Quarterly Holdings Report
for
Fidelity® Environmental Bond Fund
November 30, 2022
ENB-NPRT1-0123
1.9901920.101
Nonconvertible Bonds - 46.7% | |||
Principal Amount (a) | Value ($) | ||
COMMUNICATION SERVICES - 1.9% | |||
Diversified Telecommunication Services - 1.9% | |||
NTT Finance Corp. 4.372% 7/27/27 (b) | 100,000 | 98,613 | |
TELUS Corp. 3.4% 5/13/32 | 200,000 | 172,658 | |
Verizon Communications, Inc. 3.875% 2/8/29 | 300,000 | 283,570 | |
554,841 | |||
CONSUMER DISCRETIONARY - 5.0% | |||
Auto Components - 1.1% | |||
Valeo SA 1% 8/3/28 (Reg. S) | EUR | 200,000 | 163,608 |
ZF Finance GmbH 2% 5/6/27 (Reg. S) | EUR | 200,000 | 176,642 |
340,250 | |||
Automobiles - 3.3% | |||
Ford Motor Co.: | |||
3.25% 2/12/32 | 500,000 | 396,977 | |
6.1% 8/19/32 | 200,000 | 191,955 | |
General Motors Co.: | |||
5.4% 10/15/29 | 200,000 | 192,997 | |
5.6% 10/15/32 | 200,000 | 192,223 | |
974,152 | |||
Household Durables - 0.3% | |||
The Berkeley Group PLC 2.5% 8/11/31 (Reg. S) | GBP | 100,000 | 80,361 |
Textiles, Apparel & Luxury Goods - 0.3% | |||
AXA Logistics Europe Master SCA 0.375% 11/15/26 (Reg. S) | EUR | 100,000 | 90,201 |
TOTAL CONSUMER DISCRETIONARY | 1,484,964 | ||
CONSUMER STAPLES - 3.0% | |||
Beverages - 0.3% | |||
PepsiCo, Inc. 3.9% 7/18/32 | 100,000 | 95,940 | |
Food & Staples Retailing - 0.9% | |||
Walmart, Inc. 1.8% 9/22/31 | 300,000 | 247,728 | |
Food Products - 1.8% | |||
General Mills, Inc. 2.25% 10/14/31 | 650,000 | 529,747 | |
TOTAL CONSUMER STAPLES | 873,415 | ||
FINANCIALS - 15.2% | |||
Banks - 7.6% | |||
ABN AMRO Bank NV 2.47% 12/13/29 (b)(c) | 200,000 | 162,123 | |
AIB Group PLC 2.875% 5/30/31 (Reg. S) (c) | EUR | 225,000 | 209,069 |
Bank of America Corp. 6.204% 11/10/28 (c) | 140,000 | 144,804 | |
Bank of Ireland Group PLC: | |||
0.375% 5/10/27 (Reg. S) (c) | EUR | 155,000 | 138,389 |
6.253% 9/16/26 (b)(c) | 200,000 | 195,964 | |
Bank of Nova Scotia 0.65% 7/31/24 | 250,000 | 232,539 | |
BNP Paribas SA 0.5% 5/30/28 (Reg. S) (c) | EUR | 100,000 | 88,706 |
BPCE SA 0.5% 1/14/28 (Reg. S) (c) | EUR | 100,000 | 89,594 |
CaixaBank SA 1.25% 6/18/31 (Reg. S) (c) | EUR | 100,000 | 89,424 |
Canadian Imperial Bank of Commerce 0.95% 10/23/25 | 325,000 | 291,735 | |
Fifth Third Bancorp 1.707% 11/1/27 (c) | 200,000 | 176,997 | |
ING Groep NV: | |||
0.875% 6/9/32 (Reg. S) (c) | EUR | 100,000 | 88,956 |
2.125% 5/23/26 (Reg. S) (c) | EUR | 100,000 | 99,333 |
NatWest Group PLC 2.057% 11/9/28 (Reg. S) (c) | GBP | 100,000 | 99,967 |
Santander Holdings U.S.A., Inc. 5.807% 9/9/26 (c) | 43,000 | 42,813 | |
Wells Fargo & Co. 4.54% 8/15/26 (c) | 100,000 | 97,973 | |
2,248,386 | |||
Capital Markets - 1.9% | |||
Deutsche Bank AG 3.25% 5/24/28 (Reg. S) (c) | EUR | 100,000 | 96,443 |
S&P Global, Inc. 2.7% 3/1/29 (b) | 400,000 | 355,521 | |
State Street Corp. 5.751% 11/4/26 (c) | 100,000 | 102,130 | |
554,094 | |||
Diversified Financial Services - 2.5% | |||
Acciona Energia Financiacion Filiales SA 0.375% 10/7/27 (Reg. S) | EUR | 100,000 | 90,989 |
ACEF Holding SCA 1.25% 4/26/30 (Reg. S) | EUR | 100,000 | 75,255 |
CBRE Global Investors Pan European Core Fund 0.9% 10/12/29 (Reg. S) | EUR | 100,000 | 77,995 |
Hitachi Finance (UK) PLC 0% 10/29/24 (Reg. S) | EUR | 100,000 | 96,197 |
Rexford Industrial Realty LP 2.15% 9/1/31 | 314,000 | 242,433 | |
VMED O2 UK Financing I PLC 4.75% 7/15/31 (b) | 200,000 | 166,170 | |
749,039 | |||
Insurance - 3.2% | |||
Metropolitan Life Global Funding I 0.95% 7/2/25 (b) | 250,000 | 225,993 | |
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen 5.875% 5/23/42 (b)(c) | 200,000 | 196,143 | |
Pacific Life Global Funding II 1.375% 4/14/26 (b) | 250,000 | 221,942 | |
Prudential Financial, Inc. 1.5% 3/10/26 | 325,000 | 294,234 | |
938,312 | |||
TOTAL FINANCIALS | 4,489,831 | ||
HEALTH CARE - 1.0% | |||
Health Care Providers & Services - 0.1% | |||
Kaiser Foundation Hospitals 3.15% 5/1/27 | 50,000 | 47,121 | |
Pharmaceuticals - 0.9% | |||
Merck & Co., Inc. 1.9% 12/10/28 | 300,000 | 261,061 | |
TOTAL HEALTH CARE | 308,182 | ||
INDUSTRIALS - 0.3% | |||
Transportation Infrastructure - 0.3% | |||
Holding d'Infrastructures et des Metiers de l'Environnement 0.125% 9/16/25 (Reg. S) | EUR | 100,000 | 92,447 |
INFORMATION TECHNOLOGY - 4.0% | |||
Semiconductors & Semiconductor Equipment - 3.2% | |||
Analog Devices, Inc. 1.7% 10/1/28 | 500,000 | 428,017 | |
ASML Holding NV 2.25% 5/17/32 (Reg. S) | EUR | 100,000 | 98,352 |
Micron Technology, Inc. 2.703% 4/15/32 | 200,000 | 154,609 | |
NXP BV/NXP Funding LLC/NXP U.S.A., Inc.: | |||
2.5% 5/11/31 | 100,000 | 79,206 | |
5% 1/15/33 | 200,000 | 190,002 | |
950,186 | |||
Software - 0.8% | �� | ||
Autodesk, Inc. 2.4% 12/15/31 | 300,000 | 242,755 | |
TOTAL INFORMATION TECHNOLOGY | 1,192,941 | ||
MATERIALS - 0.3% | |||
Chemicals - 0.3% | |||
Evonik Industries AG 1.375% 9/2/81 (Reg. S) (c) | EUR | 100,000 | 85,187 |
REAL ESTATE - 4.2% | |||
Equity Real Estate Investment Trusts (REITs) - 2.4% | |||
Boston Properties, Inc. 6.75% 12/1/27 | 22,000 | 23,007 | |
Hudson Pacific Properties LP 5.95% 2/15/28 | 151,000 | 143,360 | |
UDR, Inc. 1.9% 3/15/33 | 375,000 | 267,926 | |
WP Carey, Inc. 2.45% 2/1/32 | 350,000 | 271,096 | |
705,389 | |||
Real Estate Management & Development - 1.8% | |||
Blackstone Property Partners Europe LP 1.625% 4/20/30 (Reg. S) | EUR | 100,000 | 78,299 |
CTP BV 0.5% 6/21/25 (Reg. S) | EUR | 200,000 | 174,767 |
Lend Lease Finance Ltd. 3.4% 10/27/27 (Reg. S) | AUD | 50,000 | 30,047 |
NE Property BV 2% 1/20/30 (Reg. S) | EUR | 100,000 | 72,582 |
P3 Group SARL 0.875% 1/26/26 (Reg. S) | EUR | 100,000 | 85,912 |
Vonovia SE 5% 11/23/30 (Reg. S) | EUR | 100,000 | 106,097 |
547,704 | |||
TOTAL REAL ESTATE | 1,253,093 | ||
UTILITIES - 11.8% | |||
Electric Utilities - 9.0% | |||
Clearway Energy Operating LLC 3.75% 1/15/32 (b) | 100,000 | 79,701 | |
EnBW Energie Baden-Wuerttemberg AG 1.875% 6/29/80 (Reg. S) (c) | EUR | 200,000 | 177,943 |
ENEL Finance International NV 1.375% 7/12/26 (b) | 600,000 | 519,691 | |
Energias de Portugal SA 1.7% 7/20/80 (Reg. S) (c) | EUR | 200,000 | 186,679 |
Northern States Power Co. 2.25% 4/1/31 | 500,000 | 418,711 | |
NSTAR Electric Co. 4.95% 9/15/52 | 400,000 | 389,286 | |
Public Service Co. of Colorado: | |||
2.7% 1/15/51 | 300,000 | 196,051 | |
3.7% 6/15/28 | 325,000 | 307,956 | |
Wisconsin Electric Power Co. 4.75% 9/30/32 | 400,000 | 396,255 | |
2,672,273 | |||
Independent Power and Renewable Electricity Producers - 1.8% | |||
Atlantica Sustainable Infrastructure PLC 4.125% 6/15/28 (b) | 200,000 | 176,305 | |
RWE AG 2.125% 5/24/26 (Reg. S) | EUR | 100,000 | 100,068 |
The AES Corp. 2.45% 1/15/31 | 300,000 | 238,385 | |
514,758 | |||
Multi-Utilities - 1.0% | |||
Consolidated Edison Co. of New York, Inc. 3.35% 4/1/30 | 325,000 | 293,556 | |
TOTAL UTILITIES | 3,480,587 | ||
TOTAL NONCONVERTIBLE BONDS (Cost $15,700,409) | 13,815,488 | ||
U.S. Government and Government Agency Obligations - 29.9% | |||
Principal Amount (a) | Value ($) | ||
U.S. Government Agency Obligations - 0.5% | |||
Tennessee Valley Authority 1.5% 9/15/31 | 200,000 | 160,352 | |
U.S. Treasury Obligations - 29.4% | |||
U.S. Treasury Bonds: | |||
1.875% 11/15/51 | 750,000 | 493,213 | |
2% 11/15/41 (d) | 2,970,000 | 2,163,110 | |
2.25% 2/15/52 | 170,000 | 122,765 | |
2.875% 5/15/52 | 1,360,000 | 1,130,500 | |
3% 8/15/52 | 185,000 | 158,406 | |
U.S. Treasury Notes: | |||
0.25% 6/15/24 (d) | 150,000 | 140,438 | |
2.75% 8/15/32 | 10,000 | 9,263 | |
2.875% 5/15/32 | 350,000 | 328,070 | |
3% 7/15/25 | 1,375,000 | 1,335,254 | |
3.25% 6/30/27 | 1,820,000 | 1,772,652 | |
4.125% 10/31/27 | 666,000 | 674,481 | |
4.375% 10/31/24 | 375,000 | 374,912 | |
TOTAL U.S. TREASURY OBLIGATIONS | 8,703,064 | ||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $10,134,559) | 8,863,416 | ||
U.S. Government Agency - Mortgage Securities - 11.2% | |||
Principal Amount (a) | Value ($) | ||
Fannie Mae - 4.1% | |||
2% 6/1/36 to 11/1/41 | 396,823 | 345,221 | |
3% 1/1/52 | 985,725 | 875,193 | |
TOTAL FANNIE MAE | 1,220,414 | ||
Freddie Mac - 6.8% | |||
2% 4/1/51 to 1/1/52 | 562,621 | 463,835 | |
2.5% 2/1/52 to 3/1/52 | 1,367,121 | 1,170,514 | |
3.5% 6/1/52 | 100,043 | 91,934 | |
1.5% 12/1/31 | 310,506 | 283,753 | |
TOTAL FREDDIE MAC | 2,010,036 | ||
Uniform Mortgage Backed Securities - 0.3% | |||
5% 12/1/52 (e) | 100,000 | 99,562 | |
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $3,670,400) | 3,330,012 | ||
Asset-Backed Securities - 2.1% | |||
Principal Amount (a) | Value ($) | ||
GoodLeap Sustainable Home Solutions Trust Series 2021-5CS Class A, 2.31% 10/20/48 (b) | 348,686 | 249,539 | |
Sunnova Helios Viii Issuer LLC Series 2022-A Class A, 2.79% 2/22/49 (b) | 236,892 | 203,222 | |
Sunrun Callisto Issuer, LLC Series 2021-2A Class A, 2.27% 1/30/57 (b) | 190,297 | 148,424 | |
Tesla Series 2020-A Class A3, 0.68% 12/20/23 (b) | 11,762 | 11,714 | |
TOTAL ASSET-BACKED SECURITIES (Cost $784,421) | 612,899 | ||
Commercial Mortgage Securities - 1.7% | |||
Principal Amount (a) | Value ($) | ||
Freddie Mac sequential payer: | |||
Series 2020-KG03 Class A2, 1.297% 6/25/30 | 160,000 | 127,908 | |
Series 2022-KG07 Class A2, 3.123% 8/25/32 | 200,000 | 179,079 | |
Series 2022-KSG4 Class A2, 3.4% 8/25/32 (c) | 200,000 | 183,238 | |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $541,218) | 490,225 | ||
Foreign Government and Government Agency Obligations - 1.6% | |||
Principal Amount (a) | Value ($) | ||
German Federal Republic 0% 8/15/31 (Reg. S) (d) | EUR | 411,000 | 364,251 |
Uruguay Republic 5.75% 10/28/34 | 100,000 | 109,000 | |
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $473,759) | 473,251 | ||
Preferred Securities - 3.2% | |||
Principal Amount (a) | Value ($) | ||
COMMUNICATION SERVICES - 0.6% | |||
Diversified Telecommunication Services - 0.6% | |||
Telefonica Europe BV 2.502% (Reg. S) (c)(f) | EUR | 200,000 | 176,902 |
FINANCIALS - 0.7% | |||
Banks - 0.7% | |||
Banco Bilbao Vizcaya Argentaria SA 6% (Reg. S) (c)(f) | EUR | 200,000 | 200,694 |
REAL ESTATE - 0.2% | |||
Real Estate Management & Development - 0.2% | |||
Citycon Oyj 4.496% (Reg. S) (c)(f) | EUR | 100,000 | 63,797 |
UTILITIES - 1.7% | |||
Electric Utilities - 1.7% | |||
Iberdrola International BV 3.25% (Reg. S) (c)(f) | EUR | 200,000 | 200,329 |
ORSTED A/S 2.25% (Reg. S) (c)(f) | EUR | 100,000 | 98,211 |
TenneT Holding BV 2.995% (Reg. S) (c)(f) | EUR | 125,000 | 126,173 |
Terna - Rete Elettrica Nazionale 2.375% (Reg. S) (c)(f) | EUR | 100,000 | 87,150 |
511,863 | |||
TOTAL PREFERRED SECURITIES (Cost $1,265,878) | 953,256 | ||
Money Market Funds - 3.7% | |||
Shares | Value ($) | ||
Fidelity Cash Central Fund 3.86% (g) (Cost $1,084,205) | 1,083,988 | 1,084,205 | |
TOTAL INVESTMENT IN SECURITIES - 100.1% (Cost $33,654,849) | 29,622,752 |
NET OTHER ASSETS (LIABILITIES) - (0.1)% | (19,120) |
NET ASSETS - 100.0% | 29,603,632 |
Futures Contracts | |||||
Number of contracts | Expiration Date | Notional Amount ($) | Value ($) | Unrealized Appreciation/ (Depreciation) ($) | |
Sold | |||||
Bond Index Contracts | |||||
Eurex Euro-Bobl Contracts (Germany) | 15 | Dec 2022 | 1,873,548 | 47,409 | 47,409 |
Eurex Euro-Bund Contracts (Germany) | 3 | Dec 2022 | 439,799 | 15,329 | 15,329 |
Eurex Euro-Schatz Contracts (Germany) | 14 | Dec 2022 | 1,555,614 | 19,923 | 19,923 |
TOTAL BOND INDEX CONTRACTS | 82,661 | ||||
Treasury Contracts | |||||
CBOT Ultra 10-Year U.S. Treasury Note Contracts (United States) | 5 | Mar 2023 | 598,281 | (6,027) | (6,027) |
TOTAL FUTURES CONTRACTS | 76,634 | ||||
The notional amount of futures sold as a percentage of Net Assets is 15.1% |
Forward Foreign Currency Contracts | ||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation/ (Depreciation) ($) | ||
EUR | 8,000 | USD | 8,239 | State Street Bank and Trust Co | 12/02/22 | 86 |
EUR | 4,000 | USD | 4,138 | HSBC Bank | 12/08/22 | 27 |
USD | 29,847 | AUD | 44,000 | BNP Paribas S.A. | 12/08/22 | (26) |
USD | 4,164,322 | EUR | 4,015,000 | BNP Paribas S.A. | 12/08/22 | (16,056) |
USD | 47,185 | EUR | 46,000 | Bank of America, N.A. | 12/08/22 | (710) |
USD | 28,049 | EUR | 27,000 | Bank of America, N.A. | 12/08/22 | (63) |
USD | 13,532 | EUR | 13,000 | JPMorgan Chase Bank, N.A. | 12/08/22 | (4) |
USD | 12,427 | EUR | 12,000 | JPMorgan Chase Bank, N.A. | 12/08/22 | (67) |
USD | 4,112 | EUR | 4,000 | JPMorgan Chase Bank, N.A. | 12/08/22 | (53) |
USD | 16,485 | EUR | 16,000 | State Street Bank and Trust Co | 12/08/22 | (174) |
USD | 10,376 | EUR | 10,000 | State Street Bank and Trust Co | 12/08/22 | (36) |
USD | 3,618 | GBP | 3,000 | Brown Brothers Harriman & Co | 12/08/22 | 1 |
USD | 192,632 | GBP | 162,000 | Royal Bank of Canada | 12/08/22 | (2,668) |
TOTAL FORWARD FOREIGN CURRENCY CONTRACTS | (19,743) | |||||
Unrealized Appreciation | 114 | |||||
Unrealized Depreciation | (19,857) |
Currency Abbreviations
AUD | - | Australian dollar |
EUR | - | European Monetary Unit |
GBP | - | British pound sterling |
USD | - | U.S. dollar |
Legend
(a) | Amount is stated in United States dollars unless otherwise noted. |
(b) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $3,011,065 or 10.2% of net assets. |
(c) | Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
(d) | Security or a portion of the security was pledged to cover margin requirements for futures contracts. At period end, the value of securities pledged amounted to $131,464. |
(e) | Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(f) | Security is perpetual in nature with no stated maturity date. |
(g) | Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request. |
Affiliated Central Funds
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
Affiliate | Value, beginning of period ($) | Purchases ($) | Sales Proceeds ($) | Dividend Income ($) | Realized Gain (loss) ($) | Change in Unrealized appreciation (depreciation) ($) | Value, end of period ($) | % ownership, end of period |
Fidelity Cash Central Fund 3.86% | 1,783,992 | 3,584,001 | 4,283,788 | 14,891 | - | - | 1,084,205 | 0.0% |
Total | 1,783,992 | 3,584,001 | 4,283,788 | 14,891 | - | - | 1,084,205 | |
Amounts in the income column in the above table include any capital gain distributions from underlying funds.
Investment Valuation
Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. Securities transactions are accounted for as of trade date. The Board of Trustees (the Board) has designated the Fund's investment adviser as the valuation designee responsible for the fair valuation function and performing fair value determinations as needed. The investment adviser has established a Fair Value Committee (the Committee) to carry out the day-to-day fair valuation responsibilities and has adopted policies and procedures to govern the fair valuation process and the activities of the Committee. In accordance with these fair valuation policies and procedures, which have been approved by the Board, the Fund attempts to obtain prices from one or more third party pricing services or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with the policies and procedures. Factors used in determining fair value vary by investment type and may include market or investment specific events, transaction data, estimated cash flows, and market observations of comparable investments. The frequency that the fair valuation procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee manages the Fund's fair valuation practices and maintains the fair valuation policies and procedures. The Fund's investment adviser reports to the Board information regarding the fair valuation process and related material matters.
The inputs to valuation techniques used to value investments are categorized into a disclosure hierarchy consisting of three levels as shown below:
Level 1 - Unadjusted quoted prices in active markets for identical investments
Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
Level 3 - unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing services or from brokers who make markets in such securities.Nonconvertible Bonds, U.S. Government and Government Agency Obligations, Foreign Government and Government Agency Obligations and Preferred Securities are valued by pricing services who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices.U.S. Government Agency - Mortgage Securities, Asset-Backed Securities and Commercial Mortgage Securities are valued by pricing services who utilize matrix pricing which considers prepayment speed assumptions, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices.When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing services. For foreign debt securities, when significant market or security specific events arise, valuations may be determined in good faith in accordance with procedures adopted by the Board. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
The U.S. dollar value of forward foreign currency contracts is determined using currency exchange rates supplied by a pricing service and are categorized as Level 2 in the hierarchy.
Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded and are categorized as Level 1 in the hierarchy.
Investments in any open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Derivative Instruments
Risk Exposures and the Use of Derivative Instruments: The Fund's investment objectives allow the Fund to enter into various types of derivative contracts. Derivatives are investments whose value is primarily derived from underlying assets, indices or reference rates and may be transacted on an exchange or over-the-counter (OTC). Derivatives may involve a future commitment to buy or sell a specified asset based on specified terms, to exchange future cash flows at periodic intervals based on a notional principal amount, or for one party to make one or more payments upon the occurrence of specified events in exchange for periodic payments from the other party.
The Fund used derivatives to increase returns, to gain exposure to certain types of assets and/or to manage exposure to certain risks as defined below. The success of any strategy involving derivatives depends on analysis of numerous economic factors, and if the strategies for investment do not work as intended, the Fund may not achieve its objectives.
The Fund's use of derivatives increased or decreased its exposure to the following risk(s):
Foreign Exchange Risk - Foreign exchange rate risk relates to fluctuations in the value of an asset or liability due to changes in currency exchange rates.
Interest Rate Risk - Interest rate risk relates to the fluctuations in the value of interest-bearing securities due to changes in the prevailing levels of market interest rates.
The Fund is also exposed to additional risks from investing in derivatives, such as liquidity risk and counterparty credit risk. Liquidity risk is the risk that the Fund will be unable to close out the derivative in the open market in a timely manner. Counterparty credit risk is the risk that the counterparty will not be able to fulfill its obligation to the Fund.
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain OTC derivatives, the Fund attempts to reduce its exposure to counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement with each of its counterparties. The ISDA Master Agreement gives the Fund the right to terminate all transactions traded under such agreement upon the deterioration in the credit quality of the counterparty beyond specified levels. The ISDA Master Agreement gives each party the right, upon an event of default by the other party or a termination of the agreement, to close out all transactions traded under such agreement and to net the amounts owed under each transaction to one net payable by one party to the other. To mitigate counterparty credit risk on bi-lateral OTC derivatives, the Fund receives collateral in the form of cash or securities once the Fund's net unrealized appreciation on outstanding derivative contracts under an ISDA Master Agreement exceeds certain applicable thresholds, subject to certain minimum transfer provisions. The collateral received is held in segregated accounts with the Fund's custodian bank in accordance with the collateral agreements entered into between the Fund, the counterparty and the Fund's custodian bank. The Fund could experience delays and costs in gaining access to the collateral even though it is held by the Fund's custodian bank. The Fund's maximum risk of loss from counterparty credit risk related to bi-lateral OTC derivatives is generally the aggregate unrealized appreciation and unpaid counterparty payments in excess of any collateral pledged by the counterparty to the Fund. The Fund may be required to pledge collateral for the benefit of the counterparties on bi-lateral OTC derivatives in an amount not less than each counterparty's unrealized appreciation on outstanding derivative contracts, subject to certain minimum transfer provisions, and any such pledged collateral is identified in the Schedule of Investments. Exchange-traded contracts are not covered by the ISDA Master Agreement; however counterparty credit risk related to these contracts may be mitigated by the protection provided by the exchange on which they trade. Counterparty credit risk related to centrally cleared OTC swaps may be mitigated by the protection provided by the clearinghouse.
Investing in derivatives may involve greater risks than investing in the underlying assets directly and, to varying degrees, may involve risk of loss in excess of any initial investment and collateral received. In addition, there may be the risk that the change in value of the derivative contract does not correspond to the change in value of the underlying instrument.
Forward Foreign Currency Contracts: Forward foreign currency contracts represent obligations to purchase or sell foreign currency on a specified future date at a price fixed at the time the contracts are entered into.
The Fund used forward foreign currency contracts to facilitate transactions in foreign-denominated securities and to manage exposure to certain foreign currencies.
Open forward foreign currency contracts at period end are presented in the Schedule of Investments under the caption "Forward Foreign Currency Contracts." The contract amount and unrealized appreciation (depreciation) reflects each contract's exposure to the underlying currency at period end.
Futures Contracts: A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a specified price at a specified future date.
The Fund used futures contracts to manage its exposure to the bond market and fluctuations in interest rates.
Open futures contracts at period end are presented in the Schedule of Investments under the caption "Futures Contracts". The underlying face amount at value reflects each contract's exposure to the underlying instrument or index at period end. Any securities and/or cash deposited to meet initial margin requirements are identified in the Schedule of Investments.
For additional information on the Fund's significant accounting policies, please refer to the Fund's most recent semiannual or annual shareholder report.
The fund's schedule of investments as of the date on the cover of this report has not been audited. This report is provided for the general information of the fund's shareholders. For more information regarding the fund and its holdings, please see the fund's most recent prospectus and annual report.
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