. These updates create new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual
Annual Report
3. Significant Accounting Policies - continued
New Accounting Pronouncement - continued
reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management expects that the impact of the update's adoption will be limited to additional financial statement disclosures as applicable.
4. Derivative Instruments.
Risk Exposures and the Use of Derivative Instruments. The Fund's investment objective allows the Fund to enter into various types of derivative contracts, including futures 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 and 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:
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. Counterparty credit risk related to exchange-traded futures contracts may be mitigated by the protection provided by the exchange on which they trade.
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 and amounts recognized in the Statement of Assets and Liabilities. 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.
Annual Report
Notes to Financial Statements - continued
4. Derivative Instruments - continued
Futures Contracts. A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a fixed price at a specified future date. The Fund used futures contracts to manage its exposure to the bond market and to fluctuations in interest rates.
Upon entering into a futures contract, a fund is required to deposit either cash or securities (initial margin) with a clearing broker in an amount equal to a certain percentage of the face value of the contract. Futures contracts are marked-to-market daily and subsequent daily payments (variation margin) are made or received by a fund depending on the daily fluctuations in the value of the futures contracts and are recorded as unrealized appreciation or (depreciation). This receivable and/or payable, if any, is included in daily variation margin for derivative instruments in the Statement of Assets and Liabilities. Realized gain or (loss) is recorded upon the expiration or closing of a futures contract.
Any 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.
During the period the Fund recognized net realized gain (loss) of $17,414 and a change in net unrealized appreciation (depreciation) of $(17,098) related to its investment in futures contracts. These amounts are included in the Statement of Operations.
5. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $255,352,971 and $157,691,752, respectively.
6. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and an annualized group fee rate that averaged .11% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .31% of the Fund's average net assets.
Distribution and Service Plan Fees. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for
Annual Report
6. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan Fees - continued
selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates, total fees and amounts retained by FDC were as follows:
| Distribution | Service | Total | Retained |
Class A | -% | .15% | $ 22,732 | $ 1,400 |
Class T | -% | .15% | 4,891 | 67 |
|
|
| $ 27,623 | $ 1,467 |
Sales Load. FDC may receive a front-end sales charge of up to 1.50% for selling Class A and Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. Depending on the holding period, FDC may receive a contingent deferred sales charges levied on Class A and Class T redemptions. The deferred sales charges range from .75% or .50% for certain purchases of Class A shares and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
| Retained |
Class A | $ 1,698 |
Class T | 922 |
| $ 2,620 |
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of each respective class of the Fund, with the exception of Ultra-Short Bond. FIIOC receives an asset-based fee of .10% of Ultra-Short Bond's average net assets. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, transfer agent fees for each class were as follows:
| Amount | % of |
Class A | $ 23,136 | .15 |
Class T | 8,089 | .25 |
Ultra-Short Bond | 326,462 | .10 |
Institutional Class | 12,731 | .16 |
| $ 370,418 |
|
Annual Report
Notes to Financial Statements - continued
6. Fees and Other Transactions with Affiliates - continued
Fund Wide Operations Fee. Pursuant to the Fund Wide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, compensation of the independent Trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent Trustees. For the period, the FWOE fee was equivalent to an annual rate of .04% of average net assets.
7. Committed Line of Credit.
The Fund participates with other funds managed by FMR or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $811 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.
8. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, including commitment fees, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
| Expense | Reimbursement |
Class T | .70% | $ 1,569 |
In addition, FMR reimbursed a portion of the Fund's operating expenses during the period in the amount of $370.
Through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's expenses by $54.
Annual Report
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2013 | 2012 |
From net investment income |
|
|
Class A | $ 23,478 | $ 38,543 |
Class T | 3,636 | 7,892 |
Ultra-Short Bond | 1,122,291 | 1,158,011 |
Institutional Class | 23,371 | 21,788 |
Total | $ 1,172,776 | $ 1,226,234 |
10. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
Years ended July 31, | 2013 | 2012 | 2013 | 2012 |
Class A |
|
|
|
|
Shares sold | 1,245,078 | 1,603,688 | $ 10,260,424 | $ 13,112,637 |
Reinvestment of distributions | 2,430 | 3,920 | 20,006 | 32,092 |
Shares redeemed | (891,404) | (1,196,047) | (7,343,122) | (9,779,740) |
Net increase (decrease) | 356,104 | 411,561 | $ 2,937,308 | $ 3,364,989 |
Class T |
|
|
|
|
Shares sold | 200,020 | 331,712 | $ 1,648,091 | $ 2,711,930 |
Reinvestment of distributions | 415 | 897 | 3,416 | 7,343 |
Shares redeemed | (173,781) | (515,942) | (1,431,755) | (4,218,475) |
Net increase (decrease) | 26,654 | (183,333) | $ 219,752 | $ (1,499,202) |
Ultra-Short Bond |
|
|
|
|
Shares sold | 19,772,594 | 16,883,162 | $ 162,947,538 | $ 138,113,317 |
Reinvestment of distributions | 134,015 | 138,342 | 1,103,898 | 1,132,483 |
Shares redeemed | (8,722,670) | (10,834,545) | (71,872,636) | (88,649,539) |
Net increase (decrease) | 11,183,939 | 6,186,959 | $ 92,178,800 | $ 50,596,261 |
Institutional Class |
|
|
|
|
Shares sold | 530,266 | 1,909,832 | $ 4,367,986 | $ 15,655,264 |
Reinvestment of distributions | 2,501 | 2,252 | 20,594 | 18,456 |
Shares redeemed | (1,534,751) | (267,573) | (12,614,091) | (2,184,698) |
Net increase (decrease) | (1,001,984) | 1,644,511 | $ (8,225,511) | $ 13,489,022 |
11. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum
Annual Report
Notes to Financial Statements - continued
11. Other - continued
exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Ultra-Short Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Ultra-Short Bond Fund (a fund of Fidelity Income Fund) at July 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Ultra-Short Bond Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 17, 2013
Annual Report
Trustees and Officers
The Trustees and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, oversee management of the risks associated with such activities and contractual arrangements, and review the fund's performance. Except for Elizabeth S. Acton and James C. Curvey, each of the Trustees oversees 221 Fidelity funds. Ms. Acton oversees 203 Fidelity funds. Mr. Curvey oversees 387 Fidelity funds.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person of the trust and the fund (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the month in which his or her 75th birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers hold office without limit in time, except that any officer may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
Experience, Skills, Attributes, and Qualifications of the Fund's Trustees. The Governance and Nominating Committee has adopted a statement of policy that describes the experience, qualifications, attributes, and skills that are necessary and desirable for potential Independent Trustee candidates (Statement of Policy). The Board believes that each Trustee satisfied at the time he or she was initially elected or appointed a Trustee, and continues to satisfy, the standards contemplated by the Statement of Policy. The Governance and Nominating Committee also engages professional search firms to help identify potential Independent Trustee candidates who have the experience, qualifications, attributes, and skills consistent with the Statement of Policy. From time to time, additional criteria based on the composition and skills of the current Independent Trustees, as well as experience or skills that may be appropriate in light of future changes to board composition, business conditions, and regulatory or other developments, have also been considered by the professional search firms and the Governance and Nominating Committee. In addition, the Board takes into account the Trustees' commitment and participation in Board and committee meetings, as well as their leadership of standing and ad hoc committees throughout their tenure.
In determining that a particular Trustee was and continues to be qualified to serve as a Trustee, the Board has considered a variety of criteria, none of which, in isolation, was controlling. The Board believes that, collectively, the Trustees have balanced and diverse experience, qualifications, attributes, and skills, which allow the Board to operate effectively in governing the fund and protecting the interests of shareholders. Information about the specific experience, skills, attributes, and qualifications of each Trustee, which in each case led to the Board's conclusion that the Trustee should serve (or continue to serve) as a trustee of the fund, is provided below.
Annual Report
Trustees and Officers - continued
Board Structure and Oversight Function. Abigail P. Johnson is an interested person (as defined in the 1940 Act) and currently serves as Chairman. The Trustees have determined that an interested Chairman is appropriate and benefits shareholders because an interested Chairman has a personal and professional stake in the quality and continuity of services provided to the fund. Independent Trustees exercise their informed business judgment to appoint an individual of their choosing to serve as Chairman, regardless of whether the Trustee happens to be independent or a member of management. The Independent Trustees have determined that they can act independently and effectively without having an Independent Trustee serve as Chairman and that a key structural component for assuring that they are in a position to do so is for the Independent Trustees to constitute a substantial majority for the Board. The Independent Trustees also regularly meet in executive session. Albert R. Gamper, Jr. serves as Chairman of the Independent Trustees and as such (i) acts as a liaison between the Independent Trustees and management with respect to matters important to the Independent Trustees and (ii) with management prepares agendas for Board meetings.
Fidelity funds are overseen by different Boards of Trustees. The fund's Board oversees Fidelity's investment-grade bond, money market, and asset allocation funds and another Board oversees Fidelity's equity and high income funds. The asset allocation funds may invest in Fidelity funds that are overseen by such other Board. The use of separate Boards, each with its own committee structure, allows the Trustees of each group of Fidelity funds to focus on the unique issues of the funds they oversee, including common research, investment, and operational issues. On occasion, the separate Boards establish joint committees to address issues of overlapping consequences for the Fidelity funds overseen by each Board.
The Trustees operate using a system of committees to facilitate the timely and efficient consideration of all matters of importance to the Trustees, the fund, and fund shareholders and to facilitate compliance with legal and regulatory requirements and oversight of the fund's activities and associated risks. The Board, acting through its committees, has charged FMR and its affiliates with (i) identifying events or circumstances the occurrence of which could have demonstrably adverse effects on the fund's business and/or reputation; (ii) implementing processes and controls to lessen the possibility that such events or circumstances occur or to mitigate the effects of such events or circumstances if they do occur; and (iii) creating and maintaining a system designed to evaluate continuously business and market conditions in order to facilitate the identification and implementation processes described in (i) and (ii) above. Because the day-to-day operations and activities of the fund are carried out by or through FMR, its affiliates, and other service providers, the fund's exposure to risks is mitigated but not eliminated by the processes overseen by the Trustees. While each of the Board's committees has responsibility for overseeing different aspects of the fund's activities, oversight is exercised primarily through the Operations and Audit Committees. In addition, an ad hoc Board committee of Independent Trustees has worked with FMR to enhance the Board's oversight of investment and financial risks, legal and regulatory risks, technology risks, and operational risks, including the development of additional risk reporting to the Board. Appropriate personnel, including but not limited to the fund's Chief Compliance Officer (CCO), FMR's internal auditor, the independent accountants, the fund's Treasurer and portfolio management personnel, make periodic reports to the Board's committees, as appropriate, including an annual review of FMR's risk management program for the Fidelity funds. The responsibilities of each standing committee, including their oversight responsibilities, are described further under "Standing Committees of the Fund's Trustees."
Annual Report
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+ | |
Abigail P. Johnson (1961) | |
| Year of Election or Appointment: 2009 Ms. Johnson is Trustee and Chairman of the Board of Trustees of certain Trusts. Ms. Johnson serves as President of Fidelity Financial Services (2012-present) and President of Personal, Workplace and Institutional Services (2005-present). Ms. Johnson is Chairman and Director of FMR Co., Inc. (2011-present), Chairman and Director of FMR (2011-present), and the Vice Chairman and Director (2007-present) of FMR LLC. Previously, Ms. Johnson served as President and a Director of FMR (2001-2005), a Trustee of other investment companies advised by FMR, Fidelity Investments Money Management, Inc., and FMR Co., Inc. (2001-2005), Senior Vice President of the Fidelity funds (2001-2005), and managed a number of Fidelity funds. Ms. Abigail P. Johnson and Mr. Arthur E. Johnson are not related. |
James C. Curvey (1935) | |
| Year of Election or Appointment: 2007 Mr. Curvey also serves as Trustee (2007-present) of other investment companies advised by FMR. Mr. Curvey is a Director of Fidelity Investments Money Management, Inc. (2009-present), Director of Fidelity Research & Analysis Co. (2009-present) and Director of FMR and FMR Co., Inc. (2007-present). Mr. Curvey is also Vice Chairman (2007-present) and Director of FMR LLC. In addition, Mr. Curvey serves as an Overseer for the Boston Symphony Orchestra and a member of the Trustees of Villanova University. Previously, Mr. Curvey was the Vice Chairman (2006-2007) and Director (2000-2007) of FMR Corp. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
+ The information above includes each Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Trustee's qualifications to serve as a Trustee, which led to the conclusion that each Trustee should serve as a Trustee for the fund.
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+ | |
Elizabeth S. Acton (1951) | |
| Year of Election or Appointment: 2013 Ms. Acton is Trustee of certain Trusts. Prior to her retirement in April 2012, Ms. Acton was Executive Vice President, Finance (November 2011-April 2012), Executive Vice President, Chief Financial Officer (April 2002-November 2011), and Treasurer (May 2004-May 2005) of Comerica Incorporated (financial services). Prior to joining Comerica, Ms. Acton held a variety of positions at Ford Motor Company (1983-2002), including Vice President and Treasurer (2000-2002) and Executive Vice President and Chief Financial Officer of Ford Motor Credit Company (1998-2000). Ms. Acton currently serves as a member of the Board of Directors and Audit and Finance Committees of Beazer Homes USA, Inc. (homebuilding, 2012-present). |
Albert R. Gamper, Jr. (1942) | |
| Year of Election or Appointment: 2006 Mr. Gamper is Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2012-present). Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (2002-2003). Mr. Gamper currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2000-present), a member of the Board of Trustees, Rutgers University (2004-present), and Chairman of the Board of Barnabas Health Care System. Previously, Mr. Gamper served as Vice Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2011-2012) and as Chairman of the Board of Governors, Rutgers University (2004-2007). |
Robert F. Gartland (1951) | |
| Year of Election or Appointment: 2010 Mr. Gartland is Chairman and an investor in Gartland and Mellina Group Corp. (consulting, 2009-present). Previously, Mr. Gartland served as a partner and investor of Vietnam Partners LLC (investments and consulting, 2008-2011). Prior to his retirement, Mr. Gartland held a variety of positions at Morgan Stanley (financial services, 1979-2007) including Managing Director (1987-2007). |
Arthur E. Johnson (1947) | |
| Year of Election or Appointment: 2008 Mr. Johnson serves as a member of the Board of Directors of Eaton Corporation (diversified power management, 2009-present), AGL Resources, Inc. (holding company, 2002-present) and Booz Allen Hamilton (management consulting, 2011-present). Prior to his retirement, Mr. Johnson served as Senior Vice President of Corporate Strategic Development of Lockheed Martin Corporation (defense contractor, 1999-2009). He previously served on the Board of Directors of IKON Office Solutions, Inc. (1999-2008) and Delta Airlines (2005-2007). Mr. Arthur E. Johnson is not related to Ms. Abigail P. Johnson. |
Michael E. Kenneally (1954) | |
| Year of Election or Appointment: 2009 Mr. Kenneally served as a Member of the Advisory Board for certain Fidelity Fixed Income and Asset Allocation Funds before joining the Board of Trustees (2008-2009). Prior to his retirement, Mr. Kenneally served as Chairman and Global Chief Executive Officer of Credit Suisse Asset Management. Before joining Credit Suisse, he was an Executive Vice President and Chief Investment Officer for Bank of America Corporation. Earlier roles at Bank of America included Director of Research, Senior Portfolio Manager and Research Analyst, and Mr. Kenneally was awarded the Chartered Financial Analyst (CFA) designation in 1991. |
James H. Keyes (1940) | |
| Year of Election or Appointment: 2007 Mr. Keyes serves as a member of the Board and Non-Executive Chairman of Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, since 2002). Previously, Mr. Keyes served as a member of the Board of Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-2013). Prior to his retirement, Mr. Keyes served as Chairman and Chief Executive Officer of Johnson Controls (automotive, building, and energy, 1998-2002) and as a member of the Board of LSI Logic Corporation (semiconductor technologies, 1984-2008). |
Marie L. Knowles (1946) | |
| Year of Election or Appointment: 2001 Ms. Knowles is Vice Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2012-present). Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. Ms. Knowles currently serves as a Director and Chairman of the Audit Committee of McKesson Corporation (healthcare service, since 2002). Ms. Knowles is a member of the Board of the Catalina Island Conservancy and of the Santa Catalina Island Company (2009-present). She also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. Previously, Ms. Knowles served as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994-2007), URS Corporation (engineering and construction, 2000-2003) and America West (airline, 1999-2002). |
Kenneth L. Wolfe (1939) | |
| Year of Election or Appointment: 2005 Prior to his retirement, Mr. Wolfe served as Chairman and a Director (2007-2009) and Chairman and Chief Executive Officer (1994-2001) of Hershey Foods Corporation. He also served as a member of the Boards of Adelphia Communications Corporation (telecommunications, 2003-2006), Bausch & Lomb, Inc. (medical/pharmaceutical, 1993-2007), and Revlon, Inc. (personal care products, 2004-2009). Mr. Wolfe previously served as Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2008-2012). |
+ The information above includes each Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Trustee's qualifications to serve as a Trustee, which led to the conclusion that each Trustee should serve as a Trustee for the fund.
Executive Officers:
Correspondence intended for each executive officer may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.
Name, Year of Birth; Principal Occupation | |
Stephanie J. Dorsey (1969) | |
| Year of Election or Appointment: 2013 President and Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Ms. Dorsey also serves as Treasurer and Chief Financial Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2013-present), Assistant Treasurer of other Fidelity funds (2010-present), and is an employee of Fidelity Investments (2008-present). Previously, Ms. Dorsey served as Deputy Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2008-2013), Treasurer (2004-2008) of the JPMorgan Mutual Funds and Vice President (2004-2008) of JPMorgan Chase Bank. |
Charles S. Morrison (1960) | |
| Year of Election or Appointment: 2012 Vice President of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Morrison also serves as President, Fixed Income and is an employee of Fidelity Investments. Previously, Mr. Morrison served as Vice President of Fidelity's Money Market Funds (2005-2009), President, Money Market Group Leader of FMR (2009), and Senior Vice President, Money Market Group of FMR (2004-2009). Mr. Morrison also served as Vice President of Fidelity's Bond Funds (2002-2005), certain Balanced Funds (2002-2005), and certain Asset Allocation Funds (2002-2007), and as Senior Vice President (2002-2005) of Fidelity's Fixed Income Division. |
Robert P. Brown (1963) | |
| Year of Election or Appointment: 2012 Vice President of Fidelity's Bond Funds. Mr. Brown also serves as Executive Vice President of Fidelity Investments Money Management, Inc. (2010-present), President, Bond Group of FMR (2011-present), Director and Managing Director, Research of Fidelity Management & Research (U.K.) Inc. (2008-present) and is an employee of Fidelity Investments. Previously, Mr. Brown served as President, Money Market Group of FMR (2010-2011) and Vice President of Fidelity's Money Market Funds (2010-2012). |
Scott C. Goebel (1968) | |
| Year of Election or Appointment: 2008 Secretary and Chief Legal Officer (CLO) of the Fidelity funds. Mr. Goebel also serves as Secretary of Fidelity Investments Money Management, Inc. (FIMM) (2010-present) and Fidelity Research and Analysis Company (FRAC) (2010-present); Secretary and CLO of The North Carolina Capital Management Trust: Cash and Term Portfolios (2008-present); General Counsel, Secretary, and Senior Vice President of FMR (2008-present) and FMR Co., Inc. (2008-present); employed by FMR LLC or an affiliate (2001-present); Chief Legal Officer of Fidelity Management & Research (Hong Kong) Limited (2008-present) and Assistant Secretary of Fidelity Management & Research (Japan) Inc. (2008-present), and Fidelity Management & Research (U.K.) Inc. (2008-present). Previously, Mr. Goebel served as Assistant Secretary of FIMM (2008-2010), FRAC (2008-2010), and the Funds (2007-2008) and as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (2005-2007). |
Marc Bryant (1966) | |
| Year of Election or Appointment: 2013 Assistant Secretary of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Bryant also serves as Secretary and Chief Legal Officer of other Fidelity funds (2010-present) and Senior Vice President and Deputy General Counsel of Fidelity Investments. Prior to joining Fidelity Investments, Mr. Bryant served as a Senior Vice President and the Head of Global Retail Legal for AllianceBernstein L.P. (2006-2010), and as the General Counsel for ProFund Advisors LLC (2001-2006). |
Elizabeth Paige Baumann (1968) | |
| Year of Election or Appointment: 2012 Anti-Money Laundering (AML) Officer of the Fidelity funds. Ms. Baumann also serves as AML Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2012-present), Chief AML Officer of FMR LLC (2012-present), and is an employee of Fidelity Investments. Previously, Ms. Baumann served as Vice President and Deputy Anti-Money Laundering Officer (2007-2012). |
Christine Reynolds (1958) | |
| Year of Election or Appointment: 2008 Chief Financial Officer of the Fidelity funds. Ms. Reynolds became President of Fidelity Pricing and Cash Management Services (FPCMS) in August 2008. Ms. Reynolds served as Chief Operating Officer of FPCMS (2007-2008). Previously, Ms. Reynolds served as President, Treasurer, and Anti-Money Laundering officer of the Fidelity funds (2004-2007). |
Michael H. Whitaker (1967) | |
| Year of Election or Appointment: 2008 Chief Compliance Officer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Whitaker also serves as Chief Compliance Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2008-present). Mr. Whitaker is an employee of Fidelity Investments (2007-present). Prior to joining Fidelity Investments, Mr. Whitaker worked at MFS Investment Management where he served as Senior Vice President and Chief Compliance Officer (2004-2006), and Assistant General Counsel. |
Joseph F. Zambello (1957) | |
| Year of Election or Appointment: 2011 Deputy Treasurer of the Fidelity funds. Mr. Zambello is an employee of Fidelity Investments. Previously, Mr. Zambello served as Vice President of FMR's Program Management Group (2009-2011) and Vice President of the Transfer Agent Oversight Group (2005-2009). |
Stephen Sadoski (1971) | |
| Year of Election or Appointment: 2013 Deputy Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Sadoski also serves as Deputy Treasurer of other Fidelity funds (2012-present) and is an employee of Fidelity Investments (2012-present). Previously, Mr. Sadoski served as Assistant Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2012-2013), an assistant chief accountant in the Division of Investment Management of the Securities and Exchange Commission (SEC) (2009-2012) and as a senior manager at Deloitte & Touche LLP (1997-2009). |
Adrien E. Deberghes (1967) | |
| Year of Election or Appointment: 2010 Assistant Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Deberghes also serves as Vice President and Assistant Treasurer (2011-present) and Deputy Treasurer (2008-present) of other Fidelity funds, and is an employee of Fidelity Investments (2008-present). Previously, Mr. Deberghes served as Senior Vice President of Mutual Fund Administration at State Street Corporation (2007-2008), Senior Director of Mutual Fund Administration at Investors Bank & Trust (2005-2007), and Director of Finance for Dunkin' Brands (2000-2005). |
Kenneth B. Robins (1969) | |
| Year of Election or Appointment: 2009 Assistant Treasurer of the Fidelity Fixed Income and Asset Allocation Funds. Mr. Robins also serves as President and Treasurer of other Fidelity funds (2008-present) and is an employee of Fidelity Investments (2004-present). Mr. Robins serves as Executive Vice President of Fidelity Investments Money Management, Inc. (FIMM) (2013-present). Previously, Mr. Robins served as Deputy Treasurer of the Fidelity funds (2005-2008) and Treasurer and Chief Financial Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2006-2008). |
Gary W. Ryan (1958) | |
| Year of Election or Appointment: 2005 Assistant Treasurer of the Fidelity funds. Mr. Ryan is an employee of Fidelity Investments. Previously, Mr. Ryan served as Vice President of Fund Reporting in Fidelity Pricing and Cash Management Services (FPCMS) (1999-2005). |
Jonathan Davis (1968) | |
| Year of Election or Appointment: 2010 Assistant Treasurer of the Fidelity funds. Mr. Davis is also Assistant Treasurer of Fidelity Rutland Square Trust II and Fidelity Commonwealth Trust II. Mr. Davis is an employee of Fidelity Investments. Previously, Mr. Davis served as Vice President and Associate General Counsel of FMR LLC (2003-2010). |
Annual Report
Distributions (Unaudited)
A total of 0.12% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund designates $564,013 of distributions paid during the period January 1, 2013 to July 31, 2013 as qualifying to be taxed as interest- related dividends for nonresident alien shareholders.
The fund will notify shareholders in January 2014 amounts for use in preparing 2013 income tax returns.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments
Money Management, Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Japan) Inc.
Fidelity Management & Research
(Hong Kong) Limited
General Distributor
Fidelity Distributors Corporation
Smithfield, RI
Transfer and Service Agents
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
(Fidelity Investment logo)(registered trademark)
AUSB-UANN-0913 1.804587.109
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor®
Ultra-Short Bond
Fund - Institutional Class
Annual Report
July 31, 2013
(Fidelity Cover Art)
Institutional Class
is a class of
Fidelity® Ultra-Short Bond Fund
Contents
Performance | How the fund has done over time. | |
Management's Discussion of Fund Performance | The Portfolio Manager's review of fund performance and strategy. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm |
| |
Trustees and Officers |
| |
Distributions |
|
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
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 LLC or an affiliated company. © 2013 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.advisor.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' distributions from dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2013 | Past 1 | Past 5 | Past 10 |
Institutional Class A | 0.65% | 0.51% | 0.00% |
A Institutional Class shares are sold to eligible investors without a sales load or 12b-1 fee. The initial offering of Institutional Class shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Fidelity® Ultra-Short Bond Fund, the original class of the fund.
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Advisor® Ultra-Short Bond Fund - Institutional Class on July 31, 2003. The chart shows how the value of your investment would have changed, and also shows how the Barclays® 6 Month Swap Index performed over the same period. The initial offering of Institutional Class took place on June 16, 2004. See above for additional information regarding the performance of Institutional Class.
Annual Report
Management's Discussion of Fund Performance
Market Recap: A steep late-spring sell-off pushed U.S. taxable investment-grade bonds into the red for the 12 months ending July 31, 2013, amid the prospect of higher interest rates. The Barclays® U.S. Aggregate Bond Index returned -1.91% for the period, with most of the damage in May and June, in response to signals from the Federal Reserve that it could begin to taper its stimulative bond-buying programs prior to year-end. The bond market suffered significant investor outflows, causing the sell-off to feed upon itself. Prior to that, "quantitative easing" had provided a positive tone for the market. Shifting expectations for global economic growth also influenced the market, with comparatively strong data in May and June tempering investor demand for bonds. Among sectors that comprise the index, U.S. Treasuries and mortgage-backed securities - widely viewed as most vulnerable to a cessation of government-bond-buying programs - fared worst, returning -2.72% and -1.98%, respectively, while government-agency securities returned -1.18%. Corporate bonds delivered sluggish performance (-1%), hurt by rising interest rates and investors' aversion to riskier assets at period end. Thanks largely to their higher yields and solid first-half appreciation, commercial mortgage- backed securities fared best, rising 2.54%.
Comments from Robert Galusza, Portfolio Manager of Fidelity Advisor® Ultra-Short Bond Fund: For the year, the fund's Class A and Class T shares rose 0.52% and 0.48%, respectively (excluding sales charges), outpacing the 0.27% return of the Barclays® 6 Month Swap Index. During the period, I continued to emphasize corporate credit, while deemphasizing U.S. government securities. The biggest contributors were corporate bonds issued by banks and other types of financial institutions. Corporate securities in a variety of industrials groups also aided performance. Within securitized sectors, asset-backed securities derived from car loans provided a further boost to results, as did a small position in commercial mortgage-backed securities. Among the fund's government-related holdings, collateralized mortgage obligations (CMOs) structured from government-backed mortgages helped the fund's return. On the downside, the fund's yield-curve positioning modestly detracted. In order to access certain securities, I held some with maturities that were longer than that of the benchmark. However, with short-term yield spreads slightly widening during the period, these bonds underperformed. As the period progressed, I notably reduced the fund's allocations to CMOs and government-agency bonds because I felt their valuations had become less attractive.
Comments from Robert Galusza, Portfolio Manager of Fidelity Advisor® Ultra-Short Bond Fund: For the year, the fund's Institutional Class shares rose 0.65%, outpacing the 0.27% gain of the Barclays® 6 Month Swap Index. During the period, I continued to emphasize corporate credit, while deemphasizing U.S. government securities. The biggest contributors were corporate bonds issued by banks and other types of financial institutions. Corporate securities in a variety of industrials groups also aided performance. Within securitized sectors, asset-backed securities derived from car loans provided a further boost to results, as did a small position in commercial mortgage-backed securities. Among the fund's government-related holdings, collateralized mortgage obligations (CMOs) structured from government-backed mortgages helped the fund's return. On the downside, the fund's yield-curve positioning modestly detracted. In order to access certain securities, I held some with maturities that were longer than that of the benchmark. However, with short-term yield spreads slightly widening during the period, these bonds underperformed. As the period progressed, I notably reduced the fund's allocations to CMOs and government-agency bonds because I felt their valuations had become less attractive.
Annual Report
Note to shareholders: The fund was closed to new accounts on August 2, 2013, in anticipation of a possible merger or liquidation.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, redemption fees and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2013 to July 31, 2013).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annual Report
| Annualized | Beginning | Ending | Expenses Paid |
Class A | .65% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,000.40 | $ 3.22 |
HypotheticalA |
| $ 1,000.00 | $ 1,021.57 | $ 3.26 |
Class T | .70% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,000.30 | $ 3.47 |
HypotheticalA |
| $ 1,000.00 | $ 1,021.32 | $ 3.51 |
Ultra-Short Bond | .45% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,001.40 | $ 2.23 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.56 | $ 2.26 |
Institutional Class | .52% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,001.00 | $ 2.58 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.22 | $ 2.61 |
A 5% return per year before expenses
B Annualized expense ratio reflects expenses net of applicable fee waivers.
* Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annual Report
Investment Changes (Unaudited)
Quality Diversification (% of fund's net assets) | |||||||
As of July 31, 2013 | As of January 31, 2013 | ||||||
![]() | U.S. Government |
| ![]() | U.S. Government |
| ||
![]() | AAA 23.6% |
| ![]() | AAA 22.9% |
| ||
![]() | AA 13.5% |
| ![]() | AA 14.8% |
| ||
![]() | A 29.9% |
| ![]() | A 25.8% |
| ||
![]() | BBB 15.1% |
| ![]() | BBB 18.0% |
| ||
![]() | BB and Below † 0.0% |
| ![]() | BB and Below † 0.0% |
| ||
![]() | Not Rated † 0.0% |
| ![]() | Not Rated 0.2% |
| ||
![]() | Short-Term |
| ![]() | Short-Term |
|
We have used ratings from Moody's Investors Service, Inc. Where Moody's® ratings are not available, we have used S&P® ratings. All ratings are as of the date indicated and do not reflect subsequent changes. Securities rated BB or below were rated investment grade at the time of acquisition. |
Weighted Average Maturity as of July 31, 2013 | ||
|
| 6 months ago |
Years | 1.4 | 1.5 |
This is a weighted average of all the maturities of the securities held in a fund. Weighted Average Maturity (WAM) can be used as a measure of sensitivity to interest rate changes and market changes. Generally, the longer the maturity, the greater the sensitivity to such changes. WAM is based on the dollar-weighted average length of time until principal payments must be paid. Depending on the types of securities held in a fund, certain maturity shortening devices (e.g., demand features, interest rate resets, and call options) may be taken into account when calculating the WAM. |
Duration as of July 31, 2013 | ||
|
| 6 months ago |
Years | 0.4 | 0.3 |
Duration is a measure of a security's price sensitivity to changes in interest rates. Duration differs from maturity in that it considers a security's interest payments in addition to the amount of time until the security reaches maturity, and also takes into account certain maturity shortening features (e.g., demand features, interest rate resets, and call options) when applicable. Securities with longer durations generally tend to be more sensitive to interest rate changes than securities with shorter durations. A fund with a longer average duration generally can be expected to be more sensitive to interest rate changes than a fund with a shorter average duration. |
† Amount represents less than 0.1%
Annual Report
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2013* | As of January 31, 2013** | ||||||
![]() | Corporate Bonds 57.5% |
| ![]() | Corporate Bonds 57.4% |
| ||
![]() | U.S. Government |
| ![]() | U.S. Government |
| ||
![]() | Asset-Backed |
| ![]() | Asset-Backed |
| ||
![]() | CMOs and Other |
| ![]() | CMOs and Other |
| ||
![]() | Municipal Bonds 0.8% |
| ![]() | Municipal Bonds 1.0% |
| ||
![]() | Short-Term |
| ![]() | Short-Term |
| ||
* Foreign investments | 18.0% |
| ** Foreign investments | 17.7% |
|
Annual Report
Investments July 31, 2013
Showing Percentage of Net Assets
Nonconvertible Bonds - 57.5% | ||||
| Principal Amount | Value | ||
CONSUMER DISCRETIONARY - 2.7% | ||||
Automobiles - 1.9% | ||||
Daimler Finance North America LLC: | ||||
0.8699% 1/9/15 (c)(d) | $ 2,000,000 | $ 2,006,580 | ||
1.0486% 4/10/14 (c)(d) | 1,250,000 | 1,254,426 | ||
Volkswagen International Finance NV: | ||||
0.8741% 11/20/14 (c)(d) | 2,000,000 | 2,006,980 | ||
0.884% 4/1/14 (c)(d) | 2,500,000 | 2,503,453 | ||
| 7,771,439 | |||
Media - 0.8% | ||||
NBCUniversal Enterprise, Inc. 0.8051% 4/15/16 (c)(d) | 3,000,000 | 3,007,035 | ||
NBCUniversal Media LLC 3.65% 4/30/15 | 354,000 | 371,654 | ||
| 3,378,689 | |||
TOTAL CONSUMER DISCRETIONARY | 11,150,128 | |||
CONSUMER STAPLES - 2.2% | ||||
Beverages - 0.6% | ||||
PepsiCo, Inc. 0.4828% 2/26/16 (d) | 2,500,000 | 2,501,283 | ||
Food & Staples Retailing - 0.7% | ||||
Walgreen Co. 0.7723% 3/13/14 (d) | 3,000,000 | 3,004,596 | ||
Food Products - 0.9% | ||||
General Mills, Inc.: | ||||
0.5638% 1/29/16 (d) | 609,000 | 608,700 | ||
0.6241% 5/16/14 (d) | 2,475,000 | 2,479,522 | ||
Kellogg Co. 0.5051% 2/13/15 (d) | 522,000 | 522,241 | ||
| 3,610,463 | |||
TOTAL CONSUMER STAPLES | 9,116,342 | |||
ENERGY - 1.7% | ||||
Energy Equipment & Services - 0.3% | ||||
Cameron International Corp. 1.2047% 6/2/14 (d) | 1,226,000 | 1,231,837 | ||
Oil, Gas & Consumable Fuels - 1.4% | ||||
Petrobras Global Finance BV 1.8941% 5/20/16 (d) | 1,000,000 | 985,000 | ||
Total Capital Canada Ltd. 0.6481% 1/15/16 (d) | 3,000,000 | 3,019,911 | ||
TransCanada PipeLines Ltd. 0.9531% 6/30/16 (d) | 1,916,000 | 1,924,804 | ||
| 5,929,715 | |||
TOTAL ENERGY | 7,161,552 | |||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
FINANCIALS - 40.5% | ||||
Capital Markets - 8.0% | ||||
Goldman Sachs Group, Inc.: | ||||
0.7226% 3/22/16 (d) | $ 5,000,000 | $ 4,943,200 | ||
0.8756% 9/29/14 (d) | 1,000,000 | 1,000,600 | ||
HSBC Bank PLC 1.0676% 1/17/14 (c)(d) | 3,000,000 | 3,011,418 | ||
JPMorgan Chase & Co.: | ||||
0.8928% 2/26/16 (d) | 2,000,000 | 2,001,040 | ||
0.9281% 10/15/15 (d) | 8,951,000 | 8,973,374 | ||
Merrill Lynch & Co., Inc. 0.7281% 1/15/15 (d) | 3,500,000 | 3,491,551 | ||
Morgan Stanley: | ||||
1.2233% 12/19/14 (d) | 2,500,000 | 2,501,950 | ||
1.5228% 2/25/16 (d) | 2,500,000 | 2,513,835 | ||
The Bank of New York Mellon Corp.: | ||||
0.4947% 10/23/15 (d) | 1,000,000 | 1,001,643 | ||
0.5338% 7/28/14 (d) | 2,000,000 | 2,004,236 | ||
UBS AG Stamford Branch 1.2638% 1/28/14 (d) | 1,722,000 | 1,730,083 | ||
| 33,172,930 | |||
Commercial Banks - 18.1% | ||||
ABN AMRO Bank NV 2.035% 1/30/14 (c)(d) | 2,000,000 | 2,014,100 | ||
ANZ Banking Group Ltd. 0.465% 5/7/15 (c)(d) | 1,000,000 | 999,652 | ||
Bank of Montreal 0.7452% 9/11/15 (d) | 2,400,000 | 2,409,336 | ||
Bank of Nova Scotia 1.3091% 1/12/15 (d) | 1,000,000 | 1,011,309 | ||
Bank of Tokyo-Mitsubishi UFJ Ltd. 0.7228% 2/26/16 (c)(d) | 2,000,000 | 2,003,058 | ||
Barclays Bank PLC 1.3081% 1/13/14 (d) | 3,500,000 | 3,514,837 | ||
BB&T Corp. 0.9638% 4/28/14 (d) | 2,000,000 | 2,004,406 | ||
BNP Paribas 1.1686% 1/10/14 (d) | 1,000,000 | 1,002,641 | ||
Capital One NA 0.7226% 3/22/16 (d) | 1,000,000 | 997,160 | ||
Commonwealth Bank of Australia: | ||||
1.0033% 3/17/14 (c)(d) | 2,500,000 | 2,510,573 | ||
1.0728% 9/18/15 (c)(d) | 1,000,000 | 1,008,994 | ||
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 0.7528% 3/18/16 (d) | 3,030,000 | 3,041,859 | ||
Credit Suisse New York Branch: | ||||
1.2281% 1/14/14 (d) | 2,500,000 | 2,509,653 | ||
2.2% 1/14/14 | 1,000,000 | 1,007,745 | ||
Danske Bank A/S 1.3181% 4/14/14 (c)(d) | 500,000 | 502,188 | ||
Fifth Third Bank 0.6828% 2/26/16 (d) | 2,000,000 | 1,995,479 | ||
KeyBank NA 5.8% 7/1/14 | 2,000,000 | 2,090,844 | ||
National Australia Bank Ltd. 0.5662% 1/22/15 (c)(d) | 1,500,000 | 1,502,519 | ||
Nordea Bank AB 0.7351% 5/13/16 (c)(d) | 1,500,000 | 1,501,653 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
FINANCIALS - continued | ||||
Commercial Banks - continued | ||||
PNC Bank NA 0.5738% 1/28/16 (d) | $ 2,000,000 | $ 1,996,228 | ||
PNC Funding Corp. 0.466% 1/31/14 (d) | 2,000,000 | 2,000,086 | ||
Rabobank (Netherlands) NV 0.6181% 4/14/14 (d) | 3,250,000 | 3,257,920 | ||
Royal Bank of Canada: | ||||
0.4738% 4/29/15 (d) | 2,000,000 | 1,998,966 | ||
0.6443% 3/8/16 (d) | 2,500,000 | 2,503,248 | ||
Royal Bank of Scotland Group PLC 2.55% 9/18/15 | 1,000,000 | 1,020,703 | ||
Societe Generale 2.2% 9/14/13 (c) | 1,122,000 | 1,123,797 | ||
Sumitomo Mitsui Banking Corp. 1.2162% 7/22/14 (c)(d) | 3,801,000 | 3,827,542 | ||
SunTrust Banks, Inc. 0.574% 4/1/15 (d) | 2,509,000 | 2,484,432 | ||
Svenska Handelsbanken AB 0.7218% 3/21/16 (d) | 2,000,000 | 2,005,246 | ||
The Toronto Dominion Bank: | ||||
0.4531% 5/1/15 (d) | 500,000 | 500,087 | ||
0.5681% 7/14/14 (d) | 2,000,000 | 2,005,616 | ||
U.S. Bank NA 0.5481% 10/14/14 (d) | 1,510,000 | 1,512,875 | ||
Union Bank NA 1.224% 6/6/14 (d) | 2,480,000 | 2,493,474 | ||
Wachovia Bank NA 0.6531% 11/3/14 (d) | 3,500,000 | 3,505,205 | ||
Wells Fargo Bank NA: | ||||
0.4841% 5/16/16 (d) | 4,000,000 | 3,951,980 | ||
0.5364% 7/20/15 (d) | 2,000,000 | 1,999,634 | ||
Westpac Banking Corp.: | ||||
1.0056% 3/31/14 (c)(d) | 1,000,000 | 1,004,426 | ||
1.0328% 9/25/15 (d) | 2,000,000 | 2,019,836 | ||
| 74,839,307 | |||
Consumer Finance - 7.9% | ||||
American Express Credit Corp.: | ||||
0.7251% 11/13/15 (d) | 3,995,000 | 3,995,943 | ||
1.3742% 6/12/15 (d) | 1,000,000 | 1,014,384 | ||
American Honda Finance Corp.: | ||||
0.6478% 5/26/16 (c)(d) | 2,000,000 | 1,999,172 | ||
0.7251% 5/8/14 (c)(d) | 2,000,000 | 2,005,182 | ||
Capital One Financial Corp.: | ||||
0.9131% 11/6/15 (d) | 1,500,000 | 1,501,674 | ||
1.4181% 7/15/14 (d) | 5,040,000 | 5,073,496 | ||
Caterpillar Financial Services Corp.: | ||||
0.5128% 2/26/16 (d) | 1,063,000 | 1,063,017 | ||
0.6251% 2/9/15 (d) | 2,000,000 | 2,008,142 | ||
Ford Motor Credit Co. LLC 1.5251% 5/9/16 (d) | 1,000,000 | 1,002,163 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
General Electric Capital Corp.: | ||||
0.8709% 1/8/16 (d) | $ 2,000,000 | $ 2,005,918 | ||
0.9191% 7/12/16 (d) | 1,000,000 | 1,001,167 | ||
1.1209% 1/7/14 (d) | 5,000,000 | 5,018,230 | ||
HSBC Finance Corp. 0.5181% 1/15/14 (d) | 800,000 | 799,841 | ||
John Deere Capital Corp. 0.3391% 1/12/15 (d) | 2,000,000 | 1,999,170 | ||
Toyota Motor Credit Corp. 0.4436% 11/21/14 (d) | 2,000,000 | 2,001,330 | ||
| 32,488,829 | |||
Diversified Financial Services - 4.4% | ||||
Bank of America Corp. 1.8191% 7/11/14 (d) | 2,500,000 | 2,527,360 | ||
BP Capital Markets PLC 0.8752% 3/11/14 (d) | 2,000,000 | 2,006,396 | ||
Citigroup, Inc.: | ||||
0.5531% 11/5/14 (d) | 2,500,000 | 2,493,475 | ||
1.064% 4/1/16 (d) | 3,000,000 | 3,007,134 | ||
1.7181% 1/13/14 (d) | 3,341,000 | 3,357,020 | ||
MetLife Institutional Funding II 0.6409% 1/6/15 (c)(d) | 5,000,000 | 5,016,675 | ||
| 18,408,060 | |||
Insurance - 1.8% | ||||
American International Group, Inc. 3% 3/20/15 | 3,000,000 | 3,095,469 | ||
Monumental Global Funding III 0.4681% 1/15/14 (c)(d) | 2,000,000 | 2,001,296 | ||
Principal Life Global Funding II: | ||||
0.6428% 5/27/16 (c)(d) | 1,000,000 | 1,001,118 | ||
0.8949% 7/9/14 (c)(d) | 1,500,000 | 1,506,219 | ||
| 7,604,102 | |||
Real Estate Management & Development - 0.3% | ||||
Liberty Property LP 5.65% 8/15/14 | 1,000,000 | 1,046,234 | ||
TOTAL FINANCIALS | 167,559,462 | |||
HEALTH CARE - 2.1% | ||||
Health Care Providers & Services - 0.7% | ||||
UnitedHealth Group, Inc. 0.3978% 8/28/14 (d) | 3,000,000 | 3,000,216 | ||
Pharmaceuticals - 1.4% | ||||
AbbVie, Inc.: | ||||
1.0331% 11/6/15 (c)(d) | 3,000,000 | 3,027,507 | ||
1.2% 11/6/15 (c) | 500,000 | 501,855 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
HEALTH CARE - continued | ||||
Pharmaceuticals - continued | ||||
Teva Pharmaceutical Finance Co. BV 1.1751% 11/8/13 (d) | $ 1,250,000 | $ 1,252,676 | ||
Teva Pharmaceutical Finance III BV 0.7718% 3/21/14 (d) | 1,000,000 | 1,002,124 | ||
| 5,784,162 | |||
TOTAL HEALTH CARE | 8,784,378 | |||
INDUSTRIALS - 0.2% | ||||
Electrical Equipment - 0.2% | ||||
Eaton Corp. 0.6033% 6/16/14 (d) | 945,000 | 946,933 | ||
INFORMATION TECHNOLOGY - 0.5% | ||||
Office Electronics - 0.5% | ||||
Xerox Corp. 1.0941% 5/16/14 (d) | 2,195,000 | 2,194,996 | ||
MATERIALS - 1.5% | ||||
Metals & Mining - 1.5% | ||||
Rio Tinto Finance (U.S.A.) PLC: | ||||
0.8233% 6/19/15 (d) | 3,500,000 | 3,503,269 | ||
1.1133% 6/17/16 (d) | 2,500,000 | 2,500,718 | ||
| 6,003,987 | |||
TELECOMMUNICATION SERVICES - 3.7% | ||||
Diversified Telecommunication Services - 3.0% | ||||
AT&T, Inc. 0.6601% 2/12/16 (d) | 3,000,000 | 3,008,646 | ||
BellSouth Corp. 4.117% 4/26/21 (c)(d) | 2,000,000 | 2,048,608 | ||
British Telecommunications PLC: | ||||
1.3973% 12/20/13 (d) | 1,445,000 | 1,450,128 | ||
2% 6/22/15 | 2,000,000 | 2,038,558 | ||
Verizon Communications, Inc. 0.474% 3/6/15 (c)(d) | 3,590,000 | 3,585,516 | ||
| 12,131,456 | |||
Wireless Telecommunication Services - 0.7% | ||||
Vodafone Group PLC 0.6591% 2/19/16 (d) | 3,000,000 | 2,998,902 | ||
TOTAL TELECOMMUNICATION SERVICES | 15,130,358 | |||
UTILITIES - 2.4% | ||||
Electric Utilities - 1.2% | ||||
Appalachian Power Co. 0.6491% 8/16/13 (d) | 1,937,000 | 1,937,169 | ||
Cleveland Electric Illuminating Co. 5.65% 12/15/13 | 348,000 | 354,294 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
Duke Energy Corp. 3.95% 9/15/14 | $ 431,000 | $ 446,167 | ||
NextEra Energy Capital Holdings, Inc. 1.611% 6/1/14 | 527,000 | 531,032 | ||
Northeast Utilities 1.0223% 9/20/13 (d) | 810,000 | 810,666 | ||
Pennsylvania Electric Co. 5.125% 4/1/14 | 1,000,000 | 1,027,669 | ||
| 5,106,997 | |||
Multi-Utilities - 1.2% | ||||
Sempra Energy 1.0333% 3/15/14 (d) | 4,822,000 | 4,835,323 | ||
TOTAL UTILITIES | 9,942,320 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $237,442,431) |
| |||
U.S. Government Agency Obligations - 1.0% | ||||
| ||||
Fannie Mae 0.875% 8/28/14 | 4,000,000 |
| ||
U.S. Government Agency - Mortgage Securities - 1.1% | ||||
| ||||
Fannie Mae - 1.1% | ||||
2.388% 7/1/35 (d) | 628,469 | 665,194 | ||
2.426% 6/1/35 (d) | 829,208 | 878,919 | ||
2.429% 12/1/34 (d) | 397,265 | 418,689 | ||
2.492% 11/1/34 (d) | 418,357 | 444,853 | ||
2.496% 2/1/34 (d) | 207,295 | 215,656 | ||
2.512% 6/1/35 (d) | 324,130 | 340,077 | ||
2.625% 10/1/35 (d) | 823,319 | 871,640 | ||
2.663% 11/1/34 (d) | 385,292 | 407,644 | ||
2.752% 7/1/34 (d) | 392,282 | 417,737 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $4,495,389) |
| |||
Asset-Backed Securities - 22.0% | ||||
| ||||
Ally Auto Receivables Trust: | ||||
Series 2010-4 Class A4, 1.35% 12/15/15 | 450,000 | 451,739 | ||
Series 2012-2 Class A3, 0.74% 4/15/16 | 2,000,000 | 2,002,092 | ||
Asset-Backed Securities - continued | ||||
| Principal Amount | Value | ||
Ally Auto Receivables Trust: - continued | ||||
Series 2012-SN1: | ||||
Class A2, 0.51% 12/22/14 | $ 738,487 | $ 738,022 | ||
Class A3, 0.57% 8/20/15 | 2,400,000 | 2,396,753 | ||
Series 2013-SN1 Class A2, 0.52% 5/20/15 | 2,000,000 | 1,997,486 | ||
Ally Master Owner Trust: | ||||
Series 2011-1 Class A1, 1.061% 1/15/16 (d) | 3,290,000 | 3,297,972 | ||
Series 2011-3 Class A2, 1.81% 5/15/16 | 220,000 | 221,820 | ||
Series 2012-2 Class A, 0.691% 3/15/16 (d) | 1,000,000 | 1,002,174 | ||
Series 2012-3 Class A2, 1.21% 6/15/17 | 2,000,000 | 2,007,548 | ||
Series 2013-1 Class A1, 0.641% 2/15/18 (d) | 2,000,000 | 1,987,303 | ||
AmeriCredit Auto Receivables Trust: | ||||
Series 2011-5 Class A2, 1.19% 8/8/15 | 18,499 | 18,511 | ||
Series 2012-1 Class A2, 0.91% 10/8/15 | 296,233 | 296,433 | ||
Series 2012-2: | ||||
Class A2, 0.76% 10/8/15 | 1,043,953 | 1,044,487 | ||
Class A3, 1.05% 10/11/16 | 400,000 | 400,634 | ||
Series 2012-5 Class A2, 0.51% 1/8/16 | 892,168 | 891,737 | ||
Series 2013-3 Class A2, 0.68% 10/11/16 | 500,000 | 499,748 | ||
BMW Floorplan Master Owner Trust Series 2012-1A Class A, 0.5925% 9/15/17 (c)(d) | 2,260,000 | 2,259,837 | ||
BMW Vehicle Lease Trust Series 2012-1 Class A2, 0.59% 6/20/14 | 238,643 | 238,677 | ||
Capital One Multi-Asset Execution Trust Series 2013-A2 Class A2, 0.3725% 2/15/19 (d) | 5,000,000 | 4,976,536 | ||
Carmax Auto Owner Trust Series 2012-3 Class A2, 0.43% 9/15/15 | 1,483,891 | 1,483,519 | ||
CIT Equipment Collateral Series 2012-VT1: | ||||
Class A2, 0.85% 5/20/14 (c) | 624,351 | 624,503 | ||
Class A3, 1.1% 8/22/16 (c) | 482,003 | 483,022 | ||
Citibank Credit Card Issuance Trust Series 2013-A1 Class A1, 0.2905% 4/24/17 (d) | 5,000,000 | 4,989,762 | ||
CNH Equipment Trust: | ||||
Series 2012-D Class A2, 0.51% 4/15/16 | 1,000,000 | 999,124 | ||
Series 2013-B Class A2, 0.44% 10/17/16 | 1,000,000 | 997,375 | ||
Discover Card Master Trust: | ||||
Series 2012-A2 Class A2, 0.341% 10/17/16 (d) | 1,000,000 | 999,298 | ||
Series 2012-A5 Class A5, 0.3925% 1/16/18 (d) | 5,000,000 | 4,991,181 | ||
Fannie Mae Series 2004-T5: | ||||
Class AB1, 0.6471% 5/28/35 (d) | 80,751 | 75,634 | ||
Class AB3, 0.9235% 5/28/35 (d) | 32,052 | 29,223 | ||
Ford Credit Auto Lease Trust Series 2012-A: | ||||
Class A2, 0.63% 4/15/14 | 277,741 | 277,733 | ||
Asset-Backed Securities - continued | ||||
| Principal Amount | Value | ||
Ford Credit Auto Lease Trust Series 2012-A: - continued | ||||
Class A4, 1.03% 4/15/15 | $ 800,000 | $ 804,003 | ||
Ford Credit Auto Owner Trust Series 2012-D Class A2, 0.4% 9/15/15 | 726,209 | 725,943 | ||
Ford Credit Floorplan Master Owner Trust: | ||||
Series 2010-5 Class A1, 1.5% 9/15/15 | 240,000 | 240,276 | ||
Series 2012-1 Class A, 0.661% 1/15/16 (d) | 5,000,000 | 5,003,960 | ||
Series 2012-4 Class A1, 0.74% 9/15/16 | 1,085,000 | 1,084,557 | ||
Series 2013-3Q Class A2, 0.4925% 6/15/17 (d) | 500,000 | 499,062 | ||
Fremont Home Loan Trust Series 2005-A Class M4, 1.21% 1/25/35 (d) | 125,000 | 29,217 | ||
GE Capital Credit Card Master Note Trust: | ||||
Series 2012-1 Class A, 1.03% 1/15/18 | 857,000 | 861,287 | ||
Series 2012-4 Class A, 0.491% 6/15/18 (d) | 5,000,000 | 4,996,622 | ||
GE Equipment Small Ticket LLC Series 2012-1A Class A2, 0.85% 11/21/14 (c) | 301,359 | 301,584 | ||
GE Equipment Transportation LLC Series 2012-2 Class A3, 0.62% 7/25/16 | 1,604,000 | 1,599,745 | ||
Home Equity Asset Trust Series 2003-5 Class A2, 0.89% 12/25/33 (d) | 10,566 | 9,387 | ||
Hyundai Auto Lease Securitization Trust: | ||||
Series 2012-A Class A3, 0.92% 8/17/15 (c) | 1,500,000 | 1,503,163 | ||
Series 2013-A Class A2, 0.51% 9/15/15 (c) | 3,000,000 | 2,995,888 | ||
Hyundai Auto Receivables Trust Series 2013-B Class A2, 0.52% 3/15/16 | 1,840,000 | 1,839,686 | ||
Hyundai Floorplan Master Owner Trust Series 2013-1A Class A, 0.5425% 5/15/18 (c)(d) | 580,000 | 576,767 | ||
John Deere Owner Trust: | ||||
Series 2011-A Class A4, 1.96% 4/16/18 | 404,000 | 408,253 | ||
Series 2012-A Class A2, 0.59% 6/16/14 | 16,845 | 16,845 | ||
Series 2012-B Class A2, 0.43% 2/17/15 | 1,296,713 | 1,296,471 | ||
Mercedes-Benz Auto Lease Trust Series 2013-A Class A2, 0.39% 6/15/15 | 2,000,000 | 1,996,630 | ||
Mercedes-Benz Master Owner Trust Series 2012-BA Class A, 0.461% 11/15/16 (c)(d) | 2,370,000 | 2,365,112 | ||
Merrill Lynch Mortgage Investors Trust Series 2004-HE2 Class A1B, 0.66% 8/25/35 (d) | 20,366 | 19,559 | ||
Morgan Stanley ABS Capital I Trust Series 2004-HE6 Class A2, 0.87% 8/25/34 (d) | 65,756 | 64,193 | ||
Nissan Auto Lease Trust Series 2013-A Class A2A, 0.45% 9/15/15 | 3,000,000 | 2,991,832 | ||
Nissan Master Owner Trust Receivables: | ||||
Series 2012-A Class A, 0.6625% 5/15/17 (d) | 2,250,000 | 2,246,758 | ||
Series 2013-A Class A, 0.4925% 2/15/18 (d) | 1,000,000 | 996,925 | ||
Asset-Backed Securities - continued | ||||
| Principal Amount | Value | ||
Ocala Funding LLC Series 2006-1A Class A, 1.5915% 3/20/11 (b)(c)(d) | $ 965,000 | $ 0 | ||
Park Place Securities, Inc. Series 2004-WCW1 Class M4, 1.64% 9/25/34 (d) | 435,000 | 132,221 | ||
Porsche Innovative Lease Owner Trust Series 2012-1 Class A2, 0.44% 2/23/15 (c) | 633,518 | 633,144 | ||
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-HE1 Class A, 0.99% 4/25/33 (d) | 1,451 | 1,350 | ||
Santander Drive Auto Receivables Trust: | ||||
Series 2011-4 Class A2, 1.37% 3/16/15 | 26,418 | 26,436 | ||
Series 2012-1 Class A2, 1.25% 4/15/15 | 424,188 | 424,589 | ||
Series 2012-2 Class A2, 0.91% 5/15/15 | 154,776 | 154,822 | ||
Series 2012-3 Class A2, 0.83% 4/15/15 | 308,275 | 308,357 | ||
Series 2013-1 Class A2, 0.48% 2/16/16 | 680,684 | 680,168 | ||
Series 2013-2 Class A2, 0.47% 3/15/16 | 1,000,000 | 998,992 | ||
Series 2013-3 Class A2, 0.55% 9/15/16 | 2,000,000 | 1,997,935 | ||
SLM Student Loan Trust: | ||||
Series 2012-6 Class A1, 0.35% 2/27/17 (d) | 1,163,401 | 1,161,623 | ||
Series 2012-7 Class A2, 0.47% 9/25/19 (d) | 1,000,000 | 995,765 | ||
Series 2013-1 Class A2, 0.44% 9/25/19 (d) | 2,000,000 | 1,984,855 | ||
Terwin Mortgage Trust Series 2003-4HE Class A1, 1.05% 9/25/34 (d) | 21,802 | 20,225 | ||
World Omni Auto Lease Securitization Trust Series 2012-A Class A2, 0.71% 1/15/15 | 736,092 | 736,218 | ||
World Omni Auto Receivables Trust: | ||||
Series 2012-A Class A2, 0.52% 6/15/15 | 694,700 | 694,761 | ||
Series 2013-A Class A2, 0.43% 5/16/16 | 2,000,000 | 1,999,372 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $92,628,217) |
| |||
Collateralized Mortgage Obligations - 9.3% | ||||
| ||||
Private Sponsor - 0.5% | ||||
Arran Residential Mortgages Funding PLC floater Series 2011-1A Class A1C, 1.4741% 11/19/47 (c)(d) | 20,421 | 20,428 | ||
Granite Master Issuer PLC floater Series 2006-1A Class A5, 0.3315% 12/20/54 (c)(d) | 571,716 | 558,281 | ||
Granite Mortgages Series 2003-2 Class 1A3, 0.7662% 7/20/43 (d) | 441,021 | 433,262 | ||
Granite Mortgages PLC floater: | ||||
Series 2003-3 Class 1A3, 0.6662% 1/20/44 (d) | 37,046 | 36,357 | ||
Series 2004-1 Class 2A1, 0.5923% 3/20/44 (d) | 679,580 | 665,979 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount | Value | ||
Private Sponsor - continued | ||||
Granite Mortgages PLC floater: - continued | ||||
Series 2004-3 Class 2A1, 0.5523% 9/20/44 (d) | $ 250,662 | $ 245,903 | ||
GSR Mortgage Loan Trust floater Series 2004-11 Class 2A1, 0.523% 12/25/34 (d) | 170,111 | 162,848 | ||
TOTAL PRIVATE SPONSOR | 2,123,058 | |||
U.S. Government Agency - 8.8% | ||||
Fannie Mae: | ||||
floater: | ||||
Series 2003-31 Class FM, 0.69% 4/25/33 (d) | 1,134,056 | 1,147,333 | ||
Series 2006-33 Class CF, 0.49% 5/25/36 (d) | 133,405 | 133,603 | ||
Series 2008-76 Class EF, 0.69% 9/25/23 (d) | 35,361 | 35,535 | ||
Series 2010-86 Class FE, 0.64% 8/25/25 (d) | 207,128 | 208,649 | ||
floater planned amortization class: | ||||
Series 2004-52 Class PF 0.64% 12/25/33 (d) | 2,639,821 | 2,656,888 | ||
Series 2005-90 Class FC, 0.44% 10/25/35 (d) | 155,206 | 155,538 | ||
pass-thru certificates Series 2012-127 Class DH, 4% 11/25/27 | 418,044 | 445,162 | ||
sequential payer: | ||||
Series 2005-47 Class HA, 4.5% 7/25/19 | 153,064 | 153,963 | ||
Series 2009-69 Class EA, 5% 10/25/36 | 513,472 | 515,507 | ||
Series 2011-16 Class FB, 0.34% 3/25/31 (d) | 1,672,487 | 1,674,509 | ||
sequential payer floater: | ||||
Series 2005-74 Class DF, 0.54% 7/25/35 (d) | 3,748,684 | 3,758,490 | ||
Series 2005-83 Class FP, 0.52% 10/25/35 (d) | 5,025,079 | 5,029,773 | ||
Series 2011-23 Class AB, 2.75% 6/25/20 | 119,242 | 122,395 | ||
Freddie Mac: | ||||
floater: | ||||
Series 2711 Class FC, 1.091% 2/15/33 (d) | 319,964 | 325,635 | ||
Series 3346 Class FA, 0.421% 2/15/19 (d) | 2,933,260 | 2,935,222 | ||
Series 3879 Class AF, 0.621% 6/15/41 (d) | 482,060 | 484,222 | ||
floater planned amortization class: | ||||
Series 2953 Class LF, 0.491% 12/15/34 (d) | 1,886,106 | 1,889,434 | ||
Series 3102 Class FD, 0.491% 1/15/36 (d) | 429,118 | 430,499 | ||
Series 3117 Class JF, 0.491% 2/15/36 (d) | 168,763 | 169,144 | ||
Series 4020 Class EF 0.641% 2/15/42 (d) | 3,319,431 | 3,318,405 | ||
Series 4057 Class EF, 0.541% 12/15/41 (d) | 2,675,892 | 2,680,258 | ||
floater sequential payer: | ||||
Series 2828 Class TF, 0.641% 10/15/30 (d) | 728,231 | 731,838 | ||
Series 3046 Class F, 0.561% 3/15/33 (d) | 1,642,844 | 1,639,218 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount | Value | ||
U.S. Government Agency - continued | ||||
Freddie Mac: - continued | ||||
planned amortization class: | ||||
Series 2836 Class PX, 4% 5/15/18 | $ 593,330 | $ 598,906 | ||
Series 3081 Class CP 5.5% 10/15/34 | 404,205 | 414,706 | ||
Series 3792 Class DF, 0.591% 11/15/40 (d) | 699,264 | 701,675 | ||
sequential payer: | ||||
Series 2582 Class CG, 4% 11/15/17 | 105,058 | 105,448 | ||
Series 2924 Class DA, 4.5% 2/15/19 | 137,071 | 137,895 | ||
Series 3573 Class LC, 1.85% 8/15/14 | 173,047 | 173,294 | ||
Series 3659 Class EJ 3% 6/15/18 | 490,818 | 502,323 | ||
Series 3696 Class AE, 1.2% 7/15/15 | 181,183 | 181,805 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
floater: | ||||
Series 2009-108 Class CF, 0.7919% 11/16/39 (d) | 199,294 | 201,076 | ||
Series 2009-116 Class KF, 0.7219% 12/16/39 (d) | 175,131 | 176,358 | ||
Series 2009-127 Class FA, 0.7415% 9/20/38 (d) | 225,280 | 226,839 | ||
Series 2010-9 Class FA, 0.7119% 1/16/40 (d) | 263,015 | 264,706 | ||
Series 2012-149 Class LF, 0.4415% 12/20/42 (d) | 353,264 | 352,363 | ||
Series 2013-37 Class F, 0.4615% 3/20/43 (d) | 245,897 | 245,599 | ||
floater planned amortization class Series 2004-80 Class FM, 0.4915% 7/20/34 (d) | 895,309 | 896,527 | ||
floater sequential payer Series 2010-120 Class FB 0.4915% 9/20/35 (d) | 236,014 | 236,766 | ||
planned amortization class: | ||||
Series 2010-112 Class PM, 3.25% 9/20/33 | 89,160 | 90,464 | ||
Series 2010-99 Class PT, 3.5% 8/20/33 | 118,842 | 121,031 | ||
TOTAL U.S. GOVERNMENT AGENCY | 36,269,001 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $38,477,774) |
| |||
Commercial Mortgage Securities - 1.3% | ||||
| ||||
Banc of America REMIC Trust Series 2012-CLRN Class A1, 1.341% 8/15/29 (c)(d) | 560,000 | 560,587 | ||
Del Coronado Trust floater Series 2013-HDC Class A, 0.993% 3/15/26 (c)(d) | 500,000 | 498,386 | ||
Extended Stay America Trust floater Series 2013-ESFL: | ||||
Class A1FL, 0.9948% 12/5/31 (c)(d) | 270,000 | 269,735 | ||
Class A2FL, 0.8948% 12/5/31 (c)(d) | 350,000 | 347,264 | ||
Commercial Mortgage Securities - continued | ||||
| Principal Amount | Value | ||
GMAC Commercial Mortgage Securities, Inc. sequential payer Series 2003-C2 Class A2, 5.6369% 5/10/40 (d) | $ 5,293 | $ 5,290 | ||
GS Mortgage Securities Corp. II floater Series 2007-EOP: | ||||
Class A2, 1.2601% 3/6/20 (c)(d) | 205,268 | 205,663 | ||
Class C, 2.0056% 3/6/20 (c)(d) | 300,000 | 300,793 | ||
GS Mortgage Securities Corp. Trust Series 2013-KYO Class A, 1.0448% 11/8/29 (c)(d) | 560,000 | 555,132 | ||
GS Mortgage Securities Trust: | ||||
sequential payer Series 2006-GG8 Class A2, 5.479% 11/10/39 | 17,129 | 17,211 | ||
Series 2011-GC5 Class A1, 1.468% 8/10/44 (d) | 145,444 | 146,434 | ||
Series 2012-GC6 Class A1, 1.282% 1/10/45 | 71,780 | 71,959 | ||
JPMorgan Chase Commercial Mortgage Securities Corp.: | ||||
floater Series 2011-CCHP Class A, 2.6% 7/15/28 (c)(d) | 211,756 | 211,348 | ||
Series 2003-CB7 Class A4, 4.879% 1/12/38 (d) | 49,676 | 50,011 | ||
Series 2012-C6 Class A1, 1.0305% 5/15/45 | 225,266 | 224,640 | ||
JPMorgan Chase Commercial Mortgage Securities Trust: | ||||
floater Series 2013-FL3 Class A1, 0.991% 4/15/28 (c)(d) | 530,000 | 526,743 | ||
sequential payer: | ||||
Series 2005-LDP5 Class A2, 5.198% 12/15/44 | 112,405 | 112,907 | ||
Series 2007-LD11 Class A2, 5.9877% 6/15/49 (d) | 122,271 | 125,293 | ||
Morgan Stanley Capital I Trust floater: | ||||
Series 2006-XLF Class C, 1.391% 7/15/19 (c)(d) | 247,826 | 173,478 | ||
Series 2007-XLFA: | ||||
Class A2, 0.293% 10/15/20 (c)(d) | 209,560 | 208,065 | ||
Class B, 0.323% 10/15/20 (c)(d) | 440,000 | 436,056 | ||
Morgan Stanley Dean Witter Capital I Trust sequential payer Series 2003-T11 Class A4, 5.15% 6/13/41 | 5,450 | 5,446 | ||
Wachovia Bank Commercial Mortgage Trust floater Series 2006-WL7A Class A2, 0.3125% 9/15/21 (c)(d) | 213,697 | 213,108 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $5,648,842) |
| |||
Municipal Securities - 0.8% | ||||
| Principal Amount | Value | ||
Illinois Gen. Oblig. Series 2010: | ||||
4.071% 1/1/14 | $ 1,940,000 | $ 1,963,707 | ||
4.421% 1/1/15 | 1,375,000 | 1,430,440 | ||
TOTAL MUNICIPAL SECURITIES (Cost $3,397,460) |
| |||
Certificates of Deposit - 0.3% | ||||
| ||||
Bank of Nova Scotia yankee 0.7751% 2/10/14 (d) | 1,000,000 |
| ||
Commercial Paper - 0.2% | ||||
| ||||
Vodafone Group PLC yankee 0.77% 12/30/13 | 1,000,000 |
|
Money Market Funds - 6.6% | |||
Shares |
| ||
Fidelity Cash Central Fund, 0.11% (a) | 27,475,112 |
| |
TOTAL INVESTMENT PORTFOLIO - 100.1% (Cost $415,589,687) | 414,312,802 | ||
NET OTHER ASSETS (LIABILITIES) - (0.1)% | (486,935) | ||
NET ASSETS - 100% | $ 413,825,867 |
Legend |
(a) 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, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request. |
(b) Non-income producing - Security is in default. |
(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 $71,309,629 or 17.2% of net assets. |
(d) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 12,674 |
Other Information |
The following is a summary of the inputs used, as of July 31, 2013, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements. |
Valuation Inputs at Reporting Date: | ||||
Description | Total | Level 1 | Level 2 | Level 3 |
Investments in Securities: | ||||
Corporate Bonds | $ 237,990,456 | $ - | $ 237,990,456 | $ - |
U.S. Government and Government Agency Obligations | 4,029,616 | - | 4,029,616 | - |
U.S. Government Agency - Mortgage Securities | 4,660,409 | - | 4,660,409 | - |
Asset-Backed Securities | 91,104,441 | - | 91,028,807 | 75,634 |
Collateralized Mortgage Obligations | 38,392,059 | - | 38,392,059 | - |
Commercial Mortgage Securities | 5,265,549 | - | 5,092,071 | 173,478 |
Municipal Securities | 3,394,147 | - | 3,394,147 | - |
Certificates of Deposit | 1,002,757 | - | 1,002,757 | - |
Commercial Paper | 998,256 | - | 998,256 | - |
Money Market Funds | 27,475,112 | 27,475,112 | - | - |
Total Investments in Securities: | $ 414,312,802 | $ 27,475,112 | $ 386,588,578 | $ 249,112 |
Distribution of investments by country or territory of incorporation, as a percentage of total net assets, is as follows. (Unaudited) |
United States of America | 82.0% |
United Kingdom | 6.1% |
Canada | 3.7% |
Netherlands | 2.6% |
Australia | 2.1% |
Japan | 1.4% |
Others (Individually Less Than 1%) | 2.1% |
| 100.0% |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
| July 31, 2013 | |
|
|
|
Assets | ||
Investment in securities, at value - See accompanying schedule: Unaffiliated issuers (cost $388,114,575) | $ 386,837,690 |
|
Fidelity Central Funds (cost $27,475,112) | 27,475,112 |
|
Total Investments (cost $415,589,687) |
| $ 414,312,802 |
Receivable for investments sold | 131,435 | |
Receivable for fund shares sold | 916,534 | |
Interest receivable | 440,541 | |
Distributions receivable from Fidelity Central Funds | 1,586 | |
Receivable from investment adviser for expense reductions | 81 | |
Other receivables | 1 | |
Total assets | 415,802,980 | |
|
|
|
Liabilities | ||
Payable to custodian bank | $ 1,772 | |
Payable for investments purchased | 1,672,395 | |
Payable for fund shares redeemed | 145,671 | |
Distributions payable | 2,582 | |
Accrued management fee | 104,999 | |
Distribution and service plan fees payable | 2,664 | |
Other affiliated payables | 47,030 | |
Total liabilities | 1,977,113 | |
|
|
|
Net Assets | $ 413,825,867 | |
Net Assets consist of: |
| |
Paid in capital | $ 541,515,615 | |
Undistributed net investment income | 257,392 | |
Accumulated undistributed net realized gain (loss) on investments | (126,670,255) | |
Net unrealized appreciation (depreciation) on investments | (1,276,885) | |
Net Assets | $ 413,825,867 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
| July 31, 2013 | |
|
|
|
Calculation of Maximum Offering Price Class A: | $ 8.24 | |
|
|
|
Maximum offering price per share (100/98.50 of $8.24) | $ 8.37 | |
Class T: | $ 8.24 | |
|
|
|
Maximum offering price per share (100/98.50 of $8.24) | $ 8.37 | |
Ultra-Short Bond: | $ 8.24 | |
|
|
|
Institutional Class: | $ 8.24 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
| Year ended July 31, 2013 | |
|
|
|
Investment Income |
|
|
Interest |
| $ 3,011,429 |
Income from Fidelity Central Funds |
| 12,674 |
Total income |
| 3,024,103 |
|
|
|
Expenses | ||
Management fee | $ 1,107,863 | |
Transfer agent fees | 370,418 | |
Distribution and service plan fees | 27,623 | |
Fund wide operations fee | 125,313 | |
Independent trustees' compensation | 1,292 | |
Miscellaneous | 811 | |
Total expenses before reductions | 1,633,320 | |
Expense reductions | (1,993) | 1,631,327 |
Net investment income (loss) | 1,392,776 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 464,089 | |
Futures contracts | 17,414 | |
Total net realized gain (loss) |
| 481,503 |
Change in net unrealized appreciation (depreciation) on: Investment securities | 317,368 | |
Futures contracts | (17,098) | |
Total change in net unrealized appreciation (depreciation) |
| 300,270 |
Net gain (loss) | 781,773 | |
Net increase (decrease) in net assets resulting from operations | $ 2,174,549 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income (loss) | $ 1,392,776 | $ 1,324,555 |
Net realized gain (loss) | 481,503 | (161,606) |
Change in net unrealized appreciation (depreciation) | 300,270 | 577,855 |
Net increase (decrease) in net assets resulting | 2,174,549 | 1,740,804 |
Distributions to shareholders from net investment income | (1,172,776) | (1,226,234) |
Share transactions - net increase (decrease) | 87,110,349 | 65,951,070 |
Redemption fees | 11,859 | 17,158 |
Total increase (decrease) in net assets | 88,123,981 | 66,482,798 |
|
|
|
Net Assets | ||
Beginning of period | 325,701,886 | 259,219,088 |
End of period (including undistributed net investment income of $257,392 and undistributed net investment income of $36,211, respectively) | $ 413,825,867 | $ 325,701,886 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) C | .017 | .023 | .013 | .047 | .091 |
Net realized and unrealized gain (loss) | .025 | .007 | .051 | .040 | (.167) |
Total from investment operations | .042 | .030 | .064 | .087 | (.076) |
Distributions from net investment income | (.012) | (.020) | (.015) | (.047) | (.071) |
Tax return of capital | - | - | - | - | (.003) |
Total distributions | (.012) | (.020) | (.015) | (.047) | (.074) |
Redemption fees added to paid in capital C | - G | - G | .001 | - G | - G |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A, B | .52% | .36% | .80% | 1.08% | (.92)% |
Ratios to Average Net Assets D, F |
|
|
|
|
|
Expenses before reductions | .65% | .66% | .63% | .64% | .68% |
Expenses net of fee waivers, if any | .65% | .66% | .63% | .64% | .68% |
Expenses net of all reductions | .65% | .66% | .63% | .64% | .67% |
Net investment income (loss) | .20% | .28% | .16% | .58% | 1.13% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 18,620 | $ 15,635 | $ 12,242 | $ 18,129 | $ 8,033 |
Portfolio turnover rate E | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
E Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
G Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) C | .013 | .019 | .009 | .044 | .090 |
Net realized and unrealized gain (loss) | .026 | .007 | .052 | .040 | (.168) |
Total from investment operations | .039 | .026 | .061 | .084 | (.078) |
Distributions from net investment income | (.009) | (.016) | (.012) | (.044) | (.069) |
Tax return of capital | - | - | - | - | (.003) |
Total distributions | (.009) | (.016) | (.012) | (.044) | (.072) |
Redemption fees added to paid in capital C | - G | - G | .001 | - G | - G |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A, B | .48% | .32% | .76% | 1.03% | (.94)% |
Ratios to Average Net Assets D, F |
|
|
|
|
|
Expenses before reductions | .75% | .72% | .68% | .68% | .69% |
Expenses net of fee waivers, if any | .70% | .70% | .68% | .68% | .69% |
Expenses net of all reductions | .70% | .70% | .68% | .68% | .69% |
Net investment income (loss) | .16% | .23% | .12% | .54% | 1.11% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 3,542 | $ 3,312 | $ 4,811 | $ 5,334 | $ 3,114 |
Portfolio turnover rate E | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
E Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
G Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Ultra-Short Bond
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) B | .034 | .040 | .028 | .063 | .111 |
Net realized and unrealized gain (loss) | .025 | .006 | .051 | .040 | (.169) |
Total from investment operations | .059 | .046 | .079 | .103 | (.058) |
Distributions from net investment income | (.029) | (.036) | (.030) | (.063) | (.088) |
Tax return of capital | - | - | - | - | (.004) |
Total distributions | (.029) | (.036) | (.030) | (.063) | (.092) |
Redemption fees added to paid in capital B | - F | - F | .001 | - F | - F |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A | .72% | .57% | .99% | 1.27% | (.70)% |
Ratios to Average Net Assets C, E |
|
|
|
|
|
Expenses before reductions | .45% | .45% | .45% | .45% | .45% |
Expenses net of fee waivers, if any | .45% | .45% | .45% | .45% | .45% |
Expenses net of all reductions | .45% | .45% | .45% | .45% | .44% |
Net investment income (loss) | .41% | .48% | .34% | .77% | 1.36% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 384,116 | $ 291,005 | $ 239,921 | $ 239,266 | $ 217,282 |
Portfolio turnover rate D | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Calculated based on average shares outstanding during the period.
C Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
D Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) B | .029 | .037 | .025 | .057 | .102 |
Net realized and unrealized gain (loss) | .025 | .009 | .051 | .040 | (.168) |
Total from investment operations | .054 | .046 | .076 | .097 | (.066) |
Distributions from net investment income | (.024) | (.036) | (.027) | (.057) | (.081) |
Tax return of capital | - | - | - | - | (.003) |
Total distributions | (.024) | (.036) | (.027) | (.057) | (.084) |
Redemption fees added to paid in capital B | - F | - F | .001 | - F | - F |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A | .65% | .56% | .95% | 1.20% | (.80)% |
Ratios to Average Net Assets C, E |
|
|
|
|
|
Expenses before reductions | .51% | .48% | .49% | .52% | .58% |
Expenses net of fee waivers, if any | .51% | .48% | .49% | .52% | .55% |
Expenses net of all reductions | .51% | .48% | .49% | .52% | .54% |
Net investment income (loss) | .35% | .45% | .31% | .70% | 1.26% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 7,548 | $ 15,750 | $ 2,245 | $ 1,206 | $ 623 |
Portfolio turnover rate D | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Calculated based on average shares outstanding during the period.
C Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
D Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2013
1. Organization.
Fidelity Ultra-Short Bond Fund (the Fund) is a fund of Fidelity Income Fund (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The Fund offers Class A, Class T, Ultra-Short Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Effective after the close of business on August 2, 2013, the Fund was closed to new accounts with certain exceptions. Each class has exclusive voting rights with respect to matters that affect that class.
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds held as of period end, if any, as an investment of the Fund, but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
The Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC website or upon request.
3. Significant Accounting Policies.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. In accordance with valuation policies and procedures approved by the Board of Trustees (the Board), the Fund attempts to obtain prices from
Annual Report
3. Significant Accounting Policies - continued
Investment Valuation - continued
one or more third party pricing vendors 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 FMR Fair Value Committee (the Committee), in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events, changes in interest rates and credit quality. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and is responsible for approving and reporting to the Board all fair value determinations.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
Level 1 - 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 the Fund's investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. For corporate bonds, municipal securities, U.S. government and government agency obligations, commercial paper and certificates of deposit, pricing vendors utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type as well as broker-supplied prices. For asset backed securities, collateralized mortgage obligations, commercial mortgage securities and U.S. government agency mortgage securities, pricing vendors utilize matrix pricing which considers prepayment speed assumptions, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity and type as well as 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 vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Annual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Investment Valuation - continued
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level, as of July 31, 2013, is included at the end of the Fund's Schedule of Investments.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Interest income and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions may also differ by class. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for income taxes is required. As of July 31, 2013, the Fund did not have any unrecognized tax benefits in the financial statements; nor is the Fund aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. A fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed.
Annual Report
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction.
Dividends are declared and recorded daily and paid monthly from net investment income. Distributions from realized gains, if any, are declared and recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to futures contracts, market discount, premium on debt securities, capital loss carryforwards and losses deferred due to excise tax regulations.
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:
Gross unrealized appreciation | $ 1,052,039 |
Gross unrealized depreciation | (2,144,418) |
Net unrealized appreciation (depreciation) on securities and other investments | $ (1,092,379) |
|
|
Tax Cost | $ 415,405,181 |
The tax-based components of distributable earnings as of period end were as follows:
Undistributed ordinary income | $ 72,886 |
Capital loss carryforward | $ (126,670,255) |
Net unrealized appreciation (depreciation) | $ (1,092,379) |
Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. Under the Regulated Investment Company Modernization Act of 2010 (the Act), the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital losses are required to be used prior to any losses that expire.
Annual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The capital loss carryforward information presented below, including any applicable limitation, is estimated as of fiscal period end and is subject to adjustment.
Fiscal year of expiration |
|
2014 | $ (1,917,431) |
2015 | (518,690) |
2016 | (12,186,304) |
2017 | (97,397,499) |
2018 | (9,829,719) |
2019 | (3,765,717) |
Total with expiration | (125,615,360) |
No expiration |
|
Long-term | (1,054,895) |
Total capital loss carryforward | $ (126,670,255) |
The tax character of distributions paid was as follows:
| July 31, 2013 | July 31, 2012 |
Ordinary Income | $ 1,172,776 | $ 1,226,234 |
Short-Term Trading (Redemption) Fees. Shares held by investors in the Fund less than 60 days may have been subject to a redemption fee equal to .25% of the net asset value of shares redeemed. All redemption fees, which reduce the proceeds of the shareholder redemption, are retained by the Fund and accounted for as an addition to paid in capital.
Restricted Securities. The Fund may 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. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
New Accounting Pronouncement. The Financial Accounting Standards Board issued in December 2011, Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities, and in January 2013, Accounting Standards Update No. 2013-1 Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. These updates create new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual
Annual Report
3. Significant Accounting Policies - continued
New Accounting Pronouncement - continued
reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management expects that the impact of the update's adoption will be limited to additional financial statement disclosures as applicable.
4. Derivative Instruments.
Risk Exposures and the Use of Derivative Instruments. The Fund's investment objective allows the Fund to enter into various types of derivative contracts, including futures 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 and 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:
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. Counterparty credit risk related to exchange-traded futures contracts may be mitigated by the protection provided by the exchange on which they trade.
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 and amounts recognized in the Statement of Assets and Liabilities. 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.
Annual Report
Notes to Financial Statements - continued
4. Derivative Instruments - continued
Futures Contracts. A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a fixed price at a specified future date. The Fund used futures contracts to manage its exposure to the bond market and to fluctuations in interest rates.
Upon entering into a futures contract, a fund is required to deposit either cash or securities (initial margin) with a clearing broker in an amount equal to a certain percentage of the face value of the contract. Futures contracts are marked-to-market daily and subsequent daily payments (variation margin) are made or received by a fund depending on the daily fluctuations in the value of the futures contracts and are recorded as unrealized appreciation or (depreciation). This receivable and/or payable, if any, is included in daily variation margin for derivative instruments in the Statement of Assets and Liabilities. Realized gain or (loss) is recorded upon the expiration or closing of a futures contract.
Any 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.
During the period the Fund recognized net realized gain (loss) of $17,414 and a change in net unrealized appreciation (depreciation) of $(17,098) related to its investment in futures contracts. These amounts are included in the Statement of Operations.
5. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $255,352,971 and $157,691,752, respectively.
6. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and an annualized group fee rate that averaged .11% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .31% of the Fund's average net assets.
Distribution and Service Plan Fees. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for
Annual Report
6. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan Fees - continued
selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates, total fees and amounts retained by FDC were as follows:
| Distribution | Service | Total | Retained |
Class A | -% | .15% | $ 22,732 | $ 1,400 |
Class T | -% | .15% | 4,891 | 67 |
|
|
| $ 27,623 | $ 1,467 |
Sales Load. FDC may receive a front-end sales charge of up to 1.50% for selling Class A and Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. Depending on the holding period, FDC may receive a contingent deferred sales charges levied on Class A and Class T redemptions. The deferred sales charges range from .75% or .50% for certain purchases of Class A shares and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
| Retained |
Class A | $ 1,698 |
Class T | 922 |
| $ 2,620 |
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of each respective class of the Fund, with the exception of Ultra-Short Bond. FIIOC receives an asset-based fee of .10% of Ultra-Short Bond's average net assets. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, transfer agent fees for each class were as follows:
| Amount | % of |
Class A | $ 23,136 | .15 |
Class T | 8,089 | .25 |
Ultra-Short Bond | 326,462 | .10 |
Institutional Class | 12,731 | .16 |
| $ 370,418 |
|
Annual Report
Notes to Financial Statements - continued
6. Fees and Other Transactions with Affiliates - continued
Fund Wide Operations Fee. Pursuant to the Fund Wide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, compensation of the independent Trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent Trustees. For the period, the FWOE fee was equivalent to an annual rate of .04% of average net assets.
7. Committed Line of Credit.
The Fund participates with other funds managed by FMR or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $811 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.
8. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, including commitment fees, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
| Expense | Reimbursement |
Class T | .70% | $ 1,569 |
In addition, FMR reimbursed a portion of the Fund's operating expenses during the period in the amount of $370.
Through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's expenses by $54.
Annual Report
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2013 | 2012 |
From net investment income |
|
|
Class A | $ 23,478 | $ 38,543 |
Class T | 3,636 | 7,892 |
Ultra-Short Bond | 1,122,291 | 1,158,011 |
Institutional Class | 23,371 | 21,788 |
Total | $ 1,172,776 | $ 1,226,234 |
10. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
Years ended July 31, | 2013 | 2012 | 2013 | 2012 |
Class A |
|
|
|
|
Shares sold | 1,245,078 | 1,603,688 | $ 10,260,424 | $ 13,112,637 |
Reinvestment of distributions | 2,430 | 3,920 | 20,006 | 32,092 |
Shares redeemed | (891,404) | (1,196,047) | (7,343,122) | (9,779,740) |
Net increase (decrease) | 356,104 | 411,561 | $ 2,937,308 | $ 3,364,989 |
Class T |
|
|
|
|
Shares sold | 200,020 | 331,712 | $ 1,648,091 | $ 2,711,930 |
Reinvestment of distributions | 415 | 897 | 3,416 | 7,343 |
Shares redeemed | (173,781) | (515,942) | (1,431,755) | (4,218,475) |
Net increase (decrease) | 26,654 | (183,333) | $ 219,752 | $ (1,499,202) |
Ultra-Short Bond |
|
|
|
|
Shares sold | 19,772,594 | 16,883,162 | $ 162,947,538 | $ 138,113,317 |
Reinvestment of distributions | 134,015 | 138,342 | 1,103,898 | 1,132,483 |
Shares redeemed | (8,722,670) | (10,834,545) | (71,872,636) | (88,649,539) |
Net increase (decrease) | 11,183,939 | 6,186,959 | $ 92,178,800 | $ 50,596,261 |
Institutional Class |
|
|
|
|
Shares sold | 530,266 | 1,909,832 | $ 4,367,986 | $ 15,655,264 |
Reinvestment of distributions | 2,501 | 2,252 | 20,594 | 18,456 |
Shares redeemed | (1,534,751) | (267,573) | (12,614,091) | (2,184,698) |
Net increase (decrease) | (1,001,984) | 1,644,511 | $ (8,225,511) | $ 13,489,022 |
11. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum
Annual Report
Notes to Financial Statements - continued
11. Other - continued
exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Ultra-Short Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Ultra-Short Bond Fund (a fund of Fidelity Income Fund) at July 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Ultra-Short Bond Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 17, 2013
Annual Report
Trustees and Officers
The Trustees and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, oversee management of the risks associated with such activities and contractual arrangements, and review the fund's performance. Except for Elizabeth S. Acton and James C. Curvey, each of the Trustees oversees 221 Fidelity funds. Ms. Acton oversees 203 Fidelity funds. Mr. Curvey oversees 387 Fidelity funds.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person of the trust and the fund (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the month in which his or her 75th birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers hold office without limit in time, except that any officer may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
Experience, Skills, Attributes, and Qualifications of the Fund's Trustees. The Governance and Nominating Committee has adopted a statement of policy that describes the experience, qualifications, attributes, and skills that are necessary and desirable for potential Independent Trustee candidates (Statement of Policy). The Board believes that each Trustee satisfied at the time he or she was initially elected or appointed a Trustee, and continues to satisfy, the standards contemplated by the Statement of Policy. The Governance and Nominating Committee also engages professional search firms to help identify potential Independent Trustee candidates who have the experience, qualifications, attributes, and skills consistent with the Statement of Policy. From time to time, additional criteria based on the composition and skills of the current Independent Trustees, as well as experience or skills that may be appropriate in light of future changes to board composition, business conditions, and regulatory or other developments, have also been considered by the professional search firms and the Governance and Nominating Committee. In addition, the Board takes into account the Trustees' commitment and participation in Board and committee meetings, as well as their leadership of standing and ad hoc committees throughout their tenure.
In determining that a particular Trustee was and continues to be qualified to serve as a Trustee, the Board has considered a variety of criteria, none of which, in isolation, was controlling. The Board believes that, collectively, the Trustees have balanced and diverse experience, qualifications, attributes, and skills, which allow the Board to operate effectively in governing the fund and protecting the interests of shareholders. Information about the specific experience, skills, attributes, and qualifications of each Trustee, which in each case led to the Board's conclusion that the Trustee should serve (or continue to serve) as a trustee of the fund, is provided below.
Annual Report
Trustees and Officers - continued
Board Structure and Oversight Function. Abigail P. Johnson is an interested person (as defined in the 1940 Act) and currently serves as Chairman. The Trustees have determined that an interested Chairman is appropriate and benefits shareholders because an interested Chairman has a personal and professional stake in the quality and continuity of services provided to the fund. Independent Trustees exercise their informed business judgment to appoint an individual of their choosing to serve as Chairman, regardless of whether the Trustee happens to be independent or a member of management. The Independent Trustees have determined that they can act independently and effectively without having an Independent Trustee serve as Chairman and that a key structural component for assuring that they are in a position to do so is for the Independent Trustees to constitute a substantial majority for the Board. The Independent Trustees also regularly meet in executive session. Albert R. Gamper, Jr. serves as Chairman of the Independent Trustees and as such (i) acts as a liaison between the Independent Trustees and management with respect to matters important to the Independent Trustees and (ii) with management prepares agendas for Board meetings.
Fidelity funds are overseen by different Boards of Trustees. The fund's Board oversees Fidelity's investment-grade bond, money market, and asset allocation funds and another Board oversees Fidelity's equity and high income funds. The asset allocation funds may invest in Fidelity funds that are overseen by such other Board. The use of separate Boards, each with its own committee structure, allows the Trustees of each group of Fidelity funds to focus on the unique issues of the funds they oversee, including common research, investment, and operational issues. On occasion, the separate Boards establish joint committees to address issues of overlapping consequences for the Fidelity funds overseen by each Board.
The Trustees operate using a system of committees to facilitate the timely and efficient consideration of all matters of importance to the Trustees, the fund, and fund shareholders and to facilitate compliance with legal and regulatory requirements and oversight of the fund's activities and associated risks. The Board, acting through its committees, has charged FMR and its affiliates with (i) identifying events or circumstances the occurrence of which could have demonstrably adverse effects on the fund's business and/or reputation; (ii) implementing processes and controls to lessen the possibility that such events or circumstances occur or to mitigate the effects of such events or circumstances if they do occur; and (iii) creating and maintaining a system designed to evaluate continuously business and market conditions in order to facilitate the identification and implementation processes described in (i) and (ii) above. Because the day-to-day operations and activities of the fund are carried out by or through FMR, its affiliates, and other service providers, the fund's exposure to risks is mitigated but not eliminated by the processes overseen by the Trustees. While each of the Board's committees has responsibility for overseeing different aspects of the fund's activities, oversight is exercised primarily through the Operations and Audit Committees. In addition, an ad hoc Board committee of Independent Trustees has worked with FMR to enhance the Board's oversight of investment and financial risks, legal and regulatory risks, technology risks, and operational risks, including the development of additional risk reporting to the Board. Appropriate personnel, including but not limited to the fund's Chief Compliance Officer (CCO), FMR's internal auditor, the independent accountants, the fund's Treasurer and portfolio management personnel, make periodic reports to the Board's committees, as appropriate, including an annual review of FMR's risk management program for the Fidelity funds. The responsibilities of each standing committee, including their oversight responsibilities, are described further under "Standing Committees of the Fund's Trustees."
Annual Report
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+ | |
Abigail P. Johnson (1961) | |
| Year of Election or Appointment: 2009 Ms. Johnson is Trustee and Chairman of the Board of Trustees of certain Trusts. Ms. Johnson serves as President of Fidelity Financial Services (2012-present) and President of Personal, Workplace and Institutional Services (2005-present). Ms. Johnson is Chairman and Director of FMR Co., Inc. (2011-present), Chairman and Director of FMR (2011-present), and the Vice Chairman and Director (2007-present) of FMR LLC. Previously, Ms. Johnson served as President and a Director of FMR (2001-2005), a Trustee of other investment companies advised by FMR, Fidelity Investments Money Management, Inc., and FMR Co., Inc. (2001-2005), Senior Vice President of the Fidelity funds (2001-2005), and managed a number of Fidelity funds. Ms. Abigail P. Johnson and Mr. Arthur E. Johnson are not related. |
James C. Curvey (1935) | |
| Year of Election or Appointment: 2007 Mr. Curvey also serves as Trustee (2007-present) of other investment companies advised by FMR. Mr. Curvey is a Director of Fidelity Investments Money Management, Inc. (2009-present), Director of Fidelity Research & Analysis Co. (2009-present) and Director of FMR and FMR Co., Inc. (2007-present). Mr. Curvey is also Vice Chairman (2007-present) and Director of FMR LLC. In addition, Mr. Curvey serves as an Overseer for the Boston Symphony Orchestra and a member of the Trustees of Villanova University. Previously, Mr. Curvey was the Vice Chairman (2006-2007) and Director (2000-2007) of FMR Corp. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
+ The information above includes each Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Trustee's qualifications to serve as a Trustee, which led to the conclusion that each Trustee should serve as a Trustee for the fund.
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+ | |
Elizabeth S. Acton (1951) | |
| Year of Election or Appointment: 2013 Ms. Acton is Trustee of certain Trusts. Prior to her retirement in April 2012, Ms. Acton was Executive Vice President, Finance (November 2011-April 2012), Executive Vice President, Chief Financial Officer (April 2002-November 2011), and Treasurer (May 2004-May 2005) of Comerica Incorporated (financial services). Prior to joining Comerica, Ms. Acton held a variety of positions at Ford Motor Company (1983-2002), including Vice President and Treasurer (2000-2002) and Executive Vice President and Chief Financial Officer of Ford Motor Credit Company (1998-2000). Ms. Acton currently serves as a member of the Board of Directors and Audit and Finance Committees of Beazer Homes USA, Inc. (homebuilding, 2012-present). |
Albert R. Gamper, Jr. (1942) | |
| Year of Election or Appointment: 2006 Mr. Gamper is Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2012-present). Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (2002-2003). Mr. Gamper currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2000-present), a member of the Board of Trustees, Rutgers University (2004-present), and Chairman of the Board of Barnabas Health Care System. Previously, Mr. Gamper served as Vice Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2011-2012) and as Chairman of the Board of Governors, Rutgers University (2004-2007). |
Robert F. Gartland (1951) | |
| Year of Election or Appointment: 2010 Mr. Gartland is Chairman and an investor in Gartland and Mellina Group Corp. (consulting, 2009-present). Previously, Mr. Gartland served as a partner and investor of Vietnam Partners LLC (investments and consulting, 2008-2011). Prior to his retirement, Mr. Gartland held a variety of positions at Morgan Stanley (financial services, 1979-2007) including Managing Director (1987-2007). |
Arthur E. Johnson (1947) | |
| Year of Election or Appointment: 2008 Mr. Johnson serves as a member of the Board of Directors of Eaton Corporation (diversified power management, 2009-present), AGL Resources, Inc. (holding company, 2002-present) and Booz Allen Hamilton (management consulting, 2011-present). Prior to his retirement, Mr. Johnson served as Senior Vice President of Corporate Strategic Development of Lockheed Martin Corporation (defense contractor, 1999-2009). He previously served on the Board of Directors of IKON Office Solutions, Inc. (1999-2008) and Delta Airlines (2005-2007). Mr. Arthur E. Johnson is not related to Ms. Abigail P. Johnson. |
Michael E. Kenneally (1954) | |
| Year of Election or Appointment: 2009 Mr. Kenneally served as a Member of the Advisory Board for certain Fidelity Fixed Income and Asset Allocation Funds before joining the Board of Trustees (2008-2009). Prior to his retirement, Mr. Kenneally served as Chairman and Global Chief Executive Officer of Credit Suisse Asset Management. Before joining Credit Suisse, he was an Executive Vice President and Chief Investment Officer for Bank of America Corporation. Earlier roles at Bank of America included Director of Research, Senior Portfolio Manager and Research Analyst, and Mr. Kenneally was awarded the Chartered Financial Analyst (CFA) designation in 1991. |
James H. Keyes (1940) | |
| Year of Election or Appointment: 2007 Mr. Keyes serves as a member of the Board and Non-Executive Chairman of Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, since 2002). Previously, Mr. Keyes served as a member of the Board of Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-2013). Prior to his retirement, Mr. Keyes served as Chairman and Chief Executive Officer of Johnson Controls (automotive, building, and energy, 1998-2002) and as a member of the Board of LSI Logic Corporation (semiconductor technologies, 1984-2008). |
Marie L. Knowles (1946) | |
| Year of Election or Appointment: 2001 Ms. Knowles is Vice Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2012-present). Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. Ms. Knowles currently serves as a Director and Chairman of the Audit Committee of McKesson Corporation (healthcare service, since 2002). Ms. Knowles is a member of the Board of the Catalina Island Conservancy and of the Santa Catalina Island Company (2009-present). She also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. Previously, Ms. Knowles served as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994-2007), URS Corporation (engineering and construction, 2000-2003) and America West (airline, 1999-2002). |
Kenneth L. Wolfe (1939) | |
| Year of Election or Appointment: 2005 Prior to his retirement, Mr. Wolfe served as Chairman and a Director (2007-2009) and Chairman and Chief Executive Officer (1994-2001) of Hershey Foods Corporation. He also served as a member of the Boards of Adelphia Communications Corporation (telecommunications, 2003-2006), Bausch & Lomb, Inc. (medical/pharmaceutical, 1993-2007), and Revlon, Inc. (personal care products, 2004-2009). Mr. Wolfe previously served as Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2008-2012). |
+ The information above includes each Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Trustee's qualifications to serve as a Trustee, which led to the conclusion that each Trustee should serve as a Trustee for the fund.
Executive Officers:
Correspondence intended for each executive officer may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.
Name, Year of Birth; Principal Occupation | |
Stephanie J. Dorsey (1969) | |
| Year of Election or Appointment: 2013 President and Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Ms. Dorsey also serves as Treasurer and Chief Financial Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2013-present), Assistant Treasurer of other Fidelity funds (2010-present), and is an employee of Fidelity Investments (2008-present). Previously, Ms. Dorsey served as Deputy Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2008-2013), Treasurer (2004-2008) of the JPMorgan Mutual Funds and Vice President (2004-2008) of JPMorgan Chase Bank. |
Charles S. Morrison (1960) | |
| Year of Election or Appointment: 2012 Vice President of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Morrison also serves as President, Fixed Income and is an employee of Fidelity Investments. Previously, Mr. Morrison served as Vice President of Fidelity's Money Market Funds (2005-2009), President, Money Market Group Leader of FMR (2009), and Senior Vice President, Money Market Group of FMR (2004-2009). Mr. Morrison also served as Vice President of Fidelity's Bond Funds (2002-2005), certain Balanced Funds (2002-2005), and certain Asset Allocation Funds (2002-2007), and as Senior Vice President (2002-2005) of Fidelity's Fixed Income Division. |
Robert P. Brown (1963) | |
| Year of Election or Appointment: 2012 Vice President of Fidelity's Bond Funds. Mr. Brown also serves as Executive Vice President of Fidelity Investments Money Management, Inc. (2010-present), President, Bond Group of FMR (2011-present), Director and Managing Director, Research of Fidelity Management & Research (U.K.) Inc. (2008-present) and is an employee of Fidelity Investments. Previously, Mr. Brown served as President, Money Market Group of FMR (2010-2011) and Vice President of Fidelity's Money Market Funds (2010-2012). |
Scott C. Goebel (1968) | |
| Year of Election or Appointment: 2008 Secretary and Chief Legal Officer (CLO) of the Fidelity funds. Mr. Goebel also serves as Secretary of Fidelity Investments Money Management, Inc. (FIMM) (2010-present) and Fidelity Research and Analysis Company (FRAC) (2010-present); Secretary and CLO of The North Carolina Capital Management Trust: Cash and Term Portfolios (2008-present); General Counsel, Secretary, and Senior Vice President of FMR (2008-present) and FMR Co., Inc. (2008-present); employed by FMR LLC or an affiliate (2001-present); Chief Legal Officer of Fidelity Management & Research (Hong Kong) Limited (2008-present) and Assistant Secretary of Fidelity Management & Research (Japan) Inc. (2008-present), and Fidelity Management & Research (U.K.) Inc. (2008-present). Previously, Mr. Goebel served as Assistant Secretary of FIMM (2008-2010), FRAC (2008-2010), and the Funds (2007-2008) and as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (2005-2007). |
Marc Bryant (1966) | |
| Year of Election or Appointment: 2013 Assistant Secretary of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Bryant also serves as Secretary and Chief Legal Officer of other Fidelity funds (2010-present) and Senior Vice President and Deputy General Counsel of Fidelity Investments. Prior to joining Fidelity Investments, Mr. Bryant served as a Senior Vice President and the Head of Global Retail Legal for AllianceBernstein L.P. (2006-2010), and as the General Counsel for ProFund Advisors LLC (2001-2006). |
Elizabeth Paige Baumann (1968) | |
| Year of Election or Appointment: 2012 Anti-Money Laundering (AML) Officer of the Fidelity funds. Ms. Baumann also serves as AML Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2012-present), Chief AML Officer of FMR LLC (2012-present), and is an employee of Fidelity Investments. Previously, Ms. Baumann served as Vice President and Deputy Anti-Money Laundering Officer (2007-2012). |
Christine Reynolds (1958) | |
| Year of Election or Appointment: 2008 Chief Financial Officer of the Fidelity funds. Ms. Reynolds became President of Fidelity Pricing and Cash Management Services (FPCMS) in August 2008. Ms. Reynolds served as Chief Operating Officer of FPCMS (2007-2008). Previously, Ms. Reynolds served as President, Treasurer, and Anti-Money Laundering officer of the Fidelity funds (2004-2007). |
Michael H. Whitaker (1967) | |
| Year of Election or Appointment: 2008 Chief Compliance Officer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Whitaker also serves as Chief Compliance Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2008-present). Mr. Whitaker is an employee of Fidelity Investments (2007-present). Prior to joining Fidelity Investments, Mr. Whitaker worked at MFS Investment Management where he served as Senior Vice President and Chief Compliance Officer (2004-2006), and Assistant General Counsel. |
Joseph F. Zambello (1957) | |
| Year of Election or Appointment: 2011 Deputy Treasurer of the Fidelity funds. Mr. Zambello is an employee of Fidelity Investments. Previously, Mr. Zambello served as Vice President of FMR's Program Management Group (2009-2011) and Vice President of the Transfer Agent Oversight Group (2005-2009). |
Stephen Sadoski (1971) | |
| Year of Election or Appointment: 2013 Deputy Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Sadoski also serves as Deputy Treasurer of other Fidelity funds (2012-present) and is an employee of Fidelity Investments (2012-present). Previously, Mr. Sadoski served as Assistant Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2012-2013), an assistant chief accountant in the Division of Investment Management of the Securities and Exchange Commission (SEC) (2009-2012) and as a senior manager at Deloitte & Touche LLP (1997-2009). |
Adrien E. Deberghes (1967) | |
| Year of Election or Appointment: 2010 Assistant Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Deberghes also serves as Vice President and Assistant Treasurer (2011-present) and Deputy Treasurer (2008-present) of other Fidelity funds, and is an employee of Fidelity Investments (2008-present). Previously, Mr. Deberghes served as Senior Vice President of Mutual Fund Administration at State Street Corporation (2007-2008), Senior Director of Mutual Fund Administration at Investors Bank & Trust (2005-2007), and Director of Finance for Dunkin' Brands (2000-2005). |
Kenneth B. Robins (1969) | |
| Year of Election or Appointment: 2009 Assistant Treasurer of the Fidelity Fixed Income and Asset Allocation Funds. Mr. Robins also serves as President and Treasurer of other Fidelity funds (2008-present) and is an employee of Fidelity Investments (2004-present). Mr. Robins serves as Executive Vice President of Fidelity Investments Money Management, Inc. (FIMM) (2013-present). Previously, Mr. Robins served as Deputy Treasurer of the Fidelity funds (2005-2008) and Treasurer and Chief Financial Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2006-2008). |
Gary W. Ryan (1958) | |
| Year of Election or Appointment: 2005 Assistant Treasurer of the Fidelity funds. Mr. Ryan is an employee of Fidelity Investments. Previously, Mr. Ryan served as Vice President of Fund Reporting in Fidelity Pricing and Cash Management Services (FPCMS) (1999-2005). |
Jonathan Davis (1968) | |
| Year of Election or Appointment: 2010 Assistant Treasurer of the Fidelity funds. Mr. Davis is also Assistant Treasurer of Fidelity Rutland Square Trust II and Fidelity Commonwealth Trust II. Mr. Davis is an employee of Fidelity Investments. Previously, Mr. Davis served as Vice President and Associate General Counsel of FMR LLC (2003-2010). |
Annual Report
Distributions (Unaudited)
A total of 0.12% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund designates $564,013 of distributions paid during the period January 1, 2013 to July 31, 2013 as qualifying to be taxed as interest- related dividends for nonresident alien shareholders.
The fund will notify shareholders in January 2014 amounts for use in preparing 2013 income tax returns.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments
Money Management, Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Japan) Inc.
Fidelity Management & Research
(Hong Kong) Limited
General Distributor
Fidelity Distributors Corporation
Smithfield, RI
Transfer and Service Agents
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
(Fidelity Investment logo)(registered trademark)
AUSBI-UANN-0913 1.804593.109
Fidelity®
Ultra-Short Bond
Fund
Annual Report
July 31, 2013
(Fidelity Cover Art)
Contents
Performance | How the fund has done over time. | |
Management's Discussion of Fund Performance | The Portfolio Manager's review of fund performance and strategy. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm |
| |
Trustees and Officers |
| |
Distributions |
|
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov. You may also call 1-800-544-8544 to request a free copy of the proxy voting guidelines.
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 LLC or an affiliated company. © 2013 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.advisor.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' distributions from dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2013 | Past 1 | Past 5 | Past 10 |
Fidelity® Ultra-Short Bond Fund | 0.72% | 0.57% | 0.04% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Ultra-Short Bond Fund, a class of the fund, on July 31, 2003. The chart shows how the value of your investment would have changed, and also shows how the Barclays® 6 Month Swap Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Market Recap: A steep late-spring sell-off pushed U.S. taxable investment-grade bonds into the red for the 12 months ending July 31, 2013, amid the prospect of higher interest rates. The Barclays® U.S. Aggregate Bond Index returned -1.91% for the period, with most of the damage in May and June, in response to signals from the Federal Reserve that it could begin to taper its stimulative bond-buying programs prior to year-end. The bond market suffered significant investor outflows, causing the sell-off to feed upon itself. Prior to that, "quantitative easing" had provided a positive tone for the market. Shifting expectations for global economic growth also influenced the market, with comparatively strong data in May and June tempering investor demand for bonds. Among sectors that comprise the index, U.S. Treasuries and mortgage-backed securities - widely viewed as most vulnerable to a cessation of government-bond-buying programs - fared worst, returning -2.72% and -1.98%, respectively, while government-agency securities returned -1.18%. Corporate bonds delivered sluggish performance (-1%), hurt by rising interest rates and investors' aversion to riskier assets at period end. Thanks largely to their higher yields and solid first-half appreciation, commercial mortgage- backed securities fared best, rising 2.54%.
Comments from Robert Galusza, Portfolio Manager of Fidelity® Ultra-Short Bond Fund: For the year, the fund's Retail Class shares returned 0.72%, outpacing the 0.27% gain of the Barclays® 6 Month Swap Index. During the period, I continued to emphasize corporate credit, while deemphasizing U.S. government securities. The biggest contributors were corporate bonds issued by banks and other types of financial institutions. Corporate securities in a variety of industrials groups also aided performance. Within securitized sectors, asset-backed securities derived from car loans provided a further boost to results, as did a small position in commercial mortgage-backed securities. Among the fund's government-related holdings, collateralized mortgage obligations (CMOs) structured from government-backed mortgages helped the fund's return. On the downside, the fund's yield-curve positioning modestly detracted. In order to access certain securities, I held some with maturities that were longer than that of the benchmark. However, with short-term yield spreads slightly widening during the period, these bonds underperformed. As the period progressed, I notably reduced the fund's allocations to CMOs and government-agency bonds because I felt their valuations had become less attractive.
Note to shareholders: The fund was closed to new accounts on August 2, 2013, in anticipation of a possible merger or liquidation.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, redemption fees and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2013 to July 31, 2013).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annual Report
Shareholder Expense Example - continued
| Annualized | Beginning | Ending | Expenses Paid |
Class A | .65% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,000.40 | $ 3.22 |
HypotheticalA |
| $ 1,000.00 | $ 1,021.57 | $ 3.26 |
Class T | .70% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,000.30 | $ 3.47 |
HypotheticalA |
| $ 1,000.00 | $ 1,021.32 | $ 3.51 |
Ultra-Short Bond | .45% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,001.40 | $ 2.23 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.56 | $ 2.26 |
Institutional Class | .52% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,001.00 | $ 2.58 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.22 | $ 2.61 |
A 5% return per year before expenses
B Annualized expense ratio reflects expenses net of applicable fee waivers.
* Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annual Report
Investment Changes (Unaudited)
Quality Diversification (% of fund's net assets) | |||||||
As of July 31, 2013 | As of January 31, 2013 | ||||||
![]() | U.S. Government |
| ![]() | U.S. Government |
| ||
![]() | AAA 23.6% |
| ![]() | AAA 22.9% |
| ||
![]() | AA 13.5% |
| ![]() | AA 14.8% |
| ||
![]() | A 29.9% |
| ![]() | A 25.8% |
| ||
![]() | BBB 15.1% |
| ![]() | BBB 18.0% |
| ||
![]() | BB and Below † 0.0% |
| ![]() | BB and Below † 0.0% |
| ||
![]() | Not Rated † 0.0% |
| ![]() | Not Rated 0.2% |
| ||
![]() | Short-Term |
| ![]() | Short-Term |
|
We have used ratings from Moody's Investors Service, Inc. Where Moody's® ratings are not available, we have used S&P® ratings. All ratings are as of the date indicated and do not reflect subsequent changes. Securities rated BB or below were rated investment grade at the time of acquisition. |
Weighted Average Maturity as of July 31, 2013 | ||
|
| 6 months ago |
Years | 1.4 | 1.5 |
This is a weighted average of all the maturities of the securities held in a fund. Weighted Average Maturity (WAM) can be used as a measure of sensitivity to interest rate changes and market changes. Generally, the longer the maturity, the greater the sensitivity to such changes. WAM is based on the dollar-weighted average length of time until principal payments must be paid. Depending on the types of securities held in a fund, certain maturity shortening devices (e.g., demand features, interest rate resets, and call options) may be taken into account when calculating the WAM. |
Duration as of July 31, 2013 | ||
|
| 6 months ago |
Years | 0.4 | 0.3 |
Duration is a measure of a security's price sensitivity to changes in interest rates. Duration differs from maturity in that it considers a security's interest payments in addition to the amount of time until the security reaches maturity, and also takes into account certain maturity shortening features (e.g., demand features, interest rate resets, and call options) when applicable. Securities with longer durations generally tend to be more sensitive to interest rate changes than securities with shorter durations. A fund with a longer average duration generally can be expected to be more sensitive to interest rate changes than a fund with a shorter average duration. |
† Amount represents less than 0.1%
Annual Report
Investment Changes (Unaudited) - continued
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2013* | As of January 31, 2013** | ||||||
![]() | Corporate Bonds 57.5% |
| ![]() | Corporate Bonds 57.4% |
| ||
![]() | U.S. Government |
| ![]() | U.S. Government |
| ||
![]() | Asset-Backed |
| ![]() | Asset-Backed |
| ||
![]() | CMOs and Other |
| ![]() | CMOs and Other |
| ||
![]() | Municipal Bonds 0.8% |
| ![]() | Municipal Bonds 1.0% |
| ||
![]() | Short-Term |
| ![]() | Short-Term |
| ||
* Foreign investments | 18.0% |
| ** Foreign investments | 17.7% |
|
Annual Report
Investments July 31, 2013
Showing Percentage of Net Assets
Nonconvertible Bonds - 57.5% | ||||
| Principal Amount | Value | ||
CONSUMER DISCRETIONARY - 2.7% | ||||
Automobiles - 1.9% | ||||
Daimler Finance North America LLC: | ||||
0.8699% 1/9/15 (c)(d) | $ 2,000,000 | $ 2,006,580 | ||
1.0486% 4/10/14 (c)(d) | 1,250,000 | 1,254,426 | ||
Volkswagen International Finance NV: | ||||
0.8741% 11/20/14 (c)(d) | 2,000,000 | 2,006,980 | ||
0.884% 4/1/14 (c)(d) | 2,500,000 | 2,503,453 | ||
| 7,771,439 | |||
Media - 0.8% | ||||
NBCUniversal Enterprise, Inc. 0.8051% 4/15/16 (c)(d) | 3,000,000 | 3,007,035 | ||
NBCUniversal Media LLC 3.65% 4/30/15 | 354,000 | 371,654 | ||
| 3,378,689 | |||
TOTAL CONSUMER DISCRETIONARY | 11,150,128 | |||
CONSUMER STAPLES - 2.2% | ||||
Beverages - 0.6% | ||||
PepsiCo, Inc. 0.4828% 2/26/16 (d) | 2,500,000 | 2,501,283 | ||
Food & Staples Retailing - 0.7% | ||||
Walgreen Co. 0.7723% 3/13/14 (d) | 3,000,000 | 3,004,596 | ||
Food Products - 0.9% | ||||
General Mills, Inc.: | ||||
0.5638% 1/29/16 (d) | 609,000 | 608,700 | ||
0.6241% 5/16/14 (d) | 2,475,000 | 2,479,522 | ||
Kellogg Co. 0.5051% 2/13/15 (d) | 522,000 | 522,241 | ||
| 3,610,463 | |||
TOTAL CONSUMER STAPLES | 9,116,342 | |||
ENERGY - 1.7% | ||||
Energy Equipment & Services - 0.3% | ||||
Cameron International Corp. 1.2047% 6/2/14 (d) | 1,226,000 | 1,231,837 | ||
Oil, Gas & Consumable Fuels - 1.4% | ||||
Petrobras Global Finance BV 1.8941% 5/20/16 (d) | 1,000,000 | 985,000 | ||
Total Capital Canada Ltd. 0.6481% 1/15/16 (d) | 3,000,000 | 3,019,911 | ||
TransCanada PipeLines Ltd. 0.9531% 6/30/16 (d) | 1,916,000 | 1,924,804 | ||
| 5,929,715 | |||
TOTAL ENERGY | 7,161,552 | |||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
FINANCIALS - 40.5% | ||||
Capital Markets - 8.0% | ||||
Goldman Sachs Group, Inc.: | ||||
0.7226% 3/22/16 (d) | $ 5,000,000 | $ 4,943,200 | ||
0.8756% 9/29/14 (d) | 1,000,000 | 1,000,600 | ||
HSBC Bank PLC 1.0676% 1/17/14 (c)(d) | 3,000,000 | 3,011,418 | ||
JPMorgan Chase & Co.: | ||||
0.8928% 2/26/16 (d) | 2,000,000 | 2,001,040 | ||
0.9281% 10/15/15 (d) | 8,951,000 | 8,973,374 | ||
Merrill Lynch & Co., Inc. 0.7281% 1/15/15 (d) | 3,500,000 | 3,491,551 | ||
Morgan Stanley: | ||||
1.2233% 12/19/14 (d) | 2,500,000 | 2,501,950 | ||
1.5228% 2/25/16 (d) | 2,500,000 | 2,513,835 | ||
The Bank of New York Mellon Corp.: | ||||
0.4947% 10/23/15 (d) | 1,000,000 | 1,001,643 | ||
0.5338% 7/28/14 (d) | 2,000,000 | 2,004,236 | ||
UBS AG Stamford Branch 1.2638% 1/28/14 (d) | 1,722,000 | 1,730,083 | ||
| 33,172,930 | |||
Commercial Banks - 18.1% | ||||
ABN AMRO Bank NV 2.035% 1/30/14 (c)(d) | 2,000,000 | 2,014,100 | ||
ANZ Banking Group Ltd. 0.465% 5/7/15 (c)(d) | 1,000,000 | 999,652 | ||
Bank of Montreal 0.7452% 9/11/15 (d) | 2,400,000 | 2,409,336 | ||
Bank of Nova Scotia 1.3091% 1/12/15 (d) | 1,000,000 | 1,011,309 | ||
Bank of Tokyo-Mitsubishi UFJ Ltd. 0.7228% 2/26/16 (c)(d) | 2,000,000 | 2,003,058 | ||
Barclays Bank PLC 1.3081% 1/13/14 (d) | 3,500,000 | 3,514,837 | ||
BB&T Corp. 0.9638% 4/28/14 (d) | 2,000,000 | 2,004,406 | ||
BNP Paribas 1.1686% 1/10/14 (d) | 1,000,000 | 1,002,641 | ||
Capital One NA 0.7226% 3/22/16 (d) | 1,000,000 | 997,160 | ||
Commonwealth Bank of Australia: | ||||
1.0033% 3/17/14 (c)(d) | 2,500,000 | 2,510,573 | ||
1.0728% 9/18/15 (c)(d) | 1,000,000 | 1,008,994 | ||
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA 0.7528% 3/18/16 (d) | 3,030,000 | 3,041,859 | ||
Credit Suisse New York Branch: | ||||
1.2281% 1/14/14 (d) | 2,500,000 | 2,509,653 | ||
2.2% 1/14/14 | 1,000,000 | 1,007,745 | ||
Danske Bank A/S 1.3181% 4/14/14 (c)(d) | 500,000 | 502,188 | ||
Fifth Third Bank 0.6828% 2/26/16 (d) | 2,000,000 | 1,995,479 | ||
KeyBank NA 5.8% 7/1/14 | 2,000,000 | 2,090,844 | ||
National Australia Bank Ltd. 0.5662% 1/22/15 (c)(d) | 1,500,000 | 1,502,519 | ||
Nordea Bank AB 0.7351% 5/13/16 (c)(d) | 1,500,000 | 1,501,653 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
FINANCIALS - continued | ||||
Commercial Banks - continued | ||||
PNC Bank NA 0.5738% 1/28/16 (d) | $ 2,000,000 | $ 1,996,228 | ||
PNC Funding Corp. 0.466% 1/31/14 (d) | 2,000,000 | 2,000,086 | ||
Rabobank (Netherlands) NV 0.6181% 4/14/14 (d) | 3,250,000 | 3,257,920 | ||
Royal Bank of Canada: | ||||
0.4738% 4/29/15 (d) | 2,000,000 | 1,998,966 | ||
0.6443% 3/8/16 (d) | 2,500,000 | 2,503,248 | ||
Royal Bank of Scotland Group PLC 2.55% 9/18/15 | 1,000,000 | 1,020,703 | ||
Societe Generale 2.2% 9/14/13 (c) | 1,122,000 | 1,123,797 | ||
Sumitomo Mitsui Banking Corp. 1.2162% 7/22/14 (c)(d) | 3,801,000 | 3,827,542 | ||
SunTrust Banks, Inc. 0.574% 4/1/15 (d) | 2,509,000 | 2,484,432 | ||
Svenska Handelsbanken AB 0.7218% 3/21/16 (d) | 2,000,000 | 2,005,246 | ||
The Toronto Dominion Bank: | ||||
0.4531% 5/1/15 (d) | 500,000 | 500,087 | ||
0.5681% 7/14/14 (d) | 2,000,000 | 2,005,616 | ||
U.S. Bank NA 0.5481% 10/14/14 (d) | 1,510,000 | 1,512,875 | ||
Union Bank NA 1.224% 6/6/14 (d) | 2,480,000 | 2,493,474 | ||
Wachovia Bank NA 0.6531% 11/3/14 (d) | 3,500,000 | 3,505,205 | ||
Wells Fargo Bank NA: | ||||
0.4841% 5/16/16 (d) | 4,000,000 | 3,951,980 | ||
0.5364% 7/20/15 (d) | 2,000,000 | 1,999,634 | ||
Westpac Banking Corp.: | ||||
1.0056% 3/31/14 (c)(d) | 1,000,000 | 1,004,426 | ||
1.0328% 9/25/15 (d) | 2,000,000 | 2,019,836 | ||
| 74,839,307 | |||
Consumer Finance - 7.9% | ||||
American Express Credit Corp.: | ||||
0.7251% 11/13/15 (d) | 3,995,000 | 3,995,943 | ||
1.3742% 6/12/15 (d) | 1,000,000 | 1,014,384 | ||
American Honda Finance Corp.: | ||||
0.6478% 5/26/16 (c)(d) | 2,000,000 | 1,999,172 | ||
0.7251% 5/8/14 (c)(d) | 2,000,000 | 2,005,182 | ||
Capital One Financial Corp.: | ||||
0.9131% 11/6/15 (d) | 1,500,000 | 1,501,674 | ||
1.4181% 7/15/14 (d) | 5,040,000 | 5,073,496 | ||
Caterpillar Financial Services Corp.: | ||||
0.5128% 2/26/16 (d) | 1,063,000 | 1,063,017 | ||
0.6251% 2/9/15 (d) | 2,000,000 | 2,008,142 | ||
Ford Motor Credit Co. LLC 1.5251% 5/9/16 (d) | 1,000,000 | 1,002,163 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
General Electric Capital Corp.: | ||||
0.8709% 1/8/16 (d) | $ 2,000,000 | $ 2,005,918 | ||
0.9191% 7/12/16 (d) | 1,000,000 | 1,001,167 | ||
1.1209% 1/7/14 (d) | 5,000,000 | 5,018,230 | ||
HSBC Finance Corp. 0.5181% 1/15/14 (d) | 800,000 | 799,841 | ||
John Deere Capital Corp. 0.3391% 1/12/15 (d) | 2,000,000 | 1,999,170 | ||
Toyota Motor Credit Corp. 0.4436% 11/21/14 (d) | 2,000,000 | 2,001,330 | ||
| 32,488,829 | |||
Diversified Financial Services - 4.4% | ||||
Bank of America Corp. 1.8191% 7/11/14 (d) | 2,500,000 | 2,527,360 | ||
BP Capital Markets PLC 0.8752% 3/11/14 (d) | 2,000,000 | 2,006,396 | ||
Citigroup, Inc.: | ||||
0.5531% 11/5/14 (d) | 2,500,000 | 2,493,475 | ||
1.064% 4/1/16 (d) | 3,000,000 | 3,007,134 | ||
1.7181% 1/13/14 (d) | 3,341,000 | 3,357,020 | ||
MetLife Institutional Funding II 0.6409% 1/6/15 (c)(d) | 5,000,000 | 5,016,675 | ||
| 18,408,060 | |||
Insurance - 1.8% | ||||
American International Group, Inc. 3% 3/20/15 | 3,000,000 | 3,095,469 | ||
Monumental Global Funding III 0.4681% 1/15/14 (c)(d) | 2,000,000 | 2,001,296 | ||
Principal Life Global Funding II: | ||||
0.6428% 5/27/16 (c)(d) | 1,000,000 | 1,001,118 | ||
0.8949% 7/9/14 (c)(d) | 1,500,000 | 1,506,219 | ||
| 7,604,102 | |||
Real Estate Management & Development - 0.3% | ||||
Liberty Property LP 5.65% 8/15/14 | 1,000,000 | 1,046,234 | ||
TOTAL FINANCIALS | 167,559,462 | |||
HEALTH CARE - 2.1% | ||||
Health Care Providers & Services - 0.7% | ||||
UnitedHealth Group, Inc. 0.3978% 8/28/14 (d) | 3,000,000 | 3,000,216 | ||
Pharmaceuticals - 1.4% | ||||
AbbVie, Inc.: | ||||
1.0331% 11/6/15 (c)(d) | 3,000,000 | 3,027,507 | ||
1.2% 11/6/15 (c) | 500,000 | 501,855 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
HEALTH CARE - continued | ||||
Pharmaceuticals - continued | ||||
Teva Pharmaceutical Finance Co. BV 1.1751% 11/8/13 (d) | $ 1,250,000 | $ 1,252,676 | ||
Teva Pharmaceutical Finance III BV 0.7718% 3/21/14 (d) | 1,000,000 | 1,002,124 | ||
| 5,784,162 | |||
TOTAL HEALTH CARE | 8,784,378 | |||
INDUSTRIALS - 0.2% | ||||
Electrical Equipment - 0.2% | ||||
Eaton Corp. 0.6033% 6/16/14 (d) | 945,000 | 946,933 | ||
INFORMATION TECHNOLOGY - 0.5% | ||||
Office Electronics - 0.5% | ||||
Xerox Corp. 1.0941% 5/16/14 (d) | 2,195,000 | 2,194,996 | ||
MATERIALS - 1.5% | ||||
Metals & Mining - 1.5% | ||||
Rio Tinto Finance (U.S.A.) PLC: | ||||
0.8233% 6/19/15 (d) | 3,500,000 | 3,503,269 | ||
1.1133% 6/17/16 (d) | 2,500,000 | 2,500,718 | ||
| 6,003,987 | |||
TELECOMMUNICATION SERVICES - 3.7% | ||||
Diversified Telecommunication Services - 3.0% | ||||
AT&T, Inc. 0.6601% 2/12/16 (d) | 3,000,000 | 3,008,646 | ||
BellSouth Corp. 4.117% 4/26/21 (c)(d) | 2,000,000 | 2,048,608 | ||
British Telecommunications PLC: | ||||
1.3973% 12/20/13 (d) | 1,445,000 | 1,450,128 | ||
2% 6/22/15 | 2,000,000 | 2,038,558 | ||
Verizon Communications, Inc. 0.474% 3/6/15 (c)(d) | 3,590,000 | 3,585,516 | ||
| 12,131,456 | |||
Wireless Telecommunication Services - 0.7% | ||||
Vodafone Group PLC 0.6591% 2/19/16 (d) | 3,000,000 | 2,998,902 | ||
TOTAL TELECOMMUNICATION SERVICES | 15,130,358 | |||
UTILITIES - 2.4% | ||||
Electric Utilities - 1.2% | ||||
Appalachian Power Co. 0.6491% 8/16/13 (d) | 1,937,000 | 1,937,169 | ||
Cleveland Electric Illuminating Co. 5.65% 12/15/13 | 348,000 | 354,294 | ||
Nonconvertible Bonds - continued | ||||
| Principal Amount | Value | ||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
Duke Energy Corp. 3.95% 9/15/14 | $ 431,000 | $ 446,167 | ||
NextEra Energy Capital Holdings, Inc. 1.611% 6/1/14 | 527,000 | 531,032 | ||
Northeast Utilities 1.0223% 9/20/13 (d) | 810,000 | 810,666 | ||
Pennsylvania Electric Co. 5.125% 4/1/14 | 1,000,000 | 1,027,669 | ||
| 5,106,997 | |||
Multi-Utilities - 1.2% | ||||
Sempra Energy 1.0333% 3/15/14 (d) | 4,822,000 | 4,835,323 | ||
TOTAL UTILITIES | 9,942,320 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $237,442,431) |
| |||
U.S. Government Agency Obligations - 1.0% | ||||
| ||||
Fannie Mae 0.875% 8/28/14 | 4,000,000 |
| ||
U.S. Government Agency - Mortgage Securities - 1.1% | ||||
| ||||
Fannie Mae - 1.1% | ||||
2.388% 7/1/35 (d) | 628,469 | 665,194 | ||
2.426% 6/1/35 (d) | 829,208 | 878,919 | ||
2.429% 12/1/34 (d) | 397,265 | 418,689 | ||
2.492% 11/1/34 (d) | 418,357 | 444,853 | ||
2.496% 2/1/34 (d) | 207,295 | 215,656 | ||
2.512% 6/1/35 (d) | 324,130 | 340,077 | ||
2.625% 10/1/35 (d) | 823,319 | 871,640 | ||
2.663% 11/1/34 (d) | 385,292 | 407,644 | ||
2.752% 7/1/34 (d) | 392,282 | 417,737 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $4,495,389) |
| |||
Asset-Backed Securities - 22.0% | ||||
| ||||
Ally Auto Receivables Trust: | ||||
Series 2010-4 Class A4, 1.35% 12/15/15 | 450,000 | 451,739 | ||
Series 2012-2 Class A3, 0.74% 4/15/16 | 2,000,000 | 2,002,092 | ||
Asset-Backed Securities - continued | ||||
| Principal Amount | Value | ||
Ally Auto Receivables Trust: - continued | ||||
Series 2012-SN1: | ||||
Class A2, 0.51% 12/22/14 | $ 738,487 | $ 738,022 | ||
Class A3, 0.57% 8/20/15 | 2,400,000 | 2,396,753 | ||
Series 2013-SN1 Class A2, 0.52% 5/20/15 | 2,000,000 | 1,997,486 | ||
Ally Master Owner Trust: | ||||
Series 2011-1 Class A1, 1.061% 1/15/16 (d) | 3,290,000 | 3,297,972 | ||
Series 2011-3 Class A2, 1.81% 5/15/16 | 220,000 | 221,820 | ||
Series 2012-2 Class A, 0.691% 3/15/16 (d) | 1,000,000 | 1,002,174 | ||
Series 2012-3 Class A2, 1.21% 6/15/17 | 2,000,000 | 2,007,548 | ||
Series 2013-1 Class A1, 0.641% 2/15/18 (d) | 2,000,000 | 1,987,303 | ||
AmeriCredit Auto Receivables Trust: | ||||
Series 2011-5 Class A2, 1.19% 8/8/15 | 18,499 | 18,511 | ||
Series 2012-1 Class A2, 0.91% 10/8/15 | 296,233 | 296,433 | ||
Series 2012-2: | ||||
Class A2, 0.76% 10/8/15 | 1,043,953 | 1,044,487 | ||
Class A3, 1.05% 10/11/16 | 400,000 | 400,634 | ||
Series 2012-5 Class A2, 0.51% 1/8/16 | 892,168 | 891,737 | ||
Series 2013-3 Class A2, 0.68% 10/11/16 | 500,000 | 499,748 | ||
BMW Floorplan Master Owner Trust Series 2012-1A Class A, 0.5925% 9/15/17 (c)(d) | 2,260,000 | 2,259,837 | ||
BMW Vehicle Lease Trust Series 2012-1 Class A2, 0.59% 6/20/14 | 238,643 | 238,677 | ||
Capital One Multi-Asset Execution Trust Series 2013-A2 Class A2, 0.3725% 2/15/19 (d) | 5,000,000 | 4,976,536 | ||
Carmax Auto Owner Trust Series 2012-3 Class A2, 0.43% 9/15/15 | 1,483,891 | 1,483,519 | ||
CIT Equipment Collateral Series 2012-VT1: | ||||
Class A2, 0.85% 5/20/14 (c) | 624,351 | 624,503 | ||
Class A3, 1.1% 8/22/16 (c) | 482,003 | 483,022 | ||
Citibank Credit Card Issuance Trust Series 2013-A1 Class A1, 0.2905% 4/24/17 (d) | 5,000,000 | 4,989,762 | ||
CNH Equipment Trust: | ||||
Series 2012-D Class A2, 0.51% 4/15/16 | 1,000,000 | 999,124 | ||
Series 2013-B Class A2, 0.44% 10/17/16 | 1,000,000 | 997,375 | ||
Discover Card Master Trust: | ||||
Series 2012-A2 Class A2, 0.341% 10/17/16 (d) | 1,000,000 | 999,298 | ||
Series 2012-A5 Class A5, 0.3925% 1/16/18 (d) | 5,000,000 | 4,991,181 | ||
Fannie Mae Series 2004-T5: | ||||
Class AB1, 0.6471% 5/28/35 (d) | 80,751 | 75,634 | ||
Class AB3, 0.9235% 5/28/35 (d) | 32,052 | 29,223 | ||
Ford Credit Auto Lease Trust Series 2012-A: | ||||
Class A2, 0.63% 4/15/14 | 277,741 | 277,733 | ||
Asset-Backed Securities - continued | ||||
| Principal Amount | Value | ||
Ford Credit Auto Lease Trust Series 2012-A: - continued | ||||
Class A4, 1.03% 4/15/15 | $ 800,000 | $ 804,003 | ||
Ford Credit Auto Owner Trust Series 2012-D Class A2, 0.4% 9/15/15 | 726,209 | 725,943 | ||
Ford Credit Floorplan Master Owner Trust: | ||||
Series 2010-5 Class A1, 1.5% 9/15/15 | 240,000 | 240,276 | ||
Series 2012-1 Class A, 0.661% 1/15/16 (d) | 5,000,000 | 5,003,960 | ||
Series 2012-4 Class A1, 0.74% 9/15/16 | 1,085,000 | 1,084,557 | ||
Series 2013-3Q Class A2, 0.4925% 6/15/17 (d) | 500,000 | 499,062 | ||
Fremont Home Loan Trust Series 2005-A Class M4, 1.21% 1/25/35 (d) | 125,000 | 29,217 | ||
GE Capital Credit Card Master Note Trust: | ||||
Series 2012-1 Class A, 1.03% 1/15/18 | 857,000 | 861,287 | ||
Series 2012-4 Class A, 0.491% 6/15/18 (d) | 5,000,000 | 4,996,622 | ||
GE Equipment Small Ticket LLC Series 2012-1A Class A2, 0.85% 11/21/14 (c) | 301,359 | 301,584 | ||
GE Equipment Transportation LLC Series 2012-2 Class A3, 0.62% 7/25/16 | 1,604,000 | 1,599,745 | ||
Home Equity Asset Trust Series 2003-5 Class A2, 0.89% 12/25/33 (d) | 10,566 | 9,387 | ||
Hyundai Auto Lease Securitization Trust: | ||||
Series 2012-A Class A3, 0.92% 8/17/15 (c) | 1,500,000 | 1,503,163 | ||
Series 2013-A Class A2, 0.51% 9/15/15 (c) | 3,000,000 | 2,995,888 | ||
Hyundai Auto Receivables Trust Series 2013-B Class A2, 0.52% 3/15/16 | 1,840,000 | 1,839,686 | ||
Hyundai Floorplan Master Owner Trust Series 2013-1A Class A, 0.5425% 5/15/18 (c)(d) | 580,000 | 576,767 | ||
John Deere Owner Trust: | ||||
Series 2011-A Class A4, 1.96% 4/16/18 | 404,000 | 408,253 | ||
Series 2012-A Class A2, 0.59% 6/16/14 | 16,845 | 16,845 | ||
Series 2012-B Class A2, 0.43% 2/17/15 | 1,296,713 | 1,296,471 | ||
Mercedes-Benz Auto Lease Trust Series 2013-A Class A2, 0.39% 6/15/15 | 2,000,000 | 1,996,630 | ||
Mercedes-Benz Master Owner Trust Series 2012-BA Class A, 0.461% 11/15/16 (c)(d) | 2,370,000 | 2,365,112 | ||
Merrill Lynch Mortgage Investors Trust Series 2004-HE2 Class A1B, 0.66% 8/25/35 (d) | 20,366 | 19,559 | ||
Morgan Stanley ABS Capital I Trust Series 2004-HE6 Class A2, 0.87% 8/25/34 (d) | 65,756 | 64,193 | ||
Nissan Auto Lease Trust Series 2013-A Class A2A, 0.45% 9/15/15 | 3,000,000 | 2,991,832 | ||
Nissan Master Owner Trust Receivables: | ||||
Series 2012-A Class A, 0.6625% 5/15/17 (d) | 2,250,000 | 2,246,758 | ||
Series 2013-A Class A, 0.4925% 2/15/18 (d) | 1,000,000 | 996,925 | ||
Asset-Backed Securities - continued | ||||
| Principal Amount | Value | ||
Ocala Funding LLC Series 2006-1A Class A, 1.5915% 3/20/11 (b)(c)(d) | $ 965,000 | $ 0 | ||
Park Place Securities, Inc. Series 2004-WCW1 Class M4, 1.64% 9/25/34 (d) | 435,000 | 132,221 | ||
Porsche Innovative Lease Owner Trust Series 2012-1 Class A2, 0.44% 2/23/15 (c) | 633,518 | 633,144 | ||
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-HE1 Class A, 0.99% 4/25/33 (d) | 1,451 | 1,350 | ||
Santander Drive Auto Receivables Trust: | ||||
Series 2011-4 Class A2, 1.37% 3/16/15 | 26,418 | 26,436 | ||
Series 2012-1 Class A2, 1.25% 4/15/15 | 424,188 | 424,589 | ||
Series 2012-2 Class A2, 0.91% 5/15/15 | 154,776 | 154,822 | ||
Series 2012-3 Class A2, 0.83% 4/15/15 | 308,275 | 308,357 | ||
Series 2013-1 Class A2, 0.48% 2/16/16 | 680,684 | 680,168 | ||
Series 2013-2 Class A2, 0.47% 3/15/16 | 1,000,000 | 998,992 | ||
Series 2013-3 Class A2, 0.55% 9/15/16 | 2,000,000 | 1,997,935 | ||
SLM Student Loan Trust: | ||||
Series 2012-6 Class A1, 0.35% 2/27/17 (d) | 1,163,401 | 1,161,623 | ||
Series 2012-7 Class A2, 0.47% 9/25/19 (d) | 1,000,000 | 995,765 | ||
Series 2013-1 Class A2, 0.44% 9/25/19 (d) | 2,000,000 | 1,984,855 | ||
Terwin Mortgage Trust Series 2003-4HE Class A1, 1.05% 9/25/34 (d) | 21,802 | 20,225 | ||
World Omni Auto Lease Securitization Trust Series 2012-A Class A2, 0.71% 1/15/15 | 736,092 | 736,218 | ||
World Omni Auto Receivables Trust: | ||||
Series 2012-A Class A2, 0.52% 6/15/15 | 694,700 | 694,761 | ||
Series 2013-A Class A2, 0.43% 5/16/16 | 2,000,000 | 1,999,372 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $92,628,217) |
| |||
Collateralized Mortgage Obligations - 9.3% | ||||
| ||||
Private Sponsor - 0.5% | ||||
Arran Residential Mortgages Funding PLC floater Series 2011-1A Class A1C, 1.4741% 11/19/47 (c)(d) | 20,421 | 20,428 | ||
Granite Master Issuer PLC floater Series 2006-1A Class A5, 0.3315% 12/20/54 (c)(d) | 571,716 | 558,281 | ||
Granite Mortgages Series 2003-2 Class 1A3, 0.7662% 7/20/43 (d) | 441,021 | 433,262 | ||
Granite Mortgages PLC floater: | ||||
Series 2003-3 Class 1A3, 0.6662% 1/20/44 (d) | 37,046 | 36,357 | ||
Series 2004-1 Class 2A1, 0.5923% 3/20/44 (d) | 679,580 | 665,979 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount | Value | ||
Private Sponsor - continued | ||||
Granite Mortgages PLC floater: - continued | ||||
Series 2004-3 Class 2A1, 0.5523% 9/20/44 (d) | $ 250,662 | $ 245,903 | ||
GSR Mortgage Loan Trust floater Series 2004-11 Class 2A1, 0.523% 12/25/34 (d) | 170,111 | 162,848 | ||
TOTAL PRIVATE SPONSOR | 2,123,058 | |||
U.S. Government Agency - 8.8% | ||||
Fannie Mae: | ||||
floater: | ||||
Series 2003-31 Class FM, 0.69% 4/25/33 (d) | 1,134,056 | 1,147,333 | ||
Series 2006-33 Class CF, 0.49% 5/25/36 (d) | 133,405 | 133,603 | ||
Series 2008-76 Class EF, 0.69% 9/25/23 (d) | 35,361 | 35,535 | ||
Series 2010-86 Class FE, 0.64% 8/25/25 (d) | 207,128 | 208,649 | ||
floater planned amortization class: | ||||
Series 2004-52 Class PF 0.64% 12/25/33 (d) | 2,639,821 | 2,656,888 | ||
Series 2005-90 Class FC, 0.44% 10/25/35 (d) | 155,206 | 155,538 | ||
pass-thru certificates Series 2012-127 Class DH, 4% 11/25/27 | 418,044 | 445,162 | ||
sequential payer: | ||||
Series 2005-47 Class HA, 4.5% 7/25/19 | 153,064 | 153,963 | ||
Series 2009-69 Class EA, 5% 10/25/36 | 513,472 | 515,507 | ||
Series 2011-16 Class FB, 0.34% 3/25/31 (d) | 1,672,487 | 1,674,509 | ||
sequential payer floater: | ||||
Series 2005-74 Class DF, 0.54% 7/25/35 (d) | 3,748,684 | 3,758,490 | ||
Series 2005-83 Class FP, 0.52% 10/25/35 (d) | 5,025,079 | 5,029,773 | ||
Series 2011-23 Class AB, 2.75% 6/25/20 | 119,242 | 122,395 | ||
Freddie Mac: | ||||
floater: | ||||
Series 2711 Class FC, 1.091% 2/15/33 (d) | 319,964 | 325,635 | ||
Series 3346 Class FA, 0.421% 2/15/19 (d) | 2,933,260 | 2,935,222 | ||
Series 3879 Class AF, 0.621% 6/15/41 (d) | 482,060 | 484,222 | ||
floater planned amortization class: | ||||
Series 2953 Class LF, 0.491% 12/15/34 (d) | 1,886,106 | 1,889,434 | ||
Series 3102 Class FD, 0.491% 1/15/36 (d) | 429,118 | 430,499 | ||
Series 3117 Class JF, 0.491% 2/15/36 (d) | 168,763 | 169,144 | ||
Series 4020 Class EF 0.641% 2/15/42 (d) | 3,319,431 | 3,318,405 | ||
Series 4057 Class EF, 0.541% 12/15/41 (d) | 2,675,892 | 2,680,258 | ||
floater sequential payer: | ||||
Series 2828 Class TF, 0.641% 10/15/30 (d) | 728,231 | 731,838 | ||
Series 3046 Class F, 0.561% 3/15/33 (d) | 1,642,844 | 1,639,218 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount | Value | ||
U.S. Government Agency - continued | ||||
Freddie Mac: - continued | ||||
planned amortization class: | ||||
Series 2836 Class PX, 4% 5/15/18 | $ 593,330 | $ 598,906 | ||
Series 3081 Class CP 5.5% 10/15/34 | 404,205 | 414,706 | ||
Series 3792 Class DF, 0.591% 11/15/40 (d) | 699,264 | 701,675 | ||
sequential payer: | ||||
Series 2582 Class CG, 4% 11/15/17 | 105,058 | 105,448 | ||
Series 2924 Class DA, 4.5% 2/15/19 | 137,071 | 137,895 | ||
Series 3573 Class LC, 1.85% 8/15/14 | 173,047 | 173,294 | ||
Series 3659 Class EJ 3% 6/15/18 | 490,818 | 502,323 | ||
Series 3696 Class AE, 1.2% 7/15/15 | 181,183 | 181,805 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
floater: | ||||
Series 2009-108 Class CF, 0.7919% 11/16/39 (d) | 199,294 | 201,076 | ||
Series 2009-116 Class KF, 0.7219% 12/16/39 (d) | 175,131 | 176,358 | ||
Series 2009-127 Class FA, 0.7415% 9/20/38 (d) | 225,280 | 226,839 | ||
Series 2010-9 Class FA, 0.7119% 1/16/40 (d) | 263,015 | 264,706 | ||
Series 2012-149 Class LF, 0.4415% 12/20/42 (d) | 353,264 | 352,363 | ||
Series 2013-37 Class F, 0.4615% 3/20/43 (d) | 245,897 | 245,599 | ||
floater planned amortization class Series 2004-80 Class FM, 0.4915% 7/20/34 (d) | 895,309 | 896,527 | ||
floater sequential payer Series 2010-120 Class FB 0.4915% 9/20/35 (d) | 236,014 | 236,766 | ||
planned amortization class: | ||||
Series 2010-112 Class PM, 3.25% 9/20/33 | 89,160 | 90,464 | ||
Series 2010-99 Class PT, 3.5% 8/20/33 | 118,842 | 121,031 | ||
TOTAL U.S. GOVERNMENT AGENCY | 36,269,001 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $38,477,774) |
| |||
Commercial Mortgage Securities - 1.3% | ||||
| ||||
Banc of America REMIC Trust Series 2012-CLRN Class A1, 1.341% 8/15/29 (c)(d) | 560,000 | 560,587 | ||
Del Coronado Trust floater Series 2013-HDC Class A, 0.993% 3/15/26 (c)(d) | 500,000 | 498,386 | ||
Extended Stay America Trust floater Series 2013-ESFL: | ||||
Class A1FL, 0.9948% 12/5/31 (c)(d) | 270,000 | 269,735 | ||
Class A2FL, 0.8948% 12/5/31 (c)(d) | 350,000 | 347,264 | ||
Commercial Mortgage Securities - continued | ||||
| Principal Amount | Value | ||
GMAC Commercial Mortgage Securities, Inc. sequential payer Series 2003-C2 Class A2, 5.6369% 5/10/40 (d) | $ 5,293 | $ 5,290 | ||
GS Mortgage Securities Corp. II floater Series 2007-EOP: | ||||
Class A2, 1.2601% 3/6/20 (c)(d) | 205,268 | 205,663 | ||
Class C, 2.0056% 3/6/20 (c)(d) | 300,000 | 300,793 | ||
GS Mortgage Securities Corp. Trust Series 2013-KYO Class A, 1.0448% 11/8/29 (c)(d) | 560,000 | 555,132 | ||
GS Mortgage Securities Trust: | ||||
sequential payer Series 2006-GG8 Class A2, 5.479% 11/10/39 | 17,129 | 17,211 | ||
Series 2011-GC5 Class A1, 1.468% 8/10/44 (d) | 145,444 | 146,434 | ||
Series 2012-GC6 Class A1, 1.282% 1/10/45 | 71,780 | 71,959 | ||
JPMorgan Chase Commercial Mortgage Securities Corp.: | ||||
floater Series 2011-CCHP Class A, 2.6% 7/15/28 (c)(d) | 211,756 | 211,348 | ||
Series 2003-CB7 Class A4, 4.879% 1/12/38 (d) | 49,676 | 50,011 | ||
Series 2012-C6 Class A1, 1.0305% 5/15/45 | 225,266 | 224,640 | ||
JPMorgan Chase Commercial Mortgage Securities Trust: | ||||
floater Series 2013-FL3 Class A1, 0.991% 4/15/28 (c)(d) | 530,000 | 526,743 | ||
sequential payer: | ||||
Series 2005-LDP5 Class A2, 5.198% 12/15/44 | 112,405 | 112,907 | ||
Series 2007-LD11 Class A2, 5.9877% 6/15/49 (d) | 122,271 | 125,293 | ||
Morgan Stanley Capital I Trust floater: | ||||
Series 2006-XLF Class C, 1.391% 7/15/19 (c)(d) | 247,826 | 173,478 | ||
Series 2007-XLFA: | ||||
Class A2, 0.293% 10/15/20 (c)(d) | 209,560 | 208,065 | ||
Class B, 0.323% 10/15/20 (c)(d) | 440,000 | 436,056 | ||
Morgan Stanley Dean Witter Capital I Trust sequential payer Series 2003-T11 Class A4, 5.15% 6/13/41 | 5,450 | 5,446 | ||
Wachovia Bank Commercial Mortgage Trust floater Series 2006-WL7A Class A2, 0.3125% 9/15/21 (c)(d) | 213,697 | 213,108 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $5,648,842) |
| |||
Municipal Securities - 0.8% | ||||
| Principal Amount | Value | ||
Illinois Gen. Oblig. Series 2010: | ||||
4.071% 1/1/14 | $ 1,940,000 | $ 1,963,707 | ||
4.421% 1/1/15 | 1,375,000 | 1,430,440 | ||
TOTAL MUNICIPAL SECURITIES (Cost $3,397,460) |
| |||
Certificates of Deposit - 0.3% | ||||
| ||||
Bank of Nova Scotia yankee 0.7751% 2/10/14 (d) | 1,000,000 |
| ||
Commercial Paper - 0.2% | ||||
| ||||
Vodafone Group PLC yankee 0.77% 12/30/13 | 1,000,000 |
|
Money Market Funds - 6.6% | |||
Shares |
| ||
Fidelity Cash Central Fund, 0.11% (a) | 27,475,112 |
| |
TOTAL INVESTMENT PORTFOLIO - 100.1% (Cost $415,589,687) | 414,312,802 | ||
NET OTHER ASSETS (LIABILITIES) - (0.1)% | (486,935) | ||
NET ASSETS - 100% | $ 413,825,867 |
Legend |
(a) 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, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request. |
(b) Non-income producing - Security is in default. |
(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 $71,309,629 or 17.2% of net assets. |
(d) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 12,674 |
Other Information |
The following is a summary of the inputs used, as of July 31, 2013, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements. |
Valuation Inputs at Reporting Date: | ||||
Description | Total | Level 1 | Level 2 | Level 3 |
Investments in Securities: | ||||
Corporate Bonds | $ 237,990,456 | $ - | $ 237,990,456 | $ - |
U.S. Government and Government Agency Obligations | 4,029,616 | - | 4,029,616 | - |
U.S. Government Agency - Mortgage Securities | 4,660,409 | - | 4,660,409 | - |
Asset-Backed Securities | 91,104,441 | - | 91,028,807 | 75,634 |
Collateralized Mortgage Obligations | 38,392,059 | - | 38,392,059 | - |
Commercial Mortgage Securities | 5,265,549 | - | 5,092,071 | 173,478 |
Municipal Securities | 3,394,147 | - | 3,394,147 | - |
Certificates of Deposit | 1,002,757 | - | 1,002,757 | - |
Commercial Paper | 998,256 | - | 998,256 | - |
Money Market Funds | 27,475,112 | 27,475,112 | - | - |
Total Investments in Securities: | $ 414,312,802 | $ 27,475,112 | $ 386,588,578 | $ 249,112 |
Distribution of investments by country or territory of incorporation, as a percentage of total net assets, is as follows. (Unaudited) |
United States of America | 82.0% |
United Kingdom | 6.1% |
Canada | 3.7% |
Netherlands | 2.6% |
Australia | 2.1% |
Japan | 1.4% |
Others (Individually Less Than 1%) | 2.1% |
| 100.0% |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
| July 31, 2013 | |
|
|
|
Assets | ||
Investment in securities, at value - See accompanying schedule: Unaffiliated issuers (cost $388,114,575) | $ 386,837,690 |
|
Fidelity Central Funds (cost $27,475,112) | 27,475,112 |
|
Total Investments (cost $415,589,687) |
| $ 414,312,802 |
Receivable for investments sold | 131,435 | |
Receivable for fund shares sold | 916,534 | |
Interest receivable | 440,541 | |
Distributions receivable from Fidelity Central Funds | 1,586 | |
Receivable from investment adviser for expense reductions | 81 | |
Other receivables | 1 | |
Total assets | 415,802,980 | |
|
|
|
Liabilities | ||
Payable to custodian bank | $ 1,772 | |
Payable for investments purchased | 1,672,395 | |
Payable for fund shares redeemed | 145,671 | |
Distributions payable | 2,582 | |
Accrued management fee | 104,999 | |
Distribution and service plan fees payable | 2,664 | |
Other affiliated payables | 47,030 | |
Total liabilities | 1,977,113 | |
|
|
|
Net Assets | $ 413,825,867 | |
Net Assets consist of: |
| |
Paid in capital | $ 541,515,615 | |
Undistributed net investment income | 257,392 | |
Accumulated undistributed net realized gain (loss) on investments | (126,670,255) | |
Net unrealized appreciation (depreciation) on investments | (1,276,885) | |
Net Assets | $ 413,825,867 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Assets and Liabilities - continued
| July 31, 2013 | |
|
|
|
Calculation of Maximum Offering Price Class A: | $ 8.24 | |
|
|
|
Maximum offering price per share (100/98.50 of $8.24) | $ 8.37 | |
Class T: | $ 8.24 | |
|
|
|
Maximum offering price per share (100/98.50 of $8.24) | $ 8.37 | |
Ultra-Short Bond: | $ 8.24 | |
|
|
|
Institutional Class: | $ 8.24 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
| Year ended July 31, 2013 | |
|
|
|
Investment Income |
|
|
Interest |
| $ 3,011,429 |
Income from Fidelity Central Funds |
| 12,674 |
Total income |
| 3,024,103 |
|
|
|
Expenses | ||
Management fee | $ 1,107,863 | |
Transfer agent fees | 370,418 | |
Distribution and service plan fees | 27,623 | |
Fund wide operations fee | 125,313 | |
Independent trustees' compensation | 1,292 | |
Miscellaneous | 811 | |
Total expenses before reductions | 1,633,320 | |
Expense reductions | (1,993) | 1,631,327 |
Net investment income (loss) | 1,392,776 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 464,089 | |
Futures contracts | 17,414 | |
Total net realized gain (loss) |
| 481,503 |
Change in net unrealized appreciation (depreciation) on: Investment securities | 317,368 | |
Futures contracts | (17,098) | |
Total change in net unrealized appreciation (depreciation) |
| 300,270 |
Net gain (loss) | 781,773 | |
Net increase (decrease) in net assets resulting from operations | $ 2,174,549 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
| Year ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income (loss) | $ 1,392,776 | $ 1,324,555 |
Net realized gain (loss) | 481,503 | (161,606) |
Change in net unrealized appreciation (depreciation) | 300,270 | 577,855 |
Net increase (decrease) in net assets resulting | 2,174,549 | 1,740,804 |
Distributions to shareholders from net investment income | (1,172,776) | (1,226,234) |
Share transactions - net increase (decrease) | 87,110,349 | 65,951,070 |
Redemption fees | 11,859 | 17,158 |
Total increase (decrease) in net assets | 88,123,981 | 66,482,798 |
|
|
|
Net Assets | ||
Beginning of period | 325,701,886 | 259,219,088 |
End of period (including undistributed net investment income of $257,392 and undistributed net investment income of $36,211, respectively) | $ 413,825,867 | $ 325,701,886 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) C | .017 | .023 | .013 | .047 | .091 |
Net realized and unrealized gain (loss) | .025 | .007 | .051 | .040 | (.167) |
Total from investment operations | .042 | .030 | .064 | .087 | (.076) |
Distributions from net investment income | (.012) | (.020) | (.015) | (.047) | (.071) |
Tax return of capital | - | - | - | - | (.003) |
Total distributions | (.012) | (.020) | (.015) | (.047) | (.074) |
Redemption fees added to paid in capital C | - G | - G | .001 | - G | - G |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A, B | .52% | .36% | .80% | 1.08% | (.92)% |
Ratios to Average Net Assets D, F |
|
|
|
|
|
Expenses before reductions | .65% | .66% | .63% | .64% | .68% |
Expenses net of fee waivers, if any | .65% | .66% | .63% | .64% | .68% |
Expenses net of all reductions | .65% | .66% | .63% | .64% | .67% |
Net investment income (loss) | .20% | .28% | .16% | .58% | 1.13% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 18,620 | $ 15,635 | $ 12,242 | $ 18,129 | $ 8,033 |
Portfolio turnover rate E | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
E Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
G Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) C | .013 | .019 | .009 | .044 | .090 |
Net realized and unrealized gain (loss) | .026 | .007 | .052 | .040 | (.168) |
Total from investment operations | .039 | .026 | .061 | .084 | (.078) |
Distributions from net investment income | (.009) | (.016) | (.012) | (.044) | (.069) |
Tax return of capital | - | - | - | - | (.003) |
Total distributions | (.009) | (.016) | (.012) | (.044) | (.072) |
Redemption fees added to paid in capital C | - G | - G | .001 | - G | - G |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A, B | .48% | .32% | .76% | 1.03% | (.94)% |
Ratios to Average Net Assets D, F |
|
|
|
|
|
Expenses before reductions | .75% | .72% | .68% | .68% | .69% |
Expenses net of fee waivers, if any | .70% | .70% | .68% | .68% | .69% |
Expenses net of all reductions | .70% | .70% | .68% | .68% | .69% |
Net investment income (loss) | .16% | .23% | .12% | .54% | 1.11% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 3,542 | $ 3,312 | $ 4,811 | $ 5,334 | $ 3,114 |
Portfolio turnover rate E | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
E Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
G Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Ultra-Short Bond
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) B | .034 | .040 | .028 | .063 | .111 |
Net realized and unrealized gain (loss) | .025 | .006 | .051 | .040 | (.169) |
Total from investment operations | .059 | .046 | .079 | .103 | (.058) |
Distributions from net investment income | (.029) | (.036) | (.030) | (.063) | (.088) |
Tax return of capital | - | - | - | - | (.004) |
Total distributions | (.029) | (.036) | (.030) | (.063) | (.092) |
Redemption fees added to paid in capital B | - F | - F | .001 | - F | - F |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A | .72% | .57% | .99% | 1.27% | (.70)% |
Ratios to Average Net Assets C, E |
|
|
|
|
|
Expenses before reductions | .45% | .45% | .45% | .45% | .45% |
Expenses net of fee waivers, if any | .45% | .45% | .45% | .45% | .45% |
Expenses net of all reductions | .45% | .45% | .45% | .45% | .44% |
Net investment income (loss) | .41% | .48% | .34% | .77% | 1.36% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 384,116 | $ 291,005 | $ 239,921 | $ 239,266 | $ 217,282 |
Portfolio turnover rate D | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Calculated based on average shares outstanding during the period.
C Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
D Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended July 31, | 2013 | 2012 | 2011 | 2010 | 2009 |
Selected Per-Share Data |
|
|
|
|
|
Net asset value, beginning of period | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 | $ 8.26 |
Income from Investment Operations |
|
|
|
|
|
Net investment income (loss) B | .029 | .037 | .025 | .057 | .102 |
Net realized and unrealized gain (loss) | .025 | .009 | .051 | .040 | (.168) |
Total from investment operations | .054 | .046 | .076 | .097 | (.066) |
Distributions from net investment income | (.024) | (.036) | (.027) | (.057) | (.081) |
Tax return of capital | - | - | - | - | (.003) |
Total distributions | (.024) | (.036) | (.027) | (.057) | (.084) |
Redemption fees added to paid in capital B | - F | - F | .001 | - F | - F |
Net asset value, end of period | $ 8.24 | $ 8.21 | $ 8.20 | $ 8.15 | $ 8.11 |
Total Return A | .65% | .56% | .95% | 1.20% | (.80)% |
Ratios to Average Net Assets C, E |
|
|
|
|
|
Expenses before reductions | .51% | .48% | .49% | .52% | .58% |
Expenses net of fee waivers, if any | .51% | .48% | .49% | .52% | .55% |
Expenses net of all reductions | .51% | .48% | .49% | .52% | .54% |
Net investment income (loss) | .35% | .45% | .31% | .70% | 1.26% |
Supplemental Data |
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 7,548 | $ 15,750 | $ 2,245 | $ 1,206 | $ 623 |
Portfolio turnover rate D | 67% | 80% | 103% | 95% | 92% |
A Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
B Calculated based on average shares outstanding during the period.
C Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
D Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2013
1. Organization.
Fidelity Ultra-Short Bond Fund (the Fund) is a fund of Fidelity Income Fund (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The Fund offers Class A, Class T, Ultra-Short Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Effective after the close of business on August 2, 2013, the Fund was closed to new accounts with certain exceptions. Each class has exclusive voting rights with respect to matters that affect that class.
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds held as of period end, if any, as an investment of the Fund, but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
The Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC website or upon request.
3. Significant Accounting Policies.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. In accordance with valuation policies and procedures approved by the Board of Trustees (the Board), the Fund attempts to obtain prices from
Annual Report
3. Significant Accounting Policies - continued
Investment Valuation - continued
one or more third party pricing vendors 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 FMR Fair Value Committee (the Committee), in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events, changes in interest rates and credit quality. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and is responsible for approving and reporting to the Board all fair value determinations.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
Level 1 - 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 the Fund's investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. For corporate bonds, municipal securities, U.S. government and government agency obligations, commercial paper and certificates of deposit, pricing vendors utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type as well as broker-supplied prices. For asset backed securities, collateralized mortgage obligations, commercial mortgage securities and U.S. government agency mortgage securities, pricing vendors utilize matrix pricing which considers prepayment speed assumptions, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity and type as well as 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 vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Annual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Investment Valuation - continued
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level, as of July 31, 2013, is included at the end of the Fund's Schedule of Investments.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Interest income and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions may also differ by class. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for income taxes is required. As of July 31, 2013, the Fund did not have any unrecognized tax benefits in the financial statements; nor is the Fund aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. A fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed.
Annual Report
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction.
Dividends are declared and recorded daily and paid monthly from net investment income. Distributions from realized gains, if any, are declared and recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to futures contracts, market discount, premium on debt securities, capital loss carryforwards and losses deferred due to excise tax regulations.
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:
Gross unrealized appreciation | $ 1,052,039 |
Gross unrealized depreciation | (2,144,418) |
Net unrealized appreciation (depreciation) on securities and other investments | $ (1,092,379) |
|
|
Tax Cost | $ 415,405,181 |
The tax-based components of distributable earnings as of period end were as follows:
Undistributed ordinary income | $ 72,886 |
Capital loss carryforward | $ (126,670,255) |
Net unrealized appreciation (depreciation) | $ (1,092,379) |
Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. Under the Regulated Investment Company Modernization Act of 2010 (the Act), the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital losses are required to be used prior to any losses that expire.
Annual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The capital loss carryforward information presented below, including any applicable limitation, is estimated as of fiscal period end and is subject to adjustment.
Fiscal year of expiration |
|
2014 | $ (1,917,431) |
2015 | (518,690) |
2016 | (12,186,304) |
2017 | (97,397,499) |
2018 | (9,829,719) |
2019 | (3,765,717) |
Total with expiration | (125,615,360) |
No expiration |
|
Long-term | (1,054,895) |
Total capital loss carryforward | $ (126,670,255) |
The tax character of distributions paid was as follows:
| July 31, 2013 | July 31, 2012 |
Ordinary Income | $ 1,172,776 | $ 1,226,234 |
Short-Term Trading (Redemption) Fees. Shares held by investors in the Fund less than 60 days may have been subject to a redemption fee equal to .25% of the net asset value of shares redeemed. All redemption fees, which reduce the proceeds of the shareholder redemption, are retained by the Fund and accounted for as an addition to paid in capital.
Restricted Securities. The Fund may 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. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
New Accounting Pronouncement. The Financial Accounting Standards Board issued in December 2011, Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities, and in January 2013, Accounting Standards Update No. 2013-1 Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. These updates create new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual
Annual Report
3. Significant Accounting Policies - continued
New Accounting Pronouncement - continued
reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management expects that the impact of the update's adoption will be limited to additional financial statement disclosures as applicable.
4. Derivative Instruments.
Risk Exposures and the Use of Derivative Instruments. The Fund's investment objective allows the Fund to enter into various types of derivative contracts, including futures 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 and 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:
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. Counterparty credit risk related to exchange-traded futures contracts may be mitigated by the protection provided by the exchange on which they trade.
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 and amounts recognized in the Statement of Assets and Liabilities. 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.
Annual Report
Notes to Financial Statements - continued
4. Derivative Instruments - continued
Futures Contracts. A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a fixed price at a specified future date. The Fund used futures contracts to manage its exposure to the bond market and to fluctuations in interest rates.
Upon entering into a futures contract, a fund is required to deposit either cash or securities (initial margin) with a clearing broker in an amount equal to a certain percentage of the face value of the contract. Futures contracts are marked-to-market daily and subsequent daily payments (variation margin) are made or received by a fund depending on the daily fluctuations in the value of the futures contracts and are recorded as unrealized appreciation or (depreciation). This receivable and/or payable, if any, is included in daily variation margin for derivative instruments in the Statement of Assets and Liabilities. Realized gain or (loss) is recorded upon the expiration or closing of a futures contract.
Any 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.
During the period the Fund recognized net realized gain (loss) of $17,414 and a change in net unrealized appreciation (depreciation) of $(17,098) related to its investment in futures contracts. These amounts are included in the Statement of Operations.
5. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $255,352,971 and $157,691,752, respectively.
6. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and an annualized group fee rate that averaged .11% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .31% of the Fund's average net assets.
Distribution and Service Plan Fees. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for
Annual Report
6. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan Fees - continued
selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates, total fees and amounts retained by FDC were as follows:
| Distribution | Service | Total | Retained |
Class A | -% | .15% | $ 22,732 | $ 1,400 |
Class T | -% | .15% | 4,891 | 67 |
|
|
| $ 27,623 | $ 1,467 |
Sales Load. FDC may receive a front-end sales charge of up to 1.50% for selling Class A and Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. Depending on the holding period, FDC may receive a contingent deferred sales charges levied on Class A and Class T redemptions. The deferred sales charges range from .75% or .50% for certain purchases of Class A shares and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
| Retained |
Class A | $ 1,698 |
Class T | 922 |
| $ 2,620 |
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of each respective class of the Fund, with the exception of Ultra-Short Bond. FIIOC receives an asset-based fee of .10% of Ultra-Short Bond's average net assets. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, transfer agent fees for each class were as follows:
| Amount | % of |
Class A | $ 23,136 | .15 |
Class T | 8,089 | .25 |
Ultra-Short Bond | 326,462 | .10 |
Institutional Class | 12,731 | .16 |
| $ 370,418 |
|
Annual Report
Notes to Financial Statements - continued
6. Fees and Other Transactions with Affiliates - continued
Fund Wide Operations Fee. Pursuant to the Fund Wide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, compensation of the independent Trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent Trustees. For the period, the FWOE fee was equivalent to an annual rate of .04% of average net assets.
7. Committed Line of Credit.
The Fund participates with other funds managed by FMR or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $811 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.
8. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, including commitment fees, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
| Expense | Reimbursement |
Class T | .70% | $ 1,569 |
In addition, FMR reimbursed a portion of the Fund's operating expenses during the period in the amount of $370.
Through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's expenses by $54.
Annual Report
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2013 | 2012 |
From net investment income |
|
|
Class A | $ 23,478 | $ 38,543 |
Class T | 3,636 | 7,892 |
Ultra-Short Bond | 1,122,291 | 1,158,011 |
Institutional Class | 23,371 | 21,788 |
Total | $ 1,172,776 | $ 1,226,234 |
10. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
Years ended July 31, | 2013 | 2012 | 2013 | 2012 |
Class A |
|
|
|
|
Shares sold | 1,245,078 | 1,603,688 | $ 10,260,424 | $ 13,112,637 |
Reinvestment of distributions | 2,430 | 3,920 | 20,006 | 32,092 |
Shares redeemed | (891,404) | (1,196,047) | (7,343,122) | (9,779,740) |
Net increase (decrease) | 356,104 | 411,561 | $ 2,937,308 | $ 3,364,989 |
Class T |
|
|
|
|
Shares sold | 200,020 | 331,712 | $ 1,648,091 | $ 2,711,930 |
Reinvestment of distributions | 415 | 897 | 3,416 | 7,343 |
Shares redeemed | (173,781) | (515,942) | (1,431,755) | (4,218,475) |
Net increase (decrease) | 26,654 | (183,333) | $ 219,752 | $ (1,499,202) |
Ultra-Short Bond |
|
|
|
|
Shares sold | 19,772,594 | 16,883,162 | $ 162,947,538 | $ 138,113,317 |
Reinvestment of distributions | 134,015 | 138,342 | 1,103,898 | 1,132,483 |
Shares redeemed | (8,722,670) | (10,834,545) | (71,872,636) | (88,649,539) |
Net increase (decrease) | 11,183,939 | 6,186,959 | $ 92,178,800 | $ 50,596,261 |
Institutional Class |
|
|
|
|
Shares sold | 530,266 | 1,909,832 | $ 4,367,986 | $ 15,655,264 |
Reinvestment of distributions | 2,501 | 2,252 | 20,594 | 18,456 |
Shares redeemed | (1,534,751) | (267,573) | (12,614,091) | (2,184,698) |
Net increase (decrease) | (1,001,984) | 1,644,511 | $ (8,225,511) | $ 13,489,022 |
11. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum
Annual Report
Notes to Financial Statements - continued
11. Other - continued
exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Ultra-Short Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Ultra-Short Bond Fund (a fund of Fidelity Income Fund) at July 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Ultra-Short Bond Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 17, 2013
Annual Report
Trustees and Officers
The Trustees and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, oversee management of the risks associated with such activities and contractual arrangements, and review the fund's performance. Except for Elizabeth S. Acton and James C. Curvey, each of the Trustees oversees 221 Fidelity funds. Ms. Acton oversees 203 Fidelity funds. Mr. Curvey oversees 387 Fidelity funds.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person of the trust and the fund (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the month in which his or her 75th birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers hold office without limit in time, except that any officer may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
Experience, Skills, Attributes, and Qualifications of the Fund's Trustees. The Governance and Nominating Committee has adopted a statement of policy that describes the experience, qualifications, attributes, and skills that are necessary and desirable for potential Independent Trustee candidates (Statement of Policy). The Board believes that each Trustee satisfied at the time he or she was initially elected or appointed a Trustee, and continues to satisfy, the standards contemplated by the Statement of Policy. The Governance and Nominating Committee also engages professional search firms to help identify potential Independent Trustee candidates who have the experience, qualifications, attributes, and skills consistent with the Statement of Policy. From time to time, additional criteria based on the composition and skills of the current Independent Trustees, as well as experience or skills that may be appropriate in light of future changes to board composition, business conditions, and regulatory or other developments, have also been considered by the professional search firms and the Governance and Nominating Committee. In addition, the Board takes into account the Trustees' commitment and participation in Board and committee meetings, as well as their leadership of standing and ad hoc committees throughout their tenure.
In determining that a particular Trustee was and continues to be qualified to serve as a Trustee, the Board has considered a variety of criteria, none of which, in isolation, was controlling. The Board believes that, collectively, the Trustees have balanced and diverse experience, qualifications, attributes, and skills, which allow the Board to operate effectively in governing the fund and protecting the interests of shareholders. Information about the specific experience, skills, attributes, and qualifications of each Trustee, which in each case led to the Board's conclusion that the Trustee should serve (or continue to serve) as a trustee of the fund, is provided below.
Annual Report
Trustees and Officers - continued
Board Structure and Oversight Function. Abigail P. Johnson is an interested person (as defined in the 1940 Act) and currently serves as Chairman. The Trustees have determined that an interested Chairman is appropriate and benefits shareholders because an interested Chairman has a personal and professional stake in the quality and continuity of services provided to the fund. Independent Trustees exercise their informed business judgment to appoint an individual of their choosing to serve as Chairman, regardless of whether the Trustee happens to be independent or a member of management. The Independent Trustees have determined that they can act independently and effectively without having an Independent Trustee serve as Chairman and that a key structural component for assuring that they are in a position to do so is for the Independent Trustees to constitute a substantial majority for the Board. The Independent Trustees also regularly meet in executive session. Albert R. Gamper, Jr. serves as Chairman of the Independent Trustees and as such (i) acts as a liaison between the Independent Trustees and management with respect to matters important to the Independent Trustees and (ii) with management prepares agendas for Board meetings.
Fidelity funds are overseen by different Boards of Trustees. The fund's Board oversees Fidelity's investment-grade bond, money market, and asset allocation funds and another Board oversees Fidelity's equity and high income funds. The asset allocation funds may invest in Fidelity funds that are overseen by such other Board. The use of separate Boards, each with its own committee structure, allows the Trustees of each group of Fidelity funds to focus on the unique issues of the funds they oversee, including common research, investment, and operational issues. On occasion, the separate Boards establish joint committees to address issues of overlapping consequences for the Fidelity funds overseen by each Board.
The Trustees operate using a system of committees to facilitate the timely and efficient consideration of all matters of importance to the Trustees, the fund, and fund shareholders and to facilitate compliance with legal and regulatory requirements and oversight of the fund's activities and associated risks. The Board, acting through its committees, has charged FMR and its affiliates with (i) identifying events or circumstances the occurrence of which could have demonstrably adverse effects on the fund's business and/or reputation; (ii) implementing processes and controls to lessen the possibility that such events or circumstances occur or to mitigate the effects of such events or circumstances if they do occur; and (iii) creating and maintaining a system designed to evaluate continuously business and market conditions in order to facilitate the identification and implementation processes described in (i) and (ii) above. Because the day-to-day operations and activities of the fund are carried out by or through FMR, its affiliates, and other service providers, the fund's exposure to risks is mitigated but not eliminated by the processes overseen by the Trustees. While each of the Board's committees has responsibility for overseeing different aspects of the fund's activities, oversight is exercised primarily through the Operations and Audit Committees. In addition, an ad hoc Board committee of Independent Trustees has worked with FMR to enhance the Board's oversight of investment and financial risks, legal and regulatory risks, technology risks, and operational risks, including the development of additional risk reporting to the Board. Appropriate personnel, including but not limited to the fund's Chief Compliance Officer (CCO), FMR's internal auditor, the independent accountants, the fund's Treasurer and portfolio management personnel, make periodic reports to the Board's committees, as appropriate, including an annual review of FMR's risk management program for the Fidelity funds. The responsibilities of each standing committee, including their oversight responsibilities, are described further under "Standing Committees of the Fund's Trustees."
Annual Report
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+ | |
Abigail P. Johnson (1961) | |
| Year of Election or Appointment: 2009 Ms. Johnson is Trustee and Chairman of the Board of Trustees of certain Trusts. Ms. Johnson serves as President of Fidelity Financial Services (2012-present) and President of Personal, Workplace and Institutional Services (2005-present). Ms. Johnson is Chairman and Director of FMR Co., Inc. (2011-present), Chairman and Director of FMR (2011-present), and the Vice Chairman and Director (2007-present) of FMR LLC. Previously, Ms. Johnson served as President and a Director of FMR (2001-2005), a Trustee of other investment companies advised by FMR, Fidelity Investments Money Management, Inc., and FMR Co., Inc. (2001-2005), Senior Vice President of the Fidelity funds (2001-2005), and managed a number of Fidelity funds. Ms. Abigail P. Johnson and Mr. Arthur E. Johnson are not related. |
James C. Curvey (1935) | |
| Year of Election or Appointment: 2007 Mr. Curvey also serves as Trustee (2007-present) of other investment companies advised by FMR. Mr. Curvey is a Director of Fidelity Investments Money Management, Inc. (2009-present), Director of Fidelity Research & Analysis Co. (2009-present) and Director of FMR and FMR Co., Inc. (2007-present). Mr. Curvey is also Vice Chairman (2007-present) and Director of FMR LLC. In addition, Mr. Curvey serves as an Overseer for the Boston Symphony Orchestra and a member of the Trustees of Villanova University. Previously, Mr. Curvey was the Vice Chairman (2006-2007) and Director (2000-2007) of FMR Corp. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
+ The information above includes each Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Trustee's qualifications to serve as a Trustee, which led to the conclusion that each Trustee should serve as a Trustee for the fund.
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+ | |
Elizabeth S. Acton (1951) | |
| Year of Election or Appointment: 2013 Ms. Acton is Trustee of certain Trusts. Prior to her retirement in April 2012, Ms. Acton was Executive Vice President, Finance (November 2011-April 2012), Executive Vice President, Chief Financial Officer (April 2002-November 2011), and Treasurer (May 2004-May 2005) of Comerica Incorporated (financial services). Prior to joining Comerica, Ms. Acton held a variety of positions at Ford Motor Company (1983-2002), including Vice President and Treasurer (2000-2002) and Executive Vice President and Chief Financial Officer of Ford Motor Credit Company (1998-2000). Ms. Acton currently serves as a member of the Board of Directors and Audit and Finance Committees of Beazer Homes USA, Inc. (homebuilding, 2012-present). |
Albert R. Gamper, Jr. (1942) | |
| Year of Election or Appointment: 2006 Mr. Gamper is Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2012-present). Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (2002-2003). Mr. Gamper currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2000-present), a member of the Board of Trustees, Rutgers University (2004-present), and Chairman of the Board of Barnabas Health Care System. Previously, Mr. Gamper served as Vice Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2011-2012) and as Chairman of the Board of Governors, Rutgers University (2004-2007). |
Robert F. Gartland (1951) | |
| Year of Election or Appointment: 2010 Mr. Gartland is Chairman and an investor in Gartland and Mellina Group Corp. (consulting, 2009-present). Previously, Mr. Gartland served as a partner and investor of Vietnam Partners LLC (investments and consulting, 2008-2011). Prior to his retirement, Mr. Gartland held a variety of positions at Morgan Stanley (financial services, 1979-2007) including Managing Director (1987-2007). |
Arthur E. Johnson (1947) | |
| Year of Election or Appointment: 2008 Mr. Johnson serves as a member of the Board of Directors of Eaton Corporation (diversified power management, 2009-present), AGL Resources, Inc. (holding company, 2002-present) and Booz Allen Hamilton (management consulting, 2011-present). Prior to his retirement, Mr. Johnson served as Senior Vice President of Corporate Strategic Development of Lockheed Martin Corporation (defense contractor, 1999-2009). He previously served on the Board of Directors of IKON Office Solutions, Inc. (1999-2008) and Delta Airlines (2005-2007). Mr. Arthur E. Johnson is not related to Ms. Abigail P. Johnson. |
Michael E. Kenneally (1954) | |
| Year of Election or Appointment: 2009 Mr. Kenneally served as a Member of the Advisory Board for certain Fidelity Fixed Income and Asset Allocation Funds before joining the Board of Trustees (2008-2009). Prior to his retirement, Mr. Kenneally served as Chairman and Global Chief Executive Officer of Credit Suisse Asset Management. Before joining Credit Suisse, he was an Executive Vice President and Chief Investment Officer for Bank of America Corporation. Earlier roles at Bank of America included Director of Research, Senior Portfolio Manager and Research Analyst, and Mr. Kenneally was awarded the Chartered Financial Analyst (CFA) designation in 1991. |
James H. Keyes (1940) | |
| Year of Election or Appointment: 2007 Mr. Keyes serves as a member of the Board and Non-Executive Chairman of Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, since 2002). Previously, Mr. Keyes served as a member of the Board of Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-2013). Prior to his retirement, Mr. Keyes served as Chairman and Chief Executive Officer of Johnson Controls (automotive, building, and energy, 1998-2002) and as a member of the Board of LSI Logic Corporation (semiconductor technologies, 1984-2008). |
Marie L. Knowles (1946) | |
| Year of Election or Appointment: 2001 Ms. Knowles is Vice Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2012-present). Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. Ms. Knowles currently serves as a Director and Chairman of the Audit Committee of McKesson Corporation (healthcare service, since 2002). Ms. Knowles is a member of the Board of the Catalina Island Conservancy and of the Santa Catalina Island Company (2009-present). She also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. Previously, Ms. Knowles served as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994-2007), URS Corporation (engineering and construction, 2000-2003) and America West (airline, 1999-2002). |
Kenneth L. Wolfe (1939) | |
| Year of Election or Appointment: 2005 Prior to his retirement, Mr. Wolfe served as Chairman and a Director (2007-2009) and Chairman and Chief Executive Officer (1994-2001) of Hershey Foods Corporation. He also served as a member of the Boards of Adelphia Communications Corporation (telecommunications, 2003-2006), Bausch & Lomb, Inc. (medical/pharmaceutical, 1993-2007), and Revlon, Inc. (personal care products, 2004-2009). Mr. Wolfe previously served as Chairman of the Independent Trustees of the Fixed Income and Asset Allocation Funds (2008-2012). |
+ The information above includes each Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Trustee's qualifications to serve as a Trustee, which led to the conclusion that each Trustee should serve as a Trustee for the fund.
Executive Officers:
Correspondence intended for each executive officer may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.
Name, Year of Birth; Principal Occupation | |
Stephanie J. Dorsey (1969) | |
| Year of Election or Appointment: 2013 President and Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Ms. Dorsey also serves as Treasurer and Chief Financial Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2013-present), Assistant Treasurer of other Fidelity funds (2010-present), and is an employee of Fidelity Investments (2008-present). Previously, Ms. Dorsey served as Deputy Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2008-2013), Treasurer (2004-2008) of the JPMorgan Mutual Funds and Vice President (2004-2008) of JPMorgan Chase Bank. |
Charles S. Morrison (1960) | |
| Year of Election or Appointment: 2012 Vice President of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Morrison also serves as President, Fixed Income and is an employee of Fidelity Investments. Previously, Mr. Morrison served as Vice President of Fidelity's Money Market Funds (2005-2009), President, Money Market Group Leader of FMR (2009), and Senior Vice President, Money Market Group of FMR (2004-2009). Mr. Morrison also served as Vice President of Fidelity's Bond Funds (2002-2005), certain Balanced Funds (2002-2005), and certain Asset Allocation Funds (2002-2007), and as Senior Vice President (2002-2005) of Fidelity's Fixed Income Division. |
Robert P. Brown (1963) | |
| Year of Election or Appointment: 2012 Vice President of Fidelity's Bond Funds. Mr. Brown also serves as Executive Vice President of Fidelity Investments Money Management, Inc. (2010-present), President, Bond Group of FMR (2011-present), Director and Managing Director, Research of Fidelity Management & Research (U.K.) Inc. (2008-present) and is an employee of Fidelity Investments. Previously, Mr. Brown served as President, Money Market Group of FMR (2010-2011) and Vice President of Fidelity's Money Market Funds (2010-2012). |
Scott C. Goebel (1968) | |
| Year of Election or Appointment: 2008 Secretary and Chief Legal Officer (CLO) of the Fidelity funds. Mr. Goebel also serves as Secretary of Fidelity Investments Money Management, Inc. (FIMM) (2010-present) and Fidelity Research and Analysis Company (FRAC) (2010-present); Secretary and CLO of The North Carolina Capital Management Trust: Cash and Term Portfolios (2008-present); General Counsel, Secretary, and Senior Vice President of FMR (2008-present) and FMR Co., Inc. (2008-present); employed by FMR LLC or an affiliate (2001-present); Chief Legal Officer of Fidelity Management & Research (Hong Kong) Limited (2008-present) and Assistant Secretary of Fidelity Management & Research (Japan) Inc. (2008-present), and Fidelity Management & Research (U.K.) Inc. (2008-present). Previously, Mr. Goebel served as Assistant Secretary of FIMM (2008-2010), FRAC (2008-2010), and the Funds (2007-2008) and as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (2005-2007). |
Marc Bryant (1966) | |
| Year of Election or Appointment: 2013 Assistant Secretary of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Bryant also serves as Secretary and Chief Legal Officer of other Fidelity funds (2010-present) and Senior Vice President and Deputy General Counsel of Fidelity Investments. Prior to joining Fidelity Investments, Mr. Bryant served as a Senior Vice President and the Head of Global Retail Legal for AllianceBernstein L.P. (2006-2010), and as the General Counsel for ProFund Advisors LLC (2001-2006). |
Elizabeth Paige Baumann (1968) | |
| Year of Election or Appointment: 2012 Anti-Money Laundering (AML) Officer of the Fidelity funds. Ms. Baumann also serves as AML Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2012-present), Chief AML Officer of FMR LLC (2012-present), and is an employee of Fidelity Investments. Previously, Ms. Baumann served as Vice President and Deputy Anti-Money Laundering Officer (2007-2012). |
Christine Reynolds (1958) | |
| Year of Election or Appointment: 2008 Chief Financial Officer of the Fidelity funds. Ms. Reynolds became President of Fidelity Pricing and Cash Management Services (FPCMS) in August 2008. Ms. Reynolds served as Chief Operating Officer of FPCMS (2007-2008). Previously, Ms. Reynolds served as President, Treasurer, and Anti-Money Laundering officer of the Fidelity funds (2004-2007). |
Michael H. Whitaker (1967) | |
| Year of Election or Appointment: 2008 Chief Compliance Officer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Whitaker also serves as Chief Compliance Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2008-present). Mr. Whitaker is an employee of Fidelity Investments (2007-present). Prior to joining Fidelity Investments, Mr. Whitaker worked at MFS Investment Management where he served as Senior Vice President and Chief Compliance Officer (2004-2006), and Assistant General Counsel. |
Joseph F. Zambello (1957) | |
| Year of Election or Appointment: 2011 Deputy Treasurer of the Fidelity funds. Mr. Zambello is an employee of Fidelity Investments. Previously, Mr. Zambello served as Vice President of FMR's Program Management Group (2009-2011) and Vice President of the Transfer Agent Oversight Group (2005-2009). |
Stephen Sadoski (1971) | |
| Year of Election or Appointment: 2013 Deputy Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Sadoski also serves as Deputy Treasurer of other Fidelity funds (2012-present) and is an employee of Fidelity Investments (2012-present). Previously, Mr. Sadoski served as Assistant Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2012-2013), an assistant chief accountant in the Division of Investment Management of the Securities and Exchange Commission (SEC) (2009-2012) and as a senior manager at Deloitte & Touche LLP (1997-2009). |
Adrien E. Deberghes (1967) | |
| Year of Election or Appointment: 2010 Assistant Treasurer of Fidelity's Fixed Income and Asset Allocation Funds. Mr. Deberghes also serves as Vice President and Assistant Treasurer (2011-present) and Deputy Treasurer (2008-present) of other Fidelity funds, and is an employee of Fidelity Investments (2008-present). Previously, Mr. Deberghes served as Senior Vice President of Mutual Fund Administration at State Street Corporation (2007-2008), Senior Director of Mutual Fund Administration at Investors Bank & Trust (2005-2007), and Director of Finance for Dunkin' Brands (2000-2005). |
Kenneth B. Robins (1969) | |
| Year of Election or Appointment: 2009 Assistant Treasurer of the Fidelity Fixed Income and Asset Allocation Funds. Mr. Robins also serves as President and Treasurer of other Fidelity funds (2008-present) and is an employee of Fidelity Investments (2004-present). Mr. Robins serves as Executive Vice President of Fidelity Investments Money Management, Inc. (FIMM) (2013-present). Previously, Mr. Robins served as Deputy Treasurer of the Fidelity funds (2005-2008) and Treasurer and Chief Financial Officer of The North Carolina Capital Management Trust: Cash and Term Portfolios (2006-2008). |
Gary W. Ryan (1958) | |
| Year of Election or Appointment: 2005 Assistant Treasurer of the Fidelity funds. Mr. Ryan is an employee of Fidelity Investments. Previously, Mr. Ryan served as Vice President of Fund Reporting in Fidelity Pricing and Cash Management Services (FPCMS) (1999-2005). |
Jonathan Davis (1968) | |
| Year of Election or Appointment: 2010 Assistant Treasurer of the Fidelity funds. Mr. Davis is also Assistant Treasurer of Fidelity Rutland Square Trust II and Fidelity Commonwealth Trust II. Mr. Davis is an employee of Fidelity Investments. Previously, Mr. Davis served as Vice President and Associate General Counsel of FMR LLC (2003-2010). |
Annual Report
Distributions (Unaudited)
A total of 0.12% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund designates $564,013 of distributions paid during the period January 1, 2013 to July 31, 2013 as qualifying to be taxed as interest- related dividends for nonresident alien shareholders.
The fund will notify shareholders in January 2014 amounts for use in preparing 2013 income tax returns.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments
Money Management, Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Japan) Inc.
Fidelity Management & Research
(Hong Kong) Limited
General Distributor
Fidelity Distributors Corporation
Smithfield, RI
Transfer and Service Agents
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
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®)
1-800-544-5555
Automated line for quickest service
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
245 Summer St., Boston, MA 02210
www.fidelity.com
ULB-UANN-0913 1.789713.110
Item 2. Code of Ethics
As of the end of the period, July 31, 2013, Fidelity Income Fund (the trust) has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert
The Board of Trustees of the trust has determined that James H. Keyes is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mr. Keyes is independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services
Fees and Services
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The following table presents fees billed by PricewaterhouseCoopers LLP ("PwC") in each of the last two fiscal years for services rendered to Fidelity GNMA Fund and Fidelity Ultra-Short Bond Fund (the "Funds"):
Services Billed by PwC
July 31, 2013 FeesA
| Audit Fees | Audit-Related Fees | Tax Fees | All Other Fees |
Fidelity GNMA Fund | $110,000 | $- | $4,600 | $5,600 |
Fidelity Ultra-Short Bond Fund | $66,000 | $- | $2,100 | $1,600 |
July 31, 2012 FeesA
| Audit Fees | Audit-Related Fees | Tax Fees | All Other Fees |
Fidelity GNMA Fund | $106,000 | $- | $4,500 | $5,500 |
Fidelity Ultra-Short Bond Fund | $55,000 | $- | $2,000 | $1,600 |
A Amounts may reflect rounding.
The following table presents fees billed by PwC that were required to be approved by the Audit Committee for services that relate directly to the operations and financial reporting of the Funds and that are rendered on behalf of Fidelity Management & Research Company ("FMR") and entities controlling, controlled by, or under common control with FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Funds ("Fund Service Providers"):
Services Billed by PwC
| July 31, 2013A | July 31, 2012A |
Audit-Related Fees | $4,295,000 | $4,450,000 |
Tax Fees | $- | $- |
All Other Fees | $- | $- |
A Amounts may reflect rounding.
"Audit-Related Fees" represent fees billed for assurance and related services that are reasonably related to the performance of the fund audit or the review of the fund's financial statements and that are not reported under Audit Fees.
"Tax Fees" represent fees billed for tax compliance, tax advice or tax planning that relate directly to the operations and financial reporting of the fund.
"All Other Fees" represent fees billed for services provided to the fund or Fund Service Provider, a significant portion of which are assurance related, that relate directly to the operations and financial reporting of the fund, excluding those services that are reported under Audit Fees, Audit-Related Fees or Tax Fees.
Assurance services must be performed by an independent public accountant.
* * *
The aggregate non-audit fees billed by PwC for services rendered to the Funds, FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any Fund Service Provider for each of the last two fiscal years of the Funds are as follows:
Billed By | July 31, 2013 A | July 31, 2012 A |
PwC | $5,075,000 | $5,665,000 |
A Amounts may reflect rounding.
The trust's Audit Committee has considered non-audit services that were not pre-approved that were provided by PwC to Fund Service Providers to be compatible with maintaining the independence of PwC in its audit of the Funds, taking into account representations from PwC, in accordance with Public Company Accounting Oversight Board rules, regarding its independence from the Funds and its related entities and FMR's review of the appropriateness and permissibility under applicable law of such non-audit services prior to their provision to the Fund Service Providers.
Audit Committee Pre-Approval Policies and Procedures
The trust's Audit Committee must pre-approve all audit and non-audit services provided by a fund's independent registered public accounting firm relating to the operations or financial reporting of the fund. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee's consideration of non-audit services by the audit firms that audit the Fidelity funds. The policies and procedures require that any non-audit service provided by a fund audit firm to a Fidelity fund and any non-audit service provided by a fund auditor to a Fund Service Provider that relates directly to the operations and financial reporting of a Fidelity fund ("Covered Service") are subject to approval by the Audit Committee before such service is provided.
All Covered Services must be approved in advance of provision of the service either: (i) by formal resolution of the Audit Committee, or (ii) by oral or written approval of the service by the Chair of the Audit Committee (or if the Chair is unavailable, such other member of the Audit Committee as may be designated by the Chair to act in the Chair's absence). The approval contemplated by (ii) above is permitted where the Treasurer determines that action on such an engagement is necessary before the next meeting of the Audit Committee.
Non-audit services provided by a fund audit firm to a Fund Service Provider that do not relate directly to the operations and financial reporting of a Fidelity fund are reported to the Audit Committee on a periodic basis.
Non-Audit Services Approved Pursuant to Rule 2-01(c)(7)(i)(C) and (ii) of Regulation S-X ("De Minimis Exception")
There were no non-audit services approved or required to be approved by the Audit Committee pursuant to the De Minimis Exception during the Funds' last two fiscal years relating to services provided to (i) the Funds or (ii) any Fund Service Provider that relate directly to the operations and financial reporting of the Funds.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Not applicable.
(b) Not applicable
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the trust's Board of Trustees.
Item 11. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the trust's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(a)(ii) There was no change in the trust's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the trust's internal control over financial reporting.
Item 12. Exhibits
(a) | (1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
(a) | (2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
(a) | (3) | Not applicable. |
(b) |
| Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Fidelity Income Fund
By: | /s/Stephanie J. Dorsey |
| Stephanie J. Dorsey |
| President and Treasurer |
|
|
Date: | September 26, 2013 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/Stephanie J. Dorsey |
| Stephanie J. Dorsey |
| President and Treasurer |
|
|
Date: | September 26, 2013 |
By: | /s/Christine Reynolds |
| Christine Reynolds |
| Chief Financial Officer |
|
|
Date: | September 26, 2013 |