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 811-4707
Fidelity Advisor Series II
(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: | August 31 |
|
|
Date of reporting period: | February 28, 2013 |
Item 1. Reports to Stockholders
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor®
Intermediate Bond
Fund - Class A, Class T, Class B
and Class C
Semiannual Report
February 28, 2013
(Fidelity Cover Art)
Contents
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. | |
Board Approval of Investment Advisory Contracts and Management Fees |
|
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.
Semiannual 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, 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 (September 1, 2012 to February 28, 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. 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. 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.
Semiannual Report
Shareholder Expense Example - continued
| Annualized | Beginning | Ending | Expenses Paid |
Class A | .83% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,008.90 | $ 4.13 |
Hypothetical A |
| $ 1,000.00 | $ 1,020.68 | $ 4.16 |
Class T | .81% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,009.00 | $ 4.03 |
HypotheticalA |
| $ 1,000.00 | $ 1,020.78 | $ 4.06 |
Class B | 1.56% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,005.30 | $ 7.76 |
Hypothetical A |
| $ 1,000.00 | $ 1,017.06 | $ 7.80 |
Class C | 1.59% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,005.20 | $ 7.91 |
Hypothetical A |
| $ 1,000.00 | $ 1,016.91 | $ 7.95 |
Institutional Class | .58% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,010.10 | $ 2.89 |
Hypothetical A |
| $ 1,000.00 | $ 1,021.92 | $ 2.91 |
A 5% return per year before expenses
* 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). The fees and expenses of the underlying Fidelity Central Funds in which the Fund invests are not included in the Fund's annualized expense ratio.
Semiannual Report
Investment Changes (Unaudited)
The information in the following tables is based on the combined investments of the Fund and its pro-rata share of the investments of Fidelity's fixed-income central funds. |
Quality Diversification (% of fund's net assets) | |||||||
As of February 28, 2013 | As of August 31, 2012 | ||||||
 | U.S. Government and |
| | U.S. Government and |
| ||
 | AAA 12.7% |
| | AAA 12.4% |
| ||
 | AA 5.9% |
| | AA 5.0% |
| ||
 | A 15.0% |
| | A 13.3% |
| ||
 | BBB 26.7% |
| | BBB 22.6% |
| ||
 | BB and Below 2.9% |
| | BB and Below 2.0% |
| ||
 | Not Rated 0.2% |
| | Not Rated 0.3% |
| ||
 | 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 February 28, 2013 | ||
|
| 6 months ago |
Years | 4.5 | 4.4 |
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 February 28, 2013 | ||
|
| 6 months ago |
Years | 3.9 | 3.9 |
Duration estimates how much a bond fund's price will change with a change in comparable interest rates. If rates rise 1%, for example, a fund with a 5-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. Duration takes into account any call or put option embedded in the bonds. |
Asset Allocation (% of fund's net assets) | |||||||
As of February 28, 2013* | As of August 31, 2012** | ||||||
| Corporate Bonds 46.8% |
| | Corporate Bonds 39.3% |
| ||
| U.S. Government and |
| | U.S. Government and |
| ||
| Asset-Backed |
| | Asset-Backed |
| ||
| CMOs and Other |
| | CMOs and Other |
| ||
| Municipal Bonds 0.3% |
| | Municipal Bonds 0.4% |
| ||
| Other Investments 1.9% |
| | Other Investments 1.6% |
| ||
| Short-Term |
| | Short-Term |
| ||
* Foreign investments | 12.3% |
| ** Foreign investments | 10.6% |
| ||
† Includes NCUA Guaranteed Notes |
An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at advisor.fidelity.com. |
Semiannual Report
Investments February 28, 2013 (Unaudited)
Showing Percentage of Net Assets
Nonconvertible Bonds - 45.9% | ||||
| Principal | Value | ||
CONSUMER DISCRETIONARY - 3.7% | ||||
Automobiles - 1.1% | ||||
Daimler Finance North America LLC: | ||||
1.25% 1/11/16 (d) | $ 1,220,000 | $ 1,222,860 | ||
1.3% 7/31/15 (d) | 1,260,000 | 1,266,912 | ||
1.65% 4/10/15 (d) | 620,000 | 627,074 | ||
1.95% 3/28/14 (d) | 790,000 | 798,610 | ||
Volkswagen International Finance NV: | ||||
1.6% 11/20/17 (d) | 620,000 | 622,551 | ||
1.625% 3/22/15 (d) | 1,180,000 | 1,195,352 | ||
2.375% 3/22/17 (d) | 600,000 | 620,436 | ||
| 6,353,795 | |||
Diversified Consumer Services - 0.1% | ||||
Yale University 2.9% 10/15/14 | 530,000 | 550,750 | ||
Media - 1.9% | ||||
Comcast Corp.: | ||||
4.95% 6/15/16 | 326,000 | 367,913 | ||
5.15% 3/1/20 | 693,000 | 818,171 | ||
5.7% 5/15/18 | 42,000 | 50,552 | ||
COX Communications, Inc. 4.625% 6/1/13 | 674,000 | 680,909 | ||
Discovery Communications LLC: | ||||
3.7% 6/1/15 | 875,000 | 929,415 | ||
5.05% 6/1/20 | 322,000 | 369,525 | ||
NBCUniversal Media LLC: | ||||
3.65% 4/30/15 | 66,000 | 70,024 | ||
5.15% 4/30/20 | 1,000,000 | 1,187,385 | ||
News America, Inc.: | ||||
5.3% 12/15/14 | 132,000 | 142,663 | ||
6.9% 3/1/19 | 750,000 | 944,427 | ||
Time Warner Cable, Inc.: | ||||
5.85% 5/1/17 | 996,000 | 1,158,568 | ||
6.2% 7/1/13 | 404,000 | 411,110 | ||
6.75% 7/1/18 | 1,141,000 | 1,397,202 | ||
Time Warner, Inc.: | ||||
3.15% 7/15/15 | 24,000 | 25,294 | ||
4.875% 3/15/20 | 731,000 | 837,993 | ||
5.875% 11/15/16 | 685,000 | 798,858 | ||
Viacom, Inc.: | ||||
3.5% 4/1/17 | 455,000 | 490,272 | ||
6.125% 10/5/17 | 679,000 | 806,672 | ||
| 11,486,953 | |||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
CONSUMER DISCRETIONARY - continued | ||||
Multiline Retail - 0.2% | ||||
Target Corp. 3.875% 7/15/20 | $ 1,000,000 | $ 1,118,720 | ||
Specialty Retail - 0.4% | ||||
AutoZone, Inc. 3.7% 4/15/22 | 494,000 | 509,690 | ||
Home Depot, Inc. 4.4% 4/1/21 | 610,000 | 708,555 | ||
Lowe's Companies, Inc. 4.625% 4/15/20 | 750,000 | 867,287 | ||
| 2,085,532 | |||
TOTAL CONSUMER DISCRETIONARY | 21,595,750 | |||
CONSUMER STAPLES - 2.8% | ||||
Beverages - 1.1% | ||||
Anheuser-Busch InBev Worldwide, Inc.: | ||||
1.375% 7/15/17 | 650,000 | 655,398 | ||
1.5% 7/14/14 | 551,000 | 558,088 | ||
5.375% 11/15/14 | 111,000 | 119,748 | ||
Beam, Inc. 1.875% 5/15/17 | 735,000 | 748,595 | ||
FBG Finance Ltd. 5.125% 6/15/15 (d) | 510,000 | 557,398 | ||
Fortune Brands, Inc.: | ||||
5.375% 1/15/16 | 466,000 | 518,376 | ||
6.375% 6/15/14 | 272,000 | 290,952 | ||
Heineken NV: | ||||
1.4% 10/1/17 (d) | 321,000 | 320,023 | ||
2.75% 4/1/23 (d) | 335,000 | 326,508 | ||
PepsiCo, Inc. 7.9% 11/1/18 | 815,000 | 1,090,036 | ||
SABMiller Holdings, Inc. 2.45% 1/15/17 (d) | 1,280,000 | 1,335,297 | ||
| 6,520,419 | |||
Food & Staples Retailing - 0.4% | ||||
CVS Caremark Corp. 4.125% 5/15/21 | 620,000 | 687,715 | ||
Wal-Mart Stores, Inc. 2.25% 7/8/15 | 820,000 | 854,576 | ||
Walgreen Co.: | ||||
1.8% 9/15/17 | 267,000 | 270,857 | ||
3.1% 9/15/22 | 386,000 | 387,456 | ||
| 2,200,604 | |||
Food Products - 0.6% | ||||
Cargill, Inc.: | ||||
3.25% 11/15/21 (d) | 600,000 | 615,833 | ||
6% 11/27/17 (d) | 106,000 | 126,784 | ||
ConAgra Foods, Inc.: | ||||
1.9% 1/25/18 | 222,000 | 224,605 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
CONSUMER STAPLES - continued | ||||
Food Products - continued | ||||
ConAgra Foods, Inc.: - continued | ||||
3.2% 1/25/23 | $ 258,000 | $ 257,473 | ||
General Mills, Inc. 5.2% 3/17/15 | 650,000 | 708,526 | ||
Kraft Foods Group, Inc. 2.25% 6/5/17 | 610,000 | 633,392 | ||
Kraft Foods, Inc.: | ||||
5.375% 2/10/20 | 660,000 | 787,269 | ||
6.5% 8/11/17 | 140,000 | 169,451 | ||
6.75% 2/19/14 | 82,000 | 86,653 | ||
| 3,609,986 | |||
Tobacco - 0.7% | ||||
Altria Group, Inc.: | ||||
2.85% 8/9/22 | 620,000 | 608,201 | ||
9.7% 11/10/18 | 454,000 | 633,713 | ||
Philip Morris International, Inc. 4.5% 3/26/20 | 1,000,000 | 1,151,428 | ||
Reynolds American, Inc.: | ||||
1.05% 10/30/15 | 707,000 | 706,297 | ||
3.25% 11/1/22 | 326,000 | 324,279 | ||
6.75% 6/15/17 | 513,000 | 619,458 | ||
| 4,043,376 | |||
TOTAL CONSUMER STAPLES | 16,374,385 | |||
ENERGY - 4.5% | ||||
Energy Equipment & Services - 0.9% | ||||
Cameron International Corp. 1.6% 4/30/15 | 468,000 | 472,084 | ||
DCP Midstream LLC 5.35% 3/15/20 (d) | 633,000 | 697,767 | ||
El Paso Pipeline Partners Operating Co. LLC 6.5% 4/1/20 | 768,000 | 928,111 | ||
FMC Technologies, Inc.: | ||||
2% 10/1/17 | 80,000 | 80,702 | ||
3.45% 10/1/22 | 146,000 | 148,169 | ||
Halliburton Co. 6.15% 9/15/19 | 425,000 | 535,126 | ||
National Oilwell Varco, Inc. 1.35% 12/1/17 | 620,000 | 622,584 | ||
Noble Holding International Ltd. 2.5% 3/15/17 | 262,000 | 269,001 | ||
Weatherford International Ltd.: | ||||
4.95% 10/15/13 | 303,000 | 310,765 | ||
5.15% 3/15/13 | 1,469,000 | 1,470,638 | ||
| 5,534,947 | |||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - 3.6% | ||||
Anadarko Petroleum Corp.: | ||||
5.95% 9/15/16 | $ 45,000 | $ 51,745 | ||
6.375% 9/15/17 | 555,000 | 662,819 | ||
Apache Corp. 1.75% 4/15/17 | 172,000 | 175,234 | ||
BG Energy Capital PLC 2.875% 10/15/16 (d) | 620,000 | 657,584 | ||
Cenovus Energy, Inc. 5.7% 10/15/19 | 650,000 | 793,768 | ||
DCP Midstream Operating LP 2.5% 12/1/17 | 292,000 | 295,272 | ||
Duke Energy Field Services 5.375% 10/15/15 (d) | 212,000 | 231,027 | ||
El Paso Natural Gas Co. 5.95% 4/15/17 | 21,000 | 24,303 | ||
Enbridge Energy Partners LP 4.2% 9/15/21 | 615,000 | 650,498 | ||
Encana Holdings Finance Corp. 5.8% 5/1/14 | 502,000 | 529,679 | ||
Enterprise Products Operating LP: | ||||
1.25% 8/13/15 | 480,000 | 483,950 | ||
4.05% 2/15/22 | 610,000 | 663,707 | ||
5.6% 10/15/14 | 339,000 | 364,663 | ||
5.65% 4/1/13 | 105,000 | 105,349 | ||
Gulfstream Natural Gas System LLC 6.95% 6/1/16 (d) | 20,000 | 23,436 | ||
Marathon Petroleum Corp. 3.5% 3/1/16 | 875,000 | 934,284 | ||
Midcontinent Express Pipeline LLC 5.45% 9/15/14 (d) | 877,000 | 914,354 | ||
Nexen, Inc. 5.2% 3/10/15 | 158,000 | 170,900 | ||
Petro-Canada 6.05% 5/15/18 | 326,000 | 393,881 | ||
Petrobras International Finance Co. Ltd.: | ||||
2.875% 2/6/15 | 630,000 | 642,978 | ||
5.75% 1/20/20 | 816,000 | 905,813 | ||
7.875% 3/15/19 | 647,000 | 792,054 | ||
Petroleos Mexicanos: | ||||
3.5% 1/30/23 (d) | 485,000 | 475,300 | ||
4.875% 1/24/22 | 700,000 | 768,950 | ||
6% 3/5/20 | 59,000 | 69,384 | ||
Phillips 66 2.95% 5/1/17 | 1,260,000 | 1,333,375 | ||
Plains All American Pipeline LP/PAA Finance Corp.: | ||||
3.95% 9/15/15 | 375,000 | 403,638 | ||
5.75% 1/15/20 | 962,000 | 1,152,335 | ||
Schlumberger Investment SA 1.25% 8/1/17 (d) | 1,000,000 | 999,185 | ||
Southeast Supply Header LLC 4.85% 8/15/14 (d) | 862,000 | 895,066 | ||
Spectra Energy Capital, LLC 5.65% 3/1/20 | 28,000 | 32,870 | ||
Suncor Energy, Inc. 6.1% 6/1/18 | 944,000 | 1,144,514 | ||
Texas Eastern Transmission LP 6% 9/15/17 (d) | 1,096,000 | 1,295,340 | ||
TransCapitalInvest Ltd. 5.67% 3/5/14 (d) | 489,000 | 507,093 | ||
Transcontinental Gas Pipe Line Corp. 6.4% 4/15/16 | 394,000 | 453,814 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - continued | ||||
Western Gas Partners LP 5.375% 6/1/21 | $ 600,000 | $ 678,521 | ||
XTO Energy, Inc.: | ||||
5% 1/31/15 | 264,000 | 287,043 | ||
5.65% 4/1/16 | 181,000 | 208,566 | ||
| 21,172,292 | |||
TOTAL ENERGY | 26,707,239 | |||
FINANCIALS - 23.4% | ||||
Capital Markets - 2.6% | ||||
Bear Stearns Companies, Inc. 5.3% 10/30/15 | 374,000 | 414,245 | ||
BlackRock, Inc. 4.25% 5/24/21 | 650,000 | 730,220 | ||
Goldman Sachs Group, Inc.: | ||||
1.6% 11/23/15 | 650,000 | 656,089 | ||
2.375% 1/22/18 | 600,000 | 607,916 | ||
3.3% 5/3/15 | 620,000 | 648,257 | ||
3.7% 8/1/15 | 712,000 | 752,195 | ||
5.25% 7/27/21 | 750,000 | 853,850 | ||
5.95% 1/18/18 | 1,693,000 | 1,980,416 | ||
6.15% 4/1/18 | 402,000 | 475,076 | ||
JPMorgan Chase & Co. 1.1% 10/15/15 | 620,000 | 622,104 | ||
Lazard Group LLC: | ||||
6.85% 6/15/17 | 669,000 | 771,089 | ||
7.125% 5/15/15 | 239,000 | 265,007 | ||
Merrill Lynch & Co., Inc.: | ||||
6.4% 8/28/17 | 40,000 | 46,965 | ||
6.875% 4/25/18 | 726,000 | 880,244 | ||
Morgan Stanley: | ||||
1.75% 2/25/16 | 510,000 | 512,270 | ||
4.1% 1/26/15 | 1,320,000 | 1,384,061 | ||
4.75% 4/1/14 | 138,000 | 142,754 | ||
5.45% 1/9/17 | 200,000 | 223,916 | ||
5.625% 9/23/19 | 112,000 | 129,587 | ||
5.75% 1/25/21 | 647,000 | 750,244 | ||
5.95% 12/28/17 | 383,000 | 443,524 | ||
6% 4/28/15 | 130,000 | 141,913 | ||
7.3% 5/13/19 | 603,000 | 748,080 | ||
The Bank of New York Mellon Corp. 2.4% 1/17/17 | 1,250,000 | 1,307,771 | ||
| 15,487,793 | |||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Commercial Banks - 7.8% | ||||
ANZ Banking Group Ltd. 2.125% 1/10/14 (d) | $ 740,000 | $ 750,721 | ||
Australia & New Zealand Banking Group Ltd. 1.875% 10/6/17 | 620,000 | 635,846 | ||
Bank of America NA 5.3% 3/15/17 | 250,000 | 280,237 | ||
Bank of Montreal 2.5% 1/11/17 | 640,000 | 669,752 | ||
Bank of Nova Scotia 1.375% 12/18/17 | 935,000 | 935,253 | ||
Bank of Tokyo-Mitsubishi UFJ Ltd. 1.65% 2/26/18 (d) | 590,000 | 590,870 | ||
BB&T Corp. 3.95% 3/22/22 | 940,000 | 1,007,139 | ||
Comerica, Inc. 3% 9/16/15 | 2,000 | 2,105 | ||
Commonwealth Bank of Australia: | ||||
1.95% 3/16/15 | 630,000 | 646,262 | ||
2.9% 9/17/14 (d) | 3,000,000 | 3,115,680 | ||
Credit Suisse 6% 2/15/18 | 1,680,000 | 1,938,419 | ||
Discover Bank 2% 2/21/18 | 1,200,000 | 1,204,008 | ||
Fifth Third Bancorp: | ||||
3.5% 3/15/22 | 700,000 | 730,415 | ||
3.625% 1/25/16 | 361,000 | 386,995 | ||
4.5% 6/1/18 | 63,000 | 70,134 | ||
8.25% 3/1/38 | 68,000 | 94,934 | ||
Fifth Third Bank: | ||||
1.45% 2/28/18 | 580,000 | 579,472 | ||
4.75% 2/1/15 | 308,000 | 329,453 | ||
Fifth Third Capital Trust IV 6.5% 4/15/67 (f) | 7,000 | 7,009 | ||
First Niagara Financial Group, Inc. 6.75% 3/19/20 | 625,000 | 743,704 | ||
HBOS PLC 6.75% 5/21/18 (d) | 509,000 | 564,144 | ||
HSBC Holdings PLC: | ||||
4% 3/30/22 | 567,000 | 610,599 | ||
5.1% 4/5/21 | 610,000 | 710,656 | ||
Huntington Bancshares, Inc. 7% 12/15/20 | 180,000 | 223,197 | ||
JPMorgan Chase Bank 6% 10/1/17 | 1,762,000 | 2,086,326 | ||
KeyBank NA: | ||||
1.65% 2/1/18 | 397,000 | 401,141 | ||
5.8% 7/1/14 | 1,351,000 | 1,441,545 | ||
KeyCorp. 5.1% 3/24/21 | 622,000 | 723,321 | ||
Marshall & Ilsley Bank 5% 1/17/17 | 778,000 | 855,301 | ||
Mizuho Corporate Bank Ltd. 1.55% 10/17/17 (d) | 940,000 | 936,901 | ||
National Australia Bank Ltd. 2% 3/9/15 | 630,000 | 646,506 | ||
National Bank of Canada 1.5% 6/26/15 | 830,000 | 842,533 | ||
PNC Bank NA 2.7% 11/1/22 | 1,560,000 | 1,523,033 | ||
PNC Funding Corp. 3.625% 2/8/15 | 717,000 | 757,199 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Commercial Banks - continued | ||||
Rabobank (Netherlands) NV: | ||||
1.85% 1/10/14 | $ 1,720,000 | $ 1,740,537 | ||
2.125% 10/13/15 | 278,000 | 286,982 | ||
3.95% 11/9/22 | 1,240,000 | 1,260,526 | ||
Regions Bank 7.5% 5/15/18 | 770,000 | 939,400 | ||
Regions Financial Corp.: | ||||
5.75% 6/15/15 | 4,000 | 4,345 | ||
7.75% 11/10/14 | 20,000 | 22,050 | ||
Royal Bank of Canada 1.5% 1/16/18 | 1,220,000 | 1,229,212 | ||
Royal Bank of Scotland Group PLC 2.55% 9/18/15 | 1,492,000 | 1,535,807 | ||
Sumitomo Mitsui Banking Corp. 1.8% 7/18/17 | 940,000 | 956,318 | ||
SunTrust Banks, Inc.: | ||||
3.5% 1/20/17 | 853,000 | 918,015 | ||
3.6% 4/15/16 | 525,000 | 562,427 | ||
The Toronto Dominion Bank 2.375% 10/19/16 | 1,230,000 | 1,290,190 | ||
Union Bank NA 2.125% 6/16/17 | 700,000 | 718,683 | ||
UnionBanCal Corp. 5.25% 12/16/13 | 115,000 | 119,182 | ||
Wachovia Corp. 5.625% 10/15/16 | 590,000 | 675,540 | ||
Wells Fargo & Co.: | ||||
1.25% 2/13/15 | 2,229,000 | 2,250,066 | ||
3.5% 3/8/22 | 700,000 | 738,546 | ||
3.676% 6/15/16 | 620,000 | 672,412 | ||
Westpac Banking Corp.: | ||||
1.125% 9/25/15 | 1,200,000 | 1,209,906 | ||
1.85% 12/9/13 | 687,000 | 694,851 | ||
2% 8/14/17 | 1,121,000 | 1,152,845 | ||
| 46,018,650 | |||
Consumer Finance - 3.3% | ||||
American Express Credit Corp.: | ||||
0.875% 11/13/15 | 620,000 | 619,785 | ||
2.75% 9/15/15 | 1,561,000 | 1,632,692 | ||
2.8% 9/19/16 | 599,000 | 633,904 | ||
American Honda Finance Corp. 1.5% 9/11/17 (d) | 620,000 | 625,449 | ||
Capital One Financial Corp.: | ||||
1% 11/6/15 | 620,000 | 617,755 | ||
2.125% 7/15/14 | 1,309,000 | 1,331,568 | ||
2.15% 3/23/15 | 620,000 | 633,820 | ||
3.15% 7/15/16 | 605,000 | 644,859 | ||
7.375% 5/23/14 | 232,000 | 250,286 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Discover Financial Services: | ||||
3.85% 11/21/22 (d) | $ 30,000 | $ 30,698 | ||
5.2% 4/27/22 | 93,000 | 105,246 | ||
6.45% 6/12/17 | 399,000 | 468,633 | ||
Ford Motor Credit Co. LLC: | ||||
2.75% 5/15/15 | 930,000 | 950,165 | ||
3% 6/12/17 | 1,000,000 | 1,025,458 | ||
4.25% 9/20/22 | 620,000 | 639,438 | ||
General Electric Capital Corp.: | ||||
1% 1/8/16 | 727,000 | 729,319 | ||
1.6% 11/20/17 | 1,860,000 | 1,871,032 | ||
2.25% 11/9/15 | 886,000 | 918,096 | ||
2.9% 1/9/17 | 640,000 | 678,792 | ||
2.95% 5/9/16 | 255,000 | 269,805 | ||
3.35% 10/17/16 | 610,000 | 655,244 | ||
3.5% 6/29/15 | 1,263,000 | 1,339,967 | ||
6.375% 11/15/67 (f) | 1,275,000 | 1,348,313 | ||
HSBC USA, Inc.: | ||||
1.625% 1/16/18 | 543,000 | 545,428 | ||
2.375% 2/13/15 | 511,000 | 526,873 | ||
Hyundai Capital America 2.125% 10/2/17 (d) | 224,000 | 225,912 | ||
| 19,318,537 | |||
Diversified Financial Services - 3.4% | ||||
ABB Finance (USA), Inc. 1.625% 5/8/17 | 238,000 | 241,239 | ||
Bank of America Corp.: | ||||
1.5% 10/9/15 | 1,250,000 | 1,253,869 | ||
4.5% 4/1/15 | 1,230,000 | 1,308,173 | ||
5.75% 12/1/17 | 1,150,000 | 1,331,097 | ||
5.875% 1/5/21 | 980,000 | 1,164,503 | ||
BP Capital Markets PLC: | ||||
2.248% 11/1/16 | 620,000 | 645,366 | ||
3.125% 10/1/15 | 60,000 | 63,563 | ||
3.2% 3/11/16 | 610,000 | 651,172 | ||
3.245% 5/6/22 | 620,000 | 637,905 | ||
Citigroup, Inc.: | ||||
1.25% 1/15/16 | 1,220,000 | 1,216,717 | ||
3.953% 6/15/16 | 610,000 | 655,726 | ||
4.5% 1/14/22 | 1,190,000 | 1,324,583 | ||
4.75% 5/19/15 | 1,605,000 | 1,722,505 | ||
5.125% 5/5/14 | 150,000 | 157,017 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Citigroup, Inc.: - continued | ||||
6.125% 5/15/18 | $ 12,000 | $ 14,359 | ||
6.5% 8/19/13 | 1,750,000 | 1,797,345 | ||
JPMorgan Chase & Co.: | ||||
3.15% 7/5/16 | 600,000 | 635,160 | ||
3.4% 6/24/15 | 2,482,000 | 2,622,613 | ||
4.5% 1/24/22 | 640,000 | 712,582 | ||
5.4% 1/6/42 | 266,000 | 313,781 | ||
RBS Citizens Financial Group, Inc. 4.15% 9/28/22 (d) | 300,000 | 307,041 | ||
TECO Finance, Inc.: | ||||
4% 3/15/16 | 171,000 | 184,209 | ||
5.15% 3/15/20 | 252,000 | 291,558 | ||
USAA Capital Corp. 3.5% 7/17/14 (d) | 932,000 | 970,193 | ||
| 20,222,276 | |||
Insurance - 2.7% | ||||
American International Group, Inc.: | ||||
3% 3/20/15 | 310,000 | 322,319 | ||
4.25% 9/15/14 | 970,000 | 1,018,920 | ||
4.875% 6/1/22 | 604,000 | 685,167 | ||
Aon Corp.: | ||||
3.5% 9/30/15 | 911,000 | 959,394 | ||
5% 9/30/20 | 600,000 | 686,209 | ||
Assurant, Inc. 5.625% 2/15/14 | 332,000 | 346,242 | ||
Axis Capital Holdings Ltd. 5.75% 12/1/14 | 84,000 | 89,663 | ||
Berkshire Hathaway Finance Corp. 1.6% 5/15/17 | 620,000 | 633,209 | ||
Great-West Life & Annuity Insurance Co. 7.153% 5/16/46 (d)(f) | 259,000 | 266,770 | ||
Hartford Financial Services Group, Inc.: | ||||
5.125% 4/15/22 | 284,000 | 327,289 | ||
5.375% 3/15/17 | 18,000 | 20,520 | ||
Liberty Mutual Group, Inc.: | ||||
5% 6/1/21 (d) | 599,000 | 654,545 | ||
6.5% 3/15/35 (d) | 104,000 | 117,098 | ||
Marsh & McLennan Companies, Inc. 4.8% 7/15/21 | 361,000 | 409,032 | ||
MetLife, Inc.: | ||||
1.756% 12/15/17 (c) | 269,000 | 272,181 | ||
2.375% 2/6/14 | 876,000 | 891,292 | ||
4.125% 8/13/42 | 600,000 | 570,427 | ||
5% 6/15/15 | 175,000 | 191,563 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Insurance - continued | ||||
Metropolitan Life Global Funding I: | ||||
1.5% 1/10/18 (d) | $ 1,431,000 | $ 1,427,729 | ||
2.5% 9/29/15 (d) | 750,000 | 780,552 | ||
Monumental Global Funding III 5.5% 4/22/13 (d) | 382,000 | 384,549 | ||
Northwestern Mutual Life Insurance Co. 6.063% 3/30/40 (d) | 48,000 | 60,950 | ||
Pacific Life Global Funding 5.15% 4/15/13 (d) | 1,218,000 | 1,224,376 | ||
Pacific LifeCorp 6% 2/10/20 (d) | 321,000 | 369,099 | ||
Prudential Financial, Inc.: | ||||
4.5% 11/15/20 | 700,000 | 784,716 | ||
5.4% 6/13/35 | 68,000 | 73,286 | ||
QBE Insurance Group Ltd. 5.647% 7/1/23 (d)(f) | 29,000 | 28,874 | ||
Symetra Financial Corp. 6.125% 4/1/16 (d) | 892,000 | 991,336 | ||
Unum Group: | ||||
5.625% 9/15/20 | 370,000 | 428,152 | ||
7.125% 9/30/16 | 704,000 | 822,939 | ||
| 15,838,398 | |||
Real Estate Investment Trusts - 1.5% | ||||
Alexandria Real Estate Equities, Inc. 4.6% 4/1/22 | 189,000 | 204,159 | ||
AvalonBay Communities, Inc. 4.95% 3/15/13 | 55,000 | 55,066 | ||
Boston Properties, Inc. 3.85% 2/1/23 | 580,000 | 614,372 | ||
BRE Properties, Inc. 5.5% 3/15/17 | 61,000 | 69,301 | ||
Camden Property Trust 5.375% 12/15/13 | 326,000 | 337,178 | ||
DDR Corp. 4.625% 7/15/22 | 200,000 | 216,223 | ||
Developers Diversified Realty Corp.: | ||||
4.75% 4/15/18 | 290,000 | 320,692 | ||
7.5% 4/1/17 | 389,000 | 463,868 | ||
Duke Realty LP: | ||||
3.875% 10/15/22 | 461,000 | 473,432 | ||
4.625% 5/15/13 | 122,000 | 122,906 | ||
5.4% 8/15/14 | 498,000 | 526,042 | ||
6.25% 5/15/13 | 1,166,000 | 1,178,447 | ||
6.75% 3/15/20 | 35,000 | 42,804 | ||
8.25% 8/15/19 | 7,000 | 9,115 | ||
Equity One, Inc.: | ||||
3.75% 11/15/22 | 1,300,000 | 1,276,683 | ||
6% 9/15/17 | 509,000 | 582,490 | ||
6.25% 1/15/17 | 74,000 | 84,300 | ||
Federal Realty Investment Trust: | ||||
5.4% 12/1/13 | 85,000 | 87,901 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Real Estate Investment Trusts - continued | ||||
Federal Realty Investment Trust: - continued | ||||
5.9% 4/1/20 | $ 5,000 | $ 5,958 | ||
6.2% 1/15/17 | 94,000 | 109,553 | ||
Health Care REIT, Inc. 2.25% 3/15/18 | 193,000 | 194,740 | ||
HRPT Properties Trust: | ||||
5.75% 11/1/15 | 211,000 | 229,063 | ||
6.25% 6/15/17 | 186,000 | 203,260 | ||
6.65% 1/15/18 | 95,000 | 108,042 | ||
UDR, Inc. 5.5% 4/1/14 | 1,107,000 | 1,158,305 | ||
Washington (REIT) 5.25% 1/15/14 | 30,000 | 30,948 | ||
| 8,704,848 | |||
Real Estate Management & Development - 2.1% | ||||
AMB Property LP 5.9% 8/15/13 | 389,000 | 396,785 | ||
BioMed Realty LP: | ||||
3.85% 4/15/16 | 1,000,000 | 1,064,994 | ||
4.25% 7/15/22 | 277,000 | 290,133 | ||
6.125% 4/15/20 | 6,000 | 7,011 | ||
Brandywine Operating Partnership LP: | ||||
3.95% 2/15/23 | 623,000 | 627,241 | ||
5.7% 5/1/17 | 369,000 | 417,359 | ||
ERP Operating LP: | ||||
4.625% 12/15/21 | 470,000 | 527,689 | ||
4.75% 7/15/20 | 446,000 | 502,407 | ||
5.375% 8/1/16 | 240,000 | 272,938 | ||
5.75% 6/15/17 | 1,003,000 | 1,176,749 | ||
Liberty Property LP: | ||||
4.125% 6/15/22 | 301,000 | 315,832 | ||
4.75% 10/1/20 | 1,045,000 | 1,151,149 | ||
5.125% 3/2/15 | 170,000 | 182,089 | ||
5.5% 12/15/16 | 260,000 | 294,709 | ||
6.625% 10/1/17 | 582,000 | 692,618 | ||
Mack-Cali Realty LP: | ||||
2.5% 12/15/17 | 439,000 | 444,855 | ||
4.5% 4/18/22 | 185,000 | 196,853 | ||
7.75% 8/15/19 | 64,000 | 81,052 | ||
Post Apartment Homes LP 3.375% 12/1/22 | 412,000 | 409,643 | ||
Prime Property Funding, Inc.: | ||||
5.125% 6/1/15 (d) | 189,000 | 199,781 | ||
5.5% 1/15/14 (d) | 144,000 | 148,345 | ||
5.7% 4/15/17 (d) | 295,000 | 325,592 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Real Estate Management & Development - continued | ||||
Regency Centers LP: | ||||
4.95% 4/15/14 | $ 92,000 | $ 95,912 | ||
5.25% 8/1/15 | 522,000 | 568,876 | ||
5.875% 6/15/17 | 160,000 | 184,235 | ||
Simon Property Group LP: | ||||
2.8% 1/30/17 | 142,000 | 149,841 | ||
4.2% 2/1/15 | 234,000 | 247,267 | ||
Tanger Properties LP: | ||||
6.125% 6/1/20 | 606,000 | 742,332 | ||
6.15% 11/15/15 | 115,000 | 130,414 | ||
Ventas Realty LP 2% 2/15/18 | 393,000 | 394,096 | ||
| 12,238,797 | |||
TOTAL FINANCIALS | 137,829,299 | |||
HEALTH CARE - 1.9% | ||||
Biotechnology - 0.1% | ||||
Amgen, Inc. 5.85% 6/1/17 | 446,000 | 528,021 | ||
Celgene Corp. 2.45% 10/15/15 | 56,000 | 58,076 | ||
| 586,097 | |||
Health Care Providers & Services - 1.1% | ||||
Aetna, Inc.: | ||||
1.5% 11/15/17 | 77,000 | 77,277 | ||
2.75% 11/15/22 | 310,000 | 302,645 | ||
Coventry Health Care, Inc.: | ||||
5.95% 3/15/17 | 264,000 | 307,398 | ||
6.3% 8/15/14 | 546,000 | 586,096 | ||
Express Scripts, Inc.: | ||||
3.125% 5/15/16 | 555,000 | 585,764 | ||
6.25% 6/15/14 | 299,000 | 319,519 | ||
McKesson Corp. 0.95% 12/4/15 | 120,000 | 120,364 | ||
Medco Health Solutions, Inc. 2.75% 9/15/15 | 1,108,000 | 1,158,035 | ||
UnitedHealth Group, Inc.: | ||||
1.4% 10/15/17 | 128,000 | 128,576 | ||
2.75% 2/15/23 | 105,000 | 103,790 | ||
3.875% 10/15/20 | 759,000 | 831,791 | ||
WellPoint, Inc.: | ||||
1.25% 9/10/15 | 180,000 | 181,392 | ||
1.875% 1/15/18 | 326,000 | 329,413 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
HEALTH CARE - continued | ||||
Health Care Providers & Services - continued | ||||
WellPoint, Inc.: - continued | ||||
3.125% 5/15/22 | $ 620,000 | $ 621,017 | ||
4.35% 8/15/20 | 760,000 | 842,750 | ||
| 6,495,827 | |||
Pharmaceuticals - 0.7% | ||||
AbbVie, Inc.: | ||||
1.75% 11/6/17 (d) | 1,062,000 | 1,075,413 | ||
2.9% 11/6/22 (d) | 620,000 | 619,778 | ||
Merck & Co., Inc. 5% 6/30/19 | 348,000 | 415,628 | ||
Novartis Capital Corp. 2.4% 9/21/22 | 500,000 | 495,187 | ||
Teva Pharmaceutical Finance II BV 3% 6/15/15 | 1,000,000 | 1,050,993 | ||
Watson Pharmaceuticals, Inc.: | ||||
1.875% 10/1/17 | 210,000 | 211,803 | ||
5% 8/15/14 | 66,000 | 69,837 | ||
Zoetis, Inc.: | ||||
1.875% 2/1/18 (d) | 96,000 | 96,340 | ||
3.25% 2/1/23 (d) | 235,000 | 236,475 | ||
| 4,271,454 | |||
TOTAL HEALTH CARE | 11,353,378 | |||
INDUSTRIALS - 0.8% | ||||
Aerospace & Defense - 0.0% | ||||
BAE Systems Holdings, Inc. 4.95% 6/1/14 (d) | 53,000 | 55,377 | ||
Airlines - 0.2% | ||||
Continental Airlines, Inc.: | ||||
6.648% 3/15/19 | 389,087 | 416,829 | ||
6.795% 2/2/20 | 14,595 | 15,179 | ||
6.9% 7/2/19 | 110,025 | 117,177 | ||
U.S. Airways pass-thru trust certificates: | ||||
6.85% 1/30/18 | 225,095 | 236,349 | ||
8.36% 1/20/19 | 185,844 | 203,035 | ||
| 988,569 | |||
Industrial Conglomerates - 0.3% | ||||
Covidien International Finance SA: | ||||
3.2% 6/15/22 | 620,000 | 647,661 | ||
6% 10/15/17 | 442,000 | 531,622 | ||
General Electric Co. 2.7% 10/9/22 | 512,000 | 510,962 | ||
| 1,690,245 | |||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
INDUSTRIALS - continued | ||||
Machinery - 0.2% | ||||
Deere & Co. 2.6% 6/8/22 | $ 1,300,000 | $ 1,310,004 | ||
Road & Rail - 0.1% | ||||
Burlington Northern Santa Fe LLC 3.45% 9/15/21 | 600,000 | 637,589 | ||
TOTAL INDUSTRIALS | 4,681,784 | |||
INFORMATION TECHNOLOGY - 0.9% | ||||
Computers & Peripherals - 0.1% | ||||
Hewlett-Packard Co. 2.625% 12/9/14 | 630,000 | 644,614 | ||
Electronic Equipment & Components - 0.2% | ||||
Tyco Electronics Group SA: | ||||
5.95% 1/15/14 | 526,000 | 549,339 | ||
6.55% 10/1/17 | 356,000 | 425,589 | ||
| 974,928 | |||
IT Services - 0.0% | ||||
The Western Union Co. 2.375% 12/10/15 | 277,000 | 281,512 | ||
Office Electronics - 0.4% | ||||
Xerox Corp. 4.25% 2/15/15 | 2,064,000 | 2,172,030 | ||
Software - 0.2% | ||||
Oracle Corp. 3.875% 7/15/20 | 1,000,000 | 1,119,444 | ||
TOTAL INFORMATION TECHNOLOGY | 5,192,528 | |||
MATERIALS - 1.2% | ||||
Chemicals - 0.3% | ||||
Ecolab, Inc. 1.45% 12/8/17 | 335,000 | 333,482 | ||
Sherwin-Williams Co. 1.35% 12/15/17 | 620,000 | 621,456 | ||
The Dow Chemical Co.: | ||||
4.125% 11/15/21 | 594,000 | 641,954 | ||
4.25% 11/15/20 | 321,000 | 352,680 | ||
7.6% 5/15/14 | 32,000 | 34,606 | ||
| 1,984,178 | |||
Construction Materials - 0.1% | ||||
CRH America, Inc. 6% 9/30/16 | 319,000 | 363,381 | ||
Metals & Mining - 0.8% | ||||
Anglo American Capital PLC: | ||||
2.15% 9/27/13 (d) | 1,000,000 | 1,006,189 | ||
9.375% 4/8/14 (d) | 459,000 | 499,772 | ||
9.375% 4/8/19 (d) | 630,000 | 843,775 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
MATERIALS - continued | ||||
Metals & Mining - continued | ||||
Corporacion Nacional del Cobre de Chile (Codelco) 3.875% 11/3/21 (d) | $ 630,000 | $ 665,150 | ||
Rio Tinto Finance USA PLC 1.625% 8/21/17 | 940,000 | 947,934 | ||
Vale Overseas Ltd. 6.25% 1/23/17 | 403,000 | 461,010 | ||
| 4,423,830 | |||
TOTAL MATERIALS | 6,771,389 | |||
TELECOMMUNICATION SERVICES - 2.6% | ||||
Diversified Telecommunication Services - 1.7% | ||||
AT&T Broadband Corp. 8.375% 3/15/13 | 390,000 | 390,866 | ||
AT&T, Inc.: | ||||
1.4% 12/1/17 | 620,000 | 618,611 | ||
2.5% 8/15/15 | 562,000 | 585,247 | ||
CenturyLink, Inc. 6.15% 9/15/19 | 592,000 | 638,077 | ||
Deutsche Telekom International Financial BV: | ||||
3.125% 4/11/16 (d) | 923,000 | 974,126 | ||
5.25% 7/22/13 | 370,000 | 376,517 | ||
France Telecom SA 2.125% 9/16/15 | 220,000 | 226,515 | ||
Qwest Corp. 3.558% 6/15/13 (f) | 1,080,000 | 1,083,181 | ||
SBC Communications, Inc. 5.1% 9/15/14 | 950,000 | 1,013,589 | ||
Telefonica Emisiones S.A.U. 3.729% 4/27/15 | 1,278,000 | 1,313,590 | ||
Verizon Communications, Inc.: | ||||
1.1% 11/1/17 | 620,000 | 615,832 | ||
2% 11/1/16 | 1,279,000 | 1,325,914 | ||
3% 4/1/16 | 621,000 | 660,699 | ||
| 9,822,764 | |||
Wireless Telecommunication Services - 0.9% | ||||
America Movil S.A.B. de CV: | ||||
2.375% 9/8/16 | 646,000 | 668,929 | ||
3.125% 7/16/22 | 434,000 | 431,930 | ||
3.625% 3/30/15 | 600,000 | 632,227 | ||
DIRECTV Holdings LLC/DIRECTV Financing, Inc.: | ||||
2.4% 3/15/17 | 700,000 | 714,902 | ||
4.75% 10/1/14 | 1,360,000 | 1,441,595 | ||
5.875% 10/1/19 | 34,000 | 40,126 | ||
Vodafone Group PLC: | ||||
1.5% 2/19/18 | 600,000 | 599,171 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
TELECOMMUNICATION SERVICES - continued | ||||
Wireless Telecommunication Services - continued | ||||
Vodafone Group PLC: - continued | ||||
4.15% 6/10/14 | $ 346,000 | $ 360,956 | ||
5% 12/16/13 | 398,000 | 412,127 | ||
| 5,301,963 | |||
TOTAL TELECOMMUNICATION SERVICES | 15,124,727 | |||
UTILITIES - 4.1% | ||||
Electric Utilities - 2.6% | ||||
AmerenUE 6.4% 6/15/17 | 519,000 | 628,802 | ||
American Electric Power Co., Inc. 1.65% 12/15/17 | 257,000 | 257,834 | ||
Cleveland Electric Illuminating Co. 5.65% 12/15/13 | 714,000 | 739,823 | ||
Commonwealth Edison Co. 4% 8/1/20 | 600,000 | 671,943 | ||
Duke Capital LLC 5.668% 8/15/14 | 357,000 | 380,901 | ||
Duquesne Light Holdings, Inc. 6.4% 9/15/20 (d) | 48,000 | 57,725 | ||
Edison International 3.75% 9/15/17 | 431,000 | 468,384 | ||
Exelon Corp. 4.9% 6/15/15 | 415,000 | 449,999 | ||
FirstEnergy Corp.: | ||||
4.25% 3/15/23 | 600,000 | 599,556 | ||
7.375% 11/15/31 | 55,000 | 65,320 | ||
FirstEnergy Solutions Corp.: | ||||
4.8% 2/15/15 | 552,000 | 589,656 | ||
6.05% 8/15/21 | 655,000 | 779,667 | ||
Hydro-Quebec 2% 6/30/16 | 2,500,000 | 2,603,168 | ||
LG&E and KU Energy LLC: | ||||
2.125% 11/15/15 | 479,000 | 490,735 | ||
3.75% 11/15/20 | 2,000 | 2,126 | ||
Nevada Power Co.: | ||||
6.5% 5/15/18 | 1,562,000 | 1,937,680 | ||
6.5% 8/1/18 | 273,000 | 341,215 | ||
NextEra Energy Capital Holdings, Inc. 1.611% 6/1/14 | 1,040,000 | 1,050,528 | ||
Pacific Gas & Electric Co. 3.25% 9/15/21 | 95,000 | 101,163 | ||
Pennsylvania Electric Co. 6.05% 9/1/17 | 115,000 | 134,367 | ||
Pepco Holdings, Inc. 2.7% 10/1/15 | 456,000 | 473,413 | ||
PPL Capital Funding, Inc. 4.2% 6/15/22 | 700,000 | 739,411 | ||
Progress Energy, Inc. 4.4% 1/15/21 | 732,000 | 814,980 | ||
Sierra Pacific Power Co. 5.45% 9/1/13 | 270,000 | 276,333 | ||
Tampa Electric Co.: | ||||
4.1% 6/15/42 | 108,000 | 112,015 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
Tampa Electric Co.: - continued | ||||
5.4% 5/15/21 | $ 238,000 | $ 293,128 | ||
Wisconsin Electric Power Co. 2.95% 9/15/21 | 110,000 | 115,212 | ||
| 15,175,084 | |||
Gas Utilities - 0.0% | ||||
Southern Natural Gas Co. / Southern Natural Issuing Corp. 4.4% 6/15/21 | 188,000 | 206,174 | ||
Independent Power Producers & Energy Traders - 0.3% | ||||
Exelon Generation Co. LLC 5.35% 1/15/14 | 231,000 | 240,063 | ||
PPL Energy Supply LLC 6.3% 7/15/13 | 1,500,000 | 1,530,185 | ||
PSEG Power LLC 2.75% 9/15/16 | 148,000 | 154,095 | ||
| 1,924,343 | |||
Multi-Utilities - 1.2% | ||||
Ameren Illinois Co. 6.125% 11/15/17 | 62,000 | 74,641 | ||
Consolidated Edison Co. of New York, Inc. 4.45% 6/15/20 | 680,000 | 787,109 | ||
Dominion Resources, Inc.: | ||||
2.611% 9/30/66 (f) | 651,000 | 608,093 | ||
7.5% 6/30/66 (f) | 567,000 | 629,398 | ||
National Grid PLC 6.3% 8/1/16 | 248,000 | 288,308 | ||
NiSource Finance Corp.: | ||||
3.85% 2/15/23 | 700,000 | 718,612 | ||
5.25% 9/15/17 | 402,000 | 462,062 | ||
5.4% 7/15/14 | 234,000 | 248,151 | ||
5.45% 9/15/20 | 43,000 | 50,418 | ||
6.4% 3/15/18 | 230,000 | 276,115 | ||
San Diego Gas & Electric Co. 3% 8/15/21 | 600,000 | 634,238 | ||
Sempra Energy: | ||||
2.3% 4/1/17 | 1,435,000 | 1,490,049 | ||
2.875% 10/1/22 | 256,000 | 255,380 | ||
Wisconsin Energy Corp. 6.25% 5/15/67 (f) | 454,000 | 492,817 | ||
| 7,015,391 | |||
TOTAL UTILITIES | 24,320,992 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $251,238,607) |
| |||
U.S. Government and Government Agency Obligations - 29.0% | ||||
| Principal | Value | ||
U.S. Government Agency Obligations - 3.0% | ||||
Fannie Mae: | ||||
0.5% 9/28/15 | $ 5,802,000 | $ 5,815,907 | ||
0.875% 12/20/17 | 1,142,000 | 1,143,772 | ||
0.875% 2/8/18 | 1,363,000 | 1,363,581 | ||
1.625% 10/26/15 | 1,941,000 | 2,003,027 | ||
Freddie Mac: | ||||
0.75% 1/12/18 | 3,200,000 | 3,180,390 | ||
1% 9/29/17 | 3,158,000 | 3,186,337 | ||
1.75% 9/10/15 | 980,000 | 1,013,410 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 17,706,424 | |||
U.S. Treasury Obligations - 25.8% | ||||
U.S. Treasury Notes: | ||||
0.75% 6/30/17 | 11,000,000 | 11,058,432 | ||
0.875% 11/30/16 | 13,269,000 | 13,454,554 | ||
0.875% 4/30/17 | 25,246,000 | 25,543,827 | ||
0.875% 1/31/18 | 2,943,000 | 2,960,935 | ||
0.875% 7/31/19 | 22,403,000 | 22,073,945 | ||
1.25% 2/29/20 | 31,682,000 | 31,672,112 | ||
1.625% 8/15/22 | 26,205,000 | 25,785,301 | ||
1.875% 9/30/17 | 9,226,000 | 9,725,505 | ||
3.125% 1/31/17 (e) | 8,719,000 | 9,593,620 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 151,868,231 | |||
Other Government Related - 0.2% | ||||
National Credit Union Administration Guaranteed Notes Master Trust 1.4% 6/12/15 (NCUA Guaranteed) | 850,000 | 869,712 | ||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $169,517,439) |
| |||
U.S. Government Agency - Mortgage Securities - 4.6% | ||||
| ||||
Fannie Mae - 3.1% | ||||
2.207% 7/1/35 (f) | 17,421 | 18,342 | ||
2.214% 2/1/33 (f) | 39,496 | 41,404 | ||
2.225% 10/1/33 (f) | 46,496 | 48,843 | ||
2.239% 3/1/35 (f) | 32,530 | 34,294 | ||
2.281% 12/1/34 (f) | 37,800 | 39,721 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value | ||
Fannie Mae - continued | ||||
2.302% 10/1/33 (f) | $ 20,046 | $ 21,133 | ||
2.332% 3/1/35 (f) | 21,705 | 23,081 | ||
2.367% 12/1/33 (f) | 1,184,021 | 1,258,599 | ||
2.38% 7/1/35 (f) | 129,084 | 137,312 | ||
2.425% 3/1/35 (f) | 5,969 | 6,185 | ||
2.441% 10/1/35 (f) | 33,563 | 35,058 | ||
2.524% 10/1/33 (f) | 45,348 | 48,349 | ||
2.559% 6/1/36 (f) | 33,388 | 35,725 | ||
2.583% 5/1/35 (f) | 90,538 | 97,179 | ||
2.605% 7/1/34 (f) | 22,879 | 24,254 | ||
2.741% 7/1/35 (f) | 195,323 | 209,449 | ||
2.769% 11/1/36 (f) | 244,057 | 262,434 | ||
2.911% 4/1/35 (f) | 680,814 | 727,153 | ||
2.944% 7/1/37 (f) | 61,350 | 65,108 | ||
3.189% 1/1/40 (f) | 354,537 | 370,515 | ||
3.476% 3/1/40 (f) | 267,640 | 279,780 | ||
3.5% 12/1/25 to 1/1/26 | 7,419,245 | 7,869,713 | ||
3.528% 12/1/39 (f) | 105,367 | 110,086 | ||
3.617% 3/1/40 (f) | 363,584 | 382,230 | ||
4% 8/1/18 | 365,989 | 391,428 | ||
4.5% 6/1/19 to 3/1/35 | 422,354 | 454,619 | ||
5.5% 11/1/34 | 2,127,339 | 2,339,289 | ||
6% 5/1/16 to 4/1/17 | 117,230 | 124,992 | ||
6.5% 12/1/13 to 8/1/36 | 1,319,718 | 1,485,153 | ||
7% 9/1/18 to 6/1/33 | 574,256 | 663,964 | ||
7.5% 8/1/17 to 3/1/28 | 182,081 | 211,896 | ||
8.5% 5/1/21 to 9/1/25 | 32,652 | 37,938 | ||
9.5% 2/1/25 | 1,125 | 1,232 | ||
10.5% 8/1/20 | 9,586 | 11,177 | ||
12.5% 12/1/13 to 4/1/15 | 2,645 | 2,818 | ||
TOTAL FANNIE MAE | 17,870,453 | |||
Freddie Mac - 1.5% | ||||
2.373% 1/1/35 (f) | 66,687 | 71,031 | ||
2.399% 4/1/35 (f) | 358,123 | 379,591 | ||
3% 8/1/21 | 956,215 | 1,005,631 | ||
3.134% 3/1/33 (f) | 5,745 | 6,118 | ||
3.439% 10/1/35 (f) | 48,690 | 52,364 | ||
3.5% 1/1/26 | 429,070 | 458,022 | ||
3.573% 4/1/40 (f) | 250,018 | 262,796 | ||
3.604% 4/1/40 (f) | 198,748 | 209,585 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value | ||
Freddie Mac - continued | ||||
3.611% 2/1/40 (f) | $ 428,323 | $ 447,820 | ||
4.5% 8/1/18 | 726,435 | 774,366 | ||
5% 3/1/19 | 1,220,344 | 1,305,912 | ||
5.5% 3/1/34 to 7/1/35 | 3,515,885 | 3,861,009 | ||
8.5% 9/1/24 to 8/1/27 | 39,328 | 47,021 | ||
11.5% 10/1/15 | 884 | 916 | ||
TOTAL FREDDIE MAC | 8,882,182 | |||
Ginnie Mae - 0.0% | ||||
7% 7/15/28 to 11/15/28 | 137,378 | 159,420 | ||
7.5% 2/15/28 to 10/15/28 | 4,019 | 4,735 | ||
8% 6/15/24 | 146 | 170 | ||
8.5% 10/15/21 | 33,053 | 38,208 | ||
11% 7/20/19 to 8/20/19 | 2,462 | 2,764 | ||
TOTAL GINNIE MAE | 205,297 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $26,169,710) |
| |||
Asset-Backed Securities - 7.3% | ||||
| ||||
Accredited Mortgage Loan Trust Series 2005-1 Class M1, 0.6717% 4/25/35 (f) | 67,559 | 62,564 | ||
ACE Securities Corp. Home Equity Loan Trust: | ||||
Series 2004-HE1 Class M2, 1.8517% 3/25/34 (f) | 49,572 | 48,453 | ||
Series 2005-HE2 Class M2, 0.8767% 4/25/35 (f) | 5,581 | 5,523 | ||
Ally Auto Receivables Trust: | ||||
Series 2010-4 Class A4, 1.35% 12/15/15 | 570,000 | 575,276 | ||
Series 2010-5 Class A4, 1.75% 3/15/16 | 240,000 | 243,252 | ||
Series 2011-1 Class A4, 2.23% 3/15/16 | 1,090,000 | 1,111,020 | ||
Series 2011-2 Class A3, 1.18% 4/15/15 | 345,237 | 346,213 | ||
Series 2011-3 Class A3, 0.97% 8/17/15 | 580,230 | 581,920 | ||
Series 2012-1 Class A2, 0.71% 9/15/14 | 364,520 | 364,945 | ||
Series 2012-SN1 Class A3, 0.57% 8/20/15 | 860,000 | 860,519 | ||
Ally Master Owner Trust: | ||||
Series 2010-3 Class A, 2.88% 4/15/15 (d) | 320,000 | 320,932 | ||
Series 2011-1 Class A2, 2.15% 1/15/16 | 2,260,000 | 2,291,215 | ||
Series 2011-3 Class A2, 1.81% 5/15/16 | 1,240,000 | 1,258,657 | ||
Series 2011-5 Class A1, 0.8512% 6/15/15 (f) | 1,240,000 | 1,241,125 | ||
Series 2012-1 Class A2, 1.44% 2/15/17 | 1,260,000 | 1,275,478 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Ally Master Owner Trust: - continued | ||||
Series 2012-2 Class A, 0.7012% 3/15/16 (f) | $ 700,000 | $ 700,271 | ||
Series 2012-3 Class A2, 1.21% 6/15/17 | 1,250,000 | 1,256,822 | ||
Series 2012-5 Class A, 1.54% 9/16/19 | 1,500,000 | 1,508,225 | ||
AmeriCredit Auto Receivables Trust: | ||||
Series 2010-4 Class A3, 1.27% 4/8/15 | 419,548 | 420,089 | ||
Series 2011-1 Class A3, 1.39% 9/8/15 | 300,204 | 301,117 | ||
Series 2011-2 Class A3, 1.61% 10/8/15 | 815,587 | 818,884 | ||
Series 2011-3 Class A3, 1.17% 1/8/16 | 330,000 | 331,265 | ||
Series 2011-4 Class AS, 0.92% 3/9/15 | 263,815 | 264,040 | ||
Series 2011-5 Class A2, 1.19% 8/8/15 | 127,617 | 127,915 | ||
Series 2012-2 Class A3, 1.05% 10/11/16 | 380,000 | 383,181 | ||
Series 2012-5 Class A3, 0.92% 6/8/17 | 920,000 | 919,995 | ||
Ameriquest Mortgage Securities, Inc. pass-thru certificates: | ||||
Series 2003-10 Class M1, 0.9017% 12/25/33 (f) | 8,192 | 7,426 | ||
Series 2004-R2 Class M3, 1.0267% 4/25/34 (f) | 11,219 | 8,595 | ||
Series 2005-R2 Class M1, 0.6517% 4/25/35 (f) | 176,341 | 172,015 | ||
Argent Securities, Inc. pass-thru certificates: | ||||
Series 2003-W7 Class A2, 0.9817% 3/25/34 (f) | 4,092 | 3,537 | ||
Series 2004-W11 Class M2, 1.2517% 11/25/34 (f) | 63,962 | 58,443 | ||
Series 2004-W7 Class M1, 1.0267% 5/25/34 (f) | 185,706 | 173,860 | ||
Series 2006-W4 Class A2C, 0.3617% 5/25/36 (f) | 144,843 | 51,083 | ||
Asset Backed Securities Corp. Home Equity Loan Trust: | ||||
Series 2004-HE2 Class M1, 1.0267% 4/25/34 (f) | 191,012 | 176,822 | ||
Series 2006-HE2 Class M1, 0.5717% 3/25/36 (f) | 6,627 | 74 | ||
Bear Stearns Asset Backed Securities I Trust Series 2005-HE2 Class M2, 1.3267% 2/25/35 (f) | 427,000 | 314,999 | ||
BMW Floorplan Master Owner Trust Series 2012-1A Class A, 0.6057% 9/15/17 (d)(f) | 1,900,000 | 1,897,419 | ||
Capital Trust Ltd. Series 2004-1: | ||||
Class A2, 0.6507% 7/20/39 (d)(f) | 6,296 | 5,753 | ||
Class B, 0.9507% 7/20/39 (d)(f) | 30,070 | 13,731 | ||
Class C, 1.3007% 7/20/39 (d)(f) | 38,684 | 12 | ||
Carrington Mortgage Loan Trust Series 2007-RFC1 Class A3, 0.3417% 12/25/36 (f) | 205,465 | 105,917 | ||
Chase Issuance Trust Series 2012-A8 Class A8, 0.54% 10/16/17 | 2,500,000 | 2,493,417 | ||
Countrywide Asset-Backed Certificates Trust Series 2007-4 Class A1A, 0.3237% 9/25/37 (f) | 5,644 | 5,633 | ||
Countrywide Home Loans, Inc.: | ||||
Series 2003-BC1 Class B1, 5.4322% 3/25/32 (MGIC Investment Corp. Insured) (f) | 28,427 | 27,449 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Countrywide Home Loans, Inc.: - continued | ||||
Series 2004-3 Class M4, 1.6567% 4/25/34 (f) | $ 18,137 | $ 8,591 | ||
Series 2004-4 Class M2, 0.9967% 6/25/34 (f) | 50,135 | 44,474 | ||
Discover Card Master Trust Series 2012-A1 Class A1, 0.81% 8/15/17 | 1,410,000 | 1,419,722 | ||
Enterprise Fleet Financing LLC Series 2012-1 Class A2, 1.14% 11/20/17 (d) | 780,000 | 784,436 | ||
Fannie Mae Series 2004-T5 Class AB3, 1.0332% 5/28/35 (f) | 4,436 | 3,424 | ||
Fieldstone Mortgage Investment Corp. Series 2004-3 Class M5, 2.3767% 8/25/34 (f) | 33,155 | 24,171 | ||
Ford Credit Auto Lease Trust Series 2012-A Class A3, 0.85% 1/15/15 | 400,000 | 401,252 | ||
Ford Credit Auto Owner Trust Series 2011-B Class A4, 1.35% 12/15/16 | 510,000 | 517,079 | ||
Ford Credit Floorplan Master Owner Trust: | ||||
Series 2010-5 Class A1, 1.5% 9/15/15 | 640,000 | 643,707 | ||
Series 2012-2 Class A, 1.92% 1/15/19 | 1,310,000 | 1,350,999 | ||
Series 2012-4 Class A1, 0.74% 9/15/16 | 1,470,000 | 1,474,246 | ||
Series 2013-1 Class A1, 0.85% 1/15/18 | 1,320,000 | 1,319,306 | ||
Fremont Home Loan Trust Series 2005-A: | ||||
Class M3, 0.9367% 1/25/35 (f) | 81,136 | 34,613 | ||
Class M4, 1.2217% 1/25/35 (f) | 41,438 | 4,892 | ||
GCO Education Loan Funding Master Trust II Series 2007-1A Class C1L, 0.6681% 2/25/47 (d)(f) | 335,000 | 227,968 | ||
GE Business Loan Trust: | ||||
Series 2003-1 Class A, 0.6312% 4/15/31 (d)(f) | 17,527 | 16,687 | ||
Series 2006-2A: | ||||
Class A, 0.3812% 11/15/34 (d)(f) | 183,811 | 169,669 | ||
Class B, 0.4812% 11/15/34 (d)(f) | 66,692 | 56,689 | ||
Class C, 0.5812% 11/15/34 (d)(f) | 110,070 | 79,250 | ||
Class D, 0.9512% 11/15/34 (d)(f) | 41,751 | 27,973 | ||
GE Capital Credit Card Master Note Trust: | ||||
Series 2012-1 Class A, 1.03% 1/15/18 | 1,190,000 | 1,202,149 | ||
Series 2012-5 Class A, 0.97% 6/15/18 | 1,560,000 | 1,574,441 | ||
GSAMP Trust Series 2004-AR1 Class B4, 3.4154% 6/25/34 (d)(f) | 54,683 | 15,249 | ||
Guggenheim Structured Real Estate Funding Ltd. Series 2006-3 Class C, 0.7517% 9/25/46 (d)(f) | 154,789 | 152,854 | ||
Home Equity Asset Trust: | ||||
Series 2003-2 Class M1, 1.5217% 8/25/33 (f) | 44,731 | 43,584 | ||
Series 2003-3 Class M1, 1.4917% 8/25/33 (f) | 54,587 | 50,190 | ||
Series 2003-5 Class A2, 0.9017% 12/25/33 (f) | 2,817 | 2,367 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Honda Auto Receivables Owner Trust: | ||||
Series 2011-1 Class A4, 1.8% 4/17/17 | $ 330,000 | $ 334,432 | ||
Series 2011-2 Class A4, 1.55% 8/18/17 | 820,000 | 833,614 | ||
HSI Asset Securitization Corp. Trust Series 2007-HE1 Class 2A3, 0.3917% 1/25/37 (f) | 141,116 | 68,655 | ||
John Deere Owner Trust Series 2011-A Class A4, 1.96% 4/16/18 | 260,000 | 265,139 | ||
JPMorgan Mortgage Acquisition Trust: | ||||
Series 2006-NC2 Class M2, 0.5017% 7/25/36 (f) | 25,000 | 417 | ||
Series 2007-CH1 Class AV4, 0.3317% 11/25/36 (f) | 176,698 | 171,079 | ||
Keycorp Student Loan Trust: | ||||
Series 1999-A Class A2, 0.64% 12/27/29 (f) | 38,139 | 36,431 | ||
Series 2006-A Class 2C, 1.46% 3/27/42 (f) | 392,000 | 18,950 | ||
MASTR Asset Backed Securities Trust Series 2007-HE1 Class M1, 0.5017% 5/25/37 (f) | 75,858 | 849 | ||
Mercedes-Benz Auto Lease Trust Series 2011-B Class A3, 1.07% 8/15/14 (d) | 670,000 | 672,030 | ||
Mercedes-Benz Master Owner Trust Series 2012-AA Class A, 0.79% 11/15/17 (d) | 1,600,000 | 1,600,534 | ||
Meritage Mortgage Loan Trust Series 2004-1 Class M1, 0.9517% 7/25/34 (f) | 19,277 | 15,696 | ||
Merrill Lynch Mortgage Investors Trust: | ||||
Series 2003-OPT1 Class M1, 1.1767% 7/25/34 (f) | 61,301 | 53,115 | ||
Series 2006-FM1 Class A2B, 0.3117% 4/25/37 (f) | 107,393 | 89,900 | ||
Series 2006-OPT1 Class A1A, 0.4617% 6/25/35 (f) | 285,142 | 254,423 | ||
Morgan Stanley ABS Capital I Trust: | ||||
Series 2004-HE6 Class A2, 0.5417% 8/25/34 (f) | 4,895 | 4,257 | ||
Series 2004-NC8 Class M6, 2.0767% 9/25/34 (f) | 78,383 | 39,339 | ||
Series 2005-NC1 Class M1, 0.6417% 1/25/35 (f) | 45,571 | 41,495 | ||
Series 2005-NC2 Class B1, 1.3717% 3/25/35 (f) | 47,458 | 1,934 | ||
New Century Home Equity Loan Trust Series 2005-4 Class M2, 0.7117% 9/25/35 (f) | 162,650 | 133,264 | ||
Nissan Auto Lease Trust: | ||||
Series 2011-A Class A3, 1.04% 8/15/14 | 910,000 | 912,130 | ||
Series 2011-B Class A3, 0.92% 2/16/15 | 460,000 | 461,531 | ||
Ocala Funding LLC: | ||||
Series 2005-1A Class A, 1.7007% 3/20/10 (b)(d)(f) | 64,000 | 0 | ||
Series 2006-1A Class A, 1.6007% 3/20/11 (b)(d)(f) | 134,000 | 0 | ||
Park Place Securities, Inc.: | ||||
Series 2004-WCW1: | ||||
Class M3, 1.4517% 9/25/34 (f) | 60,741 | 48,611 | ||
Class M4, 1.6517% 9/25/34 (f) | 77,891 | 22,885 | ||
Series 2005-WCH1 Class M4, 1.0317% 1/25/36 (f) | 126,217 | 102,532 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-HE1 Class A, 1.0017% 4/25/33 (f) | $ 582 | $ 542 | ||
Santander Drive Auto Receivables Trust: | ||||
Series 2011-3 Class A2, 1.11% 8/15/14 | 104,626 | 104,727 | ||
Series 2011-4 Class A2, 1.37% 3/16/15 | 228,337 | 228,918 | ||
Series 2012-1 Class A2, 1.25% 4/15/15 | 302,965 | 303,865 | ||
Series 2012-3 Class A3, 1.08% 4/15/16 | 420,000 | 422,599 | ||
Series 2012-4 Class A3, 1.04% 8/15/16 | 500,000 | 503,388 | ||
Saxon Asset Securities Trust Series 2004-1 Class M1, 0.9967% 3/25/35 (f) | 135,706 | 112,730 | ||
Sierra Receivables Funding Co. Series 2007-1A Class A2, 0.3547% 3/20/19 (FGIC Insured) (d)(f) | 36,798 | 36,554 | ||
SLM Private Credit Student Loan Trust Series 2004-A Class C, 1.258% 6/15/33 (f) | 143,893 | 98,324 | ||
Structured Asset Investment Loan Trust Series 2004-8 Class M5, 1.9267% 9/25/34 (f) | 6,568 | 2,739 | ||
SVO VOI Mortgage Corp. Series 2006-AA Class A, 5.28% 2/20/24 (d) | 48,689 | 49,495 | ||
Terwin Mortgage Trust Series 2003-4HE Class A1, 1.0617% 9/25/34 (f) | 2,472 | 2,239 | ||
Trapeza CDO XII Ltd./Trapeza CDO XII, Inc. Series 2007-12A Class B, 0.865% 4/6/42 (d)(f) | 314,337 | 3,929 | ||
Whinstone Capital Management Ltd. Series 1A Class B3, 2.101% 10/25/44 (d)(f) | 203,978 | 178,481 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $41,882,320) |
| |||
Collateralized Mortgage Obligations - 3.1% | ||||
| ||||
Private Sponsor - 1.1% | ||||
Arran Residential Mortgages Funding PLC floater Series 2011-1A Class A1C, 1.4901% 11/19/47 (d)(f) | 159,271 | 159,602 | ||
Credit Suisse Mortgage Capital Certificates: | ||||
floater Series 2011-7R Class A1, 1.4597% 8/28/47 (d)(f) | 269,848 | 267,975 | ||
sequential payer Series 2010-16 Class A1, 3% 6/25/50 (d) | 143,179 | 144,107 | ||
Granite Master Issuer PLC floater: | ||||
Series 2005-4 Class C2, 1.3007% 12/20/54 (f) | 25,291 | 21,522 | ||
Series 2006-1A: | ||||
Class A5, 0.3407% 12/20/54 (d)(f) | 1,239,109 | 1,214,326 | ||
Class C2, 1.4007% 12/20/54 (d)(f) | 578,000 | 491,878 | ||
Series 2006-2 Class C1, 1.1407% 12/20/54 (f) | 463,000 | 394,013 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
Private Sponsor - continued | ||||
Granite Master Issuer PLC floater: - continued | ||||
Series 2006-3 Class C2, 1.2007% 12/20/54 (f) | $ 128,000 | $ 108,928 | ||
Series 2006-4: | ||||
Class B1, 0.3807% 12/20/54 (f) | 521,000 | 486,093 | ||
Class C1, 0.9607% 12/20/54 (f) | 319,000 | 271,469 | ||
Class M1, 0.5407% 12/20/54 (f) | 137,000 | 122,615 | ||
Series 2007-1: | ||||
Class 1C1, 0.8007% 12/20/54 (f) | 258,000 | 219,558 | ||
Class 1M1, 0.5007% 12/20/54 (f) | 172,000 | 153,940 | ||
Class 2C1, 1.0607% 12/20/54 (f) | 117,000 | 99,567 | ||
Class 2M1, 0.7007% 12/20/54 (f) | 222,000 | 198,690 | ||
Series 2007-2 Class 2C1, 1.0622% 12/17/54 (f) | 308,000 | 262,108 | ||
Granite Mortgages Series 2003-2 Class 1A3, 0.802% 7/20/43 (f) | 252,254 | 249,315 | ||
Granite Mortgages PLC floater: | ||||
Series 2003-3 Class 1C, 2.752% 1/20/44 (f) | 36,767 | 35,318 | ||
Series 2004-1 Class 2A1, 0.629% 3/20/44 (f) | 1,146,017 | 1,132,666 | ||
MASTR Adjustable Rate Mortgages Trust Series 2007-3 Class 22A2, 0.4117% 5/25/47 (f) | 57,838 | 42,282 | ||
Merrill Lynch Alternative Note Asset Trust floater Series 2007-OAR1 Class A1, 0.3717% 2/25/37 (f) | 117,564 | 101,518 | ||
RESI Finance LP/RESI Finance DE Corp. floater Series 2003-B: | ||||
Class B5, 2.5492% 7/10/35 (d)(f) | 109,416 | 96,254 | ||
Class B6, 3.0492% 7/10/35 (d)(f) | 182,025 | 156,781 | ||
Residential Funding Securities Corp. floater Series 2003-RP2 Class A1, 0.6517% 6/25/33 (d)(f) | 12,504 | 12,169 | ||
Sequoia Mortgage Trust floater Series 2004-6 Class A3B, 1.3885% 7/20/34 (f) | 3,625 | 3,395 | ||
TOTAL PRIVATE SPONSOR | 6,446,089 | |||
U.S. Government Agency - 2.0% | ||||
Fannie Mae: | ||||
pass-thru certificates Series 2012-127 Class DH, 4% 11/25/27 | 936,411 | 1,005,508 | ||
planned amortization class Series 2002-9 Class PC, 6% 3/25/17 | 30,161 | 32,144 | ||
sequential payer: | ||||
Series 2002-56 Class MC, 5.5% 9/25/17 | 100,819 | 106,448 | ||
Series 2004-86 Class KC, 4.5% 5/25/19 | 53,697 | 55,007 | ||
Series 2010-123 Class DL, 3.5% 11/25/25 | 303,719 | 316,720 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
Series 2010-143 Class B, 3.5% 12/25/25 | $ 474,159 | $ 498,613 | ||
Series 2013-16 Class GP, 3% 3/25/33 | 3,000,000 | 3,221,250 | ||
Freddie Mac: | ||||
floater Series 3346 Class FA, 0.4312% 2/15/19 (f) | 416,909 | 417,492 | ||
planned amortization class: | ||||
Series 2356 Class GD, 6% 9/15/16 | 107,887 | 115,107 | ||
Series 2363 Class PF, 6% 9/15/16 | 133,943 | 142,055 | ||
Series 3820 Class DA, 4% 11/15/35 | 495,836 | 540,882 | ||
Series 3777 Class AC, 3.5% 12/15/25 | 1,087,661 | 1,148,475 | ||
Series 3949 Class MK, 4.5% 10/15/34 | 340,000 | 380,816 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
floater: | ||||
Series 2010-53 Class FC, 1.0247% 4/20/40 (f) | 453,994 | 461,347 | ||
Series 2012-149 Class MF, 0.4547% 12/20/42 (f) | 1,883,260 | 1,882,322 | ||
floater sequential payer Series 2011-150 Class D, 3% 4/20/37 | 349,599 | 358,264 | ||
Series 2012-97 Class JF, 0.4517% 8/16/42 (f) | 815,971 | 817,046 | ||
TOTAL U.S. GOVERNMENT AGENCY | 11,499,496 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $15,304,071) |
| |||
Commercial Mortgage Securities - 6.4% | ||||
| ||||
7 WTC Depositor LLC Trust Series 2012-7WTC Class A, 4.0824% 3/13/31 (d) | 890,000 | 934,203 | ||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.4302% 2/14/43 (f)(h) | 92,757 | 3,044 | ||
Banc of America Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2004-2 Class A4, 4.153% 11/10/38 | 217,288 | 219,109 | ||
Series 2006-2 Class AAB, 5.7141% 5/10/45 (f) | 146,580 | 154,079 | ||
Series 2006-5 Class A3, 5.39% 9/10/47 | 301,000 | 316,577 | ||
Series 2006-6 Class A3, 5.369% 10/10/45 | 432,000 | 468,078 | ||
Series 2007-4 Class A3, 5.806% 2/10/51 (f) | 144,747 | 152,315 | ||
Series 2001-3 Class H, 6.562% 4/11/37 (d) | 121,000 | 121,684 | ||
Series 2006-6 Class E, 5.619% 10/10/45 (d) | 125,000 | 12,102 | ||
Series 2007-3 Class A3, 5.5925% 6/10/49 (f) | 361,000 | 361,007 | ||
Banc of America Large Loan, Inc. floater Series 2006-BIX1 Class G, 0.5312% 10/15/19 (d)(f) | 48,471 | 47,987 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Banc of America REMIC Trust Series 2012-CLRN Class A1, 1.3512% 8/15/17 (d)(f) | $ 1,080,000 | $ 1,089,792 | ||
Bayview Commercial Asset Trust: | ||||
floater: | ||||
Series 2003-2 Class M1, 1.0517% 12/25/33 (d)(f) | 6,164 | 4,508 | ||
Series 2005-3A: | ||||
Class A2, 0.6017% 11/25/35 (d)(f) | 57,417 | 48,069 | ||
Class M1, 0.6417% 11/25/35 (d)(f) | 6,744 | 4,376 | ||
Class M2, 0.6917% 11/25/35 (d)(f) | 8,563 | 5,463 | ||
Class M3, 0.7117% 11/25/35 (d)(f) | 7,663 | 4,790 | ||
Class M4, 0.8017% 11/25/35 (d)(f) | 9,548 | 4,625 | ||
Series 2005-4A: | ||||
Class A2, 0.5917% 1/25/36 (d)(f) | 135,035 | 106,510 | ||
Class B1, 1.6017% 1/25/36 (d)(f) | 11,669 | 1,801 | ||
Class M1, 0.6517% 1/25/36 (d)(f) | 43,560 | 24,205 | ||
Class M2, 0.6717% 1/25/36 (d)(f) | 13,068 | 6,862 | ||
Class M3, 0.7017% 1/25/36 (d)(f) | 19,085 | 9,833 | ||
Class M4, 0.8117% 1/25/36 (d)(f) | 10,555 | 5,123 | ||
Class M5, 0.8517% 1/25/36 (d)(f) | 10,555 | 3,722 | ||
Class M6, 0.9017% 1/25/36 (d)(f) | 11,211 | 3,015 | ||
Series 2006-1: | ||||
Class A2, 0.5617% 4/25/36 (d)(f) | 20,926 | 16,946 | ||
Class M1, 0.5817% 4/25/36 (d)(f) | 7,485 | 4,823 | ||
Class M2, 0.6017% 4/25/36 (d)(f) | 7,908 | 4,898 | ||
Class M3, 0.6217% 4/25/36 (d)(f) | 6,804 | 4,053 | ||
Class M4, 0.7217% 4/25/36 (d)(f) | 3,856 | 2,217 | ||
Class M5, 0.7617% 4/25/36 (d)(f) | 3,742 | 2,058 | ||
Class M6, 0.8417% 4/25/36 (d)(f) | 7,462 | 3,140 | ||
Series 2006-2A: | ||||
Class A1, 0.4317% 7/25/36 (d)(f) | 324,918 | 254,695 | ||
Class A2, 0.4817% 7/25/36 (d)(f) | 18,666 | 14,682 | ||
Class B1, 1.0717% 7/25/36 (d)(f) | 6,989 | 1,255 | ||
Class M1, 0.5117% 7/25/36 (d)(f) | 19,585 | 9,313 | ||
Class M2, 0.5317% 7/25/36 (d)(f) | 13,818 | 6,185 | ||
Class M3, 0.5517% 7/25/36 (d)(f) | 11,462 | 4,871 | ||
Class M4, 0.6217% 7/25/36 (d)(f) | 7,740 | 1,917 | ||
Class M5, 0.6717% 7/25/36 (d)(f) | 9,513 | 2,229 | ||
Class M6, 0.7417% 7/25/36 (d)(f) | 14,193 | 2,969 | ||
Series 2006-3A: | ||||
Class M4, 0.6317% 10/25/36 (d)(f) | 15,624 | 2,364 | ||
Class M5, 0.6817% 10/25/36 (d)(f) | 18,450 | 978 | ||
Series 2006-4A Class M6, 0.7217% 12/25/36 (d)(f) | 13,743 | 440 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Bayview Commercial Asset Trust: - continued | ||||
floater: | ||||
Series 2007-1 Class A2, 0.4717% 3/25/37 (d)(f) | $ 89,293 | $ 51,646 | ||
Series 2007-2A: | ||||
Class A1, 0.4717% 7/25/37 (d)(f) | 86,314 | 60,455 | ||
Class A2, 0.5217% 7/25/37 (d)(f) | 80,696 | 39,373 | ||
Class M1, 0.5717% 7/25/37 (d)(f) | 28,337 | 7,790 | ||
Class M2, 0.6117% 7/25/37 (d)(f) | 15,309 | 2,613 | ||
Class M3, 0.6917% 7/25/37 (d)(f) | 15,443 | 1,553 | ||
Class M4, 0.8517% 7/25/37 (d)(f) | 31,478 | 1,930 | ||
Class M5, 0.9517% 7/25/37 (d)(f) | 27,733 | 1,234 | ||
Class M6, 1.2017% 7/25/37 (d)(f) | 17,783 | 155 | ||
Series 2007-3: | ||||
Class A2, 0.4917% 7/25/37 (d)(f) | 79,886 | 41,585 | ||
Class B1, 1.1517% 7/25/37 (d)(f) | 19,656 | 1,502 | ||
Class B2, 1.8017% 7/25/37 (d)(f) | 8,391 | 448 | ||
Class M1, 0.5117% 7/25/37 (d)(f) | 17,721 | 5,985 | ||
Class M2, 0.5417% 7/25/37 (d)(f) | 19,013 | 5,309 | ||
Class M3, 0.5717% 7/25/37 (d)(f) | 29,331 | 6,373 | ||
Class M4, 0.7017% 7/25/37 (d)(f) | 46,409 | 7,826 | ||
Class M5, 0.8017% 7/25/37 (d)(f) | 24,124 | 3,453 | ||
Class M6, 1.0017% 7/25/37 (d)(f) | 18,274 | 2,207 | ||
Series 2007-4A: | ||||
Class M1, 1.1517% 9/25/37 (d)(f) | 33,246 | 3,091 | ||
Class M2, 1.2517% 9/25/37 (d)(f) | 33,246 | 2,557 | ||
Class M4, 1.8017% 9/25/37 (d)(f) | 83,833 | 4,092 | ||
Class M5, 1.9517% 9/25/37 (d)(f) | 53,327 | 1,700 | ||
Series 2007-5A, Class IO, 4.186% 10/25/37 (d)(f)(h) | 863,773 | 71,919 | ||
Bear Stearns Commercial Mortgage Securities Trust: | ||||
floater: | ||||
Series 2006-BBA7: | ||||
Class H, 0.8512% 3/15/19 (d)(f) | 111,360 | 110,275 | ||
Class J, 1.0512% 3/15/19 (d)(f) | 146,405 | 139,191 | ||
Series 2007-BBA8: | ||||
Class D, 0.4512% 3/15/22 (d)(f) | 76,569 | 72,317 | ||
Class E, 0.5012% 3/15/22 (d)(f) | 394,020 | 364,257 | ||
Class F, 0.5512% 3/15/22 (d)(f) | 241,475 | 218,405 | ||
Class G, 0.6012% 3/15/22 (d)(f) | 62,931 | 55,660 | ||
Class H, 0.7512% 3/15/22 (d)(f) | 76,569 | 66,191 | ||
Class J, 0.9012% 3/15/22 (d)(f) | 76,569 | 64,277 | ||
sequential payer Series 2004-PWR3 Class A3, 4.487% 2/11/41 | 6,369 | 6,368 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Bear Stearns Commercial Mortgage Securities Trust: - continued | ||||
Series 2006-PW14 Class X2, 0.6687% 12/11/38 (d)(f)(h) | $ 2,038,198 | $ 11,375 | ||
Series 2006-T24 Class X2, 0.4454% 10/12/41 (d)(f)(h) | 367,020 | 1,192 | ||
Series 2007-PW18 Class X2, 0.3087% 6/11/50 (d)(f)(h) | 13,976,215 | 120,126 | ||
Series 2007-T28 Class X2, 0.1575% 9/11/42 (d)(f)(h) | 7,618,124 | 35,188 | ||
C-BASS Trust floater Series 2006-SC1 Class A, 0.4717% 5/25/36 (d)(f) | 73,860 | 68,881 | ||
CDC Commercial Mortgage Trust Series 2002-FX1: | ||||
Class G, 6.625% 5/15/35 (d) | 254,000 | 264,748 | ||
Class XCL, 1.3266% 5/15/35 (d)(f)(h) | 852,830 | 13,391 | ||
Citigroup Commercial Mortgage Trust: | ||||
floater Series 2006-FL2 Class H, 0.5712% 8/15/21 (d)(f) | 9,315 | 8,952 | ||
Series 2008-C7 Class A2B, 6.0632% 12/10/49 (f) | 128,953 | 130,080 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2007-CD4 Class A3, 5.293% 12/11/49 | 210,000 | 217,097 | ||
Cobalt CMBS Commercial Mortgage Trust: | ||||
sequential payer Series 2007-C3 Class A3, 5.8027% 5/15/46 (f) | 216,000 | 230,146 | ||
Series 2006-C1 Class B, 5.359% 8/15/48 | 648,000 | 73,682 | ||
Series 2007-C2 Class B, 5.617% 4/15/47 (f) | 241,000 | 107,438 | ||
COMM Mortgage Trust Series 2013-LC6 Class ASB, 2.478% 1/10/46 | 1,180,000 | 1,204,296 | ||
COMM pass-thru certificates: | ||||
floater: | ||||
Series 2001-J2A Class A2F, 0.7022% 7/16/34 (d)(f) | 205 | 205 | ||
Series 2005-F10A Class J, 1.0512% 4/15/17 (d)(f) | 14,447 | 12,887 | ||
Series 2005-FL11: | ||||
Class C, 0.5012% 11/15/17 (d)(f) | 132,785 | 126,055 | ||
Class D, 0.5412% 11/15/17 (d)(f) | 6,961 | 6,468 | ||
Class E, 0.5912% 11/15/17 (d)(f) | 24,362 | 22,396 | ||
Class F, 0.6512% 11/15/17 (d)(f) | 17,061 | 15,514 | ||
Class G, 0.7012% 11/15/17 (d)(f) | 11,826 | 10,517 | ||
Series 2006-FL12 Class AJ, 0.3312% 12/15/20 (d)(f) | 308,000 | 295,232 | ||
sequential payer: | ||||
Series 2006-C8: | ||||
Class A3, 5.31% 12/10/46 | 615,000 | 630,782 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
COMM pass-thru certificates: - continued | ||||
sequential payer: | ||||
Series 2006-C8: | ||||
Class A4, 5.306% 12/10/46 | $ 790,000 | $ 892,819 | ||
Series 2006-CN2A: | ||||
Class A2FX, 5.449% 2/5/19 (d) | 266,721 | 268,127 | ||
Class AJFX, 5.478% 2/5/19 (d) | 380,000 | 381,300 | ||
Series 2006-C8 Class XP, 0.4673% 12/10/46 (f)(h) | 1,954,241 | 7,807 | ||
Commercial Mortgage pass-thru certificates Series 2004-LB4A Class A5, 4.84% 10/15/37 | 2,720,000 | 2,854,602 | ||
Credit Suisse Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2007-C2 Class A3, 5.542% 1/15/49 (f) | 432,000 | 493,528 | ||
Series 2007-C3 Class A4, 5.6803% 6/15/39 (f) | 130,000 | 149,346 | ||
Series 2006-C5 Class ASP, 0.6649% 12/15/39 (f)(h) | 1,217,736 | 7,053 | ||
Credit Suisse First Boston Mortgage Capital Certificates floater Series 2007-TF2A Class B, 0.5512% 4/15/22 (d)(f) | 771,000 | 676,812 | ||
Credit Suisse First Boston Mortgage Securities Corp.: | ||||
sequential payer Series 2004-C1 Class A4, 4.75% 1/15/37 | 92,331 | 94,404 | ||
Series 2001-CK6 Class AX, 1.0608% 8/15/36 (f)(h) | 45,831 | 57 | ||
Series 2001-CKN5 Class AX, 1.5108% 9/15/34 (d)(f)(h) | 192,272 | 291 | ||
Series 2003-C4 Class A4, 5.137% 8/15/36 | 348,007 | 350,231 | ||
Credit Suisse Mortgage Capital Certificates: | ||||
floater Series 2007-TFL1: | ||||
Class B, 0.3512% 2/15/22 (d)(f) | 82,000 | 79,527 | ||
Class C: | ||||
0.3712% 2/15/22 (d)(f) | 212,546 | 199,760 | ||
0.4712% 2/15/22 (d)(f) | 75,912 | 71,118 | ||
Class F, 0.5212% 2/15/22 (d)(f) | 151,805 | 142,142 | ||
Series 2007-C1: | ||||
Class ASP, 0.381% 2/15/40 (f)(h) | 3,133,099 | 11,558 | ||
Class B, 5.487% 2/15/40 (d)(f) | 330,000 | 47,685 | ||
Extended Stay America Trust floater Series 2013-ESFL: | ||||
Class A1FL, 1.008% 12/5/31 (d)(f) | 480,000 | 480,144 | ||
Class A2FL, 0.908% 12/5/31 (d)(f) | 630,000 | 630,778 | ||
Freddie Mac: | ||||
Multi-family pass-thru certificates sequential payer Series K017 Class A1, 1.891% 12/25/20 | 1,320,608 | 1,365,359 | ||
Series K707 Class A1, 1.615% 9/25/18 | 820,470 | 841,443 | ||
GE Capital Commercial Mortgage Corp.: | ||||
sequential payer Series 2007-C1 Class A4, 5.543% 12/10/49 | 1,136,000 | 1,288,959 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
GE Capital Commercial Mortgage Corp.: - continued | ||||
Series 2001-1 Class X1, 1.8773% 5/15/33 (d)(f)(h) | $ 99,949 | $ 1,521 | ||
Series 2007-C1 Class XP, 0.1604% 12/10/49 (f)(h) | 2,818,779 | 6,227 | ||
GMAC Commercial Mortgage Securities, Inc. sequential payer Series 2003-C2 Class A2, 5.4417% 5/10/40 (f) | 266,688 | 269,233 | ||
Greenwich Capital Commercial Funding Corp.: | ||||
floater Series 2006-FL4 Class B, 0.3892% 11/5/21 (d)(f) | 81,000 | 77,908 | ||
sequential payer: | ||||
Series 2007-GG11 Class A2, 5.597% 12/10/49 | 272,274 | 275,630 | ||
Series 2007-GG9 Class A4, 5.444% 3/10/39 | 1,090,000 | 1,241,897 | ||
Series 2007-GG11 Class A1, 0.2381% 12/10/49 (d)(f)(h) | 3,452,552 | 16,987 | ||
GS Mortgage Securities Corp. II: | ||||
floater: | ||||
Series 2006-FL8A: | ||||
Class E, 0.5777% 6/6/20 (d)(f) | 39,222 | 39,139 | ||
Class F, 0.6477% 6/6/20 (d)(f) | 95,176 | 94,858 | ||
Series 2007-EOP: | ||||
Class A1, 1.1031% 3/6/20 (d)(f) | 553,670 | 554,191 | ||
Class A2, 1.2601% 3/6/20 (d)(f) | 260,000 | 260,457 | ||
Class C, 2.0056% 3/6/20 (d)(f) | 806,000 | 809,865 | ||
Class D, 2.2018% 3/6/20 (d)(f) | 467,000 | 469,301 | ||
Class F, 2.6334% 3/6/20 (d)(f) | 19,000 | 19,111 | ||
Class G, 2.7903% 3/6/20 (d)(f) | 10,000 | 10,059 | ||
Class H, 3.3004% 3/6/20 (d)(f) | 7,000 | 7,045 | ||
Class J, 4.0852% 3/6/20 (d)(f) | 11,000 | 11,077 | ||
sequential payer Series 2005-GG4 Class A3, 4.607% 7/10/39 | 3,245 | 3,261 | ||
GS Mortgage Securities Trust: | ||||
sequential payer: | ||||
Series 2006-GG8 Class A2, 5.479% 11/10/39 | 78,171 | 79,305 | ||
Series 2007-GG10 Class A2, 5.778% 8/10/45 | 46,936 | 47,602 | ||
Series 2012-GC6 Class A1, 1.282% 1/10/45 | 186,506 | 188,064 | ||
JPMorgan Chase Commercial Mortgage Securities Corp.: | ||||
floater Series 2011-CCHP Class A, 2.6% 7/15/28 (d)(f) | 169,405 | 169,476 | ||
Series 2003-CB7 Class A4, 4.879% 1/12/38 (f) | 219,647 | 224,173 | ||
JPMorgan Chase Commercial Mortgage Securities Trust: | ||||
floater Series 2006-FLA2: | ||||
Class B, 0.3712% 11/15/18 (d)(f) | 120,756 | 117,314 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
JPMorgan Chase Commercial Mortgage Securities Trust: - continued | ||||
floater Series 2006-FLA2: | ||||
Class C, 0.4112% 11/15/18 (d)(f) | $ 86,034 | $ 83,115 | ||
Class D, 0.4312% 11/15/18 (d)(f) | 23,239 | 21,986 | ||
Class E, 0.4812% 11/15/18 (d)(f) | 33,957 | 31,447 | ||
Class F, 0.5312% 11/15/18 (d)(f) | 50,739 | 44,959 | ||
Class G, 0.5612% 11/15/18 (d)(f) | 44,105 | 37,317 | ||
Class H, 0.7012% 11/15/18 (d)(f) | 33,965 | 27,378 | ||
sequential payer: | ||||
Series 2006-LDP9 Class A2, 5.134% 5/15/47 (f) | 60,506 | 63,456 | ||
Series 2007-LD11 Class A2, 5.7974% 6/15/49 (f) | 296,049 | 305,360 | ||
Series 2007-LDPX: | ||||
Class A2 S, 5.305% 1/15/49 | 678,313 | 686,110 | ||
Class A3, 5.42% 1/15/49 | 594,000 | 678,056 | ||
Series 2006-CB17 Class A3, 5.45% 12/12/43 | 41,434 | 41,450 | ||
Series 2007-CB18 Class A3, 5.447% 6/12/47 (f) | 146,889 | 151,256 | ||
Series 2007-CB19: | ||||
Class B, 5.7259% 2/12/49 (f) | 18,000 | 6,425 | ||
Class C, 5.7259% 2/12/49 (f) | 48,000 | 13,277 | ||
Class D, 5.7259% 2/12/49 (f) | 51,000 | 8,599 | ||
Series 2007-LDP10 Class ES, 5.562% 1/15/49 (d)(f) | 112,000 | 4,337 | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2006-C1 Class A2, 5.084% 2/15/31 | 2,884 | 2,887 | ||
Series 2006-C7 Class A2, 5.3% 11/15/38 | 124,729 | 131,485 | ||
Series 2007-C1 Class A4, 5.424% 2/15/40 | 28,000 | 32,042 | ||
Series 2007-C2 Class A3, 5.43% 2/15/40 | 104,000 | 117,512 | ||
Series 2006-C6 Class XCP, 0.6751% 9/15/39 (f)(h) | 829,285 | 3,369 | ||
Series 2007-C1 Class XCP, 0.4249% 2/15/40 (f)(h) | 294,851 | 1,326 | ||
Series 2007-C7 Class XCP, 0.2757% 9/15/45 (f)(h) | 13,547,825 | 69,812 | ||
Lehman Brothers Floating Rate Commercial Mortgage Trust floater Series 2006-LLFA: | ||||
Class D, 0.4312% 9/15/21 (d)(f) | 69,510 | 67,292 | ||
Class E, 0.4912% 9/15/21 (d)(f) | 249,861 | 239,390 | ||
Class F, 0.5412% 9/15/21 (d)(f) | 97,418 | 92,361 | ||
Class G, 0.5612% 9/15/21 (d)(f) | 192,585 | 180,663 | ||
Class H, 0.6012% 9/15/21 (d)(f) | 49,497 | 45,443 | ||
Merrill Lynch Mortgage Trust Series 2005-LC1 Class F, 5.4232% 1/12/44 (d)(f) | 188,000 | 133,194 | ||
Merrill Lynch-CFC Commercial Mortgage Trust: | ||||
floater Series 2006-4 Class A2FL, 0.3202% 12/12/49 (f) | 12,474 | 12,434 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Merrill Lynch-CFC Commercial Mortgage Trust: - continued | ||||
sequential payer: | ||||
Series 2006-4 Class ASB, 5.133% 12/12/49 (f) | $ 138,763 | $ 145,093 | ||
Series 2007-5: | ||||
Class A3, 5.364% 8/12/48 | 83,595 | 85,308 | ||
Class A4, 5.378% 8/12/48 | 9,000 | 10,198 | ||
Series 2006-3 Class ASB, 5.382% 7/12/46 (f) | 639,938 | 657,611 | ||
Series 2006-4 Class XP, 0.6175% 12/12/49 (f)(h) | 3,000,848 | 33,913 | ||
Series 2007-6 Class B, 5.635% 3/12/51 (f) | 216,000 | 52,294 | ||
Series 2007-7 Class B, 5.7411% 6/12/50 (f) | 19,000 | 1,081 | ||
Morgan Stanley Capital I Trust: | ||||
floater: | ||||
Series 2006-XLF Class C, 1.402% 7/15/19 (d)(f) | 40,774 | 16,361 | ||
Series 2007-XLFA: | ||||
Class A2, 0.302% 10/15/20 (d)(f) | 240,866 | 238,687 | ||
Class C, 0.362% 10/15/20 (d)(f) | 124,000 | 116,957 | ||
Class D, 0.392% 10/15/20 (d)(f) | 76,067 | 70,225 | ||
Class E, 0.452% 10/15/20 (d)(f) | 95,138 | 84,978 | ||
Class F, 0.502% 10/15/20 (d)(f) | 57,094 | 49,284 | ||
Class G, 0.542% 10/15/20 (d)(f) | 70,577 | 57,394 | ||
Class H, 0.632% 10/15/20 (d)(f) | 44,426 | 30,352 | ||
Class J, 0.782% 10/15/20 (d)(f) | 25,649 | 9,059 | ||
sequential payer: | ||||
Series 2003-IQ4 Class A2, 4.07% 5/15/40 | 36,140 | 36,135 | ||
Series 2005-IQ9 Class A3, 4.54% 7/15/56 | 186,127 | 187,373 | ||
Series 2006-HQ9 Class A4, 5.731% 7/12/44 (f) | 610,000 | 690,030 | ||
Series 2006-T23 Class A3, 5.815% 8/12/41 (f) | 110,000 | 114,053 | ||
Morgan Stanley Dean Witter Capital I Trust sequential payer Series 2003-T11 Class A4, 5.15% 6/13/41 | 156,531 | 157,747 | ||
Providence Place Group Ltd. Partnership sequential payer Series 2000-C1 Class A1, 7.75% 7/20/16 (d) | 94,890 | 100,251 | ||
UBS Commercial Mortgage Trust Series 2012-C1 Class A2, 2.18% 5/10/45 | 520,000 | 539,969 | ||
Wachovia Bank Commercial Mortgage Trust: | ||||
floater: | ||||
Series 2006-WL7A: | ||||
Class A2, 0.3212% 9/15/21 (d)(f) | 633,090 | 623,148 | ||
Class E, 0.4812% 9/15/21 (d)(f) | 201,847 | 189,319 | ||
Class F, 0.5412% 9/15/21 (d)(f) | 214,060 | 198,998 | ||
Class G, 0.5612% 9/15/21 (d)(f) | 202,788 | 183,920 | ||
Class J, 0.8012% 9/15/21 (d)(f) | 45,086 | 34,218 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Wachovia Bank Commercial Mortgage Trust: - continued | ||||
floater: | ||||
Series 2007-WHL8: | ||||
Class F, 0.6812% 6/15/20 (d)(f) | $ 526,588 | $ 464,592 | ||
Class LXR1, 0.9012% 6/15/20 (d)(f) | 26,291 | 22,873 | ||
sequential payer: | ||||
Series 2006-C29 Class A3, 5.313% 11/15/48 | 573,240 | 588,417 | ||
Series 2007-C30: | ||||
Class A3, 5.246% 12/15/43 | 58,674 | 59,725 | ||
Class A4, 5.305% 12/15/43 | 64,000 | 70,122 | ||
Class A5, 5.342% 12/15/43 | 231,000 | 260,686 | ||
Series 2007-C32 Class A3, 5.7388% 6/15/49 (f) | 367,000 | 421,521 | ||
Series 2007-C33 Class A5, 5.9245% 2/15/51 (f) | 143,000 | 165,013 | ||
Series 2005-C22 Class F, 5.3875% 12/15/44 (d)(f) | 360,000 | 100,152 | ||
Series 2007-C30 Class XP, 0.4747% 12/15/43 (d)(f)(h) | 1,809,002 | 9,325 | ||
Series 2007-C31 Class C, 5.6823% 4/15/47 (f) | 59,000 | 34,228 | ||
Series 2007-C31A Class A2, 5.421% 4/15/47 | 510,989 | 513,863 | ||
WF-RBS Commercial Mortgage Trust Series 2013-C11 Class ASB, 2.63% 3/15/45 | 1,310,000 | 1,358,920 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $32,936,936) |
| |||
Municipal Securities - 0.3% | ||||
| ||||
California Gen. Oblig. 5.25% 4/1/14 | 1,500,000 | 1,566,165 | ||
Illinois Gen. Oblig. Series 2011, 5.877% 3/1/19 | 75,000 | 86,141 | ||
TOTAL MUNICIPAL SECURITIES (Cost $1,576,870) |
| |||
Foreign Government and Government Agency Obligations - 0.8% | ||||
| ||||
Brazilian Federative Republic 4.875% 1/22/21 | 500,000 | 583,750 | ||
New Brunswick Province 2.75% 6/15/18 | 1,300,000 | 1,399,351 | ||
Ontario Province 2.3% 5/10/16 | 2,820,000 | 2,962,593 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $4,659,495) |
| |||
Supranational Obligations - 1.0% | ||||
| Principal | Value | ||
International Bank for Reconstruction & Development 0.5% 4/15/16 | $ 5,950,000 | $ 5,949,000 | ||
Bank Notes - 0.1% | ||||
| ||||
Wachovia Bank NA 6% 11/15/17 | 570,000 |
| ||
Fixed-Income Funds - 0.9% | |||
Shares |
| ||
Fidelity Specialized High Income Central Fund (g) | 51,011 |
| |
Money Market Funds - 0.2% | |||
|
|
|
|
Fidelity Cash Central Fund, 0.16% (a) | 939,752 |
| |
TOTAL INVESTMENT PORTFOLIO - 99.6% (Cost $555,903,591) | 585,853,919 | ||
NET OTHER ASSETS (LIABILITIES) - 0.4% | 2,281,977 | ||
NET ASSETS - 100% | $ 588,135,896 | ||
Swap Agreements | ||||||||
Credit Default Swaps | ||||||||
Underlying | Rating | Expiration | Counterparty | Fixed | Notional | Value (1) | Upfront | Unrealized |
Sell Protection | ||||||||
Morgan Stanley ABS Capital I Inc Series 2004-NC8 Class B3 | C | Oct. 2034 | Merrill | 4.60% | $ 76,653 | $ (40,215) | $ 0 | $ (40,215) |
|
(1) Ratings are presented for credit default swaps in which the Fund has sold protection on the underlying referenced debt. Ratings for an underlying index represent a weighted average of the ratings of all securities included in the index. The value of each credit default swap and the credit rating can be measures of the current payment/performance risk. Where a credit rating is not disclosed, the value is used as the measure of the payment/performance risk. Ratings are from Moody's Investors Service, Inc. Where Moody's ratings are not available, S&P ratings are disclosed and are indicated as such. All ratings are as of the report date and do not reflect subsequent changes. |
|
(2) The notional amount of each credit default swap where the Fund has sold protection approximates the maximum potential amount of future payments that the Fund could be required to make if a credit event were to occur. |
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 are available on the SEC's website or upon request. |
(b) Non-income producing - Security is in default. |
(c) Security initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(d) 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 $60,864,019 or 10.3% of net assets. |
(e) Security or a portion of the security has been segregated as collateral for open swap agreements. At the period end, the value of securities pledged amounted to $115,533. |
(f) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
(g) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited schedule of portfolio holdings for each Fidelity Central Fund is filed with the SEC for the first and third quarters of each fiscal year on Form N-Q and is available upon request or at the SEC's website at www.sec.gov. An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro rata share of securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at advisor.fidelity.com. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request. |
(h) 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. |
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 | $ 3,505 |
Fidelity Specialized High Income Central Fund | 151,191 |
Total | $ 154,696 |
Additional information regarding the Fund's fiscal year to date purchases and sales, including the ownership percentage, of the non Money Market Central Funds is as follows: |
Fund | Value, | Purchases | Sales | Value, | % ownership, |
Fidelity Specialized High Income Central Fund | $ 5,199,627 | $ 151,191 | $ - | $ 5,439,280 | 1.4% |
Other Information |
The following is a summary of the inputs used, as of February 28, 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 | $ 269,951,471 | $ - | $ 269,715,122 | $ 236,349 |
U.S. Government and Government Agency Obligations | 170,444,367 | - | 170,444,367 | - |
U.S. Government Agency - Mortgage Securities | 26,957,932 | - | 26,957,932 | - |
Asset-Backed Securities | 43,016,835 | - | 42,296,138 | 720,697 |
Collateralized Mortgage Obligations | 17,945,585 | - | 17,945,585 | - |
Commercial Mortgage Securities | 37,926,979 | - | 37,887,745 | 39,234 |
Municipal Securities | 1,652,306 | - | 1,652,306 | - |
Foreign Government and Government Agency Obligations | 4,945,694 | - | 4,945,694 | - |
Supranational Obligations | 5,949,000 | - | 5,949,000 | - |
Bank Notes | 684,718 | - | 684,718 | - |
Fixed-Income Funds | 5,439,280 | 5,439,280 | - | - |
Money Market Funds | 939,752 | 939,752 | - | - |
Total Investments in Securities: | $ 585,853,919 | $ 6,379,032 | $ 578,478,607 | $ 996,280 |
Derivative Instruments: | ||||
Liabilities | ||||
Swap Agreements | $ (40,215) | $ - | $ (40,215) | $ - |
Value of Derivative Instruments |
The following table is a summary of the Fund's value of derivative instruments by primary risk exposure as of February 28, 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 |
Credit Risk | ||
Swap Agreements (a) | $ - | $ (40,215) |
Total Value of Derivatives | $ - | $ (40,215) |
(a) Value is disclosed on the Statement of Assets and Liabilities in the Swap agreements, at value line-items. |
Distribution of investments by country or territory of incorporation, as a percentage of total net assets, is as follows. (Unaudited) |
United States of America | 87.7% |
United Kingdom | 3.0% |
Canada | 2.4% |
Netherlands | 1.5% |
Australia | 1.2% |
Multi-National | 1.0% |
Others (Individually Less Than 1%) | 3.2% |
| 100.0% |
The information in the above table is based on the combined investments of the Fund and its pro-rata share of the investments of Fidelity's fixed-income central funds. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements
Statement of Assets and Liabilities
| February 28, 2013 (Unaudited) | |
|
|
|
Assets | ||
Investment in securities, at value - See accompanying schedule: Unaffiliated issuers (cost $549,850,732) | $ 579,474,887 |
|
Fidelity Central Funds (cost $6,052,859) | 6,379,032 |
|
Total Investments (cost $555,903,591) |
| $ 585,853,919 |
Receivable for investments sold | 3,827,996 | |
Receivable for swap agreements | 311 | |
Receivable for fund shares sold | 564,803 | |
Interest receivable | 3,333,318 | |
Distributions receivable from Fidelity Central Funds | 576 | |
Prepaid expenses | 990 | |
Other receivables | 129,364 | |
Total assets | 593,711,277 | |
|
|
|
Liabilities | ||
Payable for investments purchased | $ 3,722,255 | |
Payable for fund shares redeemed | 1,132,313 | |
Distributions payable | 89,406 | |
Swap agreements, at value | 40,215 | |
Accrued management fee | 155,243 | |
Distribution and service plan fees payable | 146,054 | |
Other affiliated payables | 105,398 | |
Other payables and accrued expenses | 184,497 | |
Total liabilities | 5,575,381 | |
|
|
|
Net Assets | $ 588,135,896 | |
Net Assets consist of: |
| |
Paid in capital | $ 588,479,602 | |
Undistributed net investment income | 2,470,674 | |
Accumulated undistributed net realized gain (loss) on investments | (32,724,493) | |
Net unrealized appreciation (depreciation) on investments | 29,910,113 | |
Net Assets | $ 588,135,896 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Statement of Assets and Liabilities - continued
| February 28, 2013 (Unaudited) | |
|
|
|
Calculation of Maximum Offering Price Class A: | $ 11.68 | |
|
|
|
Maximum offering price per share (100/97.25 of $11.68) | $ 12.01 | |
Class T: | $ 11.69 | |
|
|
|
Maximum offering price per share (100/97.25 of $11.69) | $ 12.02 | |
Class B: | $ 11.67 | |
|
|
|
Class C: | $ 11.66 | |
|
|
|
Institutional Class: | $ 11.71 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Operations
| Six months ended February 28, 2013 (Unaudited) | |
|
|
|
Investment Income |
|
|
Interest |
| $ 8,582,466 |
Income from Fidelity Central Funds |
| 154,696 |
Total income |
| 8,737,162 |
|
|
|
Expenses | ||
Management fee | $ 969,766 | |
Transfer agent fees | 530,253 | |
Distribution and service plan fees | 908,460 | |
Accounting and security lending fees | 121,558 | |
Custodian fees and expenses | 14,869 | |
Independent trustees' compensation | 1,236 | |
Registration fees | 51,879 | |
Audit | 53,369 | |
Legal | 1,890 | |
Miscellaneous | 2,347 | |
Total expenses before reductions | 2,655,627 | |
Expense reductions | (123) | 2,655,504 |
Net investment income (loss) | 6,081,658 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 3,547,252 | |
Swap agreements | 1,538 |
|
Total net realized gain (loss) |
| 3,548,790 |
Change in net unrealized appreciation (depreciation) on: Investment securities | (4,213,110) | |
Swap agreements | (3,232) | |
Total change in net unrealized appreciation (depreciation) |
| (4,216,342) |
Net gain (loss) | (667,552) | |
Net increase (decrease) in net assets resulting from operations | $ 5,414,106 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Statement of Changes in Net Assets
| Six months ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income (loss) | $ 6,081,658 | $ 15,610,469 |
Net realized gain (loss) | 3,548,790 | 15,589,917 |
Change in net unrealized appreciation (depreciation) | (4,216,342) | (3,611,564) |
Net increase (decrease) in net assets resulting | 5,414,106 | 27,588,822 |
Distributions to shareholders from net investment income | (5,892,923) | (14,195,791) |
Share transactions - net increase (decrease) | (41,440,280) | (5,031,239) |
Total increase (decrease) in net assets | (41,919,097) | 8,361,792 |
|
|
|
Net Assets | ||
Beginning of period | 630,054,993 | 621,693,201 |
End of period (including undistributed net investment income of $2,470,674 and undistributed net investment income of $2,281,939, respectively) | $ 588,135,896 | $ 630,054,993 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class A
| Six months ended February 28, 2013 | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.69 | $ 11.45 | $ 11.28 | $ 10.48 | $ 10.31 | $ 10.64 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .117 | .289 | .344 | .416 | .435 | .457 |
Net realized and unrealized gain (loss) | (.013) | .215 | .163 | .793 | .149 | (.319) |
Total from investment operations | .104 | .504 | .507 | 1.209 | .584 | .138 |
Distributions from net investment income | (.114) | (.264) | (.322) | (.372) | (.414) | (.468) |
Distributions from net realized gain | - | - | (.015) | (.037) | - | - |
Total distributions | (.114) | (.264) | (.337) | (.409) | (.414) | (.468) |
Net asset value, end of period | $ 11.68 | $ 11.69 | $ 11.45 | $ 11.28 | $ 10.48 | $ 10.31 |
Total Return B,C,D | .89% | 4.46% | 4.59% | 11.77% | 6.05% | 1.28% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | .83% A | .83% | .83% | .85% | .87% | .85% |
Expenses net of fee waivers, if any | .83% A | .83% | .83% | .85% | .87% | .85% |
Expenses net of all reductions | .83% A | .83% | .83% | .85% | .87% | .85% |
Net investment income (loss) | 2.02% A | 2.52% | 3.06% | 3.84% | 4.45% | 4.32% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 182,211 | $ 192,761 | $ 187,442 | $ 211,123 | $ 195,407 | $ 216,683 |
Portfolio turnover rate G | 117% A | 129% | 108% I | 107% I | 73% I | 81% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class T
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.70 | $ 11.45 | $ 11.29 | $ 10.48 | $ 10.32 | $ 10.64 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .119 | .292 | .348 | .420 | .440 | .462 |
Net realized and unrealized gain (loss) | (.014) | .225 | .153 | .803 | .139 | (.310) |
Total from investment operations | .105 | .517 | .501 | 1.223 | .579 | .152 |
Distributions from net investment income | (.115) | (.267) | (.326) | (.376) | (.419) | (.472) |
Distributions from net realized gain | - | - | (.015) | (.037) | - | - |
Total distributions | (.115) | (.267) | (.341) | (.413) | (.419) | (.472) |
Net asset value, end of period | $ 11.69 | $ 11.70 | $ 11.45 | $ 11.29 | $ 10.48 | $ 10.32 |
Total Return B,C,D | .90% | 4.57% | 4.53% | 11.90% | 6.00% | 1.41% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | .81% A | .80% | .80% | .81% | .82% | .82% |
Expenses net of fee waivers, if any | .81% A | .80% | .80% | .81% | .82% | .82% |
Expenses net of all reductions | .81% A | .80% | .80% | .81% | .82% | .82% |
Net investment income (loss) | 2.05% A | 2.54% | 3.09% | 3.87% | 4.50% | 4.35% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 245,697 | $ 265,426 | $ 274,215 | $ 314,110 | $ 290,428 | $ 344,229 |
Portfolio turnover rate G | 117% A | 129% | 108% I | 107% I | 73% I | 81% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class B
| Six months ended February 28, 2013 | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.68 | $ 11.43 | $ 11.27 | $ 10.47 | $ 10.30 | $ 10.63 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .075 | .206 | .264 | .339 | .369 | .385 |
Net realized and unrealized gain (loss) | (.014) | .225 | .154 | .794 | .150 | (.318) |
Total from investment operations | .061 | .431 | .418 | 1.133 | .519 | .067 |
Distributions from net investment income | (.071) | (.181) | (.243) | (.296) | (.349) | (.397) |
Distributions from net realized gain | - | - | (.015) | (.037) | - | - |
Total distributions | (.071) | (.181) | (.258) | (.333) | (.349) | (.397) |
Net asset value, end of period | $ 11.67 | $ 11.68 | $ 11.43 | $ 11.27 | $ 10.47 | $ 10.30 |
Total Return B,C,D | .53% | 3.81% | 3.77% | 11.00% | 5.35% | .60% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | 1.56% A | 1.55% | 1.55% | 1.55% | 1.54% | 1.53% |
Expenses net of fee waivers, if any | 1.56% A | 1.55% | 1.55% | 1.55% | 1.54% | 1.53% |
Expenses net of all reductions | 1.56% A | 1.55% | 1.55% | 1.55% | 1.54% | 1.53% |
Net investment income (loss) | 1.29% A | 1.79% | 2.35% | 3.13% | 3.78% | 3.64% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 4,318 | $ 5,209 | $ 7,018 | $ 10,941 | $ 11,753 | $ 15,141 |
Portfolio turnover rate G | 117% A | 129% | 108% I | 107% I | 73% I | 81% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class C
| Six months ended February 28, 2013 | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.67 | $ 11.42 | $ 11.26 | $ 10.46 | $ 10.29 | $ 10.62 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .073 | .204 | .262 | .338 | .364 | .378 |
Net realized and unrealized gain (loss) | (.013) | .225 | .154 | .794 | .150 | (.317) |
Total from investment operations | .060 | .429 | .416 | 1.132 | .514 | .061 |
Distributions from net investment income | (.070) | (.179) | (.241) | (.295) | (.344) | (.391) |
Distributions from net realized gain | - | - | (.015) | (.037) | - | - |
Total distributions | (.070) | (.179) | (.256) | (.332) | (.344) | (.391) |
Net asset value, end of period | $ 11.66 | $ 11.67 | $ 11.42 | $ 11.26 | $ 10.46 | $ 10.29 |
Total Return B,C,D | .52% | 3.79% | 3.76% | 11.00% | 5.31% | .54% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | 1.59% A | 1.57% | 1.56% | 1.56% | 1.59% | 1.59% |
Expenses net of fee waivers, if any | 1.59% A | 1.57% | 1.56% | 1.56% | 1.59% | 1.59% |
Expenses net of all reductions | 1.59% A | 1.57% | 1.56% | 1.56% | 1.59% | 1.59% |
Net investment income (loss) | 1.27% A | 1.78% | 2.33% | 3.12% | 3.73% | 3.58% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 63,167 | $ 65,425 | $ 63,435 | $ 80,043 | $ 63,750 | $ 52,529 |
Portfolio turnover rate G | 117% A | 129% | 108% I | 107% I | 73% I | 81% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Institutional Class
| Six months ended February 28, 2013 | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.72 | $ 11.48 | $ 11.31 | $ 10.50 | $ 10.34 | $ 10.66 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) D | .132 | .319 | .373 | .447 | .468 | .494 |
Net realized and unrealized gain (loss) | (.014) | .213 | .163 | .802 | .139 | (.311) |
Total from investment operations | .118 | .532 | .536 | 1.249 | .607 | .183 |
Distributions from net investment income | (.128) | (.292) | (.351) | (.402) | (.447) | (.503) |
Distributions from net realized gain | - | - | (.015) | (.037) | - | - |
Total distributions | (.128) | (.292) | (.366) | (.439) | (.447) | (.503) |
Net asset value, end of period | $ 11.71 | $ 11.72 | $ 11.48 | $ 11.31 | $ 10.50 | $ 10.34 |
Total Return B,C | 1.01% | 4.71% | 4.85% | 12.15% | 6.30% | 1.71% |
Ratios to Average Net Assets E,G | ||||||
Expenses before reductions | .58% A | .58% | .58% | .57% | .54% | .53% |
Expenses net of fee waivers, if any | .58% A | .58% | .58% | .57% | .54% | .53% |
Expenses net of all reductions | .58% A | .58% | .58% | .57% | .54% | .53% |
Net investment income (loss) | 2.28% A | 2.77% | 3.32% | 4.11% | 4.78% | 4.64% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 92,744 | $ 101,234 | $ 89,583 | $ 95,061 | $ 78,372 | $ 362,708 |
Portfolio turnover rate F | 117% A | 129% | 108% H | 107% H | 73% H | 81% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Calculated based on average shares outstanding during the period.
E 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.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Notes to Financial Statements
For the period ended February 28, 2013 (Unaudited)
1. Organization.
Fidelity Advisor® Intermediate Bond Fund (the Fund) is a fund of Fidelity Advisor Series II (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, Class C and Institutional Class shares, each of which, along with Class B shares, has equal rights as to assets and voting privileges. Class B shares are closed to new accounts and additional purchases, except for exchanges and reinvestments. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of four years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the 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.
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies 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.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the Fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the Fund. 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. The following summarizes the Fund's investment in each non-money market Fidelity Central Fund.
Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices |
Fidelity Specialized | FMR Co., Inc. (FMRC) | Seeks a high level of current income by normally investing in income-producing debt securities, with an emphasis on lower-quality debt securities. | Delayed Delivery & When Issued Securities Loans & Direct Debt Instruments Repurchase Agreements Restricted Securities
|
Semiannual Report
2. Investments in Fidelity Central Funds - continued
An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at advisor.fidelity.com. 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 contain the significant accounting policies (including investment valuation policies) of those funds 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 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)
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
3. 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 corporate bonds, bank notes, foreign government and government agency obligations, municipal securities, supranational obligations and 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 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. Swap agreements are marked-to-market daily based on valuations from third party pricing vendors or broker-supplied valuations. Pricing vendors utilize matrix pricing which considers comparisons to interest rate curves, credit spread curves, default possibilities and recovery rates. When independent prices are unavailable or unreliable, debt securities and swap agreements may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities and swap agreements 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.
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 February 28, 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
Semiannual Report
3. Significant Accounting Policies - continued
Investment Transactions and Income - continued
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.
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.
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. 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 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 swap agreements, market discount, partnerships (including allocations from Fidelity Central Funds), deferred trustees compensation, capital loss carryforwards and losses deferred due to wash sales.
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:
Gross unrealized appreciation | $ 24,660,494 |
Gross unrealized depreciation | (2,367,559) |
Net unrealized appreciation (depreciation) on securities and other investments | $ 22,292,935 |
|
|
Tax cost | $ 563,560,984 |
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
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. At August 31, 2012, capital loss carryforwards were as follows:
Fiscal year of expiration |
|
|
|
2017 | $ (4,092,917) |
2018 | (18,759,952) |
Total capital loss carryforward | $ (22,852,869) |
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 reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is currently evaluating the impact of the update's adoption on the Fund's financial statement disclosures.
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 swap agreements. 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
Semiannual Report
4. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
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:
Credit Risk | Credit risk relates to the ability of the issuer of a financial instrument to make further principal or interest payments on an obligation or commitment that it has to the Fund. |
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 swap agreements, the Fund attempts to reduce its exposure to counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement on a bilateral basis 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 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 OTC derivatives is generally the aggregate unrealized appreciation and unpaid counterparty payments in
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
4. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
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 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.
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 | Change in Net |
Credit Risk |
|
|
Swap Agreements (a) | $ 1,538 | $ (3,232) |
(a) A summary of the value of derivatives by primary risk exposure as of period end, if any, is included at the end of the Schedule of Investments and is representative of activity for the period.
Swap Agreements. A swap agreement (swap) is a contract between two parties to exchange future cash flows at periodic intervals based on a notional principal amount.
Swaps are marked-to-market daily and changes in value are reflected in the Statement of Assets and Liabilities in the swap agreements at value line items. Any upfront premiums paid or received upon entering a swap to compensate for differences between stated terms of the agreement and prevailing market conditions (e.g. credit spreads, interest rates or other factors) are recorded in net unrealized 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. 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.
Semiannual Report
4. Derivative Instruments - continued
Swap Agreements - continued
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 "Swap Agreements."
Credit Default Swaps. Credit default swaps enable the Fund to buy or sell protection against specified credit events on a single-name issuer or a traded credit index. Under the terms of a credit default swap the buyer of protection (buyer) receives credit protection in exchange for making periodic payments to the seller of protection (seller) based on a fixed percentage applied to a notional principal amount. In return for these payments, the seller will be required to make a payment upon the occurrence of one or more specified credit events. The Fund enters into credit default swaps as a seller to gain credit exposure to an issuer and/or as a buyer to obtain a measure of protection against defaults of an issuer. Periodic payments are made over the life of the contract by the buyer provided that no credit event occurs.
For credit default swaps on most corporate and sovereign issuers, credit events include bankruptcy, failure to pay or repudiation/moratorium. For credit default swaps on corporate or sovereign issuers, the obligation that may be put to the seller is not limited to the specific reference obligation described in the Schedule of Investments. For credit default swaps on asset-backed securities, a credit event may be triggered by events such as failure to pay principal, maturity extension, rating downgrade or write-down. For credit default swaps on asset-backed securities, the reference obligation described represents the security that may be put to the seller. For credit default swaps on a traded credit index, a specified credit event may affect all or individual underlying securities included in the index.
As a seller, if an underlying credit event occurs, the Fund will pay a net settlement amount of cash equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising an index. Only in the event of the industry's inability to value the underlying asset will the Fund be required to take delivery of the reference obligation or underlying securities comprising an index and pay an amount equal to the notional amount of the swap.
As a buyer, if an underlying credit event occurs, the Fund will receive a net settlement amount of cash equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising an index. Only in the event of the industry's inability to value the underlying asset will the Fund be required to deliver the reference obligation or underlying securities comprising an index in exchange for payment of an amount equal to the notional amount of the swap.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
4. Derivative Instruments - continued
Credit Default Swaps - continued
Typically, the value of each credit default swap and credit rating disclosed for each reference obligation in the Schedule of Investments, where the Fund is the seller, can be used as measures of the current payment/performance risk of the swap. As the value of the swap changes as a positive or negative percentage of the total notional amount, the payment/performance risk may decrease or increase, respectively. In addition to these measures, FMR monitors a variety of factors including cash flow assumptions, market activity and market sentiment as part of its ongoing process of assessing payment/performance risk.
5. Purchases and Sales of Investments.
Purchases and sales of securities (including the Fixed-Income Central Funds), other than short-term securities and U.S. government securities, aggregated $77,918,609 and $54,303,091, 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 annualized 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 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 Fees | Retained |
Class A | -% | .25% | $ 238,506 | $ 12,028 |
Class T | -% | .25% | 319,732 | 4,161 |
Class B | .65% | .25% | 22,048 | 15,995 |
Class C | .75% | .25% | 328,174 | 39,815 |
|
|
| $ 908,460 | $ 71,999 |
Semiannual Report
6. Fees and Other Transactions with Affiliates - continued
Sales Load. FDC may receive a front-end sales charge of up to 2.75% for selling Class A shares 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 contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. The deferred sales charges range from 3.00% to 1.00% for Class B shares, 1.00% for Class C shares, .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 | $ 6,245 |
Class T | 6,600 |
Class B* | 979 |
Class C* | 3,660 |
| $ 17,484 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
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 the respective classes of the Fund. 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 | $ 172,305 | .18 |
Class T | 202,155 | .16 |
Class B | 6,356 | .26 |
Class C | 59,315 | .18 |
Institutional Class | 90,122 | .18 |
| $ 530,253 |
|
* Annualized
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
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 $768 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.
8. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is maintained at the Fund's custodian and/or invested in cash equivalents. At period end, there were no security loans outstanding. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Total security lending income during the period amounted to $590.
9. 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 expenses. During the period, these credits reduced the Fund's custody expenses by $123.
10. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| Six months ended | Year ended |
From net investment income |
|
|
Class A | $ 1,858,534 | $ 4,384,784 |
Class T | 2,517,331 | 6,258,120 |
Class B | 30,051 | 97,338 |
Class C | 394,780 | 1,010,197 |
Institutional Class | 1,092,227 | 2,445,352 |
Total | $ 5,892,923 | $ 14,195,791 |
Semiannual Report
11. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
| Six months ended | Year ended | Six months ended | Year ended |
Class A |
|
|
|
|
Shares sold | 2,013,739 | 4,921,704 | $ 23,554,329 | $ 56,545,464 |
Reinvestment of distributions | 132,137 | 314,093 | 1,545,715 | 3,613,245 |
Shares redeemed | (3,037,179) | (5,123,272) | (35,492,632) | (58,883,551) |
Net increase (decrease) | (891,303) | 112,525 | $ (10,392,588) | $ 1,275,158 |
Class T |
|
|
|
|
Shares sold | 2,450,840 | 7,233,970 | $ 28,677,160 | $ 83,035,227 |
Reinvestment of distributions | 205,370 | 517,399 | 2,403,723 | 5,955,060 |
Shares redeemed | (4,327,949) | (9,003,581) | (50,633,493) | (103,500,030) |
Net increase (decrease) | (1,671,739) | (1,252,212) | $ (19,552,610) | $ (14,509,743) |
Class B |
|
|
|
|
Shares sold | 36,993 | 116,051 | $ 431,947 | $ 1,328,317 |
Reinvestment of distributions | 2,318 | 7,572 | 27,090 | 86,917 |
Shares redeemed | (115,302) | (291,361) | (1,346,477) | (3,339,311) |
Net increase (decrease) | (75,991) | (167,738) | $ (887,440) | $ (1,924,077) |
Class C |
|
|
|
|
Shares sold | 911,713 | 1,466,208 | $ 10,646,458 | $ 16,778,041 |
Reinvestment of distributions | 27,262 | 71,373 | 318,256 | 819,120 |
Shares redeemed | (1,128,619) | (1,482,787) | (13,152,568) | (16,987,687) |
Net increase (decrease) | (189,644) | 54,794 | $ (2,187,854) | $ 609,474 |
Institutional Class |
|
|
|
|
Shares sold | 858,106 | 2,368,506 | $ 10,060,354 | $ 27,240,632 |
Reinvestment of distributions | 84,217 | 190,054 | 987,854 | 2,192,530 |
Shares redeemed | (1,661,238) | (1,728,351) | (19,467,996) | (19,915,213) |
Net increase (decrease) | (718,915) | 830,209 | $ (8,419,788) | $ 9,517,949 |
12. 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.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
13. Credit Risk.
The Fund invests a portion of its assets in structured securities of issuers backed by residential mortgage loans, credit card receivables and automotive loans. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults.
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Advisor Intermediate Bond Fund
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established three standing committees, Operations, Audit, and Governance and Nominating, each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Operations Committee, of which all of the Independent Trustees are members, meets regularly throughout the year and, among other matters, considers matters specifically related to the annual consideration of the renewal of the fund's Advisory Contracts. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through ad hoc joint committees to discuss certain matters relevant to the Fidelity funds.
At its September 2012 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with the fund; (iv) the extent to which economies of scale exist and would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts is in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts is fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Semiannual Report
Nature, Extent, and Quality of Services Provided. The Board considered the staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the fund's investment personnel, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the general qualifications and capabilities of the Investment Advisers' investment staff, including its size, education, experience, and resources, as well as the Investment Advisers' approach to recruiting, managing, and compensating investment personnel. The Board also noted that FMR has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. The Board also believes that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered the Investment Advisers' trading and risk management capabilities and resources, which are an integral part of the investment management process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through telephone representatives and over the Internet, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including (i) continuing to dedicate additional resources to investment research and support of the senior management team that oversees asset management; (ii) persisting in efforts to enhance Fidelity's research capabilities, in particular, international research; (iii) launching new funds and making other enhancements to meet client needs for global and income-oriented solutions; (iv) continuing to launch dedicated lower cost underlying funds to meet investment management's portfolio construction needs related to expanding underlying fund options, specifically for the Freedom Fund product lines; (v) adopting a sector neutral investment approach for certain funds and utilizing a team of portfolio managers to manage certain sector-neutral funds; (vi) rationalizing product lines and gaining increased efficiencies through combinations of several funds with other funds; (vii) strengthening the Spartan Index Fund product line by adding new funds and/or new low-cost institutional share classes, restructuring fund expenses to accommodate new classes, and reducing investment minimums for certain classes of shares; (viii) modifying the eligibility criteria for Institutional Class shares to increase their appeal to government entities and charitable investors; and (ix) reducing certain transfer agent fee rates.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured over multiple periods against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by Fidelity and reviewed by the Board. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2011, the cumulative total returns of Institutional Class (Class I) and Class C of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Institutional Class (Class I) and Class C show the performance of the highest and lowest performing classes, respectively (based on five-year performance). The box within each chart shows the 25th percentile return (top of box) and the 75th percentile return (bottom of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the peer group whose performance was equal to or lower than that of the class indicated.
Semiannual Report
Fidelity Advisor Intermediate Bond Fund
The Board reviewed the fund's relative investment performance against its peer group and noted that the performance of Institutional Class (Class I) of the fund was in the first quartile for the one- and three-year periods and the second quartile for the five-year period. The Board also noted that the investment performance of Institutional Class (Class I) of the fund compared favorably to its benchmark for the one- and three-year periods, although the fund's five-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes. The Board also reviewed the fund's performance since inception as well as performance in the current year.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should benefit the fund's shareholders.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 11% means that 89% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Advisor Intermediate Bond Fund
Semiannual Report
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2011.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered the current and historical total expense ratios of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expense ratio of each class ranked below its competitive median for 2011.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of FMR and its affiliates, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients. The Board noted the findings of the 2010 ad hoc joint committee (created with the board of other Fidelity funds), which reviewed and compared Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds, including the differences in services provided, fees charged, and costs incurred, as well as competition in their respective marketplaces.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and was satisfied that the profitability was not excessive in the circumstances.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board also noted that in 2009, it and the board of other Fidelity funds created an ad hoc committee (the Economies of Scale Committee) to analyze whether FMR attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
Semiannual Report
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including: (i) Fidelity's fund profitability methodology, profitability trends for certain funds, and the impact of certain factors on fund profitability results; (ii) portfolio manager changes that have occurred during the past year and the amount of the investment that each portfolio manager has made in the Fidelity fund(s) that he or she manages; (iii) Fidelity's compensation structure for portfolio managers, research analysts, and other key personnel, including its effects on fund profitability, the rationale for the compensation structure, and the extent to which current market conditions have affected retention and recruitment; (iv) the compensation paid to fund sub-advisers on behalf of the Fidelity funds; (v) Fidelity's fee structures, including the group fee structure, and the rationale for recommending different fees among different categories of funds and classes; (vi) Fidelity's voluntary waiver of its fees to maintain minimum yields for certain money market funds and classes as well as contractual waivers in place for certain funds; (vii) regulatory and industry developments, including those affecting money market funds and target date funds, and the potential impact to Fidelity; (viii) Fidelity's transfer agent fees, expenses, and services, and drivers for determining the transfer agent fee structure of different funds and classes; (ix) management fee rates charged by FMR or Fidelity entities to other Fidelity clients; (x) the allocation of and historical trends in Fidelity's realization of fall-out benefits; and (xi) explanations regarding the relative total expense ratios of certain funds and classes, total expense competitive trends, and actions that might be taken by FMR to reduce total expense ratios for certain funds and classes or to achieve further economies of scale.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Semiannual 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
(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
(Fidelity Investment logo)(registered trademark)
LTB-USAN-0413 1.784888.110
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor®
Intermediate Bond
Fund - Institutional Class
Semiannual Report
February 28, 2013
(Fidelity Cover Art)
Contents
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. | |
Board Approval of Investment Advisory Contracts and Management Fees |
|
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.
Semiannual 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, 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 (September 1, 2012 to February 28, 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. 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. 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.
Semiannual Report
Shareholder Expense Example - continued
| Annualized | Beginning | Ending | Expenses Paid |
Class A | .83% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,008.90 | $ 4.13 |
Hypothetical A |
| $ 1,000.00 | $ 1,020.68 | $ 4.16 |
Class T | .81% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,009.00 | $ 4.03 |
HypotheticalA |
| $ 1,000.00 | $ 1,020.78 | $ 4.06 |
Class B | 1.56% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,005.30 | $ 7.76 |
Hypothetical A |
| $ 1,000.00 | $ 1,017.06 | $ 7.80 |
Class C | 1.59% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,005.20 | $ 7.91 |
Hypothetical A |
| $ 1,000.00 | $ 1,016.91 | $ 7.95 |
Institutional Class | .58% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,010.10 | $ 2.89 |
Hypothetical A |
| $ 1,000.00 | $ 1,021.92 | $ 2.91 |
A 5% return per year before expenses
* 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). The fees and expenses of the underlying Fidelity Central Funds in which the Fund invests are not included in the Fund's annualized expense ratio.
Semiannual Report
Investment Changes (Unaudited)
The information in the following tables is based on the combined investments of the Fund and its pro-rata share of the investments of Fidelity's fixed-income central funds. |
Quality Diversification (% of fund's net assets) | |||||||
As of February 28, 2013 | As of August 31, 2012 | ||||||
 | U.S. Government and |
| | U.S. Government and |
| ||
 | AAA 12.7% |
| | AAA 12.4% |
| ||
 | AA 5.9% |
| | AA 5.0% |
| ||
 | A 15.0% |
| | A 13.3% |
| ||
 | BBB 26.7% |
| | BBB 22.6% |
| ||
 | BB and Below 2.9% |
| | BB and Below 2.0% |
| ||
 | Not Rated 0.2% |
| | Not Rated 0.3% |
| ||
 | 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 February 28, 2013 | ||
|
| 6 months ago |
Years | 4.5 | 4.4 |
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 February 28, 2013 | ||
|
| 6 months ago |
Years | 3.9 | 3.9 |
Duration estimates how much a bond fund's price will change with a change in comparable interest rates. If rates rise 1%, for example, a fund with a 5-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. Duration takes into account any call or put option embedded in the bonds. |
Asset Allocation (% of fund's net assets) | |||||||
As of February 28, 2013* | As of August 31, 2012** | ||||||
| Corporate Bonds 46.8% |
| | Corporate Bonds 39.3% |
| ||
| U.S. Government and |
| | U.S. Government and |
| ||
| Asset-Backed |
| | Asset-Backed |
| ||
| CMOs and Other |
| | CMOs and Other |
| ||
| Municipal Bonds 0.3% |
| | Municipal Bonds 0.4% |
| ||
| Other Investments 1.9% |
| | Other Investments 1.6% |
| ||
| Short-Term |
| | Short-Term |
| ||
* Foreign investments | 12.3% |
| ** Foreign investments | 10.6% |
| ||
† Includes NCUA Guaranteed Notes |
An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at advisor.fidelity.com. |
Semiannual Report
Investments February 28, 2013 (Unaudited)
Showing Percentage of Net Assets
Nonconvertible Bonds - 45.9% | ||||
| Principal | Value | ||
CONSUMER DISCRETIONARY - 3.7% | ||||
Automobiles - 1.1% | ||||
Daimler Finance North America LLC: | ||||
1.25% 1/11/16 (d) | $ 1,220,000 | $ 1,222,860 | ||
1.3% 7/31/15 (d) | 1,260,000 | 1,266,912 | ||
1.65% 4/10/15 (d) | 620,000 | 627,074 | ||
1.95% 3/28/14 (d) | 790,000 | 798,610 | ||
Volkswagen International Finance NV: | ||||
1.6% 11/20/17 (d) | 620,000 | 622,551 | ||
1.625% 3/22/15 (d) | 1,180,000 | 1,195,352 | ||
2.375% 3/22/17 (d) | 600,000 | 620,436 | ||
| 6,353,795 | |||
Diversified Consumer Services - 0.1% | ||||
Yale University 2.9% 10/15/14 | 530,000 | 550,750 | ||
Media - 1.9% | ||||
Comcast Corp.: | ||||
4.95% 6/15/16 | 326,000 | 367,913 | ||
5.15% 3/1/20 | 693,000 | 818,171 | ||
5.7% 5/15/18 | 42,000 | 50,552 | ||
COX Communications, Inc. 4.625% 6/1/13 | 674,000 | 680,909 | ||
Discovery Communications LLC: | ||||
3.7% 6/1/15 | 875,000 | 929,415 | ||
5.05% 6/1/20 | 322,000 | 369,525 | ||
NBCUniversal Media LLC: | ||||
3.65% 4/30/15 | 66,000 | 70,024 | ||
5.15% 4/30/20 | 1,000,000 | 1,187,385 | ||
News America, Inc.: | ||||
5.3% 12/15/14 | 132,000 | 142,663 | ||
6.9% 3/1/19 | 750,000 | 944,427 | ||
Time Warner Cable, Inc.: | ||||
5.85% 5/1/17 | 996,000 | 1,158,568 | ||
6.2% 7/1/13 | 404,000 | 411,110 | ||
6.75% 7/1/18 | 1,141,000 | 1,397,202 | ||
Time Warner, Inc.: | ||||
3.15% 7/15/15 | 24,000 | 25,294 | ||
4.875% 3/15/20 | 731,000 | 837,993 | ||
5.875% 11/15/16 | 685,000 | 798,858 | ||
Viacom, Inc.: | ||||
3.5% 4/1/17 | 455,000 | 490,272 | ||
6.125% 10/5/17 | 679,000 | 806,672 | ||
| 11,486,953 | |||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
CONSUMER DISCRETIONARY - continued | ||||
Multiline Retail - 0.2% | ||||
Target Corp. 3.875% 7/15/20 | $ 1,000,000 | $ 1,118,720 | ||
Specialty Retail - 0.4% | ||||
AutoZone, Inc. 3.7% 4/15/22 | 494,000 | 509,690 | ||
Home Depot, Inc. 4.4% 4/1/21 | 610,000 | 708,555 | ||
Lowe's Companies, Inc. 4.625% 4/15/20 | 750,000 | 867,287 | ||
| 2,085,532 | |||
TOTAL CONSUMER DISCRETIONARY | 21,595,750 | |||
CONSUMER STAPLES - 2.8% | ||||
Beverages - 1.1% | ||||
Anheuser-Busch InBev Worldwide, Inc.: | ||||
1.375% 7/15/17 | 650,000 | 655,398 | ||
1.5% 7/14/14 | 551,000 | 558,088 | ||
5.375% 11/15/14 | 111,000 | 119,748 | ||
Beam, Inc. 1.875% 5/15/17 | 735,000 | 748,595 | ||
FBG Finance Ltd. 5.125% 6/15/15 (d) | 510,000 | 557,398 | ||
Fortune Brands, Inc.: | ||||
5.375% 1/15/16 | 466,000 | 518,376 | ||
6.375% 6/15/14 | 272,000 | 290,952 | ||
Heineken NV: | ||||
1.4% 10/1/17 (d) | 321,000 | 320,023 | ||
2.75% 4/1/23 (d) | 335,000 | 326,508 | ||
PepsiCo, Inc. 7.9% 11/1/18 | 815,000 | 1,090,036 | ||
SABMiller Holdings, Inc. 2.45% 1/15/17 (d) | 1,280,000 | 1,335,297 | ||
| 6,520,419 | |||
Food & Staples Retailing - 0.4% | ||||
CVS Caremark Corp. 4.125% 5/15/21 | 620,000 | 687,715 | ||
Wal-Mart Stores, Inc. 2.25% 7/8/15 | 820,000 | 854,576 | ||
Walgreen Co.: | ||||
1.8% 9/15/17 | 267,000 | 270,857 | ||
3.1% 9/15/22 | 386,000 | 387,456 | ||
| 2,200,604 | |||
Food Products - 0.6% | ||||
Cargill, Inc.: | ||||
3.25% 11/15/21 (d) | 600,000 | 615,833 | ||
6% 11/27/17 (d) | 106,000 | 126,784 | ||
ConAgra Foods, Inc.: | ||||
1.9% 1/25/18 | 222,000 | 224,605 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
CONSUMER STAPLES - continued | ||||
Food Products - continued | ||||
ConAgra Foods, Inc.: - continued | ||||
3.2% 1/25/23 | $ 258,000 | $ 257,473 | ||
General Mills, Inc. 5.2% 3/17/15 | 650,000 | 708,526 | ||
Kraft Foods Group, Inc. 2.25% 6/5/17 | 610,000 | 633,392 | ||
Kraft Foods, Inc.: | ||||
5.375% 2/10/20 | 660,000 | 787,269 | ||
6.5% 8/11/17 | 140,000 | 169,451 | ||
6.75% 2/19/14 | 82,000 | 86,653 | ||
| 3,609,986 | |||
Tobacco - 0.7% | ||||
Altria Group, Inc.: | ||||
2.85% 8/9/22 | 620,000 | 608,201 | ||
9.7% 11/10/18 | 454,000 | 633,713 | ||
Philip Morris International, Inc. 4.5% 3/26/20 | 1,000,000 | 1,151,428 | ||
Reynolds American, Inc.: | ||||
1.05% 10/30/15 | 707,000 | 706,297 | ||
3.25% 11/1/22 | 326,000 | 324,279 | ||
6.75% 6/15/17 | 513,000 | 619,458 | ||
| 4,043,376 | |||
TOTAL CONSUMER STAPLES | 16,374,385 | |||
ENERGY - 4.5% | ||||
Energy Equipment & Services - 0.9% | ||||
Cameron International Corp. 1.6% 4/30/15 | 468,000 | 472,084 | ||
DCP Midstream LLC 5.35% 3/15/20 (d) | 633,000 | 697,767 | ||
El Paso Pipeline Partners Operating Co. LLC 6.5% 4/1/20 | 768,000 | 928,111 | ||
FMC Technologies, Inc.: | ||||
2% 10/1/17 | 80,000 | 80,702 | ||
3.45% 10/1/22 | 146,000 | 148,169 | ||
Halliburton Co. 6.15% 9/15/19 | 425,000 | 535,126 | ||
National Oilwell Varco, Inc. 1.35% 12/1/17 | 620,000 | 622,584 | ||
Noble Holding International Ltd. 2.5% 3/15/17 | 262,000 | 269,001 | ||
Weatherford International Ltd.: | ||||
4.95% 10/15/13 | 303,000 | 310,765 | ||
5.15% 3/15/13 | 1,469,000 | 1,470,638 | ||
| 5,534,947 | |||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - 3.6% | ||||
Anadarko Petroleum Corp.: | ||||
5.95% 9/15/16 | $ 45,000 | $ 51,745 | ||
6.375% 9/15/17 | 555,000 | 662,819 | ||
Apache Corp. 1.75% 4/15/17 | 172,000 | 175,234 | ||
BG Energy Capital PLC 2.875% 10/15/16 (d) | 620,000 | 657,584 | ||
Cenovus Energy, Inc. 5.7% 10/15/19 | 650,000 | 793,768 | ||
DCP Midstream Operating LP 2.5% 12/1/17 | 292,000 | 295,272 | ||
Duke Energy Field Services 5.375% 10/15/15 (d) | 212,000 | 231,027 | ||
El Paso Natural Gas Co. 5.95% 4/15/17 | 21,000 | 24,303 | ||
Enbridge Energy Partners LP 4.2% 9/15/21 | 615,000 | 650,498 | ||
Encana Holdings Finance Corp. 5.8% 5/1/14 | 502,000 | 529,679 | ||
Enterprise Products Operating LP: | ||||
1.25% 8/13/15 | 480,000 | 483,950 | ||
4.05% 2/15/22 | 610,000 | 663,707 | ||
5.6% 10/15/14 | 339,000 | 364,663 | ||
5.65% 4/1/13 | 105,000 | 105,349 | ||
Gulfstream Natural Gas System LLC 6.95% 6/1/16 (d) | 20,000 | 23,436 | ||
Marathon Petroleum Corp. 3.5% 3/1/16 | 875,000 | 934,284 | ||
Midcontinent Express Pipeline LLC 5.45% 9/15/14 (d) | 877,000 | 914,354 | ||
Nexen, Inc. 5.2% 3/10/15 | 158,000 | 170,900 | ||
Petro-Canada 6.05% 5/15/18 | 326,000 | 393,881 | ||
Petrobras International Finance Co. Ltd.: | ||||
2.875% 2/6/15 | 630,000 | 642,978 | ||
5.75% 1/20/20 | 816,000 | 905,813 | ||
7.875% 3/15/19 | 647,000 | 792,054 | ||
Petroleos Mexicanos: | ||||
3.5% 1/30/23 (d) | 485,000 | 475,300 | ||
4.875% 1/24/22 | 700,000 | 768,950 | ||
6% 3/5/20 | 59,000 | 69,384 | ||
Phillips 66 2.95% 5/1/17 | 1,260,000 | 1,333,375 | ||
Plains All American Pipeline LP/PAA Finance Corp.: | ||||
3.95% 9/15/15 | 375,000 | 403,638 | ||
5.75% 1/15/20 | 962,000 | 1,152,335 | ||
Schlumberger Investment SA 1.25% 8/1/17 (d) | 1,000,000 | 999,185 | ||
Southeast Supply Header LLC 4.85% 8/15/14 (d) | 862,000 | 895,066 | ||
Spectra Energy Capital, LLC 5.65% 3/1/20 | 28,000 | 32,870 | ||
Suncor Energy, Inc. 6.1% 6/1/18 | 944,000 | 1,144,514 | ||
Texas Eastern Transmission LP 6% 9/15/17 (d) | 1,096,000 | 1,295,340 | ||
TransCapitalInvest Ltd. 5.67% 3/5/14 (d) | 489,000 | 507,093 | ||
Transcontinental Gas Pipe Line Corp. 6.4% 4/15/16 | 394,000 | 453,814 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - continued | ||||
Western Gas Partners LP 5.375% 6/1/21 | $ 600,000 | $ 678,521 | ||
XTO Energy, Inc.: | ||||
5% 1/31/15 | 264,000 | 287,043 | ||
5.65% 4/1/16 | 181,000 | 208,566 | ||
| 21,172,292 | |||
TOTAL ENERGY | 26,707,239 | |||
FINANCIALS - 23.4% | ||||
Capital Markets - 2.6% | ||||
Bear Stearns Companies, Inc. 5.3% 10/30/15 | 374,000 | 414,245 | ||
BlackRock, Inc. 4.25% 5/24/21 | 650,000 | 730,220 | ||
Goldman Sachs Group, Inc.: | ||||
1.6% 11/23/15 | 650,000 | 656,089 | ||
2.375% 1/22/18 | 600,000 | 607,916 | ||
3.3% 5/3/15 | 620,000 | 648,257 | ||
3.7% 8/1/15 | 712,000 | 752,195 | ||
5.25% 7/27/21 | 750,000 | 853,850 | ||
5.95% 1/18/18 | 1,693,000 | 1,980,416 | ||
6.15% 4/1/18 | 402,000 | 475,076 | ||
JPMorgan Chase & Co. 1.1% 10/15/15 | 620,000 | 622,104 | ||
Lazard Group LLC: | ||||
6.85% 6/15/17 | 669,000 | 771,089 | ||
7.125% 5/15/15 | 239,000 | 265,007 | ||
Merrill Lynch & Co., Inc.: | ||||
6.4% 8/28/17 | 40,000 | 46,965 | ||
6.875% 4/25/18 | 726,000 | 880,244 | ||
Morgan Stanley: | ||||
1.75% 2/25/16 | 510,000 | 512,270 | ||
4.1% 1/26/15 | 1,320,000 | 1,384,061 | ||
4.75% 4/1/14 | 138,000 | 142,754 | ||
5.45% 1/9/17 | 200,000 | 223,916 | ||
5.625% 9/23/19 | 112,000 | 129,587 | ||
5.75% 1/25/21 | 647,000 | 750,244 | ||
5.95% 12/28/17 | 383,000 | 443,524 | ||
6% 4/28/15 | 130,000 | 141,913 | ||
7.3% 5/13/19 | 603,000 | 748,080 | ||
The Bank of New York Mellon Corp. 2.4% 1/17/17 | 1,250,000 | 1,307,771 | ||
| 15,487,793 | |||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Commercial Banks - 7.8% | ||||
ANZ Banking Group Ltd. 2.125% 1/10/14 (d) | $ 740,000 | $ 750,721 | ||
Australia & New Zealand Banking Group Ltd. 1.875% 10/6/17 | 620,000 | 635,846 | ||
Bank of America NA 5.3% 3/15/17 | 250,000 | 280,237 | ||
Bank of Montreal 2.5% 1/11/17 | 640,000 | 669,752 | ||
Bank of Nova Scotia 1.375% 12/18/17 | 935,000 | 935,253 | ||
Bank of Tokyo-Mitsubishi UFJ Ltd. 1.65% 2/26/18 (d) | 590,000 | 590,870 | ||
BB&T Corp. 3.95% 3/22/22 | 940,000 | 1,007,139 | ||
Comerica, Inc. 3% 9/16/15 | 2,000 | 2,105 | ||
Commonwealth Bank of Australia: | ||||
1.95% 3/16/15 | 630,000 | 646,262 | ||
2.9% 9/17/14 (d) | 3,000,000 | 3,115,680 | ||
Credit Suisse 6% 2/15/18 | 1,680,000 | 1,938,419 | ||
Discover Bank 2% 2/21/18 | 1,200,000 | 1,204,008 | ||
Fifth Third Bancorp: | ||||
3.5% 3/15/22 | 700,000 | 730,415 | ||
3.625% 1/25/16 | 361,000 | 386,995 | ||
4.5% 6/1/18 | 63,000 | 70,134 | ||
8.25% 3/1/38 | 68,000 | 94,934 | ||
Fifth Third Bank: | ||||
1.45% 2/28/18 | 580,000 | 579,472 | ||
4.75% 2/1/15 | 308,000 | 329,453 | ||
Fifth Third Capital Trust IV 6.5% 4/15/67 (f) | 7,000 | 7,009 | ||
First Niagara Financial Group, Inc. 6.75% 3/19/20 | 625,000 | 743,704 | ||
HBOS PLC 6.75% 5/21/18 (d) | 509,000 | 564,144 | ||
HSBC Holdings PLC: | ||||
4% 3/30/22 | 567,000 | 610,599 | ||
5.1% 4/5/21 | 610,000 | 710,656 | ||
Huntington Bancshares, Inc. 7% 12/15/20 | 180,000 | 223,197 | ||
JPMorgan Chase Bank 6% 10/1/17 | 1,762,000 | 2,086,326 | ||
KeyBank NA: | ||||
1.65% 2/1/18 | 397,000 | 401,141 | ||
5.8% 7/1/14 | 1,351,000 | 1,441,545 | ||
KeyCorp. 5.1% 3/24/21 | 622,000 | 723,321 | ||
Marshall & Ilsley Bank 5% 1/17/17 | 778,000 | 855,301 | ||
Mizuho Corporate Bank Ltd. 1.55% 10/17/17 (d) | 940,000 | 936,901 | ||
National Australia Bank Ltd. 2% 3/9/15 | 630,000 | 646,506 | ||
National Bank of Canada 1.5% 6/26/15 | 830,000 | 842,533 | ||
PNC Bank NA 2.7% 11/1/22 | 1,560,000 | 1,523,033 | ||
PNC Funding Corp. 3.625% 2/8/15 | 717,000 | 757,199 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Commercial Banks - continued | ||||
Rabobank (Netherlands) NV: | ||||
1.85% 1/10/14 | $ 1,720,000 | $ 1,740,537 | ||
2.125% 10/13/15 | 278,000 | 286,982 | ||
3.95% 11/9/22 | 1,240,000 | 1,260,526 | ||
Regions Bank 7.5% 5/15/18 | 770,000 | 939,400 | ||
Regions Financial Corp.: | ||||
5.75% 6/15/15 | 4,000 | 4,345 | ||
7.75% 11/10/14 | 20,000 | 22,050 | ||
Royal Bank of Canada 1.5% 1/16/18 | 1,220,000 | 1,229,212 | ||
Royal Bank of Scotland Group PLC 2.55% 9/18/15 | 1,492,000 | 1,535,807 | ||
Sumitomo Mitsui Banking Corp. 1.8% 7/18/17 | 940,000 | 956,318 | ||
SunTrust Banks, Inc.: | ||||
3.5% 1/20/17 | 853,000 | 918,015 | ||
3.6% 4/15/16 | 525,000 | 562,427 | ||
The Toronto Dominion Bank 2.375% 10/19/16 | 1,230,000 | 1,290,190 | ||
Union Bank NA 2.125% 6/16/17 | 700,000 | 718,683 | ||
UnionBanCal Corp. 5.25% 12/16/13 | 115,000 | 119,182 | ||
Wachovia Corp. 5.625% 10/15/16 | 590,000 | 675,540 | ||
Wells Fargo & Co.: | ||||
1.25% 2/13/15 | 2,229,000 | 2,250,066 | ||
3.5% 3/8/22 | 700,000 | 738,546 | ||
3.676% 6/15/16 | 620,000 | 672,412 | ||
Westpac Banking Corp.: | ||||
1.125% 9/25/15 | 1,200,000 | 1,209,906 | ||
1.85% 12/9/13 | 687,000 | 694,851 | ||
2% 8/14/17 | 1,121,000 | 1,152,845 | ||
| 46,018,650 | |||
Consumer Finance - 3.3% | ||||
American Express Credit Corp.: | ||||
0.875% 11/13/15 | 620,000 | 619,785 | ||
2.75% 9/15/15 | 1,561,000 | 1,632,692 | ||
2.8% 9/19/16 | 599,000 | 633,904 | ||
American Honda Finance Corp. 1.5% 9/11/17 (d) | 620,000 | 625,449 | ||
Capital One Financial Corp.: | ||||
1% 11/6/15 | 620,000 | 617,755 | ||
2.125% 7/15/14 | 1,309,000 | 1,331,568 | ||
2.15% 3/23/15 | 620,000 | 633,820 | ||
3.15% 7/15/16 | 605,000 | 644,859 | ||
7.375% 5/23/14 | 232,000 | 250,286 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Discover Financial Services: | ||||
3.85% 11/21/22 (d) | $ 30,000 | $ 30,698 | ||
5.2% 4/27/22 | 93,000 | 105,246 | ||
6.45% 6/12/17 | 399,000 | 468,633 | ||
Ford Motor Credit Co. LLC: | ||||
2.75% 5/15/15 | 930,000 | 950,165 | ||
3% 6/12/17 | 1,000,000 | 1,025,458 | ||
4.25% 9/20/22 | 620,000 | 639,438 | ||
General Electric Capital Corp.: | ||||
1% 1/8/16 | 727,000 | 729,319 | ||
1.6% 11/20/17 | 1,860,000 | 1,871,032 | ||
2.25% 11/9/15 | 886,000 | 918,096 | ||
2.9% 1/9/17 | 640,000 | 678,792 | ||
2.95% 5/9/16 | 255,000 | 269,805 | ||
3.35% 10/17/16 | 610,000 | 655,244 | ||
3.5% 6/29/15 | 1,263,000 | 1,339,967 | ||
6.375% 11/15/67 (f) | 1,275,000 | 1,348,313 | ||
HSBC USA, Inc.: | ||||
1.625% 1/16/18 | 543,000 | 545,428 | ||
2.375% 2/13/15 | 511,000 | 526,873 | ||
Hyundai Capital America 2.125% 10/2/17 (d) | 224,000 | 225,912 | ||
| 19,318,537 | |||
Diversified Financial Services - 3.4% | ||||
ABB Finance (USA), Inc. 1.625% 5/8/17 | 238,000 | 241,239 | ||
Bank of America Corp.: | ||||
1.5% 10/9/15 | 1,250,000 | 1,253,869 | ||
4.5% 4/1/15 | 1,230,000 | 1,308,173 | ||
5.75% 12/1/17 | 1,150,000 | 1,331,097 | ||
5.875% 1/5/21 | 980,000 | 1,164,503 | ||
BP Capital Markets PLC: | ||||
2.248% 11/1/16 | 620,000 | 645,366 | ||
3.125% 10/1/15 | 60,000 | 63,563 | ||
3.2% 3/11/16 | 610,000 | 651,172 | ||
3.245% 5/6/22 | 620,000 | 637,905 | ||
Citigroup, Inc.: | ||||
1.25% 1/15/16 | 1,220,000 | 1,216,717 | ||
3.953% 6/15/16 | 610,000 | 655,726 | ||
4.5% 1/14/22 | 1,190,000 | 1,324,583 | ||
4.75% 5/19/15 | 1,605,000 | 1,722,505 | ||
5.125% 5/5/14 | 150,000 | 157,017 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Citigroup, Inc.: - continued | ||||
6.125% 5/15/18 | $ 12,000 | $ 14,359 | ||
6.5% 8/19/13 | 1,750,000 | 1,797,345 | ||
JPMorgan Chase & Co.: | ||||
3.15% 7/5/16 | 600,000 | 635,160 | ||
3.4% 6/24/15 | 2,482,000 | 2,622,613 | ||
4.5% 1/24/22 | 640,000 | 712,582 | ||
5.4% 1/6/42 | 266,000 | 313,781 | ||
RBS Citizens Financial Group, Inc. 4.15% 9/28/22 (d) | 300,000 | 307,041 | ||
TECO Finance, Inc.: | ||||
4% 3/15/16 | 171,000 | 184,209 | ||
5.15% 3/15/20 | 252,000 | 291,558 | ||
USAA Capital Corp. 3.5% 7/17/14 (d) | 932,000 | 970,193 | ||
| 20,222,276 | |||
Insurance - 2.7% | ||||
American International Group, Inc.: | ||||
3% 3/20/15 | 310,000 | 322,319 | ||
4.25% 9/15/14 | 970,000 | 1,018,920 | ||
4.875% 6/1/22 | 604,000 | 685,167 | ||
Aon Corp.: | ||||
3.5% 9/30/15 | 911,000 | 959,394 | ||
5% 9/30/20 | 600,000 | 686,209 | ||
Assurant, Inc. 5.625% 2/15/14 | 332,000 | 346,242 | ||
Axis Capital Holdings Ltd. 5.75% 12/1/14 | 84,000 | 89,663 | ||
Berkshire Hathaway Finance Corp. 1.6% 5/15/17 | 620,000 | 633,209 | ||
Great-West Life & Annuity Insurance Co. 7.153% 5/16/46 (d)(f) | 259,000 | 266,770 | ||
Hartford Financial Services Group, Inc.: | ||||
5.125% 4/15/22 | 284,000 | 327,289 | ||
5.375% 3/15/17 | 18,000 | 20,520 | ||
Liberty Mutual Group, Inc.: | ||||
5% 6/1/21 (d) | 599,000 | 654,545 | ||
6.5% 3/15/35 (d) | 104,000 | 117,098 | ||
Marsh & McLennan Companies, Inc. 4.8% 7/15/21 | 361,000 | 409,032 | ||
MetLife, Inc.: | ||||
1.756% 12/15/17 (c) | 269,000 | 272,181 | ||
2.375% 2/6/14 | 876,000 | 891,292 | ||
4.125% 8/13/42 | 600,000 | 570,427 | ||
5% 6/15/15 | 175,000 | 191,563 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Insurance - continued | ||||
Metropolitan Life Global Funding I: | ||||
1.5% 1/10/18 (d) | $ 1,431,000 | $ 1,427,729 | ||
2.5% 9/29/15 (d) | 750,000 | 780,552 | ||
Monumental Global Funding III 5.5% 4/22/13 (d) | 382,000 | 384,549 | ||
Northwestern Mutual Life Insurance Co. 6.063% 3/30/40 (d) | 48,000 | 60,950 | ||
Pacific Life Global Funding 5.15% 4/15/13 (d) | 1,218,000 | 1,224,376 | ||
Pacific LifeCorp 6% 2/10/20 (d) | 321,000 | 369,099 | ||
Prudential Financial, Inc.: | ||||
4.5% 11/15/20 | 700,000 | 784,716 | ||
5.4% 6/13/35 | 68,000 | 73,286 | ||
QBE Insurance Group Ltd. 5.647% 7/1/23 (d)(f) | 29,000 | 28,874 | ||
Symetra Financial Corp. 6.125% 4/1/16 (d) | 892,000 | 991,336 | ||
Unum Group: | ||||
5.625% 9/15/20 | 370,000 | 428,152 | ||
7.125% 9/30/16 | 704,000 | 822,939 | ||
| 15,838,398 | |||
Real Estate Investment Trusts - 1.5% | ||||
Alexandria Real Estate Equities, Inc. 4.6% 4/1/22 | 189,000 | 204,159 | ||
AvalonBay Communities, Inc. 4.95% 3/15/13 | 55,000 | 55,066 | ||
Boston Properties, Inc. 3.85% 2/1/23 | 580,000 | 614,372 | ||
BRE Properties, Inc. 5.5% 3/15/17 | 61,000 | 69,301 | ||
Camden Property Trust 5.375% 12/15/13 | 326,000 | 337,178 | ||
DDR Corp. 4.625% 7/15/22 | 200,000 | 216,223 | ||
Developers Diversified Realty Corp.: | ||||
4.75% 4/15/18 | 290,000 | 320,692 | ||
7.5% 4/1/17 | 389,000 | 463,868 | ||
Duke Realty LP: | ||||
3.875% 10/15/22 | 461,000 | 473,432 | ||
4.625% 5/15/13 | 122,000 | 122,906 | ||
5.4% 8/15/14 | 498,000 | 526,042 | ||
6.25% 5/15/13 | 1,166,000 | 1,178,447 | ||
6.75% 3/15/20 | 35,000 | 42,804 | ||
8.25% 8/15/19 | 7,000 | 9,115 | ||
Equity One, Inc.: | ||||
3.75% 11/15/22 | 1,300,000 | 1,276,683 | ||
6% 9/15/17 | 509,000 | 582,490 | ||
6.25% 1/15/17 | 74,000 | 84,300 | ||
Federal Realty Investment Trust: | ||||
5.4% 12/1/13 | 85,000 | 87,901 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Real Estate Investment Trusts - continued | ||||
Federal Realty Investment Trust: - continued | ||||
5.9% 4/1/20 | $ 5,000 | $ 5,958 | ||
6.2% 1/15/17 | 94,000 | 109,553 | ||
Health Care REIT, Inc. 2.25% 3/15/18 | 193,000 | 194,740 | ||
HRPT Properties Trust: | ||||
5.75% 11/1/15 | 211,000 | 229,063 | ||
6.25% 6/15/17 | 186,000 | 203,260 | ||
6.65% 1/15/18 | 95,000 | 108,042 | ||
UDR, Inc. 5.5% 4/1/14 | 1,107,000 | 1,158,305 | ||
Washington (REIT) 5.25% 1/15/14 | 30,000 | 30,948 | ||
| 8,704,848 | |||
Real Estate Management & Development - 2.1% | ||||
AMB Property LP 5.9% 8/15/13 | 389,000 | 396,785 | ||
BioMed Realty LP: | ||||
3.85% 4/15/16 | 1,000,000 | 1,064,994 | ||
4.25% 7/15/22 | 277,000 | 290,133 | ||
6.125% 4/15/20 | 6,000 | 7,011 | ||
Brandywine Operating Partnership LP: | ||||
3.95% 2/15/23 | 623,000 | 627,241 | ||
5.7% 5/1/17 | 369,000 | 417,359 | ||
ERP Operating LP: | ||||
4.625% 12/15/21 | 470,000 | 527,689 | ||
4.75% 7/15/20 | 446,000 | 502,407 | ||
5.375% 8/1/16 | 240,000 | 272,938 | ||
5.75% 6/15/17 | 1,003,000 | 1,176,749 | ||
Liberty Property LP: | ||||
4.125% 6/15/22 | 301,000 | 315,832 | ||
4.75% 10/1/20 | 1,045,000 | 1,151,149 | ||
5.125% 3/2/15 | 170,000 | 182,089 | ||
5.5% 12/15/16 | 260,000 | 294,709 | ||
6.625% 10/1/17 | 582,000 | 692,618 | ||
Mack-Cali Realty LP: | ||||
2.5% 12/15/17 | 439,000 | 444,855 | ||
4.5% 4/18/22 | 185,000 | 196,853 | ||
7.75% 8/15/19 | 64,000 | 81,052 | ||
Post Apartment Homes LP 3.375% 12/1/22 | 412,000 | 409,643 | ||
Prime Property Funding, Inc.: | ||||
5.125% 6/1/15 (d) | 189,000 | 199,781 | ||
5.5% 1/15/14 (d) | 144,000 | 148,345 | ||
5.7% 4/15/17 (d) | 295,000 | 325,592 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Real Estate Management & Development - continued | ||||
Regency Centers LP: | ||||
4.95% 4/15/14 | $ 92,000 | $ 95,912 | ||
5.25% 8/1/15 | 522,000 | 568,876 | ||
5.875% 6/15/17 | 160,000 | 184,235 | ||
Simon Property Group LP: | ||||
2.8% 1/30/17 | 142,000 | 149,841 | ||
4.2% 2/1/15 | 234,000 | 247,267 | ||
Tanger Properties LP: | ||||
6.125% 6/1/20 | 606,000 | 742,332 | ||
6.15% 11/15/15 | 115,000 | 130,414 | ||
Ventas Realty LP 2% 2/15/18 | 393,000 | 394,096 | ||
| 12,238,797 | |||
TOTAL FINANCIALS | 137,829,299 | |||
HEALTH CARE - 1.9% | ||||
Biotechnology - 0.1% | ||||
Amgen, Inc. 5.85% 6/1/17 | 446,000 | 528,021 | ||
Celgene Corp. 2.45% 10/15/15 | 56,000 | 58,076 | ||
| 586,097 | |||
Health Care Providers & Services - 1.1% | ||||
Aetna, Inc.: | ||||
1.5% 11/15/17 | 77,000 | 77,277 | ||
2.75% 11/15/22 | 310,000 | 302,645 | ||
Coventry Health Care, Inc.: | ||||
5.95% 3/15/17 | 264,000 | 307,398 | ||
6.3% 8/15/14 | 546,000 | 586,096 | ||
Express Scripts, Inc.: | ||||
3.125% 5/15/16 | 555,000 | 585,764 | ||
6.25% 6/15/14 | 299,000 | 319,519 | ||
McKesson Corp. 0.95% 12/4/15 | 120,000 | 120,364 | ||
Medco Health Solutions, Inc. 2.75% 9/15/15 | 1,108,000 | 1,158,035 | ||
UnitedHealth Group, Inc.: | ||||
1.4% 10/15/17 | 128,000 | 128,576 | ||
2.75% 2/15/23 | 105,000 | 103,790 | ||
3.875% 10/15/20 | 759,000 | 831,791 | ||
WellPoint, Inc.: | ||||
1.25% 9/10/15 | 180,000 | 181,392 | ||
1.875% 1/15/18 | 326,000 | 329,413 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
HEALTH CARE - continued | ||||
Health Care Providers & Services - continued | ||||
WellPoint, Inc.: - continued | ||||
3.125% 5/15/22 | $ 620,000 | $ 621,017 | ||
4.35% 8/15/20 | 760,000 | 842,750 | ||
| 6,495,827 | |||
Pharmaceuticals - 0.7% | ||||
AbbVie, Inc.: | ||||
1.75% 11/6/17 (d) | 1,062,000 | 1,075,413 | ||
2.9% 11/6/22 (d) | 620,000 | 619,778 | ||
Merck & Co., Inc. 5% 6/30/19 | 348,000 | 415,628 | ||
Novartis Capital Corp. 2.4% 9/21/22 | 500,000 | 495,187 | ||
Teva Pharmaceutical Finance II BV 3% 6/15/15 | 1,000,000 | 1,050,993 | ||
Watson Pharmaceuticals, Inc.: | ||||
1.875% 10/1/17 | 210,000 | 211,803 | ||
5% 8/15/14 | 66,000 | 69,837 | ||
Zoetis, Inc.: | ||||
1.875% 2/1/18 (d) | 96,000 | 96,340 | ||
3.25% 2/1/23 (d) | 235,000 | 236,475 | ||
| 4,271,454 | |||
TOTAL HEALTH CARE | 11,353,378 | |||
INDUSTRIALS - 0.8% | ||||
Aerospace & Defense - 0.0% | ||||
BAE Systems Holdings, Inc. 4.95% 6/1/14 (d) | 53,000 | 55,377 | ||
Airlines - 0.2% | ||||
Continental Airlines, Inc.: | ||||
6.648% 3/15/19 | 389,087 | 416,829 | ||
6.795% 2/2/20 | 14,595 | 15,179 | ||
6.9% 7/2/19 | 110,025 | 117,177 | ||
U.S. Airways pass-thru trust certificates: | ||||
6.85% 1/30/18 | 225,095 | 236,349 | ||
8.36% 1/20/19 | 185,844 | 203,035 | ||
| 988,569 | |||
Industrial Conglomerates - 0.3% | ||||
Covidien International Finance SA: | ||||
3.2% 6/15/22 | 620,000 | 647,661 | ||
6% 10/15/17 | 442,000 | 531,622 | ||
General Electric Co. 2.7% 10/9/22 | 512,000 | 510,962 | ||
| 1,690,245 | |||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
INDUSTRIALS - continued | ||||
Machinery - 0.2% | ||||
Deere & Co. 2.6% 6/8/22 | $ 1,300,000 | $ 1,310,004 | ||
Road & Rail - 0.1% | ||||
Burlington Northern Santa Fe LLC 3.45% 9/15/21 | 600,000 | 637,589 | ||
TOTAL INDUSTRIALS | 4,681,784 | |||
INFORMATION TECHNOLOGY - 0.9% | ||||
Computers & Peripherals - 0.1% | ||||
Hewlett-Packard Co. 2.625% 12/9/14 | 630,000 | 644,614 | ||
Electronic Equipment & Components - 0.2% | ||||
Tyco Electronics Group SA: | ||||
5.95% 1/15/14 | 526,000 | 549,339 | ||
6.55% 10/1/17 | 356,000 | 425,589 | ||
| 974,928 | |||
IT Services - 0.0% | ||||
The Western Union Co. 2.375% 12/10/15 | 277,000 | 281,512 | ||
Office Electronics - 0.4% | ||||
Xerox Corp. 4.25% 2/15/15 | 2,064,000 | 2,172,030 | ||
Software - 0.2% | ||||
Oracle Corp. 3.875% 7/15/20 | 1,000,000 | 1,119,444 | ||
TOTAL INFORMATION TECHNOLOGY | 5,192,528 | |||
MATERIALS - 1.2% | ||||
Chemicals - 0.3% | ||||
Ecolab, Inc. 1.45% 12/8/17 | 335,000 | 333,482 | ||
Sherwin-Williams Co. 1.35% 12/15/17 | 620,000 | 621,456 | ||
The Dow Chemical Co.: | ||||
4.125% 11/15/21 | 594,000 | 641,954 | ||
4.25% 11/15/20 | 321,000 | 352,680 | ||
7.6% 5/15/14 | 32,000 | 34,606 | ||
| 1,984,178 | |||
Construction Materials - 0.1% | ||||
CRH America, Inc. 6% 9/30/16 | 319,000 | 363,381 | ||
Metals & Mining - 0.8% | ||||
Anglo American Capital PLC: | ||||
2.15% 9/27/13 (d) | 1,000,000 | 1,006,189 | ||
9.375% 4/8/14 (d) | 459,000 | 499,772 | ||
9.375% 4/8/19 (d) | 630,000 | 843,775 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
MATERIALS - continued | ||||
Metals & Mining - continued | ||||
Corporacion Nacional del Cobre de Chile (Codelco) 3.875% 11/3/21 (d) | $ 630,000 | $ 665,150 | ||
Rio Tinto Finance USA PLC 1.625% 8/21/17 | 940,000 | 947,934 | ||
Vale Overseas Ltd. 6.25% 1/23/17 | 403,000 | 461,010 | ||
| 4,423,830 | |||
TOTAL MATERIALS | 6,771,389 | |||
TELECOMMUNICATION SERVICES - 2.6% | ||||
Diversified Telecommunication Services - 1.7% | ||||
AT&T Broadband Corp. 8.375% 3/15/13 | 390,000 | 390,866 | ||
AT&T, Inc.: | ||||
1.4% 12/1/17 | 620,000 | 618,611 | ||
2.5% 8/15/15 | 562,000 | 585,247 | ||
CenturyLink, Inc. 6.15% 9/15/19 | 592,000 | 638,077 | ||
Deutsche Telekom International Financial BV: | ||||
3.125% 4/11/16 (d) | 923,000 | 974,126 | ||
5.25% 7/22/13 | 370,000 | 376,517 | ||
France Telecom SA 2.125% 9/16/15 | 220,000 | 226,515 | ||
Qwest Corp. 3.558% 6/15/13 (f) | 1,080,000 | 1,083,181 | ||
SBC Communications, Inc. 5.1% 9/15/14 | 950,000 | 1,013,589 | ||
Telefonica Emisiones S.A.U. 3.729% 4/27/15 | 1,278,000 | 1,313,590 | ||
Verizon Communications, Inc.: | ||||
1.1% 11/1/17 | 620,000 | 615,832 | ||
2% 11/1/16 | 1,279,000 | 1,325,914 | ||
3% 4/1/16 | 621,000 | 660,699 | ||
| 9,822,764 | |||
Wireless Telecommunication Services - 0.9% | ||||
America Movil S.A.B. de CV: | ||||
2.375% 9/8/16 | 646,000 | 668,929 | ||
3.125% 7/16/22 | 434,000 | 431,930 | ||
3.625% 3/30/15 | 600,000 | 632,227 | ||
DIRECTV Holdings LLC/DIRECTV Financing, Inc.: | ||||
2.4% 3/15/17 | 700,000 | 714,902 | ||
4.75% 10/1/14 | 1,360,000 | 1,441,595 | ||
5.875% 10/1/19 | 34,000 | 40,126 | ||
Vodafone Group PLC: | ||||
1.5% 2/19/18 | 600,000 | 599,171 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
TELECOMMUNICATION SERVICES - continued | ||||
Wireless Telecommunication Services - continued | ||||
Vodafone Group PLC: - continued | ||||
4.15% 6/10/14 | $ 346,000 | $ 360,956 | ||
5% 12/16/13 | 398,000 | 412,127 | ||
| 5,301,963 | |||
TOTAL TELECOMMUNICATION SERVICES | 15,124,727 | |||
UTILITIES - 4.1% | ||||
Electric Utilities - 2.6% | ||||
AmerenUE 6.4% 6/15/17 | 519,000 | 628,802 | ||
American Electric Power Co., Inc. 1.65% 12/15/17 | 257,000 | 257,834 | ||
Cleveland Electric Illuminating Co. 5.65% 12/15/13 | 714,000 | 739,823 | ||
Commonwealth Edison Co. 4% 8/1/20 | 600,000 | 671,943 | ||
Duke Capital LLC 5.668% 8/15/14 | 357,000 | 380,901 | ||
Duquesne Light Holdings, Inc. 6.4% 9/15/20 (d) | 48,000 | 57,725 | ||
Edison International 3.75% 9/15/17 | 431,000 | 468,384 | ||
Exelon Corp. 4.9% 6/15/15 | 415,000 | 449,999 | ||
FirstEnergy Corp.: | ||||
4.25% 3/15/23 | 600,000 | 599,556 | ||
7.375% 11/15/31 | 55,000 | 65,320 | ||
FirstEnergy Solutions Corp.: | ||||
4.8% 2/15/15 | 552,000 | 589,656 | ||
6.05% 8/15/21 | 655,000 | 779,667 | ||
Hydro-Quebec 2% 6/30/16 | 2,500,000 | 2,603,168 | ||
LG&E and KU Energy LLC: | ||||
2.125% 11/15/15 | 479,000 | 490,735 | ||
3.75% 11/15/20 | 2,000 | 2,126 | ||
Nevada Power Co.: | ||||
6.5% 5/15/18 | 1,562,000 | 1,937,680 | ||
6.5% 8/1/18 | 273,000 | 341,215 | ||
NextEra Energy Capital Holdings, Inc. 1.611% 6/1/14 | 1,040,000 | 1,050,528 | ||
Pacific Gas & Electric Co. 3.25% 9/15/21 | 95,000 | 101,163 | ||
Pennsylvania Electric Co. 6.05% 9/1/17 | 115,000 | 134,367 | ||
Pepco Holdings, Inc. 2.7% 10/1/15 | 456,000 | 473,413 | ||
PPL Capital Funding, Inc. 4.2% 6/15/22 | 700,000 | 739,411 | ||
Progress Energy, Inc. 4.4% 1/15/21 | 732,000 | 814,980 | ||
Sierra Pacific Power Co. 5.45% 9/1/13 | 270,000 | 276,333 | ||
Tampa Electric Co.: | ||||
4.1% 6/15/42 | 108,000 | 112,015 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
Tampa Electric Co.: - continued | ||||
5.4% 5/15/21 | $ 238,000 | $ 293,128 | ||
Wisconsin Electric Power Co. 2.95% 9/15/21 | 110,000 | 115,212 | ||
| 15,175,084 | |||
Gas Utilities - 0.0% | ||||
Southern Natural Gas Co. / Southern Natural Issuing Corp. 4.4% 6/15/21 | 188,000 | 206,174 | ||
Independent Power Producers & Energy Traders - 0.3% | ||||
Exelon Generation Co. LLC 5.35% 1/15/14 | 231,000 | 240,063 | ||
PPL Energy Supply LLC 6.3% 7/15/13 | 1,500,000 | 1,530,185 | ||
PSEG Power LLC 2.75% 9/15/16 | 148,000 | 154,095 | ||
| 1,924,343 | |||
Multi-Utilities - 1.2% | ||||
Ameren Illinois Co. 6.125% 11/15/17 | 62,000 | 74,641 | ||
Consolidated Edison Co. of New York, Inc. 4.45% 6/15/20 | 680,000 | 787,109 | ||
Dominion Resources, Inc.: | ||||
2.611% 9/30/66 (f) | 651,000 | 608,093 | ||
7.5% 6/30/66 (f) | 567,000 | 629,398 | ||
National Grid PLC 6.3% 8/1/16 | 248,000 | 288,308 | ||
NiSource Finance Corp.: | ||||
3.85% 2/15/23 | 700,000 | 718,612 | ||
5.25% 9/15/17 | 402,000 | 462,062 | ||
5.4% 7/15/14 | 234,000 | 248,151 | ||
5.45% 9/15/20 | 43,000 | 50,418 | ||
6.4% 3/15/18 | 230,000 | 276,115 | ||
San Diego Gas & Electric Co. 3% 8/15/21 | 600,000 | 634,238 | ||
Sempra Energy: | ||||
2.3% 4/1/17 | 1,435,000 | 1,490,049 | ||
2.875% 10/1/22 | 256,000 | 255,380 | ||
Wisconsin Energy Corp. 6.25% 5/15/67 (f) | 454,000 | 492,817 | ||
| 7,015,391 | |||
TOTAL UTILITIES | 24,320,992 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $251,238,607) |
| |||
U.S. Government and Government Agency Obligations - 29.0% | ||||
| Principal | Value | ||
U.S. Government Agency Obligations - 3.0% | ||||
Fannie Mae: | ||||
0.5% 9/28/15 | $ 5,802,000 | $ 5,815,907 | ||
0.875% 12/20/17 | 1,142,000 | 1,143,772 | ||
0.875% 2/8/18 | 1,363,000 | 1,363,581 | ||
1.625% 10/26/15 | 1,941,000 | 2,003,027 | ||
Freddie Mac: | ||||
0.75% 1/12/18 | 3,200,000 | 3,180,390 | ||
1% 9/29/17 | 3,158,000 | 3,186,337 | ||
1.75% 9/10/15 | 980,000 | 1,013,410 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 17,706,424 | |||
U.S. Treasury Obligations - 25.8% | ||||
U.S. Treasury Notes: | ||||
0.75% 6/30/17 | 11,000,000 | 11,058,432 | ||
0.875% 11/30/16 | 13,269,000 | 13,454,554 | ||
0.875% 4/30/17 | 25,246,000 | 25,543,827 | ||
0.875% 1/31/18 | 2,943,000 | 2,960,935 | ||
0.875% 7/31/19 | 22,403,000 | 22,073,945 | ||
1.25% 2/29/20 | 31,682,000 | 31,672,112 | ||
1.625% 8/15/22 | 26,205,000 | 25,785,301 | ||
1.875% 9/30/17 | 9,226,000 | 9,725,505 | ||
3.125% 1/31/17 (e) | 8,719,000 | 9,593,620 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 151,868,231 | |||
Other Government Related - 0.2% | ||||
National Credit Union Administration Guaranteed Notes Master Trust 1.4% 6/12/15 (NCUA Guaranteed) | 850,000 | 869,712 | ||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $169,517,439) |
| |||
U.S. Government Agency - Mortgage Securities - 4.6% | ||||
| ||||
Fannie Mae - 3.1% | ||||
2.207% 7/1/35 (f) | 17,421 | 18,342 | ||
2.214% 2/1/33 (f) | 39,496 | 41,404 | ||
2.225% 10/1/33 (f) | 46,496 | 48,843 | ||
2.239% 3/1/35 (f) | 32,530 | 34,294 | ||
2.281% 12/1/34 (f) | 37,800 | 39,721 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value | ||
Fannie Mae - continued | ||||
2.302% 10/1/33 (f) | $ 20,046 | $ 21,133 | ||
2.332% 3/1/35 (f) | 21,705 | 23,081 | ||
2.367% 12/1/33 (f) | 1,184,021 | 1,258,599 | ||
2.38% 7/1/35 (f) | 129,084 | 137,312 | ||
2.425% 3/1/35 (f) | 5,969 | 6,185 | ||
2.441% 10/1/35 (f) | 33,563 | 35,058 | ||
2.524% 10/1/33 (f) | 45,348 | 48,349 | ||
2.559% 6/1/36 (f) | 33,388 | 35,725 | ||
2.583% 5/1/35 (f) | 90,538 | 97,179 | ||
2.605% 7/1/34 (f) | 22,879 | 24,254 | ||
2.741% 7/1/35 (f) | 195,323 | 209,449 | ||
2.769% 11/1/36 (f) | 244,057 | 262,434 | ||
2.911% 4/1/35 (f) | 680,814 | 727,153 | ||
2.944% 7/1/37 (f) | 61,350 | 65,108 | ||
3.189% 1/1/40 (f) | 354,537 | 370,515 | ||
3.476% 3/1/40 (f) | 267,640 | 279,780 | ||
3.5% 12/1/25 to 1/1/26 | 7,419,245 | 7,869,713 | ||
3.528% 12/1/39 (f) | 105,367 | 110,086 | ||
3.617% 3/1/40 (f) | 363,584 | 382,230 | ||
4% 8/1/18 | 365,989 | 391,428 | ||
4.5% 6/1/19 to 3/1/35 | 422,354 | 454,619 | ||
5.5% 11/1/34 | 2,127,339 | 2,339,289 | ||
6% 5/1/16 to 4/1/17 | 117,230 | 124,992 | ||
6.5% 12/1/13 to 8/1/36 | 1,319,718 | 1,485,153 | ||
7% 9/1/18 to 6/1/33 | 574,256 | 663,964 | ||
7.5% 8/1/17 to 3/1/28 | 182,081 | 211,896 | ||
8.5% 5/1/21 to 9/1/25 | 32,652 | 37,938 | ||
9.5% 2/1/25 | 1,125 | 1,232 | ||
10.5% 8/1/20 | 9,586 | 11,177 | ||
12.5% 12/1/13 to 4/1/15 | 2,645 | 2,818 | ||
TOTAL FANNIE MAE | 17,870,453 | |||
Freddie Mac - 1.5% | ||||
2.373% 1/1/35 (f) | 66,687 | 71,031 | ||
2.399% 4/1/35 (f) | 358,123 | 379,591 | ||
3% 8/1/21 | 956,215 | 1,005,631 | ||
3.134% 3/1/33 (f) | 5,745 | 6,118 | ||
3.439% 10/1/35 (f) | 48,690 | 52,364 | ||
3.5% 1/1/26 | 429,070 | 458,022 | ||
3.573% 4/1/40 (f) | 250,018 | 262,796 | ||
3.604% 4/1/40 (f) | 198,748 | 209,585 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value | ||
Freddie Mac - continued | ||||
3.611% 2/1/40 (f) | $ 428,323 | $ 447,820 | ||
4.5% 8/1/18 | 726,435 | 774,366 | ||
5% 3/1/19 | 1,220,344 | 1,305,912 | ||
5.5% 3/1/34 to 7/1/35 | 3,515,885 | 3,861,009 | ||
8.5% 9/1/24 to 8/1/27 | 39,328 | 47,021 | ||
11.5% 10/1/15 | 884 | 916 | ||
TOTAL FREDDIE MAC | 8,882,182 | |||
Ginnie Mae - 0.0% | ||||
7% 7/15/28 to 11/15/28 | 137,378 | 159,420 | ||
7.5% 2/15/28 to 10/15/28 | 4,019 | 4,735 | ||
8% 6/15/24 | 146 | 170 | ||
8.5% 10/15/21 | 33,053 | 38,208 | ||
11% 7/20/19 to 8/20/19 | 2,462 | 2,764 | ||
TOTAL GINNIE MAE | 205,297 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $26,169,710) |
| |||
Asset-Backed Securities - 7.3% | ||||
| ||||
Accredited Mortgage Loan Trust Series 2005-1 Class M1, 0.6717% 4/25/35 (f) | 67,559 | 62,564 | ||
ACE Securities Corp. Home Equity Loan Trust: | ||||
Series 2004-HE1 Class M2, 1.8517% 3/25/34 (f) | 49,572 | 48,453 | ||
Series 2005-HE2 Class M2, 0.8767% 4/25/35 (f) | 5,581 | 5,523 | ||
Ally Auto Receivables Trust: | ||||
Series 2010-4 Class A4, 1.35% 12/15/15 | 570,000 | 575,276 | ||
Series 2010-5 Class A4, 1.75% 3/15/16 | 240,000 | 243,252 | ||
Series 2011-1 Class A4, 2.23% 3/15/16 | 1,090,000 | 1,111,020 | ||
Series 2011-2 Class A3, 1.18% 4/15/15 | 345,237 | 346,213 | ||
Series 2011-3 Class A3, 0.97% 8/17/15 | 580,230 | 581,920 | ||
Series 2012-1 Class A2, 0.71% 9/15/14 | 364,520 | 364,945 | ||
Series 2012-SN1 Class A3, 0.57% 8/20/15 | 860,000 | 860,519 | ||
Ally Master Owner Trust: | ||||
Series 2010-3 Class A, 2.88% 4/15/15 (d) | 320,000 | 320,932 | ||
Series 2011-1 Class A2, 2.15% 1/15/16 | 2,260,000 | 2,291,215 | ||
Series 2011-3 Class A2, 1.81% 5/15/16 | 1,240,000 | 1,258,657 | ||
Series 2011-5 Class A1, 0.8512% 6/15/15 (f) | 1,240,000 | 1,241,125 | ||
Series 2012-1 Class A2, 1.44% 2/15/17 | 1,260,000 | 1,275,478 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Ally Master Owner Trust: - continued | ||||
Series 2012-2 Class A, 0.7012% 3/15/16 (f) | $ 700,000 | $ 700,271 | ||
Series 2012-3 Class A2, 1.21% 6/15/17 | 1,250,000 | 1,256,822 | ||
Series 2012-5 Class A, 1.54% 9/16/19 | 1,500,000 | 1,508,225 | ||
AmeriCredit Auto Receivables Trust: | ||||
Series 2010-4 Class A3, 1.27% 4/8/15 | 419,548 | 420,089 | ||
Series 2011-1 Class A3, 1.39% 9/8/15 | 300,204 | 301,117 | ||
Series 2011-2 Class A3, 1.61% 10/8/15 | 815,587 | 818,884 | ||
Series 2011-3 Class A3, 1.17% 1/8/16 | 330,000 | 331,265 | ||
Series 2011-4 Class AS, 0.92% 3/9/15 | 263,815 | 264,040 | ||
Series 2011-5 Class A2, 1.19% 8/8/15 | 127,617 | 127,915 | ||
Series 2012-2 Class A3, 1.05% 10/11/16 | 380,000 | 383,181 | ||
Series 2012-5 Class A3, 0.92% 6/8/17 | 920,000 | 919,995 | ||
Ameriquest Mortgage Securities, Inc. pass-thru certificates: | ||||
Series 2003-10 Class M1, 0.9017% 12/25/33 (f) | 8,192 | 7,426 | ||
Series 2004-R2 Class M3, 1.0267% 4/25/34 (f) | 11,219 | 8,595 | ||
Series 2005-R2 Class M1, 0.6517% 4/25/35 (f) | 176,341 | 172,015 | ||
Argent Securities, Inc. pass-thru certificates: | ||||
Series 2003-W7 Class A2, 0.9817% 3/25/34 (f) | 4,092 | 3,537 | ||
Series 2004-W11 Class M2, 1.2517% 11/25/34 (f) | 63,962 | 58,443 | ||
Series 2004-W7 Class M1, 1.0267% 5/25/34 (f) | 185,706 | 173,860 | ||
Series 2006-W4 Class A2C, 0.3617% 5/25/36 (f) | 144,843 | 51,083 | ||
Asset Backed Securities Corp. Home Equity Loan Trust: | ||||
Series 2004-HE2 Class M1, 1.0267% 4/25/34 (f) | 191,012 | 176,822 | ||
Series 2006-HE2 Class M1, 0.5717% 3/25/36 (f) | 6,627 | 74 | ||
Bear Stearns Asset Backed Securities I Trust Series 2005-HE2 Class M2, 1.3267% 2/25/35 (f) | 427,000 | 314,999 | ||
BMW Floorplan Master Owner Trust Series 2012-1A Class A, 0.6057% 9/15/17 (d)(f) | 1,900,000 | 1,897,419 | ||
Capital Trust Ltd. Series 2004-1: | ||||
Class A2, 0.6507% 7/20/39 (d)(f) | 6,296 | 5,753 | ||
Class B, 0.9507% 7/20/39 (d)(f) | 30,070 | 13,731 | ||
Class C, 1.3007% 7/20/39 (d)(f) | 38,684 | 12 | ||
Carrington Mortgage Loan Trust Series 2007-RFC1 Class A3, 0.3417% 12/25/36 (f) | 205,465 | 105,917 | ||
Chase Issuance Trust Series 2012-A8 Class A8, 0.54% 10/16/17 | 2,500,000 | 2,493,417 | ||
Countrywide Asset-Backed Certificates Trust Series 2007-4 Class A1A, 0.3237% 9/25/37 (f) | 5,644 | 5,633 | ||
Countrywide Home Loans, Inc.: | ||||
Series 2003-BC1 Class B1, 5.4322% 3/25/32 (MGIC Investment Corp. Insured) (f) | 28,427 | 27,449 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Countrywide Home Loans, Inc.: - continued | ||||
Series 2004-3 Class M4, 1.6567% 4/25/34 (f) | $ 18,137 | $ 8,591 | ||
Series 2004-4 Class M2, 0.9967% 6/25/34 (f) | 50,135 | 44,474 | ||
Discover Card Master Trust Series 2012-A1 Class A1, 0.81% 8/15/17 | 1,410,000 | 1,419,722 | ||
Enterprise Fleet Financing LLC Series 2012-1 Class A2, 1.14% 11/20/17 (d) | 780,000 | 784,436 | ||
Fannie Mae Series 2004-T5 Class AB3, 1.0332% 5/28/35 (f) | 4,436 | 3,424 | ||
Fieldstone Mortgage Investment Corp. Series 2004-3 Class M5, 2.3767% 8/25/34 (f) | 33,155 | 24,171 | ||
Ford Credit Auto Lease Trust Series 2012-A Class A3, 0.85% 1/15/15 | 400,000 | 401,252 | ||
Ford Credit Auto Owner Trust Series 2011-B Class A4, 1.35% 12/15/16 | 510,000 | 517,079 | ||
Ford Credit Floorplan Master Owner Trust: | ||||
Series 2010-5 Class A1, 1.5% 9/15/15 | 640,000 | 643,707 | ||
Series 2012-2 Class A, 1.92% 1/15/19 | 1,310,000 | 1,350,999 | ||
Series 2012-4 Class A1, 0.74% 9/15/16 | 1,470,000 | 1,474,246 | ||
Series 2013-1 Class A1, 0.85% 1/15/18 | 1,320,000 | 1,319,306 | ||
Fremont Home Loan Trust Series 2005-A: | ||||
Class M3, 0.9367% 1/25/35 (f) | 81,136 | 34,613 | ||
Class M4, 1.2217% 1/25/35 (f) | 41,438 | 4,892 | ||
GCO Education Loan Funding Master Trust II Series 2007-1A Class C1L, 0.6681% 2/25/47 (d)(f) | 335,000 | 227,968 | ||
GE Business Loan Trust: | ||||
Series 2003-1 Class A, 0.6312% 4/15/31 (d)(f) | 17,527 | 16,687 | ||
Series 2006-2A: | ||||
Class A, 0.3812% 11/15/34 (d)(f) | 183,811 | 169,669 | ||
Class B, 0.4812% 11/15/34 (d)(f) | 66,692 | 56,689 | ||
Class C, 0.5812% 11/15/34 (d)(f) | 110,070 | 79,250 | ||
Class D, 0.9512% 11/15/34 (d)(f) | 41,751 | 27,973 | ||
GE Capital Credit Card Master Note Trust: | ||||
Series 2012-1 Class A, 1.03% 1/15/18 | 1,190,000 | 1,202,149 | ||
Series 2012-5 Class A, 0.97% 6/15/18 | 1,560,000 | 1,574,441 | ||
GSAMP Trust Series 2004-AR1 Class B4, 3.4154% 6/25/34 (d)(f) | 54,683 | 15,249 | ||
Guggenheim Structured Real Estate Funding Ltd. Series 2006-3 Class C, 0.7517% 9/25/46 (d)(f) | 154,789 | 152,854 | ||
Home Equity Asset Trust: | ||||
Series 2003-2 Class M1, 1.5217% 8/25/33 (f) | 44,731 | 43,584 | ||
Series 2003-3 Class M1, 1.4917% 8/25/33 (f) | 54,587 | 50,190 | ||
Series 2003-5 Class A2, 0.9017% 12/25/33 (f) | 2,817 | 2,367 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Honda Auto Receivables Owner Trust: | ||||
Series 2011-1 Class A4, 1.8% 4/17/17 | $ 330,000 | $ 334,432 | ||
Series 2011-2 Class A4, 1.55% 8/18/17 | 820,000 | 833,614 | ||
HSI Asset Securitization Corp. Trust Series 2007-HE1 Class 2A3, 0.3917% 1/25/37 (f) | 141,116 | 68,655 | ||
John Deere Owner Trust Series 2011-A Class A4, 1.96% 4/16/18 | 260,000 | 265,139 | ||
JPMorgan Mortgage Acquisition Trust: | ||||
Series 2006-NC2 Class M2, 0.5017% 7/25/36 (f) | 25,000 | 417 | ||
Series 2007-CH1 Class AV4, 0.3317% 11/25/36 (f) | 176,698 | 171,079 | ||
Keycorp Student Loan Trust: | ||||
Series 1999-A Class A2, 0.64% 12/27/29 (f) | 38,139 | 36,431 | ||
Series 2006-A Class 2C, 1.46% 3/27/42 (f) | 392,000 | 18,950 | ||
MASTR Asset Backed Securities Trust Series 2007-HE1 Class M1, 0.5017% 5/25/37 (f) | 75,858 | 849 | ||
Mercedes-Benz Auto Lease Trust Series 2011-B Class A3, 1.07% 8/15/14 (d) | 670,000 | 672,030 | ||
Mercedes-Benz Master Owner Trust Series 2012-AA Class A, 0.79% 11/15/17 (d) | 1,600,000 | 1,600,534 | ||
Meritage Mortgage Loan Trust Series 2004-1 Class M1, 0.9517% 7/25/34 (f) | 19,277 | 15,696 | ||
Merrill Lynch Mortgage Investors Trust: | ||||
Series 2003-OPT1 Class M1, 1.1767% 7/25/34 (f) | 61,301 | 53,115 | ||
Series 2006-FM1 Class A2B, 0.3117% 4/25/37 (f) | 107,393 | 89,900 | ||
Series 2006-OPT1 Class A1A, 0.4617% 6/25/35 (f) | 285,142 | 254,423 | ||
Morgan Stanley ABS Capital I Trust: | ||||
Series 2004-HE6 Class A2, 0.5417% 8/25/34 (f) | 4,895 | 4,257 | ||
Series 2004-NC8 Class M6, 2.0767% 9/25/34 (f) | 78,383 | 39,339 | ||
Series 2005-NC1 Class M1, 0.6417% 1/25/35 (f) | 45,571 | 41,495 | ||
Series 2005-NC2 Class B1, 1.3717% 3/25/35 (f) | 47,458 | 1,934 | ||
New Century Home Equity Loan Trust Series 2005-4 Class M2, 0.7117% 9/25/35 (f) | 162,650 | 133,264 | ||
Nissan Auto Lease Trust: | ||||
Series 2011-A Class A3, 1.04% 8/15/14 | 910,000 | 912,130 | ||
Series 2011-B Class A3, 0.92% 2/16/15 | 460,000 | 461,531 | ||
Ocala Funding LLC: | ||||
Series 2005-1A Class A, 1.7007% 3/20/10 (b)(d)(f) | 64,000 | 0 | ||
Series 2006-1A Class A, 1.6007% 3/20/11 (b)(d)(f) | 134,000 | 0 | ||
Park Place Securities, Inc.: | ||||
Series 2004-WCW1: | ||||
Class M3, 1.4517% 9/25/34 (f) | 60,741 | 48,611 | ||
Class M4, 1.6517% 9/25/34 (f) | 77,891 | 22,885 | ||
Series 2005-WCH1 Class M4, 1.0317% 1/25/36 (f) | 126,217 | 102,532 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-HE1 Class A, 1.0017% 4/25/33 (f) | $ 582 | $ 542 | ||
Santander Drive Auto Receivables Trust: | ||||
Series 2011-3 Class A2, 1.11% 8/15/14 | 104,626 | 104,727 | ||
Series 2011-4 Class A2, 1.37% 3/16/15 | 228,337 | 228,918 | ||
Series 2012-1 Class A2, 1.25% 4/15/15 | 302,965 | 303,865 | ||
Series 2012-3 Class A3, 1.08% 4/15/16 | 420,000 | 422,599 | ||
Series 2012-4 Class A3, 1.04% 8/15/16 | 500,000 | 503,388 | ||
Saxon Asset Securities Trust Series 2004-1 Class M1, 0.9967% 3/25/35 (f) | 135,706 | 112,730 | ||
Sierra Receivables Funding Co. Series 2007-1A Class A2, 0.3547% 3/20/19 (FGIC Insured) (d)(f) | 36,798 | 36,554 | ||
SLM Private Credit Student Loan Trust Series 2004-A Class C, 1.258% 6/15/33 (f) | 143,893 | 98,324 | ||
Structured Asset Investment Loan Trust Series 2004-8 Class M5, 1.9267% 9/25/34 (f) | 6,568 | 2,739 | ||
SVO VOI Mortgage Corp. Series 2006-AA Class A, 5.28% 2/20/24 (d) | 48,689 | 49,495 | ||
Terwin Mortgage Trust Series 2003-4HE Class A1, 1.0617% 9/25/34 (f) | 2,472 | 2,239 | ||
Trapeza CDO XII Ltd./Trapeza CDO XII, Inc. Series 2007-12A Class B, 0.865% 4/6/42 (d)(f) | 314,337 | 3,929 | ||
Whinstone Capital Management Ltd. Series 1A Class B3, 2.101% 10/25/44 (d)(f) | 203,978 | 178,481 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $41,882,320) |
| |||
Collateralized Mortgage Obligations - 3.1% | ||||
| ||||
Private Sponsor - 1.1% | ||||
Arran Residential Mortgages Funding PLC floater Series 2011-1A Class A1C, 1.4901% 11/19/47 (d)(f) | 159,271 | 159,602 | ||
Credit Suisse Mortgage Capital Certificates: | ||||
floater Series 2011-7R Class A1, 1.4597% 8/28/47 (d)(f) | 269,848 | 267,975 | ||
sequential payer Series 2010-16 Class A1, 3% 6/25/50 (d) | 143,179 | 144,107 | ||
Granite Master Issuer PLC floater: | ||||
Series 2005-4 Class C2, 1.3007% 12/20/54 (f) | 25,291 | 21,522 | ||
Series 2006-1A: | ||||
Class A5, 0.3407% 12/20/54 (d)(f) | 1,239,109 | 1,214,326 | ||
Class C2, 1.4007% 12/20/54 (d)(f) | 578,000 | 491,878 | ||
Series 2006-2 Class C1, 1.1407% 12/20/54 (f) | 463,000 | 394,013 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
Private Sponsor - continued | ||||
Granite Master Issuer PLC floater: - continued | ||||
Series 2006-3 Class C2, 1.2007% 12/20/54 (f) | $ 128,000 | $ 108,928 | ||
Series 2006-4: | ||||
Class B1, 0.3807% 12/20/54 (f) | 521,000 | 486,093 | ||
Class C1, 0.9607% 12/20/54 (f) | 319,000 | 271,469 | ||
Class M1, 0.5407% 12/20/54 (f) | 137,000 | 122,615 | ||
Series 2007-1: | ||||
Class 1C1, 0.8007% 12/20/54 (f) | 258,000 | 219,558 | ||
Class 1M1, 0.5007% 12/20/54 (f) | 172,000 | 153,940 | ||
Class 2C1, 1.0607% 12/20/54 (f) | 117,000 | 99,567 | ||
Class 2M1, 0.7007% 12/20/54 (f) | 222,000 | 198,690 | ||
Series 2007-2 Class 2C1, 1.0622% 12/17/54 (f) | 308,000 | 262,108 | ||
Granite Mortgages Series 2003-2 Class 1A3, 0.802% 7/20/43 (f) | 252,254 | 249,315 | ||
Granite Mortgages PLC floater: | ||||
Series 2003-3 Class 1C, 2.752% 1/20/44 (f) | 36,767 | 35,318 | ||
Series 2004-1 Class 2A1, 0.629% 3/20/44 (f) | 1,146,017 | 1,132,666 | ||
MASTR Adjustable Rate Mortgages Trust Series 2007-3 Class 22A2, 0.4117% 5/25/47 (f) | 57,838 | 42,282 | ||
Merrill Lynch Alternative Note Asset Trust floater Series 2007-OAR1 Class A1, 0.3717% 2/25/37 (f) | 117,564 | 101,518 | ||
RESI Finance LP/RESI Finance DE Corp. floater Series 2003-B: | ||||
Class B5, 2.5492% 7/10/35 (d)(f) | 109,416 | 96,254 | ||
Class B6, 3.0492% 7/10/35 (d)(f) | 182,025 | 156,781 | ||
Residential Funding Securities Corp. floater Series 2003-RP2 Class A1, 0.6517% 6/25/33 (d)(f) | 12,504 | 12,169 | ||
Sequoia Mortgage Trust floater Series 2004-6 Class A3B, 1.3885% 7/20/34 (f) | 3,625 | 3,395 | ||
TOTAL PRIVATE SPONSOR | 6,446,089 | |||
U.S. Government Agency - 2.0% | ||||
Fannie Mae: | ||||
pass-thru certificates Series 2012-127 Class DH, 4% 11/25/27 | 936,411 | 1,005,508 | ||
planned amortization class Series 2002-9 Class PC, 6% 3/25/17 | 30,161 | 32,144 | ||
sequential payer: | ||||
Series 2002-56 Class MC, 5.5% 9/25/17 | 100,819 | 106,448 | ||
Series 2004-86 Class KC, 4.5% 5/25/19 | 53,697 | 55,007 | ||
Series 2010-123 Class DL, 3.5% 11/25/25 | 303,719 | 316,720 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
Series 2010-143 Class B, 3.5% 12/25/25 | $ 474,159 | $ 498,613 | ||
Series 2013-16 Class GP, 3% 3/25/33 | 3,000,000 | 3,221,250 | ||
Freddie Mac: | ||||
floater Series 3346 Class FA, 0.4312% 2/15/19 (f) | 416,909 | 417,492 | ||
planned amortization class: | ||||
Series 2356 Class GD, 6% 9/15/16 | 107,887 | 115,107 | ||
Series 2363 Class PF, 6% 9/15/16 | 133,943 | 142,055 | ||
Series 3820 Class DA, 4% 11/15/35 | 495,836 | 540,882 | ||
Series 3777 Class AC, 3.5% 12/15/25 | 1,087,661 | 1,148,475 | ||
Series 3949 Class MK, 4.5% 10/15/34 | 340,000 | 380,816 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
floater: | ||||
Series 2010-53 Class FC, 1.0247% 4/20/40 (f) | 453,994 | 461,347 | ||
Series 2012-149 Class MF, 0.4547% 12/20/42 (f) | 1,883,260 | 1,882,322 | ||
floater sequential payer Series 2011-150 Class D, 3% 4/20/37 | 349,599 | 358,264 | ||
Series 2012-97 Class JF, 0.4517% 8/16/42 (f) | 815,971 | 817,046 | ||
TOTAL U.S. GOVERNMENT AGENCY | 11,499,496 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $15,304,071) |
| |||
Commercial Mortgage Securities - 6.4% | ||||
| ||||
7 WTC Depositor LLC Trust Series 2012-7WTC Class A, 4.0824% 3/13/31 (d) | 890,000 | 934,203 | ||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.4302% 2/14/43 (f)(h) | 92,757 | 3,044 | ||
Banc of America Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2004-2 Class A4, 4.153% 11/10/38 | 217,288 | 219,109 | ||
Series 2006-2 Class AAB, 5.7141% 5/10/45 (f) | 146,580 | 154,079 | ||
Series 2006-5 Class A3, 5.39% 9/10/47 | 301,000 | 316,577 | ||
Series 2006-6 Class A3, 5.369% 10/10/45 | 432,000 | 468,078 | ||
Series 2007-4 Class A3, 5.806% 2/10/51 (f) | 144,747 | 152,315 | ||
Series 2001-3 Class H, 6.562% 4/11/37 (d) | 121,000 | 121,684 | ||
Series 2006-6 Class E, 5.619% 10/10/45 (d) | 125,000 | 12,102 | ||
Series 2007-3 Class A3, 5.5925% 6/10/49 (f) | 361,000 | 361,007 | ||
Banc of America Large Loan, Inc. floater Series 2006-BIX1 Class G, 0.5312% 10/15/19 (d)(f) | 48,471 | 47,987 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Banc of America REMIC Trust Series 2012-CLRN Class A1, 1.3512% 8/15/17 (d)(f) | $ 1,080,000 | $ 1,089,792 | ||
Bayview Commercial Asset Trust: | ||||
floater: | ||||
Series 2003-2 Class M1, 1.0517% 12/25/33 (d)(f) | 6,164 | 4,508 | ||
Series 2005-3A: | ||||
Class A2, 0.6017% 11/25/35 (d)(f) | 57,417 | 48,069 | ||
Class M1, 0.6417% 11/25/35 (d)(f) | 6,744 | 4,376 | ||
Class M2, 0.6917% 11/25/35 (d)(f) | 8,563 | 5,463 | ||
Class M3, 0.7117% 11/25/35 (d)(f) | 7,663 | 4,790 | ||
Class M4, 0.8017% 11/25/35 (d)(f) | 9,548 | 4,625 | ||
Series 2005-4A: | ||||
Class A2, 0.5917% 1/25/36 (d)(f) | 135,035 | 106,510 | ||
Class B1, 1.6017% 1/25/36 (d)(f) | 11,669 | 1,801 | ||
Class M1, 0.6517% 1/25/36 (d)(f) | 43,560 | 24,205 | ||
Class M2, 0.6717% 1/25/36 (d)(f) | 13,068 | 6,862 | ||
Class M3, 0.7017% 1/25/36 (d)(f) | 19,085 | 9,833 | ||
Class M4, 0.8117% 1/25/36 (d)(f) | 10,555 | 5,123 | ||
Class M5, 0.8517% 1/25/36 (d)(f) | 10,555 | 3,722 | ||
Class M6, 0.9017% 1/25/36 (d)(f) | 11,211 | 3,015 | ||
Series 2006-1: | ||||
Class A2, 0.5617% 4/25/36 (d)(f) | 20,926 | 16,946 | ||
Class M1, 0.5817% 4/25/36 (d)(f) | 7,485 | 4,823 | ||
Class M2, 0.6017% 4/25/36 (d)(f) | 7,908 | 4,898 | ||
Class M3, 0.6217% 4/25/36 (d)(f) | 6,804 | 4,053 | ||
Class M4, 0.7217% 4/25/36 (d)(f) | 3,856 | 2,217 | ||
Class M5, 0.7617% 4/25/36 (d)(f) | 3,742 | 2,058 | ||
Class M6, 0.8417% 4/25/36 (d)(f) | 7,462 | 3,140 | ||
Series 2006-2A: | ||||
Class A1, 0.4317% 7/25/36 (d)(f) | 324,918 | 254,695 | ||
Class A2, 0.4817% 7/25/36 (d)(f) | 18,666 | 14,682 | ||
Class B1, 1.0717% 7/25/36 (d)(f) | 6,989 | 1,255 | ||
Class M1, 0.5117% 7/25/36 (d)(f) | 19,585 | 9,313 | ||
Class M2, 0.5317% 7/25/36 (d)(f) | 13,818 | 6,185 | ||
Class M3, 0.5517% 7/25/36 (d)(f) | 11,462 | 4,871 | ||
Class M4, 0.6217% 7/25/36 (d)(f) | 7,740 | 1,917 | ||
Class M5, 0.6717% 7/25/36 (d)(f) | 9,513 | 2,229 | ||
Class M6, 0.7417% 7/25/36 (d)(f) | 14,193 | 2,969 | ||
Series 2006-3A: | ||||
Class M4, 0.6317% 10/25/36 (d)(f) | 15,624 | 2,364 | ||
Class M5, 0.6817% 10/25/36 (d)(f) | 18,450 | 978 | ||
Series 2006-4A Class M6, 0.7217% 12/25/36 (d)(f) | 13,743 | 440 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Bayview Commercial Asset Trust: - continued | ||||
floater: | ||||
Series 2007-1 Class A2, 0.4717% 3/25/37 (d)(f) | $ 89,293 | $ 51,646 | ||
Series 2007-2A: | ||||
Class A1, 0.4717% 7/25/37 (d)(f) | 86,314 | 60,455 | ||
Class A2, 0.5217% 7/25/37 (d)(f) | 80,696 | 39,373 | ||
Class M1, 0.5717% 7/25/37 (d)(f) | 28,337 | 7,790 | ||
Class M2, 0.6117% 7/25/37 (d)(f) | 15,309 | 2,613 | ||
Class M3, 0.6917% 7/25/37 (d)(f) | 15,443 | 1,553 | ||
Class M4, 0.8517% 7/25/37 (d)(f) | 31,478 | 1,930 | ||
Class M5, 0.9517% 7/25/37 (d)(f) | 27,733 | 1,234 | ||
Class M6, 1.2017% 7/25/37 (d)(f) | 17,783 | 155 | ||
Series 2007-3: | ||||
Class A2, 0.4917% 7/25/37 (d)(f) | 79,886 | 41,585 | ||
Class B1, 1.1517% 7/25/37 (d)(f) | 19,656 | 1,502 | ||
Class B2, 1.8017% 7/25/37 (d)(f) | 8,391 | 448 | ||
Class M1, 0.5117% 7/25/37 (d)(f) | 17,721 | 5,985 | ||
Class M2, 0.5417% 7/25/37 (d)(f) | 19,013 | 5,309 | ||
Class M3, 0.5717% 7/25/37 (d)(f) | 29,331 | 6,373 | ||
Class M4, 0.7017% 7/25/37 (d)(f) | 46,409 | 7,826 | ||
Class M5, 0.8017% 7/25/37 (d)(f) | 24,124 | 3,453 | ||
Class M6, 1.0017% 7/25/37 (d)(f) | 18,274 | 2,207 | ||
Series 2007-4A: | ||||
Class M1, 1.1517% 9/25/37 (d)(f) | 33,246 | 3,091 | ||
Class M2, 1.2517% 9/25/37 (d)(f) | 33,246 | 2,557 | ||
Class M4, 1.8017% 9/25/37 (d)(f) | 83,833 | 4,092 | ||
Class M5, 1.9517% 9/25/37 (d)(f) | 53,327 | 1,700 | ||
Series 2007-5A, Class IO, 4.186% 10/25/37 (d)(f)(h) | 863,773 | 71,919 | ||
Bear Stearns Commercial Mortgage Securities Trust: | ||||
floater: | ||||
Series 2006-BBA7: | ||||
Class H, 0.8512% 3/15/19 (d)(f) | 111,360 | 110,275 | ||
Class J, 1.0512% 3/15/19 (d)(f) | 146,405 | 139,191 | ||
Series 2007-BBA8: | ||||
Class D, 0.4512% 3/15/22 (d)(f) | 76,569 | 72,317 | ||
Class E, 0.5012% 3/15/22 (d)(f) | 394,020 | 364,257 | ||
Class F, 0.5512% 3/15/22 (d)(f) | 241,475 | 218,405 | ||
Class G, 0.6012% 3/15/22 (d)(f) | 62,931 | 55,660 | ||
Class H, 0.7512% 3/15/22 (d)(f) | 76,569 | 66,191 | ||
Class J, 0.9012% 3/15/22 (d)(f) | 76,569 | 64,277 | ||
sequential payer Series 2004-PWR3 Class A3, 4.487% 2/11/41 | 6,369 | 6,368 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Bear Stearns Commercial Mortgage Securities Trust: - continued | ||||
Series 2006-PW14 Class X2, 0.6687% 12/11/38 (d)(f)(h) | $ 2,038,198 | $ 11,375 | ||
Series 2006-T24 Class X2, 0.4454% 10/12/41 (d)(f)(h) | 367,020 | 1,192 | ||
Series 2007-PW18 Class X2, 0.3087% 6/11/50 (d)(f)(h) | 13,976,215 | 120,126 | ||
Series 2007-T28 Class X2, 0.1575% 9/11/42 (d)(f)(h) | 7,618,124 | 35,188 | ||
C-BASS Trust floater Series 2006-SC1 Class A, 0.4717% 5/25/36 (d)(f) | 73,860 | 68,881 | ||
CDC Commercial Mortgage Trust Series 2002-FX1: | ||||
Class G, 6.625% 5/15/35 (d) | 254,000 | 264,748 | ||
Class XCL, 1.3266% 5/15/35 (d)(f)(h) | 852,830 | 13,391 | ||
Citigroup Commercial Mortgage Trust: | ||||
floater Series 2006-FL2 Class H, 0.5712% 8/15/21 (d)(f) | 9,315 | 8,952 | ||
Series 2008-C7 Class A2B, 6.0632% 12/10/49 (f) | 128,953 | 130,080 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2007-CD4 Class A3, 5.293% 12/11/49 | 210,000 | 217,097 | ||
Cobalt CMBS Commercial Mortgage Trust: | ||||
sequential payer Series 2007-C3 Class A3, 5.8027% 5/15/46 (f) | 216,000 | 230,146 | ||
Series 2006-C1 Class B, 5.359% 8/15/48 | 648,000 | 73,682 | ||
Series 2007-C2 Class B, 5.617% 4/15/47 (f) | 241,000 | 107,438 | ||
COMM Mortgage Trust Series 2013-LC6 Class ASB, 2.478% 1/10/46 | 1,180,000 | 1,204,296 | ||
COMM pass-thru certificates: | ||||
floater: | ||||
Series 2001-J2A Class A2F, 0.7022% 7/16/34 (d)(f) | 205 | 205 | ||
Series 2005-F10A Class J, 1.0512% 4/15/17 (d)(f) | 14,447 | 12,887 | ||
Series 2005-FL11: | ||||
Class C, 0.5012% 11/15/17 (d)(f) | 132,785 | 126,055 | ||
Class D, 0.5412% 11/15/17 (d)(f) | 6,961 | 6,468 | ||
Class E, 0.5912% 11/15/17 (d)(f) | 24,362 | 22,396 | ||
Class F, 0.6512% 11/15/17 (d)(f) | 17,061 | 15,514 | ||
Class G, 0.7012% 11/15/17 (d)(f) | 11,826 | 10,517 | ||
Series 2006-FL12 Class AJ, 0.3312% 12/15/20 (d)(f) | 308,000 | 295,232 | ||
sequential payer: | ||||
Series 2006-C8: | ||||
Class A3, 5.31% 12/10/46 | 615,000 | 630,782 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
COMM pass-thru certificates: - continued | ||||
sequential payer: | ||||
Series 2006-C8: | ||||
Class A4, 5.306% 12/10/46 | $ 790,000 | $ 892,819 | ||
Series 2006-CN2A: | ||||
Class A2FX, 5.449% 2/5/19 (d) | 266,721 | 268,127 | ||
Class AJFX, 5.478% 2/5/19 (d) | 380,000 | 381,300 | ||
Series 2006-C8 Class XP, 0.4673% 12/10/46 (f)(h) | 1,954,241 | 7,807 | ||
Commercial Mortgage pass-thru certificates Series 2004-LB4A Class A5, 4.84% 10/15/37 | 2,720,000 | 2,854,602 | ||
Credit Suisse Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2007-C2 Class A3, 5.542% 1/15/49 (f) | 432,000 | 493,528 | ||
Series 2007-C3 Class A4, 5.6803% 6/15/39 (f) | 130,000 | 149,346 | ||
Series 2006-C5 Class ASP, 0.6649% 12/15/39 (f)(h) | 1,217,736 | 7,053 | ||
Credit Suisse First Boston Mortgage Capital Certificates floater Series 2007-TF2A Class B, 0.5512% 4/15/22 (d)(f) | 771,000 | 676,812 | ||
Credit Suisse First Boston Mortgage Securities Corp.: | ||||
sequential payer Series 2004-C1 Class A4, 4.75% 1/15/37 | 92,331 | 94,404 | ||
Series 2001-CK6 Class AX, 1.0608% 8/15/36 (f)(h) | 45,831 | 57 | ||
Series 2001-CKN5 Class AX, 1.5108% 9/15/34 (d)(f)(h) | 192,272 | 291 | ||
Series 2003-C4 Class A4, 5.137% 8/15/36 | 348,007 | 350,231 | ||
Credit Suisse Mortgage Capital Certificates: | ||||
floater Series 2007-TFL1: | ||||
Class B, 0.3512% 2/15/22 (d)(f) | 82,000 | 79,527 | ||
Class C: | ||||
0.3712% 2/15/22 (d)(f) | 212,546 | 199,760 | ||
0.4712% 2/15/22 (d)(f) | 75,912 | 71,118 | ||
Class F, 0.5212% 2/15/22 (d)(f) | 151,805 | 142,142 | ||
Series 2007-C1: | ||||
Class ASP, 0.381% 2/15/40 (f)(h) | 3,133,099 | 11,558 | ||
Class B, 5.487% 2/15/40 (d)(f) | 330,000 | 47,685 | ||
Extended Stay America Trust floater Series 2013-ESFL: | ||||
Class A1FL, 1.008% 12/5/31 (d)(f) | 480,000 | 480,144 | ||
Class A2FL, 0.908% 12/5/31 (d)(f) | 630,000 | 630,778 | ||
Freddie Mac: | ||||
Multi-family pass-thru certificates sequential payer Series K017 Class A1, 1.891% 12/25/20 | 1,320,608 | 1,365,359 | ||
Series K707 Class A1, 1.615% 9/25/18 | 820,470 | 841,443 | ||
GE Capital Commercial Mortgage Corp.: | ||||
sequential payer Series 2007-C1 Class A4, 5.543% 12/10/49 | 1,136,000 | 1,288,959 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
GE Capital Commercial Mortgage Corp.: - continued | ||||
Series 2001-1 Class X1, 1.8773% 5/15/33 (d)(f)(h) | $ 99,949 | $ 1,521 | ||
Series 2007-C1 Class XP, 0.1604% 12/10/49 (f)(h) | 2,818,779 | 6,227 | ||
GMAC Commercial Mortgage Securities, Inc. sequential payer Series 2003-C2 Class A2, 5.4417% 5/10/40 (f) | 266,688 | 269,233 | ||
Greenwich Capital Commercial Funding Corp.: | ||||
floater Series 2006-FL4 Class B, 0.3892% 11/5/21 (d)(f) | 81,000 | 77,908 | ||
sequential payer: | ||||
Series 2007-GG11 Class A2, 5.597% 12/10/49 | 272,274 | 275,630 | ||
Series 2007-GG9 Class A4, 5.444% 3/10/39 | 1,090,000 | 1,241,897 | ||
Series 2007-GG11 Class A1, 0.2381% 12/10/49 (d)(f)(h) | 3,452,552 | 16,987 | ||
GS Mortgage Securities Corp. II: | ||||
floater: | ||||
Series 2006-FL8A: | ||||
Class E, 0.5777% 6/6/20 (d)(f) | 39,222 | 39,139 | ||
Class F, 0.6477% 6/6/20 (d)(f) | 95,176 | 94,858 | ||
Series 2007-EOP: | ||||
Class A1, 1.1031% 3/6/20 (d)(f) | 553,670 | 554,191 | ||
Class A2, 1.2601% 3/6/20 (d)(f) | 260,000 | 260,457 | ||
Class C, 2.0056% 3/6/20 (d)(f) | 806,000 | 809,865 | ||
Class D, 2.2018% 3/6/20 (d)(f) | 467,000 | 469,301 | ||
Class F, 2.6334% 3/6/20 (d)(f) | 19,000 | 19,111 | ||
Class G, 2.7903% 3/6/20 (d)(f) | 10,000 | 10,059 | ||
Class H, 3.3004% 3/6/20 (d)(f) | 7,000 | 7,045 | ||
Class J, 4.0852% 3/6/20 (d)(f) | 11,000 | 11,077 | ||
sequential payer Series 2005-GG4 Class A3, 4.607% 7/10/39 | 3,245 | 3,261 | ||
GS Mortgage Securities Trust: | ||||
sequential payer: | ||||
Series 2006-GG8 Class A2, 5.479% 11/10/39 | 78,171 | 79,305 | ||
Series 2007-GG10 Class A2, 5.778% 8/10/45 | 46,936 | 47,602 | ||
Series 2012-GC6 Class A1, 1.282% 1/10/45 | 186,506 | 188,064 | ||
JPMorgan Chase Commercial Mortgage Securities Corp.: | ||||
floater Series 2011-CCHP Class A, 2.6% 7/15/28 (d)(f) | 169,405 | 169,476 | ||
Series 2003-CB7 Class A4, 4.879% 1/12/38 (f) | 219,647 | 224,173 | ||
JPMorgan Chase Commercial Mortgage Securities Trust: | ||||
floater Series 2006-FLA2: | ||||
Class B, 0.3712% 11/15/18 (d)(f) | 120,756 | 117,314 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
JPMorgan Chase Commercial Mortgage Securities Trust: - continued | ||||
floater Series 2006-FLA2: | ||||
Class C, 0.4112% 11/15/18 (d)(f) | $ 86,034 | $ 83,115 | ||
Class D, 0.4312% 11/15/18 (d)(f) | 23,239 | 21,986 | ||
Class E, 0.4812% 11/15/18 (d)(f) | 33,957 | 31,447 | ||
Class F, 0.5312% 11/15/18 (d)(f) | 50,739 | 44,959 | ||
Class G, 0.5612% 11/15/18 (d)(f) | 44,105 | 37,317 | ||
Class H, 0.7012% 11/15/18 (d)(f) | 33,965 | 27,378 | ||
sequential payer: | ||||
Series 2006-LDP9 Class A2, 5.134% 5/15/47 (f) | 60,506 | 63,456 | ||
Series 2007-LD11 Class A2, 5.7974% 6/15/49 (f) | 296,049 | 305,360 | ||
Series 2007-LDPX: | ||||
Class A2 S, 5.305% 1/15/49 | 678,313 | 686,110 | ||
Class A3, 5.42% 1/15/49 | 594,000 | 678,056 | ||
Series 2006-CB17 Class A3, 5.45% 12/12/43 | 41,434 | 41,450 | ||
Series 2007-CB18 Class A3, 5.447% 6/12/47 (f) | 146,889 | 151,256 | ||
Series 2007-CB19: | ||||
Class B, 5.7259% 2/12/49 (f) | 18,000 | 6,425 | ||
Class C, 5.7259% 2/12/49 (f) | 48,000 | 13,277 | ||
Class D, 5.7259% 2/12/49 (f) | 51,000 | 8,599 | ||
Series 2007-LDP10 Class ES, 5.562% 1/15/49 (d)(f) | 112,000 | 4,337 | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2006-C1 Class A2, 5.084% 2/15/31 | 2,884 | 2,887 | ||
Series 2006-C7 Class A2, 5.3% 11/15/38 | 124,729 | 131,485 | ||
Series 2007-C1 Class A4, 5.424% 2/15/40 | 28,000 | 32,042 | ||
Series 2007-C2 Class A3, 5.43% 2/15/40 | 104,000 | 117,512 | ||
Series 2006-C6 Class XCP, 0.6751% 9/15/39 (f)(h) | 829,285 | 3,369 | ||
Series 2007-C1 Class XCP, 0.4249% 2/15/40 (f)(h) | 294,851 | 1,326 | ||
Series 2007-C7 Class XCP, 0.2757% 9/15/45 (f)(h) | 13,547,825 | 69,812 | ||
Lehman Brothers Floating Rate Commercial Mortgage Trust floater Series 2006-LLFA: | ||||
Class D, 0.4312% 9/15/21 (d)(f) | 69,510 | 67,292 | ||
Class E, 0.4912% 9/15/21 (d)(f) | 249,861 | 239,390 | ||
Class F, 0.5412% 9/15/21 (d)(f) | 97,418 | 92,361 | ||
Class G, 0.5612% 9/15/21 (d)(f) | 192,585 | 180,663 | ||
Class H, 0.6012% 9/15/21 (d)(f) | 49,497 | 45,443 | ||
Merrill Lynch Mortgage Trust Series 2005-LC1 Class F, 5.4232% 1/12/44 (d)(f) | 188,000 | 133,194 | ||
Merrill Lynch-CFC Commercial Mortgage Trust: | ||||
floater Series 2006-4 Class A2FL, 0.3202% 12/12/49 (f) | 12,474 | 12,434 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Merrill Lynch-CFC Commercial Mortgage Trust: - continued | ||||
sequential payer: | ||||
Series 2006-4 Class ASB, 5.133% 12/12/49 (f) | $ 138,763 | $ 145,093 | ||
Series 2007-5: | ||||
Class A3, 5.364% 8/12/48 | 83,595 | 85,308 | ||
Class A4, 5.378% 8/12/48 | 9,000 | 10,198 | ||
Series 2006-3 Class ASB, 5.382% 7/12/46 (f) | 639,938 | 657,611 | ||
Series 2006-4 Class XP, 0.6175% 12/12/49 (f)(h) | 3,000,848 | 33,913 | ||
Series 2007-6 Class B, 5.635% 3/12/51 (f) | 216,000 | 52,294 | ||
Series 2007-7 Class B, 5.7411% 6/12/50 (f) | 19,000 | 1,081 | ||
Morgan Stanley Capital I Trust: | ||||
floater: | ||||
Series 2006-XLF Class C, 1.402% 7/15/19 (d)(f) | 40,774 | 16,361 | ||
Series 2007-XLFA: | ||||
Class A2, 0.302% 10/15/20 (d)(f) | 240,866 | 238,687 | ||
Class C, 0.362% 10/15/20 (d)(f) | 124,000 | 116,957 | ||
Class D, 0.392% 10/15/20 (d)(f) | 76,067 | 70,225 | ||
Class E, 0.452% 10/15/20 (d)(f) | 95,138 | 84,978 | ||
Class F, 0.502% 10/15/20 (d)(f) | 57,094 | 49,284 | ||
Class G, 0.542% 10/15/20 (d)(f) | 70,577 | 57,394 | ||
Class H, 0.632% 10/15/20 (d)(f) | 44,426 | 30,352 | ||
Class J, 0.782% 10/15/20 (d)(f) | 25,649 | 9,059 | ||
sequential payer: | ||||
Series 2003-IQ4 Class A2, 4.07% 5/15/40 | 36,140 | 36,135 | ||
Series 2005-IQ9 Class A3, 4.54% 7/15/56 | 186,127 | 187,373 | ||
Series 2006-HQ9 Class A4, 5.731% 7/12/44 (f) | 610,000 | 690,030 | ||
Series 2006-T23 Class A3, 5.815% 8/12/41 (f) | 110,000 | 114,053 | ||
Morgan Stanley Dean Witter Capital I Trust sequential payer Series 2003-T11 Class A4, 5.15% 6/13/41 | 156,531 | 157,747 | ||
Providence Place Group Ltd. Partnership sequential payer Series 2000-C1 Class A1, 7.75% 7/20/16 (d) | 94,890 | 100,251 | ||
UBS Commercial Mortgage Trust Series 2012-C1 Class A2, 2.18% 5/10/45 | 520,000 | 539,969 | ||
Wachovia Bank Commercial Mortgage Trust: | ||||
floater: | ||||
Series 2006-WL7A: | ||||
Class A2, 0.3212% 9/15/21 (d)(f) | 633,090 | 623,148 | ||
Class E, 0.4812% 9/15/21 (d)(f) | 201,847 | 189,319 | ||
Class F, 0.5412% 9/15/21 (d)(f) | 214,060 | 198,998 | ||
Class G, 0.5612% 9/15/21 (d)(f) | 202,788 | 183,920 | ||
Class J, 0.8012% 9/15/21 (d)(f) | 45,086 | 34,218 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Wachovia Bank Commercial Mortgage Trust: - continued | ||||
floater: | ||||
Series 2007-WHL8: | ||||
Class F, 0.6812% 6/15/20 (d)(f) | $ 526,588 | $ 464,592 | ||
Class LXR1, 0.9012% 6/15/20 (d)(f) | 26,291 | 22,873 | ||
sequential payer: | ||||
Series 2006-C29 Class A3, 5.313% 11/15/48 | 573,240 | 588,417 | ||
Series 2007-C30: | ||||
Class A3, 5.246% 12/15/43 | 58,674 | 59,725 | ||
Class A4, 5.305% 12/15/43 | 64,000 | 70,122 | ||
Class A5, 5.342% 12/15/43 | 231,000 | 260,686 | ||
Series 2007-C32 Class A3, 5.7388% 6/15/49 (f) | 367,000 | 421,521 | ||
Series 2007-C33 Class A5, 5.9245% 2/15/51 (f) | 143,000 | 165,013 | ||
Series 2005-C22 Class F, 5.3875% 12/15/44 (d)(f) | 360,000 | 100,152 | ||
Series 2007-C30 Class XP, 0.4747% 12/15/43 (d)(f)(h) | 1,809,002 | 9,325 | ||
Series 2007-C31 Class C, 5.6823% 4/15/47 (f) | 59,000 | 34,228 | ||
Series 2007-C31A Class A2, 5.421% 4/15/47 | 510,989 | 513,863 | ||
WF-RBS Commercial Mortgage Trust Series 2013-C11 Class ASB, 2.63% 3/15/45 | 1,310,000 | 1,358,920 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $32,936,936) |
| |||
Municipal Securities - 0.3% | ||||
| ||||
California Gen. Oblig. 5.25% 4/1/14 | 1,500,000 | 1,566,165 | ||
Illinois Gen. Oblig. Series 2011, 5.877% 3/1/19 | 75,000 | 86,141 | ||
TOTAL MUNICIPAL SECURITIES (Cost $1,576,870) |
| |||
Foreign Government and Government Agency Obligations - 0.8% | ||||
| ||||
Brazilian Federative Republic 4.875% 1/22/21 | 500,000 | 583,750 | ||
New Brunswick Province 2.75% 6/15/18 | 1,300,000 | 1,399,351 | ||
Ontario Province 2.3% 5/10/16 | 2,820,000 | 2,962,593 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $4,659,495) |
| |||
Supranational Obligations - 1.0% | ||||
| Principal | Value | ||
International Bank for Reconstruction & Development 0.5% 4/15/16 | $ 5,950,000 | $ 5,949,000 | ||
Bank Notes - 0.1% | ||||
| ||||
Wachovia Bank NA 6% 11/15/17 | 570,000 |
| ||
Fixed-Income Funds - 0.9% | |||
Shares |
| ||
Fidelity Specialized High Income Central Fund (g) | 51,011 |
| |
Money Market Funds - 0.2% | |||
|
|
|
|
Fidelity Cash Central Fund, 0.16% (a) | 939,752 |
| |
TOTAL INVESTMENT PORTFOLIO - 99.6% (Cost $555,903,591) | 585,853,919 | ||
NET OTHER ASSETS (LIABILITIES) - 0.4% | 2,281,977 | ||
NET ASSETS - 100% | $ 588,135,896 | ||
Swap Agreements | ||||||||
Credit Default Swaps | ||||||||
Underlying | Rating | Expiration | Counterparty | Fixed | Notional | Value (1) | Upfront | Unrealized |
Sell Protection | ||||||||
Morgan Stanley ABS Capital I Inc Series 2004-NC8 Class B3 | C | Oct. 2034 | Merrill | 4.60% | $ 76,653 | $ (40,215) | $ 0 | $ (40,215) |
|
(1) Ratings are presented for credit default swaps in which the Fund has sold protection on the underlying referenced debt. Ratings for an underlying index represent a weighted average of the ratings of all securities included in the index. The value of each credit default swap and the credit rating can be measures of the current payment/performance risk. Where a credit rating is not disclosed, the value is used as the measure of the payment/performance risk. Ratings are from Moody's Investors Service, Inc. Where Moody's ratings are not available, S&P ratings are disclosed and are indicated as such. All ratings are as of the report date and do not reflect subsequent changes. |
|
(2) The notional amount of each credit default swap where the Fund has sold protection approximates the maximum potential amount of future payments that the Fund could be required to make if a credit event were to occur. |
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 are available on the SEC's website or upon request. |
(b) Non-income producing - Security is in default. |
(c) Security initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(d) 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 $60,864,019 or 10.3% of net assets. |
(e) Security or a portion of the security has been segregated as collateral for open swap agreements. At the period end, the value of securities pledged amounted to $115,533. |
(f) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
(g) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited schedule of portfolio holdings for each Fidelity Central Fund is filed with the SEC for the first and third quarters of each fiscal year on Form N-Q and is available upon request or at the SEC's website at www.sec.gov. An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro rata share of securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at advisor.fidelity.com. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request. |
(h) 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. |
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 | $ 3,505 |
Fidelity Specialized High Income Central Fund | 151,191 |
Total | $ 154,696 |
Additional information regarding the Fund's fiscal year to date purchases and sales, including the ownership percentage, of the non Money Market Central Funds is as follows: |
Fund | Value, | Purchases | Sales | Value, | % ownership, |
Fidelity Specialized High Income Central Fund | $ 5,199,627 | $ 151,191 | $ - | $ 5,439,280 | 1.4% |
Other Information |
The following is a summary of the inputs used, as of February 28, 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 | $ 269,951,471 | $ - | $ 269,715,122 | $ 236,349 |
U.S. Government and Government Agency Obligations | 170,444,367 | - | 170,444,367 | - |
U.S. Government Agency - Mortgage Securities | 26,957,932 | - | 26,957,932 | - |
Asset-Backed Securities | 43,016,835 | - | 42,296,138 | 720,697 |
Collateralized Mortgage Obligations | 17,945,585 | - | 17,945,585 | - |
Commercial Mortgage Securities | 37,926,979 | - | 37,887,745 | 39,234 |
Municipal Securities | 1,652,306 | - | 1,652,306 | - |
Foreign Government and Government Agency Obligations | 4,945,694 | - | 4,945,694 | - |
Supranational Obligations | 5,949,000 | - | 5,949,000 | - |
Bank Notes | 684,718 | - | 684,718 | - |
Fixed-Income Funds | 5,439,280 | 5,439,280 | - | - |
Money Market Funds | 939,752 | 939,752 | - | - |
Total Investments in Securities: | $ 585,853,919 | $ 6,379,032 | $ 578,478,607 | $ 996,280 |
Derivative Instruments: | ||||
Liabilities | ||||
Swap Agreements | $ (40,215) | $ - | $ (40,215) | $ - |
Value of Derivative Instruments |
The following table is a summary of the Fund's value of derivative instruments by primary risk exposure as of February 28, 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 |
Credit Risk | ||
Swap Agreements (a) | $ - | $ (40,215) |
Total Value of Derivatives | $ - | $ (40,215) |
(a) Value is disclosed on the Statement of Assets and Liabilities in the Swap agreements, at value line-items. |
Distribution of investments by country or territory of incorporation, as a percentage of total net assets, is as follows. (Unaudited) |
United States of America | 87.7% |
United Kingdom | 3.0% |
Canada | 2.4% |
Netherlands | 1.5% |
Australia | 1.2% |
Multi-National | 1.0% |
Others (Individually Less Than 1%) | 3.2% |
| 100.0% |
The information in the above table is based on the combined investments of the Fund and its pro-rata share of the investments of Fidelity's fixed-income central funds. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements
Statement of Assets and Liabilities
| February 28, 2013 (Unaudited) | |
|
|
|
Assets | ||
Investment in securities, at value - See accompanying schedule: Unaffiliated issuers (cost $549,850,732) | $ 579,474,887 |
|
Fidelity Central Funds (cost $6,052,859) | 6,379,032 |
|
Total Investments (cost $555,903,591) |
| $ 585,853,919 |
Receivable for investments sold | 3,827,996 | |
Receivable for swap agreements | 311 | |
Receivable for fund shares sold | 564,803 | |
Interest receivable | 3,333,318 | |
Distributions receivable from Fidelity Central Funds | 576 | |
Prepaid expenses | 990 | |
Other receivables | 129,364 | |
Total assets | 593,711,277 | |
|
|
|
Liabilities | ||
Payable for investments purchased | $ 3,722,255 | |
Payable for fund shares redeemed | 1,132,313 | |
Distributions payable | 89,406 | |
Swap agreements, at value | 40,215 | |
Accrued management fee | 155,243 | |
Distribution and service plan fees payable | 146,054 | |
Other affiliated payables | 105,398 | |
Other payables and accrued expenses | 184,497 | |
Total liabilities | 5,575,381 | |
|
|
|
Net Assets | $ 588,135,896 | |
Net Assets consist of: |
| |
Paid in capital | $ 588,479,602 | |
Undistributed net investment income | 2,470,674 | |
Accumulated undistributed net realized gain (loss) on investments | (32,724,493) | |
Net unrealized appreciation (depreciation) on investments | 29,910,113 | |
Net Assets | $ 588,135,896 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Statement of Assets and Liabilities - continued
| February 28, 2013 (Unaudited) | |
|
|
|
Calculation of Maximum Offering Price Class A: | $ 11.68 | |
|
|
|
Maximum offering price per share (100/97.25 of $11.68) | $ 12.01 | |
Class T: | $ 11.69 | |
|
|
|
Maximum offering price per share (100/97.25 of $11.69) | $ 12.02 | |
Class B: | $ 11.67 | |
|
|
|
Class C: | $ 11.66 | |
|
|
|
Institutional Class: | $ 11.71 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Operations
| Six months ended February 28, 2013 (Unaudited) | |
|
|
|
Investment Income |
|
|
Interest |
| $ 8,582,466 |
Income from Fidelity Central Funds |
| 154,696 |
Total income |
| 8,737,162 |
|
|
|
Expenses | ||
Management fee | $ 969,766 | |
Transfer agent fees | 530,253 | |
Distribution and service plan fees | 908,460 | |
Accounting and security lending fees | 121,558 | |
Custodian fees and expenses | 14,869 | |
Independent trustees' compensation | 1,236 | |
Registration fees | 51,879 | |
Audit | 53,369 | |
Legal | 1,890 | |
Miscellaneous | 2,347 | |
Total expenses before reductions | 2,655,627 | |
Expense reductions | (123) | 2,655,504 |
Net investment income (loss) | 6,081,658 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 3,547,252 | |
Swap agreements | 1,538 |
|
Total net realized gain (loss) |
| 3,548,790 |
Change in net unrealized appreciation (depreciation) on: Investment securities | (4,213,110) | |
Swap agreements | (3,232) | |
Total change in net unrealized appreciation (depreciation) |
| (4,216,342) |
Net gain (loss) | (667,552) | |
Net increase (decrease) in net assets resulting from operations | $ 5,414,106 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Statement of Changes in Net Assets
| Six months ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income (loss) | $ 6,081,658 | $ 15,610,469 |
Net realized gain (loss) | 3,548,790 | 15,589,917 |
Change in net unrealized appreciation (depreciation) | (4,216,342) | (3,611,564) |
Net increase (decrease) in net assets resulting | 5,414,106 | 27,588,822 |
Distributions to shareholders from net investment income | (5,892,923) | (14,195,791) |
Share transactions - net increase (decrease) | (41,440,280) | (5,031,239) |
Total increase (decrease) in net assets | (41,919,097) | 8,361,792 |
|
|
|
Net Assets | ||
Beginning of period | 630,054,993 | 621,693,201 |
End of period (including undistributed net investment income of $2,470,674 and undistributed net investment income of $2,281,939, respectively) | $ 588,135,896 | $ 630,054,993 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class A
| Six months ended February 28, 2013 | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.69 | $ 11.45 | $ 11.28 | $ 10.48 | $ 10.31 | $ 10.64 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .117 | .289 | .344 | .416 | .435 | .457 |
Net realized and unrealized gain (loss) | (.013) | .215 | .163 | .793 | .149 | (.319) |
Total from investment operations | .104 | .504 | .507 | 1.209 | .584 | .138 |
Distributions from net investment income | (.114) | (.264) | (.322) | (.372) | (.414) | (.468) |
Distributions from net realized gain | - | - | (.015) | (.037) | - | - |
Total distributions | (.114) | (.264) | (.337) | (.409) | (.414) | (.468) |
Net asset value, end of period | $ 11.68 | $ 11.69 | $ 11.45 | $ 11.28 | $ 10.48 | $ 10.31 |
Total Return B,C,D | .89% | 4.46% | 4.59% | 11.77% | 6.05% | 1.28% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | .83% A | .83% | .83% | .85% | .87% | .85% |
Expenses net of fee waivers, if any | .83% A | .83% | .83% | .85% | .87% | .85% |
Expenses net of all reductions | .83% A | .83% | .83% | .85% | .87% | .85% |
Net investment income (loss) | 2.02% A | 2.52% | 3.06% | 3.84% | 4.45% | 4.32% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 182,211 | $ 192,761 | $ 187,442 | $ 211,123 | $ 195,407 | $ 216,683 |
Portfolio turnover rate G | 117% A | 129% | 108% I | 107% I | 73% I | 81% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class T
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.70 | $ 11.45 | $ 11.29 | $ 10.48 | $ 10.32 | $ 10.64 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .119 | .292 | .348 | .420 | .440 | .462 |
Net realized and unrealized gain (loss) | (.014) | .225 | .153 | .803 | .139 | (.310) |
Total from investment operations | .105 | .517 | .501 | 1.223 | .579 | .152 |
Distributions from net investment income | (.115) | (.267) | (.326) | (.376) | (.419) | (.472) |
Distributions from net realized gain | - | - | (.015) | (.037) | - | - |
Total distributions | (.115) | (.267) | (.341) | (.413) | (.419) | (.472) |
Net asset value, end of period | $ 11.69 | $ 11.70 | $ 11.45 | $ 11.29 | $ 10.48 | $ 10.32 |
Total Return B,C,D | .90% | 4.57% | 4.53% | 11.90% | 6.00% | 1.41% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | .81% A | .80% | .80% | .81% | .82% | .82% |
Expenses net of fee waivers, if any | .81% A | .80% | .80% | .81% | .82% | .82% |
Expenses net of all reductions | .81% A | .80% | .80% | .81% | .82% | .82% |
Net investment income (loss) | 2.05% A | 2.54% | 3.09% | 3.87% | 4.50% | 4.35% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 245,697 | $ 265,426 | $ 274,215 | $ 314,110 | $ 290,428 | $ 344,229 |
Portfolio turnover rate G | 117% A | 129% | 108% I | 107% I | 73% I | 81% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class B
| Six months ended February 28, 2013 | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.68 | $ 11.43 | $ 11.27 | $ 10.47 | $ 10.30 | $ 10.63 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .075 | .206 | .264 | .339 | .369 | .385 |
Net realized and unrealized gain (loss) | (.014) | .225 | .154 | .794 | .150 | (.318) |
Total from investment operations | .061 | .431 | .418 | 1.133 | .519 | .067 |
Distributions from net investment income | (.071) | (.181) | (.243) | (.296) | (.349) | (.397) |
Distributions from net realized gain | - | - | (.015) | (.037) | - | - |
Total distributions | (.071) | (.181) | (.258) | (.333) | (.349) | (.397) |
Net asset value, end of period | $ 11.67 | $ 11.68 | $ 11.43 | $ 11.27 | $ 10.47 | $ 10.30 |
Total Return B,C,D | .53% | 3.81% | 3.77% | 11.00% | 5.35% | .60% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | 1.56% A | 1.55% | 1.55% | 1.55% | 1.54% | 1.53% |
Expenses net of fee waivers, if any | 1.56% A | 1.55% | 1.55% | 1.55% | 1.54% | 1.53% |
Expenses net of all reductions | 1.56% A | 1.55% | 1.55% | 1.55% | 1.54% | 1.53% |
Net investment income (loss) | 1.29% A | 1.79% | 2.35% | 3.13% | 3.78% | 3.64% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 4,318 | $ 5,209 | $ 7,018 | $ 10,941 | $ 11,753 | $ 15,141 |
Portfolio turnover rate G | 117% A | 129% | 108% I | 107% I | 73% I | 81% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class C
| Six months ended February 28, 2013 | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.67 | $ 11.42 | $ 11.26 | $ 10.46 | $ 10.29 | $ 10.62 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .073 | .204 | .262 | .338 | .364 | .378 |
Net realized and unrealized gain (loss) | (.013) | .225 | .154 | .794 | .150 | (.317) |
Total from investment operations | .060 | .429 | .416 | 1.132 | .514 | .061 |
Distributions from net investment income | (.070) | (.179) | (.241) | (.295) | (.344) | (.391) |
Distributions from net realized gain | - | - | (.015) | (.037) | - | - |
Total distributions | (.070) | (.179) | (.256) | (.332) | (.344) | (.391) |
Net asset value, end of period | $ 11.66 | $ 11.67 | $ 11.42 | $ 11.26 | $ 10.46 | $ 10.29 |
Total Return B,C,D | .52% | 3.79% | 3.76% | 11.00% | 5.31% | .54% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | 1.59% A | 1.57% | 1.56% | 1.56% | 1.59% | 1.59% |
Expenses net of fee waivers, if any | 1.59% A | 1.57% | 1.56% | 1.56% | 1.59% | 1.59% |
Expenses net of all reductions | 1.59% A | 1.57% | 1.56% | 1.56% | 1.59% | 1.59% |
Net investment income (loss) | 1.27% A | 1.78% | 2.33% | 3.12% | 3.73% | 3.58% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 63,167 | $ 65,425 | $ 63,435 | $ 80,043 | $ 63,750 | $ 52,529 |
Portfolio turnover rate G | 117% A | 129% | 108% I | 107% I | 73% I | 81% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Institutional Class
| Six months ended February 28, 2013 | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.72 | $ 11.48 | $ 11.31 | $ 10.50 | $ 10.34 | $ 10.66 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) D | .132 | .319 | .373 | .447 | .468 | .494 |
Net realized and unrealized gain (loss) | (.014) | .213 | .163 | .802 | .139 | (.311) |
Total from investment operations | .118 | .532 | .536 | 1.249 | .607 | .183 |
Distributions from net investment income | (.128) | (.292) | (.351) | (.402) | (.447) | (.503) |
Distributions from net realized gain | - | - | (.015) | (.037) | - | - |
Total distributions | (.128) | (.292) | (.366) | (.439) | (.447) | (.503) |
Net asset value, end of period | $ 11.71 | $ 11.72 | $ 11.48 | $ 11.31 | $ 10.50 | $ 10.34 |
Total Return B,C | 1.01% | 4.71% | 4.85% | 12.15% | 6.30% | 1.71% |
Ratios to Average Net Assets E,G | ||||||
Expenses before reductions | .58% A | .58% | .58% | .57% | .54% | .53% |
Expenses net of fee waivers, if any | .58% A | .58% | .58% | .57% | .54% | .53% |
Expenses net of all reductions | .58% A | .58% | .58% | .57% | .54% | .53% |
Net investment income (loss) | 2.28% A | 2.77% | 3.32% | 4.11% | 4.78% | 4.64% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 92,744 | $ 101,234 | $ 89,583 | $ 95,061 | $ 78,372 | $ 362,708 |
Portfolio turnover rate F | 117% A | 129% | 108% H | 107% H | 73% H | 81% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Calculated based on average shares outstanding during the period.
E 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.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Notes to Financial Statements
For the period ended February 28, 2013 (Unaudited)
1. Organization.
Fidelity Advisor® Intermediate Bond Fund (the Fund) is a fund of Fidelity Advisor Series II (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, Class C and Institutional Class shares, each of which, along with Class B shares, has equal rights as to assets and voting privileges. Class B shares are closed to new accounts and additional purchases, except for exchanges and reinvestments. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of four years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the 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.
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies 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.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the Fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the Fund. 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. The following summarizes the Fund's investment in each non-money market Fidelity Central Fund.
Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices |
Fidelity Specialized | FMR Co., Inc. (FMRC) | Seeks a high level of current income by normally investing in income-producing debt securities, with an emphasis on lower-quality debt securities. | Delayed Delivery & When Issued Securities Loans & Direct Debt Instruments Repurchase Agreements Restricted Securities
|
Semiannual Report
2. Investments in Fidelity Central Funds - continued
An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at advisor.fidelity.com. 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 contain the significant accounting policies (including investment valuation policies) of those funds 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 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)
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
3. 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 corporate bonds, bank notes, foreign government and government agency obligations, municipal securities, supranational obligations and 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 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. Swap agreements are marked-to-market daily based on valuations from third party pricing vendors or broker-supplied valuations. Pricing vendors utilize matrix pricing which considers comparisons to interest rate curves, credit spread curves, default possibilities and recovery rates. When independent prices are unavailable or unreliable, debt securities and swap agreements may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities and swap agreements 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.
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 February 28, 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
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3. Significant Accounting Policies - continued
Investment Transactions and Income - continued
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.
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.
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. 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 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 swap agreements, market discount, partnerships (including allocations from Fidelity Central Funds), deferred trustees compensation, capital loss carryforwards and losses deferred due to wash sales.
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:
Gross unrealized appreciation | $ 24,660,494 |
Gross unrealized depreciation | (2,367,559) |
Net unrealized appreciation (depreciation) on securities and other investments | $ 22,292,935 |
|
|
Tax cost | $ 563,560,984 |
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
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. At August 31, 2012, capital loss carryforwards were as follows:
Fiscal year of expiration |
|
|
|
2017 | $ (4,092,917) |
2018 | (18,759,952) |
Total capital loss carryforward | $ (22,852,869) |
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 reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is currently evaluating the impact of the update's adoption on the Fund's financial statement disclosures.
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 swap agreements. 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
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4. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
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:
Credit Risk | Credit risk relates to the ability of the issuer of a financial instrument to make further principal or interest payments on an obligation or commitment that it has to the Fund. |
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 swap agreements, the Fund attempts to reduce its exposure to counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement on a bilateral basis 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 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 OTC derivatives is generally the aggregate unrealized appreciation and unpaid counterparty payments in
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
4. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
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 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.
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 | Change in Net |
Credit Risk |
|
|
Swap Agreements (a) | $ 1,538 | $ (3,232) |
(a) A summary of the value of derivatives by primary risk exposure as of period end, if any, is included at the end of the Schedule of Investments and is representative of activity for the period.
Swap Agreements. A swap agreement (swap) is a contract between two parties to exchange future cash flows at periodic intervals based on a notional principal amount.
Swaps are marked-to-market daily and changes in value are reflected in the Statement of Assets and Liabilities in the swap agreements at value line items. Any upfront premiums paid or received upon entering a swap to compensate for differences between stated terms of the agreement and prevailing market conditions (e.g. credit spreads, interest rates or other factors) are recorded in net unrealized 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. 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.
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4. Derivative Instruments - continued
Swap Agreements - continued
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 "Swap Agreements."
Credit Default Swaps. Credit default swaps enable the Fund to buy or sell protection against specified credit events on a single-name issuer or a traded credit index. Under the terms of a credit default swap the buyer of protection (buyer) receives credit protection in exchange for making periodic payments to the seller of protection (seller) based on a fixed percentage applied to a notional principal amount. In return for these payments, the seller will be required to make a payment upon the occurrence of one or more specified credit events. The Fund enters into credit default swaps as a seller to gain credit exposure to an issuer and/or as a buyer to obtain a measure of protection against defaults of an issuer. Periodic payments are made over the life of the contract by the buyer provided that no credit event occurs.
For credit default swaps on most corporate and sovereign issuers, credit events include bankruptcy, failure to pay or repudiation/moratorium. For credit default swaps on corporate or sovereign issuers, the obligation that may be put to the seller is not limited to the specific reference obligation described in the Schedule of Investments. For credit default swaps on asset-backed securities, a credit event may be triggered by events such as failure to pay principal, maturity extension, rating downgrade or write-down. For credit default swaps on asset-backed securities, the reference obligation described represents the security that may be put to the seller. For credit default swaps on a traded credit index, a specified credit event may affect all or individual underlying securities included in the index.
As a seller, if an underlying credit event occurs, the Fund will pay a net settlement amount of cash equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising an index. Only in the event of the industry's inability to value the underlying asset will the Fund be required to take delivery of the reference obligation or underlying securities comprising an index and pay an amount equal to the notional amount of the swap.
As a buyer, if an underlying credit event occurs, the Fund will receive a net settlement amount of cash equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising an index. Only in the event of the industry's inability to value the underlying asset will the Fund be required to deliver the reference obligation or underlying securities comprising an index in exchange for payment of an amount equal to the notional amount of the swap.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
4. Derivative Instruments - continued
Credit Default Swaps - continued
Typically, the value of each credit default swap and credit rating disclosed for each reference obligation in the Schedule of Investments, where the Fund is the seller, can be used as measures of the current payment/performance risk of the swap. As the value of the swap changes as a positive or negative percentage of the total notional amount, the payment/performance risk may decrease or increase, respectively. In addition to these measures, FMR monitors a variety of factors including cash flow assumptions, market activity and market sentiment as part of its ongoing process of assessing payment/performance risk.
5. Purchases and Sales of Investments.
Purchases and sales of securities (including the Fixed-Income Central Funds), other than short-term securities and U.S. government securities, aggregated $77,918,609 and $54,303,091, 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 annualized 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 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 Fees | Retained |
Class A | -% | .25% | $ 238,506 | $ 12,028 |
Class T | -% | .25% | 319,732 | 4,161 |
Class B | .65% | .25% | 22,048 | 15,995 |
Class C | .75% | .25% | 328,174 | 39,815 |
|
|
| $ 908,460 | $ 71,999 |
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6. Fees and Other Transactions with Affiliates - continued
Sales Load. FDC may receive a front-end sales charge of up to 2.75% for selling Class A shares 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 contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. The deferred sales charges range from 3.00% to 1.00% for Class B shares, 1.00% for Class C shares, .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 | $ 6,245 |
Class T | 6,600 |
Class B* | 979 |
Class C* | 3,660 |
| $ 17,484 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
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 the respective classes of the Fund. 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 | $ 172,305 | .18 |
Class T | 202,155 | .16 |
Class B | 6,356 | .26 |
Class C | 59,315 | .18 |
Institutional Class | 90,122 | .18 |
| $ 530,253 |
|
* Annualized
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
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 $768 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.
8. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is maintained at the Fund's custodian and/or invested in cash equivalents. At period end, there were no security loans outstanding. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Total security lending income during the period amounted to $590.
9. 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 expenses. During the period, these credits reduced the Fund's custody expenses by $123.
10. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| Six months ended | Year ended |
From net investment income |
|
|
Class A | $ 1,858,534 | $ 4,384,784 |
Class T | 2,517,331 | 6,258,120 |
Class B | 30,051 | 97,338 |
Class C | 394,780 | 1,010,197 |
Institutional Class | 1,092,227 | 2,445,352 |
Total | $ 5,892,923 | $ 14,195,791 |
Semiannual Report
11. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
| Six months ended | Year ended | Six months ended | Year ended |
Class A |
|
|
|
|
Shares sold | 2,013,739 | 4,921,704 | $ 23,554,329 | $ 56,545,464 |
Reinvestment of distributions | 132,137 | 314,093 | 1,545,715 | 3,613,245 |
Shares redeemed | (3,037,179) | (5,123,272) | (35,492,632) | (58,883,551) |
Net increase (decrease) | (891,303) | 112,525 | $ (10,392,588) | $ 1,275,158 |
Class T |
|
|
|
|
Shares sold | 2,450,840 | 7,233,970 | $ 28,677,160 | $ 83,035,227 |
Reinvestment of distributions | 205,370 | 517,399 | 2,403,723 | 5,955,060 |
Shares redeemed | (4,327,949) | (9,003,581) | (50,633,493) | (103,500,030) |
Net increase (decrease) | (1,671,739) | (1,252,212) | $ (19,552,610) | $ (14,509,743) |
Class B |
|
|
|
|
Shares sold | 36,993 | 116,051 | $ 431,947 | $ 1,328,317 |
Reinvestment of distributions | 2,318 | 7,572 | 27,090 | 86,917 |
Shares redeemed | (115,302) | (291,361) | (1,346,477) | (3,339,311) |
Net increase (decrease) | (75,991) | (167,738) | $ (887,440) | $ (1,924,077) |
Class C |
|
|
|
|
Shares sold | 911,713 | 1,466,208 | $ 10,646,458 | $ 16,778,041 |
Reinvestment of distributions | 27,262 | 71,373 | 318,256 | 819,120 |
Shares redeemed | (1,128,619) | (1,482,787) | (13,152,568) | (16,987,687) |
Net increase (decrease) | (189,644) | 54,794 | $ (2,187,854) | $ 609,474 |
Institutional Class |
|
|
|
|
Shares sold | 858,106 | 2,368,506 | $ 10,060,354 | $ 27,240,632 |
Reinvestment of distributions | 84,217 | 190,054 | 987,854 | 2,192,530 |
Shares redeemed | (1,661,238) | (1,728,351) | (19,467,996) | (19,915,213) |
Net increase (decrease) | (718,915) | 830,209 | $ (8,419,788) | $ 9,517,949 |
12. 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.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
13. Credit Risk.
The Fund invests a portion of its assets in structured securities of issuers backed by residential mortgage loans, credit card receivables and automotive loans. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults.
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Advisor Intermediate Bond Fund
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established three standing committees, Operations, Audit, and Governance and Nominating, each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Operations Committee, of which all of the Independent Trustees are members, meets regularly throughout the year and, among other matters, considers matters specifically related to the annual consideration of the renewal of the fund's Advisory Contracts. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through ad hoc joint committees to discuss certain matters relevant to the Fidelity funds.
At its September 2012 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with the fund; (iv) the extent to which economies of scale exist and would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts is in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts is fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Semiannual Report
Nature, Extent, and Quality of Services Provided. The Board considered the staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the fund's investment personnel, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the general qualifications and capabilities of the Investment Advisers' investment staff, including its size, education, experience, and resources, as well as the Investment Advisers' approach to recruiting, managing, and compensating investment personnel. The Board also noted that FMR has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. The Board also believes that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered the Investment Advisers' trading and risk management capabilities and resources, which are an integral part of the investment management process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through telephone representatives and over the Internet, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including (i) continuing to dedicate additional resources to investment research and support of the senior management team that oversees asset management; (ii) persisting in efforts to enhance Fidelity's research capabilities, in particular, international research; (iii) launching new funds and making other enhancements to meet client needs for global and income-oriented solutions; (iv) continuing to launch dedicated lower cost underlying funds to meet investment management's portfolio construction needs related to expanding underlying fund options, specifically for the Freedom Fund product lines; (v) adopting a sector neutral investment approach for certain funds and utilizing a team of portfolio managers to manage certain sector-neutral funds; (vi) rationalizing product lines and gaining increased efficiencies through combinations of several funds with other funds; (vii) strengthening the Spartan Index Fund product line by adding new funds and/or new low-cost institutional share classes, restructuring fund expenses to accommodate new classes, and reducing investment minimums for certain classes of shares; (viii) modifying the eligibility criteria for Institutional Class shares to increase their appeal to government entities and charitable investors; and (ix) reducing certain transfer agent fee rates.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured over multiple periods against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by Fidelity and reviewed by the Board. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2011, the cumulative total returns of Institutional Class (Class I) and Class C of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Institutional Class (Class I) and Class C show the performance of the highest and lowest performing classes, respectively (based on five-year performance). The box within each chart shows the 25th percentile return (top of box) and the 75th percentile return (bottom of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the peer group whose performance was equal to or lower than that of the class indicated.
Semiannual Report
Fidelity Advisor Intermediate Bond Fund
The Board reviewed the fund's relative investment performance against its peer group and noted that the performance of Institutional Class (Class I) of the fund was in the first quartile for the one- and three-year periods and the second quartile for the five-year period. The Board also noted that the investment performance of Institutional Class (Class I) of the fund compared favorably to its benchmark for the one- and three-year periods, although the fund's five-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes. The Board also reviewed the fund's performance since inception as well as performance in the current year.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should benefit the fund's shareholders.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 11% means that 89% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Advisor Intermediate Bond Fund
Semiannual Report
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2011.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered the current and historical total expense ratios of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expense ratio of each class ranked below its competitive median for 2011.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of FMR and its affiliates, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients. The Board noted the findings of the 2010 ad hoc joint committee (created with the board of other Fidelity funds), which reviewed and compared Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds, including the differences in services provided, fees charged, and costs incurred, as well as competition in their respective marketplaces.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and was satisfied that the profitability was not excessive in the circumstances.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board also noted that in 2009, it and the board of other Fidelity funds created an ad hoc committee (the Economies of Scale Committee) to analyze whether FMR attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
Semiannual Report
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including: (i) Fidelity's fund profitability methodology, profitability trends for certain funds, and the impact of certain factors on fund profitability results; (ii) portfolio manager changes that have occurred during the past year and the amount of the investment that each portfolio manager has made in the Fidelity fund(s) that he or she manages; (iii) Fidelity's compensation structure for portfolio managers, research analysts, and other key personnel, including its effects on fund profitability, the rationale for the compensation structure, and the extent to which current market conditions have affected retention and recruitment; (iv) the compensation paid to fund sub-advisers on behalf of the Fidelity funds; (v) Fidelity's fee structures, including the group fee structure, and the rationale for recommending different fees among different categories of funds and classes; (vi) Fidelity's voluntary waiver of its fees to maintain minimum yields for certain money market funds and classes as well as contractual waivers in place for certain funds; (vii) regulatory and industry developments, including those affecting money market funds and target date funds, and the potential impact to Fidelity; (viii) Fidelity's transfer agent fees, expenses, and services, and drivers for determining the transfer agent fee structure of different funds and classes; (ix) management fee rates charged by FMR or Fidelity entities to other Fidelity clients; (x) the allocation of and historical trends in Fidelity's realization of fall-out benefits; and (xi) explanations regarding the relative total expense ratios of certain funds and classes, total expense competitive trends, and actions that might be taken by FMR to reduce total expense ratios for certain funds and classes or to achieve further economies of scale.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Semiannual 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
(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
(Fidelity Investment logo)(registered trademark)
LTBI-USAN-0413 1.784889.110
Fidelity®
Mortgage Securities
Fund
(A Class of Fidelity Advisor® Mortgage
Securities Fund)
Semiannual Report
February 28, 2013
Contents
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. | |
Board Approval of Investment Advisory Contracts and Management Fees |
|
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.
Semiannual 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, 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 (September 1, 2012 to February 28, 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.
Semiannual Report
Shareholder Expense Example - continued
| Annualized | Beginning | Ending | Expenses Paid |
Class A | .80% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,004.10 | $ 3.98 |
HypotheticalA |
| $ 1,000.00 | $ 1,020.83 | $ 4.01 |
Class T | .77% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,003.40 | $ 3.82 |
HypotheticalA |
| $ 1,000.00 | $ 1,020.98 | $ 3.86 |
Class B | 1.51% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,000.60 | $ 7.49 |
HypotheticalA |
| $ 1,000.00 | $ 1,017.31 | $ 7.55 |
Class C | 1.53% |
|
|
|
Actual |
| $ 1,000.00 | $ 999.60 | $ 7.59 |
HypotheticalA |
| $ 1,000.00 | $ 1,017.21 | $ 7.65 |
Fidelity Mortgage Securities Fund | .45% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,004.90 | $ 2.24 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.56 | $ 2.26 |
Institutional Class | .52% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,004.70 | $ 2.58 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.22 | $ 2.61 |
A 5% return per year before expenses
* 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). The fees and expenses of the underlying Fidelity Central Funds in which the Fund invests are not included in the Fund's annualized expense ratio.
Semiannual Report
Investment Changes (Unaudited)
The information in the following tables is based on the combined investments of the Fund and its pro-rata share of the investments of Fidelity's fixed-income central funds. |
Coupon Distribution as of February 28, 2013 | ||
| % of fund's investments | % of fund's investments |
Zero coupon bonds | 0.2 | 0.4 |
0.01 - 0.99% | 5.7 | 5.1 |
1 - 1.99% | 1.1 | 0.7 |
2 - 2.99% | 4.2 | 0.8 |
3 - 3.99% | 23.0 | 11.7 |
4 - 4.99% | 30.0 | 36.4 |
5 - 5.99% | 16.9 | 23.5 |
6 - 6.99% | 6.1 | 5.8 |
7% and above | 1.6 | 1.9 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Weighted Average Maturity as of February 28, 2013 | ||
|
| 6 months ago |
Years | 3.8 | 3.6 |
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 February 28, 2013 | ||
|
| 6 months ago |
Years | 2.8 | 1.9 |
Duration estimates how much a bond fund's price will change with a change in comparable interest rates. If rates rise 1%, for example, a fund with a 5-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. Duration takes into account any call or put option embedded in the bonds. |
Asset Allocation (% of fund's net assets) | |||||||
As of February 28, 2013* | As of August 31, 2012** | ||||||
 | Mortgage |
|  | Mortgage |
| ||
 | CMOs and Other Mortgage Related Securities 14.0% |
| | CMOs and Other Mortgage Related Securities 13.1% |
| ||
 | Asset-Backed |
| | Asset-Backed |
| ||
 | Short-Term |
| | Short-Term |
| ||
* Foreign investments | 3.8% |
| ** Foreign investments | 1.1% |
| ||
* Futures and Swaps | (3.6)% |
| ** Futures and Swaps | (2.6)% |
| ||
† Short-Term Investments and Net Other Assets (Liabilities) are not included in the pie chart. |
A holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. |
Percentages in the above tables are adjusted for the effect of TBA Sale Commitments. |
Semiannual Report
Investments February 28, 2013 (Unaudited)
Showing Percentage of Net Assets
U.S. Government Agency - Mortgage Securities - 105.6% | ||||
| Principal Amount (000s) | Value (000s) | ||
Fannie Mae - 59.6% | ||||
1.865% 9/1/37 (e) | $ 22 | $ 23 | ||
2.296% 7/1/35 (e) | 8 | 8 | ||
2.332% 3/1/35 (e) | 44 | 46 | ||
2.5% 3/1/28 (c) | 15,100 | 15,684 | ||
2.5% 3/1/28 (c) | 11,100 | 11,529 | ||
2.5% 3/1/28 (c) | 11,800 | 12,256 | ||
2.5% 3/1/28 (c) | 5,200 | 5,401 | ||
2.524% 10/1/33 (e) | 68 | 73 | ||
2.559% 6/1/36 (e) | 49 | 52 | ||
2.583% 1/1/35 (e) | 330 | 351 | ||
2.611% 5/1/36 (e) | 260 | 276 | ||
2.741% 7/1/35 (e) | 82 | 88 | ||
2.769% 11/1/36 (e) | 63 | 68 | ||
2.777% 4/1/36 (e) | 221 | 236 | ||
2.781% 9/1/36 (e) | 145 | 156 | ||
2.806% 8/1/35 (e) | 418 | 448 | ||
2.861% 5/1/36 (e) | 65 | 69 | ||
2.875% 10/1/36 (e) | 172 | 185 | ||
3% 4/1/27 to 2/1/43 | 19,613 | 20,612 | ||
3% 3/1/28 (c) | 2,700 | 2,842 | ||
3% 2/1/43 | 132 | 137 | ||
3% 2/1/43 | 177 | 184 | ||
3% 2/1/43 | 200 | 208 | ||
3% 3/1/43 (c) | 4,500 | 4,659 | ||
3% 3/1/43 (c) | 15,400 | 15,945 | ||
3% 3/1/43 (c) | 11,500 | 11,907 | ||
3% 3/1/43 (c) | 4,000 | 4,142 | ||
3% 3/1/43 (c) | 4,000 | 4,142 | ||
3% 3/1/43 (c) | 1,000 | 1,035 | ||
3% 3/1/43 (c) | 4,000 | 4,142 | ||
3% 4/1/43 (c) | 5,300 | 5,474 | ||
3% 4/1/43 (c) | 9,200 | 9,502 | ||
3% 4/1/43 (c) | 4,000 | 4,131 | ||
3% 4/1/43 (c) | 4,000 | 4,131 | ||
3% 4/1/43 (c) | 2,000 | 2,066 | ||
3% 4/1/43 (c) | 2,000 | 2,066 | ||
3% 4/1/43 (c) | 18,700 | 19,315 | ||
3.155% 9/1/37 (e) | 30 | 32 | ||
3.291% 6/1/36 (e) | 797 | 841 | ||
3.357% 9/1/41 (e) | 296 | 313 | ||
3.476% 3/1/40 (e) | 578 | 605 | ||
3.5% 4/1/20 to 3/1/43 | 76,229 | 80,846 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Fannie Mae - continued | ||||
3.5% 3/1/28 (c) | $ 2,200 | $ 2,333 | ||
3.5% 7/1/42 | 24 | 26 | ||
3.5% 2/1/43 | 105 | 111 | ||
3.5% 2/1/43 | 605 | 641 | ||
3.5% 2/1/43 | 1,728 | 1,834 | ||
3.5% 2/1/43 | 714 | 756 | ||
3.5% 2/1/43 | 201 | 213 | ||
3.5% 3/1/43 (c) | 8,800 | 9,306 | ||
3.5% 3/1/43 (c) | 8,800 | 9,306 | ||
3.5% 3/1/43 (c) | 8,800 | 9,306 | ||
3.5% 3/1/43 (c) | 10,000 | 10,575 | ||
3.5% 3/1/43 (c) | 12,200 | 12,902 | ||
3.5% 3/1/43 (c) | 3,200 | 3,384 | ||
3.5% 3/1/43 (c) | 6,600 | 6,980 | ||
3.5% 3/1/43 (c) | 2,600 | 2,750 | ||
3.5% 4/1/43 (c) | 21,400 | 22,580 | ||
3.5% 4/1/43 (c) | 4,600 | 4,854 | ||
4% 10/1/25 to 7/1/42 | 110,427 | 118,639 | ||
4% 3/1/43 | 1,200 | 1,279 | ||
4% 3/1/43 | 1,400 | 1,493 | ||
4.5% 5/1/25 to 10/1/41 | 49,682 | 53,927 | ||
4.5% 3/1/43 (c) | 1,500 | 1,615 | ||
5% 5/1/20 to 6/1/40 | 23,820 | 26,014 | ||
5.5% 2/1/18 to 9/1/38 | 58,115 | 63,747 | ||
5.858% 3/1/36 (e) | 391 | 415 | ||
6% 9/1/29 to 1/1/42 | 21,593 | 24,210 | ||
6.022% 8/1/46 (e) | 45 | 48 | ||
6.039% 9/1/36 (e) | 202 | 211 | ||
6.311% 4/1/37 (e) | 175 | 187 | ||
6.499% 12/1/36 (e) | 192 | 209 | ||
6.5% 3/1/13 to 5/1/38 | 3,818 | 4,260 | ||
7% 12/1/15 to 5/1/30 | 1,773 | 2,032 | ||
7.21% 12/1/36 (e) | 44 | 48 | ||
7.5% 8/1/22 to 9/1/32 | 978 | 1,146 | ||
8% 12/1/29 to 3/1/37 | 54 | 65 | ||
8.5% 1/1/16 to 7/1/31 | 162 | 188 | ||
9% 10/1/30 | 215 | 261 | ||
9.5% 7/1/16 to 8/1/22 | 29 | 31 | ||
12.5% 8/1/15 to 3/1/16 | 7 | 8 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Fannie Mae - continued | ||||
12.75% 2/1/15 | $ 2 | $ 2 | ||
13.5% 9/1/14 | 1 | 1 | ||
| 644,119 | |||
Freddie Mac - 23.5% | ||||
2.104% 3/1/35 (e) | 180 | 188 | ||
2.356% 5/1/34 (e) | 14 | 14 | ||
2.357% 5/1/37 (e) | 112 | 119 | ||
2.362% 8/1/37 (e) | 136 | 143 | ||
2.478% 6/1/37 (e) | 42 | 45 | ||
2.492% 4/1/35 (e) | 76 | 81 | ||
2.528% 11/1/35 (e) | 347 | 371 | ||
2.574% 6/1/37 (e) | 334 | 359 | ||
2.635% 6/1/37 (e) | 29 | 31 | ||
2.696% 4/1/37 (e) | 158 | 169 | ||
2.785% 6/1/37 (e) | 775 | 831 | ||
2.97% 4/1/37 (e) | 9 | 9 | ||
2.971% 6/1/33 (e) | 984 | 1,058 | ||
3% 11/1/42 (c) | 500 | 517 | ||
3% 1/1/43 (c) | 500 | 516 | ||
3% 2/1/43 | 234 | 242 | ||
3% 2/1/43 | 2,267 | 2,343 | ||
3% 3/1/43 (c) | 14,200 | 14,633 | ||
3.057% 7/1/36 (e) | 140 | 151 | ||
3.439% 10/1/35 (e) | 70 | 75 | ||
3.5% 1/1/26 to 3/1/43 | 44,703 | 47,384 | ||
3.5% 2/1/43 | 620 | 656 | ||
3.5% 2/1/43 | 1,099 | 1,163 | ||
3.5% 2/1/43 | 712 | 751 | ||
3.5% 2/1/43 | 2,006 | 2,117 | ||
4% 6/1/24 to 5/1/42 | 34,177 | 36,694 | ||
4% 3/1/43 (c) | 7,000 | 7,436 | ||
4.5% 7/1/25 to 3/1/42 | 41,991 | 45,210 | ||
5% 7/1/33 to 9/1/40 | 25,895 | 28,203 | ||
5.145% 3/1/36 (e) | 634 | 666 | ||
5.5% 10/1/17 to 1/1/40 (d) | 33,900 | 36,934 | ||
6% 4/1/14 to 6/1/39 | 5,775 | 6,340 | ||
6.011% 4/1/37 (e) | 81 | 86 | ||
6.082% 10/1/36 (e) | 40 | 43 | ||
6.404% 12/1/36 (e) | 613 | 659 | ||
6.5% 8/1/13 to 9/1/39 | 8,674 | 9,725 | ||
7% 6/1/21 to 9/1/36 | 2,641 | 3,088 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Freddie Mac - continued | ||||
7.03% 6/1/36 (e) | $ 32 | $ 34 | ||
7.5% 7/1/14 to 7/1/34 | 3,777 | 4,344 | ||
8% 11/1/16 to 1/1/37 | 58 | 69 | ||
8.5% 6/1/16 to 9/1/20 | 9 | 10 | ||
9% 9/1/16 to 5/1/21 | 69 | 75 | ||
10% 1/1/16 to 12/1/18 | 8 | 9 | ||
10.5% 2/1/16 | 0* | 0* | ||
12.5% 2/1/14 to 12/1/14 | 1 | 1 | ||
13% 12/1/13 to 6/1/15 | 5 | 5 | ||
| 253,597 | |||
Ginnie Mae - 22.5% | ||||
3% 3/1/43 (c) | 1,000 | 1,048 | ||
3% 3/1/43 (c) | 15,200 | 15,916 | ||
3.5% 3/15/42 to 11/20/42 | 26,778 | 28,711 | ||
3.5% 3/1/43 (c) | 2,300 | 2,464 | ||
3.5% 3/1/43 (c) | 3,200 | 3,428 | ||
3.5% 3/1/43 (c) | 5,400 | 5,784 | ||
4% 9/15/25 to 1/20/42 | 17,206 | 18,832 | ||
4.497% 1/20/62 (j) | 775 | 878 | ||
4.5% 8/15/33 to 3/20/41 | 88,459 | 97,529 | ||
4.564% 11/20/61 (j) | 949 | 1,073 | ||
4.751% 12/20/60 (j) | 13,571 | 15,232 | ||
4.814% 1/20/61 (j) | 313 | 353 | ||
5% 9/20/33 to 9/15/40 | 33,220 | 36,986 | ||
5% 3/1/43 (c) | 1,600 | 1,748 | ||
5.5% 10/15/33 to 9/15/39 | 4,918 | 5,456 | ||
6% 1/15/36 to 9/20/38 | 3,994 | 4,529 | ||
6.5% 10/15/34 to 7/15/36 | 275 | 313 | ||
7% 2/15/24 to 4/20/32 | 1,572 | 1,829 | ||
7.5% 12/15/16 to 4/15/32 | 587 | 682 | ||
8% 6/15/21 to 12/15/25 | 272 | 317 | ||
8.5% 8/15/16 to 10/15/28 | 284 | 328 | ||
9% 11/20/17 | 1 | 1 | ||
10.5% 10/20/17 to 2/20/18 | 6 | 7 | ||
| 243,444 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $1,122,810) | 1,141,160 | |||
Asset-Backed Securities - 2.6% | ||||
| Principal Amount (000s) | Value (000s) | ||
American Credit Acceptance Receivables Trust Series 2012-2 Class A, 1.89% 7/15/16 (b) | $ 2,021 | $ 2,036 | ||
Ameriquest Mortgage Securities, Inc. pass-thru certificates Series 2005-R6 Class A2, 0.4017% 8/25/35 (e) | 2,586 | 2,571 | ||
Carnow Auto Receivables Trust Series 2012-1A Class A, 2.09% 1/15/15 (b) | 747 | 747 | ||
Countrywide Asset-Backed Certificates Trust: | ||||
Series 2006-22 Class 2A2, 0.3117% 5/25/47 (e) | 1,217 | 1,212 | ||
Series 2006-25 Class 2A2, 0.3217% 6/25/47 (e) | 2,552 | 2,524 | ||
Series 2007-4 Class A1A, 0.3237% 9/25/37 (e) | 130 | 130 | ||
Countrywide Home Loans, Inc. Series 2005-2 Class M2, 0.9067% 7/25/35 (e) | 293 | 293 | ||
GSAMP Trust: | ||||
Series 2004-AR1 Class B4, 3.4154% 6/25/34 (b)(e) | 82 | 23 | ||
Series 2004-AR2 Class B1, 3.0517% 8/25/34 (e) | 796 | 39 | ||
Morgan Stanley ABS Capital I Trust Series 2005-3 Class A3, 0.5817% 8/25/35 (e) | 237 | 237 | ||
Ocala Funding LLC Series 2006-1A Class A, 1.6007% 3/20/11 (a)(b)(e) | 2,100 | 0 | ||
Soundview Home Loan Trust Series 2006-WF1 Class A3, 5.5619% 10/25/36 | 6,783 | 5,744 | ||
Specialty Underwriting & Residential Finance Trust Series 2006-BC1 Class A2C, 0.4017% 12/25/36 (e) | 3,390 | 3,329 | ||
Structured Asset Securities Corp.: | ||||
Series 2005-NC2 Class M3, 0.6317% 5/25/35 (e) | 1,995 | 1,731 | ||
Series 2007-BC3 Class 2A1, 0.2617% 5/25/47 (e) | 7,304 | 7,234 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $29,658) |
| |||
Collateralized Mortgage Obligations - 11.0% | ||||
| ||||
Private Sponsor - 4.7% | ||||
Banc of America Funding Trust sequential payer Series 2009-R1 Class A1, 4.9643% 5/20/36 (e) | 24 | 24 | ||
BCAP LLC Trust sequential payer Series 2010-RR12 Class 3A5, 5% 8/26/37 (b) | 184 | 185 | ||
Citigroup Mortgage Loan Trust Series 2010-7 Class 9A1, 4.5% 10/25/37 (b) | 2,402 | 2,435 | ||
Credit Suisse Mortgage Capital Certificates: | ||||
floater Series 2011-7R Class A1, 1.4597% 8/28/47 (b)(e) | 1,306 | 1,297 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Private Sponsor - continued | ||||
Credit Suisse Mortgage Capital Certificates: - continued | ||||
sequential payer Series 2010-16 Class A1, 3% 6/25/50 (b) | $ 197 | $ 198 | ||
CSMC floater Series 2011-1R Class A1, 1.2097% 2/27/47 (b)(e) | 2,205 | 2,195 | ||
First Horizon Mortgage pass-thru Trust Series 2004-AR5 Class 2A1, 2.6313% 10/25/34 (e) | 803 | 836 | ||
Granite Master Issuer PLC: | ||||
floater: | ||||
Series 2006-1A Class A5, 0.3407% 12/20/54 (b)(e) | 8,843 | 8,667 | ||
Series 2006-4 Class A4, 0.3007% 12/20/54 (e) | 8,631 | 8,459 | ||
Series 2007-1: | ||||
Class 2A1, 0.3407% 12/20/54 (e) | 2,967 | 2,908 | ||
Class 3A1, 0.4007% 12/20/54 (e) | 2,636 | 2,584 | ||
Series 2007-2 Class 2A1, 0.2822% 12/17/54 (e) | 3,196 | 3,132 | ||
Series 2007-2 Class 3A1, 0.3822% 12/17/54 (e) | 1,933 | 1,895 | ||
Granite Mortgages Series 2003-2 Class 1A3, 0.802% 7/20/43 (e) | 365 | 361 | ||
Granite Mortgages PLC floater: | ||||
Series 2003-3 Class 1A3, 0.702% 1/20/44 (e) | 998 | 989 | ||
Series 2004-1 Class 2A1, 0.629% 3/20/44 (e) | 5,150 | 5,090 | ||
Series 2004-3 Class 2A1, 0.589% 9/20/44 (e) | 3,232 | 3,195 | ||
JP Morgan REREMIC Trust floater Series 2009-5 Class 2A1, 2.1382% 1/26/37 (b)(e) | 1,112 | 1,107 | ||
MASTR Adjustable Rate Mortgages Trust Series 2007-3 Class 22A2, 0.4117% 5/25/47 (e) | 476 | 348 | ||
Merrill Lynch Alternative Note Asset Trust floater Series 2007-OAR1 Class A1, 0.3717% 2/25/37 (e) | 2,343 | 2,023 | ||
Structured Asset Securities Corp. Series 2003-15A Class 4A, 4.7816% 4/25/33 (e) | 327 | 324 | ||
Wells Fargo Mortgage Backed Securities Trust: | ||||
Series 2005-AR2 Class 1A2, 2.6255% 3/25/35 (e) | 369 | 185 | ||
Series 2006-AR10 Class 3A1, 2.621% 7/25/36 (e) | 2,731 | 2,724 | ||
TOTAL PRIVATE SPONSOR | 51,161 | |||
U.S. Government Agency - 6.3% | ||||
Fannie Mae: | ||||
floater: | ||||
Series 2003-118 Class S, 7.8983% 12/25/33 (e)(g)(i) | 780 | 150 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
floater: | ||||
Series 2007-57 Class FA, 0.4317% 6/25/37 (e) | $ 3,278 | $ 3,279 | ||
planned amortization class: | ||||
Series 1994-23: | ||||
Class PX, 6% 8/25/23 | 424 | 432 | ||
Class PZ, 6% 2/25/24 | 3,414 | 3,963 | ||
Series 1999-17 Class PG, 6% 4/25/29 | 1,555 | 1,730 | ||
Series 1999-32 Class PL, 6% 7/25/29 | 1,235 | 1,380 | ||
Series 1999-33 Class PK, 6% 7/25/29 | 736 | 824 | ||
Series 2001-52 Class YZ, 6.5% 10/25/31 | 83 | 96 | ||
Series 2005-39 Class TE, 5% 5/25/35 | 1,120 | 1,273 | ||
Series 2005-73 Class SA, 17.0256% 8/25/35 (e)(i) | 320 | 386 | ||
Series 2006-105 Class MD, 5.5% 6/25/35 | 1,145 | 1,237 | ||
sequential payer: | ||||
Series 2001-20 Class Z, 6% 5/25/31 | 1,408 | 1,571 | ||
Series 2001-31 Class ZC, 6.5% 7/25/31 | 560 | 639 | ||
Series 2002-16 Class ZD, 6.5% 4/25/32 | 220 | 250 | ||
Series 2002-74 Class SV, 7.3483% 11/25/32 (e)(g) | 402 | 89 | ||
Series 2002-79 Class Z, 5.5% 11/25/22 | 724 | 785 | ||
Series 2003-80 Class CG, 6% 4/25/30 | 70 | 70 | ||
Series 1993-165 Class SH, 19.1811% 9/25/23 (e)(i) | 65 | 87 | ||
Series 2003-21 Class SK, 7.8983% 3/25/33 (e)(g)(i) | 229 | 51 | ||
Series 2003-35 Class TQ, 7.2983% 5/25/18 (e)(g)(i) | 169 | 26 | ||
Series 2003-39 Class IA, 5.5% 10/25/22 (e)(g) | 208 | 7 | ||
Series 2003-42 Class SJ, 6.8483% 11/25/22 (e)(g)(i) | 111 | 8 | ||
Series 2003-48 Class HI, 5% 11/25/17 (g) | 271 | 5 | ||
Series 2005-104 Class NI, 6.4983% 3/25/35 (e)(g)(i) | 3,013 | 482 | ||
Series 2007-57 Class SA, 39.4098% 6/25/37 (e)(i) | 981 | 1,807 | ||
Series 2007-66: | ||||
Class FB, 0.6017% 7/25/37 (e) | 1,601 | 1,609 | ||
Class SB, 38.3898% 7/25/37 (e)(i) | 295 | 564 | ||
Series 2008-12 Class SG, 6.1483% 3/25/38 (e)(g)(i) | 1,951 | 238 | ||
Series 2009-114 Class AI, 5% 12/25/23 (g) | 983 | 72 | ||
Series 2009-16 Class SA, 6.0483% 3/25/24 (e)(g)(i) | 1,108 | 90 | ||
Series 2009-76 Class MI, 5.5% 9/25/24 (g) | 633 | 53 | ||
Series 2009-85 Class IB, 4.5% 8/25/24 (g) | 292 | 25 | ||
Series 2009-93 Class IC, 4.5% 9/25/24 (g) | 449 | 35 | ||
Series 2010-12 Class AI, 5% 12/25/18 (g) | 1,817 | 164 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
Series 2010-135 Class LS, 5.8483% 12/25/40 (e)(g)(i) | $ 1,578 | $ 213 | ||
Series 2010-139 Class NI, 4.5% 2/25/40 (g) | 1,600 | 237 | ||
Series 2010-23: | ||||
Class AI, 5% 12/25/18 (g) | 827 | 62 | ||
Class HI, 4.5% 10/25/18 (g) | 550 | 46 | ||
Series 2010-29 Class LI, 4.5% 6/25/19 (g) | 1,681 | 138 | ||
Series 2010-96 Class DI, 4% 5/25/23 (g) | 603 | 9 | ||
Series 2010-97 Class CI, 4.5% 8/25/25 (g) | 929 | 87 | ||
Series 2011-67 Class AI, 4% 7/25/26 (g) | 537 | 54 | ||
Series 2011-83 Class DI, 6% 9/25/26 (g) | 889 | 135 | ||
Fannie Mae Stripped Mortgage-Backed Securities: | ||||
Series 339 Class 29, 5.5% 7/1/18 (g) | 512 | 44 | ||
Series 348 Class 14, 6.5% 8/1/34 (g) | 385 | 70 | ||
Series 351: | ||||
Class 12, 5.5% 4/1/34 (g) | 282 | 44 | ||
Class 13, 6% 3/1/34 (g) | 351 | 63 | ||
Series 359 Class 19, 6% 7/1/35 (g) | 304 | 40 | ||
Series 384 Class 6, 5% 7/25/37 (g) | 1,080 | 118 | ||
Freddie Mac: | ||||
floater: | ||||
Series 3222 Class HF, 0% 9/15/36 (e) | 52 | 49 | ||
Series 3318 Class GY, 0% 5/15/37 (e) | 7 | 7 | ||
planned amortization class: | ||||
Series 2095 Class PE, 6% 11/15/28 | 1,523 | 1,707 | ||
Series 2104 Class PG, 6% 12/15/28 | 465 | 519 | ||
Series 2121 Class MG, 6% 2/15/29 | 623 | 695 | ||
Series 2154 Class PT, 6% 5/15/29 | 975 | 1,086 | ||
Series 2162 Class PH, 6% 6/15/29 | 164 | 182 | ||
Series 2520 Class BE, 6% 11/15/32 | 839 | 936 | ||
Series 2585 Class KS, 7.3988% 3/15/23 (e)(g)(i) | 99 | 16 | ||
Series 2590 Class YR, 5.5% 9/15/32 (g) | 19 | 1 | ||
Series 2802 Class OB, 6% 5/15/34 | 3,375 | 3,862 | ||
Series 2810 Class PD, 6% 6/15/33 | 703 | 726 | ||
Series 3002 Class NE, 5% 7/15/35 | 680 | 786 | ||
Series 3189 Class PD, 6% 7/15/36 | 610 | 737 | ||
Series 3415 Class PC, 5% 12/15/37 | 476 | 517 | ||
Series 3741 Class YU, 3.5% 11/15/22 | 1,948 | 2,045 | ||
Series 3786 Class HI, 4% 3/15/38 (g) | 1,427 | 206 | ||
Series 3806 Class UP, 4.5% 2/15/41 | 2,096 | 2,322 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Freddie Mac: - continued | ||||
planned amortization class: | ||||
Series 3832 Class PE, 5% 3/15/41 | $ 960 | $ 1,100 | ||
Series 70 Class C, 9% 9/15/20 | 35 | 38 | ||
sequential payer: | ||||
Series 2114 Class ZM, 6% 1/15/29 | 216 | 241 | ||
Series 2135 Class JE, 6% 3/15/29 | 714 | 795 | ||
Series 2274 Class ZM, 6.5% 1/15/31 | 318 | 361 | ||
Series 2281 Class ZB, 6% 3/15/30 | 277 | 308 | ||
Series 2357 Class ZB, 6.5% 9/15/31 | 657 | 746 | ||
Series 2502 Class ZC, 6% 9/15/32 | 819 | 920 | ||
Series 2575 Class ID, 5.5% 8/15/22 (g) | 5 | 0* | ||
Series 2817 Class SD, 6.8488% 7/15/30 (e)(g)(i) | 130 | 10 | ||
Series 3097 Class IA, 5.5% 3/15/33 (g) | 592 | 27 | ||
Series 1658 Class GZ, 7% 1/15/24 | 892 | 997 | ||
Series 2380 Class SY, 7.9988% 11/15/31 (e)(g)(i) | 2,242 | 519 | ||
Series 2587 Class IM, 6.5% 3/15/33 (g) | 429 | 95 | ||
Series 2844: | ||||
Class SC, 45.4922% 8/15/24 (e)(i) | 31 | 62 | ||
Class SD, 83.8344% 8/15/24 (e)(i) | 46 | 109 | ||
Series 2947 Class XZ, 6% 3/15/35 | 705 | 840 | ||
Series 3055 Class CS, 6.3888% 10/15/35 (e)(g) | 545 | 75 | ||
Series 3244 Class SG, 6.4588% 11/15/36 (e)(g)(i) | 817 | 145 | ||
Series 3274 Class SM, 6.2288% 2/15/37 (e)(g) | 776 | 99 | ||
Series 3284 Class CI, 5.9188% 3/15/37 (e)(g) | 2,146 | 379 | ||
Series 3287 Class SD, 6.5488% 3/15/37 (e)(g)(i) | 1,334 | 289 | ||
Series 3297 Class BI, 6.5588% 4/15/37 (e)(g)(i) | 1,904 | 413 | ||
Series 3336 Class LI, 6.3788% 6/15/37 (e)(g) | 1,131 | 175 | ||
Series 3772 Class BI, 4.5% 10/15/18 (g) | 1,101 | 86 | ||
Series 3949 Class MK, 4.5% 10/15/34 | 600 | 672 | ||
Freddie Mac Manufactured Housing participation certificates guaranteed planned amortization class Series 2043 Class CJ, 6.5% 4/15/28 | 584 | 665 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
floater: | ||||
Series 2007-37 Class TS, 6.4883% 6/16/37 (e)(g)(i) | 455 | 97 | ||
Series 2010-H17 Class FA, 0.5337% 7/20/60 (e)(j) | 397 | 395 | ||
Series 2010-H18 Class AF, 0.5077% 9/20/60 (e)(j) | 420 | 418 | ||
Series 2010-H19 Class FG, 0.5077% 8/20/60 (e)(j) | 550 | 548 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass-thru certificates: - continued | ||||
floater: | ||||
Series 2011-H05 Class FA, 0.7077% 12/20/60 (e)(j) | $ 1,446 | $ 1,452 | ||
Series 2011-H13 Class FA, 0.7077% 4/20/61 (e)(j) | 227 | 228 | ||
Series 2011-H14: | ||||
Class FB, 0.7077% 5/20/61 (e)(j) | 1,622 | 1,631 | ||
Class FC, 0.7077% 5/20/61 (e)(j) | 1,606 | 1,614 | ||
planned amortization class: | ||||
Series 2011-136 Class WI, 4.5% 5/20/40 (g) | 847 | 165 | ||
Series 2011-79 Class PO, 6/20/40 (h) | 2,678 | 2,316 | ||
sequential payer: | ||||
Series 2001-33 Class SD, 7.8493% 7/20/31 (e)(g)(i) | 68 | 17 | ||
Series 2002-24 Class SK, 7.7483% 4/16/32 (e)(g)(i) | 1,897 | 485 | ||
Series 2002-42 Class ZA, 6% 6/20/32 | 781 | 884 | ||
Series 2004-24 Class ZM, 5% 4/20/34 | 948 | 1,099 | ||
Series 2001-36 Class SP, 8.5483% 9/16/26 (e)(g) | 966 | 193 | ||
Series 2004-73 Class AL, 6.9983% 8/17/34 (e)(g)(i) | 233 | 49 | ||
Series 1998-2 Class SA, 8.2983% 1/16/28 (e)(g) | 725 | 174 | ||
Series 1999-34 Class SC, 8.3983% 9/16/19 (e)(g)(i) | 942 | 110 | ||
Series 1999-40 Class SE, 8.7483% 11/16/29 (e)(g)(i) | 1,280 | 161 | ||
Series 2000-8 Class SA, 8.2483% 1/16/30 (e)(g)(i) | 1,112 | 133 | ||
Series 2001-3 Class S, 7.8983% 2/16/31 (e)(g) | 431 | 99 | ||
Series 2001-36 Class SB, 7.8983% 12/16/23 (e)(g)(i) | 1,264 | 261 | ||
Series 2001-38 Class SB, 7.3783% 8/16/31 (e)(g)(i) | 692 | 158 | ||
Series 2001-41 Class SG, 8.5483% 9/16/31 (e)(g) | 492 | 93 | ||
Series 2001-46 Class SB, 7.9483% 5/16/23 (e)(g) | 704 | 100 | ||
Series 2001-49: | ||||
Class SC, 7.3983% 12/16/25 (e)(g)(i) | 1,629 | 317 | ||
Class SL, 7.3983% 5/16/30 (e)(g)(i) | 1,749 | 373 | ||
Class SV, 8.0483% 12/16/28 (e)(g)(i) | 1,802 | 221 | ||
Series 2001-50: | ||||
Class SD, 7.9993% 11/20/31 (e)(g)(i) | 1,029 | 251 | ||
Class ST, 7.4983% 8/16/27 (e)(g)(i) | 413 | 93 | ||
Series 2002-5 Class SP, 7.2483% 1/16/32 (e)(g)(i) | 712 | 150 | ||
Series 2004-32 Class GS, 6.2983% 5/16/34 (e)(g)(i) | 638 | 133 | ||
Series 2008-60 Class SH, 5.9483% 7/16/38 (e)(g)(i) | 636 | 106 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass-thru certificates: - continued | ||||
Series 2011-52 Class HI, 7% 4/16/41 (g) | $ 2,548 | $ 765 | ||
Series 2012-76 Class GS, 6.4983% 6/16/42 (e)(g)(i) | 1,496 | 238 | ||
Series 2012-97 Class JS, 6.0483% 8/16/42 (e)(g)(i) | 4,842 | 836 | ||
TOTAL U.S. GOVERNMENT AGENCY | 67,765 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $115,365) | 118,926 | |||
Commercial Mortgage Securities - 2.9% | ||||
| ||||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.4302% 2/14/43 (e)(g) | 1,492 | 49 | ||
Banc of America Commercial Mortgage Trust sequential payer Series 2004-4 Class A5, 4.576% 7/10/42 | 234 | 235 | ||
Banc of America REMIC Trust Series 2012-CLRN Class A1, 1.3512% 8/15/17 (b)(e) | 2,910 | 2,936 | ||
Bayview Commercial Asset Trust floater Series 2007-3: | ||||
Class M1, 0.5117% 7/25/37 (b)(e) | 60 | 20 | ||
Class M2, 0.5417% 7/25/37 (b)(e) | 62 | 17 | ||
Class M3, 0.5717% 7/25/37 (b)(e) | 101 | 22 | ||
CDC Commercial Mortgage Trust Series 2002-FX1 Class XCL, 1.3266% 5/15/35 (b)(e)(g) | 6,264 | 98 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust sequential payer Series 2007-CD4 Class A4, 5.322% 12/11/49 | 5,110 | 5,793 | ||
Granite Master Issuer PLC floater Series 2005-2 Class A6, 0.4607% 12/20/54 (e) | 2,909 | 2,851 | ||
GS Mortgage Securities Corp. II: | ||||
floater Series 2007-EOP Class A2, 1.2601% 3/6/20 (b)(e) | 740 | 741 | ||
sequential payer Series 2005-GG4 Class A3, 4.607% 7/10/39 | 4 | 4 | ||
GS Mortgage Securities Corp. Trust Series 2013-KYO Class A, 1.0512% 11/8/29 (b)(e) | 5,000 | 5,012 | ||
JPMorgan Chase Commercial Mortgage Securities Corp. floater Series 2011-CCHP Class A, 2.6% 7/15/28 (b)(e) | 1,281 | 1,282 | ||
JPMorgan Chase Commercial Mortgage Securities Trust sequential payer: | ||||
Series 2007-LD11 Class A4, 5.8124% 6/15/49 (e) | 4,140 | 4,757 | ||
Commercial Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
JPMorgan Chase Commercial Mortgage Securities Trust sequential payer: - continued | ||||
Series 2007-LDPX Class A2 S, 5.305% 1/15/49 | $ 2,260 | $ 2,286 | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential payer Series 2007-C6 Class A2, 5.845% 7/15/40 | 249 | 249 | ||
Series 2007-C1 Class XCP, 0.4249% 2/15/40 (e)(g) | 7,984 | 36 | ||
Merrill Lynch Commercial Trust floater Series 2008-LAQA Class A2, 0.7374% 7/9/21 (b)(e) | 1,210 | 1,199 | ||
Merrill Lynch-CFC Commercial Mortgage Trust sequential payer Series 2007-6 Class A4, 5.485% 3/12/51 (e) | 175 | 199 | ||
Wachovia Bank Commercial Mortgage Trust: | ||||
floater Series 2006-WL7A Class A2, 0.3212% 9/15/21 (b)(e) | 1,484 | 1,461 | ||
sequential payer Series 2007-C33 Class A4, 5.9245% 2/15/51 (e) | 1,470 | 1,697 | ||
Series 2007-C31A Class A2, 5.421% 4/15/47 | 593 | 596 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $30,088) | 31,540 | |||
Fixed-Income Funds - 0.8% | |||
Shares |
| ||
Fidelity Mortgage Backed Securities Central Fund (f) | 82,889 |
| |
Cash Equivalents - 2.8% | |||
Maturity Amount (000s) |
| ||
Investments in repurchase agreements in a joint trading account at 0.17%, dated 2/28/13 due 3/1/13 (Collateralized by U.S. Government Obligations) # | $ 29,970 |
| |
Purchased Swaptions - 0.0% | |||||
Expiration Date | Notional Amount (000s) | Value (000s) | |||
Put Options - 0.0% | |||||
Option on an interest rate swap with JPMorgan Chase Bank to receive a fixed rate of 2.144% and pay a floating rate based on 3-month LIBOR expiring May 2023 | 5/13/13 | $ 11,585 | $ 203 | ||
TOTAL INVESTMENT PORTFOLIO - 125.7% (Cost $1,337,163) | 1,358,691 | ||
NET OTHER ASSETS (LIABILITIES) - (25.7)% | (277,924) | ||
NET ASSETS - 100% | $ 1,080,767 | ||
TBA Sale Commitments | |||
| Principal Amount (000s) |
| |
Fannie Mae | |||
3% 3/1/43 | $ (400) | (414) | |
3% 3/1/43 | (200) | (207) | |
3% 3/1/43 | (1,300) | (1,346) | |
3% 3/1/43 | (1,000) | (1,035) | |
3% 3/1/43 | (1,500) | (1,553) | |
3% 3/1/43 | (5,300) | (5,488) | |
3% 3/1/43 | (9,200) | (9,526) | |
3% 3/1/43 | (4,000) | (4,142) | |
3% 3/1/43 | (4,000) | (4,142) | |
3% 3/1/43 | (2,000) | (2,071) | |
3% 3/1/43 | (2,000) | (2,071) | |
3% 3/1/43 | (4,000) | (4,142) | |
3.5% 3/1/43 | (3,200) | (3,384) | |
3.5% 3/1/43 | (5,400) | (5,711) | |
3.5% 3/1/43 | (1,200) | (1,269) | |
3.5% 3/1/43 | (3,200) | (3,384) | |
3.5% 3/1/43 | (6,600) | (6,980) | |
3.5% 3/1/43 | (21,400) | (22,631) | |
3.5% 3/1/43 | (2,600) | (2,750) | |
4% 3/1/43 | (1,000) | (1,066) | |
5% 3/1/43 | (900) | (975) | |
TOTAL FANNIE MAE | (84,287) | ||
TBA Sale Commitments - continued | |||
| Principal Amount (000s) | Value (000s) | |
Freddie Mac | |||
3.5% 3/1/43 | $ (4,400) | $ (4,633) | |
3.5% 3/1/43 | (1,900) | (2,001) | |
4% 3/1/43 | (2,500) | (2,656) | |
TOTAL FREDDIE MAC | (9,290) | ||
Ginnie Mae | |||
3.5% 3/1/43 | (2,000) | (2,142) | |
3.5% 3/1/43 | (22,000) | (23,564) | |
3.5% 3/1/43 | (2,425) | (2,597) | |
4% 3/1/43 | (2,000) | (2,171) | |
TOTAL GINNIE MAE | (30,474) | ||
TOTAL TBA SALE COMMITMENTS (Proceeds $123,668) | $ (124,051) | ||
Swap Agreements | |||||||
Interest Rate Swaps | |||||||
Counterparty | Expiration | Notional | Payment | Payment | Value | Upfront | Unrealized |
JPMorgan Chase, Inc. | Jun. 2014 | $ 900 | 3-month LIBOR | 0.54% | $ (3) | $ 0 | $ (3) |
JPMorgan Chase, Inc. | Feb. 2017 | 18,000 | 3-month LIBOR | 1% | (238) | 0 | (238) |
JPMorgan Chase, Inc. | Jun. 2017 | 1,700 | 3-month LIBOR | 1% | (21) | 0 | (21) |
JPMorgan Chase, Inc. | Jun. 2017 | 1,000 | 3-month LIBOR | 0.98% | (11) | 0 | (11) |
JPMorgan Chase, Inc. | Sep. 2017 | 13,000 | 3-month LIBOR | 0.83% | (53) | 0 | (53) |
JPMorgan Chase, Inc. | Jun. 2022 | 1,500 | 3-month LIBOR | 1.78% | 6 | 0 | 6 |
Credit Suisse | Aug. 2041 | 2,900 | 3-month LIBOR | 3.75% | (497) | 0 | (497) |
JPMorgan Chase, Inc. | Jun. 2042 | 300 | 3-month LIBOR | 2.45% | 30 | 0 | 30 |
TOTAL INTEREST RATE SWAPS | $ (787) | $ 0 | $ (787) | ||||
|
Legend |
(a) Non-income producing - Security is in default. |
(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 $31,678,000 or 2.9% of net assets. |
(c) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(d) Security or a portion of the security has been segregated as collateral for open options and swap agreements. At the period end, the value of securities pledged amounted to $416,000. |
(e) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
(f) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited schedule of portfolio holdings for each Fidelity Central Fund is filed with the SEC for the first and third quarters of each fiscal year on Form N-Q and is available upon request or at the SEC's website at www.sec.gov. An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro rata share of securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request. |
(g) 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. |
(h) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
(i) 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. |
(j) 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 |
# Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement / Counterparty | Value |
$29,970,000 due 3/01/13 at 0.17% | |
Barclays Capital, Inc. | $ 74 |
Credit Agricole CIB New York Branch | 13,214 |
Credit Suisse Securities (USA) LLC | 3,303 |
Mizuho Securities USA, Inc. | 8,259 |
Morgan Stanley & Co., Inc. | 826 |
RBS Securities, Inc. | 4,294 |
| $ 29,970 |
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 Mortgage Backed Securities Central Fund | $ 397 |
Additional information regarding the Fund's fiscal year to date purchases and sales, including the ownership percentage, of the non Money Market Central Funds is as follows: |
Fund | Value, | Purchases | Sales | Value, | % ownership, |
Fidelity Mortgage Backed Securities Central Fund | $ - | $ 121,344 | $ 112,001 | $ 9,042 | 0.1% |
Other Information |
The following is a summary of the inputs used, as of February 28, 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: | ||||
U.S. Government Agency - Mortgage Securities | $ 1,141,160 | $ - | $ 1,141,160 | $ - |
Asset-Backed Securities | 27,850 | - | 27,850 | - |
Collateralized Mortgage Obligations | 118,926 | - | 118,926 | - |
Commercial Mortgage Securities | 31,540 | - | 31,540 | - |
Fixed-Income Funds | 9,042 | 9,042 | - | - |
Cash Equivalents | 29,970 | - | 29,970 | - |
Purchased Swaptions | 203 | - | 203 | - |
Total Investments in Securities: | $ 1,358,691 | $ 9,042 | $ 1,349,649 | $ - |
Other Derivative Instruments: | ||||
Assets | ||||
Swap Agreements | $ 36 | $ - | $ 36 | $ - |
Liabilities | ||||
Swap Agreements | $ (823) | $ - | $ (823) | $ - |
Total Other Derivative Instruments: | $ (787) | $ - | $ (787) | $ - |
Other Financial Instruments: | ||||
TBA Sale Commitments | $ (124,051) | $ - | $ (124,051) | $ - |
Value of Derivative Instruments |
The following table is a summary of the Fund's value of derivative instruments by primary risk exposure as of February 28, 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 | ||
Purchased Swaptions (a) | $ 203 | $ - |
Swap Agreements (b) | 36 | (823) |
Total Value of Derivatives | $ 239 | $ (823) |
(a) Value is included in the Statement of Assets and Liabilities in the Investments, at value line-item. |
(b) Value is disclosed on the Statement of Assets and Liabilities in the Swap agreements, at value line-items. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amounts) | February 28, 2013 (Unaudited) | |
|
|
|
Assets | ||
Investment in securities, at value (including repurchase agreements of $29,970) - See accompanying schedule: Unaffiliated issuers (cost $1,328,047) | $ 1,349,649 |
|
Fidelity Central Funds (cost $9,116) | 9,042 |
|
Total Investments (cost $1,337,163) |
| $ 1,358,691 |
Receivable for investments sold | 12,218 | |
Receivable for TBA sale commitments |
| 123,668 |
Receivable for fund shares sold | 5,997 | |
Interest receivable | 3,792 | |
Swap agreements, at value | 36 | |
Other receivables | 115 | |
Total assets | 1,504,517 | |
|
|
|
Liabilities | ||
Payable for investments purchased | $ 3,957 | |
Delayed delivery | 291,924 | |
TBA sale commitments, at value | 124,051 | |
Payable for fund shares redeemed | 2,325 | |
Distributions payable | 102 | |
Swap agreements, at value | 823 | |
Accrued management fee | 282 | |
Distribution and service plan fees payable | 39 | |
Other affiliated payables | 133 | |
Other payables and accrued expenses | 114 | |
Total liabilities | 423,750 | |
|
|
|
Net Assets | $ 1,080,767 | |
Net Assets consist of: |
| |
Paid in capital | $ 1,144,887 | |
Distributions in excess of net investment income | (7,686) | |
Accumulated undistributed net realized gain (loss) on investments | (76,792) | |
Net unrealized appreciation (depreciation) on investments | 20,358 | |
Net Assets | $ 1,080,767 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
Amounts in thousands (except per-share amounts) | February 28, 2013 (Unaudited) | |
|
|
|
Calculation of Maximum Offering Price Class A: | $ 11.30 | |
|
|
|
Maximum offering price per share (100/96.00 of $11.30) | $ 11.77 | |
Class T: | $ 11.32 | |
|
|
|
Maximum offering price per share (100/96.00 of $11.32) | $ 11.79 | |
Class B: | $ 11.30 | |
|
|
|
Class C: | $ 11.28 | |
|
|
|
|
|
|
Fidelity Mortgage Securities Fund: | $ 11.32 | |
|
|
|
Institutional Class: | $ 11.28 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Statement of Operations
Amounts in thousands Six months ended February 28, 2013 (Unaudited) | ||
|
|
|
Investment Income |
|
|
Interest |
| $ 12,840 |
Income from Fidelity Central Funds |
| 397 |
Total income |
| 13,237 |
|
|
|
Expenses | ||
Management fee | $ 1,804 | |
Transfer agent fees | 632 | |
Distribution and service plan fees | 242 | |
Fund wide operations fee | 201 | |
Independent trustees' compensation | 2 | |
Miscellaneous | 1 | |
Total expenses before reductions | 2,882 | |
Expense reductions | (10) | 2,872 |
Net investment income (loss) | 10,365 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 46 | |
Fidelity Central Funds | (227) |
|
Swap agreements | (112) |
|
Total net realized gain (loss) |
| (293) |
Change in net unrealized appreciation (depreciation) on: Investment securities | (5,877) | |
Swap agreements | 373 | |
Delayed delivery commitments | 188 |
|
Total change in net unrealized appreciation (depreciation) |
| (5,316) |
Net gain (loss) | (5,609) | |
Net increase (decrease) in net assets resulting from operations | $ 4,756 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Six months ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income (loss) | $ 10,365 | $ 25,133 |
Net realized gain (loss) | (293) | 17,420 |
Change in net unrealized appreciation (depreciation) | (5,316) | (321) |
Net increase (decrease) in net assets resulting | 4,756 | 42,232 |
Distributions to shareholders from net investment income | (10,442) | (25,516) |
Share transactions - net increase (decrease) | 111,376 | 70,977 |
Total increase (decrease) in net assets | 105,690 | 87,693 |
|
|
|
Net Assets | ||
Beginning of period | 975,077 | 887,384 |
End of period (including distributions in excess of net investment income of $7,686 and distributions in excess of net investment income of $7,609, respectively) | $ 1,080,767 | $ 975,077 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class A
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 | $ 10.57 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .086 | .278 | .323 | .357 | .464 | .467 |
Net realized and unrealized gain (loss) | (.039) | .206 | .235 | .602 | .283 | (.461) |
Total from investment operations | .047 | .484 | .558 | .959 | .747 | .006 |
Distributions from net investment income | (.087) | (.284) | (.328) | (.429) | (.457) | (.486) |
Net asset value, end of period | $ 11.30 | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 |
Total Return B, C, D | .41% | 4.41% | 5.22% | 9.44% | 7.63% | .06% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | .80% A | .81% | .82% | .83% | .84% | .85% |
Expenses net of fee waivers, if any | .80% A | .81% | .82% | .83% | .84% | .85% |
Expenses net of all reductions | .80% A | .81% | .82% | .83% | .84% | .85% |
Net investment income (loss) | 1.53% A | 2.48% | 2.96% | 3.36% | 4.59% | 4.52% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 58 | $ 60 | $ 59 | $ 61 | $ 47 | $ 39 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class T
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.37 | $ 11.16 | $ 10.93 | $ 10.40 | $ 10.11 | $ 10.59 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .087 | .281 | .326 | .360 | .466 | .470 |
Net realized and unrealized gain (loss) | (.049) | .216 | .235 | .602 | .282 | (.462) |
Total from investment operations | .038 | .497 | .561 | .962 | .748 | .008 |
Distributions from net investment income | (.088) | (.287) | (.331) | (.432) | (.458) | (.488) |
Net asset value, end of period | $ 11.32 | $ 11.37 | $ 11.16 | $ 10.93 | $ 10.40 | $ 10.11 |
Total Return B, C, D | .34% | 4.52% | 5.24% | 9.44% | 7.62% | .07% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | .77% A | .78% | .79% | .81% | .83% | .83% |
Expenses net of fee waivers, if any | .77% A | .78% | .79% | .81% | .83% | .83% |
Expenses net of all reductions | .76% A | .78% | .79% | .81% | .83% | .83% |
Net investment income (loss) | 1.56% A | 2.50% | 2.99% | 3.39% | 4.60% | 4.53% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 37 | $ 31 | $ 37 | $ 41 | $ 40 | $ 41 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class B
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 | $ 10.57 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .046 | .200 | .248 | .286 | .398 | .400 |
Net realized and unrealized gain (loss) | (.039) | .207 | .235 | .602 | .283 | (.461) |
Total from investment operations | .007 | .407 | .483 | .888 | .681 | (.061) |
Distributions from net investment income | (.047) | (.207) | (.253) | (.358) | (.391) | (.419) |
Net asset value, end of period | $ 11.30 | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 |
Total Return B, C, D | .06% | 3.69% | 4.51% | 8.71% | 6.93% | (.58)% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | 1.51% A | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% |
Expenses net of fee waivers, if any | 1.51% A | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% |
Expenses net of all reductions | 1.51% A | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% |
Net investment income (loss) | .81% A | 1.79% | 2.27% | 2.69% | 3.93% | 3.86% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 3 | $ 4 | $ 5 | $ 7 | $ 19 | $ 32 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class C
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.33 | $ 11.12 | $ 10.90 | $ 10.37 | $ 10.08 | $ 10.56 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .045 | .197 | .244 | .282 | .390 | .389 |
Net realized and unrealized gain (loss) | (.049) | .217 | .226 | .603 | .284 | (.459) |
Total from investment operations | (.004) | .414 | .470 | .885 | .674 | (.070) |
Distributions from net investment income | (.046) | (.204) | (.250) | (.355) | (.384) | (.410) |
Net asset value, end of period | $ 11.28 | $ 11.33 | $ 11.12 | $ 10.90 | $ 10.37 | $ 10.08 |
Total Return B, C, D | (.04)% | 3.76% | 4.39% | 8.69% | 6.86% | (.68)% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | 1.53% A | 1.53% | 1.53% | 1.53% | 1.57% | 1.60% |
Expenses net of fee waivers, if any | 1.53% A | 1.53% | 1.53% | 1.53% | 1.57% | 1.60% |
Expenses net of all reductions | 1.53% A | 1.53% | 1.53% | 1.53% | 1.57% | 1.60% |
Net investment income (loss) | .80% A | 1.76% | 2.24% | 2.66% | 3.86% | 3.77% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 20 | $ 18 | $ 15 | $ 18 | $ 18 | $ 15 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Fidelity Mortgage Securities Fund
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.37 | $ 11.17 | $ 10.94 | $ 10.41 | $ 10.11 | $ 10.59 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) D | .105 | .318 | .364 | .399 | .505 | .509 |
Net realized and unrealized gain (loss) | (.049) | .206 | .234 | .601 | .292 | (.462) |
Total from investment operations | .056 | .524 | .598 | 1.000 | .797 | .047 |
Distributions from net investment income | (.106) | (.324) | (.368) | (.470) | (.497) | (.527) |
Net asset value, end of period | $ 11.32 | $ 11.37 | $ 11.17 | $ 10.94 | $ 10.41 | $ 10.11 |
Total Return B, C | .49% | 4.77% | 5.59% | 9.83% | 8.14% | .46% |
Ratios to Average Net Assets E, G |
|
|
|
|
| |
Expenses before reductions | .45% A | .45% | .45% | .45% | .45% | .45% |
Expenses net of fee waivers, if any | .45% A | .45% | .45% | .45% | .45% | .45% |
Expenses net of all reductions | .45% A | .45% | .45% | .45% | .45% | .45% |
Net investment income (loss) | 1.87% A | 2.84% | 3.33% | 3.74% | 4.99% | 4.91% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 928 | $ 850 | $ 765 | $ 829 | $ 838 | $ 1,049 |
Portfolio turnover rate F | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Calculated based on average shares outstanding during the period.
E 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.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Institutional Class
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.33 | $ 11.13 | $ 10.90 | $ 10.37 | $ 10.08 | $ 10.56 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) D | .101 | .311 | .354 | .391 | .496 | .499 |
Net realized and unrealized gain (loss) | (.048) | .207 | .235 | .603 | .284 | (.461) |
Total from investment operations | .053 | .518 | .589 | .994 | .780 | .038 |
Distributions from net investment income | (.103) | (.318) | (.359) | (.464) | (.490) | (.518) |
Net asset value, end of period | $ 11.28 | $ 11.33 | $ 11.13 | $ 10.90 | $ 10.37 | $ 10.08 |
Total Return B, C | .47% | 4.73% | 5.53% | 9.80% | 7.98% | .37% |
Ratios to Average Net Assets E, G |
|
|
|
|
| |
Expenses before reductions | .52% A | .50% | .53% | .50% | .52% | .54% |
Expenses net of fee waivers, if any | .52% A | .50% | .53% | .50% | .52% | .54% |
Expenses net of all reductions | .52% A | .50% | .53% | .50% | .52% | .54% |
Net investment income (loss) | 1.80% A | 2.79% | 3.24% | 3.69% | 4.92% | 4.83% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 34 | $ 12 | $ 7 | $ 10 | $ 10 | $ 7 |
Portfolio turnover rate F | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Calculated based on average shares outstanding during the period.
E 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.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Notes to Financial Statements
For the period ended February 28, 2013 (Unaudited)
(Amounts in thousands except percentages)
1. Organization.
Fidelity Advisor® Mortgage Securities Fund (the Fund) is a fund of Fidelity Advisor Series II (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, Class C, Fidelity Mortgage Securities Fund and Institutional Class shares, each of which, along with Class B shares, has equal rights as to assets and voting privileges. Class B shares are closed to new accounts and additional purchases, except for exchanges and reinvestments. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the 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.
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies 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.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the Fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the Fund. The following summarizes the Fund's investment in each non-money market Fidelity Central Fund.
Fidelity Mortgage Backed Securities Central Fund | Fidelity Investment Money Management, Inc. (FIMM) | Seeks a high level of income by normally investing in investment-grade mortgage-related securities and repurchase agreements for those securities. | Delayed Delivery & When Issued Securities Repurchase Agreements Options Swap Agreements |
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
2. Investments in Fidelity Central Funds - continued
An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. 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 contain the significant accounting policies (including investment valuation policies) of those funds 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 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)
Semiannual Report
3. 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 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. Brokers which make markets in asset backed securities, collateralized mortgage obligations and commercial mortgage securities may also consider such factors as the structure of the issue, cash flow assumptions, the value of underlying assets as well as any guarantees. Swap agreements are marked-to-market daily based on valuations from third party pricing vendors or broker-supplied valuations. Pricing vendors utilize matrix pricing which considers comparisons to interest rate curves, credit spread curves, default possibilities and recovery rates. When independent prices are unavailable or unreliable, debt securities and swap agreements may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities and swap agreements are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Options traded over-the-counter are valued using broker-supplied valuations and are categorized as Level 2 in the hierarchy. 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. 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. The aggregate value of investments by input level, as of February 28, 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. Interest income and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
3. Significant Accounting Policies - continued
Investment Transactions and Income - continued
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.
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.
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. 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 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, swap agreements, market discount, deferred trustees compensation, financing transactions, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.
Semiannual Report
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:
Gross unrealized appreciation | $ 28,780 |
Gross unrealized depreciation | (7,255) |
Net unrealized appreciation (depreciation) on securities and other investments | $ 21,525 |
|
|
Tax cost | $ 1,337,166 |
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. At August 31, 2012, capital loss carryforwards were as follows:
Fiscal year of expiration |
|
2017 | $ (76,480) |
Repurchase Agreements. FMR has received an Exemptive Order from 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
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
3. Significant Accounting Policies - continued
Delayed Delivery Transactions and When-Issued Securities - continued
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.
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.
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
Semiannual Report
3. Significant Accounting Policies - continued
Restricted Securities - continued
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 reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is currently evaluating the impact of the update's adoption on the Fund's financial statement disclosures.
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 options and swap agreements. 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
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
4. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
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 swap agreements, the Fund attempts to reduce its exposure to counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement on a bilateral basis 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 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 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 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.
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
Semiannual Report
4. Derivative Instruments - continued
Net Realized Gain (Loss) and Change in Net Unrealized Appreciation (Depreciation) on Derivatives - continued
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 | Change in Net Unrealized Appreciation (Depreciation) |
Interest Rate Risk |
|
|
Purchased Options | $ - | $ 47 |
Swap Agreements | (112) | 373 |
Totals (a) | $ (112) | $ 420 |
(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 agreement, to manage its exposure to the market and to fluctuations in interest rates.
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 for the closing sale transaction are greater or less than the premium received or paid, respectively. 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.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
4. Derivative Instruments - continued
Options - continued
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.
Swap Agreements. A swap agreement (swap) is a contract between two parties to exchange future cash flows at periodic intervals based on a notional principal amount.
Swaps are marked-to-market daily and changes in value are reflected in the Statement of Assets and Liabilities in the swap agreements at value line items. Any upfront premiums paid or received upon entering a swap to compensate for differences between stated terms of the agreement and prevailing market conditions (e.g. credit spreads, interest rates or other factors) are recorded in net unrealized 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. 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 "Swap Agreements."
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.
5. Purchases and Sales of Investments.
Purchases and sales of securities (including the Fixed-Income Central Funds), other than short-term securities and U.S. government securities, aggregated $175,601 and $156,438, respectively.
Semiannual Report
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 annualized 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 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 Fees | Retained |
Class A | -% | .25% | $ 75 | $ 3 |
Class T | -% | .25% | 50 | -* |
Class B | .65% | .25% | 15 | 11 |
Class C | .75% | .25% | 102 | 13 |
|
|
| $ 242 | $ 27 |
* Amount represents four hundred seventy three dollars.
Sales Load. FDC may receive a front-end sales charge of up to 4.00% for selling Class A shares 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 contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. The deferred sales charges range from 5.00% to 1.00% for Class B shares, 1.00% for Class C shares, .75% for certain purchases of Class A shares and .25% for certain purchases of Class T shares.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
6. Fees and Other Transactions with Affiliates - continued
Sales Load - continued
For the period, sales charge amounts retained by FDC were as follows:
| Retained |
Class A | $ 5 |
Class T | 1 |
Class B* | 3 |
Class C* | 1 |
| $ 10 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales
are made.
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 Fidelity Mortgage Securities Fund. FIIOC receives an asset-based fee of .10% of Fidelity Mortgage Securities Fund'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 | $ 58 | .19 |
Class T | 32 | .16 |
Class B | 4 | .25 |
Class C | 17 | .17 |
Fidelity Mortgage Securities Fund | 497 | .10 |
Institutional Class | 24 | .17 |
| $ 632 |
|
* Annualized
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 annualized rate of .04% of average net assets.
Semiannual Report
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 $1 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.
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 $9.
In addition, FMR reimbursed a portion of the Fund's operating expenses during the period in the amount of four hundred seventy three dollars.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Six months ended | Year ended | |
From net investment income |
|
|
Class A | $ 462 | $ 1,509 |
Class T | 312 | 879 |
Class B | 14 | 80 |
Class C | 82 | 311 |
Fidelity Mortgage Securities Fund | 9,317 | 22,468 |
Institutional Class | 255 | 269 |
Total | $ 10,442 | $ 25,516 |
10. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
Six months ended | Year ended | Six months ended | Year ended | |
Class A |
|
|
|
|
Shares sold | 745 | 1,763 | $ 8,453 | $ 19,760 |
Reinvestment of distributions | 34 | 110 | 383 | 1,235 |
Shares redeemed | (959) | (1,889) | (10,866) | (21,161) |
Net increase (decrease) | (180) | (16) | $ (2,030) | $ (166) |
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
10. Share Transactions - continued
| Shares | Dollars | ||
Six months ended | Year ended | Six months ended | Year ended | |
Class T |
|
|
|
|
Shares sold | 1,555 | 517 | $ 17,697 | $ 5,786 |
Reinvestment of distributions | 26 | 71 | 291 | 794 |
Shares redeemed | (1,041) | (1,118) | (11,818) | (12,509) |
Net increase (decrease) | 540 | (530) | $ 6,170 | $ (5,929) |
Class B |
|
|
|
|
Shares sold | 1 | 11 | $ 10 | $ 118 |
Reinvestment of distributions | 1 | 4 | 8 | 46 |
Shares redeemed | (57) | (129) | (641) | (1,440) |
Net increase (decrease) | (55) | (114) | $ (623) | $ (1,276) |
Class C |
|
|
|
|
Shares sold | 389 | 587 | $ 4,412 | $ 6,563 |
Reinvestment of distributions | 5 | 19 | 59 | 213 |
Shares redeemed | (193) | (375) | (2,182) | (4,193) |
Net increase (decrease) | 201 | 231 | $ 2,289 | $ 2,583 |
Fidelity Mortgage Securities Fund |
|
|
|
|
Shares sold | 33,641 | 15,948 | $ 383,102 | $ 179,572 |
Reinvestment of distributions | 758 | 1,817 | 8,604 | 20,398 |
Shares redeemed | (27,113) | (11,555) | (307,788) | (129,715) |
Net increase (decrease) | 7,286 | 6,210 | $ 83,918 | $ 70,255 |
Institutional Class |
|
|
|
|
Shares sold | 3,092 | 710 | $ 35,019 | $ 7,943 |
Reinvestment of distributions | 21 | 20 | 237 | 228 |
Shares redeemed | (1,202) | (238) | (13,604) | (2,661) |
Net increase (decrease) | 1,911 | 492 | $ 21,652 | $ 5,510 |
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 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.
At the end of the period, FMR or its affiliates were the owners of record of 12% of the total outstanding shares of the Fund.
Semiannual Report
12. Credit Risk.
The Fund invests a portion of its assets in structured securities of issuers backed by residential mortgage loans, credit card receivables and automotive loans. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults.
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Advisor Mortgage Securities Fund
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established three standing committees, Operations, Audit, and Governance and Nominating, each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Operations Committee, of which all of the Independent Trustees are members, meets regularly throughout the year and, among other matters, considers matters specifically related to the annual consideration of the renewal of the fund's Advisory Contracts. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through ad hoc joint committees to discuss certain matters relevant to the Fidelity funds.
At its September 2012 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with the fund; (iv) the extent to which economies of scale exist and would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts is in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts is fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Semiannual Report
Nature, Extent, and Quality of Services Provided. The Board considered the staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the fund's investment personnel, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the general qualifications and capabilities of the Investment Advisers' investment staff, including its size, education, experience, and resources, as well as the Investment Advisers' approach to recruiting, managing, and compensating investment personnel. The Board also noted that FMR has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. The Board also believes that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered the Investment Advisers' trading and risk management capabilities and resources, which are an integral part of the investment management process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through telephone representatives and over the Internet, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including (i) continuing to dedicate additional resources to investment research and support of the senior management team that oversees asset management; (ii) persisting in efforts to enhance Fidelity's research capabilities, in particular, international research; (iii) launching new funds and making other enhancements to meet client needs for global and income-oriented solutions; (iv) continuing to launch dedicated lower cost underlying funds to meet investment management's portfolio construction needs related to expanding underlying fund options, specifically for the Freedom Fund product lines; (v) adopting a sector neutral investment approach for certain funds and utilizing a team of portfolio managers to manage certain sector-neutral funds; (vi) rationalizing product lines and gaining increased efficiencies through combinations of several funds with other funds; (vii) strengthening the Spartan Index Fund product line by adding new funds and/or new low-cost institutional share classes, restructuring fund expenses to accommodate new classes, and reducing investment minimums for certain classes of shares; (viii) modifying the eligibility criteria for Institutional Class shares to increase their appeal to government entities and charitable investors; and (ix) reducing certain transfer agent fee rates.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured over multiple periods against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by Fidelity and reviewed by the Board. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2011, the cumulative total returns of the retail class and Class C of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of the retail class and Class C show the performance of the highest and lowest performing classes, respectively (based on five-year performance). The box within each chart shows the 25th percentile return (top of box) and the 75th percentile return (bottom of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the peer group whose performance was equal to or lower than that of the class indicated.
Semiannual Report
Fidelity Advisor Mortgage Securities Fund
The Board reviewed the fund's relative investment performance against its peer group and noted that the performance of the retail class of the fund was in the first quartile for the one-year period, the second quartile for the three-year period, and the third quartile for the five-year period. The Board also noted that the investment performance of the retail class of the fund compared favorably to its benchmark for the one- and three-year periods, although the fund's five-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes. The Board also reviewed the fund's performance since inception as well as performance in the current year.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should benefit the fund's shareholders.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 11% means that 89% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Advisor Mortgage Securities Fund
Semiannual Report
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2011.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered the current and historical total expense ratios of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expense ratio of each class ranked below its competitive median for 2011.
The Board considered that the current contractual arrangements for the fund have the effect of setting the total "fund-level" (but not "class-level") expenses (including, among certain other "fund-level" expenses, the management fee) for each class at 0.35%.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board noted, however, that because the current contractual arrangements set the total "fund-level" expenses for each class at 0.35%, increases or decreases in the management fee due to changes in the group fee rate will not impact the total expense ratio.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of FMR and its affiliates, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients. The Board noted the findings of the 2010 ad hoc joint committee (created with the board of other Fidelity funds), which reviewed and compared Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds, including the differences in services provided, fees charged, and costs incurred, as well as competition in their respective marketplaces.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and was satisfied that the profitability was not excessive in the circumstances.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board also noted that in 2009, it and the board of other Fidelity funds created an ad hoc committee (the Economies of Scale Committee) to analyze whether FMR attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
Semiannual Report
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including: (i) Fidelity's fund profitability methodology, profitability trends for certain funds, and the impact of certain factors on fund profitability results; (ii) portfolio manager changes that have occurred during the past year and the amount of the investment that each portfolio manager has made in the Fidelity fund(s) that he or she manages; (iii) Fidelity's compensation structure for portfolio managers, research analysts, and other key personnel, including its effects on fund profitability, the rationale for the compensation structure, and the extent to which current market conditions have affected retention and recruitment; (iv) the compensation paid to fund sub-advisers on behalf of the Fidelity funds; (v) Fidelity's fee structures, including the group fee structure, and the rationale for recommending different fees among different categories of funds and classes; (vi) Fidelity's voluntary waiver of its fees to maintain minimum yields for certain money market funds and classes as well as contractual waivers in place for certain funds; (vii) regulatory and industry developments, including those affecting money market funds and target date funds, and the potential impact to Fidelity; (viii) Fidelity's transfer agent fees, expenses, and services, and drivers for determining the transfer agent fee structure of different funds and classes; (ix) management fee rates charged by FMR or Fidelity entities to other Fidelity clients; (x) the allocation of and historical trends in Fidelity's realization of fall-out benefits; and (xi) explanations regarding the relative total expense ratios of certain funds and classes, total expense competitive trends, and actions that might be taken by FMR to reduce total expense ratios for certain funds and classes or to achieve further economies of scale.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Semiannual 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
(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
MOR-USAN-0413 1.784900.110
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor®
Mortgage Securities
Fund - Class A, Class T, Class B
and Class C
Semiannual Report
February 28, 2013
(Fidelity Cover Art)
Contents
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. | |
Board Approval of Investment Advisory Contracts and Management Fees |
|
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.
Semiannual 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, 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 (September 1, 2012 to February 28, 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.
Semiannual Report
Shareholder Expense Example - continued
| Annualized | Beginning | Ending | Expenses Paid |
Class A | .80% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,004.10 | $ 3.98 |
HypotheticalA |
| $ 1,000.00 | $ 1,020.83 | $ 4.01 |
Class T | .77% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,003.40 | $ 3.82 |
HypotheticalA |
| $ 1,000.00 | $ 1,020.98 | $ 3.86 |
Class B | 1.51% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,000.60 | $ 7.49 |
HypotheticalA |
| $ 1,000.00 | $ 1,017.31 | $ 7.55 |
Class C | 1.53% |
|
|
|
Actual |
| $ 1,000.00 | $ 999.60 | $ 7.59 |
HypotheticalA |
| $ 1,000.00 | $ 1,017.21 | $ 7.65 |
Fidelity Mortgage Securities Fund | .45% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,004.90 | $ 2.24 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.56 | $ 2.26 |
Institutional Class | .52% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,004.70 | $ 2.58 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.22 | $ 2.61 |
A 5% return per year before expenses
* 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). The fees and expenses of the underlying Fidelity Central Funds in which the Fund invests are not included in the Fund's annualized expense ratio.
Semiannual Report
Investment Changes (Unaudited)
The information in the following tables is based on the combined investments of the Fund and its pro-rata share of the investments of Fidelity's fixed-income central funds. |
Coupon Distribution as of February 28, 2013 | ||
| % of fund's investments | % of fund's investments |
Zero coupon bonds | 0.2 | 0.4 |
0.01 - 0.99% | 5.7 | 5.1 |
1 - 1.99% | 1.1 | 0.7 |
2 - 2.99% | 4.2 | 0.8 |
3 - 3.99% | 23.0 | 11.7 |
4 - 4.99% | 30.0 | 36.4 |
5 - 5.99% | 16.9 | 23.5 |
6 - 6.99% | 6.1 | 5.8 |
7% and above | 1.6 | 1.9 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Weighted Average Maturity as of February 28, 2013 | ||
|
| 6 months ago |
Years | 3.8 | 3.6 |
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 February 28, 2013 | ||
|
| 6 months ago |
Years | 2.8 | 1.9 |
Duration estimates how much a bond fund's price will change with a change in comparable interest rates. If rates rise 1%, for example, a fund with a 5-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. Duration takes into account any call or put option embedded in the bonds. |
Asset Allocation (% of fund's net assets) | |||||||
As of February 28, 2013* | As of August 31, 2012** | ||||||
 | Mortgage |
|  | Mortgage |
| ||
 | CMOs and Other Mortgage Related Securities 14.0% |
| | CMOs and Other Mortgage Related Securities 13.1% |
| ||
 | Asset-Backed |
| | Asset-Backed |
| ||
 | Short-Term |
| | Short-Term |
| ||
* Foreign investments | 3.8% |
| ** Foreign investments | 1.1% |
| ||
* Futures and Swaps | (3.6)% |
| ** Futures and Swaps | (2.6)% |
| ||
† Short-Term Investments and Net Other Assets (Liabilities) are not included in the pie chart. |
A holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. |
Percentages in the above tables are adjusted for the effect of TBA Sale Commitments. |
Semiannual Report
Investments February 28, 2013 (Unaudited)
Showing Percentage of Net Assets
U.S. Government Agency - Mortgage Securities - 105.6% | ||||
| Principal Amount (000s) | Value (000s) | ||
Fannie Mae - 59.6% | ||||
1.865% 9/1/37 (e) | $ 22 | $ 23 | ||
2.296% 7/1/35 (e) | 8 | 8 | ||
2.332% 3/1/35 (e) | 44 | 46 | ||
2.5% 3/1/28 (c) | 15,100 | 15,684 | ||
2.5% 3/1/28 (c) | 11,100 | 11,529 | ||
2.5% 3/1/28 (c) | 11,800 | 12,256 | ||
2.5% 3/1/28 (c) | 5,200 | 5,401 | ||
2.524% 10/1/33 (e) | 68 | 73 | ||
2.559% 6/1/36 (e) | 49 | 52 | ||
2.583% 1/1/35 (e) | 330 | 351 | ||
2.611% 5/1/36 (e) | 260 | 276 | ||
2.741% 7/1/35 (e) | 82 | 88 | ||
2.769% 11/1/36 (e) | 63 | 68 | ||
2.777% 4/1/36 (e) | 221 | 236 | ||
2.781% 9/1/36 (e) | 145 | 156 | ||
2.806% 8/1/35 (e) | 418 | 448 | ||
2.861% 5/1/36 (e) | 65 | 69 | ||
2.875% 10/1/36 (e) | 172 | 185 | ||
3% 4/1/27 to 2/1/43 | 19,613 | 20,612 | ||
3% 3/1/28 (c) | 2,700 | 2,842 | ||
3% 2/1/43 | 132 | 137 | ||
3% 2/1/43 | 177 | 184 | ||
3% 2/1/43 | 200 | 208 | ||
3% 3/1/43 (c) | 4,500 | 4,659 | ||
3% 3/1/43 (c) | 15,400 | 15,945 | ||
3% 3/1/43 (c) | 11,500 | 11,907 | ||
3% 3/1/43 (c) | 4,000 | 4,142 | ||
3% 3/1/43 (c) | 4,000 | 4,142 | ||
3% 3/1/43 (c) | 1,000 | 1,035 | ||
3% 3/1/43 (c) | 4,000 | 4,142 | ||
3% 4/1/43 (c) | 5,300 | 5,474 | ||
3% 4/1/43 (c) | 9,200 | 9,502 | ||
3% 4/1/43 (c) | 4,000 | 4,131 | ||
3% 4/1/43 (c) | 4,000 | 4,131 | ||
3% 4/1/43 (c) | 2,000 | 2,066 | ||
3% 4/1/43 (c) | 2,000 | 2,066 | ||
3% 4/1/43 (c) | 18,700 | 19,315 | ||
3.155% 9/1/37 (e) | 30 | 32 | ||
3.291% 6/1/36 (e) | 797 | 841 | ||
3.357% 9/1/41 (e) | 296 | 313 | ||
3.476% 3/1/40 (e) | 578 | 605 | ||
3.5% 4/1/20 to 3/1/43 | 76,229 | 80,846 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Fannie Mae - continued | ||||
3.5% 3/1/28 (c) | $ 2,200 | $ 2,333 | ||
3.5% 7/1/42 | 24 | 26 | ||
3.5% 2/1/43 | 105 | 111 | ||
3.5% 2/1/43 | 605 | 641 | ||
3.5% 2/1/43 | 1,728 | 1,834 | ||
3.5% 2/1/43 | 714 | 756 | ||
3.5% 2/1/43 | 201 | 213 | ||
3.5% 3/1/43 (c) | 8,800 | 9,306 | ||
3.5% 3/1/43 (c) | 8,800 | 9,306 | ||
3.5% 3/1/43 (c) | 8,800 | 9,306 | ||
3.5% 3/1/43 (c) | 10,000 | 10,575 | ||
3.5% 3/1/43 (c) | 12,200 | 12,902 | ||
3.5% 3/1/43 (c) | 3,200 | 3,384 | ||
3.5% 3/1/43 (c) | 6,600 | 6,980 | ||
3.5% 3/1/43 (c) | 2,600 | 2,750 | ||
3.5% 4/1/43 (c) | 21,400 | 22,580 | ||
3.5% 4/1/43 (c) | 4,600 | 4,854 | ||
4% 10/1/25 to 7/1/42 | 110,427 | 118,639 | ||
4% 3/1/43 | 1,200 | 1,279 | ||
4% 3/1/43 | 1,400 | 1,493 | ||
4.5% 5/1/25 to 10/1/41 | 49,682 | 53,927 | ||
4.5% 3/1/43 (c) | 1,500 | 1,615 | ||
5% 5/1/20 to 6/1/40 | 23,820 | 26,014 | ||
5.5% 2/1/18 to 9/1/38 | 58,115 | 63,747 | ||
5.858% 3/1/36 (e) | 391 | 415 | ||
6% 9/1/29 to 1/1/42 | 21,593 | 24,210 | ||
6.022% 8/1/46 (e) | 45 | 48 | ||
6.039% 9/1/36 (e) | 202 | 211 | ||
6.311% 4/1/37 (e) | 175 | 187 | ||
6.499% 12/1/36 (e) | 192 | 209 | ||
6.5% 3/1/13 to 5/1/38 | 3,818 | 4,260 | ||
7% 12/1/15 to 5/1/30 | 1,773 | 2,032 | ||
7.21% 12/1/36 (e) | 44 | 48 | ||
7.5% 8/1/22 to 9/1/32 | 978 | 1,146 | ||
8% 12/1/29 to 3/1/37 | 54 | 65 | ||
8.5% 1/1/16 to 7/1/31 | 162 | 188 | ||
9% 10/1/30 | 215 | 261 | ||
9.5% 7/1/16 to 8/1/22 | 29 | 31 | ||
12.5% 8/1/15 to 3/1/16 | 7 | 8 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Fannie Mae - continued | ||||
12.75% 2/1/15 | $ 2 | $ 2 | ||
13.5% 9/1/14 | 1 | 1 | ||
| 644,119 | |||
Freddie Mac - 23.5% | ||||
2.104% 3/1/35 (e) | 180 | 188 | ||
2.356% 5/1/34 (e) | 14 | 14 | ||
2.357% 5/1/37 (e) | 112 | 119 | ||
2.362% 8/1/37 (e) | 136 | 143 | ||
2.478% 6/1/37 (e) | 42 | 45 | ||
2.492% 4/1/35 (e) | 76 | 81 | ||
2.528% 11/1/35 (e) | 347 | 371 | ||
2.574% 6/1/37 (e) | 334 | 359 | ||
2.635% 6/1/37 (e) | 29 | 31 | ||
2.696% 4/1/37 (e) | 158 | 169 | ||
2.785% 6/1/37 (e) | 775 | 831 | ||
2.97% 4/1/37 (e) | 9 | 9 | ||
2.971% 6/1/33 (e) | 984 | 1,058 | ||
3% 11/1/42 (c) | 500 | 517 | ||
3% 1/1/43 (c) | 500 | 516 | ||
3% 2/1/43 | 234 | 242 | ||
3% 2/1/43 | 2,267 | 2,343 | ||
3% 3/1/43 (c) | 14,200 | 14,633 | ||
3.057% 7/1/36 (e) | 140 | 151 | ||
3.439% 10/1/35 (e) | 70 | 75 | ||
3.5% 1/1/26 to 3/1/43 | 44,703 | 47,384 | ||
3.5% 2/1/43 | 620 | 656 | ||
3.5% 2/1/43 | 1,099 | 1,163 | ||
3.5% 2/1/43 | 712 | 751 | ||
3.5% 2/1/43 | 2,006 | 2,117 | ||
4% 6/1/24 to 5/1/42 | 34,177 | 36,694 | ||
4% 3/1/43 (c) | 7,000 | 7,436 | ||
4.5% 7/1/25 to 3/1/42 | 41,991 | 45,210 | ||
5% 7/1/33 to 9/1/40 | 25,895 | 28,203 | ||
5.145% 3/1/36 (e) | 634 | 666 | ||
5.5% 10/1/17 to 1/1/40 (d) | 33,900 | 36,934 | ||
6% 4/1/14 to 6/1/39 | 5,775 | 6,340 | ||
6.011% 4/1/37 (e) | 81 | 86 | ||
6.082% 10/1/36 (e) | 40 | 43 | ||
6.404% 12/1/36 (e) | 613 | 659 | ||
6.5% 8/1/13 to 9/1/39 | 8,674 | 9,725 | ||
7% 6/1/21 to 9/1/36 | 2,641 | 3,088 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Freddie Mac - continued | ||||
7.03% 6/1/36 (e) | $ 32 | $ 34 | ||
7.5% 7/1/14 to 7/1/34 | 3,777 | 4,344 | ||
8% 11/1/16 to 1/1/37 | 58 | 69 | ||
8.5% 6/1/16 to 9/1/20 | 9 | 10 | ||
9% 9/1/16 to 5/1/21 | 69 | 75 | ||
10% 1/1/16 to 12/1/18 | 8 | 9 | ||
10.5% 2/1/16 | 0* | 0* | ||
12.5% 2/1/14 to 12/1/14 | 1 | 1 | ||
13% 12/1/13 to 6/1/15 | 5 | 5 | ||
| 253,597 | |||
Ginnie Mae - 22.5% | ||||
3% 3/1/43 (c) | 1,000 | 1,048 | ||
3% 3/1/43 (c) | 15,200 | 15,916 | ||
3.5% 3/15/42 to 11/20/42 | 26,778 | 28,711 | ||
3.5% 3/1/43 (c) | 2,300 | 2,464 | ||
3.5% 3/1/43 (c) | 3,200 | 3,428 | ||
3.5% 3/1/43 (c) | 5,400 | 5,784 | ||
4% 9/15/25 to 1/20/42 | 17,206 | 18,832 | ||
4.497% 1/20/62 (j) | 775 | 878 | ||
4.5% 8/15/33 to 3/20/41 | 88,459 | 97,529 | ||
4.564% 11/20/61 (j) | 949 | 1,073 | ||
4.751% 12/20/60 (j) | 13,571 | 15,232 | ||
4.814% 1/20/61 (j) | 313 | 353 | ||
5% 9/20/33 to 9/15/40 | 33,220 | 36,986 | ||
5% 3/1/43 (c) | 1,600 | 1,748 | ||
5.5% 10/15/33 to 9/15/39 | 4,918 | 5,456 | ||
6% 1/15/36 to 9/20/38 | 3,994 | 4,529 | ||
6.5% 10/15/34 to 7/15/36 | 275 | 313 | ||
7% 2/15/24 to 4/20/32 | 1,572 | 1,829 | ||
7.5% 12/15/16 to 4/15/32 | 587 | 682 | ||
8% 6/15/21 to 12/15/25 | 272 | 317 | ||
8.5% 8/15/16 to 10/15/28 | 284 | 328 | ||
9% 11/20/17 | 1 | 1 | ||
10.5% 10/20/17 to 2/20/18 | 6 | 7 | ||
| 243,444 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $1,122,810) | 1,141,160 | |||
Asset-Backed Securities - 2.6% | ||||
| Principal Amount (000s) | Value (000s) | ||
American Credit Acceptance Receivables Trust Series 2012-2 Class A, 1.89% 7/15/16 (b) | $ 2,021 | $ 2,036 | ||
Ameriquest Mortgage Securities, Inc. pass-thru certificates Series 2005-R6 Class A2, 0.4017% 8/25/35 (e) | 2,586 | 2,571 | ||
Carnow Auto Receivables Trust Series 2012-1A Class A, 2.09% 1/15/15 (b) | 747 | 747 | ||
Countrywide Asset-Backed Certificates Trust: | ||||
Series 2006-22 Class 2A2, 0.3117% 5/25/47 (e) | 1,217 | 1,212 | ||
Series 2006-25 Class 2A2, 0.3217% 6/25/47 (e) | 2,552 | 2,524 | ||
Series 2007-4 Class A1A, 0.3237% 9/25/37 (e) | 130 | 130 | ||
Countrywide Home Loans, Inc. Series 2005-2 Class M2, 0.9067% 7/25/35 (e) | 293 | 293 | ||
GSAMP Trust: | ||||
Series 2004-AR1 Class B4, 3.4154% 6/25/34 (b)(e) | 82 | 23 | ||
Series 2004-AR2 Class B1, 3.0517% 8/25/34 (e) | 796 | 39 | ||
Morgan Stanley ABS Capital I Trust Series 2005-3 Class A3, 0.5817% 8/25/35 (e) | 237 | 237 | ||
Ocala Funding LLC Series 2006-1A Class A, 1.6007% 3/20/11 (a)(b)(e) | 2,100 | 0 | ||
Soundview Home Loan Trust Series 2006-WF1 Class A3, 5.5619% 10/25/36 | 6,783 | 5,744 | ||
Specialty Underwriting & Residential Finance Trust Series 2006-BC1 Class A2C, 0.4017% 12/25/36 (e) | 3,390 | 3,329 | ||
Structured Asset Securities Corp.: | ||||
Series 2005-NC2 Class M3, 0.6317% 5/25/35 (e) | 1,995 | 1,731 | ||
Series 2007-BC3 Class 2A1, 0.2617% 5/25/47 (e) | 7,304 | 7,234 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $29,658) |
| |||
Collateralized Mortgage Obligations - 11.0% | ||||
| ||||
Private Sponsor - 4.7% | ||||
Banc of America Funding Trust sequential payer Series 2009-R1 Class A1, 4.9643% 5/20/36 (e) | 24 | 24 | ||
BCAP LLC Trust sequential payer Series 2010-RR12 Class 3A5, 5% 8/26/37 (b) | 184 | 185 | ||
Citigroup Mortgage Loan Trust Series 2010-7 Class 9A1, 4.5% 10/25/37 (b) | 2,402 | 2,435 | ||
Credit Suisse Mortgage Capital Certificates: | ||||
floater Series 2011-7R Class A1, 1.4597% 8/28/47 (b)(e) | 1,306 | 1,297 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Private Sponsor - continued | ||||
Credit Suisse Mortgage Capital Certificates: - continued | ||||
sequential payer Series 2010-16 Class A1, 3% 6/25/50 (b) | $ 197 | $ 198 | ||
CSMC floater Series 2011-1R Class A1, 1.2097% 2/27/47 (b)(e) | 2,205 | 2,195 | ||
First Horizon Mortgage pass-thru Trust Series 2004-AR5 Class 2A1, 2.6313% 10/25/34 (e) | 803 | 836 | ||
Granite Master Issuer PLC: | ||||
floater: | ||||
Series 2006-1A Class A5, 0.3407% 12/20/54 (b)(e) | 8,843 | 8,667 | ||
Series 2006-4 Class A4, 0.3007% 12/20/54 (e) | 8,631 | 8,459 | ||
Series 2007-1: | ||||
Class 2A1, 0.3407% 12/20/54 (e) | 2,967 | 2,908 | ||
Class 3A1, 0.4007% 12/20/54 (e) | 2,636 | 2,584 | ||
Series 2007-2 Class 2A1, 0.2822% 12/17/54 (e) | 3,196 | 3,132 | ||
Series 2007-2 Class 3A1, 0.3822% 12/17/54 (e) | 1,933 | 1,895 | ||
Granite Mortgages Series 2003-2 Class 1A3, 0.802% 7/20/43 (e) | 365 | 361 | ||
Granite Mortgages PLC floater: | ||||
Series 2003-3 Class 1A3, 0.702% 1/20/44 (e) | 998 | 989 | ||
Series 2004-1 Class 2A1, 0.629% 3/20/44 (e) | 5,150 | 5,090 | ||
Series 2004-3 Class 2A1, 0.589% 9/20/44 (e) | 3,232 | 3,195 | ||
JP Morgan REREMIC Trust floater Series 2009-5 Class 2A1, 2.1382% 1/26/37 (b)(e) | 1,112 | 1,107 | ||
MASTR Adjustable Rate Mortgages Trust Series 2007-3 Class 22A2, 0.4117% 5/25/47 (e) | 476 | 348 | ||
Merrill Lynch Alternative Note Asset Trust floater Series 2007-OAR1 Class A1, 0.3717% 2/25/37 (e) | 2,343 | 2,023 | ||
Structured Asset Securities Corp. Series 2003-15A Class 4A, 4.7816% 4/25/33 (e) | 327 | 324 | ||
Wells Fargo Mortgage Backed Securities Trust: | ||||
Series 2005-AR2 Class 1A2, 2.6255% 3/25/35 (e) | 369 | 185 | ||
Series 2006-AR10 Class 3A1, 2.621% 7/25/36 (e) | 2,731 | 2,724 | ||
TOTAL PRIVATE SPONSOR | 51,161 | |||
U.S. Government Agency - 6.3% | ||||
Fannie Mae: | ||||
floater: | ||||
Series 2003-118 Class S, 7.8983% 12/25/33 (e)(g)(i) | 780 | 150 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
floater: | ||||
Series 2007-57 Class FA, 0.4317% 6/25/37 (e) | $ 3,278 | $ 3,279 | ||
planned amortization class: | ||||
Series 1994-23: | ||||
Class PX, 6% 8/25/23 | 424 | 432 | ||
Class PZ, 6% 2/25/24 | 3,414 | 3,963 | ||
Series 1999-17 Class PG, 6% 4/25/29 | 1,555 | 1,730 | ||
Series 1999-32 Class PL, 6% 7/25/29 | 1,235 | 1,380 | ||
Series 1999-33 Class PK, 6% 7/25/29 | 736 | 824 | ||
Series 2001-52 Class YZ, 6.5% 10/25/31 | 83 | 96 | ||
Series 2005-39 Class TE, 5% 5/25/35 | 1,120 | 1,273 | ||
Series 2005-73 Class SA, 17.0256% 8/25/35 (e)(i) | 320 | 386 | ||
Series 2006-105 Class MD, 5.5% 6/25/35 | 1,145 | 1,237 | ||
sequential payer: | ||||
Series 2001-20 Class Z, 6% 5/25/31 | 1,408 | 1,571 | ||
Series 2001-31 Class ZC, 6.5% 7/25/31 | 560 | 639 | ||
Series 2002-16 Class ZD, 6.5% 4/25/32 | 220 | 250 | ||
Series 2002-74 Class SV, 7.3483% 11/25/32 (e)(g) | 402 | 89 | ||
Series 2002-79 Class Z, 5.5% 11/25/22 | 724 | 785 | ||
Series 2003-80 Class CG, 6% 4/25/30 | 70 | 70 | ||
Series 1993-165 Class SH, 19.1811% 9/25/23 (e)(i) | 65 | 87 | ||
Series 2003-21 Class SK, 7.8983% 3/25/33 (e)(g)(i) | 229 | 51 | ||
Series 2003-35 Class TQ, 7.2983% 5/25/18 (e)(g)(i) | 169 | 26 | ||
Series 2003-39 Class IA, 5.5% 10/25/22 (e)(g) | 208 | 7 | ||
Series 2003-42 Class SJ, 6.8483% 11/25/22 (e)(g)(i) | 111 | 8 | ||
Series 2003-48 Class HI, 5% 11/25/17 (g) | 271 | 5 | ||
Series 2005-104 Class NI, 6.4983% 3/25/35 (e)(g)(i) | 3,013 | 482 | ||
Series 2007-57 Class SA, 39.4098% 6/25/37 (e)(i) | 981 | 1,807 | ||
Series 2007-66: | ||||
Class FB, 0.6017% 7/25/37 (e) | 1,601 | 1,609 | ||
Class SB, 38.3898% 7/25/37 (e)(i) | 295 | 564 | ||
Series 2008-12 Class SG, 6.1483% 3/25/38 (e)(g)(i) | 1,951 | 238 | ||
Series 2009-114 Class AI, 5% 12/25/23 (g) | 983 | 72 | ||
Series 2009-16 Class SA, 6.0483% 3/25/24 (e)(g)(i) | 1,108 | 90 | ||
Series 2009-76 Class MI, 5.5% 9/25/24 (g) | 633 | 53 | ||
Series 2009-85 Class IB, 4.5% 8/25/24 (g) | 292 | 25 | ||
Series 2009-93 Class IC, 4.5% 9/25/24 (g) | 449 | 35 | ||
Series 2010-12 Class AI, 5% 12/25/18 (g) | 1,817 | 164 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
Series 2010-135 Class LS, 5.8483% 12/25/40 (e)(g)(i) | $ 1,578 | $ 213 | ||
Series 2010-139 Class NI, 4.5% 2/25/40 (g) | 1,600 | 237 | ||
Series 2010-23: | ||||
Class AI, 5% 12/25/18 (g) | 827 | 62 | ||
Class HI, 4.5% 10/25/18 (g) | 550 | 46 | ||
Series 2010-29 Class LI, 4.5% 6/25/19 (g) | 1,681 | 138 | ||
Series 2010-96 Class DI, 4% 5/25/23 (g) | 603 | 9 | ||
Series 2010-97 Class CI, 4.5% 8/25/25 (g) | 929 | 87 | ||
Series 2011-67 Class AI, 4% 7/25/26 (g) | 537 | 54 | ||
Series 2011-83 Class DI, 6% 9/25/26 (g) | 889 | 135 | ||
Fannie Mae Stripped Mortgage-Backed Securities: | ||||
Series 339 Class 29, 5.5% 7/1/18 (g) | 512 | 44 | ||
Series 348 Class 14, 6.5% 8/1/34 (g) | 385 | 70 | ||
Series 351: | ||||
Class 12, 5.5% 4/1/34 (g) | 282 | 44 | ||
Class 13, 6% 3/1/34 (g) | 351 | 63 | ||
Series 359 Class 19, 6% 7/1/35 (g) | 304 | 40 | ||
Series 384 Class 6, 5% 7/25/37 (g) | 1,080 | 118 | ||
Freddie Mac: | ||||
floater: | ||||
Series 3222 Class HF, 0% 9/15/36 (e) | 52 | 49 | ||
Series 3318 Class GY, 0% 5/15/37 (e) | 7 | 7 | ||
planned amortization class: | ||||
Series 2095 Class PE, 6% 11/15/28 | 1,523 | 1,707 | ||
Series 2104 Class PG, 6% 12/15/28 | 465 | 519 | ||
Series 2121 Class MG, 6% 2/15/29 | 623 | 695 | ||
Series 2154 Class PT, 6% 5/15/29 | 975 | 1,086 | ||
Series 2162 Class PH, 6% 6/15/29 | 164 | 182 | ||
Series 2520 Class BE, 6% 11/15/32 | 839 | 936 | ||
Series 2585 Class KS, 7.3988% 3/15/23 (e)(g)(i) | 99 | 16 | ||
Series 2590 Class YR, 5.5% 9/15/32 (g) | 19 | 1 | ||
Series 2802 Class OB, 6% 5/15/34 | 3,375 | 3,862 | ||
Series 2810 Class PD, 6% 6/15/33 | 703 | 726 | ||
Series 3002 Class NE, 5% 7/15/35 | 680 | 786 | ||
Series 3189 Class PD, 6% 7/15/36 | 610 | 737 | ||
Series 3415 Class PC, 5% 12/15/37 | 476 | 517 | ||
Series 3741 Class YU, 3.5% 11/15/22 | 1,948 | 2,045 | ||
Series 3786 Class HI, 4% 3/15/38 (g) | 1,427 | 206 | ||
Series 3806 Class UP, 4.5% 2/15/41 | 2,096 | 2,322 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Freddie Mac: - continued | ||||
planned amortization class: | ||||
Series 3832 Class PE, 5% 3/15/41 | $ 960 | $ 1,100 | ||
Series 70 Class C, 9% 9/15/20 | 35 | 38 | ||
sequential payer: | ||||
Series 2114 Class ZM, 6% 1/15/29 | 216 | 241 | ||
Series 2135 Class JE, 6% 3/15/29 | 714 | 795 | ||
Series 2274 Class ZM, 6.5% 1/15/31 | 318 | 361 | ||
Series 2281 Class ZB, 6% 3/15/30 | 277 | 308 | ||
Series 2357 Class ZB, 6.5% 9/15/31 | 657 | 746 | ||
Series 2502 Class ZC, 6% 9/15/32 | 819 | 920 | ||
Series 2575 Class ID, 5.5% 8/15/22 (g) | 5 | 0* | ||
Series 2817 Class SD, 6.8488% 7/15/30 (e)(g)(i) | 130 | 10 | ||
Series 3097 Class IA, 5.5% 3/15/33 (g) | 592 | 27 | ||
Series 1658 Class GZ, 7% 1/15/24 | 892 | 997 | ||
Series 2380 Class SY, 7.9988% 11/15/31 (e)(g)(i) | 2,242 | 519 | ||
Series 2587 Class IM, 6.5% 3/15/33 (g) | 429 | 95 | ||
Series 2844: | ||||
Class SC, 45.4922% 8/15/24 (e)(i) | 31 | 62 | ||
Class SD, 83.8344% 8/15/24 (e)(i) | 46 | 109 | ||
Series 2947 Class XZ, 6% 3/15/35 | 705 | 840 | ||
Series 3055 Class CS, 6.3888% 10/15/35 (e)(g) | 545 | 75 | ||
Series 3244 Class SG, 6.4588% 11/15/36 (e)(g)(i) | 817 | 145 | ||
Series 3274 Class SM, 6.2288% 2/15/37 (e)(g) | 776 | 99 | ||
Series 3284 Class CI, 5.9188% 3/15/37 (e)(g) | 2,146 | 379 | ||
Series 3287 Class SD, 6.5488% 3/15/37 (e)(g)(i) | 1,334 | 289 | ||
Series 3297 Class BI, 6.5588% 4/15/37 (e)(g)(i) | 1,904 | 413 | ||
Series 3336 Class LI, 6.3788% 6/15/37 (e)(g) | 1,131 | 175 | ||
Series 3772 Class BI, 4.5% 10/15/18 (g) | 1,101 | 86 | ||
Series 3949 Class MK, 4.5% 10/15/34 | 600 | 672 | ||
Freddie Mac Manufactured Housing participation certificates guaranteed planned amortization class Series 2043 Class CJ, 6.5% 4/15/28 | 584 | 665 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
floater: | ||||
Series 2007-37 Class TS, 6.4883% 6/16/37 (e)(g)(i) | 455 | 97 | ||
Series 2010-H17 Class FA, 0.5337% 7/20/60 (e)(j) | 397 | 395 | ||
Series 2010-H18 Class AF, 0.5077% 9/20/60 (e)(j) | 420 | 418 | ||
Series 2010-H19 Class FG, 0.5077% 8/20/60 (e)(j) | 550 | 548 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass-thru certificates: - continued | ||||
floater: | ||||
Series 2011-H05 Class FA, 0.7077% 12/20/60 (e)(j) | $ 1,446 | $ 1,452 | ||
Series 2011-H13 Class FA, 0.7077% 4/20/61 (e)(j) | 227 | 228 | ||
Series 2011-H14: | ||||
Class FB, 0.7077% 5/20/61 (e)(j) | 1,622 | 1,631 | ||
Class FC, 0.7077% 5/20/61 (e)(j) | 1,606 | 1,614 | ||
planned amortization class: | ||||
Series 2011-136 Class WI, 4.5% 5/20/40 (g) | 847 | 165 | ||
Series 2011-79 Class PO, 6/20/40 (h) | 2,678 | 2,316 | ||
sequential payer: | ||||
Series 2001-33 Class SD, 7.8493% 7/20/31 (e)(g)(i) | 68 | 17 | ||
Series 2002-24 Class SK, 7.7483% 4/16/32 (e)(g)(i) | 1,897 | 485 | ||
Series 2002-42 Class ZA, 6% 6/20/32 | 781 | 884 | ||
Series 2004-24 Class ZM, 5% 4/20/34 | 948 | 1,099 | ||
Series 2001-36 Class SP, 8.5483% 9/16/26 (e)(g) | 966 | 193 | ||
Series 2004-73 Class AL, 6.9983% 8/17/34 (e)(g)(i) | 233 | 49 | ||
Series 1998-2 Class SA, 8.2983% 1/16/28 (e)(g) | 725 | 174 | ||
Series 1999-34 Class SC, 8.3983% 9/16/19 (e)(g)(i) | 942 | 110 | ||
Series 1999-40 Class SE, 8.7483% 11/16/29 (e)(g)(i) | 1,280 | 161 | ||
Series 2000-8 Class SA, 8.2483% 1/16/30 (e)(g)(i) | 1,112 | 133 | ||
Series 2001-3 Class S, 7.8983% 2/16/31 (e)(g) | 431 | 99 | ||
Series 2001-36 Class SB, 7.8983% 12/16/23 (e)(g)(i) | 1,264 | 261 | ||
Series 2001-38 Class SB, 7.3783% 8/16/31 (e)(g)(i) | 692 | 158 | ||
Series 2001-41 Class SG, 8.5483% 9/16/31 (e)(g) | 492 | 93 | ||
Series 2001-46 Class SB, 7.9483% 5/16/23 (e)(g) | 704 | 100 | ||
Series 2001-49: | ||||
Class SC, 7.3983% 12/16/25 (e)(g)(i) | 1,629 | 317 | ||
Class SL, 7.3983% 5/16/30 (e)(g)(i) | 1,749 | 373 | ||
Class SV, 8.0483% 12/16/28 (e)(g)(i) | 1,802 | 221 | ||
Series 2001-50: | ||||
Class SD, 7.9993% 11/20/31 (e)(g)(i) | 1,029 | 251 | ||
Class ST, 7.4983% 8/16/27 (e)(g)(i) | 413 | 93 | ||
Series 2002-5 Class SP, 7.2483% 1/16/32 (e)(g)(i) | 712 | 150 | ||
Series 2004-32 Class GS, 6.2983% 5/16/34 (e)(g)(i) | 638 | 133 | ||
Series 2008-60 Class SH, 5.9483% 7/16/38 (e)(g)(i) | 636 | 106 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass-thru certificates: - continued | ||||
Series 2011-52 Class HI, 7% 4/16/41 (g) | $ 2,548 | $ 765 | ||
Series 2012-76 Class GS, 6.4983% 6/16/42 (e)(g)(i) | 1,496 | 238 | ||
Series 2012-97 Class JS, 6.0483% 8/16/42 (e)(g)(i) | 4,842 | 836 | ||
TOTAL U.S. GOVERNMENT AGENCY | 67,765 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $115,365) | 118,926 | |||
Commercial Mortgage Securities - 2.9% | ||||
| ||||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.4302% 2/14/43 (e)(g) | 1,492 | 49 | ||
Banc of America Commercial Mortgage Trust sequential payer Series 2004-4 Class A5, 4.576% 7/10/42 | 234 | 235 | ||
Banc of America REMIC Trust Series 2012-CLRN Class A1, 1.3512% 8/15/17 (b)(e) | 2,910 | 2,936 | ||
Bayview Commercial Asset Trust floater Series 2007-3: | ||||
Class M1, 0.5117% 7/25/37 (b)(e) | 60 | 20 | ||
Class M2, 0.5417% 7/25/37 (b)(e) | 62 | 17 | ||
Class M3, 0.5717% 7/25/37 (b)(e) | 101 | 22 | ||
CDC Commercial Mortgage Trust Series 2002-FX1 Class XCL, 1.3266% 5/15/35 (b)(e)(g) | 6,264 | 98 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust sequential payer Series 2007-CD4 Class A4, 5.322% 12/11/49 | 5,110 | 5,793 | ||
Granite Master Issuer PLC floater Series 2005-2 Class A6, 0.4607% 12/20/54 (e) | 2,909 | 2,851 | ||
GS Mortgage Securities Corp. II: | ||||
floater Series 2007-EOP Class A2, 1.2601% 3/6/20 (b)(e) | 740 | 741 | ||
sequential payer Series 2005-GG4 Class A3, 4.607% 7/10/39 | 4 | 4 | ||
GS Mortgage Securities Corp. Trust Series 2013-KYO Class A, 1.0512% 11/8/29 (b)(e) | 5,000 | 5,012 | ||
JPMorgan Chase Commercial Mortgage Securities Corp. floater Series 2011-CCHP Class A, 2.6% 7/15/28 (b)(e) | 1,281 | 1,282 | ||
JPMorgan Chase Commercial Mortgage Securities Trust sequential payer: | ||||
Series 2007-LD11 Class A4, 5.8124% 6/15/49 (e) | 4,140 | 4,757 | ||
Commercial Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
JPMorgan Chase Commercial Mortgage Securities Trust sequential payer: - continued | ||||
Series 2007-LDPX Class A2 S, 5.305% 1/15/49 | $ 2,260 | $ 2,286 | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential payer Series 2007-C6 Class A2, 5.845% 7/15/40 | 249 | 249 | ||
Series 2007-C1 Class XCP, 0.4249% 2/15/40 (e)(g) | 7,984 | 36 | ||
Merrill Lynch Commercial Trust floater Series 2008-LAQA Class A2, 0.7374% 7/9/21 (b)(e) | 1,210 | 1,199 | ||
Merrill Lynch-CFC Commercial Mortgage Trust sequential payer Series 2007-6 Class A4, 5.485% 3/12/51 (e) | 175 | 199 | ||
Wachovia Bank Commercial Mortgage Trust: | ||||
floater Series 2006-WL7A Class A2, 0.3212% 9/15/21 (b)(e) | 1,484 | 1,461 | ||
sequential payer Series 2007-C33 Class A4, 5.9245% 2/15/51 (e) | 1,470 | 1,697 | ||
Series 2007-C31A Class A2, 5.421% 4/15/47 | 593 | 596 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $30,088) | 31,540 | |||
Fixed-Income Funds - 0.8% | |||
Shares |
| ||
Fidelity Mortgage Backed Securities Central Fund (f) | 82,889 |
| |
Cash Equivalents - 2.8% | |||
Maturity Amount (000s) |
| ||
Investments in repurchase agreements in a joint trading account at 0.17%, dated 2/28/13 due 3/1/13 (Collateralized by U.S. Government Obligations) # | $ 29,970 |
| |
Purchased Swaptions - 0.0% | |||||
Expiration Date | Notional Amount (000s) | Value (000s) | |||
Put Options - 0.0% | |||||
Option on an interest rate swap with JPMorgan Chase Bank to receive a fixed rate of 2.144% and pay a floating rate based on 3-month LIBOR expiring May 2023 | 5/13/13 | $ 11,585 | $ 203 | ||
TOTAL INVESTMENT PORTFOLIO - 125.7% (Cost $1,337,163) | 1,358,691 | ||
NET OTHER ASSETS (LIABILITIES) - (25.7)% | (277,924) | ||
NET ASSETS - 100% | $ 1,080,767 | ||
TBA Sale Commitments | |||
| Principal Amount (000s) |
| |
Fannie Mae | |||
3% 3/1/43 | $ (400) | (414) | |
3% 3/1/43 | (200) | (207) | |
3% 3/1/43 | (1,300) | (1,346) | |
3% 3/1/43 | (1,000) | (1,035) | |
3% 3/1/43 | (1,500) | (1,553) | |
3% 3/1/43 | (5,300) | (5,488) | |
3% 3/1/43 | (9,200) | (9,526) | |
3% 3/1/43 | (4,000) | (4,142) | |
3% 3/1/43 | (4,000) | (4,142) | |
3% 3/1/43 | (2,000) | (2,071) | |
3% 3/1/43 | (2,000) | (2,071) | |
3% 3/1/43 | (4,000) | (4,142) | |
3.5% 3/1/43 | (3,200) | (3,384) | |
3.5% 3/1/43 | (5,400) | (5,711) | |
3.5% 3/1/43 | (1,200) | (1,269) | |
3.5% 3/1/43 | (3,200) | (3,384) | |
3.5% 3/1/43 | (6,600) | (6,980) | |
3.5% 3/1/43 | (21,400) | (22,631) | |
3.5% 3/1/43 | (2,600) | (2,750) | |
4% 3/1/43 | (1,000) | (1,066) | |
5% 3/1/43 | (900) | (975) | |
TOTAL FANNIE MAE | (84,287) | ||
TBA Sale Commitments - continued | |||
| Principal Amount (000s) | Value (000s) | |
Freddie Mac | |||
3.5% 3/1/43 | $ (4,400) | $ (4,633) | |
3.5% 3/1/43 | (1,900) | (2,001) | |
4% 3/1/43 | (2,500) | (2,656) | |
TOTAL FREDDIE MAC | (9,290) | ||
Ginnie Mae | |||
3.5% 3/1/43 | (2,000) | (2,142) | |
3.5% 3/1/43 | (22,000) | (23,564) | |
3.5% 3/1/43 | (2,425) | (2,597) | |
4% 3/1/43 | (2,000) | (2,171) | |
TOTAL GINNIE MAE | (30,474) | ||
TOTAL TBA SALE COMMITMENTS (Proceeds $123,668) | $ (124,051) | ||
Swap Agreements | |||||||
Interest Rate Swaps | |||||||
Counterparty | Expiration | Notional | Payment | Payment | Value | Upfront | Unrealized |
JPMorgan Chase, Inc. | Jun. 2014 | $ 900 | 3-month LIBOR | 0.54% | $ (3) | $ 0 | $ (3) |
JPMorgan Chase, Inc. | Feb. 2017 | 18,000 | 3-month LIBOR | 1% | (238) | 0 | (238) |
JPMorgan Chase, Inc. | Jun. 2017 | 1,700 | 3-month LIBOR | 1% | (21) | 0 | (21) |
JPMorgan Chase, Inc. | Jun. 2017 | 1,000 | 3-month LIBOR | 0.98% | (11) | 0 | (11) |
JPMorgan Chase, Inc. | Sep. 2017 | 13,000 | 3-month LIBOR | 0.83% | (53) | 0 | (53) |
JPMorgan Chase, Inc. | Jun. 2022 | 1,500 | 3-month LIBOR | 1.78% | 6 | 0 | 6 |
Credit Suisse | Aug. 2041 | 2,900 | 3-month LIBOR | 3.75% | (497) | 0 | (497) |
JPMorgan Chase, Inc. | Jun. 2042 | 300 | 3-month LIBOR | 2.45% | 30 | 0 | 30 |
TOTAL INTEREST RATE SWAPS | $ (787) | $ 0 | $ (787) | ||||
|
Legend |
(a) Non-income producing - Security is in default. |
(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 $31,678,000 or 2.9% of net assets. |
(c) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(d) Security or a portion of the security has been segregated as collateral for open options and swap agreements. At the period end, the value of securities pledged amounted to $416,000. |
(e) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
(f) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited schedule of portfolio holdings for each Fidelity Central Fund is filed with the SEC for the first and third quarters of each fiscal year on Form N-Q and is available upon request or at the SEC's website at www.sec.gov. An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro rata share of securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request. |
(g) 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. |
(h) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
(i) 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. |
(j) 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 |
# Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement / Counterparty | Value |
$29,970,000 due 3/01/13 at 0.17% | |
Barclays Capital, Inc. | $ 74 |
Credit Agricole CIB New York Branch | 13,214 |
Credit Suisse Securities (USA) LLC | 3,303 |
Mizuho Securities USA, Inc. | 8,259 |
Morgan Stanley & Co., Inc. | 826 |
RBS Securities, Inc. | 4,294 |
| $ 29,970 |
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 Mortgage Backed Securities Central Fund | $ 397 |
Additional information regarding the Fund's fiscal year to date purchases and sales, including the ownership percentage, of the non Money Market Central Funds is as follows: |
Fund | Value, | Purchases | Sales | Value, | % ownership, |
Fidelity Mortgage Backed Securities Central Fund | $ - | $ 121,344 | $ 112,001 | $ 9,042 | 0.1% |
Other Information |
The following is a summary of the inputs used, as of February 28, 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: | ||||
U.S. Government Agency - Mortgage Securities | $ 1,141,160 | $ - | $ 1,141,160 | $ - |
Asset-Backed Securities | 27,850 | - | 27,850 | - |
Collateralized Mortgage Obligations | 118,926 | - | 118,926 | - |
Commercial Mortgage Securities | 31,540 | - | 31,540 | - |
Fixed-Income Funds | 9,042 | 9,042 | - | - |
Cash Equivalents | 29,970 | - | 29,970 | - |
Purchased Swaptions | 203 | - | 203 | - |
Total Investments in Securities: | $ 1,358,691 | $ 9,042 | $ 1,349,649 | $ - |
Other Derivative Instruments: | ||||
Assets | ||||
Swap Agreements | $ 36 | $ - | $ 36 | $ - |
Liabilities | ||||
Swap Agreements | $ (823) | $ - | $ (823) | $ - |
Total Other Derivative Instruments: | $ (787) | $ - | $ (787) | $ - |
Other Financial Instruments: | ||||
TBA Sale Commitments | $ (124,051) | $ - | $ (124,051) | $ - |
Value of Derivative Instruments |
The following table is a summary of the Fund's value of derivative instruments by primary risk exposure as of February 28, 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 | ||
Purchased Swaptions (a) | $ 203 | $ - |
Swap Agreements (b) | 36 | (823) |
Total Value of Derivatives | $ 239 | $ (823) |
(a) Value is included in the Statement of Assets and Liabilities in the Investments, at value line-item. |
(b) Value is disclosed on the Statement of Assets and Liabilities in the Swap agreements, at value line-items. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amounts) | February 28, 2013 (Unaudited) | |
|
|
|
Assets | ||
Investment in securities, at value (including repurchase agreements of $29,970) - See accompanying schedule: Unaffiliated issuers (cost $1,328,047) | $ 1,349,649 |
|
Fidelity Central Funds (cost $9,116) | 9,042 |
|
Total Investments (cost $1,337,163) |
| $ 1,358,691 |
Receivable for investments sold | 12,218 | |
Receivable for TBA sale commitments |
| 123,668 |
Receivable for fund shares sold | 5,997 | |
Interest receivable | 3,792 | |
Swap agreements, at value | 36 | |
Other receivables | 115 | |
Total assets | 1,504,517 | |
|
|
|
Liabilities | ||
Payable for investments purchased | $ 3,957 | |
Delayed delivery | 291,924 | |
TBA sale commitments, at value | 124,051 | |
Payable for fund shares redeemed | 2,325 | |
Distributions payable | 102 | |
Swap agreements, at value | 823 | |
Accrued management fee | 282 | |
Distribution and service plan fees payable | 39 | |
Other affiliated payables | 133 | |
Other payables and accrued expenses | 114 | |
Total liabilities | 423,750 | |
|
|
|
Net Assets | $ 1,080,767 | |
Net Assets consist of: |
| |
Paid in capital | $ 1,144,887 | |
Distributions in excess of net investment income | (7,686) | |
Accumulated undistributed net realized gain (loss) on investments | (76,792) | |
Net unrealized appreciation (depreciation) on investments | 20,358 | |
Net Assets | $ 1,080,767 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
Amounts in thousands (except per-share amounts) | February 28, 2013 (Unaudited) | |
|
|
|
Calculation of Maximum Offering Price Class A: | $ 11.30 | |
|
|
|
Maximum offering price per share (100/96.00 of $11.30) | $ 11.77 | |
Class T: | $ 11.32 | |
|
|
|
Maximum offering price per share (100/96.00 of $11.32) | $ 11.79 | |
Class B: | $ 11.30 | |
|
|
|
Class C: | $ 11.28 | |
|
|
|
|
|
|
Fidelity Mortgage Securities Fund: | $ 11.32 | |
|
|
|
Institutional Class: | $ 11.28 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Statement of Operations
Amounts in thousands Six months ended February 28, 2013 (Unaudited) | ||
|
|
|
Investment Income |
|
|
Interest |
| $ 12,840 |
Income from Fidelity Central Funds |
| 397 |
Total income |
| 13,237 |
|
|
|
Expenses | ||
Management fee | $ 1,804 | |
Transfer agent fees | 632 | |
Distribution and service plan fees | 242 | |
Fund wide operations fee | 201 | |
Independent trustees' compensation | 2 | |
Miscellaneous | 1 | |
Total expenses before reductions | 2,882 | |
Expense reductions | (10) | 2,872 |
Net investment income (loss) | 10,365 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 46 | |
Fidelity Central Funds | (227) |
|
Swap agreements | (112) |
|
Total net realized gain (loss) |
| (293) |
Change in net unrealized appreciation (depreciation) on: Investment securities | (5,877) | |
Swap agreements | 373 | |
Delayed delivery commitments | 188 |
|
Total change in net unrealized appreciation (depreciation) |
| (5,316) |
Net gain (loss) | (5,609) | |
Net increase (decrease) in net assets resulting from operations | $ 4,756 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Six months ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income (loss) | $ 10,365 | $ 25,133 |
Net realized gain (loss) | (293) | 17,420 |
Change in net unrealized appreciation (depreciation) | (5,316) | (321) |
Net increase (decrease) in net assets resulting | 4,756 | 42,232 |
Distributions to shareholders from net investment income | (10,442) | (25,516) |
Share transactions - net increase (decrease) | 111,376 | 70,977 |
Total increase (decrease) in net assets | 105,690 | 87,693 |
|
|
|
Net Assets | ||
Beginning of period | 975,077 | 887,384 |
End of period (including distributions in excess of net investment income of $7,686 and distributions in excess of net investment income of $7,609, respectively) | $ 1,080,767 | $ 975,077 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class A
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 | $ 10.57 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .086 | .278 | .323 | .357 | .464 | .467 |
Net realized and unrealized gain (loss) | (.039) | .206 | .235 | .602 | .283 | (.461) |
Total from investment operations | .047 | .484 | .558 | .959 | .747 | .006 |
Distributions from net investment income | (.087) | (.284) | (.328) | (.429) | (.457) | (.486) |
Net asset value, end of period | $ 11.30 | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 |
Total Return B, C, D | .41% | 4.41% | 5.22% | 9.44% | 7.63% | .06% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | .80% A | .81% | .82% | .83% | .84% | .85% |
Expenses net of fee waivers, if any | .80% A | .81% | .82% | .83% | .84% | .85% |
Expenses net of all reductions | .80% A | .81% | .82% | .83% | .84% | .85% |
Net investment income (loss) | 1.53% A | 2.48% | 2.96% | 3.36% | 4.59% | 4.52% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 58 | $ 60 | $ 59 | $ 61 | $ 47 | $ 39 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class T
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.37 | $ 11.16 | $ 10.93 | $ 10.40 | $ 10.11 | $ 10.59 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .087 | .281 | .326 | .360 | .466 | .470 |
Net realized and unrealized gain (loss) | (.049) | .216 | .235 | .602 | .282 | (.462) |
Total from investment operations | .038 | .497 | .561 | .962 | .748 | .008 |
Distributions from net investment income | (.088) | (.287) | (.331) | (.432) | (.458) | (.488) |
Net asset value, end of period | $ 11.32 | $ 11.37 | $ 11.16 | $ 10.93 | $ 10.40 | $ 10.11 |
Total Return B, C, D | .34% | 4.52% | 5.24% | 9.44% | 7.62% | .07% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | .77% A | .78% | .79% | .81% | .83% | .83% |
Expenses net of fee waivers, if any | .77% A | .78% | .79% | .81% | .83% | .83% |
Expenses net of all reductions | .76% A | .78% | .79% | .81% | .83% | .83% |
Net investment income (loss) | 1.56% A | 2.50% | 2.99% | 3.39% | 4.60% | 4.53% |
Supplemental Data |
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|
|
|
| |
Net assets, end of period (in millions) | $ 37 | $ 31 | $ 37 | $ 41 | $ 40 | $ 41 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class B
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 | $ 10.57 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .046 | .200 | .248 | .286 | .398 | .400 |
Net realized and unrealized gain (loss) | (.039) | .207 | .235 | .602 | .283 | (.461) |
Total from investment operations | .007 | .407 | .483 | .888 | .681 | (.061) |
Distributions from net investment income | (.047) | (.207) | (.253) | (.358) | (.391) | (.419) |
Net asset value, end of period | $ 11.30 | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 |
Total Return B, C, D | .06% | 3.69% | 4.51% | 8.71% | 6.93% | (.58)% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | 1.51% A | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% |
Expenses net of fee waivers, if any | 1.51% A | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% |
Expenses net of all reductions | 1.51% A | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% |
Net investment income (loss) | .81% A | 1.79% | 2.27% | 2.69% | 3.93% | 3.86% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 3 | $ 4 | $ 5 | $ 7 | $ 19 | $ 32 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class C
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.33 | $ 11.12 | $ 10.90 | $ 10.37 | $ 10.08 | $ 10.56 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .045 | .197 | .244 | .282 | .390 | .389 |
Net realized and unrealized gain (loss) | (.049) | .217 | .226 | .603 | .284 | (.459) |
Total from investment operations | (.004) | .414 | .470 | .885 | .674 | (.070) |
Distributions from net investment income | (.046) | (.204) | (.250) | (.355) | (.384) | (.410) |
Net asset value, end of period | $ 11.28 | $ 11.33 | $ 11.12 | $ 10.90 | $ 10.37 | $ 10.08 |
Total Return B, C, D | (.04)% | 3.76% | 4.39% | 8.69% | 6.86% | (.68)% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | 1.53% A | 1.53% | 1.53% | 1.53% | 1.57% | 1.60% |
Expenses net of fee waivers, if any | 1.53% A | 1.53% | 1.53% | 1.53% | 1.57% | 1.60% |
Expenses net of all reductions | 1.53% A | 1.53% | 1.53% | 1.53% | 1.57% | 1.60% |
Net investment income (loss) | .80% A | 1.76% | 2.24% | 2.66% | 3.86% | 3.77% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 20 | $ 18 | $ 15 | $ 18 | $ 18 | $ 15 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Fidelity Mortgage Securities Fund
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.37 | $ 11.17 | $ 10.94 | $ 10.41 | $ 10.11 | $ 10.59 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) D | .105 | .318 | .364 | .399 | .505 | .509 |
Net realized and unrealized gain (loss) | (.049) | .206 | .234 | .601 | .292 | (.462) |
Total from investment operations | .056 | .524 | .598 | 1.000 | .797 | .047 |
Distributions from net investment income | (.106) | (.324) | (.368) | (.470) | (.497) | (.527) |
Net asset value, end of period | $ 11.32 | $ 11.37 | $ 11.17 | $ 10.94 | $ 10.41 | $ 10.11 |
Total Return B, C | .49% | 4.77% | 5.59% | 9.83% | 8.14% | .46% |
Ratios to Average Net Assets E, G |
|
|
|
|
| |
Expenses before reductions | .45% A | .45% | .45% | .45% | .45% | .45% |
Expenses net of fee waivers, if any | .45% A | .45% | .45% | .45% | .45% | .45% |
Expenses net of all reductions | .45% A | .45% | .45% | .45% | .45% | .45% |
Net investment income (loss) | 1.87% A | 2.84% | 3.33% | 3.74% | 4.99% | 4.91% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 928 | $ 850 | $ 765 | $ 829 | $ 838 | $ 1,049 |
Portfolio turnover rate F | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Calculated based on average shares outstanding during the period.
E 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.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Institutional Class
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.33 | $ 11.13 | $ 10.90 | $ 10.37 | $ 10.08 | $ 10.56 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) D | .101 | .311 | .354 | .391 | .496 | .499 |
Net realized and unrealized gain (loss) | (.048) | .207 | .235 | .603 | .284 | (.461) |
Total from investment operations | .053 | .518 | .589 | .994 | .780 | .038 |
Distributions from net investment income | (.103) | (.318) | (.359) | (.464) | (.490) | (.518) |
Net asset value, end of period | $ 11.28 | $ 11.33 | $ 11.13 | $ 10.90 | $ 10.37 | $ 10.08 |
Total Return B, C | .47% | 4.73% | 5.53% | 9.80% | 7.98% | .37% |
Ratios to Average Net Assets E, G |
|
|
|
|
| |
Expenses before reductions | .52% A | .50% | .53% | .50% | .52% | .54% |
Expenses net of fee waivers, if any | .52% A | .50% | .53% | .50% | .52% | .54% |
Expenses net of all reductions | .52% A | .50% | .53% | .50% | .52% | .54% |
Net investment income (loss) | 1.80% A | 2.79% | 3.24% | 3.69% | 4.92% | 4.83% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 34 | $ 12 | $ 7 | $ 10 | $ 10 | $ 7 |
Portfolio turnover rate F | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Calculated based on average shares outstanding during the period.
E 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.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Notes to Financial Statements
For the period ended February 28, 2013 (Unaudited)
(Amounts in thousands except percentages)
1. Organization.
Fidelity Advisor® Mortgage Securities Fund (the Fund) is a fund of Fidelity Advisor Series II (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, Class C, Fidelity Mortgage Securities Fund and Institutional Class shares, each of which, along with Class B shares, has equal rights as to assets and voting privileges. Class B shares are closed to new accounts and additional purchases, except for exchanges and reinvestments. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the 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.
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies 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.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the Fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the Fund. The following summarizes the Fund's investment in each non-money market Fidelity Central Fund.
Fidelity Mortgage Backed Securities Central Fund | Fidelity Investment Money Management, Inc. (FIMM) | Seeks a high level of income by normally investing in investment-grade mortgage-related securities and repurchase agreements for those securities. | Delayed Delivery & When Issued Securities Repurchase Agreements Options Swap Agreements |
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
2. Investments in Fidelity Central Funds - continued
An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. 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 contain the significant accounting policies (including investment valuation policies) of those funds 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 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)
Semiannual Report
3. 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 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. Brokers which make markets in asset backed securities, collateralized mortgage obligations and commercial mortgage securities may also consider such factors as the structure of the issue, cash flow assumptions, the value of underlying assets as well as any guarantees. Swap agreements are marked-to-market daily based on valuations from third party pricing vendors or broker-supplied valuations. Pricing vendors utilize matrix pricing which considers comparisons to interest rate curves, credit spread curves, default possibilities and recovery rates. When independent prices are unavailable or unreliable, debt securities and swap agreements may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities and swap agreements are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Options traded over-the-counter are valued using broker-supplied valuations and are categorized as Level 2 in the hierarchy. 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. 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. The aggregate value of investments by input level, as of February 28, 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. Interest income and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
3. Significant Accounting Policies - continued
Investment Transactions and Income - continued
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.
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.
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. 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 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, swap agreements, market discount, deferred trustees compensation, financing transactions, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.
Semiannual Report
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:
Gross unrealized appreciation | $ 28,780 |
Gross unrealized depreciation | (7,255) |
Net unrealized appreciation (depreciation) on securities and other investments | $ 21,525 |
|
|
Tax cost | $ 1,337,166 |
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. At August 31, 2012, capital loss carryforwards were as follows:
Fiscal year of expiration |
|
2017 | $ (76,480) |
Repurchase Agreements. FMR has received an Exemptive Order from 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
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
3. Significant Accounting Policies - continued
Delayed Delivery Transactions and When-Issued Securities - continued
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.
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.
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
Semiannual Report
3. Significant Accounting Policies - continued
Restricted Securities - continued
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 reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is currently evaluating the impact of the update's adoption on the Fund's financial statement disclosures.
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 options and swap agreements. 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
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
4. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
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 swap agreements, the Fund attempts to reduce its exposure to counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement on a bilateral basis 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 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 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 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.
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
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4. Derivative Instruments - continued
Net Realized Gain (Loss) and Change in Net Unrealized Appreciation (Depreciation) on Derivatives - continued
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 | Change in Net Unrealized Appreciation (Depreciation) |
Interest Rate Risk |
|
|
Purchased Options | $ - | $ 47 |
Swap Agreements | (112) | 373 |
Totals (a) | $ (112) | $ 420 |
(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 agreement, to manage its exposure to the market and to fluctuations in interest rates.
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 for the closing sale transaction are greater or less than the premium received or paid, respectively. 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.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
4. Derivative Instruments - continued
Options - continued
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.
Swap Agreements. A swap agreement (swap) is a contract between two parties to exchange future cash flows at periodic intervals based on a notional principal amount.
Swaps are marked-to-market daily and changes in value are reflected in the Statement of Assets and Liabilities in the swap agreements at value line items. Any upfront premiums paid or received upon entering a swap to compensate for differences between stated terms of the agreement and prevailing market conditions (e.g. credit spreads, interest rates or other factors) are recorded in net unrealized 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. 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 "Swap Agreements."
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.
5. Purchases and Sales of Investments.
Purchases and sales of securities (including the Fixed-Income Central Funds), other than short-term securities and U.S. government securities, aggregated $175,601 and $156,438, respectively.
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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 annualized 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 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 Fees | Retained |
Class A | -% | .25% | $ 75 | $ 3 |
Class T | -% | .25% | 50 | -* |
Class B | .65% | .25% | 15 | 11 |
Class C | .75% | .25% | 102 | 13 |
|
|
| $ 242 | $ 27 |
* Amount represents four hundred seventy three dollars.
Sales Load. FDC may receive a front-end sales charge of up to 4.00% for selling Class A shares 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 contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. The deferred sales charges range from 5.00% to 1.00% for Class B shares, 1.00% for Class C shares, .75% for certain purchases of Class A shares and .25% for certain purchases of Class T shares.
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Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
6. Fees and Other Transactions with Affiliates - continued
Sales Load - continued
For the period, sales charge amounts retained by FDC were as follows:
| Retained |
Class A | $ 5 |
Class T | 1 |
Class B* | 3 |
Class C* | 1 |
| $ 10 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales
are made.
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 Fidelity Mortgage Securities Fund. FIIOC receives an asset-based fee of .10% of Fidelity Mortgage Securities Fund'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 | $ 58 | .19 |
Class T | 32 | .16 |
Class B | 4 | .25 |
Class C | 17 | .17 |
Fidelity Mortgage Securities Fund | 497 | .10 |
Institutional Class | 24 | .17 |
| $ 632 |
|
* Annualized
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 annualized rate of .04% of average net assets.
Semiannual Report
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 $1 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.
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 $9.
In addition, FMR reimbursed a portion of the Fund's operating expenses during the period in the amount of four hundred seventy three dollars.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Six months ended | Year ended | |
From net investment income |
|
|
Class A | $ 462 | $ 1,509 |
Class T | 312 | 879 |
Class B | 14 | 80 |
Class C | 82 | 311 |
Fidelity Mortgage Securities Fund | 9,317 | 22,468 |
Institutional Class | 255 | 269 |
Total | $ 10,442 | $ 25,516 |
10. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
Six months ended | Year ended | Six months ended | Year ended | |
Class A |
|
|
|
|
Shares sold | 745 | 1,763 | $ 8,453 | $ 19,760 |
Reinvestment of distributions | 34 | 110 | 383 | 1,235 |
Shares redeemed | (959) | (1,889) | (10,866) | (21,161) |
Net increase (decrease) | (180) | (16) | $ (2,030) | $ (166) |
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Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
10. Share Transactions - continued
| Shares | Dollars | ||
Six months ended | Year ended | Six months ended | Year ended | |
Class T |
|
|
|
|
Shares sold | 1,555 | 517 | $ 17,697 | $ 5,786 |
Reinvestment of distributions | 26 | 71 | 291 | 794 |
Shares redeemed | (1,041) | (1,118) | (11,818) | (12,509) |
Net increase (decrease) | 540 | (530) | $ 6,170 | $ (5,929) |
Class B |
|
|
|
|
Shares sold | 1 | 11 | $ 10 | $ 118 |
Reinvestment of distributions | 1 | 4 | 8 | 46 |
Shares redeemed | (57) | (129) | (641) | (1,440) |
Net increase (decrease) | (55) | (114) | $ (623) | $ (1,276) |
Class C |
|
|
|
|
Shares sold | 389 | 587 | $ 4,412 | $ 6,563 |
Reinvestment of distributions | 5 | 19 | 59 | 213 |
Shares redeemed | (193) | (375) | (2,182) | (4,193) |
Net increase (decrease) | 201 | 231 | $ 2,289 | $ 2,583 |
Fidelity Mortgage Securities Fund |
|
|
|
|
Shares sold | 33,641 | 15,948 | $ 383,102 | $ 179,572 |
Reinvestment of distributions | 758 | 1,817 | 8,604 | 20,398 |
Shares redeemed | (27,113) | (11,555) | (307,788) | (129,715) |
Net increase (decrease) | 7,286 | 6,210 | $ 83,918 | $ 70,255 |
Institutional Class |
|
|
|
|
Shares sold | 3,092 | 710 | $ 35,019 | $ 7,943 |
Reinvestment of distributions | 21 | 20 | 237 | 228 |
Shares redeemed | (1,202) | (238) | (13,604) | (2,661) |
Net increase (decrease) | 1,911 | 492 | $ 21,652 | $ 5,510 |
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 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.
At the end of the period, FMR or its affiliates were the owners of record of 12% of the total outstanding shares of the Fund.
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12. Credit Risk.
The Fund invests a portion of its assets in structured securities of issuers backed by residential mortgage loans, credit card receivables and automotive loans. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults.
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Advisor Mortgage Securities Fund
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established three standing committees, Operations, Audit, and Governance and Nominating, each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Operations Committee, of which all of the Independent Trustees are members, meets regularly throughout the year and, among other matters, considers matters specifically related to the annual consideration of the renewal of the fund's Advisory Contracts. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through ad hoc joint committees to discuss certain matters relevant to the Fidelity funds.
At its September 2012 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with the fund; (iv) the extent to which economies of scale exist and would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts is in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts is fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
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Nature, Extent, and Quality of Services Provided. The Board considered the staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the fund's investment personnel, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the general qualifications and capabilities of the Investment Advisers' investment staff, including its size, education, experience, and resources, as well as the Investment Advisers' approach to recruiting, managing, and compensating investment personnel. The Board also noted that FMR has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. The Board also believes that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered the Investment Advisers' trading and risk management capabilities and resources, which are an integral part of the investment management process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
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Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through telephone representatives and over the Internet, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including (i) continuing to dedicate additional resources to investment research and support of the senior management team that oversees asset management; (ii) persisting in efforts to enhance Fidelity's research capabilities, in particular, international research; (iii) launching new funds and making other enhancements to meet client needs for global and income-oriented solutions; (iv) continuing to launch dedicated lower cost underlying funds to meet investment management's portfolio construction needs related to expanding underlying fund options, specifically for the Freedom Fund product lines; (v) adopting a sector neutral investment approach for certain funds and utilizing a team of portfolio managers to manage certain sector-neutral funds; (vi) rationalizing product lines and gaining increased efficiencies through combinations of several funds with other funds; (vii) strengthening the Spartan Index Fund product line by adding new funds and/or new low-cost institutional share classes, restructuring fund expenses to accommodate new classes, and reducing investment minimums for certain classes of shares; (viii) modifying the eligibility criteria for Institutional Class shares to increase their appeal to government entities and charitable investors; and (ix) reducing certain transfer agent fee rates.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured over multiple periods against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by Fidelity and reviewed by the Board. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2011, the cumulative total returns of the retail class and Class C of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of the retail class and Class C show the performance of the highest and lowest performing classes, respectively (based on five-year performance). The box within each chart shows the 25th percentile return (top of box) and the 75th percentile return (bottom of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the peer group whose performance was equal to or lower than that of the class indicated.
Semiannual Report
Fidelity Advisor Mortgage Securities Fund
The Board reviewed the fund's relative investment performance against its peer group and noted that the performance of the retail class of the fund was in the first quartile for the one-year period, the second quartile for the three-year period, and the third quartile for the five-year period. The Board also noted that the investment performance of the retail class of the fund compared favorably to its benchmark for the one- and three-year periods, although the fund's five-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes. The Board also reviewed the fund's performance since inception as well as performance in the current year.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should benefit the fund's shareholders.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
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Board Approval of Investment Advisory Contracts and
Management Fees - continued
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 11% means that 89% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Advisor Mortgage Securities Fund
Semiannual Report
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2011.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered the current and historical total expense ratios of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expense ratio of each class ranked below its competitive median for 2011.
The Board considered that the current contractual arrangements for the fund have the effect of setting the total "fund-level" (but not "class-level") expenses (including, among certain other "fund-level" expenses, the management fee) for each class at 0.35%.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board noted, however, that because the current contractual arrangements set the total "fund-level" expenses for each class at 0.35%, increases or decreases in the management fee due to changes in the group fee rate will not impact the total expense ratio.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of FMR and its affiliates, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients. The Board noted the findings of the 2010 ad hoc joint committee (created with the board of other Fidelity funds), which reviewed and compared Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds, including the differences in services provided, fees charged, and costs incurred, as well as competition in their respective marketplaces.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
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Board Approval of Investment Advisory Contracts and
Management Fees - continued
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and was satisfied that the profitability was not excessive in the circumstances.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board also noted that in 2009, it and the board of other Fidelity funds created an ad hoc committee (the Economies of Scale Committee) to analyze whether FMR attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
Semiannual Report
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including: (i) Fidelity's fund profitability methodology, profitability trends for certain funds, and the impact of certain factors on fund profitability results; (ii) portfolio manager changes that have occurred during the past year and the amount of the investment that each portfolio manager has made in the Fidelity fund(s) that he or she manages; (iii) Fidelity's compensation structure for portfolio managers, research analysts, and other key personnel, including its effects on fund profitability, the rationale for the compensation structure, and the extent to which current market conditions have affected retention and recruitment; (iv) the compensation paid to fund sub-advisers on behalf of the Fidelity funds; (v) Fidelity's fee structures, including the group fee structure, and the rationale for recommending different fees among different categories of funds and classes; (vi) Fidelity's voluntary waiver of its fees to maintain minimum yields for certain money market funds and classes as well as contractual waivers in place for certain funds; (vii) regulatory and industry developments, including those affecting money market funds and target date funds, and the potential impact to Fidelity; (viii) Fidelity's transfer agent fees, expenses, and services, and drivers for determining the transfer agent fee structure of different funds and classes; (ix) management fee rates charged by FMR or Fidelity entities to other Fidelity clients; (x) the allocation of and historical trends in Fidelity's realization of fall-out benefits; and (xi) explanations regarding the relative total expense ratios of certain funds and classes, total expense competitive trends, and actions that might be taken by FMR to reduce total expense ratios for certain funds and classes or to achieve further economies of scale.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Semiannual 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
(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
(Fidelity Investment logo)(registered trademark)
AMOR-USAN-0413 1.784898.110
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor®
Mortgage Securities
Fund - Institutional Class
Semiannual Report
February 28, 2013
(Fidelity Cover Art)
Contents
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. | |
Board Approval of Investment Advisory Contracts and Management Fees |
|
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.
Semiannual 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, 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 (September 1, 2012 to February 28, 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.
Semiannual Report
Shareholder Expense Example - continued
| Annualized | Beginning | Ending | Expenses Paid |
Class A | .80% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,004.10 | $ 3.98 |
HypotheticalA |
| $ 1,000.00 | $ 1,020.83 | $ 4.01 |
Class T | .77% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,003.40 | $ 3.82 |
HypotheticalA |
| $ 1,000.00 | $ 1,020.98 | $ 3.86 |
Class B | 1.51% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,000.60 | $ 7.49 |
HypotheticalA |
| $ 1,000.00 | $ 1,017.31 | $ 7.55 |
Class C | 1.53% |
|
|
|
Actual |
| $ 1,000.00 | $ 999.60 | $ 7.59 |
HypotheticalA |
| $ 1,000.00 | $ 1,017.21 | $ 7.65 |
Fidelity Mortgage Securities Fund | .45% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,004.90 | $ 2.24 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.56 | $ 2.26 |
Institutional Class | .52% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,004.70 | $ 2.58 |
HypotheticalA |
| $ 1,000.00 | $ 1,022.22 | $ 2.61 |
A 5% return per year before expenses
* 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). The fees and expenses of the underlying Fidelity Central Funds in which the Fund invests are not included in the Fund's annualized expense ratio.
Semiannual Report
Investment Changes (Unaudited)
The information in the following tables is based on the combined investments of the Fund and its pro-rata share of the investments of Fidelity's fixed-income central funds. |
Coupon Distribution as of February 28, 2013 | ||
| % of fund's investments | % of fund's investments |
Zero coupon bonds | 0.2 | 0.4 |
0.01 - 0.99% | 5.7 | 5.1 |
1 - 1.99% | 1.1 | 0.7 |
2 - 2.99% | 4.2 | 0.8 |
3 - 3.99% | 23.0 | 11.7 |
4 - 4.99% | 30.0 | 36.4 |
5 - 5.99% | 16.9 | 23.5 |
6 - 6.99% | 6.1 | 5.8 |
7% and above | 1.6 | 1.9 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Weighted Average Maturity as of February 28, 2013 | ||
|
| 6 months ago |
Years | 3.8 | 3.6 |
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 February 28, 2013 | ||
|
| 6 months ago |
Years | 2.8 | 1.9 |
Duration estimates how much a bond fund's price will change with a change in comparable interest rates. If rates rise 1%, for example, a fund with a 5-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. Duration takes into account any call or put option embedded in the bonds. |
Asset Allocation (% of fund's net assets) | |||||||
As of February 28, 2013* | As of August 31, 2012** | ||||||
 | Mortgage |
|  | Mortgage |
| ||
 | CMOs and Other Mortgage Related Securities 14.0% |
| | CMOs and Other Mortgage Related Securities 13.1% |
| ||
 | Asset-Backed |
| | Asset-Backed |
| ||
 | Short-Term |
| | Short-Term |
| ||
* Foreign investments | 3.8% |
| ** Foreign investments | 1.1% |
| ||
* Futures and Swaps | (3.6)% |
| ** Futures and Swaps | (2.6)% |
| ||
† Short-Term Investments and Net Other Assets (Liabilities) are not included in the pie chart. |
A holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. |
Percentages in the above tables are adjusted for the effect of TBA Sale Commitments. |
Semiannual Report
Investments February 28, 2013 (Unaudited)
Showing Percentage of Net Assets
U.S. Government Agency - Mortgage Securities - 105.6% | ||||
| Principal Amount (000s) | Value (000s) | ||
Fannie Mae - 59.6% | ||||
1.865% 9/1/37 (e) | $ 22 | $ 23 | ||
2.296% 7/1/35 (e) | 8 | 8 | ||
2.332% 3/1/35 (e) | 44 | 46 | ||
2.5% 3/1/28 (c) | 15,100 | 15,684 | ||
2.5% 3/1/28 (c) | 11,100 | 11,529 | ||
2.5% 3/1/28 (c) | 11,800 | 12,256 | ||
2.5% 3/1/28 (c) | 5,200 | 5,401 | ||
2.524% 10/1/33 (e) | 68 | 73 | ||
2.559% 6/1/36 (e) | 49 | 52 | ||
2.583% 1/1/35 (e) | 330 | 351 | ||
2.611% 5/1/36 (e) | 260 | 276 | ||
2.741% 7/1/35 (e) | 82 | 88 | ||
2.769% 11/1/36 (e) | 63 | 68 | ||
2.777% 4/1/36 (e) | 221 | 236 | ||
2.781% 9/1/36 (e) | 145 | 156 | ||
2.806% 8/1/35 (e) | 418 | 448 | ||
2.861% 5/1/36 (e) | 65 | 69 | ||
2.875% 10/1/36 (e) | 172 | 185 | ||
3% 4/1/27 to 2/1/43 | 19,613 | 20,612 | ||
3% 3/1/28 (c) | 2,700 | 2,842 | ||
3% 2/1/43 | 132 | 137 | ||
3% 2/1/43 | 177 | 184 | ||
3% 2/1/43 | 200 | 208 | ||
3% 3/1/43 (c) | 4,500 | 4,659 | ||
3% 3/1/43 (c) | 15,400 | 15,945 | ||
3% 3/1/43 (c) | 11,500 | 11,907 | ||
3% 3/1/43 (c) | 4,000 | 4,142 | ||
3% 3/1/43 (c) | 4,000 | 4,142 | ||
3% 3/1/43 (c) | 1,000 | 1,035 | ||
3% 3/1/43 (c) | 4,000 | 4,142 | ||
3% 4/1/43 (c) | 5,300 | 5,474 | ||
3% 4/1/43 (c) | 9,200 | 9,502 | ||
3% 4/1/43 (c) | 4,000 | 4,131 | ||
3% 4/1/43 (c) | 4,000 | 4,131 | ||
3% 4/1/43 (c) | 2,000 | 2,066 | ||
3% 4/1/43 (c) | 2,000 | 2,066 | ||
3% 4/1/43 (c) | 18,700 | 19,315 | ||
3.155% 9/1/37 (e) | 30 | 32 | ||
3.291% 6/1/36 (e) | 797 | 841 | ||
3.357% 9/1/41 (e) | 296 | 313 | ||
3.476% 3/1/40 (e) | 578 | 605 | ||
3.5% 4/1/20 to 3/1/43 | 76,229 | 80,846 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Fannie Mae - continued | ||||
3.5% 3/1/28 (c) | $ 2,200 | $ 2,333 | ||
3.5% 7/1/42 | 24 | 26 | ||
3.5% 2/1/43 | 105 | 111 | ||
3.5% 2/1/43 | 605 | 641 | ||
3.5% 2/1/43 | 1,728 | 1,834 | ||
3.5% 2/1/43 | 714 | 756 | ||
3.5% 2/1/43 | 201 | 213 | ||
3.5% 3/1/43 (c) | 8,800 | 9,306 | ||
3.5% 3/1/43 (c) | 8,800 | 9,306 | ||
3.5% 3/1/43 (c) | 8,800 | 9,306 | ||
3.5% 3/1/43 (c) | 10,000 | 10,575 | ||
3.5% 3/1/43 (c) | 12,200 | 12,902 | ||
3.5% 3/1/43 (c) | 3,200 | 3,384 | ||
3.5% 3/1/43 (c) | 6,600 | 6,980 | ||
3.5% 3/1/43 (c) | 2,600 | 2,750 | ||
3.5% 4/1/43 (c) | 21,400 | 22,580 | ||
3.5% 4/1/43 (c) | 4,600 | 4,854 | ||
4% 10/1/25 to 7/1/42 | 110,427 | 118,639 | ||
4% 3/1/43 | 1,200 | 1,279 | ||
4% 3/1/43 | 1,400 | 1,493 | ||
4.5% 5/1/25 to 10/1/41 | 49,682 | 53,927 | ||
4.5% 3/1/43 (c) | 1,500 | 1,615 | ||
5% 5/1/20 to 6/1/40 | 23,820 | 26,014 | ||
5.5% 2/1/18 to 9/1/38 | 58,115 | 63,747 | ||
5.858% 3/1/36 (e) | 391 | 415 | ||
6% 9/1/29 to 1/1/42 | 21,593 | 24,210 | ||
6.022% 8/1/46 (e) | 45 | 48 | ||
6.039% 9/1/36 (e) | 202 | 211 | ||
6.311% 4/1/37 (e) | 175 | 187 | ||
6.499% 12/1/36 (e) | 192 | 209 | ||
6.5% 3/1/13 to 5/1/38 | 3,818 | 4,260 | ||
7% 12/1/15 to 5/1/30 | 1,773 | 2,032 | ||
7.21% 12/1/36 (e) | 44 | 48 | ||
7.5% 8/1/22 to 9/1/32 | 978 | 1,146 | ||
8% 12/1/29 to 3/1/37 | 54 | 65 | ||
8.5% 1/1/16 to 7/1/31 | 162 | 188 | ||
9% 10/1/30 | 215 | 261 | ||
9.5% 7/1/16 to 8/1/22 | 29 | 31 | ||
12.5% 8/1/15 to 3/1/16 | 7 | 8 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Fannie Mae - continued | ||||
12.75% 2/1/15 | $ 2 | $ 2 | ||
13.5% 9/1/14 | 1 | 1 | ||
| 644,119 | |||
Freddie Mac - 23.5% | ||||
2.104% 3/1/35 (e) | 180 | 188 | ||
2.356% 5/1/34 (e) | 14 | 14 | ||
2.357% 5/1/37 (e) | 112 | 119 | ||
2.362% 8/1/37 (e) | 136 | 143 | ||
2.478% 6/1/37 (e) | 42 | 45 | ||
2.492% 4/1/35 (e) | 76 | 81 | ||
2.528% 11/1/35 (e) | 347 | 371 | ||
2.574% 6/1/37 (e) | 334 | 359 | ||
2.635% 6/1/37 (e) | 29 | 31 | ||
2.696% 4/1/37 (e) | 158 | 169 | ||
2.785% 6/1/37 (e) | 775 | 831 | ||
2.97% 4/1/37 (e) | 9 | 9 | ||
2.971% 6/1/33 (e) | 984 | 1,058 | ||
3% 11/1/42 (c) | 500 | 517 | ||
3% 1/1/43 (c) | 500 | 516 | ||
3% 2/1/43 | 234 | 242 | ||
3% 2/1/43 | 2,267 | 2,343 | ||
3% 3/1/43 (c) | 14,200 | 14,633 | ||
3.057% 7/1/36 (e) | 140 | 151 | ||
3.439% 10/1/35 (e) | 70 | 75 | ||
3.5% 1/1/26 to 3/1/43 | 44,703 | 47,384 | ||
3.5% 2/1/43 | 620 | 656 | ||
3.5% 2/1/43 | 1,099 | 1,163 | ||
3.5% 2/1/43 | 712 | 751 | ||
3.5% 2/1/43 | 2,006 | 2,117 | ||
4% 6/1/24 to 5/1/42 | 34,177 | 36,694 | ||
4% 3/1/43 (c) | 7,000 | 7,436 | ||
4.5% 7/1/25 to 3/1/42 | 41,991 | 45,210 | ||
5% 7/1/33 to 9/1/40 | 25,895 | 28,203 | ||
5.145% 3/1/36 (e) | 634 | 666 | ||
5.5% 10/1/17 to 1/1/40 (d) | 33,900 | 36,934 | ||
6% 4/1/14 to 6/1/39 | 5,775 | 6,340 | ||
6.011% 4/1/37 (e) | 81 | 86 | ||
6.082% 10/1/36 (e) | 40 | 43 | ||
6.404% 12/1/36 (e) | 613 | 659 | ||
6.5% 8/1/13 to 9/1/39 | 8,674 | 9,725 | ||
7% 6/1/21 to 9/1/36 | 2,641 | 3,088 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Freddie Mac - continued | ||||
7.03% 6/1/36 (e) | $ 32 | $ 34 | ||
7.5% 7/1/14 to 7/1/34 | 3,777 | 4,344 | ||
8% 11/1/16 to 1/1/37 | 58 | 69 | ||
8.5% 6/1/16 to 9/1/20 | 9 | 10 | ||
9% 9/1/16 to 5/1/21 | 69 | 75 | ||
10% 1/1/16 to 12/1/18 | 8 | 9 | ||
10.5% 2/1/16 | 0* | 0* | ||
12.5% 2/1/14 to 12/1/14 | 1 | 1 | ||
13% 12/1/13 to 6/1/15 | 5 | 5 | ||
| 253,597 | |||
Ginnie Mae - 22.5% | ||||
3% 3/1/43 (c) | 1,000 | 1,048 | ||
3% 3/1/43 (c) | 15,200 | 15,916 | ||
3.5% 3/15/42 to 11/20/42 | 26,778 | 28,711 | ||
3.5% 3/1/43 (c) | 2,300 | 2,464 | ||
3.5% 3/1/43 (c) | 3,200 | 3,428 | ||
3.5% 3/1/43 (c) | 5,400 | 5,784 | ||
4% 9/15/25 to 1/20/42 | 17,206 | 18,832 | ||
4.497% 1/20/62 (j) | 775 | 878 | ||
4.5% 8/15/33 to 3/20/41 | 88,459 | 97,529 | ||
4.564% 11/20/61 (j) | 949 | 1,073 | ||
4.751% 12/20/60 (j) | 13,571 | 15,232 | ||
4.814% 1/20/61 (j) | 313 | 353 | ||
5% 9/20/33 to 9/15/40 | 33,220 | 36,986 | ||
5% 3/1/43 (c) | 1,600 | 1,748 | ||
5.5% 10/15/33 to 9/15/39 | 4,918 | 5,456 | ||
6% 1/15/36 to 9/20/38 | 3,994 | 4,529 | ||
6.5% 10/15/34 to 7/15/36 | 275 | 313 | ||
7% 2/15/24 to 4/20/32 | 1,572 | 1,829 | ||
7.5% 12/15/16 to 4/15/32 | 587 | 682 | ||
8% 6/15/21 to 12/15/25 | 272 | 317 | ||
8.5% 8/15/16 to 10/15/28 | 284 | 328 | ||
9% 11/20/17 | 1 | 1 | ||
10.5% 10/20/17 to 2/20/18 | 6 | 7 | ||
| 243,444 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $1,122,810) | 1,141,160 | |||
Asset-Backed Securities - 2.6% | ||||
| Principal Amount (000s) | Value (000s) | ||
American Credit Acceptance Receivables Trust Series 2012-2 Class A, 1.89% 7/15/16 (b) | $ 2,021 | $ 2,036 | ||
Ameriquest Mortgage Securities, Inc. pass-thru certificates Series 2005-R6 Class A2, 0.4017% 8/25/35 (e) | 2,586 | 2,571 | ||
Carnow Auto Receivables Trust Series 2012-1A Class A, 2.09% 1/15/15 (b) | 747 | 747 | ||
Countrywide Asset-Backed Certificates Trust: | ||||
Series 2006-22 Class 2A2, 0.3117% 5/25/47 (e) | 1,217 | 1,212 | ||
Series 2006-25 Class 2A2, 0.3217% 6/25/47 (e) | 2,552 | 2,524 | ||
Series 2007-4 Class A1A, 0.3237% 9/25/37 (e) | 130 | 130 | ||
Countrywide Home Loans, Inc. Series 2005-2 Class M2, 0.9067% 7/25/35 (e) | 293 | 293 | ||
GSAMP Trust: | ||||
Series 2004-AR1 Class B4, 3.4154% 6/25/34 (b)(e) | 82 | 23 | ||
Series 2004-AR2 Class B1, 3.0517% 8/25/34 (e) | 796 | 39 | ||
Morgan Stanley ABS Capital I Trust Series 2005-3 Class A3, 0.5817% 8/25/35 (e) | 237 | 237 | ||
Ocala Funding LLC Series 2006-1A Class A, 1.6007% 3/20/11 (a)(b)(e) | 2,100 | 0 | ||
Soundview Home Loan Trust Series 2006-WF1 Class A3, 5.5619% 10/25/36 | 6,783 | 5,744 | ||
Specialty Underwriting & Residential Finance Trust Series 2006-BC1 Class A2C, 0.4017% 12/25/36 (e) | 3,390 | 3,329 | ||
Structured Asset Securities Corp.: | ||||
Series 2005-NC2 Class M3, 0.6317% 5/25/35 (e) | 1,995 | 1,731 | ||
Series 2007-BC3 Class 2A1, 0.2617% 5/25/47 (e) | 7,304 | 7,234 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $29,658) |
| |||
Collateralized Mortgage Obligations - 11.0% | ||||
| ||||
Private Sponsor - 4.7% | ||||
Banc of America Funding Trust sequential payer Series 2009-R1 Class A1, 4.9643% 5/20/36 (e) | 24 | 24 | ||
BCAP LLC Trust sequential payer Series 2010-RR12 Class 3A5, 5% 8/26/37 (b) | 184 | 185 | ||
Citigroup Mortgage Loan Trust Series 2010-7 Class 9A1, 4.5% 10/25/37 (b) | 2,402 | 2,435 | ||
Credit Suisse Mortgage Capital Certificates: | ||||
floater Series 2011-7R Class A1, 1.4597% 8/28/47 (b)(e) | 1,306 | 1,297 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
Private Sponsor - continued | ||||
Credit Suisse Mortgage Capital Certificates: - continued | ||||
sequential payer Series 2010-16 Class A1, 3% 6/25/50 (b) | $ 197 | $ 198 | ||
CSMC floater Series 2011-1R Class A1, 1.2097% 2/27/47 (b)(e) | 2,205 | 2,195 | ||
First Horizon Mortgage pass-thru Trust Series 2004-AR5 Class 2A1, 2.6313% 10/25/34 (e) | 803 | 836 | ||
Granite Master Issuer PLC: | ||||
floater: | ||||
Series 2006-1A Class A5, 0.3407% 12/20/54 (b)(e) | 8,843 | 8,667 | ||
Series 2006-4 Class A4, 0.3007% 12/20/54 (e) | 8,631 | 8,459 | ||
Series 2007-1: | ||||
Class 2A1, 0.3407% 12/20/54 (e) | 2,967 | 2,908 | ||
Class 3A1, 0.4007% 12/20/54 (e) | 2,636 | 2,584 | ||
Series 2007-2 Class 2A1, 0.2822% 12/17/54 (e) | 3,196 | 3,132 | ||
Series 2007-2 Class 3A1, 0.3822% 12/17/54 (e) | 1,933 | 1,895 | ||
Granite Mortgages Series 2003-2 Class 1A3, 0.802% 7/20/43 (e) | 365 | 361 | ||
Granite Mortgages PLC floater: | ||||
Series 2003-3 Class 1A3, 0.702% 1/20/44 (e) | 998 | 989 | ||
Series 2004-1 Class 2A1, 0.629% 3/20/44 (e) | 5,150 | 5,090 | ||
Series 2004-3 Class 2A1, 0.589% 9/20/44 (e) | 3,232 | 3,195 | ||
JP Morgan REREMIC Trust floater Series 2009-5 Class 2A1, 2.1382% 1/26/37 (b)(e) | 1,112 | 1,107 | ||
MASTR Adjustable Rate Mortgages Trust Series 2007-3 Class 22A2, 0.4117% 5/25/47 (e) | 476 | 348 | ||
Merrill Lynch Alternative Note Asset Trust floater Series 2007-OAR1 Class A1, 0.3717% 2/25/37 (e) | 2,343 | 2,023 | ||
Structured Asset Securities Corp. Series 2003-15A Class 4A, 4.7816% 4/25/33 (e) | 327 | 324 | ||
Wells Fargo Mortgage Backed Securities Trust: | ||||
Series 2005-AR2 Class 1A2, 2.6255% 3/25/35 (e) | 369 | 185 | ||
Series 2006-AR10 Class 3A1, 2.621% 7/25/36 (e) | 2,731 | 2,724 | ||
TOTAL PRIVATE SPONSOR | 51,161 | |||
U.S. Government Agency - 6.3% | ||||
Fannie Mae: | ||||
floater: | ||||
Series 2003-118 Class S, 7.8983% 12/25/33 (e)(g)(i) | 780 | 150 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
floater: | ||||
Series 2007-57 Class FA, 0.4317% 6/25/37 (e) | $ 3,278 | $ 3,279 | ||
planned amortization class: | ||||
Series 1994-23: | ||||
Class PX, 6% 8/25/23 | 424 | 432 | ||
Class PZ, 6% 2/25/24 | 3,414 | 3,963 | ||
Series 1999-17 Class PG, 6% 4/25/29 | 1,555 | 1,730 | ||
Series 1999-32 Class PL, 6% 7/25/29 | 1,235 | 1,380 | ||
Series 1999-33 Class PK, 6% 7/25/29 | 736 | 824 | ||
Series 2001-52 Class YZ, 6.5% 10/25/31 | 83 | 96 | ||
Series 2005-39 Class TE, 5% 5/25/35 | 1,120 | 1,273 | ||
Series 2005-73 Class SA, 17.0256% 8/25/35 (e)(i) | 320 | 386 | ||
Series 2006-105 Class MD, 5.5% 6/25/35 | 1,145 | 1,237 | ||
sequential payer: | ||||
Series 2001-20 Class Z, 6% 5/25/31 | 1,408 | 1,571 | ||
Series 2001-31 Class ZC, 6.5% 7/25/31 | 560 | 639 | ||
Series 2002-16 Class ZD, 6.5% 4/25/32 | 220 | 250 | ||
Series 2002-74 Class SV, 7.3483% 11/25/32 (e)(g) | 402 | 89 | ||
Series 2002-79 Class Z, 5.5% 11/25/22 | 724 | 785 | ||
Series 2003-80 Class CG, 6% 4/25/30 | 70 | 70 | ||
Series 1993-165 Class SH, 19.1811% 9/25/23 (e)(i) | 65 | 87 | ||
Series 2003-21 Class SK, 7.8983% 3/25/33 (e)(g)(i) | 229 | 51 | ||
Series 2003-35 Class TQ, 7.2983% 5/25/18 (e)(g)(i) | 169 | 26 | ||
Series 2003-39 Class IA, 5.5% 10/25/22 (e)(g) | 208 | 7 | ||
Series 2003-42 Class SJ, 6.8483% 11/25/22 (e)(g)(i) | 111 | 8 | ||
Series 2003-48 Class HI, 5% 11/25/17 (g) | 271 | 5 | ||
Series 2005-104 Class NI, 6.4983% 3/25/35 (e)(g)(i) | 3,013 | 482 | ||
Series 2007-57 Class SA, 39.4098% 6/25/37 (e)(i) | 981 | 1,807 | ||
Series 2007-66: | ||||
Class FB, 0.6017% 7/25/37 (e) | 1,601 | 1,609 | ||
Class SB, 38.3898% 7/25/37 (e)(i) | 295 | 564 | ||
Series 2008-12 Class SG, 6.1483% 3/25/38 (e)(g)(i) | 1,951 | 238 | ||
Series 2009-114 Class AI, 5% 12/25/23 (g) | 983 | 72 | ||
Series 2009-16 Class SA, 6.0483% 3/25/24 (e)(g)(i) | 1,108 | 90 | ||
Series 2009-76 Class MI, 5.5% 9/25/24 (g) | 633 | 53 | ||
Series 2009-85 Class IB, 4.5% 8/25/24 (g) | 292 | 25 | ||
Series 2009-93 Class IC, 4.5% 9/25/24 (g) | 449 | 35 | ||
Series 2010-12 Class AI, 5% 12/25/18 (g) | 1,817 | 164 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
Series 2010-135 Class LS, 5.8483% 12/25/40 (e)(g)(i) | $ 1,578 | $ 213 | ||
Series 2010-139 Class NI, 4.5% 2/25/40 (g) | 1,600 | 237 | ||
Series 2010-23: | ||||
Class AI, 5% 12/25/18 (g) | 827 | 62 | ||
Class HI, 4.5% 10/25/18 (g) | 550 | 46 | ||
Series 2010-29 Class LI, 4.5% 6/25/19 (g) | 1,681 | 138 | ||
Series 2010-96 Class DI, 4% 5/25/23 (g) | 603 | 9 | ||
Series 2010-97 Class CI, 4.5% 8/25/25 (g) | 929 | 87 | ||
Series 2011-67 Class AI, 4% 7/25/26 (g) | 537 | 54 | ||
Series 2011-83 Class DI, 6% 9/25/26 (g) | 889 | 135 | ||
Fannie Mae Stripped Mortgage-Backed Securities: | ||||
Series 339 Class 29, 5.5% 7/1/18 (g) | 512 | 44 | ||
Series 348 Class 14, 6.5% 8/1/34 (g) | 385 | 70 | ||
Series 351: | ||||
Class 12, 5.5% 4/1/34 (g) | 282 | 44 | ||
Class 13, 6% 3/1/34 (g) | 351 | 63 | ||
Series 359 Class 19, 6% 7/1/35 (g) | 304 | 40 | ||
Series 384 Class 6, 5% 7/25/37 (g) | 1,080 | 118 | ||
Freddie Mac: | ||||
floater: | ||||
Series 3222 Class HF, 0% 9/15/36 (e) | 52 | 49 | ||
Series 3318 Class GY, 0% 5/15/37 (e) | 7 | 7 | ||
planned amortization class: | ||||
Series 2095 Class PE, 6% 11/15/28 | 1,523 | 1,707 | ||
Series 2104 Class PG, 6% 12/15/28 | 465 | 519 | ||
Series 2121 Class MG, 6% 2/15/29 | 623 | 695 | ||
Series 2154 Class PT, 6% 5/15/29 | 975 | 1,086 | ||
Series 2162 Class PH, 6% 6/15/29 | 164 | 182 | ||
Series 2520 Class BE, 6% 11/15/32 | 839 | 936 | ||
Series 2585 Class KS, 7.3988% 3/15/23 (e)(g)(i) | 99 | 16 | ||
Series 2590 Class YR, 5.5% 9/15/32 (g) | 19 | 1 | ||
Series 2802 Class OB, 6% 5/15/34 | 3,375 | 3,862 | ||
Series 2810 Class PD, 6% 6/15/33 | 703 | 726 | ||
Series 3002 Class NE, 5% 7/15/35 | 680 | 786 | ||
Series 3189 Class PD, 6% 7/15/36 | 610 | 737 | ||
Series 3415 Class PC, 5% 12/15/37 | 476 | 517 | ||
Series 3741 Class YU, 3.5% 11/15/22 | 1,948 | 2,045 | ||
Series 3786 Class HI, 4% 3/15/38 (g) | 1,427 | 206 | ||
Series 3806 Class UP, 4.5% 2/15/41 | 2,096 | 2,322 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Freddie Mac: - continued | ||||
planned amortization class: | ||||
Series 3832 Class PE, 5% 3/15/41 | $ 960 | $ 1,100 | ||
Series 70 Class C, 9% 9/15/20 | 35 | 38 | ||
sequential payer: | ||||
Series 2114 Class ZM, 6% 1/15/29 | 216 | 241 | ||
Series 2135 Class JE, 6% 3/15/29 | 714 | 795 | ||
Series 2274 Class ZM, 6.5% 1/15/31 | 318 | 361 | ||
Series 2281 Class ZB, 6% 3/15/30 | 277 | 308 | ||
Series 2357 Class ZB, 6.5% 9/15/31 | 657 | 746 | ||
Series 2502 Class ZC, 6% 9/15/32 | 819 | 920 | ||
Series 2575 Class ID, 5.5% 8/15/22 (g) | 5 | 0* | ||
Series 2817 Class SD, 6.8488% 7/15/30 (e)(g)(i) | 130 | 10 | ||
Series 3097 Class IA, 5.5% 3/15/33 (g) | 592 | 27 | ||
Series 1658 Class GZ, 7% 1/15/24 | 892 | 997 | ||
Series 2380 Class SY, 7.9988% 11/15/31 (e)(g)(i) | 2,242 | 519 | ||
Series 2587 Class IM, 6.5% 3/15/33 (g) | 429 | 95 | ||
Series 2844: | ||||
Class SC, 45.4922% 8/15/24 (e)(i) | 31 | 62 | ||
Class SD, 83.8344% 8/15/24 (e)(i) | 46 | 109 | ||
Series 2947 Class XZ, 6% 3/15/35 | 705 | 840 | ||
Series 3055 Class CS, 6.3888% 10/15/35 (e)(g) | 545 | 75 | ||
Series 3244 Class SG, 6.4588% 11/15/36 (e)(g)(i) | 817 | 145 | ||
Series 3274 Class SM, 6.2288% 2/15/37 (e)(g) | 776 | 99 | ||
Series 3284 Class CI, 5.9188% 3/15/37 (e)(g) | 2,146 | 379 | ||
Series 3287 Class SD, 6.5488% 3/15/37 (e)(g)(i) | 1,334 | 289 | ||
Series 3297 Class BI, 6.5588% 4/15/37 (e)(g)(i) | 1,904 | 413 | ||
Series 3336 Class LI, 6.3788% 6/15/37 (e)(g) | 1,131 | 175 | ||
Series 3772 Class BI, 4.5% 10/15/18 (g) | 1,101 | 86 | ||
Series 3949 Class MK, 4.5% 10/15/34 | 600 | 672 | ||
Freddie Mac Manufactured Housing participation certificates guaranteed planned amortization class Series 2043 Class CJ, 6.5% 4/15/28 | 584 | 665 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
floater: | ||||
Series 2007-37 Class TS, 6.4883% 6/16/37 (e)(g)(i) | 455 | 97 | ||
Series 2010-H17 Class FA, 0.5337% 7/20/60 (e)(j) | 397 | 395 | ||
Series 2010-H18 Class AF, 0.5077% 9/20/60 (e)(j) | 420 | 418 | ||
Series 2010-H19 Class FG, 0.5077% 8/20/60 (e)(j) | 550 | 548 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass-thru certificates: - continued | ||||
floater: | ||||
Series 2011-H05 Class FA, 0.7077% 12/20/60 (e)(j) | $ 1,446 | $ 1,452 | ||
Series 2011-H13 Class FA, 0.7077% 4/20/61 (e)(j) | 227 | 228 | ||
Series 2011-H14: | ||||
Class FB, 0.7077% 5/20/61 (e)(j) | 1,622 | 1,631 | ||
Class FC, 0.7077% 5/20/61 (e)(j) | 1,606 | 1,614 | ||
planned amortization class: | ||||
Series 2011-136 Class WI, 4.5% 5/20/40 (g) | 847 | 165 | ||
Series 2011-79 Class PO, 6/20/40 (h) | 2,678 | 2,316 | ||
sequential payer: | ||||
Series 2001-33 Class SD, 7.8493% 7/20/31 (e)(g)(i) | 68 | 17 | ||
Series 2002-24 Class SK, 7.7483% 4/16/32 (e)(g)(i) | 1,897 | 485 | ||
Series 2002-42 Class ZA, 6% 6/20/32 | 781 | 884 | ||
Series 2004-24 Class ZM, 5% 4/20/34 | 948 | 1,099 | ||
Series 2001-36 Class SP, 8.5483% 9/16/26 (e)(g) | 966 | 193 | ||
Series 2004-73 Class AL, 6.9983% 8/17/34 (e)(g)(i) | 233 | 49 | ||
Series 1998-2 Class SA, 8.2983% 1/16/28 (e)(g) | 725 | 174 | ||
Series 1999-34 Class SC, 8.3983% 9/16/19 (e)(g)(i) | 942 | 110 | ||
Series 1999-40 Class SE, 8.7483% 11/16/29 (e)(g)(i) | 1,280 | 161 | ||
Series 2000-8 Class SA, 8.2483% 1/16/30 (e)(g)(i) | 1,112 | 133 | ||
Series 2001-3 Class S, 7.8983% 2/16/31 (e)(g) | 431 | 99 | ||
Series 2001-36 Class SB, 7.8983% 12/16/23 (e)(g)(i) | 1,264 | 261 | ||
Series 2001-38 Class SB, 7.3783% 8/16/31 (e)(g)(i) | 692 | 158 | ||
Series 2001-41 Class SG, 8.5483% 9/16/31 (e)(g) | 492 | 93 | ||
Series 2001-46 Class SB, 7.9483% 5/16/23 (e)(g) | 704 | 100 | ||
Series 2001-49: | ||||
Class SC, 7.3983% 12/16/25 (e)(g)(i) | 1,629 | 317 | ||
Class SL, 7.3983% 5/16/30 (e)(g)(i) | 1,749 | 373 | ||
Class SV, 8.0483% 12/16/28 (e)(g)(i) | 1,802 | 221 | ||
Series 2001-50: | ||||
Class SD, 7.9993% 11/20/31 (e)(g)(i) | 1,029 | 251 | ||
Class ST, 7.4983% 8/16/27 (e)(g)(i) | 413 | 93 | ||
Series 2002-5 Class SP, 7.2483% 1/16/32 (e)(g)(i) | 712 | 150 | ||
Series 2004-32 Class GS, 6.2983% 5/16/34 (e)(g)(i) | 638 | 133 | ||
Series 2008-60 Class SH, 5.9483% 7/16/38 (e)(g)(i) | 636 | 106 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass-thru certificates: - continued | ||||
Series 2011-52 Class HI, 7% 4/16/41 (g) | $ 2,548 | $ 765 | ||
Series 2012-76 Class GS, 6.4983% 6/16/42 (e)(g)(i) | 1,496 | 238 | ||
Series 2012-97 Class JS, 6.0483% 8/16/42 (e)(g)(i) | 4,842 | 836 | ||
TOTAL U.S. GOVERNMENT AGENCY | 67,765 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $115,365) | 118,926 | |||
Commercial Mortgage Securities - 2.9% | ||||
| ||||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.4302% 2/14/43 (e)(g) | 1,492 | 49 | ||
Banc of America Commercial Mortgage Trust sequential payer Series 2004-4 Class A5, 4.576% 7/10/42 | 234 | 235 | ||
Banc of America REMIC Trust Series 2012-CLRN Class A1, 1.3512% 8/15/17 (b)(e) | 2,910 | 2,936 | ||
Bayview Commercial Asset Trust floater Series 2007-3: | ||||
Class M1, 0.5117% 7/25/37 (b)(e) | 60 | 20 | ||
Class M2, 0.5417% 7/25/37 (b)(e) | 62 | 17 | ||
Class M3, 0.5717% 7/25/37 (b)(e) | 101 | 22 | ||
CDC Commercial Mortgage Trust Series 2002-FX1 Class XCL, 1.3266% 5/15/35 (b)(e)(g) | 6,264 | 98 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust sequential payer Series 2007-CD4 Class A4, 5.322% 12/11/49 | 5,110 | 5,793 | ||
Granite Master Issuer PLC floater Series 2005-2 Class A6, 0.4607% 12/20/54 (e) | 2,909 | 2,851 | ||
GS Mortgage Securities Corp. II: | ||||
floater Series 2007-EOP Class A2, 1.2601% 3/6/20 (b)(e) | 740 | 741 | ||
sequential payer Series 2005-GG4 Class A3, 4.607% 7/10/39 | 4 | 4 | ||
GS Mortgage Securities Corp. Trust Series 2013-KYO Class A, 1.0512% 11/8/29 (b)(e) | 5,000 | 5,012 | ||
JPMorgan Chase Commercial Mortgage Securities Corp. floater Series 2011-CCHP Class A, 2.6% 7/15/28 (b)(e) | 1,281 | 1,282 | ||
JPMorgan Chase Commercial Mortgage Securities Trust sequential payer: | ||||
Series 2007-LD11 Class A4, 5.8124% 6/15/49 (e) | 4,140 | 4,757 | ||
Commercial Mortgage Securities - continued | ||||
| Principal Amount (000s) | Value (000s) | ||
JPMorgan Chase Commercial Mortgage Securities Trust sequential payer: - continued | ||||
Series 2007-LDPX Class A2 S, 5.305% 1/15/49 | $ 2,260 | $ 2,286 | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential payer Series 2007-C6 Class A2, 5.845% 7/15/40 | 249 | 249 | ||
Series 2007-C1 Class XCP, 0.4249% 2/15/40 (e)(g) | 7,984 | 36 | ||
Merrill Lynch Commercial Trust floater Series 2008-LAQA Class A2, 0.7374% 7/9/21 (b)(e) | 1,210 | 1,199 | ||
Merrill Lynch-CFC Commercial Mortgage Trust sequential payer Series 2007-6 Class A4, 5.485% 3/12/51 (e) | 175 | 199 | ||
Wachovia Bank Commercial Mortgage Trust: | ||||
floater Series 2006-WL7A Class A2, 0.3212% 9/15/21 (b)(e) | 1,484 | 1,461 | ||
sequential payer Series 2007-C33 Class A4, 5.9245% 2/15/51 (e) | 1,470 | 1,697 | ||
Series 2007-C31A Class A2, 5.421% 4/15/47 | 593 | 596 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $30,088) | 31,540 | |||
Fixed-Income Funds - 0.8% | |||
Shares |
| ||
Fidelity Mortgage Backed Securities Central Fund (f) | 82,889 |
| |
Cash Equivalents - 2.8% | |||
Maturity Amount (000s) |
| ||
Investments in repurchase agreements in a joint trading account at 0.17%, dated 2/28/13 due 3/1/13 (Collateralized by U.S. Government Obligations) # | $ 29,970 |
| |
Purchased Swaptions - 0.0% | |||||
Expiration Date | Notional Amount (000s) | Value (000s) | |||
Put Options - 0.0% | |||||
Option on an interest rate swap with JPMorgan Chase Bank to receive a fixed rate of 2.144% and pay a floating rate based on 3-month LIBOR expiring May 2023 | 5/13/13 | $ 11,585 | $ 203 | ||
TOTAL INVESTMENT PORTFOLIO - 125.7% (Cost $1,337,163) | 1,358,691 | ||
NET OTHER ASSETS (LIABILITIES) - (25.7)% | (277,924) | ||
NET ASSETS - 100% | $ 1,080,767 | ||
TBA Sale Commitments | |||
| Principal Amount (000s) |
| |
Fannie Mae | |||
3% 3/1/43 | $ (400) | (414) | |
3% 3/1/43 | (200) | (207) | |
3% 3/1/43 | (1,300) | (1,346) | |
3% 3/1/43 | (1,000) | (1,035) | |
3% 3/1/43 | (1,500) | (1,553) | |
3% 3/1/43 | (5,300) | (5,488) | |
3% 3/1/43 | (9,200) | (9,526) | |
3% 3/1/43 | (4,000) | (4,142) | |
3% 3/1/43 | (4,000) | (4,142) | |
3% 3/1/43 | (2,000) | (2,071) | |
3% 3/1/43 | (2,000) | (2,071) | |
3% 3/1/43 | (4,000) | (4,142) | |
3.5% 3/1/43 | (3,200) | (3,384) | |
3.5% 3/1/43 | (5,400) | (5,711) | |
3.5% 3/1/43 | (1,200) | (1,269) | |
3.5% 3/1/43 | (3,200) | (3,384) | |
3.5% 3/1/43 | (6,600) | (6,980) | |
3.5% 3/1/43 | (21,400) | (22,631) | |
3.5% 3/1/43 | (2,600) | (2,750) | |
4% 3/1/43 | (1,000) | (1,066) | |
5% 3/1/43 | (900) | (975) | |
TOTAL FANNIE MAE | (84,287) | ||
TBA Sale Commitments - continued | |||
| Principal Amount (000s) | Value (000s) | |
Freddie Mac | |||
3.5% 3/1/43 | $ (4,400) | $ (4,633) | |
3.5% 3/1/43 | (1,900) | (2,001) | |
4% 3/1/43 | (2,500) | (2,656) | |
TOTAL FREDDIE MAC | (9,290) | ||
Ginnie Mae | |||
3.5% 3/1/43 | (2,000) | (2,142) | |
3.5% 3/1/43 | (22,000) | (23,564) | |
3.5% 3/1/43 | (2,425) | (2,597) | |
4% 3/1/43 | (2,000) | (2,171) | |
TOTAL GINNIE MAE | (30,474) | ||
TOTAL TBA SALE COMMITMENTS (Proceeds $123,668) | $ (124,051) | ||
Swap Agreements | |||||||
Interest Rate Swaps | |||||||
Counterparty | Expiration | Notional | Payment | Payment | Value | Upfront | Unrealized |
JPMorgan Chase, Inc. | Jun. 2014 | $ 900 | 3-month LIBOR | 0.54% | $ (3) | $ 0 | $ (3) |
JPMorgan Chase, Inc. | Feb. 2017 | 18,000 | 3-month LIBOR | 1% | (238) | 0 | (238) |
JPMorgan Chase, Inc. | Jun. 2017 | 1,700 | 3-month LIBOR | 1% | (21) | 0 | (21) |
JPMorgan Chase, Inc. | Jun. 2017 | 1,000 | 3-month LIBOR | 0.98% | (11) | 0 | (11) |
JPMorgan Chase, Inc. | Sep. 2017 | 13,000 | 3-month LIBOR | 0.83% | (53) | 0 | (53) |
JPMorgan Chase, Inc. | Jun. 2022 | 1,500 | 3-month LIBOR | 1.78% | 6 | 0 | 6 |
Credit Suisse | Aug. 2041 | 2,900 | 3-month LIBOR | 3.75% | (497) | 0 | (497) |
JPMorgan Chase, Inc. | Jun. 2042 | 300 | 3-month LIBOR | 2.45% | 30 | 0 | 30 |
TOTAL INTEREST RATE SWAPS | $ (787) | $ 0 | $ (787) | ||||
|
Legend |
(a) Non-income producing - Security is in default. |
(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 $31,678,000 or 2.9% of net assets. |
(c) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(d) Security or a portion of the security has been segregated as collateral for open options and swap agreements. At the period end, the value of securities pledged amounted to $416,000. |
(e) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
(f) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited schedule of portfolio holdings for each Fidelity Central Fund is filed with the SEC for the first and third quarters of each fiscal year on Form N-Q and is available upon request or at the SEC's website at www.sec.gov. An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro rata share of securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request. |
(g) 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. |
(h) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
(i) 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. |
(j) 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 |
# Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement / Counterparty | Value |
$29,970,000 due 3/01/13 at 0.17% | |
Barclays Capital, Inc. | $ 74 |
Credit Agricole CIB New York Branch | 13,214 |
Credit Suisse Securities (USA) LLC | 3,303 |
Mizuho Securities USA, Inc. | 8,259 |
Morgan Stanley & Co., Inc. | 826 |
RBS Securities, Inc. | 4,294 |
| $ 29,970 |
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 Mortgage Backed Securities Central Fund | $ 397 |
Additional information regarding the Fund's fiscal year to date purchases and sales, including the ownership percentage, of the non Money Market Central Funds is as follows: |
Fund | Value, | Purchases | Sales | Value, | % ownership, |
Fidelity Mortgage Backed Securities Central Fund | $ - | $ 121,344 | $ 112,001 | $ 9,042 | 0.1% |
Other Information |
The following is a summary of the inputs used, as of February 28, 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: | ||||
U.S. Government Agency - Mortgage Securities | $ 1,141,160 | $ - | $ 1,141,160 | $ - |
Asset-Backed Securities | 27,850 | - | 27,850 | - |
Collateralized Mortgage Obligations | 118,926 | - | 118,926 | - |
Commercial Mortgage Securities | 31,540 | - | 31,540 | - |
Fixed-Income Funds | 9,042 | 9,042 | - | - |
Cash Equivalents | 29,970 | - | 29,970 | - |
Purchased Swaptions | 203 | - | 203 | - |
Total Investments in Securities: | $ 1,358,691 | $ 9,042 | $ 1,349,649 | $ - |
Other Derivative Instruments: | ||||
Assets | ||||
Swap Agreements | $ 36 | $ - | $ 36 | $ - |
Liabilities | ||||
Swap Agreements | $ (823) | $ - | $ (823) | $ - |
Total Other Derivative Instruments: | $ (787) | $ - | $ (787) | $ - |
Other Financial Instruments: | ||||
TBA Sale Commitments | $ (124,051) | $ - | $ (124,051) | $ - |
Value of Derivative Instruments |
The following table is a summary of the Fund's value of derivative instruments by primary risk exposure as of February 28, 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 | ||
Purchased Swaptions (a) | $ 203 | $ - |
Swap Agreements (b) | 36 | (823) |
Total Value of Derivatives | $ 239 | $ (823) |
(a) Value is included in the Statement of Assets and Liabilities in the Investments, at value line-item. |
(b) Value is disclosed on the Statement of Assets and Liabilities in the Swap agreements, at value line-items. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amounts) | February 28, 2013 (Unaudited) | |
|
|
|
Assets | ||
Investment in securities, at value (including repurchase agreements of $29,970) - See accompanying schedule: Unaffiliated issuers (cost $1,328,047) | $ 1,349,649 |
|
Fidelity Central Funds (cost $9,116) | 9,042 |
|
Total Investments (cost $1,337,163) |
| $ 1,358,691 |
Receivable for investments sold | 12,218 | |
Receivable for TBA sale commitments |
| 123,668 |
Receivable for fund shares sold | 5,997 | |
Interest receivable | 3,792 | |
Swap agreements, at value | 36 | |
Other receivables | 115 | |
Total assets | 1,504,517 | |
|
|
|
Liabilities | ||
Payable for investments purchased | $ 3,957 | |
Delayed delivery | 291,924 | |
TBA sale commitments, at value | 124,051 | |
Payable for fund shares redeemed | 2,325 | |
Distributions payable | 102 | |
Swap agreements, at value | 823 | |
Accrued management fee | 282 | |
Distribution and service plan fees payable | 39 | |
Other affiliated payables | 133 | |
Other payables and accrued expenses | 114 | |
Total liabilities | 423,750 | |
|
|
|
Net Assets | $ 1,080,767 | |
Net Assets consist of: |
| |
Paid in capital | $ 1,144,887 | |
Distributions in excess of net investment income | (7,686) | |
Accumulated undistributed net realized gain (loss) on investments | (76,792) | |
Net unrealized appreciation (depreciation) on investments | 20,358 | |
Net Assets | $ 1,080,767 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
Amounts in thousands (except per-share amounts) | February 28, 2013 (Unaudited) | |
|
|
|
Calculation of Maximum Offering Price Class A: | $ 11.30 | |
|
|
|
Maximum offering price per share (100/96.00 of $11.30) | $ 11.77 | |
Class T: | $ 11.32 | |
|
|
|
Maximum offering price per share (100/96.00 of $11.32) | $ 11.79 | |
Class B: | $ 11.30 | |
|
|
|
Class C: | $ 11.28 | |
|
|
|
|
|
|
Fidelity Mortgage Securities Fund: | $ 11.32 | |
|
|
|
Institutional Class: | $ 11.28 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Statement of Operations
Amounts in thousands Six months ended February 28, 2013 (Unaudited) | ||
|
|
|
Investment Income |
|
|
Interest |
| $ 12,840 |
Income from Fidelity Central Funds |
| 397 |
Total income |
| 13,237 |
|
|
|
Expenses | ||
Management fee | $ 1,804 | |
Transfer agent fees | 632 | |
Distribution and service plan fees | 242 | |
Fund wide operations fee | 201 | |
Independent trustees' compensation | 2 | |
Miscellaneous | 1 | |
Total expenses before reductions | 2,882 | |
Expense reductions | (10) | 2,872 |
Net investment income (loss) | 10,365 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 46 | |
Fidelity Central Funds | (227) |
|
Swap agreements | (112) |
|
Total net realized gain (loss) |
| (293) |
Change in net unrealized appreciation (depreciation) on: Investment securities | (5,877) | |
Swap agreements | 373 | |
Delayed delivery commitments | 188 |
|
Total change in net unrealized appreciation (depreciation) |
| (5,316) |
Net gain (loss) | (5,609) | |
Net increase (decrease) in net assets resulting from operations | $ 4,756 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Six months ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income (loss) | $ 10,365 | $ 25,133 |
Net realized gain (loss) | (293) | 17,420 |
Change in net unrealized appreciation (depreciation) | (5,316) | (321) |
Net increase (decrease) in net assets resulting | 4,756 | 42,232 |
Distributions to shareholders from net investment income | (10,442) | (25,516) |
Share transactions - net increase (decrease) | 111,376 | 70,977 |
Total increase (decrease) in net assets | 105,690 | 87,693 |
|
|
|
Net Assets | ||
Beginning of period | 975,077 | 887,384 |
End of period (including distributions in excess of net investment income of $7,686 and distributions in excess of net investment income of $7,609, respectively) | $ 1,080,767 | $ 975,077 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class A
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 | $ 10.57 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .086 | .278 | .323 | .357 | .464 | .467 |
Net realized and unrealized gain (loss) | (.039) | .206 | .235 | .602 | .283 | (.461) |
Total from investment operations | .047 | .484 | .558 | .959 | .747 | .006 |
Distributions from net investment income | (.087) | (.284) | (.328) | (.429) | (.457) | (.486) |
Net asset value, end of period | $ 11.30 | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 |
Total Return B, C, D | .41% | 4.41% | 5.22% | 9.44% | 7.63% | .06% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | .80% A | .81% | .82% | .83% | .84% | .85% |
Expenses net of fee waivers, if any | .80% A | .81% | .82% | .83% | .84% | .85% |
Expenses net of all reductions | .80% A | .81% | .82% | .83% | .84% | .85% |
Net investment income (loss) | 1.53% A | 2.48% | 2.96% | 3.36% | 4.59% | 4.52% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 58 | $ 60 | $ 59 | $ 61 | $ 47 | $ 39 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class T
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.37 | $ 11.16 | $ 10.93 | $ 10.40 | $ 10.11 | $ 10.59 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .087 | .281 | .326 | .360 | .466 | .470 |
Net realized and unrealized gain (loss) | (.049) | .216 | .235 | .602 | .282 | (.462) |
Total from investment operations | .038 | .497 | .561 | .962 | .748 | .008 |
Distributions from net investment income | (.088) | (.287) | (.331) | (.432) | (.458) | (.488) |
Net asset value, end of period | $ 11.32 | $ 11.37 | $ 11.16 | $ 10.93 | $ 10.40 | $ 10.11 |
Total Return B, C, D | .34% | 4.52% | 5.24% | 9.44% | 7.62% | .07% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | .77% A | .78% | .79% | .81% | .83% | .83% |
Expenses net of fee waivers, if any | .77% A | .78% | .79% | .81% | .83% | .83% |
Expenses net of all reductions | .76% A | .78% | .79% | .81% | .83% | .83% |
Net investment income (loss) | 1.56% A | 2.50% | 2.99% | 3.39% | 4.60% | 4.53% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 37 | $ 31 | $ 37 | $ 41 | $ 40 | $ 41 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class B
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 | $ 10.57 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .046 | .200 | .248 | .286 | .398 | .400 |
Net realized and unrealized gain (loss) | (.039) | .207 | .235 | .602 | .283 | (.461) |
Total from investment operations | .007 | .407 | .483 | .888 | .681 | (.061) |
Distributions from net investment income | (.047) | (.207) | (.253) | (.358) | (.391) | (.419) |
Net asset value, end of period | $ 11.30 | $ 11.34 | $ 11.14 | $ 10.91 | $ 10.38 | $ 10.09 |
Total Return B, C, D | .06% | 3.69% | 4.51% | 8.71% | 6.93% | (.58)% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | 1.51% A | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% |
Expenses net of fee waivers, if any | 1.51% A | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% |
Expenses net of all reductions | 1.51% A | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% |
Net investment income (loss) | .81% A | 1.79% | 2.27% | 2.69% | 3.93% | 3.86% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 3 | $ 4 | $ 5 | $ 7 | $ 19 | $ 32 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class C
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.33 | $ 11.12 | $ 10.90 | $ 10.37 | $ 10.08 | $ 10.56 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) E | .045 | .197 | .244 | .282 | .390 | .389 |
Net realized and unrealized gain (loss) | (.049) | .217 | .226 | .603 | .284 | (.459) |
Total from investment operations | (.004) | .414 | .470 | .885 | .674 | (.070) |
Distributions from net investment income | (.046) | (.204) | (.250) | (.355) | (.384) | (.410) |
Net asset value, end of period | $ 11.28 | $ 11.33 | $ 11.12 | $ 10.90 | $ 10.37 | $ 10.08 |
Total Return B, C, D | (.04)% | 3.76% | 4.39% | 8.69% | 6.86% | (.68)% |
Ratios to Average Net Assets F, H |
|
|
|
|
| |
Expenses before reductions | 1.53% A | 1.53% | 1.53% | 1.53% | 1.57% | 1.60% |
Expenses net of fee waivers, if any | 1.53% A | 1.53% | 1.53% | 1.53% | 1.57% | 1.60% |
Expenses net of all reductions | 1.53% A | 1.53% | 1.53% | 1.53% | 1.57% | 1.60% |
Net investment income (loss) | .80% A | 1.76% | 2.24% | 2.66% | 3.86% | 3.77% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 20 | $ 18 | $ 15 | $ 18 | $ 18 | $ 15 |
Portfolio turnover rate G | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Fidelity Mortgage Securities Fund
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.37 | $ 11.17 | $ 10.94 | $ 10.41 | $ 10.11 | $ 10.59 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) D | .105 | .318 | .364 | .399 | .505 | .509 |
Net realized and unrealized gain (loss) | (.049) | .206 | .234 | .601 | .292 | (.462) |
Total from investment operations | .056 | .524 | .598 | 1.000 | .797 | .047 |
Distributions from net investment income | (.106) | (.324) | (.368) | (.470) | (.497) | (.527) |
Net asset value, end of period | $ 11.32 | $ 11.37 | $ 11.17 | $ 10.94 | $ 10.41 | $ 10.11 |
Total Return B, C | .49% | 4.77% | 5.59% | 9.83% | 8.14% | .46% |
Ratios to Average Net Assets E, G |
|
|
|
|
| |
Expenses before reductions | .45% A | .45% | .45% | .45% | .45% | .45% |
Expenses net of fee waivers, if any | .45% A | .45% | .45% | .45% | .45% | .45% |
Expenses net of all reductions | .45% A | .45% | .45% | .45% | .45% | .45% |
Net investment income (loss) | 1.87% A | 2.84% | 3.33% | 3.74% | 4.99% | 4.91% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 928 | $ 850 | $ 765 | $ 829 | $ 838 | $ 1,049 |
Portfolio turnover rate F | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Calculated based on average shares outstanding during the period.
E 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.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Institutional Class
| Six months ended | Years ended August 31, | ||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 11.33 | $ 11.13 | $ 10.90 | $ 10.37 | $ 10.08 | $ 10.56 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income (loss) D | .101 | .311 | .354 | .391 | .496 | .499 |
Net realized and unrealized gain (loss) | (.048) | .207 | .235 | .603 | .284 | (.461) |
Total from investment operations | .053 | .518 | .589 | .994 | .780 | .038 |
Distributions from net investment income | (.103) | (.318) | (.359) | (.464) | (.490) | (.518) |
Net asset value, end of period | $ 11.28 | $ 11.33 | $ 11.13 | $ 10.90 | $ 10.37 | $ 10.08 |
Total Return B, C | .47% | 4.73% | 5.53% | 9.80% | 7.98% | .37% |
Ratios to Average Net Assets E, G |
|
|
|
|
| |
Expenses before reductions | .52% A | .50% | .53% | .50% | .52% | .54% |
Expenses net of fee waivers, if any | .52% A | .50% | .53% | .50% | .52% | .54% |
Expenses net of all reductions | .52% A | .50% | .53% | .50% | .52% | .54% |
Net investment income (loss) | 1.80% A | 2.79% | 3.24% | 3.69% | 4.92% | 4.83% |
Supplemental Data |
|
|
|
|
| |
Net assets, end of period (in millions) | $ 34 | $ 12 | $ 7 | $ 10 | $ 10 | $ 7 |
Portfolio turnover rate F | 513% A | 451% | 490% | 527% | 476% | 397% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Calculated based on average shares outstanding during the period.
E 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.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G 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.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Notes to Financial Statements
For the period ended February 28, 2013 (Unaudited)
(Amounts in thousands except percentages)
1. Organization.
Fidelity Advisor® Mortgage Securities Fund (the Fund) is a fund of Fidelity Advisor Series II (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, Class C, Fidelity Mortgage Securities Fund and Institutional Class shares, each of which, along with Class B shares, has equal rights as to assets and voting privileges. Class B shares are closed to new accounts and additional purchases, except for exchanges and reinvestments. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the 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.
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies 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.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the Fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the Fund. The following summarizes the Fund's investment in each non-money market Fidelity Central Fund.
Fidelity Mortgage Backed Securities Central Fund | Fidelity Investment Money Management, Inc. (FIMM) | Seeks a high level of income by normally investing in investment-grade mortgage-related securities and repurchase agreements for those securities. | Delayed Delivery & When Issued Securities Repurchase Agreements Options Swap Agreements |
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
2. Investments in Fidelity Central Funds - continued
An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. 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 contain the significant accounting policies (including investment valuation policies) of those funds 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 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)
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3. 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 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. Brokers which make markets in asset backed securities, collateralized mortgage obligations and commercial mortgage securities may also consider such factors as the structure of the issue, cash flow assumptions, the value of underlying assets as well as any guarantees. Swap agreements are marked-to-market daily based on valuations from third party pricing vendors or broker-supplied valuations. Pricing vendors utilize matrix pricing which considers comparisons to interest rate curves, credit spread curves, default possibilities and recovery rates. When independent prices are unavailable or unreliable, debt securities and swap agreements may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities and swap agreements are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Options traded over-the-counter are valued using broker-supplied valuations and are categorized as Level 2 in the hierarchy. 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. 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. The aggregate value of investments by input level, as of February 28, 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. Interest income and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
3. Significant Accounting Policies - continued
Investment Transactions and Income - continued
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.
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.
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. 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 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, swap agreements, market discount, deferred trustees compensation, financing transactions, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.
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3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:
Gross unrealized appreciation | $ 28,780 |
Gross unrealized depreciation | (7,255) |
Net unrealized appreciation (depreciation) on securities and other investments | $ 21,525 |
|
|
Tax cost | $ 1,337,166 |
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. At August 31, 2012, capital loss carryforwards were as follows:
Fiscal year of expiration |
|
2017 | $ (76,480) |
Repurchase Agreements. FMR has received an Exemptive Order from 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
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Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
3. Significant Accounting Policies - continued
Delayed Delivery Transactions and When-Issued Securities - continued
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.
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.
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
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3. Significant Accounting Policies - continued
Restricted Securities - continued
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 reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is currently evaluating the impact of the update's adoption on the Fund's financial statement disclosures.
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 options and swap agreements. 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
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Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
4. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
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 swap agreements, the Fund attempts to reduce its exposure to counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement on a bilateral basis 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 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 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 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.
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
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4. Derivative Instruments - continued
Net Realized Gain (Loss) and Change in Net Unrealized Appreciation (Depreciation) on Derivatives - continued
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 | Change in Net Unrealized Appreciation (Depreciation) |
Interest Rate Risk |
|
|
Purchased Options | $ - | $ 47 |
Swap Agreements | (112) | 373 |
Totals (a) | $ (112) | $ 420 |
(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 agreement, to manage its exposure to the market and to fluctuations in interest rates.
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 for the closing sale transaction are greater or less than the premium received or paid, respectively. 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.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
4. Derivative Instruments - continued
Options - continued
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.
Swap Agreements. A swap agreement (swap) is a contract between two parties to exchange future cash flows at periodic intervals based on a notional principal amount.
Swaps are marked-to-market daily and changes in value are reflected in the Statement of Assets and Liabilities in the swap agreements at value line items. Any upfront premiums paid or received upon entering a swap to compensate for differences between stated terms of the agreement and prevailing market conditions (e.g. credit spreads, interest rates or other factors) are recorded in net unrealized 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. 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 "Swap Agreements."
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.
5. Purchases and Sales of Investments.
Purchases and sales of securities (including the Fixed-Income Central Funds), other than short-term securities and U.S. government securities, aggregated $175,601 and $156,438, respectively.
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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 annualized 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 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 Fees | Retained |
Class A | -% | .25% | $ 75 | $ 3 |
Class T | -% | .25% | 50 | -* |
Class B | .65% | .25% | 15 | 11 |
Class C | .75% | .25% | 102 | 13 |
|
|
| $ 242 | $ 27 |
* Amount represents four hundred seventy three dollars.
Sales Load. FDC may receive a front-end sales charge of up to 4.00% for selling Class A shares 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 contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. The deferred sales charges range from 5.00% to 1.00% for Class B shares, 1.00% for Class C shares, .75% for certain purchases of Class A shares and .25% for certain purchases of Class T shares.
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Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
6. Fees and Other Transactions with Affiliates - continued
Sales Load - continued
For the period, sales charge amounts retained by FDC were as follows:
| Retained |
Class A | $ 5 |
Class T | 1 |
Class B* | 3 |
Class C* | 1 |
| $ 10 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales
are made.
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 Fidelity Mortgage Securities Fund. FIIOC receives an asset-based fee of .10% of Fidelity Mortgage Securities Fund'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 | $ 58 | .19 |
Class T | 32 | .16 |
Class B | 4 | .25 |
Class C | 17 | .17 |
Fidelity Mortgage Securities Fund | 497 | .10 |
Institutional Class | 24 | .17 |
| $ 632 |
|
* Annualized
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 annualized rate of .04% of average net assets.
Semiannual Report
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 $1 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.
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 $9.
In addition, FMR reimbursed a portion of the Fund's operating expenses during the period in the amount of four hundred seventy three dollars.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Six months ended | Year ended | |
From net investment income |
|
|
Class A | $ 462 | $ 1,509 |
Class T | 312 | 879 |
Class B | 14 | 80 |
Class C | 82 | 311 |
Fidelity Mortgage Securities Fund | 9,317 | 22,468 |
Institutional Class | 255 | 269 |
Total | $ 10,442 | $ 25,516 |
10. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
Six months ended | Year ended | Six months ended | Year ended | |
Class A |
|
|
|
|
Shares sold | 745 | 1,763 | $ 8,453 | $ 19,760 |
Reinvestment of distributions | 34 | 110 | 383 | 1,235 |
Shares redeemed | (959) | (1,889) | (10,866) | (21,161) |
Net increase (decrease) | (180) | (16) | $ (2,030) | $ (166) |
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Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except percentages)
10. Share Transactions - continued
| Shares | Dollars | ||
Six months ended | Year ended | Six months ended | Year ended | |
Class T |
|
|
|
|
Shares sold | 1,555 | 517 | $ 17,697 | $ 5,786 |
Reinvestment of distributions | 26 | 71 | 291 | 794 |
Shares redeemed | (1,041) | (1,118) | (11,818) | (12,509) |
Net increase (decrease) | 540 | (530) | $ 6,170 | $ (5,929) |
Class B |
|
|
|
|
Shares sold | 1 | 11 | $ 10 | $ 118 |
Reinvestment of distributions | 1 | 4 | 8 | 46 |
Shares redeemed | (57) | (129) | (641) | (1,440) |
Net increase (decrease) | (55) | (114) | $ (623) | $ (1,276) |
Class C |
|
|
|
|
Shares sold | 389 | 587 | $ 4,412 | $ 6,563 |
Reinvestment of distributions | 5 | 19 | 59 | 213 |
Shares redeemed | (193) | (375) | (2,182) | (4,193) |
Net increase (decrease) | 201 | 231 | $ 2,289 | $ 2,583 |
Fidelity Mortgage Securities Fund |
|
|
|
|
Shares sold | 33,641 | 15,948 | $ 383,102 | $ 179,572 |
Reinvestment of distributions | 758 | 1,817 | 8,604 | 20,398 |
Shares redeemed | (27,113) | (11,555) | (307,788) | (129,715) |
Net increase (decrease) | 7,286 | 6,210 | $ 83,918 | $ 70,255 |
Institutional Class |
|
|
|
|
Shares sold | 3,092 | 710 | $ 35,019 | $ 7,943 |
Reinvestment of distributions | 21 | 20 | 237 | 228 |
Shares redeemed | (1,202) | (238) | (13,604) | (2,661) |
Net increase (decrease) | 1,911 | 492 | $ 21,652 | $ 5,510 |
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 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.
At the end of the period, FMR or its affiliates were the owners of record of 12% of the total outstanding shares of the Fund.
Semiannual Report
12. Credit Risk.
The Fund invests a portion of its assets in structured securities of issuers backed by residential mortgage loans, credit card receivables and automotive loans. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults.
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Advisor Mortgage Securities Fund
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established three standing committees, Operations, Audit, and Governance and Nominating, each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Operations Committee, of which all of the Independent Trustees are members, meets regularly throughout the year and, among other matters, considers matters specifically related to the annual consideration of the renewal of the fund's Advisory Contracts. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through ad hoc joint committees to discuss certain matters relevant to the Fidelity funds.
At its September 2012 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with the fund; (iv) the extent to which economies of scale exist and would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts is in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts is fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Semiannual Report
Nature, Extent, and Quality of Services Provided. The Board considered the staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the fund's investment personnel, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the general qualifications and capabilities of the Investment Advisers' investment staff, including its size, education, experience, and resources, as well as the Investment Advisers' approach to recruiting, managing, and compensating investment personnel. The Board also noted that FMR has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. The Board also believes that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered the Investment Advisers' trading and risk management capabilities and resources, which are an integral part of the investment management process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through telephone representatives and over the Internet, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including (i) continuing to dedicate additional resources to investment research and support of the senior management team that oversees asset management; (ii) persisting in efforts to enhance Fidelity's research capabilities, in particular, international research; (iii) launching new funds and making other enhancements to meet client needs for global and income-oriented solutions; (iv) continuing to launch dedicated lower cost underlying funds to meet investment management's portfolio construction needs related to expanding underlying fund options, specifically for the Freedom Fund product lines; (v) adopting a sector neutral investment approach for certain funds and utilizing a team of portfolio managers to manage certain sector-neutral funds; (vi) rationalizing product lines and gaining increased efficiencies through combinations of several funds with other funds; (vii) strengthening the Spartan Index Fund product line by adding new funds and/or new low-cost institutional share classes, restructuring fund expenses to accommodate new classes, and reducing investment minimums for certain classes of shares; (viii) modifying the eligibility criteria for Institutional Class shares to increase their appeal to government entities and charitable investors; and (ix) reducing certain transfer agent fee rates.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured over multiple periods against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by Fidelity and reviewed by the Board. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2011, the cumulative total returns of the retail class and Class C of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of the retail class and Class C show the performance of the highest and lowest performing classes, respectively (based on five-year performance). The box within each chart shows the 25th percentile return (top of box) and the 75th percentile return (bottom of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the peer group whose performance was equal to or lower than that of the class indicated.
Semiannual Report
Fidelity Advisor Mortgage Securities Fund
The Board reviewed the fund's relative investment performance against its peer group and noted that the performance of the retail class of the fund was in the first quartile for the one-year period, the second quartile for the three-year period, and the third quartile for the five-year period. The Board also noted that the investment performance of the retail class of the fund compared favorably to its benchmark for the one- and three-year periods, although the fund's five-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes. The Board also reviewed the fund's performance since inception as well as performance in the current year.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should benefit the fund's shareholders.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 11% means that 89% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Advisor Mortgage Securities Fund
Semiannual Report
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2011.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered the current and historical total expense ratios of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expense ratio of each class ranked below its competitive median for 2011.
The Board considered that the current contractual arrangements for the fund have the effect of setting the total "fund-level" (but not "class-level") expenses (including, among certain other "fund-level" expenses, the management fee) for each class at 0.35%.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board noted, however, that because the current contractual arrangements set the total "fund-level" expenses for each class at 0.35%, increases or decreases in the management fee due to changes in the group fee rate will not impact the total expense ratio.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of FMR and its affiliates, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients. The Board noted the findings of the 2010 ad hoc joint committee (created with the board of other Fidelity funds), which reviewed and compared Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds, including the differences in services provided, fees charged, and costs incurred, as well as competition in their respective marketplaces.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and was satisfied that the profitability was not excessive in the circumstances.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board also noted that in 2009, it and the board of other Fidelity funds created an ad hoc committee (the Economies of Scale Committee) to analyze whether FMR attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
Semiannual Report
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including: (i) Fidelity's fund profitability methodology, profitability trends for certain funds, and the impact of certain factors on fund profitability results; (ii) portfolio manager changes that have occurred during the past year and the amount of the investment that each portfolio manager has made in the Fidelity fund(s) that he or she manages; (iii) Fidelity's compensation structure for portfolio managers, research analysts, and other key personnel, including its effects on fund profitability, the rationale for the compensation structure, and the extent to which current market conditions have affected retention and recruitment; (iv) the compensation paid to fund sub-advisers on behalf of the Fidelity funds; (v) Fidelity's fee structures, including the group fee structure, and the rationale for recommending different fees among different categories of funds and classes; (vi) Fidelity's voluntary waiver of its fees to maintain minimum yields for certain money market funds and classes as well as contractual waivers in place for certain funds; (vii) regulatory and industry developments, including those affecting money market funds and target date funds, and the potential impact to Fidelity; (viii) Fidelity's transfer agent fees, expenses, and services, and drivers for determining the transfer agent fee structure of different funds and classes; (ix) management fee rates charged by FMR or Fidelity entities to other Fidelity clients; (x) the allocation of and historical trends in Fidelity's realization of fall-out benefits; and (xi) explanations regarding the relative total expense ratios of certain funds and classes, total expense competitive trends, and actions that might be taken by FMR to reduce total expense ratios for certain funds and classes or to achieve further economies of scale.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Semiannual 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
(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
(Fidelity Investment logo)(registered trademark)
AMORI-USAN-0413 1.784899.110
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor®
Short Fixed-Income
Fund - Class A, Class T, Class B and Class C
Semiannual Report
February 28, 2013
(Fidelity Cover Art)
Contents
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, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm |
| |
Board Approval of Investment Advisory Contracts and Management Fees |
|
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.
Semiannual 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, 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 (September 1, 2012 to February 28, 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. 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. 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.
Semiannual Report
| Annualized | Beginning | Ending | Expenses Paid |
Class A | .70% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,005.00 | $ 3.48 |
Hypothetical A |
| $ 1,000.00 | $ 1,021.32 | $ 3.51 |
Class T | .71% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,006.00 | $ 3.53 |
Hypothetical A |
| $ 1,000.00 | $ 1,021.27 | $ 3.56 |
Class B | 1.51% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,002.40 | $ 7.50 |
Hypothetical A |
| $ 1,000.00 | $ 1,017.31 | $ 7.55 |
Class C | 1.56% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,001.20 | $ 7.74 |
Hypothetical A |
| $ 1,000.00 | $ 1,017.06 | $ 7.80 |
Institutional Class | .52% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,006.90 | $ 2.59 |
Hypothetical A |
| $ 1,000.00 | $ 1,022.22 | $ 2.61 |
A 5% return per year before expenses
* 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).
Semiannual Report
Investment Changes (Unaudited)
Quality Diversification (% of fund's net assets) | |||||||
As of February 28, 2013 | As of August 31, 2012 | ||||||
 | U.S. Government and |
| | U.S. Government and |
| ||
 | AAA 20.0% |
| | AAA 16.6% |
| ||
 | AA 9.3% |
| | AA 7.5% |
| ||
 | A 16.2% |
| | A 14.9% |
| ||
 | BBB 18.7% |
| | BBB 14.0% |
| ||
 | BB and Below 0.9% |
| | BB and Below 0.8% |
| ||
 | Not Rated 0.2% |
| | Not Rated 0.4% |
| ||
 | 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 February 28, 2013 | ||
|
| 6 months ago |
Years | 2.3 | 2.2 |
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 February 28, 2013 | ||
|
| 6 months ago |
Years | 1.8 | 1.7 |
Duration estimates how much a bond fund's price will change with a change in comparable interest rates. If rates rise 1%, for example, a fund with a 5-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. Duration takes into account any call or put option embedded in the bonds. |
Asset Allocation (% of fund's net assets) | |||||||
As of February 28, 2013* | As of August 31, 2012** | ||||||
| Corporate Bonds 42.3% |
| | Corporate Bonds 35.3% |
| ||
| U.S. Government and |
| | U.S. Government and |
| ||
| Asset-Backed |
| | Asset-Backed |
| ||
| CMOs and Other |
| | CMOs and Other |
| ||
| Municipal Bonds 0.4% |
| | Municipal Bonds 0.5% |
| ||
| Other Investments 1.5% |
| | Other Investments 0.4% |
| ||
| Short-Term |
| | Short-Term |
| ||
* Foreign investments | 13.7% |
| ** Foreign investments | 12.6% |
| ||
† Includes NCUA Guaranteed Notes. |
Semiannual Report
Investments February 28, 2013
Showing Percentage of Net Assets
Nonconvertible Bonds - 42.3% | ||||
| Principal | Value | ||
CONSUMER DISCRETIONARY - 2.3% | ||||
Automobiles - 1.4% | ||||
Daimler Finance North America LLC: | ||||
1.25% 1/11/16 (d) | $ 2,210,000 | $ 2,215,180 | ||
1.3% 7/31/15 (d) | 2,620,000 | 2,634,373 | ||
1.65% 4/10/15 (d) | 1,310,000 | 1,324,947 | ||
1.875% 9/15/14 (d) | 1,270,000 | 1,288,783 | ||
1.95% 3/28/14 (d) | 3,076,000 | 3,109,525 | ||
2.3% 1/9/15 (d) | 1,330,000 | 1,359,348 | ||
Volkswagen International Finance NV: | ||||
1.6% 11/20/17 (d) | 1,090,000 | 1,094,484 | ||
1.625% 3/22/15 (d) | 2,300,000 | 2,329,923 | ||
| 15,356,563 | |||
Diversified Consumer Services - 0.1% | ||||
Yale University 2.9% 10/15/14 | 970,000 | 1,007,976 | ||
Media - 0.8% | ||||
NBCUniversal Media LLC: | ||||
2.875% 4/1/16 | 1,200,000 | 1,266,181 | ||
3.65% 4/30/15 | 1,310,000 | 1,389,865 | ||
News America, Inc. 5.3% 12/15/14 | 2,007,000 | 2,169,133 | ||
Time Warner, Inc. 3.15% 7/15/15 | 1,923,000 | 2,026,715 | ||
Viacom, Inc. 1.25% 2/27/15 | 1,634,000 | 1,647,820 | ||
Walt Disney Co. 1.1% 12/1/17 | 976,000 | 975,143 | ||
| 9,474,857 | |||
TOTAL CONSUMER DISCRETIONARY | 25,839,396 | |||
CONSUMER STAPLES - 2.9% | ||||
Beverages - 1.3% | ||||
Anheuser-Busch InBev Finance, Inc. 0.8% 1/15/16 | 2,500,000 | 2,501,690 | ||
Anheuser-Busch InBev Worldwide, Inc.: | ||||
0.8% 7/15/15 | 2,630,000 | 2,636,267 | ||
1.5% 7/14/14 | 1,611,000 | 1,631,724 | ||
Beam, Inc. 1.875% 5/15/17 | 1,366,000 | 1,391,267 | ||
FBG Finance Ltd. 5.125% 6/15/15 (d) | 1,054,000 | 1,151,956 | ||
Heineken NV: | ||||
0.8% 10/1/15 (d) | 1,492,000 | 1,494,351 | ||
1.4% 10/1/17 (d) | 556,000 | 554,308 | ||
SABMiller Holdings, Inc. 2.45% 1/15/17 (d) | 2,660,000 | 2,774,915 | ||
| 14,136,478 | |||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
CONSUMER STAPLES - continued | ||||
Food & Staples Retailing - 0.3% | ||||
Wal-Mart Stores, Inc. 2.25% 7/8/15 | $ 1,607,000 | $ 1,674,761 | ||
Walgreen Co. 1% 3/13/15 | 1,695,000 | 1,699,987 | ||
| 3,374,748 | |||
Food Products - 0.8% | ||||
General Mills, Inc.: | ||||
0.875% 1/29/16 | 971,000 | 974,586 | ||
1.55% 5/16/14 | 1,200,000 | 1,214,470 | ||
Kellogg Co. 0.5221% 2/13/15 (f) | 1,685,000 | 1,686,634 | ||
Kraft Foods Group, Inc. 1.625% 6/4/15 | 2,690,000 | 2,733,398 | ||
Kraft Foods, Inc. 2.625% 5/8/13 | 2,575,000 | 2,584,010 | ||
| 9,193,098 | |||
Tobacco - 0.5% | ||||
Altria Group, Inc. 4.125% 9/11/15 | 2,300,000 | 2,487,878 | ||
Reynolds American, Inc.: | ||||
1.05% 10/30/15 | 1,240,000 | 1,238,767 | ||
6.75% 6/15/17 | 1,032,000 | 1,246,162 | ||
| 4,972,807 | |||
TOTAL CONSUMER STAPLES | 31,677,131 | |||
ENERGY - 2.1% | ||||
Energy Equipment & Services - 0.1% | ||||
Cameron International Corp. 1.6% 4/30/15 | 1,005,000 | 1,013,770 | ||
Oil, Gas & Consumable Fuels - 2.0% | ||||
BG Energy Capital PLC 2.875% 10/15/16 (d) | 1,350,000 | 1,431,836 | ||
Canadian Natural Resources Ltd. 1.45% 11/14/14 | 2,453,000 | 2,485,622 | ||
Cenovus Energy, Inc. 4.5% 9/15/14 | 2,105,000 | 2,222,762 | ||
Enterprise Products Operating LP: | ||||
1.25% 8/13/15 | 962,000 | 969,916 | ||
5.65% 4/1/13 | 1,227,000 | 1,231,080 | ||
Gazstream SA 5.625% 7/22/13 (d) | 105,224 | 106,340 | ||
Marathon Petroleum Corp. 3.5% 3/1/16 | 1,703,000 | 1,818,383 | ||
Petrobras International Finance Co. Ltd.: | ||||
2.875% 2/6/15 | 1,320,000 | 1,347,192 | ||
3.875% 1/27/16 | 1,151,000 | 1,203,239 | ||
Phillips 66: | ||||
1.95% 3/5/15 | 2,620,000 | 2,677,664 | ||
2.95% 5/1/17 | 650,000 | 687,852 | ||
Schlumberger Investment SA 1.25% 8/1/17 (d) | 1,500,000 | 1,498,778 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - continued | ||||
Southeast Supply Header LLC 4.85% 8/15/14 (d) | $ 1,835,000 | $ 1,905,391 | ||
Spectra Energy Partners, LP 2.95% 6/15/16 | 313,000 | 323,431 | ||
Total Capital Canada Ltd. 1.625% 1/28/14 | 1,210,000 | 1,225,732 | ||
Total Capital International SA 0.75% 1/25/16 | 1,403,000 | 1,407,168 | ||
| 22,542,386 | |||
TOTAL ENERGY | 23,556,156 | |||
FINANCIALS - 25.2% | ||||
Capital Markets - 2.7% | ||||
Goldman Sachs Group, Inc.: | ||||
1.6% 11/23/15 | 1,090,000 | 1,100,211 | ||
2.375% 1/22/18 | 2,200,000 | 2,229,027 | ||
3.7% 8/1/15 | 2,000,000 | 2,112,908 | ||
5.125% 1/15/15 | 5,117,000 | 5,481,745 | ||
HSBC Bank PLC 3.1% 5/24/16 (d) | 1,210,000 | 1,284,968 | ||
JPMorgan Chase & Co.: | ||||
0.9081% 2/26/16 (f) | 1,000,000 | 999,721 | ||
0.964% 10/15/15 (f) | 1,768,000 | 1,777,662 | ||
1.1% 10/15/15 | 1,080,000 | 1,083,664 | ||
Merrill Lynch & Co., Inc. 5.45% 7/15/14 | 950,000 | 1,003,162 | ||
Morgan Stanley: | ||||
1.75% 2/25/16 | 966,000 | 970,300 | ||
2.875% 1/24/14 | 1,200,000 | 1,222,399 | ||
2.875% 7/28/14 | 452,000 | 463,358 | ||
4.1% 1/26/15 | 554,000 | 580,886 | ||
4.2% 11/20/14 | 400,000 | 419,195 | ||
6% 5/13/14 | 2,690,000 | 2,842,032 | ||
State Street Corp. 4.3% 5/30/14 | 1,110,000 | 1,162,924 | ||
The Bank of New York Mellon Corp. 1.7% 11/24/14 | 3,150,000 | 3,213,280 | ||
UBS AG Stamford Branch: | ||||
1.3005% 1/28/14 (f) | 924,000 | 930,061 | ||
2.25% 1/28/14 | 1,453,000 | 1,474,650 | ||
| 30,352,153 | |||
Commercial Banks - 10.9% | ||||
ABN AMRO Bank NV 2.0715% 1/30/14 (d)(f) | 1,700,000 | 1,720,995 | ||
ANZ Banking Group Ltd. 2.125% 1/10/14 (d) | 1,210,000 | 1,227,530 | ||
Australia & New Zealand Banking Group Ltd. 0.9% 2/12/16 | 1,670,000 | 1,675,513 | ||
Bank of America NA 5.3% 3/15/17 | 250,000 | 280,237 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Commercial Banks - continued | ||||
Bank of England 0.5% 3/6/15 (d) | $ 3,902,000 | $ 3,912,535 | ||
Bank of Nova Scotia: | ||||
1.375% 12/18/17 | 1,069,000 | 1,069,290 | ||
1.85% 1/12/15 | 3,131,000 | 3,204,867 | ||
Bank of Tokyo-Mitsubishi UFJ Ltd. 1% 2/26/16 (d) | 2,200,000 | 2,200,900 | ||
Barclays Bank PLC 1.345% 1/13/14 (f) | 4,500,000 | 4,525,403 | ||
BB&T Corp. 2.05% 4/28/14 | 2,710,000 | 2,754,571 | ||
BNP Paribas 0.705% 4/8/13 (f) | 965,000 | 965,312 | ||
Commonwealth Bank of Australia: | ||||
1.038% 3/17/14 (d)(f) | 1,440,000 | 1,449,135 | ||
1.95% 3/16/15 | 1,310,000 | 1,343,814 | ||
3.5% 3/19/15 (d) | 1,300,000 | 1,373,884 | ||
Credit Suisse New York Branch: | ||||
1.265% 1/14/14 (f) | 1,400,000 | 1,409,621 | ||
2.2% 1/14/14 | 6,582,000 | 6,676,919 | ||
Danske Bank A/S 1.355% 4/14/14 (d)(f) | 1,800,000 | 1,809,907 | ||
Discover Bank 2% 2/21/18 | 2,500,000 | 2,508,350 | ||
Fifth Third Bancorp 3.625% 1/25/16 | 673,000 | 721,462 | ||
Fifth Third Bank 0.9% 2/26/16 | 2,200,000 | 2,201,687 | ||
KeyBank NA: | ||||
1.65% 2/1/18 | 735,000 | 742,666 | ||
5.8% 7/1/14 | 4,064,000 | 4,336,373 | ||
KeyCorp. 6.5% 5/14/13 | 1,500,000 | 1,517,345 | ||
Marshall & Ilsley Bank 5% 1/17/17 | 86,000 | 94,545 | ||
Mizuho Corporate Bank Ltd. 1.55% 10/17/17 (d) | 1,630,000 | 1,624,626 | ||
National Australia Bank Ltd.: | ||||
0.602% 1/22/15 (d)(f) | 2,000,000 | 1,999,286 | ||
2% 3/9/15 | 1,310,000 | 1,344,322 | ||
National Bank of Canada 1.5% 6/26/15 | 1,794,000 | 1,821,089 | ||
Nordea Bank AB 1.75% 10/4/13 (d) | 1,830,000 | 1,842,687 | ||
PNC Bank NA 0.8% 1/28/16 | 3,000,000 | 3,008,679 | ||
PNC Funding Corp.: | ||||
3% 5/19/14 | 1,700,000 | 1,750,427 | ||
3.625% 2/8/15 | 1,445,000 | 1,526,014 | ||
Rabobank (Netherlands) NV: | ||||
1.85% 1/10/14 | 5,323,000 | 5,386,557 | ||
2.125% 10/13/15 | 862,000 | 889,852 | ||
Regions Financial Corp. 4.875% 4/26/13 | 1,300,000 | 1,307,696 | ||
Royal Bank of Canada: | ||||
0.603% 4/17/14 (f) | 1,400,000 | 1,404,987 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Commercial Banks - continued | ||||
Royal Bank of Canada: - continued | ||||
0.8% 10/30/15 | $ 2,180,000 | $ 2,184,685 | ||
1.125% 1/15/14 | 553,000 | 556,886 | ||
1.45% 10/30/14 | 2,332,000 | 2,371,982 | ||
1.5% 1/16/18 | 2,210,000 | 2,226,688 | ||
Royal Bank of Scotland Group PLC 2.55% 9/18/15 | 2,739,000 | 2,819,420 | ||
Sumitomo Mitsui Banking Corp.: | ||||
1.8% 7/18/17 | 1,970,000 | 2,004,199 | ||
1.9% 1/12/15 (d) | 1,600,000 | 1,629,683 | ||
1.95% 1/14/14 (d) | 2,400,000 | 2,420,477 | ||
SunTrust Banks, Inc.: | ||||
0.5781% 8/24/15 (f) | 500,000 | 491,501 | ||
0.608% 4/1/15 (f) | 2,270,000 | 2,226,096 | ||
3.5% 1/20/17 | 424,000 | 456,317 | ||
3.6% 4/15/16 | 1,025,000 | 1,098,071 | ||
5% 9/1/15 | 1,059,000 | 1,153,891 | ||
The Toronto Dominion Bank: | ||||
0.7485% 11/1/13 (f) | 1,400,000 | 1,403,784 | ||
1.375% 7/14/14 | 3,000,000 | 3,031,887 | ||
U.S. Bancorp 4.2% 5/15/14 | 1,770,000 | 1,849,666 | ||
Wachovia Bank NA 0.678% 11/3/14 (f) | 1,820,000 | 1,822,967 | ||
Wells Fargo & Co.: | ||||
0.5005% 10/28/15 (f) | 5,000,000 | 4,977,835 | ||
3.625% 4/15/15 | 2,400,000 | 2,547,468 | ||
Wells Fargo Bank NA 0.5001% 5/16/16 (f) | 1,000,000 | 986,509 | ||
Westpac Banking Corp.: | ||||
0.95% 1/12/16 | 2,210,000 | 2,217,706 | ||
1.041% 3/31/14 (d)(f) | 1,300,000 | 1,309,866 | ||
1.125% 9/25/15 | 2,685,000 | 2,707,165 | ||
2% 8/14/17 | 2,250,000 | 2,313,918 | ||
| 120,437,750 | |||
Consumer Finance - 4.6% | ||||
American Express Credit Corp.: | ||||
0.7431% 11/13/15 (f) | 2,735,000 | 2,741,676 | ||
0.875% 11/13/15 | 1,090,000 | 1,089,622 | ||
2.75% 9/15/15 | 2,530,000 | 2,646,195 | ||
2.8% 9/19/16 | 970,000 | 1,026,523 | ||
American Honda Finance Corp.: | ||||
0.743% 5/8/14 (d)(f) | 1,000,000 | 1,004,891 | ||
1.45% 2/27/15 (d) | 1,310,000 | 1,328,278 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Capital One Financial Corp.: | ||||
0.9355% 11/6/15 (f) | $ 1,000,000 | $ 1,001,092 | ||
1% 11/6/15 | 1,090,000 | 1,086,053 | ||
2.125% 7/15/14 | 2,639,000 | 2,684,499 | ||
2.15% 3/23/15 | 1,300,000 | 1,328,977 | ||
7.375% 5/23/14 | 2,500,000 | 2,697,045 | ||
Caterpillar Financial Services Corp. 2.75% 6/24/15 | 701,000 | 733,963 | ||
Ford Motor Credit Co. LLC: | ||||
2.75% 5/15/15 | 2,000,000 | 2,043,366 | ||
3% 6/12/17 | 2,450,000 | 2,512,372 | ||
General Electric Capital Corp.: | ||||
1% 1/8/16 | 1,299,000 | 1,303,144 | ||
1.002% 4/24/14 (f) | 1,310,000 | 1,319,550 | ||
1.625% 7/2/15 | 3,165,000 | 3,220,751 | ||
2.15% 1/9/15 | 10,668,000 | 10,961,274 | ||
2.25% 11/9/15 | 3,150,000 | 3,264,112 | ||
HSBC USA, Inc.: | ||||
1.625% 1/16/18 | 963,000 | 967,306 | ||
2.375% 2/13/15 | 2,353,000 | 2,426,089 | ||
Hyundai Capital America 1.625% 10/2/15 (d) | 851,000 | 857,159 | ||
Toyota Motor Credit Corp. 0.703% 1/17/14 (f) | 2,000,000 | 2,006,044 | ||
| 50,249,981 | |||
Diversified Financial Services - 4.7% | ||||
ABB Finance (USA), Inc. 1.625% 5/8/17 | 511,000 | 517,954 | ||
Bank of America Corp.: | ||||
1.25% 1/11/16 | 2,200,000 | 2,193,492 | ||
1.5% 10/9/15 | 1,000,000 | 1,003,095 | ||
1.855% 7/11/14 (f) | 2,780,000 | 2,817,171 | ||
3.7% 9/1/15 | 3,960,000 | 4,180,220 | ||
BP Capital Markets PLC: | ||||
0.9095% 3/11/14 (f) | 2,210,000 | 2,222,173 | ||
1.7% 12/5/14 | 1,320,000 | 1,345,979 | ||
2.248% 11/1/16 | 1,320,000 | 1,374,005 | ||
Citigroup, Inc.: | ||||
1.238% 4/1/14 (f) | 500,000 | 502,032 | ||
1.25% 1/15/16 | 4,049,000 | 4,038,104 | ||
1.755% 1/13/14 (f) | 3,558,000 | 3,593,552 | ||
2.2931% 8/13/13 (f) | 650,000 | 655,227 | ||
2.65% 3/2/15 | 3,350,000 | 3,439,432 | ||
5.125% 5/5/14 | 1,022,000 | 1,069,808 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Citigroup, Inc.: - continued | ||||
6.375% 8/12/14 | $ 2,900,000 | $ 3,118,730 | ||
6.5% 8/19/13 | 1,733,000 | 1,779,885 | ||
Export Development Canada 1.5% 5/15/14 | 800,000 | 811,886 | ||
JPMorgan Chase & Co.: | ||||
3.4% 6/24/15 | 2,005,000 | 2,118,589 | ||
3.7% 1/20/15 | 7,280,000 | 7,666,757 | ||
MassMutual Global Funding II 0.685% 1/14/14 (d)(f) | 4,242,000 | 4,256,512 | ||
MetLife Institutional Funding II 0.675% 1/6/15 (d)(f) | 1,000,000 | 1,001,117 | ||
OAO Industry & Construction Bank 5.01% 9/29/15 (Issued by Or-ICB SA for OAO Industry & Construction Bank) (f) | 270,000 | 277,933 | ||
USAA Capital Corp. 3.5% 7/17/14 (d) | 1,798,000 | 1,871,682 | ||
| 51,855,335 | |||
Insurance - 1.8% | ||||
American International Group, Inc.: | ||||
3% 3/20/15 | 1,050,000 | 1,091,725 | ||
3.8% 3/22/17 | 818,000 | 888,283 | ||
4.25% 9/15/14 | 2,270,000 | 2,384,483 | ||
Berkshire Hathaway Finance Corp. 1.6% 5/15/17 | 1,330,000 | 1,358,336 | ||
Berkshire Hathaway, Inc.: | ||||
0.9901% 8/15/14 (f) | 1,400,000 | 1,413,772 | ||
1.55% 2/9/18 | 1,110,000 | 1,124,884 | ||
MetLife, Inc. 1.756% 12/15/17 (c) | 465,000 | 470,500 | ||
Metropolitan Life Global Funding I: | ||||
1.5% 1/10/18 (d) | 2,559,000 | 2,553,150 | ||
2% 1/9/15 (d) | 4,359,000 | 4,471,732 | ||
2.5% 9/29/15 (d) | 1,000,000 | 1,040,736 | ||
Pricoa Global Funding I 5.45% 6/11/14 (d) | 1,150,000 | 1,221,202 | ||
Principal Life Global Funding II 0.93% 7/9/14 (d)(f) | 2,000,000 | 2,013,096 | ||
| 20,031,899 | |||
Real Estate Investment Trusts - 0.1% | ||||
Developers Diversified Realty Corp. 9.625% 3/15/16 | 330,000 | 403,281 | ||
Equity One, Inc. 5.375% 10/15/15 | 144,000 | 157,310 | ||
Health Care REIT, Inc. 2.25% 3/15/18 | 341,000 | 344,074 | ||
| 904,665 | |||
Real Estate Management & Development - 0.4% | ||||
Mack-Cali Realty LP 2.5% 12/15/17 | 770,000 | 780,269 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Real Estate Management & Development - continued | ||||
Simon Property Group LP: | ||||
4.2% 2/1/15 | $ 484,000 | $ 511,441 | ||
5.3% 5/30/13 | 1,511,000 | 1,527,662 | ||
Tanger Properties LP 6.15% 11/15/15 | 404,000 | 458,150 | ||
Ventas Realty LP 2% 2/15/18 | 696,000 | 697,941 | ||
| 3,975,463 | |||
TOTAL FINANCIALS | 277,807,246 | |||
HEALTH CARE - 1.1% | ||||
Biotechnology - 0.1% | ||||
Amgen, Inc. 1.875% 11/15/14 | 1,300,000 | 1,326,832 | ||
Health Care Providers & Services - 0.3% | ||||
Aetna, Inc. 1.5% 11/15/17 | 135,000 | 135,486 | ||
Express Scripts Holding Co. 2.1% 2/12/15 | 1,970,000 | 2,013,813 | ||
McKesson Corp. 0.95% 12/4/15 | 213,000 | 213,646 | ||
WellPoint, Inc.: | ||||
1.25% 9/10/15 | 357,000 | 359,761 | ||
1.875% 1/15/18 | 647,000 | 653,774 | ||
| 3,376,480 | |||
Pharmaceuticals - 0.7% | ||||
AbbVie, Inc.: | ||||
1.2% 11/6/15 (d) | 1,100,000 | 1,109,031 | ||
1.75% 11/6/17 (d) | 1,865,000 | 1,888,555 | ||
Sanofi SA: | ||||
1.2% 9/30/14 | 920,000 | 930,396 | ||
2.625% 3/29/16 | 1,263,000 | 1,330,478 | ||
Teva Pharmaceutical Finance III BV 1.7% 3/21/14 | 1,210,000 | 1,224,357 | ||
Zoetis, Inc.: | ||||
1.15% 2/1/16 (d) | 978,000 | 980,901 | ||
1.875% 2/1/18 (d) | 174,000 | 174,617 | ||
| 7,638,335 | |||
TOTAL HEALTH CARE | 12,341,647 | |||
INDUSTRIALS - 0.4% | ||||
Aerospace & Defense - 0.1% | ||||
BAE Systems Holdings, Inc. 4.95% 6/1/14 (d) | 1,500,000 | 1,567,268 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
INDUSTRIALS - continued | ||||
Airlines - 0.1% | ||||
Iberbond 2004 PLC 4.826% 12/24/17 (h) | $ 753,174 | $ 738,111 | ||
Industrial Conglomerates - 0.2% | ||||
Covidien International Finance SA 1.875% 6/15/13 | 1,330,000 | 1,335,121 | ||
General Electric Co. 0.85% 10/9/15 | 1,143,000 | 1,146,576 | ||
| 2,481,697 | |||
TOTAL INDUSTRIALS | 4,787,076 | |||
INFORMATION TECHNOLOGY - 1.0% | ||||
Computers & Peripherals - 0.2% | ||||
Hewlett-Packard Co.: | ||||
1.25% 9/13/13 | 1,216,000 | 1,218,668 | ||
2.625% 12/9/14 | 1,330,000 | 1,360,852 | ||
| 2,579,520 | |||
Electronic Equipment & Components - 0.1% | ||||
Tyco Electronics Group SA 1.6% 2/3/15 | 678,000 | 687,126 | ||
IT Services - 0.2% | ||||
IBM Corp. 1.95% 7/22/16 | 1,621,000 | 1,683,819 | ||
The Western Union Co. 2.375% 12/10/15 | 490,000 | 497,982 | ||
| 2,181,801 | |||
Office Electronics - 0.5% | ||||
Xerox Corp. 1.1101% 5/16/14 (f) | 5,738,000 | 5,727,471 | ||
TOTAL INFORMATION TECHNOLOGY | 11,175,918 | |||
MATERIALS - 0.6% | ||||
Chemicals - 0.1% | ||||
Ecolab, Inc. 1.45% 12/8/17 | 594,000 | 591,309 | ||
Metals & Mining - 0.5% | ||||
Anglo American Capital PLC 2.15% 9/27/13 (d) | 2,400,000 | 2,414,854 | ||
BHP Billiton Financial (USA) Ltd. 1.125% 11/21/14 | 1,970,000 | 1,993,043 | ||
Rio Tinto Finance (USA) Ltd. 8.95% 5/1/14 | 1,413,000 | 1,546,594 | ||
| 5,954,491 | |||
TOTAL MATERIALS | 6,545,800 | |||
TELECOMMUNICATION SERVICES - 2.4% | ||||
Diversified Telecommunication Services - 1.6% | ||||
AT&T Broadband Corp. 8.375% 3/15/13 | 750,000 | 751,665 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
TELECOMMUNICATION SERVICES - continued | ||||
Diversified Telecommunication Services - continued | ||||
AT&T, Inc.: | ||||
1.4% 12/1/17 | $ 1,100,000 | $ 1,097,535 | ||
2.5% 8/15/15 | 2,320,000 | 2,415,967 | ||
2.95% 5/15/16 | 1,200,000 | 1,273,534 | ||
British Telecommunications PLC 2% 6/22/15 | 3,350,000 | 3,434,507 | ||
CenturyLink, Inc. 5.15% 6/15/17 | 1,100,000 | 1,158,102 | ||
Deutsche Telekom International Financial BV 3.125% 4/11/16 (d) | 1,209,000 | 1,275,968 | ||
Qwest Corp. 3.558% 6/15/13 (f) | 3,110,000 | 3,119,159 | ||
Verizon Communications, Inc. 2% 11/1/16 | 2,727,000 | 2,827,026 | ||
| 17,353,463 | |||
Wireless Telecommunication Services - 0.8% | ||||
America Movil S.A.B. de CV 2.375% 9/8/16 | 1,532,000 | 1,586,377 | ||
DIRECTV Holdings LLC/DIRECTV Financing, Inc. 4.75% 10/1/14 | 2,496,000 | 2,645,750 | ||
Verizon Wireless Capital LLC 5.55% 2/1/14 | 2,380,000 | 2,481,581 | ||
Vodafone Group PLC 0.9% 2/19/16 | 2,500,000 | 2,498,108 | ||
| 9,211,816 | |||
TOTAL TELECOMMUNICATION SERVICES | 26,565,279 | |||
UTILITIES - 4.3% | ||||
Electric Utilities - 2.7% | ||||
American Electric Power Co., Inc. 1.65% 12/15/17 | 454,000 | 455,473 | ||
Appalachian Power Co. 0.6651% 8/16/13 (f) | 2,520,000 | 2,523,442 | ||
Commonwealth Edison Co. 1.625% 1/15/14 | 2,440,000 | 2,464,417 | ||
Duke Energy Corp. 3.95% 9/15/14 | 1,441,000 | 1,511,184 | ||
Entergy Louisiana LLC 1.875% 12/15/14 | 748,000 | 763,391 | ||
FirstEnergy Corp. 2.75% 3/15/18 | 485,000 | 484,952 | ||
FirstEnergy Solutions Corp. 4.8% 2/15/15 | 3,566,000 | 3,809,265 | ||
LG&E and KU Energy LLC 2.125% 11/15/15 | 2,334,000 | 2,391,181 | ||
NextEra Energy Capital Holdings, Inc. 1.611% 6/1/14 | 2,234,000 | 2,256,615 | ||
Niagara Mohawk Power Corp. 3.553% 10/1/14 (d) | 2,675,000 | 2,786,045 | ||
Northeast Utilities 1.059% 9/20/13 (f) | 3,490,000 | 3,501,629 | ||
Pacific Gas & Electric Co.: | ||||
5.625% 11/30/17 | 1,774,000 | 2,125,364 | ||
6.25% 12/1/13 | 1,278,000 | 1,331,932 | ||
Pepco Holdings, Inc. 2.7% 10/1/15 | 1,098,000 | 1,139,929 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
Progress Energy, Inc. 6.05% 3/15/14 | $ 1,532,000 | $ 1,616,308 | ||
Southern Co. 4.15% 5/15/14 | 412,000 | 429,591 | ||
| 29,590,718 | |||
Independent Power Producers & Energy Traders - 0.3% | ||||
PSEG Power LLC 2.5% 4/15/13 | 2,910,000 | 2,916,626 | ||
Multi-Utilities - 1.3% | ||||
Dominion Resources, Inc.: | ||||
1.4% 9/15/17 | 848,000 | 849,893 | ||
1.95% 8/15/16 | 848,000 | 875,324 | ||
2.25% 9/1/15 | 1,300,000 | 1,346,751 | ||
2.611% 9/30/66 (f) | 1,336,000 | 1,247,944 | ||
DTE Energy Co. 1.0105% 6/3/13 (f) | 3,081,000 | 3,085,255 | ||
NiSource Finance Corp.: | ||||
5.4% 7/15/14 | 1,000,000 | 1,060,475 | ||
6.15% 3/1/13 | 1,790,000 | 1,790,000 | ||
PG&E Corp. 5.75% 4/1/14 | 590,000 | 620,866 | ||
Sempra Energy: | ||||
1.068% 3/15/14 (f) | 1,515,000 | 1,521,487 | ||
2% 3/15/14 | 2,435,000 | 2,466,404 | ||
| 14,864,399 | |||
TOTAL UTILITIES | 47,371,743 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $459,465,308) |
| |||
U.S. Government and Government Agency Obligations - 25.1% | ||||
| ||||
U.S. Government Agency Obligations - 5.7% | ||||
Fannie Mae: | ||||
0.5% 5/27/15 | 8,541,000 | 8,567,955 | ||
0.5% 7/2/15 | 10,824,000 | 10,855,660 | ||
0.5% 9/28/15 | 22,889,000 | 22,943,865 | ||
0.5% 3/30/16 | 9,073,000 | 9,078,580 | ||
0.875% 12/20/17 | 985,000 | 986,529 | ||
0.875% 2/8/18 | 1,177,000 | 1,177,501 | ||
1.625% 10/26/15 | 5,050,000 | 5,211,378 | ||
U.S. Government and Government Agency Obligations - continued | ||||
| Principal | Value | ||
U.S. Government Agency Obligations - continued | ||||
Freddie Mac: | ||||
1% 9/29/17 | $ 2,727,000 | $ 2,751,469 | ||
1.75% 9/10/15 | 1,397,000 | 1,444,627 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 63,017,564 | |||
U.S. Treasury Obligations - 19.2% | ||||
U.S. Treasury Notes: | ||||
0.25% 1/15/15 | 14,999,000 | 15,002,510 | ||
0.25% 7/15/15 | 42,805,000 | 42,764,849 | ||
0.25% 9/15/15 | 55,000,000 | 54,926,949 | ||
0.375% 11/15/14 | 22,073,000 | 22,128,183 | ||
0.375% 1/15/16 | 32,000,000 | 32,037,504 | ||
1.375% 11/30/15 | 32,008,000 | 32,925,733 | ||
1.75% 7/31/15 | 12,067,000 | 12,489,345 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 212,275,073 | |||
Other Government Related - 0.2% | ||||
National Credit Union Administration Guaranteed Notes Master Trust 1.4% 6/12/15 (NCUA Guaranteed) | 1,700,000 | 1,739,423 | ||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $276,231,722) |
| |||
U.S. Government Agency - Mortgage Securities - 3.9% | ||||
| ||||
Fannie Mae - 2.4% | ||||
2.225% 10/1/33 (f) | 54,246 | 56,983 | ||
2.239% 3/1/35 (f) | 43,567 | 45,929 | ||
2.332% 3/1/35 (f) | 26,115 | 27,771 | ||
2.332% 5/1/35 (f) | 497,172 | 527,959 | ||
2.367% 12/1/33 (f) | 295,701 | 314,326 | ||
2.38% 7/1/35 (f) | 1,653,822 | 1,759,236 | ||
2.421% 11/1/36 (f) | 87,210 | 93,082 | ||
2.429% 12/1/34 (f) | 292,776 | 313,496 | ||
2.441% 10/1/35 (f) | 40,068 | 41,853 | ||
2.524% 10/1/33 (f) | 79,359 | 84,610 | ||
2.53% 5/1/33 (f) | 10,798 | 11,440 | ||
2.539% 10/1/41 (f) | 950,272 | 994,051 | ||
2.613% 7/1/35 (f) | 478,252 | 509,511 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value | ||
Fannie Mae - continued | ||||
2.674% 11/1/34 (f) | $ 251,541 | $ 268,312 | ||
2.688% 9/1/41 (f) | 1,109,107 | 1,160,595 | ||
2.69% 10/1/35 (f) | 615,357 | 654,292 | ||
2.72% 2/1/35 (f) | 564,177 | 598,309 | ||
2.736% 8/1/41 (f) | 1,393,755 | 1,461,823 | ||
2.741% 7/1/35 (f) | 182,509 | 195,709 | ||
2.769% 11/1/36 (f) | 620,897 | 667,651 | ||
2.806% 8/1/35 (f) | 363,134 | 389,013 | ||
2.911% 4/1/35 (f) | 174,392 | 186,262 | ||
3.014% 8/1/41 (f) | 335,133 | 349,742 | ||
3.189% 1/1/40 (f) | 682,813 | 713,584 | ||
3.212% 10/1/35 (f) | 120,892 | 129,045 | ||
3.476% 3/1/40 (f) | 524,489 | 548,279 | ||
3.5% 1/1/26 to 5/1/27 | 5,769,225 | 6,176,244 | ||
3.528% 12/1/39 (f) | 187,319 | 195,709 | ||
3.617% 3/1/40 (f) | 704,444 | 740,570 | ||
4.5% 6/1/19 to 7/1/20 | 646,694 | 695,979 | ||
5.5% 11/1/17 to 11/1/34 | 6,255,500 | 6,844,611 | ||
6.5% 4/1/13 to 6/1/16 | 166,198 | 171,104 | ||
7% 1/1/16 to 11/1/18 | 40,408 | 43,148 | ||
7.5% 10/1/14 | 4,213 | 4,393 | ||
TOTAL FANNIE MAE | 26,974,621 | |||
Freddie Mac - 1.5% | ||||
2.373% 1/1/35 (f) | 84,571 | 90,079 | ||
2.663% 11/1/35 (f) | 363,911 | 385,087 | ||
2.745% 4/1/35 (f) | 635,097 | 677,301 | ||
2.844% 6/1/37 (f) | 375,612 | 403,896 | ||
2.881% 8/1/36 (f) | 188,446 | 202,636 | ||
2.971% 8/1/41 (f) | 731,214 | 768,978 | ||
2.985% 8/1/34 (f) | 102,728 | 108,890 | ||
3% 8/1/21 | 1,975,971 | 2,078,088 | ||
3.086% 9/1/41 (f) | 403,865 | 422,128 | ||
3.5% 1/1/26 | 735,549 | 785,181 | ||
3.573% 4/1/40 (f) | 488,130 | 513,078 | ||
3.604% 4/1/40 (f) | 386,454 | 407,527 | ||
4% 6/1/24 to 4/1/26 | 6,548,586 | 7,010,565 | ||
4.5% 8/1/18 to 11/1/18 | 2,104,778 | 2,243,655 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value | ||
Freddie Mac - continued | ||||
8.5% 5/1/26 to 7/1/28 | $ 64,293 | $ 76,351 | ||
12% 11/1/19 | 939 | 985 | ||
TOTAL FREDDIE MAC | 16,174,425 | |||
Ginnie Mae - 0.0% | ||||
7% 1/15/25 to 6/15/32 | 312,787 | 363,537 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $42,540,597) |
| |||
Asset-Backed Securities - 14.8% | ||||
| ||||
Accredited Mortgage Loan Trust: | ||||
Series 2003-3 Class A1, 4.46% 1/25/34 (AMBAC Insured) | 386,623 | 384,356 | ||
Series 2005-1 Class M1, 0.6717% 4/25/35 (f) | 100,277 | 92,862 | ||
ACE Securities Corp. Home Equity Loan Trust Series 2005-HE2 Class M2, 0.8767% 4/25/35 (f) | 6,214 | 6,150 | ||
Ally Auto Receivables Trust: | ||||
Series 2011-2 Class A3, 1.18% 4/15/15 | 690,475 | 692,426 | ||
Series 2011-3 Class A3, 0.97% 8/17/15 | 1,167,995 | 1,171,397 | ||
Series 2012-SN1 Class A3, 0.57% 8/20/15 | 1,130,000 | 1,130,682 | ||
Ally Master Owner Trust: | ||||
Series 2010-3 Class A, 2.88% 4/15/15 (d) | 510,000 | 511,485 | ||
Series 2011-1 Class A2, 2.15% 1/15/16 | 4,370,000 | 4,430,358 | ||
Series 2011-3 Class A2, 1.81% 5/15/16 | 3,460,000 | 3,512,059 | ||
Series 2011-5 Class A1, 0.8512% 6/15/15 (f) | 2,720,000 | 2,722,467 | ||
Series 2012-1 Class A2, 1.44% 2/15/17 | 2,630,000 | 2,662,307 | ||
Series 2012-2 Class A, 0.7012% 3/15/16 (f) | 1,300,000 | 1,300,503 | ||
Series 2012-3 Class A2, 1.21% 6/15/17 | 2,630,000 | 2,644,353 | ||
Series 2013-1 Class A2, 1% 2/15/18 | 2,500,000 | 2,499,454 | ||
American Express Credit Account Master Trust: | ||||
Series 2012-2 Class A, 0.68% 3/15/18 | 6,180,000 | 6,204,065 | ||
Series 2012-5 Class A, 0.59% 5/15/18 | 2,730,000 | 2,730,696 | ||
AmeriCredit Auto Receivables Trust: | ||||
Series 2010-4 Class A3, 1.27% 4/8/15 | 728,180 | 729,119 | ||
Series 2011-1 Class A3, 1.39% 9/8/15 | 567,052 | 568,777 | ||
Series 2011-2 Class A3, 1.61% 10/8/15 | 1,613,248 | 1,619,771 | ||
Series 2011-3 Class A3, 1.17% 1/8/16 | 650,000 | 652,492 | ||
Series 2011-4 Class AS, 0.92% 3/9/15 | 539,227 | 539,687 | ||
Series 2011-5 Class A2, 1.19% 8/8/15 | 272,251 | 272,886 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
AmeriCredit Auto Receivables Trust: - continued | ||||
Series 2012-1 Class A2, 0.91% 10/8/15 | $ 615,334 | $ 616,730 | ||
Series 2012-2 Class A3, 1.05% 10/11/16 | 810,000 | 816,781 | ||
Series 2012-5 Class A3, 0.92% 6/8/17 | 1,610,000 | 1,609,992 | ||
Americredit Auto Receivables Trust Series 2013-1: | ||||
Class A2, 0.49% 6/8/16 | 760,000 | 760,310 | ||
Class A3, 0.61% 10/10/17 | 2,240,000 | 2,239,915 | ||
Ameriquest Mortgage Securities, Inc. pass-thru certificates: | ||||
Series 2004-R2 Class M3, 1.0267% 4/25/34 (f) | 12,491 | 9,570 | ||
Series 2005-R2 Class M1, 0.6517% 4/25/35 (f) | 262,030 | 255,602 | ||
Argent Securities, Inc. pass-thru certificates: | ||||
Series 2003-W7 Class A2, 0.9817% 3/25/34 (f) | 82,560 | 71,359 | ||
Series 2006-W4 Class A2C, 0.3617% 5/25/36 (f) | 161,268 | 56,875 | ||
Bank of America Auto Trust Series 2012-1 Class A3, 0.78% 6/15/16 | 1,830,000 | 1,838,073 | ||
BMW Floorplan Master Owner Trust Series 2012-1A Class A, 0.6057% 9/15/17 (d)(f) | 2,000,000 | 1,997,283 | ||
BMW Vehicle Lease Trust Series 2012-1 Class A3, 0.75% 2/20/15 | 1,410,000 | 1,414,301 | ||
BMW Vehicle Owner Trust Series 2011-A Class A3, 0.76% 8/25/15 | 1,121,918 | 1,125,163 | ||
Capital Auto Receivables Asset Trust Series 2008-A Class B, 6.89% 1/15/15 (d) | 506,594 | 508,624 | ||
Capital One Multi-Asset Execution Trust Series 2013-A1 Class A1, 0.63% 11/15/18 | 5,860,000 | 5,849,165 | ||
Capital Trust Ltd. Series 2004-1: | ||||
Class A2, 0.6507% 7/20/39 (d)(f) | 84,886 | 77,565 | ||
Class B, 0.9507% 7/20/39 (d)(f) | 373,480 | 170,538 | ||
Class C, 1.3007% 7/20/39 (d)(f) | 478,070 | 148 | ||
Carrington Mortgage Loan Trust Series 2007-RFC1 Class A3, 0.3417% 12/25/36 (f) | 228,766 | 117,929 | ||
Chase Issuance Trust: | ||||
Series 2012-A Class A1, 0.3012% 5/16/16 (f) | 2,000,000 | 2,001,064 | ||
Series 2012-A8 Class A8, 0.54% 10/16/17 | 5,000,000 | 4,986,835 | ||
CIT Equipment Collateral Series 2012-VT1: | ||||
Class A2, 0.85% 5/20/14 (d) | 870,212 | 871,431 | ||
Class A3, 1.1% 8/22/16 (d) | 1,800,000 | 1,804,802 | ||
Citibank Credit Card Issuance Trust Series 2012-A1 Class A1, 0.55% 10/7/17 | 2,990,000 | 2,989,902 | ||
Countrywide Home Loans, Inc.: | ||||
Series 2003-BC1 Class B1, 5.4322% 3/25/32 (MGIC Investment Corp. Insured) (f) | 25,161 | 24,295 | ||
Series 2004-2 Class 3A4, 0.7017% 7/25/34 (f) | 62,430 | 56,887 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Countrywide Home Loans, Inc.: - continued | ||||
Series 2004-3 Class M4, 1.6567% 4/25/34 (f) | $ 20,061 | $ 9,502 | ||
Series 2004-4 Class M2, 0.9967% 6/25/34 (f) | 74,616 | 66,191 | ||
Discover Card Master Trust: | ||||
Series 2012-A1 Class A1, 0.81% 8/15/17 | 2,920,000 | 2,940,133 | ||
Series 2012-A2 Class A2, 0.3512% 10/17/16 (f) | 3,000,000 | 3,002,533 | ||
Series 2012-A3 Class A3, 0.86% 11/15/17 | 5,410,000 | 5,451,668 | ||
Series 2013-A2 Class A2, 0.69% 8/15/18 | 5,580,000 | 5,579,316 | ||
Enterprise Fleet Financing LLC Series 2012-1 Class A2, 1.14% 11/20/17 (d) | 1,680,000 | 1,689,555 | ||
Fannie Mae Series 2004-T5: | ||||
Class AB1, 0.7272% 5/28/35 (f) | 159,655 | 129,444 | ||
Class AB3, 1.0332% 5/28/35 (f) | 67,441 | 52,066 | ||
Fieldstone Mortgage Investment Corp. Series 2004-3 Class M5, 2.3767% 8/25/34 (f) | 36,914 | 26,912 | ||
First Franklin Mortgage Loan Trust Series 2005-FF9 Class A3, 0.4817% 10/25/35 (f) | 82,006 | 81,766 | ||
Ford Credit Auto Lease Trust: | ||||
Series 2012-A Class A3, 0.85% 1/15/15 | 820,000 | 822,567 | ||
Series 2012-B: | ||||
Class A2, 0.54% 11/15/14 | 520,000 | 520,354 | ||
Class A3, 0.57% 9/15/15 | 1,240,000 | 1,241,266 | ||
Ford Credit Auto Owner Trust Series 2012-B Class A3, 0.72% 12/15/16 | 1,950,000 | 1,956,204 | ||
Ford Credit Auto Owner Trust Series 2012-D Class A3, 0.51% 4/15/17 | 1,090,000 | 1,089,204 | ||
Ford Credit Floorplan Master Owner Trust: | ||||
Series 2010-5 Class A1, 1.5% 9/15/15 | 1,110,000 | 1,116,429 | ||
Series 2012-1 Class A, 0.6712% 1/15/16 (f) | 5,000,000 | 5,014,240 | ||
Series 2012-4 Class A1, 0.74% 9/15/16 | 2,380,000 | 2,386,874 | ||
Series 2013-1 Class A1, 0.85% 1/15/18 | 2,380,000 | 2,378,748 | ||
Fremont Home Loan Trust: | ||||
Series 2004-D: | ||||
Class M4, 1.6267% 11/25/34 (f) | 104,293 | 5,298 | ||
Class M5, 1.7017% 11/25/34 (f) | 55,183 | 970 | ||
Series 2005-A: | ||||
Class M3, 0.9367% 1/25/35 (f) | 120,398 | 51,362 | ||
Class M4, 1.2217% 1/25/35 (f) | 46,138 | 5,447 | ||
GCO Education Loan Funding Master Trust II Series 2007-1A Class C1L, 0.6681% 2/25/47 (d)(f) | 298,000 | 202,789 | ||
GE Business Loan Trust Series 2003-1 Class A, 0.6312% 4/15/31 (d)(f) | 19,515 | 18,580 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
GE Capital Credit Card Master Note Trust: | ||||
Series 2012-1 Class A, 1.03% 1/15/18 | $ 2,450,000 | $ 2,475,012 | ||
Series 2012-4 Class A, 0.5012% 6/15/18 (f) | 3,995,000 | 4,003,452 | ||
Series 2012-5 Class A, 0.97% 6/15/18 | 3,380,000 | 3,411,288 | ||
GE Equipment Small Ticket LLC Series 2012-1 Class A3, 1.04% 9/21/15 (d) | 1,050,000 | 1,054,432 | ||
GE Equipment Transportation LLC: | ||||
Series 2012-1 Class A2, 0.74% 9/22/14 | 915,359 | 916,525 | ||
Series 2012-2 Class A2, 0.47% 4/24/15 | 1,700,000 | 1,699,803 | ||
Guggenheim Structured Real Estate Funding Ltd. Series 2006-3 Class C, 0.7517% 9/25/46 (d)(f) | 1,728,962 | 1,707,350 | ||
Home Equity Asset Trust: | ||||
Series 2003-3 Class M1, 1.4917% 8/25/33 (f) | 80,822 | 74,313 | ||
Series 2003-5 Class A2, 0.9017% 12/25/33 (f) | 44,160 | 37,104 | ||
Series 2004-1 Class M2, 1.9017% 6/25/34 (f) | 71,529 | 57,506 | ||
Honda Auto Receivables Owner Trust: | ||||
Series 2011-1 Class A4, 1.8% 4/17/17 | 640,000 | 648,595 | ||
Series 2012-2 Class A3, 0.7% 2/16/16 | 1,610,000 | 1,616,450 | ||
HSI Asset Securitization Corp. Trust Series 2007-HE1 Class 2A3, 0.3917% 1/25/37 (f) | 157,118 | 76,440 | ||
John Deere Owner Trust Series 2011-A Class A3, 1.29% 1/15/16 | 1,196,986 | 1,202,721 | ||
JPMorgan Mortgage Acquisition Trust Series 2007-CH1 Class AV4, 0.3317% 11/25/36 (f) | 157,766 | 152,749 | ||
Keycorp Student Loan Trust Series 1999-A Class A2, 0.64% 12/27/29 (f) | 56,686 | 54,148 | ||
Marriott Vacation Club Owner Trust Series 2006-1A: | ||||
Class B, 5.827% 4/20/28 (d) | 43,833 | 43,783 | ||
Class C, 6.125% 4/20/28 (d) | 43,833 | 43,764 | ||
MASTR Asset Backed Securities Trust Series 2007-HE1 Class M1, 0.5017% 5/25/37 (f) | 84,461 | 946 | ||
Mercedes-Benz Master Owner Trust Series 2012-AA Class A, 0.79% 11/15/17 (d) | 3,260,000 | 3,261,088 | ||
Mercedes-Benz Auto Lease Trust: | ||||
Series 2011-B Class A3, 1.07% 8/15/14 (d) | 1,410,000 | 1,414,272 | ||
Series 2012-A Class A3, 0.88% 11/17/14 | 1,310,000 | 1,314,459 | ||
Merrill Lynch Mortgage Investors Trust: | ||||
Series 2006-FM1 Class A2B, 0.3117% 4/25/37 (f) | 119,572 | 100,096 | ||
Series 2006-OPT1 Class A1A, 0.4617% 6/25/35 (f) | 167,544 | 149,494 | ||
Morgan Stanley ABS Capital I Trust: | ||||
Series 2004-HE6 Class A2, 0.5417% 8/25/34 (f) | 138,792 | 120,696 | ||
Series 2004-NC8 Class M6, 2.0767% 9/25/34 (f) | 69,376 | 34,818 | ||
Series 2005-NC1 Class M1, 0.6417% 1/25/35 (f) | 50,738 | 46,200 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Morgan Stanley ABS Capital I Trust: - continued | ||||
Series 2005-NC2 Class B1, 1.3717% 3/25/35 (f) | $ 52,840 | $ 2,153 | ||
Nissan Auto Lease Trust: | ||||
Series 2011-A Class A3, 1.04% 8/15/14 | 1,840,000 | 1,844,307 | ||
Series 2011-B Class A3, 0.92% 2/16/15 | 930,000 | 933,095 | ||
Nissan Auto Receivables Owner Trust Series 2011-B Class A3, 0.95% 2/16/16 | 950,000 | 956,184 | ||
Nissan Master Owner Trust Receivables: | ||||
Series 2012-A Class A, 0.6757% 5/15/17 (f) | 2,900,000 | 2,917,199 | ||
Series 2013-A Class A, 0.5017% 2/15/18 (f) | 2,000,000 | 2,000,000 | ||
Northstar Education Finance, Inc., Delaware Series 2005-1 Class A5, 1.0505% 10/30/45 (f) | 488,838 | 475,268 | ||
Ocala Funding LLC: | ||||
Series 2005-1A Class A, 1.7007% 3/20/10 (b)(d)(f) | 71,000 | 0 | ||
Series 2006-1A Class A, 1.6007% 3/20/11 (b)(d)(f) | 149,000 | 0 | ||
Park Place Securities, Inc.: | ||||
Series 2004-WCW1: | ||||
Class M3, 1.4517% 9/25/34 (f) | 797,630 | 638,347 | ||
Class M4, 1.6517% 9/25/34 (f) | 1,086,724 | 319,294 | ||
Series 2005-WCH1 Class M4, 1.0317% 1/25/36 (f) | 187,294 | 152,147 | ||
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-HE1 Class A, 1.0017% 4/25/33 (f) | 648 | 603 | ||
Santander Drive Auto Receivables Trust: | ||||
Series 2011-3 Class A2, 1.11% 8/15/14 | 212,798 | 213,005 | ||
Series 2011-4 Class A2, 1.37% 3/16/15 | 499,487 | 500,757 | ||
Series 2012-1 Class A2, 1.25% 4/15/15 | 632,506 | 634,384 | ||
Series 2012-2 Class A2, 0.91% 5/15/15 | 970,049 | 972,273 | ||
Series 2012-3 Class A3, 1.08% 4/15/16 | 910,000 | 915,630 | ||
Series 2012-4 Class A3, 1.04% 8/15/16 | 1,620,000 | 1,630,976 | ||
Series 2012-5 Class A3, 0.83% 12/15/16 | 1,320,000 | 1,325,498 | ||
Series 2013-1 Class A2, 0.48% 2/16/16 | 2,630,000 | 2,629,767 | ||
Saxon Asset Securities Trust Series 2004-1 Class M1, 0.9967% 3/25/35 (f) | 150,854 | 125,314 | ||
Sierra Receivables Funding Co. Series 2007-1A Class A2, 0.3547% 3/20/19 (FGIC Insured) (d)(f) | 32,616 | 32,400 | ||
SLM Private Credit Student Loan Trust: | ||||
Series 2004-A: | ||||
Class B, 0.888% 6/15/33 (f) | 256,974 | 176,123 | ||
Class C, 1.258% 6/15/33 (f) | 1,171,983 | 800,829 | ||
Series 2004-B: | ||||
Class A2, 0.508% 6/15/21 (f) | 1,180,447 | 1,162,545 | ||
Class C, 1.178% 9/15/33 (f) | 1,789,879 | 1,214,798 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
SLM Student Loan Trust: | ||||
Series 2012-7 Class A2, 0.4837% 9/25/19 (f) | $ 2,189,000 | $ 2,188,997 | ||
Series 2013-1 Class A2, 0.4512% 9/25/19 (f) | 2,790,000 | 2,790,073 | ||
Structured Asset Investment Loan Trust Series 2004-8 Class M5, 1.9267% 9/25/34 (f) | 7,313 | 3,050 | ||
Terwin Mortgage Trust Series 2003-4HE Class A1, 1.0617% 9/25/34 (f) | 86,903 | 78,711 | ||
Volkswagen Auto Loan Enhanced Trust Series 2011-1 Class A3, 1.22% 6/22/15 | 2,205,181 | 2,215,053 | ||
Whinstone Capital Management Ltd. Series 1A Class B3, 2.101% 10/25/44 (d)(f) | 1,390,734 | 1,216,893 | ||
World Omni Auto Lease Securitization Trust Series 2012-A Class A3, 0.93% 11/16/15 | 910,000 | 915,888 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $164,767,109) |
| |||
Collateralized Mortgage Obligations - 5.8% | ||||
| ||||
Private Sponsor - 1.2% | ||||
Arran Residential Mortgages Funding PLC floater Series 2011-1A Class A1C, 1.4901% 11/19/47 (d)(f) | 315,699 | 316,353 | ||
Banc of America Funding Trust sequential payer Series 2009-R1 Class A1, 4.9643% 5/20/36 (f) | 33,886 | 33,971 | ||
Credit Suisse Mortgage Capital Certificates: | ||||
floater Series 2011-7R Class A1, 1.4597% 8/28/47 (d)(f) | 539,696 | 535,949 | ||
sequential payer Series 2010-16 Class A1, 3% 6/25/50 (d) | 250,564 | 252,186 | ||
Gracechurch Mortgage Financing PLC floater Series 2006-1 Class A6, 0.3891% 11/20/56 (d)(f) | 281,228 | 281,169 | ||
Granite Master Issuer PLC floater: | ||||
Series 2006-1A: | ||||
Class A5, 0.3407% 12/20/54 (d)(f) | 1,727,538 | 1,692,987 | ||
Class C2, 1.4007% 12/20/54 (d)(f) | 762,000 | 648,462 | ||
Series 2006-2: | ||||
Class A4, 0.2807% 12/20/54 (f) | 569,879 | 558,482 | ||
Class C1, 1.1407% 12/20/54 (f) | 3,254,000 | 2,769,154 | ||
Series 2006-3 Class C2, 1.2007% 12/20/54 (f) | 142,000 | 120,842 | ||
Series 2006-4: | ||||
Class B1, 0.3807% 12/20/54 (f) | 381,000 | 355,473 | ||
Class C1, 0.9607% 12/20/54 (f) | 233,000 | 198,283 | ||
Class M1, 0.5407% 12/20/54 (f) | 100,000 | 89,500 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
Private Sponsor - continued | ||||
Granite Master Issuer PLC floater: - continued | ||||
Series 2007-1: | ||||
Class 1C1, 0.8007% 12/20/54 (f) | $ 235,000 | $ 199,985 | ||
Class 1M1, 0.5007% 12/20/54 (f) | 153,000 | 136,935 | ||
Class 2C1, 1.0607% 12/20/54 (f) | 107,000 | 91,057 | ||
Class 2M1, 0.7007% 12/20/54 (f) | 196,000 | 175,420 | ||
Series 2007-2 Class 2C1, 1.0622% 12/17/54 (f) | 272,000 | 231,472 | ||
Granite Mortgages Series 2003-2 Class 1A3, 0.802% 7/20/43 (f) | 499,216 | 493,400 | ||
Granite Mortgages PLC floater: | ||||
Series 2003-3: | ||||
Class 1A3, 0.702% 1/20/44 (f) | 198,365 | 196,446 | ||
Class 1C, 2.752% 1/20/44 (f) | 54,183 | 52,047 | ||
Series 2004-1 Class 2A1, 0.629% 3/20/44 (f) | 2,760,494 | 2,728,334 | ||
Series 2004-3 Class 2A1, 0.589% 9/20/44 (f) | 907,291 | 896,721 | ||
MASTR Adjustable Rate Mortgages Trust Series 2007-3 Class 22A2, 0.4117% 5/25/47 (f) | 86,112 | 62,952 | ||
Merrill Lynch Alternative Note Asset Trust floater Series 2007-OAR1 Class A1, 0.3717% 2/25/37 (f) | 131,418 | 113,482 | ||
RESI Finance LP/RESI Finance DE Corp. floater Series 2003-B Class B5, 2.5492% 7/10/35 (d)(f) | 56,785 | 49,954 | ||
Residential Funding Securities Corp. floater Series 2003-RP2 Class A1, 0.6517% 6/25/33 (d)(f) | 8,767 | 8,532 | ||
Sequoia Mortgage Trust floater Series 2004-6 Class A3B, 1.3885% 7/20/34 (f) | 4,036 | 3,780 | ||
TOTAL PRIVATE SPONSOR | 13,293,328 | |||
U.S. Government Agency - 4.6% | ||||
Fannie Mae: | ||||
floater: | ||||
Series 2008-76 Class EF, 0.7017% 9/25/23 (f) | 217,476 | 218,257 | ||
Series 2013-9 Class FA 0.5517% 3/25/42 (f) | 3,240,000 | 3,243,441 | ||
floater planned amortization class Series 2005-90 Class FC, 0.4517% 10/25/35 (f) | 804,249 | 804,391 | ||
pass-thru certificates Series 2012-127 Class DH, 4% 11/25/27 | 1,614,194 | 1,733,304 | ||
planned amortization class: | ||||
Series 2006-54 Class PE, 6% 2/25/33 | 207,022 | 209,310 | ||
Series 2012-94 Class E, 3% 6/25/22 | 937,745 | 983,790 | ||
sequential payer: | ||||
Series 2001-40 Class Z, 6% 8/25/31 | 321,272 | 359,825 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
sequential payer: - continued | ||||
Series 2003-76 Class BA, 4.5% 3/25/18 | $ 396,652 | $ 410,696 | ||
Series 2009-31 Class A, 4% 2/25/24 | 306,956 | 320,533 | ||
Series 2010-135 Class DE, 2.25% 4/25/24 | 1,063,387 | 1,082,585 | ||
Series 2011-16 Class FB, 0.3517% 3/25/31 (f) | 2,231,373 | 2,229,685 | ||
Series 2010-123 Class DL, 3.5% 11/25/25 | 520,662 | 542,949 | ||
Series 2010-143 Class B, 3.5% 12/25/25 | 818,595 | 860,813 | ||
Series 2011-23 Class AB, 2.75% 6/25/20 | 671,460 | 694,207 | ||
target amortization Series 2008-29 Class BG 4.7% 12/25/35 | 524,133 | 554,739 | ||
Federal Home Loan Mortgage Corp. floater sequential payer Series 3943 Class EF 0.4512% 2/15/26 (f) | 1,345,086 | 1,347,809 | ||
Freddie Mac: | ||||
floater: | ||||
Series 2711 Class FC, 1.1012% 2/15/33 (f) | 1,741,979 | 1,769,088 | ||
Series 3346 Class FA, 0.4312% 2/15/19 (f) | 2,600,238 | 2,603,873 | ||
floater planned amortization class Series 3117 Class JF, 0.5012% 2/15/36 (f) | 919,886 | 921,250 | ||
floater sequential payer Series 3387 Class DF, 0.3812% 10/15/17 (f) | 278,646 | 278,645 | ||
planned amortization class: | ||||
Series 2535 Class PC, 6% 9/15/32 | 252,704 | 263,600 | ||
Series 2866 Class XE, 4% 12/15/18 | 486,179 | 500,845 | ||
Series 3081 Class CP 5.5% 10/15/34 | 2,837,838 | 2,947,416 | ||
Series 3792 Class DF, 0.6012% 11/15/40 (f) | 2,307,004 | 2,314,831 | ||
Series 3820 Class DA, 4% 11/15/35 | 865,613 | 944,251 | ||
sequential payer: | ||||
Series 2635 Class DG, 4.5% 1/15/18 | 426,032 | 438,659 | ||
Series 3560 Class LA, 2% 8/15/14 | 56,626 | 56,647 | ||
Series 3573 Class LC, 1.85% 8/15/14 | 345,298 | 346,822 | ||
Series 3659 Class EJ 3% 6/15/18 | 1,494,453 | 1,542,362 | ||
Series 3696 Class AE, 1.2% 7/15/15 | 617,822 | 621,276 | ||
Series 3949 Class MK, 4.5% 10/15/34 | 590,000 | 660,828 | ||
Ginnie Mae guaranteed Multi-family REMIC pass-thru securities Series 2013-37 Class F, 0.4722% 6/20/40 (e)(f) | 890,000 | 890,000 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
floater: | ||||
Series 2010-53 Class FC, 1.0247% 4/20/40 (f) | 907,988 | 922,694 | ||
Series 2012-113 Class FJ, 0.4547% 1/20/42 (f) | 1,776,915 | 1,782,278 | ||
Series 2012-149 Class MF, 0.4547% 12/20/42 (f) | 3,321,729 | 3,320,075 | ||
Series 2013-9 Class F, 0.4507% 1/20/43 (f) | 2,366,990 | 2,374,176 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass-thru certificates: - continued | ||||
floater planned amortization class Series 2005-47 Class FX, 0.3547% 5/20/34 (f) | $ 3,365,356 | $ 3,364,714 | ||
floater sequential payer: | ||||
Series 2010-120 Class FB 0.5047% 9/20/35 (f) | 1,285,869 | 1,287,857 | ||
Series 2011-150 Class D, 3% 4/20/37 | 743,591 | 762,021 | ||
planned amortization class: | ||||
Series 2010-112 Class PM, 3.25% 9/20/33 | 558,353 | 571,203 | ||
Series 2010-99 Class PT, 3.5% 8/20/33 | 674,216 | 692,556 | ||
Series 2012-149 Class LF, 0.4547% 12/20/42 (f) | 1,373,367 | 1,372,684 | ||
Series 2012-97 Class JF, 0.4517% 8/16/42 (f) | 1,667,809 | 1,670,006 | ||
TOTAL U.S. GOVERNMENT AGENCY | 50,816,991 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $61,844,208) |
| |||
Commercial Mortgage Securities - 5.5% | ||||
| ||||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.4302% 2/14/43 (f)(g) | 391,841 | 12,861 | ||
Banc of America Large Loan, Inc. floater Series 2006-BIX1 Class G, 0.5312% 10/15/19 (d)(f) | 46,101 | 45,640 | ||
Banc of America REMIC Trust Series 2012-CLRN Class A1, 1.3512% 8/15/17 (d)(f) | 1,950,000 | 1,967,681 | ||
Bayview Commercial Asset Trust: | ||||
floater: | ||||
Series 2003-2 Class M1, 1.0517% 12/25/33 (d)(f) | 6,863 | 5,019 | ||
Series 2005-3A: | ||||
Class A2, 0.6017% 11/25/35 (d)(f) | 41,160 | 34,459 | ||
Class M1, 0.6417% 11/25/35 (d)(f) | 7,509 | 4,872 | ||
Class M2, 0.6917% 11/25/35 (d)(f) | 9,534 | 6,082 | ||
Class M3, 0.7117% 11/25/35 (d)(f) | 8,532 | 5,333 | ||
Class M4, 0.8017% 11/25/35 (d)(f) | 10,630 | 5,150 | ||
Series 2005-4A: | ||||
Class A2, 0.5917% 1/25/36 (d)(f) | 751,109 | 592,442 | ||
Class B1, 1.6017% 1/25/36 (d)(f) | 50,540 | 7,799 | ||
Class M1, 0.6517% 1/25/36 (d)(f) | 236,237 | 131,269 | ||
Class M2, 0.6717% 1/25/36 (d)(f) | 89,645 | 47,071 | ||
Class M3, 0.7017% 1/25/36 (d)(f) | 96,344 | 49,637 | ||
Class M4, 0.8117% 1/25/36 (d)(f) | 49,299 | 23,927 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Bayview Commercial Asset Trust: - continued | ||||
floater: - continued | ||||
Series 2005-4A: - continued | ||||
Class M5, 0.8517% 1/25/36 (d)(f) | $ 49,299 | $ 17,384 | ||
Class M6, 0.9017% 1/25/36 (d)(f) | 50,029 | 13,456 | ||
Series 2006-1: | ||||
Class A2, 0.5617% 4/25/36 (d)(f) | 23,300 | 18,868 | ||
Class M1, 0.5817% 4/25/36 (d)(f) | 8,333 | 5,370 | ||
Class M2, 0.6017% 4/25/36 (d)(f) | 8,805 | 5,454 | ||
Class M3, 0.6217% 4/25/36 (d)(f) | 7,576 | 4,513 | ||
Class M4, 0.7217% 4/25/36 (d)(f) | 4,293 | 2,468 | ||
Class M5, 0.7617% 4/25/36 (d)(f) | 4,167 | 2,291 | ||
Class M6, 0.8417% 4/25/36 (d)(f) | 8,308 | 3,496 | ||
Series 2006-2A: | ||||
Class A1, 0.4317% 7/25/36 (d)(f) | 230,204 | 180,451 | ||
Class A2, 0.4817% 7/25/36 (d)(f) | 20,783 | 16,347 | ||
Class B1, 1.0717% 7/25/36 (d)(f) | 7,781 | 1,397 | ||
Class M1, 0.5117% 7/25/36 (d)(f) | 21,805 | 10,369 | ||
Class M2, 0.5317% 7/25/36 (d)(f) | 15,385 | 6,887 | ||
Class M3, 0.5517% 7/25/36 (d)(f) | 12,761 | 5,423 | ||
Class M4, 0.6217% 7/25/36 (d)(f) | 8,617 | 2,135 | ||
Class M5, 0.6717% 7/25/36 (d)(f) | 10,592 | 2,481 | ||
Class M6, 0.7417% 7/25/36 (d)(f) | 15,803 | 3,306 | ||
Series 2006-3A: | ||||
Class M4, 0.6317% 10/25/36 (d)(f) | 17,397 | 2,632 | ||
Class M5, 0.6817% 10/25/36 (d)(f) | 20,543 | 1,089 | ||
Series 2006-4A Class M6, 0.7217% 12/25/36 (d)(f) | 12,494 | 400 | ||
Series 2007-1 Class A2, 0.4717% 3/25/37 (d)(f) | 361,147 | 208,885 | ||
Series 2007-2A: | ||||
Class A1, 0.4717% 7/25/37 (d)(f) | 62,214 | 43,575 | ||
Class A2, 0.5217% 7/25/37 (d)(f) | 58,270 | 28,431 | ||
Class M1, 0.5717% 7/25/37 (d)(f) | 20,768 | 5,709 | ||
Class M2, 0.6117% 7/25/37 (d)(f) | 11,654 | 1,989 | ||
Class M3, 0.6917% 7/25/37 (d)(f) | 11,803 | 1,187 | ||
Class M4, 0.8517% 7/25/37 (d)(f) | 22,726 | 1,394 | ||
Class M5, 0.9517% 7/25/37 (d)(f) | 20,096 | 894 | ||
Class M6, 1.2017% 7/25/37 (d)(f) | 13,083 | 114 | ||
Series 2007-3: | ||||
Class A2, 0.4917% 7/25/37 (d)(f) | 88,945 | 46,301 | ||
Class B1, 1.1517% 7/25/37 (d)(f) | 76,544 | 5,847 | ||
Class B2, 1.8017% 7/25/37 (d)(f) | 33,299 | 1,778 | ||
Class M1, 0.5117% 7/25/37 (d)(f) | 67,197 | 22,693 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Bayview Commercial Asset Trust: - continued | ||||
floater: - continued | ||||
Series 2007-3: - continued | ||||
Class M2, 0.5417% 7/25/37 (d)(f) | $ 70,648 | $ 19,726 | ||
Class M3, 0.5717% 7/25/37 (d)(f) | 114,358 | 24,846 | ||
Class M4, 0.7017% 7/25/37 (d)(f) | 180,838 | 30,494 | ||
Class M5, 0.8017% 7/25/37 (d)(f) | 90,148 | 12,903 | ||
Class M6, 1.0017% 7/25/37 (d)(f) | 70,402 | 8,502 | ||
Series 2007-4A: | ||||
Class A2, 0.7517% 9/25/37 (d)(f) | 814,701 | 144,178 | ||
Class M1, 1.1517% 9/25/37 (d)(f) | 126,242 | 11,736 | ||
Class M2, 1.2517% 9/25/37 (d)(f) | 126,242 | 9,710 | ||
Class M4, 1.8017% 9/25/37 (d)(f) | 332,687 | 16,239 | ||
Class M5, 1.9517% 9/25/37 (d)(f) | 211,626 | 6,745 | ||
Series 2006-2A Class IO, 3.1745% 7/25/36 (c)(d)(g) | 7,534,273 | 69,433 | ||
Bear Stearns Commercial Mortgage Securities Trust: | ||||
floater: | ||||
Series 2006-BBA7: | ||||
Class H, 0.8512% 3/15/19 (d)(f) | 47,343 | 46,882 | ||
Class J, 1.0512% 3/15/19 (d)(f) | 51,667 | 49,121 | ||
Series 2007-BBA8: | ||||
Class A2, 0.3512% 3/15/22 (d)(f) | 114,346 | 113,713 | ||
Class D, 0.4512% 3/15/22 (d)(f) | 52,963 | 50,022 | ||
Class E, 0.5012% 3/15/22 (d)(f) | 275,033 | 254,258 | ||
Class F, 0.5512% 3/15/22 (d)(f) | 168,653 | 152,541 | ||
Class G, 0.6012% 3/15/22 (d)(f) | 43,346 | 38,338 | ||
Class H, 0.7512% 3/15/22 (d)(f) | 52,963 | 45,785 | ||
Class J, 0.9012% 3/15/22 (d)(f) | 52,963 | 44,461 | ||
sequential payer Series 2005-PWR8 Class A4, 4.674% 6/11/41 | 1,320,000 | 1,414,693 | ||
Series 2005-PWR9 Class X2, 0.3653% 9/11/42 (d)(f)(g) | 24,675,481 | 58,925 | ||
Series 2005-T18 Class A4, 4.933% 2/13/42 | 1,884,729 | 2,018,976 | ||
C-BASS Trust floater Series 2006-SC1 Class A, 0.4717% 5/25/36 (d)(f) | 82,236 | 76,693 | ||
CDC Commercial Mortgage Trust Series 2002-FX1 Class XCL, 1.3266% 5/15/35 (d)(f)(g) | 8,571,648 | 134,592 | ||
Citigroup / Deutsche Bank Commercial Mortgage Trust Series 2005-CD1 Class A4, 5.2194% 7/15/44 (f) | 640,000 | 702,410 | ||
Citigroup Commercial Mortgage Trust floater Series 2006-FL2 Class H, 0.5712% 8/15/21 (d)(f) | 10,371 | 9,967 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2006-CD3 Class X3, 0.4852% 10/15/48 (f)(g) | 40,021,201 | 133,191 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
COMM pass-thru certificates: | ||||
floater: | ||||
Series 2005-F10A Class J, 1.0512% 4/15/17 (d)(f) | $ 16,086 | $ 14,349 | ||
Series 2005-FL11: | ||||
Class F, 0.6512% 11/15/17 (d)(f) | 18,996 | 17,273 | ||
Class G, 0.7012% 11/15/17 (d)(f) | 13,167 | 11,709 | ||
Series 2006-CN2A Class A2FL, 0.4192% 2/5/19 (d)(f) | 226,530 | 225,013 | ||
sequential payer Series 2006-CN2A Class A2FX, 5.449% 2/5/19 (d) | 1,004,771 | 1,010,067 | ||
Series 2006-CN2A Class E, 5.5699% 2/5/19 (d)(f) | 630,000 | 629,240 | ||
Commercial Mortgage pass-thru certificates Series 2004-LB4A Class A5, 4.84% 10/15/37 | 5,370,000 | 5,635,740 | ||
Credit Suisse Commercial Mortgage Trust Series 2006-C5 Class ASP, 0.6649% 12/15/39 (f)(g) | 29,436,600 | 170,497 | ||
Credit Suisse First Boston Mortgage Securities Corp.: | ||||
Series 2001-CK6 Class AX, 1.0608% 8/15/36 (f)(g) | 1,212,829 | 1,509 | ||
Series 2003-C4 Class A4, 5.137% 8/15/36 | 708,442 | 712,971 | ||
Credit Suisse Mortgage Capital Certificates floater Series 2007-TFL1: | ||||
Class C: | ||||
0.3712% 2/15/22 (d)(f) | 236,650 | 222,414 | ||
0.4712% 2/15/22 (d)(f) | 84,521 | 79,183 | ||
Class F, 0.5212% 2/15/22 (d)(f) | 169,020 | 158,261 | ||
DBUBS Series 2011-LC3A Class A1, 2.238% 8/10/44 | 273,025 | 277,656 | ||
Extended Stay America Trust floater Series 2013-ESFL: | ||||
Class A1FL, 1.008% 12/5/31 (d)(f) | 890,000 | 890,267 | ||
Class A2FL, 0.908% 12/5/31 (d)(f) | 1,160,000 | 1,161,432 | ||
Freddie Mac: | ||||
pass-thru certificates Series K708 Class A1, 1.67% 10/25/18 | 1,484,688 | 1,524,526 | ||
Series K707 Class A1, 1.615% 9/25/18 | 1,727,814 | 1,771,980 | ||
GE Capital Commercial Mortgage Corp.: | ||||
sequential payer Series 2006-C1 Class A4, 5.2965% 3/10/44 (f) | 1,770,000 | 1,961,102 | ||
Series 2001-1 Class X1, 1.8773% 5/15/33 (d)(f)(g) | 462,645 | 7,042 | ||
GMAC Commercial Mortgage Securities, Inc.: | ||||
sequential payer Series 2003-C2 Class A2, 5.4417% 5/10/40 (f) | 542,573 | 547,750 | ||
Series 2004-C2 Class A4, 5.301% 8/10/38 | 1,200,000 | 1,262,028 | ||
Greenwich Capital Commercial Funding Corp.: | ||||
floater Series 2006-FL4 Class B, 0.3892% 11/5/21 (d)(f) | 1,170,000 | 1,125,336 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Greenwich Capital Commercial Funding Corp.: - continued | ||||
Series 2007-GG11 Class A1, 0.2381% 12/10/49 (d)(f)(g) | $ 60,357,078 | $ 296,957 | ||
GS Mortgage Securities Corp. II: | ||||
floater: | ||||
Series 2006-FL8A Class F, 0.6477% 6/6/20 (d)(f) | 105,970 | 105,616 | ||
Series 2007-EOP: | ||||
Class A1, 1.1031% 3/6/20 (d)(f) | 1,499,304 | 1,500,715 | ||
Class A2, 1.2601% 3/6/20 (d)(f) | 460,000 | 460,808 | ||
Class C, 2.0056% 3/6/20 (d)(f) | 1,710,000 | 1,718,199 | ||
Class D, 2.2018% 3/6/20 (d)(f) | 215,000 | 216,059 | ||
Class E, 2.4764% 3/6/20 (d)(f) | 360,000 | 362,113 | ||
Class F, 2.6334% 3/6/20 (d)(f) | 180,000 | 181,056 | ||
Class G, 2.7903% 3/6/20 (d)(f) | 90,000 | 90,535 | ||
Class H, 3.3004% 3/6/20 (d)(f) | 150,000 | 150,967 | ||
Class J, 4.0852% 3/6/20 (d)(f) | 215,000 | 216,497 | ||
sequential payer: | ||||
Series 2004-GG2 Class A6, 5.396% 8/10/38 (f) | 1,340,000 | 1,403,973 | ||
Series 2005-GG4 Class A3, 4.607% 7/10/39 | 5,485 | 5,512 | ||
Series 2006-GG6 Class A2, 5.506% 4/10/38 | 276,455 | 286,323 | ||
GS Mortgage Securities Corp. Trust Series 2013-KYO Class A, 1.0512% 11/8/29 (d)(f) | 1,880,000 | 1,884,356 | ||
GS Mortgage Securities Trust: | ||||
sequential payer Series 2006-GG8 Class A2, 5.479% 11/10/39 | 612,896 | 621,786 | ||
Series 2011-GC5 Class A1, 1.468% 8/10/44 (f) | 815,636 | 826,295 | ||
Series 2012-GC6 Class A1, 1.282% 1/10/45 | 389,230 | 392,482 | ||
JPMorgan Chase Commercial Mortgage Securities Corp.: | ||||
floater Series 2011-CCHP Class A, 2.6% 7/15/28 (d)(f) | 484,216 | 484,419 | ||
Series 2003-CB7 Class A4, 4.879% 1/12/38 (f) | 439,294 | 448,345 | ||
Series 2012-C6 Class A1, 1.0305% 5/15/45 | 1,072,569 | 1,079,650 | ||
JPMorgan Chase Commercial Mortgage Securities Trust: | ||||
floater Series 2006-FLA2: | ||||
Class D, 0.4312% 11/15/18 (d)(f) | 17,283 | 16,351 | ||
Class E, 0.4812% 11/15/18 (d)(f) | 24,491 | 22,681 | ||
Class F, 0.5312% 11/15/18 (d)(f) | 36,733 | 32,549 | ||
Class G, 0.5612% 11/15/18 (d)(f) | 31,925 | 27,011 | ||
Class H, 0.7012% 11/15/18 (d)(f) | 24,497 | 19,747 | ||
sequential payer: | ||||
Series 2005-LDP5 Class A2, 5.198% 12/15/44 | 549,018 | 552,992 | ||
Series 2007-LD11 Class A2, 5.7974% 6/15/49 (f) | 597,480 | 616,272 | ||
Series 2007-LDPX Class A2 S, 5.305% 1/15/49 | 205,021 | 207,377 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2003-C3 Class A4, 4.166% 5/15/32 | $ 7,932 | $ 7,940 | ||
Series 2006-C1 Class A2, 5.084% 2/15/31 | 92,762 | 92,848 | ||
Series 2007-C6 Class A2, 5.845% 7/15/40 | 339,527 | 339,974 | ||
Series 2004-C8, 4.799% 12/15/29 | 1,186,768 | 1,243,164 | ||
Series 2006-C6 Class XCP, 0.6751% 9/15/39 (f)(g) | 16,194,199 | 65,797 | ||
Series 2007-C1 Class XCP, 0.4249% 2/15/40 (f)(g) | 5,753,510 | 25,874 | ||
Series 2007-C2 Class XCP, 0.4823% 2/15/40 (f)(g) | 33,180,365 | 174,894 | ||
Lehman Brothers Floating Rate Commercial Mortgage Trust floater Series 2006-LLFA: | ||||
Class F, 0.5412% 9/15/21 (d)(f) | 145,070 | 137,539 | ||
Class G, 0.5612% 9/15/21 (d)(f) | 286,588 | 268,846 | ||
Class H, 0.6012% 9/15/21 (d)(f) | 73,934 | 67,879 | ||
Merrill Lynch Mortgage Trust: | ||||
sequential payer Series 2005-MKB2 Class A2, 4.806% 9/12/42 | 20,566 | 20,600 | ||
Series 2005-MCP1 Class XP, 0.6316% 6/12/43 (f)(g) | 7,198,672 | 13,591 | ||
Series 2005-MKB2 Class XP, 0.2487% 9/12/42 (f)(g) | 3,253,415 | 68 | ||
Merrill Lynch-CFC Commercial Mortgage Trust: | ||||
sequential payer Series 2007-9 Class A2, 5.59% 9/12/49 | 328,435 | 329,056 | ||
Series 2006-4 Class XP, 0.6175% 12/12/49 (f)(g) | 12,516,996 | 141,455 | ||
Morgan Stanley BAML Trust Series 2012-C5 Class A1, 0.916% 8/15/45 | 1,218,038 | 1,222,733 | ||
Morgan Stanley Capital I Trust: | ||||
floater: | ||||
Series 2006-XLF Class C, 1.402% 7/15/19 (d)(f) | 45,397 | 18,216 | ||
Series 2007-XLFA: | ||||
Class A2, 0.302% 10/15/20 (d)(f) | 619,371 | 613,766 | ||
Class D, 0.392% 10/15/20 (d)(f) | 84,694 | 78,190 | ||
Class E, 0.452% 10/15/20 (d)(f) | 105,926 | 94,614 | ||
Class F, 0.502% 10/15/20 (d)(f) | 63,569 | 54,873 | ||
Class G, 0.542% 10/15/20 (d)(f) | 78,581 | 63,902 | ||
Class H, 0.632% 10/15/20 (d)(f) | 49,464 | 33,794 | ||
Class J, 0.782% 10/15/20 (d)(f) | 28,557 | 10,086 | ||
sequential payer: | ||||
Series 2003-IQ4 Class A2, 4.07% 5/15/40 | 72,279 | 72,270 | ||
Series 2007-IQ14 Class A2, 5.61% 4/15/49 | 857,633 | 882,668 | ||
Series 2012-C4 Class A1, 1.085% 3/15/45 | 1,067,420 | 1,075,105 | ||
Series 2005-HQ5 Class X2, 0.2189% 1/14/42 (f)(g) | 8,075,457 | 145 | ||
Series 2006-HQ9 Class A4, 5.731% 7/12/44 (f) | 1,130,000 | 1,278,253 | ||
Series 2011-C3 Class A1, 2.178% 7/15/49 | 1,939,599 | 1,987,889 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Morgan Stanley Dean Witter Capital I Trust sequential payer Series 2003-T11 Class A4, 5.15% 6/13/41 | $ 319,323 | $ 321,805 | ||
UBS Commercial Mortgage Trust Series 2012-C1 Class A1, 1.032% 5/10/45 | 704,305 | 708,858 | ||
Wachovia Bank Commercial Mortgage Trust: | ||||
floater: | ||||
Series 2006-WL7A: | ||||
Class A2, 0.3212% 9/15/21 (d)(f) | 1,117,800 | 1,100,245 | ||
Class E, 0.4812% 9/15/21 (d)(f) | 176,861 | 165,884 | ||
Class F, 0.5412% 9/15/21 (d)(f) | 238,334 | 221,564 | ||
Class G, 0.5612% 9/15/21 (d)(f) | 225,785 | 204,777 | ||
Class J, 0.8012% 9/15/21 (d)(f) | 50,198 | 38,098 | ||
Series 2007-WHL8 Class F, 0.6812% 6/15/20 (d)(f) | 376,985 | 332,602 | ||
Series 2003-C9 Class A4, 5.012% 12/15/35 | 1,376,118 | 1,402,971 | ||
Series 2006-C23: | ||||
Class A5, 5.416% 1/15/45 (f) | 2,290,000 | 2,562,304 | ||
Class X, 0.0906% 1/15/45 (d)(f)(g) | 184,080,072 | 1,473 | ||
Series 2007-C30 Class XP, 0.4747% 12/15/43 (d)(f)(g) | 33,690,178 | 173,670 | ||
Series 2007-C31A Class A2, 5.421% 4/15/47 | 592,064 | 595,394 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $63,487,683) |
| |||
Municipal Securities - 0.4% | ||||
| ||||
Illinois Gen. Oblig. Series 2010, 4.421% 1/1/15 | 4,570,000 |
| ||
Foreign Government and Government Agency Obligations - 0.5% | ||||
| ||||
Ontario Province 0.95% 5/26/15 | 3,800,000 | 3,837,141 | ||
United Mexican States 6.625% 3/3/15 | 1,300,000 | 1,443,000 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $5,215,862) |
| |||
Supranational Obligations - 1.0% | ||||
| ||||
International Bank for Reconstruction & Development 0.5% 4/15/16 | 11,100,000 |
| ||
Commercial Paper - 0.5% | ||||
| Principal | Value | ||
British Telecommunications PLC 1.5% 5/14/13 | $ 2,000,000 | $ 1,997,813 | ||
Vodafone Group PLC yankee: | ||||
0.77% 12/30/13 | 2,000,000 | 1,988,461 | ||
1.25% 3/12/13 | 1,500,000 | 1,499,867 | ||
TOTAL COMMERCIAL PAPER (Cost $5,480,256) | 5,486,141 | |||
Money Market Funds - 0.1% | |||
Shares |
| ||
Fidelity Cash Central Fund, 0.16% (a) | 598,825 |
| |
Cash Equivalents - 0.2% | |||
Maturity |
| ||
Investments in repurchase agreements in a joint trading account at 0.16%, dated 2/28/13 due 3/1/13 (Collateralized by U.S. Treasury Obligations) # | $ 2,101,009 |
| |
TOTAL INVESTMENT PORTFOLIO - 100.1% (Cost $1,097,646,201) | 1,105,796,034 | ||
NET OTHER ASSETS (LIABILITIES) - (0.1)% | (1,027,433) | ||
NET ASSETS - 100% | $ 1,104,768,601 | ||
Swap Agreements | ||||||||
Credit Default Swaps | ||||||||
Underlying Reference | Rating | Expiration | Counterparty | Fixed | Notional | Value(1) | Upfront | Unrealized |
Sell Protection | ||||||||
Morgan Stanley ABS Capital I Inc Series 2004-NC8 Class B3 | C | Oct. 2034 | Merrill Lynch, Inc. | 4.60% | $ 76,653 | $ (40,215) | $ - | $ (40,215) |
|
(1) Ratings are presented for credit default swaps in which the Fund has sold protection on the underlying referenced debt. Ratings for an underlying index represent a weighted average of the ratings of all securities included in the index. The value of each credit default swap and the credit rating can be measures of the current payment/performance risk. Where a credit rating is not disclosed, the value is used as the measure of the payment/performance risk. Ratings are from Moody's Investors Service, Inc. Where Moody's ratings are not available, S&P ratings are disclosed and are indicated as such. All ratings are as of the report date and do not reflect subsequent changes. |
|
(2) The notional amount of each credit default swap where the Fund has sold protection approximates the maximum potential amount of future payments that the Fund could be required to make if a credit event were to occur. |
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 initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(d) 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 $128,359,530 or 11.6% of net assets. |
(e) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(f) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
(g) 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. |
(h) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $738,111 or 0.1% of net assets. |
Additional information on each restricted holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
Iberbond 2004 PLC 4.826% 12/24/17 | 11/30/05 | $ 730,602 |
# Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement / Counterparty | Value |
$2,101,000 due 3/01/13 at 0.16% | |
Barclays Capital, Inc. | $ 588,352 |
Merrill Lynch, Pierce, Fenner & Smith, Inc. | 406,546 |
RBS Securities, Inc. | 1,106,102 |
| $ 2,101,000 |
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 | $ 7,497 |
Other Information |
The following is a summary of the inputs used, as of February 28, 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 | $ 467,667,392 | $ - | $ 466,929,281 | $ 738,111 |
U.S. Government and Government Agency Obligations | 277,032,060 | - | 277,032,060 | - |
U.S. Government Agency - Mortgage Securities | 43,512,583 | - | 43,512,583 | - |
Asset-Backed Securities | 162,887,974 | - | 159,392,646 | 3,495,328 |
Collateralized Mortgage Obligations | 64,110,319 | - | 64,110,319 | - |
Commercial Mortgage Securities | 61,203,998 | - | 61,185,782 | 18,216 |
Municipal Securities | 4,817,466 | - | 4,817,466 | - |
Foreign Government and Government Agency Obligations | 5,280,141 | - | 5,280,141 | - |
Supranational Obligations | 11,098,135 | - | 11,098,135 | - |
Commercial Paper | 5,486,141 | - | 5,486,141 | - |
Money Market Funds | 598,825 | 598,825 | - | - |
Cash Equivalents | 2,101,000 | - | 2,101,000 | - |
Total Investments in Securities: | $ 1,105,796,034 | $ 598,825 | $ 1,100,945,554 | $ 4,251,655 |
Derivative Instruments: | ||||
Liabilities | ||||
Swap Agreements | $ (40,215) | $ - | $ (40,215) | $ - |
Value of Derivative Instruments |
The following table is a summary of the Fund's value of derivative instruments by primary risk exposure as of February 28, 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 |
Credit Risk | ||
Swap Agreements (a) | $ - | $ (40,215) |
Total Value of Derivatives | $ - | $ (40,215) |
(a) Value is disclosed on the Statement of Assets and Liabilities in the Swap agreements, at value line-items. |
Distribution of investments by country or territory of incorporation, as a percentage of total net assets, is as follows. (Unaudited) |
United States of America | 86.3% |
United Kingdom | 4.1% |
Canada | 2.8% |
Australia | 1.5% |
Netherlands | 1.4% |
Multi-National | 1.0% |
Others (Individually Less Than 1%) | 2.9% |
| 100.0% |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements
Statement of Assets and Liabilities
| February 28, 2013 | |
|
|
|
Assets | ||
Investment in securities, at value (including repurchase agreements of $2,101,000) - See accompanying schedule: Unaffiliated issuers (cost $1,097,047,376) | $ 1,105,197,209 |
|
Fidelity Central Funds (cost $598,825) | 598,825 |
|
Total Investments (cost $1,097,646,201) |
| $ 1,105,796,034 |
Cash |
| 475 |
Receivable for investments sold | 1,000,359 | |
Receivable for swap agreements | 311 | |
Receivable for fund shares sold | 769,352 | |
Interest receivable | 3,628,741 | |
Distributions receivable from Fidelity Central Funds | 790 | |
Prepaid expenses | 2,091 | |
Total assets | 1,111,198,153 | |
|
|
|
Liabilities | ||
Payable for investments purchased | $ 2,681,477 | |
Delayed delivery | 890,000 | |
Payable for fund shares redeemed | 2,126,980 | |
Distributions payable | 25,067 | |
Swap agreements, at value | 40,215 | |
Accrued management fee | 291,423 | |
Distribution and service plan fees payable | 131,429 | |
Other affiliated payables | 170,869 | |
Other payables and accrued expenses | 72,092 | |
Total liabilities | 6,429,552 | |
|
|
|
Net Assets | $ 1,104,768,601 | |
Net Assets consist of: |
| |
Paid in capital | $ 1,139,101,609 | |
Undistributed net investment income | 108,929 | |
Accumulated undistributed net realized gain (loss) on investments | (42,551,556) | |
Net unrealized appreciation (depreciation) on investments | 8,109,619 | |
Net Assets | $ 1,104,768,601 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
| February 28, 2013 | |
|
|
|
Calculation of Maximum Offering Price Class A: | $ 9.35 | |
|
|
|
Maximum offering price per share (100/98.50 of $9.35) | $ 9.49 | |
Class T: | $ 9.36 | |
|
|
|
Maximum offering price per share (100/98.50 of $9.36) | $ 9.50 | |
Class B: | $ 9.37 | |
|
|
|
Class C: | $ 9.36 | |
|
|
|
Institutional Class: | $ 9.36 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Statement of Operations
| Six months ended February 28, 2013 | |
|
|
|
Investment Income |
|
|
Interest |
| $ 8,339,701 |
Income from Fidelity Central Funds |
| 7,497 |
Total income |
| 8,347,198 |
|
|
|
Expenses | ||
Management fee | $ 1,737,645 | |
Transfer agent fees | 831,934 | |
Distribution and service plan fees | 833,311 | |
Accounting and security lending fees | 194,830 | |
Custodian fees and expenses | 16,017 | |
Independent trustees' compensation | 2,205 | |
Registration fees | 61,608 | |
Audit | 87,062 | |
Legal | 2,691 | |
Miscellaneous | 4,676 | |
Total expenses before reductions | 3,771,979 | |
Expense reductions | (59) | 3,771,920 |
Net investment income (loss) | 4,575,278 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 2,634,124 | |
Swap agreements | 1,538 |
|
Total net realized gain (loss) |
| 2,635,662 |
Change in net unrealized appreciation (depreciation) on: Investment securities | (609,803) | |
Swap agreements | (3,232) | |
Total change in net unrealized appreciation (depreciation) |
| (613,035) |
Net gain (loss) | 2,022,627 | |
Net increase (decrease) in net assets resulting from operations | $ 6,597,905 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Changes in Net Assets
| Six months ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income (loss) | $ 4,575,278 | $ 13,063,045 |
Net realized gain (loss) | 2,635,662 | 3,181,198 |
Change in net unrealized appreciation (depreciation) | (613,035) | 4,946,490 |
Net increase (decrease) in net assets resulting | 6,597,905 | 21,190,733 |
Distributions to shareholders from net investment income | (4,417,339) | (14,264,673) |
Share transactions - net increase (decrease) | (144,905,684) | (35,012,868) |
Total increase (decrease) in net assets | (142,725,118) | (28,086,808) |
|
|
|
Net Assets | ||
Beginning of period | 1,247,493,719 | 1,275,580,527 |
End of period (including undistributed net investment income of $108,929 and distributions in excess of net investment income of $49,010, respectively) | $ 1,104,768,601 | $ 1,247,493,719 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class A
| Six months ended | Years ended August 31, | ||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data | ||||||
Net asset value, beginning of period | $ 9.34 | $ 9.29 | $ 9.23 | $ 8.96 | $ 8.94 | $ 9.25 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .038 | .090 | .134 | .189 | .237 | .364 |
Net realized and unrealized gain (loss) | .008 | .058 | .062 | .273 | .007 | (.315) |
Total from investment operations | .046 | .148 | .196 | .462 | .244 | .049 |
Distributions from net investment income | (.036) | (.098) | (.136) | (.192) | (.224) | (.359) |
Net asset value, end of period | $ 9.35 | $ 9.34 | $ 9.29 | $ 9.23 | $ 8.96 | $ 8.94 |
Total Return B,C,D | .50% | 1.61% | 2.14% | 5.21% | 2.81% | .51% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | .70% A | .70% | .70% | .71% | .74% | .78% |
Expenses net of fee waivers, if any | .70% A | .70% | .70% | .71% | .74% | .78% |
Expenses net of all reductions | .70% A | .69% | .70% | .71% | .74% | .78% |
Net investment income (loss) | .82% A | .97% | 1.44% | 2.07% | 2.70% | 3.98% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 205,422 | $ 212,725 | $ 250,546 | $ 254,410 | $ 265,959 | $ 342,015 |
Portfolio turnover rate G | 64% A | 75% | 204% | 217% | 318% I | 94% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class T
| Six months ended | Years ended August 31, | ||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 9.34 | $ 9.29 | $ 9.24 | $ 8.97 | $ 8.94 | $ 9.26 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .038 | .089 | .134 | .189 | .237 | .368 |
Net realized and unrealized gain (loss) | .018 | .059 | .052 | .273 | .016 | (.327) |
Total from investment operations | .056 | .148 | .186 | .462 | .253 | .041 |
Distributions from net investment income | (.036) | (.098) | (.136) | (.192) | (.223) | (.361) |
Net asset value, end of period | $ 9.36 | $ 9.34 | $ 9.29 | $ 9.24 | $ 8.97 | $ 8.94 |
Total Return B,C,D | .60% | 1.60% | 2.03% | 5.20% | 2.91% | .43% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | .71% A | .70% | .70% | .71% | .75% | .76% |
Expenses net of fee waivers, if any | .71% A | .70% | .70% | .71% | .75% | .76% |
Expenses net of all reductions | .71% A | .70% | .70% | .71% | .75% | .76% |
Net investment income (loss) | .81% A | .96% | 1.44% | 2.08% | 2.70% | 4.01% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 130,567 | $ 140,285 | $ 163,217 | $ 189,230 | $ 253,439 | $ 334,850 |
Portfolio turnover rate G | 64% A | 75% | 204% | 217% | 318% I | 94% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class B
| Six months ended | Years ended August 31, | ||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
|
|
Net asset value, beginning of period | $ 9.35 | $ 9.30 | $ 9.24 | $ 8.97 | $ 8.95 | $ 9.27 |
Income from Investment |
|
|
|
|
|
|
Net investment income (loss) E | - I | .015 | .059 | .115 | .167 | .295 |
Net realized and unrealized gain (loss) | .022 | .059 | .062 | .273 | .007 | (.326) |
Total from investment operations | .022 | .074 | .121 | .388 | .174 | (.031) |
Distributions from net investment income | (.002) | (.024) | (.061) | (.118) | (.154) | (.289) |
Net asset value, end of period | $ 9.37 | $ 9.35 | $ 9.30 | $ 9.24 | $ 8.97 | $ 8.95 |
Total Return B,C,D | .24% | .79% | 1.31% | 4.35% | 2.00% | (.36)% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | 1.51% A | 1.50% | 1.52% | 1.52% | 1.54% | 1.55% |
Expenses net of fee waivers, if any | 1.51% A | 1.50% | 1.52% | 1.52% | 1.54% | 1.55% |
Expenses net of all reductions | 1.51% A | 1.50% | 1.52% | 1.52% | 1.54% | 1.55% |
Net investment income (loss) | .01% A | .16% | .63% | 1.26% | 1.91% | 3.22% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 6,207 | $ 7,991 | $ 9,337 | $ 12,587 | $ 12,579 | $ 11,617 |
Portfolio turnover rate G | 64% A | 75% | 204% | 217% | 318% J | 94% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I Amount represents less than $.001 per share.
J The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class C
| Six months ended | Years ended August 31, | ||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 9.35 | $ 9.30 | $ 9.24 | $ 8.97 | $ 8.95 | $ 9.26 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | (.002) | .012 | .056 | .113 | .164 | .291 |
Net realized and unrealized gain (loss) | .013 | .058 | .062 | .273 | .006 | (.315) |
Total from investment operations | .011 | .070 | .118 | .386 | .170 | (.024) |
Distributions from net investment income | (.001) | (.020) | (.058) | (.116) | (.150) | (.286) |
Net asset value, end of period | $ 9.36 | $ 9.35 | $ 9.30 | $ 9.24 | $ 8.97 | $ 8.95 |
Total Return B,C,D | .12% | .76% | 1.29% | 4.33% | 1.95% | (.29)% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | 1.56% A | 1.54% | 1.54% | 1.54% | 1.57% | 1.58% |
Expenses net of fee waivers, if any | 1.56% A | 1.54% | 1.54% | 1.54% | 1.57% | 1.58% |
Expenses net of all reductions | 1.56% A | 1.54% | 1.54% | 1.54% | 1.57% | 1.58% |
Net investment income (loss) | (.03)% A | .13% | .61% | 1.24% | 1.87% | 3.18% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 100,066 | $ 114,564 | $ 132,589 | $ 131,947 | $ 103,378 | $ 97,150 |
Portfolio turnover rate G | 64% A | 75% | 204% | 217% | 318% I | 94% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Institutional Class
| Six months ended | Years ended August 31, | ||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data | ||||||
Net asset value, beginning of period | $ 9.34 | $ 9.29 | $ 9.24 | $ 8.97 | $ 8.94 | $ 9.26 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) D | .046 | .106 | .150 | .205 | .255 | .385 |
Net realized and unrealized gain (loss) | .019 | .058 | .052 | .273 | .016 | (.324) |
Total from investment operations | .065 | .164 | .202 | .478 | .271 | .061 |
Distributions from net investment income | (.045) | (.114) | (.152) | (.208) | (.241) | (.381) |
Net asset value, end of period | $ 9.36 | $ 9.34 | $ 9.29 | $ 9.24 | $ 8.97 | $ 8.94 |
Total Return B,C | .69% | 1.78% | 2.21% | 5.38% | 3.12% | .65% |
Ratios to Average Net Assets E,G | ||||||
Expenses before reductions | .52% A | .52% | .53% | .53% | .54% | .54% |
Expenses net of fee waivers, if any | .52% A | .52% | .53% | .53% | .54% | .54% |
Expenses net of all reductions | .52% A | .52% | .53% | .53% | .54% | .54% |
Net investment income (loss) | 1.00% A | 1.14% | 1.62% | 2.25% | 2.90% | 4.23% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 662,505 | $ 771,929 | $ 719,891 | $ 647,129 | $ 618,098 | $ 589,076 |
Portfolio turnover rate F | 64% A | 75% | 204% | 217% | 318% H | 94% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Calculated based on average shares outstanding during the period.
E 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.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Notes to Financial Statements
For the period ended February 28, 2013
1. Organization.
Fidelity Advisor® Short Fixed-Income Fund (the Fund) is a fund of Fidelity Advisor Series II (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, Class C, and Institutional Class shares, each of which, along with Class B shares, has equal rights as to assets and voting privileges. Class B shares are closed to new accounts and additional purchases, except for exchanges and reinvestments. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of four years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the 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.
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies 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:
Semiannual Report
3. Significant Accounting Policies - continued
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 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, foreign government and government agency obligations, municipal securities, supranational obligations, U.S. government and government agency obligations and commercial paper, 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. Swap agreements are marked-to-market daily based on valuations from third party pricing vendors or broker-supplied valuations. Pricing vendors utilize matrix pricing which considers comparisons to interest rate curves, credit spread curves, default possibilities and recovery rates. When independent prices are unavailable or unreliable, debt securities and swap agreements may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities and swap agreements are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Semiannual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Investment Valuation - continued
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. 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. The aggregate value of investments by input level, as of February 28, 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.
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.
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. 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.
Semiannual Report
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
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 swap agreements, market discount, deferred trustees compensation, capital loss carryforwards and losses deferred due to wash sales.
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:
Gross unrealized appreciation | $ 16,341,121 |
Gross unrealized depreciation | (7,505,131) |
Net unrealized appreciation (depreciation) on securities and other investments | $ 8,835,990 |
|
|
Tax cost | $ 1,096,960,044 |
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. At August 31, 2012, capital loss carryforwards were as follows:
Fiscal year of expiration |
|
2016 | $ (24,671) |
2017 | (28,600,668) |
2018 | (16,553,917) |
Total capital loss carryforward | $ (45,179,256) |
Repurchase Agreements. FMR has received an Exemptive Order from 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.
Semiannual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Repurchase Agreements - continued
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.
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 reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is currently evaluating the impact of the update's adoption on the Fund's financial statement disclosures.
Semiannual Report
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 swap agreements. 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:
Credit Risk | Credit risk relates to the ability of the issuer of a financial instrument to make further principal or interest payments on an obligation or commitment that it has to the Fund. |
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 swap agreements, the Fund attempts to reduce its exposure to counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement on a bilateral basis 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 OTC derivatives, the Fund receives collateral in the form of cash or securities once the 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
Semiannual Report
Notes to Financial Statements - continued
4. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
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 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 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.
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 | Change in Net |
Credit Risk |
|
|
Swap Agreements (a) | $ 1,538 | $ (3,232) |
(a) A summary of the value of derivatives by primary risk exposure as of period end, if any, is included at the end of the Schedule of Investments and is representative of activity for the period.
Swap Agreements. A swap agreement (swap) is a contract between two parties to exchange future cash flows at periodic intervals based on a notional principal amount.
Swaps are marked-to-market daily and changes in value are reflected in the Statement of Assets and Liabilities in the swap agreements at value line items. Any upfront premiums paid or received upon entering a swap to compensate for differences between stated terms of the agreement and prevailing market conditions (e.g. credit spreads, interest rates or other factors) are recorded in net unrealized 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
Semiannual Report
4. Derivative Instruments - continued
Swap Agreements - continued
of Investments. 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 "Swap Agreements."
Credit Default Swaps. Credit default swaps enable the Fund to buy or sell protection against specified credit events on a single-name issuer or a traded credit index. Under the terms of a credit default swap the buyer of protection (buyer) receives credit protection in exchange for making periodic payments to the seller of protection (seller) based on a fixed percentage applied to a notional principal amount. In return for these payments, the seller will be required to make a payment upon the occurrence of one or more specified credit events. The Fund enters into credit default swaps as a seller to gain credit exposure to an issuer and/or as a buyer to obtain a measure of protection against defaults of an issuer. Periodic payments are made over the life of the contract by the buyer provided that no credit event occurs.
For credit default swaps on most corporate and sovereign issuers, credit events include bankruptcy, failure to pay or repudiation/moratorium. For credit default swaps on corporate or sovereign issuers, the obligation that may be put to the seller is not limited to the specific reference obligation described in the Schedule of Investments. For credit default swaps on asset-backed securities, a credit event may be triggered by events such as failure to pay principal, maturity extension, rating downgrade or write-down. For credit default swaps on asset-backed securities, the reference obligation described represents the security that may be put to the seller. For credit default swaps on a traded credit index, a specified credit event may affect all or individual underlying securities included in the index.
As a seller, if an underlying credit event occurs, the Fund will pay a net settlement amount of cash equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising an index. Only in the event of the industry's inability to value the underlying asset will the Fund be required to take delivery of the reference obligation or underlying securities comprising an index and pay an amount equal to the notional amount of the swap.
As a buyer, if an underlying credit event occurs, the Fund will receive a net settlement amount of cash equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising an index. Only in the event of the industry's inability to value the underlying asset will the Fund be required to deliver the reference obligation or underlying securities comprising an index in exchange for payment of an amount equal to the notional amount of the swap.
Semiannual Report
Notes to Financial Statements - continued
4. Derivative Instruments - continued
Credit Default Swaps - continued
Typically, the value of each credit default swap and credit rating disclosed for each reference obligation in the Schedule of Investments, where the Fund is the seller, can be used as measures of the current payment/performance risk of the swap. As the value of the swap changes as a positive or negative percentage of the total notional amount, the payment/performance risk may decrease or increase, respectively. In addition to these measures, FMR monitors a variety of factors including cash flow assumptions, market activity and market sentiment as part of its ongoing process of assessing payment/performance risk.
5. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $210,864,975 and $157,648,702, 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 annualized 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 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 Fees | Retained |
Class A | -% | .15% | $ 158,715 | $ 34,101 |
Class T | -% | .15% | 101,338 | 1,824 |
Class B | .65% | .25% | 32,035 | 23,229 |
Class C | .75% | .25% | 541,223 | 71,499 |
|
|
| $ 833,311 | $ 130,653 |
Semiannual Report
6. Fees and Other Transactions with Affiliates - continued
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, Class T, Class B and Class C redemptions. The deferred sales charges range from 3.00% to 1.00% for Class B shares, 1.00% for Class C shares, .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 | $ 15,999 |
Class T | 5,423 |
Class B* | 9,619 |
Class C* | 8,981 |
| $ 40,022 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
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 the respective classes of the Fund. 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 | $ 177,105 | .17 |
Class T | 115,629 | .17 |
Class B | 7,885 | .22 |
Class C | 88,565 | .16 |
Institutional Class | 442,750 | .14 |
| $ 831,934 |
|
* Annualized
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Semiannual Report
Notes to Financial Statements - continued
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 $1,431 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.
8. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is maintained at the Fund's custodian and/or invested in cash equivalents. At period end, there were no security loans outstanding. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Total security lending income during the period amounted to $289.
9. 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 expenses. During the period, these credits reduced the Fund's custody expenses by $59.
10. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| Six months ended | Year ended |
From net investment income |
|
|
Class A | $ 821,475 | $ 2,366,926 |
Class T | 522,784 | 1,612,220 |
Class B | 1,884 | 23,760 |
Class C | 9,526 | 276,779 |
Institutional Class | 3,061,670 | 9,984,988 |
Total | $ 4,417,339 | $ 14,264,673 |
Semiannual Report
11. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
| Six months ended | Year ended | Six months ended | Year ended |
Class A |
|
|
|
|
Shares sold | 4,705,623 | 11,014,249 | $ 43,980,382 | $ 102,166,877 |
Reinvestment of distributions | 72,988 | 212,888 | 682,435 | 1,974,463 |
Shares redeemed | (5,606,488) | (15,418,290) | (52,408,347) | (142,936,211) |
Net increase (decrease) | (827,877) | (4,191,153) | $ (7,745,530) | $ (38,794,871) |
Class T |
|
|
|
|
Shares sold | 1,097,456 | 3,668,518 | $ 10,267,578 | $ 34,010,430 |
Reinvestment of distributions | 50,448 | 154,693 | 472,016 | 1,435,835 |
Shares redeemed | (2,217,047) | (6,368,676) | (20,738,205) | (59,098,203) |
Net increase (decrease) | (1,069,143) | (2,545,465) | $ (9,998,611) | $ (23,651,938) |
Class B |
|
|
|
|
Shares sold | 41,215 | 303,790 | $ 385,928 | $ 2,818,839 |
Reinvestment of distributions | 176 | 2,143 | 1,646 | 19,886 |
Shares redeemed | (233,266) | (455,109) | (2,184,398) | (4,227,668) |
Net increase (decrease) | (191,875) | (149,176) | $ (1,796,824) | $ (1,388,943) |
Class C |
|
|
|
|
Shares sold | 1,446,722 | 3,509,446 | $ 13,539,771 | $ 32,577,911 |
Reinvestment of distributions | 803 | 23,322 | 7,518 | 216,245 |
Shares redeemed | (3,016,217) | (5,535,239) | (28,226,954) | (51,381,344) |
Net increase (decrease) | (1,568,692) | (2,002,471) | $ (14,679,665) | $ (18,587,188) |
Institutional Class |
|
|
|
|
Shares sold | 14,322,019 | 43,790,241 | $ 133,988,863 | $ 406,214,278 |
Reinvestment of distributions | 312,032 | 1,025,348 | 2,919,512 | 9,519,588 |
Shares redeemed | (26,493,286) | (39,647,339) | (247,593,429) | (368,323,794) |
Net increase (decrease) | (11,859,235) | 5,168,250 | $ (110,685,054) | $ 47,410,072 |
12. 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.
Semiannual Report
Notes to Financial Statements - continued
12. Other - continued
At the end of the period, the Fidelity Advisor Freedom Funds were the owners of record in the aggregate of approximately 31% of the Fund.
13. Credit Risk.
The Fund invests a portion of its assets in structured securities of issuers backed by residential mortgage loans, credit card receivables and automotive loans. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults.
Semiannual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor Short Fixed-Income Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor Short Fixed-Income Fund (the Fund), a fund of Fidelity Advisor Series II, including the schedule of investments, as of February 28, 2013, and the related statement of operations for the six months then ended, the statements of changes in net assets for the six months ended February 28, 2013 and for the year ended August 31, 2012, and the financial highlights for the six months ended February 28, 2013 and for each of the five years in the period ended August 31, 2012. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits 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 and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of February 28, 2013, by correspondence with the custodians and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Advisor Short Fixed-Income Fund as of February 28, 2013, the results of its operations for the six months then ended, the changes in its net assets for the six months ended February 28, 2013 and for the year ended August 31, 2012, and the financial highlights for the six months ended February 28, 2013 and for each of the five years in the period ended August 31, 2012, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 18, 2013
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Advisor Short Fixed-Income Fund
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established three standing committees, Operations, Audit, and Governance and Nominating, each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Operations Committee, of which all of the Independent Trustees are members, meets regularly throughout the year and, among other matters, considers matters specifically related to the annual consideration of the renewal of the fund's Advisory Contracts. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through ad hoc joint committees to discuss certain matters relevant to the Fidelity funds.
At its September 2012 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with the fund; (iv) the extent to which economies of scale exist and would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts is in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts is fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered the staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the fund's investment personnel, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the general qualifications and capabilities of the Investment Advisers' investment staff, including its size, education, experience, and resources, as well as the Investment Advisers' approach to recruiting, managing, and compensating investment personnel. The Board also noted that FMR has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. The Board also believes that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered the Investment Advisers' trading and risk management capabilities and resources, which are an integral part of the investment management process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through telephone representatives and over the Internet, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
Semiannual Report
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including (i) continuing to dedicate additional resources to investment research and support of the senior management team that oversees asset management; (ii) persisting in efforts to enhance Fidelity's research capabilities, in particular, international research; (iii) launching new funds and making other enhancements to meet client needs for global and income-oriented solutions; (iv) continuing to launch dedicated lower cost underlying funds to meet investment management's portfolio construction needs related to expanding underlying fund options, specifically for the Freedom Fund product lines; (v) adopting a sector neutral investment approach for certain funds and utilizing a team of portfolio managers to manage certain sector-neutral funds; (vi) rationalizing product lines and gaining increased efficiencies through combinations of several funds with other funds; (vii) strengthening the Spartan Index Fund product line by adding new funds and/or new low-cost institutional share classes, restructuring fund expenses to accommodate new classes, and reducing investment minimums for certain classes of shares; (viii) modifying the eligibility criteria for Institutional Class shares to increase their appeal to government entities and charitable investors; and (ix) reducing certain transfer agent fee rates.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured over multiple periods against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by Fidelity and reviewed by the Board. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2011, the cumulative total returns of Institutional Class (Class I) and Class C of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Institutional Class (Class I) and Class C show the performance of the highest and lowest performing classes, respectively (based on five-year performance). The box within each chart shows the 25th percentile return (top of box) and the 75th percentile return (bottom of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the peer group whose performance was equal to or lower than that of the class indicated.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Advisor Short Fixed-Income Fund
The Board reviewed the fund's relative investment performance against its peer group and noted that the performance of Institutional Class (Class I) of the fund was in the first quartile for the one-year period and the third quartile for the three- and five-year periods. The Board also noted that the investment performance of Institutional Class (Class I) of the fund compared favorably to its benchmark for the one- and three-year periods, although the fund's five-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes. The Board also reviewed the fund's performance since inception as well as performance in the current year.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should benefit the fund's shareholders.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Semiannual Report
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 26% means that 84% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Advisor Short Fixed-Income Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2011.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered the current and historical total expense ratios of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expense ratio of each of Class A and Class T ranked below its competitive median for 2011, the total expense ratio of each of Class B and Institutional Class ranked equal to its competitive median for 2011, and the total expense ratio of Class C ranked above its competitive median for 2011. The Board considered that various factors, including 12b-1 fees and relatively higher other expenses in the case of small fund size, can affect total expense ratios. The Board noted that the fund offers multiple classes, each of which has a different sales load and 12b-1 fee structure, and that the multiple structures are intended to offer a range of pricing options for the intermediary market. The Board also noted that the total expense ratios of the classes vary primarily by the level of their 12b-1 fees, although differences in transfer agent fees may also cause expenses to vary from class to class.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of FMR and its affiliates, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients. The Board noted the findings of the 2010 ad hoc joint committee (created with the board of other Fidelity funds), which reviewed and compared Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds, including the differences in services provided, fees charged, and costs incurred, as well as competition in their respective marketplaces.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable, although Class C was above the median of the universe presented for comparison, in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
Semiannual Report
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and was satisfied that the profitability was not excessive in the circumstances.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board also noted that in 2009, it and the board of other Fidelity funds created an ad hoc committee (the Economies of Scale Committee) to analyze whether FMR attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including: (i) Fidelity's fund profitability methodology, profitability trends for certain funds, and the impact of certain factors on fund profitability results; (ii) portfolio manager changes that have occurred during the past year and the amount of the investment that each portfolio manager has made in the Fidelity fund(s) that he or she manages; (iii) Fidelity's compensation structure for portfolio managers, research analysts, and other key personnel, including its effects on fund profitability, the rationale for the compensation structure, and the extent to which current market conditions have affected retention and recruitment; (iv) the compensation paid to fund sub-advisers on behalf of the Fidelity funds; (v) Fidelity's fee structures, including the group fee structure, and the rationale for recommending different fees among different categories of funds and classes; (vi) Fidelity's voluntary waiver of its fees to maintain minimum yields for certain money market funds and classes as well as contractual waivers in place for certain funds; (vii) regulatory and industry developments, including those affecting money market funds and target date funds, and the potential impact to Fidelity; (viii) Fidelity's transfer agent fees, expenses, and services, and drivers for determining the transfer agent fee structure of different funds and classes; (ix) management fee rates charged by FMR or Fidelity entities to other Fidelity clients; (x) the allocation of and historical trends in Fidelity's realization of fall-out benefits; and (xi) explanations regarding the relative total expense ratios of certain funds and classes, total expense competitive trends, and actions that might be taken by FMR to reduce total expense ratios for certain funds and classes or to achieve further economies of scale.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Semiannual 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
(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
(Fidelity Investment logo)(registered trademark)
SFI-USAN-0413 1.784905.110
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor®
Short Fixed-Income
Fund - Institutional Class
Semiannual Report
February 28, 2013
(Fidelity Cover Art)
Contents
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, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm |
| |
Board Approval of Investment Advisory Contracts and Management Fees |
|
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.
Semiannual 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, 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 (September 1, 2012 to February 28, 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. 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. 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.
Semiannual Report
| Annualized | Beginning | Ending | Expenses Paid |
Class A | .70% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,005.00 | $ 3.48 |
Hypothetical A |
| $ 1,000.00 | $ 1,021.32 | $ 3.51 |
Class T | .71% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,006.00 | $ 3.53 |
Hypothetical A |
| $ 1,000.00 | $ 1,021.27 | $ 3.56 |
Class B | 1.51% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,002.40 | $ 7.50 |
Hypothetical A |
| $ 1,000.00 | $ 1,017.31 | $ 7.55 |
Class C | 1.56% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,001.20 | $ 7.74 |
Hypothetical A |
| $ 1,000.00 | $ 1,017.06 | $ 7.80 |
Institutional Class | .52% |
|
|
|
Actual |
| $ 1,000.00 | $ 1,006.90 | $ 2.59 |
Hypothetical A |
| $ 1,000.00 | $ 1,022.22 | $ 2.61 |
A 5% return per year before expenses
* 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).
Semiannual Report
Investment Changes (Unaudited)
Quality Diversification (% of fund's net assets) | |||||||
As of February 28, 2013 | As of August 31, 2012 | ||||||
 | U.S. Government and |
| | U.S. Government and |
| ||
 | AAA 20.0% |
| | AAA 16.6% |
| ||
 | AA 9.3% |
| | AA 7.5% |
| ||
 | A 16.2% |
| | A 14.9% |
| ||
 | BBB 18.7% |
| | BBB 14.0% |
| ||
 | BB and Below 0.9% |
| | BB and Below 0.8% |
| ||
 | Not Rated 0.2% |
| | Not Rated 0.4% |
| ||
 | 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 February 28, 2013 | ||
|
| 6 months ago |
Years | 2.3 | 2.2 |
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 February 28, 2013 | ||
|
| 6 months ago |
Years | 1.8 | 1.7 |
Duration estimates how much a bond fund's price will change with a change in comparable interest rates. If rates rise 1%, for example, a fund with a 5-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. Duration takes into account any call or put option embedded in the bonds. |
Asset Allocation (% of fund's net assets) | |||||||
As of February 28, 2013* | As of August 31, 2012** | ||||||
| Corporate Bonds 42.3% |
| | Corporate Bonds 35.3% |
| ||
| U.S. Government and |
| | U.S. Government and |
| ||
| Asset-Backed |
| | Asset-Backed |
| ||
| CMOs and Other |
| | CMOs and Other |
| ||
| Municipal Bonds 0.4% |
| | Municipal Bonds 0.5% |
| ||
| Other Investments 1.5% |
| | Other Investments 0.4% |
| ||
| Short-Term |
| | Short-Term |
| ||
* Foreign investments | 13.7% |
| ** Foreign investments | 12.6% |
| ||
† Includes NCUA Guaranteed Notes. |
Semiannual Report
Investments February 28, 2013
Showing Percentage of Net Assets
Nonconvertible Bonds - 42.3% | ||||
| Principal | Value | ||
CONSUMER DISCRETIONARY - 2.3% | ||||
Automobiles - 1.4% | ||||
Daimler Finance North America LLC: | ||||
1.25% 1/11/16 (d) | $ 2,210,000 | $ 2,215,180 | ||
1.3% 7/31/15 (d) | 2,620,000 | 2,634,373 | ||
1.65% 4/10/15 (d) | 1,310,000 | 1,324,947 | ||
1.875% 9/15/14 (d) | 1,270,000 | 1,288,783 | ||
1.95% 3/28/14 (d) | 3,076,000 | 3,109,525 | ||
2.3% 1/9/15 (d) | 1,330,000 | 1,359,348 | ||
Volkswagen International Finance NV: | ||||
1.6% 11/20/17 (d) | 1,090,000 | 1,094,484 | ||
1.625% 3/22/15 (d) | 2,300,000 | 2,329,923 | ||
| 15,356,563 | |||
Diversified Consumer Services - 0.1% | ||||
Yale University 2.9% 10/15/14 | 970,000 | 1,007,976 | ||
Media - 0.8% | ||||
NBCUniversal Media LLC: | ||||
2.875% 4/1/16 | 1,200,000 | 1,266,181 | ||
3.65% 4/30/15 | 1,310,000 | 1,389,865 | ||
News America, Inc. 5.3% 12/15/14 | 2,007,000 | 2,169,133 | ||
Time Warner, Inc. 3.15% 7/15/15 | 1,923,000 | 2,026,715 | ||
Viacom, Inc. 1.25% 2/27/15 | 1,634,000 | 1,647,820 | ||
Walt Disney Co. 1.1% 12/1/17 | 976,000 | 975,143 | ||
| 9,474,857 | |||
TOTAL CONSUMER DISCRETIONARY | 25,839,396 | |||
CONSUMER STAPLES - 2.9% | ||||
Beverages - 1.3% | ||||
Anheuser-Busch InBev Finance, Inc. 0.8% 1/15/16 | 2,500,000 | 2,501,690 | ||
Anheuser-Busch InBev Worldwide, Inc.: | ||||
0.8% 7/15/15 | 2,630,000 | 2,636,267 | ||
1.5% 7/14/14 | 1,611,000 | 1,631,724 | ||
Beam, Inc. 1.875% 5/15/17 | 1,366,000 | 1,391,267 | ||
FBG Finance Ltd. 5.125% 6/15/15 (d) | 1,054,000 | 1,151,956 | ||
Heineken NV: | ||||
0.8% 10/1/15 (d) | 1,492,000 | 1,494,351 | ||
1.4% 10/1/17 (d) | 556,000 | 554,308 | ||
SABMiller Holdings, Inc. 2.45% 1/15/17 (d) | 2,660,000 | 2,774,915 | ||
| 14,136,478 | |||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
CONSUMER STAPLES - continued | ||||
Food & Staples Retailing - 0.3% | ||||
Wal-Mart Stores, Inc. 2.25% 7/8/15 | $ 1,607,000 | $ 1,674,761 | ||
Walgreen Co. 1% 3/13/15 | 1,695,000 | 1,699,987 | ||
| 3,374,748 | |||
Food Products - 0.8% | ||||
General Mills, Inc.: | ||||
0.875% 1/29/16 | 971,000 | 974,586 | ||
1.55% 5/16/14 | 1,200,000 | 1,214,470 | ||
Kellogg Co. 0.5221% 2/13/15 (f) | 1,685,000 | 1,686,634 | ||
Kraft Foods Group, Inc. 1.625% 6/4/15 | 2,690,000 | 2,733,398 | ||
Kraft Foods, Inc. 2.625% 5/8/13 | 2,575,000 | 2,584,010 | ||
| 9,193,098 | |||
Tobacco - 0.5% | ||||
Altria Group, Inc. 4.125% 9/11/15 | 2,300,000 | 2,487,878 | ||
Reynolds American, Inc.: | ||||
1.05% 10/30/15 | 1,240,000 | 1,238,767 | ||
6.75% 6/15/17 | 1,032,000 | 1,246,162 | ||
| 4,972,807 | |||
TOTAL CONSUMER STAPLES | 31,677,131 | |||
ENERGY - 2.1% | ||||
Energy Equipment & Services - 0.1% | ||||
Cameron International Corp. 1.6% 4/30/15 | 1,005,000 | 1,013,770 | ||
Oil, Gas & Consumable Fuels - 2.0% | ||||
BG Energy Capital PLC 2.875% 10/15/16 (d) | 1,350,000 | 1,431,836 | ||
Canadian Natural Resources Ltd. 1.45% 11/14/14 | 2,453,000 | 2,485,622 | ||
Cenovus Energy, Inc. 4.5% 9/15/14 | 2,105,000 | 2,222,762 | ||
Enterprise Products Operating LP: | ||||
1.25% 8/13/15 | 962,000 | 969,916 | ||
5.65% 4/1/13 | 1,227,000 | 1,231,080 | ||
Gazstream SA 5.625% 7/22/13 (d) | 105,224 | 106,340 | ||
Marathon Petroleum Corp. 3.5% 3/1/16 | 1,703,000 | 1,818,383 | ||
Petrobras International Finance Co. Ltd.: | ||||
2.875% 2/6/15 | 1,320,000 | 1,347,192 | ||
3.875% 1/27/16 | 1,151,000 | 1,203,239 | ||
Phillips 66: | ||||
1.95% 3/5/15 | 2,620,000 | 2,677,664 | ||
2.95% 5/1/17 | 650,000 | 687,852 | ||
Schlumberger Investment SA 1.25% 8/1/17 (d) | 1,500,000 | 1,498,778 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - continued | ||||
Southeast Supply Header LLC 4.85% 8/15/14 (d) | $ 1,835,000 | $ 1,905,391 | ||
Spectra Energy Partners, LP 2.95% 6/15/16 | 313,000 | 323,431 | ||
Total Capital Canada Ltd. 1.625% 1/28/14 | 1,210,000 | 1,225,732 | ||
Total Capital International SA 0.75% 1/25/16 | 1,403,000 | 1,407,168 | ||
| 22,542,386 | |||
TOTAL ENERGY | 23,556,156 | |||
FINANCIALS - 25.2% | ||||
Capital Markets - 2.7% | ||||
Goldman Sachs Group, Inc.: | ||||
1.6% 11/23/15 | 1,090,000 | 1,100,211 | ||
2.375% 1/22/18 | 2,200,000 | 2,229,027 | ||
3.7% 8/1/15 | 2,000,000 | 2,112,908 | ||
5.125% 1/15/15 | 5,117,000 | 5,481,745 | ||
HSBC Bank PLC 3.1% 5/24/16 (d) | 1,210,000 | 1,284,968 | ||
JPMorgan Chase & Co.: | ||||
0.9081% 2/26/16 (f) | 1,000,000 | 999,721 | ||
0.964% 10/15/15 (f) | 1,768,000 | 1,777,662 | ||
1.1% 10/15/15 | 1,080,000 | 1,083,664 | ||
Merrill Lynch & Co., Inc. 5.45% 7/15/14 | 950,000 | 1,003,162 | ||
Morgan Stanley: | ||||
1.75% 2/25/16 | 966,000 | 970,300 | ||
2.875% 1/24/14 | 1,200,000 | 1,222,399 | ||
2.875% 7/28/14 | 452,000 | 463,358 | ||
4.1% 1/26/15 | 554,000 | 580,886 | ||
4.2% 11/20/14 | 400,000 | 419,195 | ||
6% 5/13/14 | 2,690,000 | 2,842,032 | ||
State Street Corp. 4.3% 5/30/14 | 1,110,000 | 1,162,924 | ||
The Bank of New York Mellon Corp. 1.7% 11/24/14 | 3,150,000 | 3,213,280 | ||
UBS AG Stamford Branch: | ||||
1.3005% 1/28/14 (f) | 924,000 | 930,061 | ||
2.25% 1/28/14 | 1,453,000 | 1,474,650 | ||
| 30,352,153 | |||
Commercial Banks - 10.9% | ||||
ABN AMRO Bank NV 2.0715% 1/30/14 (d)(f) | 1,700,000 | 1,720,995 | ||
ANZ Banking Group Ltd. 2.125% 1/10/14 (d) | 1,210,000 | 1,227,530 | ||
Australia & New Zealand Banking Group Ltd. 0.9% 2/12/16 | 1,670,000 | 1,675,513 | ||
Bank of America NA 5.3% 3/15/17 | 250,000 | 280,237 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Commercial Banks - continued | ||||
Bank of England 0.5% 3/6/15 (d) | $ 3,902,000 | $ 3,912,535 | ||
Bank of Nova Scotia: | ||||
1.375% 12/18/17 | 1,069,000 | 1,069,290 | ||
1.85% 1/12/15 | 3,131,000 | 3,204,867 | ||
Bank of Tokyo-Mitsubishi UFJ Ltd. 1% 2/26/16 (d) | 2,200,000 | 2,200,900 | ||
Barclays Bank PLC 1.345% 1/13/14 (f) | 4,500,000 | 4,525,403 | ||
BB&T Corp. 2.05% 4/28/14 | 2,710,000 | 2,754,571 | ||
BNP Paribas 0.705% 4/8/13 (f) | 965,000 | 965,312 | ||
Commonwealth Bank of Australia: | ||||
1.038% 3/17/14 (d)(f) | 1,440,000 | 1,449,135 | ||
1.95% 3/16/15 | 1,310,000 | 1,343,814 | ||
3.5% 3/19/15 (d) | 1,300,000 | 1,373,884 | ||
Credit Suisse New York Branch: | ||||
1.265% 1/14/14 (f) | 1,400,000 | 1,409,621 | ||
2.2% 1/14/14 | 6,582,000 | 6,676,919 | ||
Danske Bank A/S 1.355% 4/14/14 (d)(f) | 1,800,000 | 1,809,907 | ||
Discover Bank 2% 2/21/18 | 2,500,000 | 2,508,350 | ||
Fifth Third Bancorp 3.625% 1/25/16 | 673,000 | 721,462 | ||
Fifth Third Bank 0.9% 2/26/16 | 2,200,000 | 2,201,687 | ||
KeyBank NA: | ||||
1.65% 2/1/18 | 735,000 | 742,666 | ||
5.8% 7/1/14 | 4,064,000 | 4,336,373 | ||
KeyCorp. 6.5% 5/14/13 | 1,500,000 | 1,517,345 | ||
Marshall & Ilsley Bank 5% 1/17/17 | 86,000 | 94,545 | ||
Mizuho Corporate Bank Ltd. 1.55% 10/17/17 (d) | 1,630,000 | 1,624,626 | ||
National Australia Bank Ltd.: | ||||
0.602% 1/22/15 (d)(f) | 2,000,000 | 1,999,286 | ||
2% 3/9/15 | 1,310,000 | 1,344,322 | ||
National Bank of Canada 1.5% 6/26/15 | 1,794,000 | 1,821,089 | ||
Nordea Bank AB 1.75% 10/4/13 (d) | 1,830,000 | 1,842,687 | ||
PNC Bank NA 0.8% 1/28/16 | 3,000,000 | 3,008,679 | ||
PNC Funding Corp.: | ||||
3% 5/19/14 | 1,700,000 | 1,750,427 | ||
3.625% 2/8/15 | 1,445,000 | 1,526,014 | ||
Rabobank (Netherlands) NV: | ||||
1.85% 1/10/14 | 5,323,000 | 5,386,557 | ||
2.125% 10/13/15 | 862,000 | 889,852 | ||
Regions Financial Corp. 4.875% 4/26/13 | 1,300,000 | 1,307,696 | ||
Royal Bank of Canada: | ||||
0.603% 4/17/14 (f) | 1,400,000 | 1,404,987 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Commercial Banks - continued | ||||
Royal Bank of Canada: - continued | ||||
0.8% 10/30/15 | $ 2,180,000 | $ 2,184,685 | ||
1.125% 1/15/14 | 553,000 | 556,886 | ||
1.45% 10/30/14 | 2,332,000 | 2,371,982 | ||
1.5% 1/16/18 | 2,210,000 | 2,226,688 | ||
Royal Bank of Scotland Group PLC 2.55% 9/18/15 | 2,739,000 | 2,819,420 | ||
Sumitomo Mitsui Banking Corp.: | ||||
1.8% 7/18/17 | 1,970,000 | 2,004,199 | ||
1.9% 1/12/15 (d) | 1,600,000 | 1,629,683 | ||
1.95% 1/14/14 (d) | 2,400,000 | 2,420,477 | ||
SunTrust Banks, Inc.: | ||||
0.5781% 8/24/15 (f) | 500,000 | 491,501 | ||
0.608% 4/1/15 (f) | 2,270,000 | 2,226,096 | ||
3.5% 1/20/17 | 424,000 | 456,317 | ||
3.6% 4/15/16 | 1,025,000 | 1,098,071 | ||
5% 9/1/15 | 1,059,000 | 1,153,891 | ||
The Toronto Dominion Bank: | ||||
0.7485% 11/1/13 (f) | 1,400,000 | 1,403,784 | ||
1.375% 7/14/14 | 3,000,000 | 3,031,887 | ||
U.S. Bancorp 4.2% 5/15/14 | 1,770,000 | 1,849,666 | ||
Wachovia Bank NA 0.678% 11/3/14 (f) | 1,820,000 | 1,822,967 | ||
Wells Fargo & Co.: | ||||
0.5005% 10/28/15 (f) | 5,000,000 | 4,977,835 | ||
3.625% 4/15/15 | 2,400,000 | 2,547,468 | ||
Wells Fargo Bank NA 0.5001% 5/16/16 (f) | 1,000,000 | 986,509 | ||
Westpac Banking Corp.: | ||||
0.95% 1/12/16 | 2,210,000 | 2,217,706 | ||
1.041% 3/31/14 (d)(f) | 1,300,000 | 1,309,866 | ||
1.125% 9/25/15 | 2,685,000 | 2,707,165 | ||
2% 8/14/17 | 2,250,000 | 2,313,918 | ||
| 120,437,750 | |||
Consumer Finance - 4.6% | ||||
American Express Credit Corp.: | ||||
0.7431% 11/13/15 (f) | 2,735,000 | 2,741,676 | ||
0.875% 11/13/15 | 1,090,000 | 1,089,622 | ||
2.75% 9/15/15 | 2,530,000 | 2,646,195 | ||
2.8% 9/19/16 | 970,000 | 1,026,523 | ||
American Honda Finance Corp.: | ||||
0.743% 5/8/14 (d)(f) | 1,000,000 | 1,004,891 | ||
1.45% 2/27/15 (d) | 1,310,000 | 1,328,278 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Capital One Financial Corp.: | ||||
0.9355% 11/6/15 (f) | $ 1,000,000 | $ 1,001,092 | ||
1% 11/6/15 | 1,090,000 | 1,086,053 | ||
2.125% 7/15/14 | 2,639,000 | 2,684,499 | ||
2.15% 3/23/15 | 1,300,000 | 1,328,977 | ||
7.375% 5/23/14 | 2,500,000 | 2,697,045 | ||
Caterpillar Financial Services Corp. 2.75% 6/24/15 | 701,000 | 733,963 | ||
Ford Motor Credit Co. LLC: | ||||
2.75% 5/15/15 | 2,000,000 | 2,043,366 | ||
3% 6/12/17 | 2,450,000 | 2,512,372 | ||
General Electric Capital Corp.: | ||||
1% 1/8/16 | 1,299,000 | 1,303,144 | ||
1.002% 4/24/14 (f) | 1,310,000 | 1,319,550 | ||
1.625% 7/2/15 | 3,165,000 | 3,220,751 | ||
2.15% 1/9/15 | 10,668,000 | 10,961,274 | ||
2.25% 11/9/15 | 3,150,000 | 3,264,112 | ||
HSBC USA, Inc.: | ||||
1.625% 1/16/18 | 963,000 | 967,306 | ||
2.375% 2/13/15 | 2,353,000 | 2,426,089 | ||
Hyundai Capital America 1.625% 10/2/15 (d) | 851,000 | 857,159 | ||
Toyota Motor Credit Corp. 0.703% 1/17/14 (f) | 2,000,000 | 2,006,044 | ||
| 50,249,981 | |||
Diversified Financial Services - 4.7% | ||||
ABB Finance (USA), Inc. 1.625% 5/8/17 | 511,000 | 517,954 | ||
Bank of America Corp.: | ||||
1.25% 1/11/16 | 2,200,000 | 2,193,492 | ||
1.5% 10/9/15 | 1,000,000 | 1,003,095 | ||
1.855% 7/11/14 (f) | 2,780,000 | 2,817,171 | ||
3.7% 9/1/15 | 3,960,000 | 4,180,220 | ||
BP Capital Markets PLC: | ||||
0.9095% 3/11/14 (f) | 2,210,000 | 2,222,173 | ||
1.7% 12/5/14 | 1,320,000 | 1,345,979 | ||
2.248% 11/1/16 | 1,320,000 | 1,374,005 | ||
Citigroup, Inc.: | ||||
1.238% 4/1/14 (f) | 500,000 | 502,032 | ||
1.25% 1/15/16 | 4,049,000 | 4,038,104 | ||
1.755% 1/13/14 (f) | 3,558,000 | 3,593,552 | ||
2.2931% 8/13/13 (f) | 650,000 | 655,227 | ||
2.65% 3/2/15 | 3,350,000 | 3,439,432 | ||
5.125% 5/5/14 | 1,022,000 | 1,069,808 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Citigroup, Inc.: - continued | ||||
6.375% 8/12/14 | $ 2,900,000 | $ 3,118,730 | ||
6.5% 8/19/13 | 1,733,000 | 1,779,885 | ||
Export Development Canada 1.5% 5/15/14 | 800,000 | 811,886 | ||
JPMorgan Chase & Co.: | ||||
3.4% 6/24/15 | 2,005,000 | 2,118,589 | ||
3.7% 1/20/15 | 7,280,000 | 7,666,757 | ||
MassMutual Global Funding II 0.685% 1/14/14 (d)(f) | 4,242,000 | 4,256,512 | ||
MetLife Institutional Funding II 0.675% 1/6/15 (d)(f) | 1,000,000 | 1,001,117 | ||
OAO Industry & Construction Bank 5.01% 9/29/15 (Issued by Or-ICB SA for OAO Industry & Construction Bank) (f) | 270,000 | 277,933 | ||
USAA Capital Corp. 3.5% 7/17/14 (d) | 1,798,000 | 1,871,682 | ||
| 51,855,335 | |||
Insurance - 1.8% | ||||
American International Group, Inc.: | ||||
3% 3/20/15 | 1,050,000 | 1,091,725 | ||
3.8% 3/22/17 | 818,000 | 888,283 | ||
4.25% 9/15/14 | 2,270,000 | 2,384,483 | ||
Berkshire Hathaway Finance Corp. 1.6% 5/15/17 | 1,330,000 | 1,358,336 | ||
Berkshire Hathaway, Inc.: | ||||
0.9901% 8/15/14 (f) | 1,400,000 | 1,413,772 | ||
1.55% 2/9/18 | 1,110,000 | 1,124,884 | ||
MetLife, Inc. 1.756% 12/15/17 (c) | 465,000 | 470,500 | ||
Metropolitan Life Global Funding I: | ||||
1.5% 1/10/18 (d) | 2,559,000 | 2,553,150 | ||
2% 1/9/15 (d) | 4,359,000 | 4,471,732 | ||
2.5% 9/29/15 (d) | 1,000,000 | 1,040,736 | ||
Pricoa Global Funding I 5.45% 6/11/14 (d) | 1,150,000 | 1,221,202 | ||
Principal Life Global Funding II 0.93% 7/9/14 (d)(f) | 2,000,000 | 2,013,096 | ||
| 20,031,899 | |||
Real Estate Investment Trusts - 0.1% | ||||
Developers Diversified Realty Corp. 9.625% 3/15/16 | 330,000 | 403,281 | ||
Equity One, Inc. 5.375% 10/15/15 | 144,000 | 157,310 | ||
Health Care REIT, Inc. 2.25% 3/15/18 | 341,000 | 344,074 | ||
| 904,665 | |||
Real Estate Management & Development - 0.4% | ||||
Mack-Cali Realty LP 2.5% 12/15/17 | 770,000 | 780,269 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Real Estate Management & Development - continued | ||||
Simon Property Group LP: | ||||
4.2% 2/1/15 | $ 484,000 | $ 511,441 | ||
5.3% 5/30/13 | 1,511,000 | 1,527,662 | ||
Tanger Properties LP 6.15% 11/15/15 | 404,000 | 458,150 | ||
Ventas Realty LP 2% 2/15/18 | 696,000 | 697,941 | ||
| 3,975,463 | |||
TOTAL FINANCIALS | 277,807,246 | |||
HEALTH CARE - 1.1% | ||||
Biotechnology - 0.1% | ||||
Amgen, Inc. 1.875% 11/15/14 | 1,300,000 | 1,326,832 | ||
Health Care Providers & Services - 0.3% | ||||
Aetna, Inc. 1.5% 11/15/17 | 135,000 | 135,486 | ||
Express Scripts Holding Co. 2.1% 2/12/15 | 1,970,000 | 2,013,813 | ||
McKesson Corp. 0.95% 12/4/15 | 213,000 | 213,646 | ||
WellPoint, Inc.: | ||||
1.25% 9/10/15 | 357,000 | 359,761 | ||
1.875% 1/15/18 | 647,000 | 653,774 | ||
| 3,376,480 | |||
Pharmaceuticals - 0.7% | ||||
AbbVie, Inc.: | ||||
1.2% 11/6/15 (d) | 1,100,000 | 1,109,031 | ||
1.75% 11/6/17 (d) | 1,865,000 | 1,888,555 | ||
Sanofi SA: | ||||
1.2% 9/30/14 | 920,000 | 930,396 | ||
2.625% 3/29/16 | 1,263,000 | 1,330,478 | ||
Teva Pharmaceutical Finance III BV 1.7% 3/21/14 | 1,210,000 | 1,224,357 | ||
Zoetis, Inc.: | ||||
1.15% 2/1/16 (d) | 978,000 | 980,901 | ||
1.875% 2/1/18 (d) | 174,000 | 174,617 | ||
| 7,638,335 | |||
TOTAL HEALTH CARE | 12,341,647 | |||
INDUSTRIALS - 0.4% | ||||
Aerospace & Defense - 0.1% | ||||
BAE Systems Holdings, Inc. 4.95% 6/1/14 (d) | 1,500,000 | 1,567,268 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
INDUSTRIALS - continued | ||||
Airlines - 0.1% | ||||
Iberbond 2004 PLC 4.826% 12/24/17 (h) | $ 753,174 | $ 738,111 | ||
Industrial Conglomerates - 0.2% | ||||
Covidien International Finance SA 1.875% 6/15/13 | 1,330,000 | 1,335,121 | ||
General Electric Co. 0.85% 10/9/15 | 1,143,000 | 1,146,576 | ||
| 2,481,697 | |||
TOTAL INDUSTRIALS | 4,787,076 | |||
INFORMATION TECHNOLOGY - 1.0% | ||||
Computers & Peripherals - 0.2% | ||||
Hewlett-Packard Co.: | ||||
1.25% 9/13/13 | 1,216,000 | 1,218,668 | ||
2.625% 12/9/14 | 1,330,000 | 1,360,852 | ||
| 2,579,520 | |||
Electronic Equipment & Components - 0.1% | ||||
Tyco Electronics Group SA 1.6% 2/3/15 | 678,000 | 687,126 | ||
IT Services - 0.2% | ||||
IBM Corp. 1.95% 7/22/16 | 1,621,000 | 1,683,819 | ||
The Western Union Co. 2.375% 12/10/15 | 490,000 | 497,982 | ||
| 2,181,801 | |||
Office Electronics - 0.5% | ||||
Xerox Corp. 1.1101% 5/16/14 (f) | 5,738,000 | 5,727,471 | ||
TOTAL INFORMATION TECHNOLOGY | 11,175,918 | |||
MATERIALS - 0.6% | ||||
Chemicals - 0.1% | ||||
Ecolab, Inc. 1.45% 12/8/17 | 594,000 | 591,309 | ||
Metals & Mining - 0.5% | ||||
Anglo American Capital PLC 2.15% 9/27/13 (d) | 2,400,000 | 2,414,854 | ||
BHP Billiton Financial (USA) Ltd. 1.125% 11/21/14 | 1,970,000 | 1,993,043 | ||
Rio Tinto Finance (USA) Ltd. 8.95% 5/1/14 | 1,413,000 | 1,546,594 | ||
| 5,954,491 | |||
TOTAL MATERIALS | 6,545,800 | |||
TELECOMMUNICATION SERVICES - 2.4% | ||||
Diversified Telecommunication Services - 1.6% | ||||
AT&T Broadband Corp. 8.375% 3/15/13 | 750,000 | 751,665 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
TELECOMMUNICATION SERVICES - continued | ||||
Diversified Telecommunication Services - continued | ||||
AT&T, Inc.: | ||||
1.4% 12/1/17 | $ 1,100,000 | $ 1,097,535 | ||
2.5% 8/15/15 | 2,320,000 | 2,415,967 | ||
2.95% 5/15/16 | 1,200,000 | 1,273,534 | ||
British Telecommunications PLC 2% 6/22/15 | 3,350,000 | 3,434,507 | ||
CenturyLink, Inc. 5.15% 6/15/17 | 1,100,000 | 1,158,102 | ||
Deutsche Telekom International Financial BV 3.125% 4/11/16 (d) | 1,209,000 | 1,275,968 | ||
Qwest Corp. 3.558% 6/15/13 (f) | 3,110,000 | 3,119,159 | ||
Verizon Communications, Inc. 2% 11/1/16 | 2,727,000 | 2,827,026 | ||
| 17,353,463 | |||
Wireless Telecommunication Services - 0.8% | ||||
America Movil S.A.B. de CV 2.375% 9/8/16 | 1,532,000 | 1,586,377 | ||
DIRECTV Holdings LLC/DIRECTV Financing, Inc. 4.75% 10/1/14 | 2,496,000 | 2,645,750 | ||
Verizon Wireless Capital LLC 5.55% 2/1/14 | 2,380,000 | 2,481,581 | ||
Vodafone Group PLC 0.9% 2/19/16 | 2,500,000 | 2,498,108 | ||
| 9,211,816 | |||
TOTAL TELECOMMUNICATION SERVICES | 26,565,279 | |||
UTILITIES - 4.3% | ||||
Electric Utilities - 2.7% | ||||
American Electric Power Co., Inc. 1.65% 12/15/17 | 454,000 | 455,473 | ||
Appalachian Power Co. 0.6651% 8/16/13 (f) | 2,520,000 | 2,523,442 | ||
Commonwealth Edison Co. 1.625% 1/15/14 | 2,440,000 | 2,464,417 | ||
Duke Energy Corp. 3.95% 9/15/14 | 1,441,000 | 1,511,184 | ||
Entergy Louisiana LLC 1.875% 12/15/14 | 748,000 | 763,391 | ||
FirstEnergy Corp. 2.75% 3/15/18 | 485,000 | 484,952 | ||
FirstEnergy Solutions Corp. 4.8% 2/15/15 | 3,566,000 | 3,809,265 | ||
LG&E and KU Energy LLC 2.125% 11/15/15 | 2,334,000 | 2,391,181 | ||
NextEra Energy Capital Holdings, Inc. 1.611% 6/1/14 | 2,234,000 | 2,256,615 | ||
Niagara Mohawk Power Corp. 3.553% 10/1/14 (d) | 2,675,000 | 2,786,045 | ||
Northeast Utilities 1.059% 9/20/13 (f) | 3,490,000 | 3,501,629 | ||
Pacific Gas & Electric Co.: | ||||
5.625% 11/30/17 | 1,774,000 | 2,125,364 | ||
6.25% 12/1/13 | 1,278,000 | 1,331,932 | ||
Pepco Holdings, Inc. 2.7% 10/1/15 | 1,098,000 | 1,139,929 | ||
Nonconvertible Bonds - continued | ||||
| Principal | Value | ||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
Progress Energy, Inc. 6.05% 3/15/14 | $ 1,532,000 | $ 1,616,308 | ||
Southern Co. 4.15% 5/15/14 | 412,000 | 429,591 | ||
| 29,590,718 | |||
Independent Power Producers & Energy Traders - 0.3% | ||||
PSEG Power LLC 2.5% 4/15/13 | 2,910,000 | 2,916,626 | ||
Multi-Utilities - 1.3% | ||||
Dominion Resources, Inc.: | ||||
1.4% 9/15/17 | 848,000 | 849,893 | ||
1.95% 8/15/16 | 848,000 | 875,324 | ||
2.25% 9/1/15 | 1,300,000 | 1,346,751 | ||
2.611% 9/30/66 (f) | 1,336,000 | 1,247,944 | ||
DTE Energy Co. 1.0105% 6/3/13 (f) | 3,081,000 | 3,085,255 | ||
NiSource Finance Corp.: | ||||
5.4% 7/15/14 | 1,000,000 | 1,060,475 | ||
6.15% 3/1/13 | 1,790,000 | 1,790,000 | ||
PG&E Corp. 5.75% 4/1/14 | 590,000 | 620,866 | ||
Sempra Energy: | ||||
1.068% 3/15/14 (f) | 1,515,000 | 1,521,487 | ||
2% 3/15/14 | 2,435,000 | 2,466,404 | ||
| 14,864,399 | |||
TOTAL UTILITIES | 47,371,743 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $459,465,308) |
| |||
U.S. Government and Government Agency Obligations - 25.1% | ||||
| ||||
U.S. Government Agency Obligations - 5.7% | ||||
Fannie Mae: | ||||
0.5% 5/27/15 | 8,541,000 | 8,567,955 | ||
0.5% 7/2/15 | 10,824,000 | 10,855,660 | ||
0.5% 9/28/15 | 22,889,000 | 22,943,865 | ||
0.5% 3/30/16 | 9,073,000 | 9,078,580 | ||
0.875% 12/20/17 | 985,000 | 986,529 | ||
0.875% 2/8/18 | 1,177,000 | 1,177,501 | ||
1.625% 10/26/15 | 5,050,000 | 5,211,378 | ||
U.S. Government and Government Agency Obligations - continued | ||||
| Principal | Value | ||
U.S. Government Agency Obligations - continued | ||||
Freddie Mac: | ||||
1% 9/29/17 | $ 2,727,000 | $ 2,751,469 | ||
1.75% 9/10/15 | 1,397,000 | 1,444,627 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 63,017,564 | |||
U.S. Treasury Obligations - 19.2% | ||||
U.S. Treasury Notes: | ||||
0.25% 1/15/15 | 14,999,000 | 15,002,510 | ||
0.25% 7/15/15 | 42,805,000 | 42,764,849 | ||
0.25% 9/15/15 | 55,000,000 | 54,926,949 | ||
0.375% 11/15/14 | 22,073,000 | 22,128,183 | ||
0.375% 1/15/16 | 32,000,000 | 32,037,504 | ||
1.375% 11/30/15 | 32,008,000 | 32,925,733 | ||
1.75% 7/31/15 | 12,067,000 | 12,489,345 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 212,275,073 | |||
Other Government Related - 0.2% | ||||
National Credit Union Administration Guaranteed Notes Master Trust 1.4% 6/12/15 (NCUA Guaranteed) | 1,700,000 | 1,739,423 | ||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $276,231,722) |
| |||
U.S. Government Agency - Mortgage Securities - 3.9% | ||||
| ||||
Fannie Mae - 2.4% | ||||
2.225% 10/1/33 (f) | 54,246 | 56,983 | ||
2.239% 3/1/35 (f) | 43,567 | 45,929 | ||
2.332% 3/1/35 (f) | 26,115 | 27,771 | ||
2.332% 5/1/35 (f) | 497,172 | 527,959 | ||
2.367% 12/1/33 (f) | 295,701 | 314,326 | ||
2.38% 7/1/35 (f) | 1,653,822 | 1,759,236 | ||
2.421% 11/1/36 (f) | 87,210 | 93,082 | ||
2.429% 12/1/34 (f) | 292,776 | 313,496 | ||
2.441% 10/1/35 (f) | 40,068 | 41,853 | ||
2.524% 10/1/33 (f) | 79,359 | 84,610 | ||
2.53% 5/1/33 (f) | 10,798 | 11,440 | ||
2.539% 10/1/41 (f) | 950,272 | 994,051 | ||
2.613% 7/1/35 (f) | 478,252 | 509,511 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value | ||
Fannie Mae - continued | ||||
2.674% 11/1/34 (f) | $ 251,541 | $ 268,312 | ||
2.688% 9/1/41 (f) | 1,109,107 | 1,160,595 | ||
2.69% 10/1/35 (f) | 615,357 | 654,292 | ||
2.72% 2/1/35 (f) | 564,177 | 598,309 | ||
2.736% 8/1/41 (f) | 1,393,755 | 1,461,823 | ||
2.741% 7/1/35 (f) | 182,509 | 195,709 | ||
2.769% 11/1/36 (f) | 620,897 | 667,651 | ||
2.806% 8/1/35 (f) | 363,134 | 389,013 | ||
2.911% 4/1/35 (f) | 174,392 | 186,262 | ||
3.014% 8/1/41 (f) | 335,133 | 349,742 | ||
3.189% 1/1/40 (f) | 682,813 | 713,584 | ||
3.212% 10/1/35 (f) | 120,892 | 129,045 | ||
3.476% 3/1/40 (f) | 524,489 | 548,279 | ||
3.5% 1/1/26 to 5/1/27 | 5,769,225 | 6,176,244 | ||
3.528% 12/1/39 (f) | 187,319 | 195,709 | ||
3.617% 3/1/40 (f) | 704,444 | 740,570 | ||
4.5% 6/1/19 to 7/1/20 | 646,694 | 695,979 | ||
5.5% 11/1/17 to 11/1/34 | 6,255,500 | 6,844,611 | ||
6.5% 4/1/13 to 6/1/16 | 166,198 | 171,104 | ||
7% 1/1/16 to 11/1/18 | 40,408 | 43,148 | ||
7.5% 10/1/14 | 4,213 | 4,393 | ||
TOTAL FANNIE MAE | 26,974,621 | |||
Freddie Mac - 1.5% | ||||
2.373% 1/1/35 (f) | 84,571 | 90,079 | ||
2.663% 11/1/35 (f) | 363,911 | 385,087 | ||
2.745% 4/1/35 (f) | 635,097 | 677,301 | ||
2.844% 6/1/37 (f) | 375,612 | 403,896 | ||
2.881% 8/1/36 (f) | 188,446 | 202,636 | ||
2.971% 8/1/41 (f) | 731,214 | 768,978 | ||
2.985% 8/1/34 (f) | 102,728 | 108,890 | ||
3% 8/1/21 | 1,975,971 | 2,078,088 | ||
3.086% 9/1/41 (f) | 403,865 | 422,128 | ||
3.5% 1/1/26 | 735,549 | 785,181 | ||
3.573% 4/1/40 (f) | 488,130 | 513,078 | ||
3.604% 4/1/40 (f) | 386,454 | 407,527 | ||
4% 6/1/24 to 4/1/26 | 6,548,586 | 7,010,565 | ||
4.5% 8/1/18 to 11/1/18 | 2,104,778 | 2,243,655 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value | ||
Freddie Mac - continued | ||||
8.5% 5/1/26 to 7/1/28 | $ 64,293 | $ 76,351 | ||
12% 11/1/19 | 939 | 985 | ||
TOTAL FREDDIE MAC | 16,174,425 | |||
Ginnie Mae - 0.0% | ||||
7% 1/15/25 to 6/15/32 | 312,787 | 363,537 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $42,540,597) |
| |||
Asset-Backed Securities - 14.8% | ||||
| ||||
Accredited Mortgage Loan Trust: | ||||
Series 2003-3 Class A1, 4.46% 1/25/34 (AMBAC Insured) | 386,623 | 384,356 | ||
Series 2005-1 Class M1, 0.6717% 4/25/35 (f) | 100,277 | 92,862 | ||
ACE Securities Corp. Home Equity Loan Trust Series 2005-HE2 Class M2, 0.8767% 4/25/35 (f) | 6,214 | 6,150 | ||
Ally Auto Receivables Trust: | ||||
Series 2011-2 Class A3, 1.18% 4/15/15 | 690,475 | 692,426 | ||
Series 2011-3 Class A3, 0.97% 8/17/15 | 1,167,995 | 1,171,397 | ||
Series 2012-SN1 Class A3, 0.57% 8/20/15 | 1,130,000 | 1,130,682 | ||
Ally Master Owner Trust: | ||||
Series 2010-3 Class A, 2.88% 4/15/15 (d) | 510,000 | 511,485 | ||
Series 2011-1 Class A2, 2.15% 1/15/16 | 4,370,000 | 4,430,358 | ||
Series 2011-3 Class A2, 1.81% 5/15/16 | 3,460,000 | 3,512,059 | ||
Series 2011-5 Class A1, 0.8512% 6/15/15 (f) | 2,720,000 | 2,722,467 | ||
Series 2012-1 Class A2, 1.44% 2/15/17 | 2,630,000 | 2,662,307 | ||
Series 2012-2 Class A, 0.7012% 3/15/16 (f) | 1,300,000 | 1,300,503 | ||
Series 2012-3 Class A2, 1.21% 6/15/17 | 2,630,000 | 2,644,353 | ||
Series 2013-1 Class A2, 1% 2/15/18 | 2,500,000 | 2,499,454 | ||
American Express Credit Account Master Trust: | ||||
Series 2012-2 Class A, 0.68% 3/15/18 | 6,180,000 | 6,204,065 | ||
Series 2012-5 Class A, 0.59% 5/15/18 | 2,730,000 | 2,730,696 | ||
AmeriCredit Auto Receivables Trust: | ||||
Series 2010-4 Class A3, 1.27% 4/8/15 | 728,180 | 729,119 | ||
Series 2011-1 Class A3, 1.39% 9/8/15 | 567,052 | 568,777 | ||
Series 2011-2 Class A3, 1.61% 10/8/15 | 1,613,248 | 1,619,771 | ||
Series 2011-3 Class A3, 1.17% 1/8/16 | 650,000 | 652,492 | ||
Series 2011-4 Class AS, 0.92% 3/9/15 | 539,227 | 539,687 | ||
Series 2011-5 Class A2, 1.19% 8/8/15 | 272,251 | 272,886 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
AmeriCredit Auto Receivables Trust: - continued | ||||
Series 2012-1 Class A2, 0.91% 10/8/15 | $ 615,334 | $ 616,730 | ||
Series 2012-2 Class A3, 1.05% 10/11/16 | 810,000 | 816,781 | ||
Series 2012-5 Class A3, 0.92% 6/8/17 | 1,610,000 | 1,609,992 | ||
Americredit Auto Receivables Trust Series 2013-1: | ||||
Class A2, 0.49% 6/8/16 | 760,000 | 760,310 | ||
Class A3, 0.61% 10/10/17 | 2,240,000 | 2,239,915 | ||
Ameriquest Mortgage Securities, Inc. pass-thru certificates: | ||||
Series 2004-R2 Class M3, 1.0267% 4/25/34 (f) | 12,491 | 9,570 | ||
Series 2005-R2 Class M1, 0.6517% 4/25/35 (f) | 262,030 | 255,602 | ||
Argent Securities, Inc. pass-thru certificates: | ||||
Series 2003-W7 Class A2, 0.9817% 3/25/34 (f) | 82,560 | 71,359 | ||
Series 2006-W4 Class A2C, 0.3617% 5/25/36 (f) | 161,268 | 56,875 | ||
Bank of America Auto Trust Series 2012-1 Class A3, 0.78% 6/15/16 | 1,830,000 | 1,838,073 | ||
BMW Floorplan Master Owner Trust Series 2012-1A Class A, 0.6057% 9/15/17 (d)(f) | 2,000,000 | 1,997,283 | ||
BMW Vehicle Lease Trust Series 2012-1 Class A3, 0.75% 2/20/15 | 1,410,000 | 1,414,301 | ||
BMW Vehicle Owner Trust Series 2011-A Class A3, 0.76% 8/25/15 | 1,121,918 | 1,125,163 | ||
Capital Auto Receivables Asset Trust Series 2008-A Class B, 6.89% 1/15/15 (d) | 506,594 | 508,624 | ||
Capital One Multi-Asset Execution Trust Series 2013-A1 Class A1, 0.63% 11/15/18 | 5,860,000 | 5,849,165 | ||
Capital Trust Ltd. Series 2004-1: | ||||
Class A2, 0.6507% 7/20/39 (d)(f) | 84,886 | 77,565 | ||
Class B, 0.9507% 7/20/39 (d)(f) | 373,480 | 170,538 | ||
Class C, 1.3007% 7/20/39 (d)(f) | 478,070 | 148 | ||
Carrington Mortgage Loan Trust Series 2007-RFC1 Class A3, 0.3417% 12/25/36 (f) | 228,766 | 117,929 | ||
Chase Issuance Trust: | ||||
Series 2012-A Class A1, 0.3012% 5/16/16 (f) | 2,000,000 | 2,001,064 | ||
Series 2012-A8 Class A8, 0.54% 10/16/17 | 5,000,000 | 4,986,835 | ||
CIT Equipment Collateral Series 2012-VT1: | ||||
Class A2, 0.85% 5/20/14 (d) | 870,212 | 871,431 | ||
Class A3, 1.1% 8/22/16 (d) | 1,800,000 | 1,804,802 | ||
Citibank Credit Card Issuance Trust Series 2012-A1 Class A1, 0.55% 10/7/17 | 2,990,000 | 2,989,902 | ||
Countrywide Home Loans, Inc.: | ||||
Series 2003-BC1 Class B1, 5.4322% 3/25/32 (MGIC Investment Corp. Insured) (f) | 25,161 | 24,295 | ||
Series 2004-2 Class 3A4, 0.7017% 7/25/34 (f) | 62,430 | 56,887 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Countrywide Home Loans, Inc.: - continued | ||||
Series 2004-3 Class M4, 1.6567% 4/25/34 (f) | $ 20,061 | $ 9,502 | ||
Series 2004-4 Class M2, 0.9967% 6/25/34 (f) | 74,616 | 66,191 | ||
Discover Card Master Trust: | ||||
Series 2012-A1 Class A1, 0.81% 8/15/17 | 2,920,000 | 2,940,133 | ||
Series 2012-A2 Class A2, 0.3512% 10/17/16 (f) | 3,000,000 | 3,002,533 | ||
Series 2012-A3 Class A3, 0.86% 11/15/17 | 5,410,000 | 5,451,668 | ||
Series 2013-A2 Class A2, 0.69% 8/15/18 | 5,580,000 | 5,579,316 | ||
Enterprise Fleet Financing LLC Series 2012-1 Class A2, 1.14% 11/20/17 (d) | 1,680,000 | 1,689,555 | ||
Fannie Mae Series 2004-T5: | ||||
Class AB1, 0.7272% 5/28/35 (f) | 159,655 | 129,444 | ||
Class AB3, 1.0332% 5/28/35 (f) | 67,441 | 52,066 | ||
Fieldstone Mortgage Investment Corp. Series 2004-3 Class M5, 2.3767% 8/25/34 (f) | 36,914 | 26,912 | ||
First Franklin Mortgage Loan Trust Series 2005-FF9 Class A3, 0.4817% 10/25/35 (f) | 82,006 | 81,766 | ||
Ford Credit Auto Lease Trust: | ||||
Series 2012-A Class A3, 0.85% 1/15/15 | 820,000 | 822,567 | ||
Series 2012-B: | ||||
Class A2, 0.54% 11/15/14 | 520,000 | 520,354 | ||
Class A3, 0.57% 9/15/15 | 1,240,000 | 1,241,266 | ||
Ford Credit Auto Owner Trust Series 2012-B Class A3, 0.72% 12/15/16 | 1,950,000 | 1,956,204 | ||
Ford Credit Auto Owner Trust Series 2012-D Class A3, 0.51% 4/15/17 | 1,090,000 | 1,089,204 | ||
Ford Credit Floorplan Master Owner Trust: | ||||
Series 2010-5 Class A1, 1.5% 9/15/15 | 1,110,000 | 1,116,429 | ||
Series 2012-1 Class A, 0.6712% 1/15/16 (f) | 5,000,000 | 5,014,240 | ||
Series 2012-4 Class A1, 0.74% 9/15/16 | 2,380,000 | 2,386,874 | ||
Series 2013-1 Class A1, 0.85% 1/15/18 | 2,380,000 | 2,378,748 | ||
Fremont Home Loan Trust: | ||||
Series 2004-D: | ||||
Class M4, 1.6267% 11/25/34 (f) | 104,293 | 5,298 | ||
Class M5, 1.7017% 11/25/34 (f) | 55,183 | 970 | ||
Series 2005-A: | ||||
Class M3, 0.9367% 1/25/35 (f) | 120,398 | 51,362 | ||
Class M4, 1.2217% 1/25/35 (f) | 46,138 | 5,447 | ||
GCO Education Loan Funding Master Trust II Series 2007-1A Class C1L, 0.6681% 2/25/47 (d)(f) | 298,000 | 202,789 | ||
GE Business Loan Trust Series 2003-1 Class A, 0.6312% 4/15/31 (d)(f) | 19,515 | 18,580 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
GE Capital Credit Card Master Note Trust: | ||||
Series 2012-1 Class A, 1.03% 1/15/18 | $ 2,450,000 | $ 2,475,012 | ||
Series 2012-4 Class A, 0.5012% 6/15/18 (f) | 3,995,000 | 4,003,452 | ||
Series 2012-5 Class A, 0.97% 6/15/18 | 3,380,000 | 3,411,288 | ||
GE Equipment Small Ticket LLC Series 2012-1 Class A3, 1.04% 9/21/15 (d) | 1,050,000 | 1,054,432 | ||
GE Equipment Transportation LLC: | ||||
Series 2012-1 Class A2, 0.74% 9/22/14 | 915,359 | 916,525 | ||
Series 2012-2 Class A2, 0.47% 4/24/15 | 1,700,000 | 1,699,803 | ||
Guggenheim Structured Real Estate Funding Ltd. Series 2006-3 Class C, 0.7517% 9/25/46 (d)(f) | 1,728,962 | 1,707,350 | ||
Home Equity Asset Trust: | ||||
Series 2003-3 Class M1, 1.4917% 8/25/33 (f) | 80,822 | 74,313 | ||
Series 2003-5 Class A2, 0.9017% 12/25/33 (f) | 44,160 | 37,104 | ||
Series 2004-1 Class M2, 1.9017% 6/25/34 (f) | 71,529 | 57,506 | ||
Honda Auto Receivables Owner Trust: | ||||
Series 2011-1 Class A4, 1.8% 4/17/17 | 640,000 | 648,595 | ||
Series 2012-2 Class A3, 0.7% 2/16/16 | 1,610,000 | 1,616,450 | ||
HSI Asset Securitization Corp. Trust Series 2007-HE1 Class 2A3, 0.3917% 1/25/37 (f) | 157,118 | 76,440 | ||
John Deere Owner Trust Series 2011-A Class A3, 1.29% 1/15/16 | 1,196,986 | 1,202,721 | ||
JPMorgan Mortgage Acquisition Trust Series 2007-CH1 Class AV4, 0.3317% 11/25/36 (f) | 157,766 | 152,749 | ||
Keycorp Student Loan Trust Series 1999-A Class A2, 0.64% 12/27/29 (f) | 56,686 | 54,148 | ||
Marriott Vacation Club Owner Trust Series 2006-1A: | ||||
Class B, 5.827% 4/20/28 (d) | 43,833 | 43,783 | ||
Class C, 6.125% 4/20/28 (d) | 43,833 | 43,764 | ||
MASTR Asset Backed Securities Trust Series 2007-HE1 Class M1, 0.5017% 5/25/37 (f) | 84,461 | 946 | ||
Mercedes-Benz Master Owner Trust Series 2012-AA Class A, 0.79% 11/15/17 (d) | 3,260,000 | 3,261,088 | ||
Mercedes-Benz Auto Lease Trust: | ||||
Series 2011-B Class A3, 1.07% 8/15/14 (d) | 1,410,000 | 1,414,272 | ||
Series 2012-A Class A3, 0.88% 11/17/14 | 1,310,000 | 1,314,459 | ||
Merrill Lynch Mortgage Investors Trust: | ||||
Series 2006-FM1 Class A2B, 0.3117% 4/25/37 (f) | 119,572 | 100,096 | ||
Series 2006-OPT1 Class A1A, 0.4617% 6/25/35 (f) | 167,544 | 149,494 | ||
Morgan Stanley ABS Capital I Trust: | ||||
Series 2004-HE6 Class A2, 0.5417% 8/25/34 (f) | 138,792 | 120,696 | ||
Series 2004-NC8 Class M6, 2.0767% 9/25/34 (f) | 69,376 | 34,818 | ||
Series 2005-NC1 Class M1, 0.6417% 1/25/35 (f) | 50,738 | 46,200 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Morgan Stanley ABS Capital I Trust: - continued | ||||
Series 2005-NC2 Class B1, 1.3717% 3/25/35 (f) | $ 52,840 | $ 2,153 | ||
Nissan Auto Lease Trust: | ||||
Series 2011-A Class A3, 1.04% 8/15/14 | 1,840,000 | 1,844,307 | ||
Series 2011-B Class A3, 0.92% 2/16/15 | 930,000 | 933,095 | ||
Nissan Auto Receivables Owner Trust Series 2011-B Class A3, 0.95% 2/16/16 | 950,000 | 956,184 | ||
Nissan Master Owner Trust Receivables: | ||||
Series 2012-A Class A, 0.6757% 5/15/17 (f) | 2,900,000 | 2,917,199 | ||
Series 2013-A Class A, 0.5017% 2/15/18 (f) | 2,000,000 | 2,000,000 | ||
Northstar Education Finance, Inc., Delaware Series 2005-1 Class A5, 1.0505% 10/30/45 (f) | 488,838 | 475,268 | ||
Ocala Funding LLC: | ||||
Series 2005-1A Class A, 1.7007% 3/20/10 (b)(d)(f) | 71,000 | 0 | ||
Series 2006-1A Class A, 1.6007% 3/20/11 (b)(d)(f) | 149,000 | 0 | ||
Park Place Securities, Inc.: | ||||
Series 2004-WCW1: | ||||
Class M3, 1.4517% 9/25/34 (f) | 797,630 | 638,347 | ||
Class M4, 1.6517% 9/25/34 (f) | 1,086,724 | 319,294 | ||
Series 2005-WCH1 Class M4, 1.0317% 1/25/36 (f) | 187,294 | 152,147 | ||
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-HE1 Class A, 1.0017% 4/25/33 (f) | 648 | 603 | ||
Santander Drive Auto Receivables Trust: | ||||
Series 2011-3 Class A2, 1.11% 8/15/14 | 212,798 | 213,005 | ||
Series 2011-4 Class A2, 1.37% 3/16/15 | 499,487 | 500,757 | ||
Series 2012-1 Class A2, 1.25% 4/15/15 | 632,506 | 634,384 | ||
Series 2012-2 Class A2, 0.91% 5/15/15 | 970,049 | 972,273 | ||
Series 2012-3 Class A3, 1.08% 4/15/16 | 910,000 | 915,630 | ||
Series 2012-4 Class A3, 1.04% 8/15/16 | 1,620,000 | 1,630,976 | ||
Series 2012-5 Class A3, 0.83% 12/15/16 | 1,320,000 | 1,325,498 | ||
Series 2013-1 Class A2, 0.48% 2/16/16 | 2,630,000 | 2,629,767 | ||
Saxon Asset Securities Trust Series 2004-1 Class M1, 0.9967% 3/25/35 (f) | 150,854 | 125,314 | ||
Sierra Receivables Funding Co. Series 2007-1A Class A2, 0.3547% 3/20/19 (FGIC Insured) (d)(f) | 32,616 | 32,400 | ||
SLM Private Credit Student Loan Trust: | ||||
Series 2004-A: | ||||
Class B, 0.888% 6/15/33 (f) | 256,974 | 176,123 | ||
Class C, 1.258% 6/15/33 (f) | 1,171,983 | 800,829 | ||
Series 2004-B: | ||||
Class A2, 0.508% 6/15/21 (f) | 1,180,447 | 1,162,545 | ||
Class C, 1.178% 9/15/33 (f) | 1,789,879 | 1,214,798 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
SLM Student Loan Trust: | ||||
Series 2012-7 Class A2, 0.4837% 9/25/19 (f) | $ 2,189,000 | $ 2,188,997 | ||
Series 2013-1 Class A2, 0.4512% 9/25/19 (f) | 2,790,000 | 2,790,073 | ||
Structured Asset Investment Loan Trust Series 2004-8 Class M5, 1.9267% 9/25/34 (f) | 7,313 | 3,050 | ||
Terwin Mortgage Trust Series 2003-4HE Class A1, 1.0617% 9/25/34 (f) | 86,903 | 78,711 | ||
Volkswagen Auto Loan Enhanced Trust Series 2011-1 Class A3, 1.22% 6/22/15 | 2,205,181 | 2,215,053 | ||
Whinstone Capital Management Ltd. Series 1A Class B3, 2.101% 10/25/44 (d)(f) | 1,390,734 | 1,216,893 | ||
World Omni Auto Lease Securitization Trust Series 2012-A Class A3, 0.93% 11/16/15 | 910,000 | 915,888 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $164,767,109) |
| |||
Collateralized Mortgage Obligations - 5.8% | ||||
| ||||
Private Sponsor - 1.2% | ||||
Arran Residential Mortgages Funding PLC floater Series 2011-1A Class A1C, 1.4901% 11/19/47 (d)(f) | 315,699 | 316,353 | ||
Banc of America Funding Trust sequential payer Series 2009-R1 Class A1, 4.9643% 5/20/36 (f) | 33,886 | 33,971 | ||
Credit Suisse Mortgage Capital Certificates: | ||||
floater Series 2011-7R Class A1, 1.4597% 8/28/47 (d)(f) | 539,696 | 535,949 | ||
sequential payer Series 2010-16 Class A1, 3% 6/25/50 (d) | 250,564 | 252,186 | ||
Gracechurch Mortgage Financing PLC floater Series 2006-1 Class A6, 0.3891% 11/20/56 (d)(f) | 281,228 | 281,169 | ||
Granite Master Issuer PLC floater: | ||||
Series 2006-1A: | ||||
Class A5, 0.3407% 12/20/54 (d)(f) | 1,727,538 | 1,692,987 | ||
Class C2, 1.4007% 12/20/54 (d)(f) | 762,000 | 648,462 | ||
Series 2006-2: | ||||
Class A4, 0.2807% 12/20/54 (f) | 569,879 | 558,482 | ||
Class C1, 1.1407% 12/20/54 (f) | 3,254,000 | 2,769,154 | ||
Series 2006-3 Class C2, 1.2007% 12/20/54 (f) | 142,000 | 120,842 | ||
Series 2006-4: | ||||
Class B1, 0.3807% 12/20/54 (f) | 381,000 | 355,473 | ||
Class C1, 0.9607% 12/20/54 (f) | 233,000 | 198,283 | ||
Class M1, 0.5407% 12/20/54 (f) | 100,000 | 89,500 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
Private Sponsor - continued | ||||
Granite Master Issuer PLC floater: - continued | ||||
Series 2007-1: | ||||
Class 1C1, 0.8007% 12/20/54 (f) | $ 235,000 | $ 199,985 | ||
Class 1M1, 0.5007% 12/20/54 (f) | 153,000 | 136,935 | ||
Class 2C1, 1.0607% 12/20/54 (f) | 107,000 | 91,057 | ||
Class 2M1, 0.7007% 12/20/54 (f) | 196,000 | 175,420 | ||
Series 2007-2 Class 2C1, 1.0622% 12/17/54 (f) | 272,000 | 231,472 | ||
Granite Mortgages Series 2003-2 Class 1A3, 0.802% 7/20/43 (f) | 499,216 | 493,400 | ||
Granite Mortgages PLC floater: | ||||
Series 2003-3: | ||||
Class 1A3, 0.702% 1/20/44 (f) | 198,365 | 196,446 | ||
Class 1C, 2.752% 1/20/44 (f) | 54,183 | 52,047 | ||
Series 2004-1 Class 2A1, 0.629% 3/20/44 (f) | 2,760,494 | 2,728,334 | ||
Series 2004-3 Class 2A1, 0.589% 9/20/44 (f) | 907,291 | 896,721 | ||
MASTR Adjustable Rate Mortgages Trust Series 2007-3 Class 22A2, 0.4117% 5/25/47 (f) | 86,112 | 62,952 | ||
Merrill Lynch Alternative Note Asset Trust floater Series 2007-OAR1 Class A1, 0.3717% 2/25/37 (f) | 131,418 | 113,482 | ||
RESI Finance LP/RESI Finance DE Corp. floater Series 2003-B Class B5, 2.5492% 7/10/35 (d)(f) | 56,785 | 49,954 | ||
Residential Funding Securities Corp. floater Series 2003-RP2 Class A1, 0.6517% 6/25/33 (d)(f) | 8,767 | 8,532 | ||
Sequoia Mortgage Trust floater Series 2004-6 Class A3B, 1.3885% 7/20/34 (f) | 4,036 | 3,780 | ||
TOTAL PRIVATE SPONSOR | 13,293,328 | |||
U.S. Government Agency - 4.6% | ||||
Fannie Mae: | ||||
floater: | ||||
Series 2008-76 Class EF, 0.7017% 9/25/23 (f) | 217,476 | 218,257 | ||
Series 2013-9 Class FA 0.5517% 3/25/42 (f) | 3,240,000 | 3,243,441 | ||
floater planned amortization class Series 2005-90 Class FC, 0.4517% 10/25/35 (f) | 804,249 | 804,391 | ||
pass-thru certificates Series 2012-127 Class DH, 4% 11/25/27 | 1,614,194 | 1,733,304 | ||
planned amortization class: | ||||
Series 2006-54 Class PE, 6% 2/25/33 | 207,022 | 209,310 | ||
Series 2012-94 Class E, 3% 6/25/22 | 937,745 | 983,790 | ||
sequential payer: | ||||
Series 2001-40 Class Z, 6% 8/25/31 | 321,272 | 359,825 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
sequential payer: - continued | ||||
Series 2003-76 Class BA, 4.5% 3/25/18 | $ 396,652 | $ 410,696 | ||
Series 2009-31 Class A, 4% 2/25/24 | 306,956 | 320,533 | ||
Series 2010-135 Class DE, 2.25% 4/25/24 | 1,063,387 | 1,082,585 | ||
Series 2011-16 Class FB, 0.3517% 3/25/31 (f) | 2,231,373 | 2,229,685 | ||
Series 2010-123 Class DL, 3.5% 11/25/25 | 520,662 | 542,949 | ||
Series 2010-143 Class B, 3.5% 12/25/25 | 818,595 | 860,813 | ||
Series 2011-23 Class AB, 2.75% 6/25/20 | 671,460 | 694,207 | ||
target amortization Series 2008-29 Class BG 4.7% 12/25/35 | 524,133 | 554,739 | ||
Federal Home Loan Mortgage Corp. floater sequential payer Series 3943 Class EF 0.4512% 2/15/26 (f) | 1,345,086 | 1,347,809 | ||
Freddie Mac: | ||||
floater: | ||||
Series 2711 Class FC, 1.1012% 2/15/33 (f) | 1,741,979 | 1,769,088 | ||
Series 3346 Class FA, 0.4312% 2/15/19 (f) | 2,600,238 | 2,603,873 | ||
floater planned amortization class Series 3117 Class JF, 0.5012% 2/15/36 (f) | 919,886 | 921,250 | ||
floater sequential payer Series 3387 Class DF, 0.3812% 10/15/17 (f) | 278,646 | 278,645 | ||
planned amortization class: | ||||
Series 2535 Class PC, 6% 9/15/32 | 252,704 | 263,600 | ||
Series 2866 Class XE, 4% 12/15/18 | 486,179 | 500,845 | ||
Series 3081 Class CP 5.5% 10/15/34 | 2,837,838 | 2,947,416 | ||
Series 3792 Class DF, 0.6012% 11/15/40 (f) | 2,307,004 | 2,314,831 | ||
Series 3820 Class DA, 4% 11/15/35 | 865,613 | 944,251 | ||
sequential payer: | ||||
Series 2635 Class DG, 4.5% 1/15/18 | 426,032 | 438,659 | ||
Series 3560 Class LA, 2% 8/15/14 | 56,626 | 56,647 | ||
Series 3573 Class LC, 1.85% 8/15/14 | 345,298 | 346,822 | ||
Series 3659 Class EJ 3% 6/15/18 | 1,494,453 | 1,542,362 | ||
Series 3696 Class AE, 1.2% 7/15/15 | 617,822 | 621,276 | ||
Series 3949 Class MK, 4.5% 10/15/34 | 590,000 | 660,828 | ||
Ginnie Mae guaranteed Multi-family REMIC pass-thru securities Series 2013-37 Class F, 0.4722% 6/20/40 (e)(f) | 890,000 | 890,000 | ||
Ginnie Mae guaranteed REMIC pass-thru certificates: | ||||
floater: | ||||
Series 2010-53 Class FC, 1.0247% 4/20/40 (f) | 907,988 | 922,694 | ||
Series 2012-113 Class FJ, 0.4547% 1/20/42 (f) | 1,776,915 | 1,782,278 | ||
Series 2012-149 Class MF, 0.4547% 12/20/42 (f) | 3,321,729 | 3,320,075 | ||
Series 2013-9 Class F, 0.4507% 1/20/43 (f) | 2,366,990 | 2,374,176 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass-thru certificates: - continued | ||||
floater planned amortization class Series 2005-47 Class FX, 0.3547% 5/20/34 (f) | $ 3,365,356 | $ 3,364,714 | ||
floater sequential payer: | ||||
Series 2010-120 Class FB 0.5047% 9/20/35 (f) | 1,285,869 | 1,287,857 | ||
Series 2011-150 Class D, 3% 4/20/37 | 743,591 | 762,021 | ||
planned amortization class: | ||||
Series 2010-112 Class PM, 3.25% 9/20/33 | 558,353 | 571,203 | ||
Series 2010-99 Class PT, 3.5% 8/20/33 | 674,216 | 692,556 | ||
Series 2012-149 Class LF, 0.4547% 12/20/42 (f) | 1,373,367 | 1,372,684 | ||
Series 2012-97 Class JF, 0.4517% 8/16/42 (f) | 1,667,809 | 1,670,006 | ||
TOTAL U.S. GOVERNMENT AGENCY | 50,816,991 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $61,844,208) |
| |||
Commercial Mortgage Securities - 5.5% | ||||
| ||||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.4302% 2/14/43 (f)(g) | 391,841 | 12,861 | ||
Banc of America Large Loan, Inc. floater Series 2006-BIX1 Class G, 0.5312% 10/15/19 (d)(f) | 46,101 | 45,640 | ||
Banc of America REMIC Trust Series 2012-CLRN Class A1, 1.3512% 8/15/17 (d)(f) | 1,950,000 | 1,967,681 | ||
Bayview Commercial Asset Trust: | ||||
floater: | ||||
Series 2003-2 Class M1, 1.0517% 12/25/33 (d)(f) | 6,863 | 5,019 | ||
Series 2005-3A: | ||||
Class A2, 0.6017% 11/25/35 (d)(f) | 41,160 | 34,459 | ||
Class M1, 0.6417% 11/25/35 (d)(f) | 7,509 | 4,872 | ||
Class M2, 0.6917% 11/25/35 (d)(f) | 9,534 | 6,082 | ||
Class M3, 0.7117% 11/25/35 (d)(f) | 8,532 | 5,333 | ||
Class M4, 0.8017% 11/25/35 (d)(f) | 10,630 | 5,150 | ||
Series 2005-4A: | ||||
Class A2, 0.5917% 1/25/36 (d)(f) | 751,109 | 592,442 | ||
Class B1, 1.6017% 1/25/36 (d)(f) | 50,540 | 7,799 | ||
Class M1, 0.6517% 1/25/36 (d)(f) | 236,237 | 131,269 | ||
Class M2, 0.6717% 1/25/36 (d)(f) | 89,645 | 47,071 | ||
Class M3, 0.7017% 1/25/36 (d)(f) | 96,344 | 49,637 | ||
Class M4, 0.8117% 1/25/36 (d)(f) | 49,299 | 23,927 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Bayview Commercial Asset Trust: - continued | ||||
floater: - continued | ||||
Series 2005-4A: - continued | ||||
Class M5, 0.8517% 1/25/36 (d)(f) | $ 49,299 | $ 17,384 | ||
Class M6, 0.9017% 1/25/36 (d)(f) | 50,029 | 13,456 | ||
Series 2006-1: | ||||
Class A2, 0.5617% 4/25/36 (d)(f) | 23,300 | 18,868 | ||
Class M1, 0.5817% 4/25/36 (d)(f) | 8,333 | 5,370 | ||
Class M2, 0.6017% 4/25/36 (d)(f) | 8,805 | 5,454 | ||
Class M3, 0.6217% 4/25/36 (d)(f) | 7,576 | 4,513 | ||
Class M4, 0.7217% 4/25/36 (d)(f) | 4,293 | 2,468 | ||
Class M5, 0.7617% 4/25/36 (d)(f) | 4,167 | 2,291 | ||
Class M6, 0.8417% 4/25/36 (d)(f) | 8,308 | 3,496 | ||
Series 2006-2A: | ||||
Class A1, 0.4317% 7/25/36 (d)(f) | 230,204 | 180,451 | ||
Class A2, 0.4817% 7/25/36 (d)(f) | 20,783 | 16,347 | ||
Class B1, 1.0717% 7/25/36 (d)(f) | 7,781 | 1,397 | ||
Class M1, 0.5117% 7/25/36 (d)(f) | 21,805 | 10,369 | ||
Class M2, 0.5317% 7/25/36 (d)(f) | 15,385 | 6,887 | ||
Class M3, 0.5517% 7/25/36 (d)(f) | 12,761 | 5,423 | ||
Class M4, 0.6217% 7/25/36 (d)(f) | 8,617 | 2,135 | ||
Class M5, 0.6717% 7/25/36 (d)(f) | 10,592 | 2,481 | ||
Class M6, 0.7417% 7/25/36 (d)(f) | 15,803 | 3,306 | ||
Series 2006-3A: | ||||
Class M4, 0.6317% 10/25/36 (d)(f) | 17,397 | 2,632 | ||
Class M5, 0.6817% 10/25/36 (d)(f) | 20,543 | 1,089 | ||
Series 2006-4A Class M6, 0.7217% 12/25/36 (d)(f) | 12,494 | 400 | ||
Series 2007-1 Class A2, 0.4717% 3/25/37 (d)(f) | 361,147 | 208,885 | ||
Series 2007-2A: | ||||
Class A1, 0.4717% 7/25/37 (d)(f) | 62,214 | 43,575 | ||
Class A2, 0.5217% 7/25/37 (d)(f) | 58,270 | 28,431 | ||
Class M1, 0.5717% 7/25/37 (d)(f) | 20,768 | 5,709 | ||
Class M2, 0.6117% 7/25/37 (d)(f) | 11,654 | 1,989 | ||
Class M3, 0.6917% 7/25/37 (d)(f) | 11,803 | 1,187 | ||
Class M4, 0.8517% 7/25/37 (d)(f) | 22,726 | 1,394 | ||
Class M5, 0.9517% 7/25/37 (d)(f) | 20,096 | 894 | ||
Class M6, 1.2017% 7/25/37 (d)(f) | 13,083 | 114 | ||
Series 2007-3: | ||||
Class A2, 0.4917% 7/25/37 (d)(f) | 88,945 | 46,301 | ||
Class B1, 1.1517% 7/25/37 (d)(f) | 76,544 | 5,847 | ||
Class B2, 1.8017% 7/25/37 (d)(f) | 33,299 | 1,778 | ||
Class M1, 0.5117% 7/25/37 (d)(f) | 67,197 | 22,693 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Bayview Commercial Asset Trust: - continued | ||||
floater: - continued | ||||
Series 2007-3: - continued | ||||
Class M2, 0.5417% 7/25/37 (d)(f) | $ 70,648 | $ 19,726 | ||
Class M3, 0.5717% 7/25/37 (d)(f) | 114,358 | 24,846 | ||
Class M4, 0.7017% 7/25/37 (d)(f) | 180,838 | 30,494 | ||
Class M5, 0.8017% 7/25/37 (d)(f) | 90,148 | 12,903 | ||
Class M6, 1.0017% 7/25/37 (d)(f) | 70,402 | 8,502 | ||
Series 2007-4A: | ||||
Class A2, 0.7517% 9/25/37 (d)(f) | 814,701 | 144,178 | ||
Class M1, 1.1517% 9/25/37 (d)(f) | 126,242 | 11,736 | ||
Class M2, 1.2517% 9/25/37 (d)(f) | 126,242 | 9,710 | ||
Class M4, 1.8017% 9/25/37 (d)(f) | 332,687 | 16,239 | ||
Class M5, 1.9517% 9/25/37 (d)(f) | 211,626 | 6,745 | ||
Series 2006-2A Class IO, 3.1745% 7/25/36 (c)(d)(g) | 7,534,273 | 69,433 | ||
Bear Stearns Commercial Mortgage Securities Trust: | ||||
floater: | ||||
Series 2006-BBA7: | ||||
Class H, 0.8512% 3/15/19 (d)(f) | 47,343 | 46,882 | ||
Class J, 1.0512% 3/15/19 (d)(f) | 51,667 | 49,121 | ||
Series 2007-BBA8: | ||||
Class A2, 0.3512% 3/15/22 (d)(f) | 114,346 | 113,713 | ||
Class D, 0.4512% 3/15/22 (d)(f) | 52,963 | 50,022 | ||
Class E, 0.5012% 3/15/22 (d)(f) | 275,033 | 254,258 | ||
Class F, 0.5512% 3/15/22 (d)(f) | 168,653 | 152,541 | ||
Class G, 0.6012% 3/15/22 (d)(f) | 43,346 | 38,338 | ||
Class H, 0.7512% 3/15/22 (d)(f) | 52,963 | 45,785 | ||
Class J, 0.9012% 3/15/22 (d)(f) | 52,963 | 44,461 | ||
sequential payer Series 2005-PWR8 Class A4, 4.674% 6/11/41 | 1,320,000 | 1,414,693 | ||
Series 2005-PWR9 Class X2, 0.3653% 9/11/42 (d)(f)(g) | 24,675,481 | 58,925 | ||
Series 2005-T18 Class A4, 4.933% 2/13/42 | 1,884,729 | 2,018,976 | ||
C-BASS Trust floater Series 2006-SC1 Class A, 0.4717% 5/25/36 (d)(f) | 82,236 | 76,693 | ||
CDC Commercial Mortgage Trust Series 2002-FX1 Class XCL, 1.3266% 5/15/35 (d)(f)(g) | 8,571,648 | 134,592 | ||
Citigroup / Deutsche Bank Commercial Mortgage Trust Series 2005-CD1 Class A4, 5.2194% 7/15/44 (f) | 640,000 | 702,410 | ||
Citigroup Commercial Mortgage Trust floater Series 2006-FL2 Class H, 0.5712% 8/15/21 (d)(f) | 10,371 | 9,967 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2006-CD3 Class X3, 0.4852% 10/15/48 (f)(g) | 40,021,201 | 133,191 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
COMM pass-thru certificates: | ||||
floater: | ||||
Series 2005-F10A Class J, 1.0512% 4/15/17 (d)(f) | $ 16,086 | $ 14,349 | ||
Series 2005-FL11: | ||||
Class F, 0.6512% 11/15/17 (d)(f) | 18,996 | 17,273 | ||
Class G, 0.7012% 11/15/17 (d)(f) | 13,167 | 11,709 | ||
Series 2006-CN2A Class A2FL, 0.4192% 2/5/19 (d)(f) | 226,530 | 225,013 | ||
sequential payer Series 2006-CN2A Class A2FX, 5.449% 2/5/19 (d) | 1,004,771 | 1,010,067 | ||
Series 2006-CN2A Class E, 5.5699% 2/5/19 (d)(f) | 630,000 | 629,240 | ||
Commercial Mortgage pass-thru certificates Series 2004-LB4A Class A5, 4.84% 10/15/37 | 5,370,000 | 5,635,740 | ||
Credit Suisse Commercial Mortgage Trust Series 2006-C5 Class ASP, 0.6649% 12/15/39 (f)(g) | 29,436,600 | 170,497 | ||
Credit Suisse First Boston Mortgage Securities Corp.: | ||||
Series 2001-CK6 Class AX, 1.0608% 8/15/36 (f)(g) | 1,212,829 | 1,509 | ||
Series 2003-C4 Class A4, 5.137% 8/15/36 | 708,442 | 712,971 | ||
Credit Suisse Mortgage Capital Certificates floater Series 2007-TFL1: | ||||
Class C: | ||||
0.3712% 2/15/22 (d)(f) | 236,650 | 222,414 | ||
0.4712% 2/15/22 (d)(f) | 84,521 | 79,183 | ||
Class F, 0.5212% 2/15/22 (d)(f) | 169,020 | 158,261 | ||
DBUBS Series 2011-LC3A Class A1, 2.238% 8/10/44 | 273,025 | 277,656 | ||
Extended Stay America Trust floater Series 2013-ESFL: | ||||
Class A1FL, 1.008% 12/5/31 (d)(f) | 890,000 | 890,267 | ||
Class A2FL, 0.908% 12/5/31 (d)(f) | 1,160,000 | 1,161,432 | ||
Freddie Mac: | ||||
pass-thru certificates Series K708 Class A1, 1.67% 10/25/18 | 1,484,688 | 1,524,526 | ||
Series K707 Class A1, 1.615% 9/25/18 | 1,727,814 | 1,771,980 | ||
GE Capital Commercial Mortgage Corp.: | ||||
sequential payer Series 2006-C1 Class A4, 5.2965% 3/10/44 (f) | 1,770,000 | 1,961,102 | ||
Series 2001-1 Class X1, 1.8773% 5/15/33 (d)(f)(g) | 462,645 | 7,042 | ||
GMAC Commercial Mortgage Securities, Inc.: | ||||
sequential payer Series 2003-C2 Class A2, 5.4417% 5/10/40 (f) | 542,573 | 547,750 | ||
Series 2004-C2 Class A4, 5.301% 8/10/38 | 1,200,000 | 1,262,028 | ||
Greenwich Capital Commercial Funding Corp.: | ||||
floater Series 2006-FL4 Class B, 0.3892% 11/5/21 (d)(f) | 1,170,000 | 1,125,336 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Greenwich Capital Commercial Funding Corp.: - continued | ||||
Series 2007-GG11 Class A1, 0.2381% 12/10/49 (d)(f)(g) | $ 60,357,078 | $ 296,957 | ||
GS Mortgage Securities Corp. II: | ||||
floater: | ||||
Series 2006-FL8A Class F, 0.6477% 6/6/20 (d)(f) | 105,970 | 105,616 | ||
Series 2007-EOP: | ||||
Class A1, 1.1031% 3/6/20 (d)(f) | 1,499,304 | 1,500,715 | ||
Class A2, 1.2601% 3/6/20 (d)(f) | 460,000 | 460,808 | ||
Class C, 2.0056% 3/6/20 (d)(f) | 1,710,000 | 1,718,199 | ||
Class D, 2.2018% 3/6/20 (d)(f) | 215,000 | 216,059 | ||
Class E, 2.4764% 3/6/20 (d)(f) | 360,000 | 362,113 | ||
Class F, 2.6334% 3/6/20 (d)(f) | 180,000 | 181,056 | ||
Class G, 2.7903% 3/6/20 (d)(f) | 90,000 | 90,535 | ||
Class H, 3.3004% 3/6/20 (d)(f) | 150,000 | 150,967 | ||
Class J, 4.0852% 3/6/20 (d)(f) | 215,000 | 216,497 | ||
sequential payer: | ||||
Series 2004-GG2 Class A6, 5.396% 8/10/38 (f) | 1,340,000 | 1,403,973 | ||
Series 2005-GG4 Class A3, 4.607% 7/10/39 | 5,485 | 5,512 | ||
Series 2006-GG6 Class A2, 5.506% 4/10/38 | 276,455 | 286,323 | ||
GS Mortgage Securities Corp. Trust Series 2013-KYO Class A, 1.0512% 11/8/29 (d)(f) | 1,880,000 | 1,884,356 | ||
GS Mortgage Securities Trust: | ||||
sequential payer Series 2006-GG8 Class A2, 5.479% 11/10/39 | 612,896 | 621,786 | ||
Series 2011-GC5 Class A1, 1.468% 8/10/44 (f) | 815,636 | 826,295 | ||
Series 2012-GC6 Class A1, 1.282% 1/10/45 | 389,230 | 392,482 | ||
JPMorgan Chase Commercial Mortgage Securities Corp.: | ||||
floater Series 2011-CCHP Class A, 2.6% 7/15/28 (d)(f) | 484,216 | 484,419 | ||
Series 2003-CB7 Class A4, 4.879% 1/12/38 (f) | 439,294 | 448,345 | ||
Series 2012-C6 Class A1, 1.0305% 5/15/45 | 1,072,569 | 1,079,650 | ||
JPMorgan Chase Commercial Mortgage Securities Trust: | ||||
floater Series 2006-FLA2: | ||||
Class D, 0.4312% 11/15/18 (d)(f) | 17,283 | 16,351 | ||
Class E, 0.4812% 11/15/18 (d)(f) | 24,491 | 22,681 | ||
Class F, 0.5312% 11/15/18 (d)(f) | 36,733 | 32,549 | ||
Class G, 0.5612% 11/15/18 (d)(f) | 31,925 | 27,011 | ||
Class H, 0.7012% 11/15/18 (d)(f) | 24,497 | 19,747 | ||
sequential payer: | ||||
Series 2005-LDP5 Class A2, 5.198% 12/15/44 | 549,018 | 552,992 | ||
Series 2007-LD11 Class A2, 5.7974% 6/15/49 (f) | 597,480 | 616,272 | ||
Series 2007-LDPX Class A2 S, 5.305% 1/15/49 | 205,021 | 207,377 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2003-C3 Class A4, 4.166% 5/15/32 | $ 7,932 | $ 7,940 | ||
Series 2006-C1 Class A2, 5.084% 2/15/31 | 92,762 | 92,848 | ||
Series 2007-C6 Class A2, 5.845% 7/15/40 | 339,527 | 339,974 | ||
Series 2004-C8, 4.799% 12/15/29 | 1,186,768 | 1,243,164 | ||
Series 2006-C6 Class XCP, 0.6751% 9/15/39 (f)(g) | 16,194,199 | 65,797 | ||
Series 2007-C1 Class XCP, 0.4249% 2/15/40 (f)(g) | 5,753,510 | 25,874 | ||
Series 2007-C2 Class XCP, 0.4823% 2/15/40 (f)(g) | 33,180,365 | 174,894 | ||
Lehman Brothers Floating Rate Commercial Mortgage Trust floater Series 2006-LLFA: | ||||
Class F, 0.5412% 9/15/21 (d)(f) | 145,070 | 137,539 | ||
Class G, 0.5612% 9/15/21 (d)(f) | 286,588 | 268,846 | ||
Class H, 0.6012% 9/15/21 (d)(f) | 73,934 | 67,879 | ||
Merrill Lynch Mortgage Trust: | ||||
sequential payer Series 2005-MKB2 Class A2, 4.806% 9/12/42 | 20,566 | 20,600 | ||
Series 2005-MCP1 Class XP, 0.6316% 6/12/43 (f)(g) | 7,198,672 | 13,591 | ||
Series 2005-MKB2 Class XP, 0.2487% 9/12/42 (f)(g) | 3,253,415 | 68 | ||
Merrill Lynch-CFC Commercial Mortgage Trust: | ||||
sequential payer Series 2007-9 Class A2, 5.59% 9/12/49 | 328,435 | 329,056 | ||
Series 2006-4 Class XP, 0.6175% 12/12/49 (f)(g) | 12,516,996 | 141,455 | ||
Morgan Stanley BAML Trust Series 2012-C5 Class A1, 0.916% 8/15/45 | 1,218,038 | 1,222,733 | ||
Morgan Stanley Capital I Trust: | ||||
floater: | ||||
Series 2006-XLF Class C, 1.402% 7/15/19 (d)(f) | 45,397 | 18,216 | ||
Series 2007-XLFA: | ||||
Class A2, 0.302% 10/15/20 (d)(f) | 619,371 | 613,766 | ||
Class D, 0.392% 10/15/20 (d)(f) | 84,694 | 78,190 | ||
Class E, 0.452% 10/15/20 (d)(f) | 105,926 | 94,614 | ||
Class F, 0.502% 10/15/20 (d)(f) | 63,569 | 54,873 | ||
Class G, 0.542% 10/15/20 (d)(f) | 78,581 | 63,902 | ||
Class H, 0.632% 10/15/20 (d)(f) | 49,464 | 33,794 | ||
Class J, 0.782% 10/15/20 (d)(f) | 28,557 | 10,086 | ||
sequential payer: | ||||
Series 2003-IQ4 Class A2, 4.07% 5/15/40 | 72,279 | 72,270 | ||
Series 2007-IQ14 Class A2, 5.61% 4/15/49 | 857,633 | 882,668 | ||
Series 2012-C4 Class A1, 1.085% 3/15/45 | 1,067,420 | 1,075,105 | ||
Series 2005-HQ5 Class X2, 0.2189% 1/14/42 (f)(g) | 8,075,457 | 145 | ||
Series 2006-HQ9 Class A4, 5.731% 7/12/44 (f) | 1,130,000 | 1,278,253 | ||
Series 2011-C3 Class A1, 2.178% 7/15/49 | 1,939,599 | 1,987,889 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Morgan Stanley Dean Witter Capital I Trust sequential payer Series 2003-T11 Class A4, 5.15% 6/13/41 | $ 319,323 | $ 321,805 | ||
UBS Commercial Mortgage Trust Series 2012-C1 Class A1, 1.032% 5/10/45 | 704,305 | 708,858 | ||
Wachovia Bank Commercial Mortgage Trust: | ||||
floater: | ||||
Series 2006-WL7A: | ||||
Class A2, 0.3212% 9/15/21 (d)(f) | 1,117,800 | 1,100,245 | ||
Class E, 0.4812% 9/15/21 (d)(f) | 176,861 | 165,884 | ||
Class F, 0.5412% 9/15/21 (d)(f) | 238,334 | 221,564 | ||
Class G, 0.5612% 9/15/21 (d)(f) | 225,785 | 204,777 | ||
Class J, 0.8012% 9/15/21 (d)(f) | 50,198 | 38,098 | ||
Series 2007-WHL8 Class F, 0.6812% 6/15/20 (d)(f) | 376,985 | 332,602 | ||
Series 2003-C9 Class A4, 5.012% 12/15/35 | 1,376,118 | 1,402,971 | ||
Series 2006-C23: | ||||
Class A5, 5.416% 1/15/45 (f) | 2,290,000 | 2,562,304 | ||
Class X, 0.0906% 1/15/45 (d)(f)(g) | 184,080,072 | 1,473 | ||
Series 2007-C30 Class XP, 0.4747% 12/15/43 (d)(f)(g) | 33,690,178 | 173,670 | ||
Series 2007-C31A Class A2, 5.421% 4/15/47 | 592,064 | 595,394 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $63,487,683) |
| |||
Municipal Securities - 0.4% | ||||
| ||||
Illinois Gen. Oblig. Series 2010, 4.421% 1/1/15 | 4,570,000 |
| ||
Foreign Government and Government Agency Obligations - 0.5% | ||||
| ||||
Ontario Province 0.95% 5/26/15 | 3,800,000 | 3,837,141 | ||
United Mexican States 6.625% 3/3/15 | 1,300,000 | 1,443,000 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $5,215,862) |
| |||
Supranational Obligations - 1.0% | ||||
| ||||
International Bank for Reconstruction & Development 0.5% 4/15/16 | 11,100,000 |
| ||
Commercial Paper - 0.5% | ||||
| Principal | Value | ||
British Telecommunications PLC 1.5% 5/14/13 | $ 2,000,000 | $ 1,997,813 | ||
Vodafone Group PLC yankee: | ||||
0.77% 12/30/13 | 2,000,000 | 1,988,461 | ||
1.25% 3/12/13 | 1,500,000 | 1,499,867 | ||
TOTAL COMMERCIAL PAPER (Cost $5,480,256) | 5,486,141 | |||
Money Market Funds - 0.1% | |||
Shares |
| ||
Fidelity Cash Central Fund, 0.16% (a) | 598,825 |
| |
Cash Equivalents - 0.2% | |||
Maturity |
| ||
Investments in repurchase agreements in a joint trading account at 0.16%, dated 2/28/13 due 3/1/13 (Collateralized by U.S. Treasury Obligations) # | $ 2,101,009 |
| |
TOTAL INVESTMENT PORTFOLIO - 100.1% (Cost $1,097,646,201) | 1,105,796,034 | ||
NET OTHER ASSETS (LIABILITIES) - (0.1)% | (1,027,433) | ||
NET ASSETS - 100% | $ 1,104,768,601 | ||
Swap Agreements | ||||||||
Credit Default Swaps | ||||||||
Underlying Reference | Rating | Expiration | Counterparty | Fixed | Notional | Value(1) | Upfront | Unrealized |
Sell Protection | ||||||||
Morgan Stanley ABS Capital I Inc Series 2004-NC8 Class B3 | C | Oct. 2034 | Merrill Lynch, Inc. | 4.60% | $ 76,653 | $ (40,215) | $ - | $ (40,215) |
|
(1) Ratings are presented for credit default swaps in which the Fund has sold protection on the underlying referenced debt. Ratings for an underlying index represent a weighted average of the ratings of all securities included in the index. The value of each credit default swap and the credit rating can be measures of the current payment/performance risk. Where a credit rating is not disclosed, the value is used as the measure of the payment/performance risk. Ratings are from Moody's Investors Service, Inc. Where Moody's ratings are not available, S&P ratings are disclosed and are indicated as such. All ratings are as of the report date and do not reflect subsequent changes. |
|
(2) The notional amount of each credit default swap where the Fund has sold protection approximates the maximum potential amount of future payments that the Fund could be required to make if a credit event were to occur. |
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 initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(d) 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 $128,359,530 or 11.6% of net assets. |
(e) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(f) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
(g) 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. |
(h) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $738,111 or 0.1% of net assets. |
Additional information on each restricted holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
Iberbond 2004 PLC 4.826% 12/24/17 | 11/30/05 | $ 730,602 |
# Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement / Counterparty | Value |
$2,101,000 due 3/01/13 at 0.16% | |
Barclays Capital, Inc. | $ 588,352 |
Merrill Lynch, Pierce, Fenner & Smith, Inc. | 406,546 |
RBS Securities, Inc. | 1,106,102 |
| $ 2,101,000 |
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 | $ 7,497 |
Other Information |
The following is a summary of the inputs used, as of February 28, 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 | $ 467,667,392 | $ - | $ 466,929,281 | $ 738,111 |
U.S. Government and Government Agency Obligations | 277,032,060 | - | 277,032,060 | - |
U.S. Government Agency - Mortgage Securities | 43,512,583 | - | 43,512,583 | - |
Asset-Backed Securities | 162,887,974 | - | 159,392,646 | 3,495,328 |
Collateralized Mortgage Obligations | 64,110,319 | - | 64,110,319 | - |
Commercial Mortgage Securities | 61,203,998 | - | 61,185,782 | 18,216 |
Municipal Securities | 4,817,466 | - | 4,817,466 | - |
Foreign Government and Government Agency Obligations | 5,280,141 | - | 5,280,141 | - |
Supranational Obligations | 11,098,135 | - | 11,098,135 | - |
Commercial Paper | 5,486,141 | - | 5,486,141 | - |
Money Market Funds | 598,825 | 598,825 | - | - |
Cash Equivalents | 2,101,000 | - | 2,101,000 | - |
Total Investments in Securities: | $ 1,105,796,034 | $ 598,825 | $ 1,100,945,554 | $ 4,251,655 |
Derivative Instruments: | ||||
Liabilities | ||||
Swap Agreements | $ (40,215) | $ - | $ (40,215) | $ - |
Value of Derivative Instruments |
The following table is a summary of the Fund's value of derivative instruments by primary risk exposure as of February 28, 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 |
Credit Risk | ||
Swap Agreements (a) | $ - | $ (40,215) |
Total Value of Derivatives | $ - | $ (40,215) |
(a) Value is disclosed on the Statement of Assets and Liabilities in the Swap agreements, at value line-items. |
Distribution of investments by country or territory of incorporation, as a percentage of total net assets, is as follows. (Unaudited) |
United States of America | 86.3% |
United Kingdom | 4.1% |
Canada | 2.8% |
Australia | 1.5% |
Netherlands | 1.4% |
Multi-National | 1.0% |
Others (Individually Less Than 1%) | 2.9% |
| 100.0% |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements
Statement of Assets and Liabilities
| February 28, 2013 | |
|
|
|
Assets | ||
Investment in securities, at value (including repurchase agreements of $2,101,000) - See accompanying schedule: Unaffiliated issuers (cost $1,097,047,376) | $ 1,105,197,209 |
|
Fidelity Central Funds (cost $598,825) | 598,825 |
|
Total Investments (cost $1,097,646,201) |
| $ 1,105,796,034 |
Cash |
| 475 |
Receivable for investments sold | 1,000,359 | |
Receivable for swap agreements | 311 | |
Receivable for fund shares sold | 769,352 | |
Interest receivable | 3,628,741 | |
Distributions receivable from Fidelity Central Funds | 790 | |
Prepaid expenses | 2,091 | |
Total assets | 1,111,198,153 | |
|
|
|
Liabilities | ||
Payable for investments purchased | $ 2,681,477 | |
Delayed delivery | 890,000 | |
Payable for fund shares redeemed | 2,126,980 | |
Distributions payable | 25,067 | |
Swap agreements, at value | 40,215 | |
Accrued management fee | 291,423 | |
Distribution and service plan fees payable | 131,429 | |
Other affiliated payables | 170,869 | |
Other payables and accrued expenses | 72,092 | |
Total liabilities | 6,429,552 | |
|
|
|
Net Assets | $ 1,104,768,601 | |
Net Assets consist of: |
| |
Paid in capital | $ 1,139,101,609 | |
Undistributed net investment income | 108,929 | |
Accumulated undistributed net realized gain (loss) on investments | (42,551,556) | |
Net unrealized appreciation (depreciation) on investments | 8,109,619 | |
Net Assets | $ 1,104,768,601 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
| February 28, 2013 | |
|
|
|
Calculation of Maximum Offering Price Class A: | $ 9.35 | |
|
|
|
Maximum offering price per share (100/98.50 of $9.35) | $ 9.49 | |
Class T: | $ 9.36 | |
|
|
|
Maximum offering price per share (100/98.50 of $9.36) | $ 9.50 | |
Class B: | $ 9.37 | |
|
|
|
Class C: | $ 9.36 | |
|
|
|
Institutional Class: | $ 9.36 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Statement of Operations
| Six months ended February 28, 2013 | |
|
|
|
Investment Income |
|
|
Interest |
| $ 8,339,701 |
Income from Fidelity Central Funds |
| 7,497 |
Total income |
| 8,347,198 |
|
|
|
Expenses | ||
Management fee | $ 1,737,645 | |
Transfer agent fees | 831,934 | |
Distribution and service plan fees | 833,311 | |
Accounting and security lending fees | 194,830 | |
Custodian fees and expenses | 16,017 | |
Independent trustees' compensation | 2,205 | |
Registration fees | 61,608 | |
Audit | 87,062 | |
Legal | 2,691 | |
Miscellaneous | 4,676 | |
Total expenses before reductions | 3,771,979 | |
Expense reductions | (59) | 3,771,920 |
Net investment income (loss) | 4,575,278 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 2,634,124 | |
Swap agreements | 1,538 |
|
Total net realized gain (loss) |
| 2,635,662 |
Change in net unrealized appreciation (depreciation) on: Investment securities | (609,803) | |
Swap agreements | (3,232) | |
Total change in net unrealized appreciation (depreciation) |
| (613,035) |
Net gain (loss) | 2,022,627 | |
Net increase (decrease) in net assets resulting from operations | $ 6,597,905 | |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Changes in Net Assets
| Six months ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income (loss) | $ 4,575,278 | $ 13,063,045 |
Net realized gain (loss) | 2,635,662 | 3,181,198 |
Change in net unrealized appreciation (depreciation) | (613,035) | 4,946,490 |
Net increase (decrease) in net assets resulting | 6,597,905 | 21,190,733 |
Distributions to shareholders from net investment income | (4,417,339) | (14,264,673) |
Share transactions - net increase (decrease) | (144,905,684) | (35,012,868) |
Total increase (decrease) in net assets | (142,725,118) | (28,086,808) |
|
|
|
Net Assets | ||
Beginning of period | 1,247,493,719 | 1,275,580,527 |
End of period (including undistributed net investment income of $108,929 and distributions in excess of net investment income of $49,010, respectively) | $ 1,104,768,601 | $ 1,247,493,719 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class A
| Six months ended | Years ended August 31, | ||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data | ||||||
Net asset value, beginning of period | $ 9.34 | $ 9.29 | $ 9.23 | $ 8.96 | $ 8.94 | $ 9.25 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .038 | .090 | .134 | .189 | .237 | .364 |
Net realized and unrealized gain (loss) | .008 | .058 | .062 | .273 | .007 | (.315) |
Total from investment operations | .046 | .148 | .196 | .462 | .244 | .049 |
Distributions from net investment income | (.036) | (.098) | (.136) | (.192) | (.224) | (.359) |
Net asset value, end of period | $ 9.35 | $ 9.34 | $ 9.29 | $ 9.23 | $ 8.96 | $ 8.94 |
Total Return B,C,D | .50% | 1.61% | 2.14% | 5.21% | 2.81% | .51% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | .70% A | .70% | .70% | .71% | .74% | .78% |
Expenses net of fee waivers, if any | .70% A | .70% | .70% | .71% | .74% | .78% |
Expenses net of all reductions | .70% A | .69% | .70% | .71% | .74% | .78% |
Net investment income (loss) | .82% A | .97% | 1.44% | 2.07% | 2.70% | 3.98% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 205,422 | $ 212,725 | $ 250,546 | $ 254,410 | $ 265,959 | $ 342,015 |
Portfolio turnover rate G | 64% A | 75% | 204% | 217% | 318% I | 94% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class T
| Six months ended | Years ended August 31, | ||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 9.34 | $ 9.29 | $ 9.24 | $ 8.97 | $ 8.94 | $ 9.26 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | .038 | .089 | .134 | .189 | .237 | .368 |
Net realized and unrealized gain (loss) | .018 | .059 | .052 | .273 | .016 | (.327) |
Total from investment operations | .056 | .148 | .186 | .462 | .253 | .041 |
Distributions from net investment income | (.036) | (.098) | (.136) | (.192) | (.223) | (.361) |
Net asset value, end of period | $ 9.36 | $ 9.34 | $ 9.29 | $ 9.24 | $ 8.97 | $ 8.94 |
Total Return B,C,D | .60% | 1.60% | 2.03% | 5.20% | 2.91% | .43% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | .71% A | .70% | .70% | .71% | .75% | .76% |
Expenses net of fee waivers, if any | .71% A | .70% | .70% | .71% | .75% | .76% |
Expenses net of all reductions | .71% A | .70% | .70% | .71% | .75% | .76% |
Net investment income (loss) | .81% A | .96% | 1.44% | 2.08% | 2.70% | 4.01% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 130,567 | $ 140,285 | $ 163,217 | $ 189,230 | $ 253,439 | $ 334,850 |
Portfolio turnover rate G | 64% A | 75% | 204% | 217% | 318% I | 94% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class B
| Six months ended | Years ended August 31, | ||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
|
|
Net asset value, beginning of period | $ 9.35 | $ 9.30 | $ 9.24 | $ 8.97 | $ 8.95 | $ 9.27 |
Income from Investment |
|
|
|
|
|
|
Net investment income (loss) E | - I | .015 | .059 | .115 | .167 | .295 |
Net realized and unrealized gain (loss) | .022 | .059 | .062 | .273 | .007 | (.326) |
Total from investment operations | .022 | .074 | .121 | .388 | .174 | (.031) |
Distributions from net investment income | (.002) | (.024) | (.061) | (.118) | (.154) | (.289) |
Net asset value, end of period | $ 9.37 | $ 9.35 | $ 9.30 | $ 9.24 | $ 8.97 | $ 8.95 |
Total Return B,C,D | .24% | .79% | 1.31% | 4.35% | 2.00% | (.36)% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | 1.51% A | 1.50% | 1.52% | 1.52% | 1.54% | 1.55% |
Expenses net of fee waivers, if any | 1.51% A | 1.50% | 1.52% | 1.52% | 1.54% | 1.55% |
Expenses net of all reductions | 1.51% A | 1.50% | 1.52% | 1.52% | 1.54% | 1.55% |
Net investment income (loss) | .01% A | .16% | .63% | 1.26% | 1.91% | 3.22% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 6,207 | $ 7,991 | $ 9,337 | $ 12,587 | $ 12,579 | $ 11,617 |
Portfolio turnover rate G | 64% A | 75% | 204% | 217% | 318% J | 94% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I Amount represents less than $.001 per share.
J The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class C
| Six months ended | Years ended August 31, | ||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 9.35 | $ 9.30 | $ 9.24 | $ 8.97 | $ 8.95 | $ 9.26 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) E | (.002) | .012 | .056 | .113 | .164 | .291 |
Net realized and unrealized gain (loss) | .013 | .058 | .062 | .273 | .006 | (.315) |
Total from investment operations | .011 | .070 | .118 | .386 | .170 | (.024) |
Distributions from net investment income | (.001) | (.020) | (.058) | (.116) | (.150) | (.286) |
Net asset value, end of period | $ 9.36 | $ 9.35 | $ 9.30 | $ 9.24 | $ 8.97 | $ 8.95 |
Total Return B,C,D | .12% | .76% | 1.29% | 4.33% | 1.95% | (.29)% |
Ratios to Average Net Assets F,H | ||||||
Expenses before reductions | 1.56% A | 1.54% | 1.54% | 1.54% | 1.57% | 1.58% |
Expenses net of fee waivers, if any | 1.56% A | 1.54% | 1.54% | 1.54% | 1.57% | 1.58% |
Expenses net of all reductions | 1.56% A | 1.54% | 1.54% | 1.54% | 1.57% | 1.58% |
Net investment income (loss) | (.03)% A | .13% | .61% | 1.24% | 1.87% | 3.18% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 100,066 | $ 114,564 | $ 132,589 | $ 131,947 | $ 103,378 | $ 97,150 |
Portfolio turnover rate G | 64% A | 75% | 204% | 217% | 318% I | 94% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F 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.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Institutional Class
| Six months ended | Years ended August 31, | ||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
Selected Per-Share Data | ||||||
Net asset value, beginning of period | $ 9.34 | $ 9.29 | $ 9.24 | $ 8.97 | $ 8.94 | $ 9.26 |
Income from Investment |
|
|
|
|
| |
Net investment income (loss) D | .046 | .106 | .150 | .205 | .255 | .385 |
Net realized and unrealized gain (loss) | .019 | .058 | .052 | .273 | .016 | (.324) |
Total from investment operations | .065 | .164 | .202 | .478 | .271 | .061 |
Distributions from net investment income | (.045) | (.114) | (.152) | (.208) | (.241) | (.381) |
Net asset value, end of period | $ 9.36 | $ 9.34 | $ 9.29 | $ 9.24 | $ 8.97 | $ 8.94 |
Total Return B,C | .69% | 1.78% | 2.21% | 5.38% | 3.12% | .65% |
Ratios to Average Net Assets E,G | ||||||
Expenses before reductions | .52% A | .52% | .53% | .53% | .54% | .54% |
Expenses net of fee waivers, if any | .52% A | .52% | .53% | .53% | .54% | .54% |
Expenses net of all reductions | .52% A | .52% | .53% | .53% | .54% | .54% |
Net investment income (loss) | 1.00% A | 1.14% | 1.62% | 2.25% | 2.90% | 4.23% |
Supplemental Data |
|
|
|
|
|
|
Net assets, end of period (000 omitted) | $ 662,505 | $ 771,929 | $ 719,891 | $ 647,129 | $ 618,098 | $ 589,076 |
Portfolio turnover rate F | 64% A | 75% | 204% | 217% | 318% H | 94% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
D Calculated based on average shares outstanding during the period.
E 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.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other 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 brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H The portfolio turnover rate excludes liquidations and/or redemptions executed in-kind from Affiliated Central Funds.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Notes to Financial Statements
For the period ended February 28, 2013
1. Organization.
Fidelity Advisor® Short Fixed-Income Fund (the Fund) is a fund of Fidelity Advisor Series II (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, Class C, and Institutional Class shares, each of which, along with Class B shares, has equal rights as to assets and voting privileges. Class B shares are closed to new accounts and additional purchases, except for exchanges and reinvestments. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of four years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the 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.
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies 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:
Semiannual Report
3. Significant Accounting Policies - continued
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 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, foreign government and government agency obligations, municipal securities, supranational obligations, U.S. government and government agency obligations and commercial paper, 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. Swap agreements are marked-to-market daily based on valuations from third party pricing vendors or broker-supplied valuations. Pricing vendors utilize matrix pricing which considers comparisons to interest rate curves, credit spread curves, default possibilities and recovery rates. When independent prices are unavailable or unreliable, debt securities and swap agreements may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities and swap agreements are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Semiannual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Investment Valuation - continued
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. 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. The aggregate value of investments by input level, as of February 28, 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.
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.
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. 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.
Semiannual Report
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
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 swap agreements, market discount, deferred trustees compensation, capital loss carryforwards and losses deferred due to wash sales.
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:
Gross unrealized appreciation | $ 16,341,121 |
Gross unrealized depreciation | (7,505,131) |
Net unrealized appreciation (depreciation) on securities and other investments | $ 8,835,990 |
|
|
Tax cost | $ 1,096,960,044 |
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. At August 31, 2012, capital loss carryforwards were as follows:
Fiscal year of expiration |
|
2016 | $ (24,671) |
2017 | (28,600,668) |
2018 | (16,553,917) |
Total capital loss carryforward | $ (45,179,256) |
Repurchase Agreements. FMR has received an Exemptive Order from 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.
Semiannual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Repurchase Agreements - continued
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.
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 reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is currently evaluating the impact of the update's adoption on the Fund's financial statement disclosures.
Semiannual Report
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 swap agreements. 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:
Credit Risk | Credit risk relates to the ability of the issuer of a financial instrument to make further principal or interest payments on an obligation or commitment that it has to the Fund. |
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 swap agreements, the Fund attempts to reduce its exposure to counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement on a bilateral basis 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 OTC derivatives, the Fund receives collateral in the form of cash or securities once the 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
Semiannual Report
Notes to Financial Statements - continued
4. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
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 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 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.
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 | Change in Net |
Credit Risk |
|
|
Swap Agreements (a) | $ 1,538 | $ (3,232) |
(a) A summary of the value of derivatives by primary risk exposure as of period end, if any, is included at the end of the Schedule of Investments and is representative of activity for the period.
Swap Agreements. A swap agreement (swap) is a contract between two parties to exchange future cash flows at periodic intervals based on a notional principal amount.
Swaps are marked-to-market daily and changes in value are reflected in the Statement of Assets and Liabilities in the swap agreements at value line items. Any upfront premiums paid or received upon entering a swap to compensate for differences between stated terms of the agreement and prevailing market conditions (e.g. credit spreads, interest rates or other factors) are recorded in net unrealized 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
Semiannual Report
4. Derivative Instruments - continued
Swap Agreements - continued
of Investments. 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 "Swap Agreements."
Credit Default Swaps. Credit default swaps enable the Fund to buy or sell protection against specified credit events on a single-name issuer or a traded credit index. Under the terms of a credit default swap the buyer of protection (buyer) receives credit protection in exchange for making periodic payments to the seller of protection (seller) based on a fixed percentage applied to a notional principal amount. In return for these payments, the seller will be required to make a payment upon the occurrence of one or more specified credit events. The Fund enters into credit default swaps as a seller to gain credit exposure to an issuer and/or as a buyer to obtain a measure of protection against defaults of an issuer. Periodic payments are made over the life of the contract by the buyer provided that no credit event occurs.
For credit default swaps on most corporate and sovereign issuers, credit events include bankruptcy, failure to pay or repudiation/moratorium. For credit default swaps on corporate or sovereign issuers, the obligation that may be put to the seller is not limited to the specific reference obligation described in the Schedule of Investments. For credit default swaps on asset-backed securities, a credit event may be triggered by events such as failure to pay principal, maturity extension, rating downgrade or write-down. For credit default swaps on asset-backed securities, the reference obligation described represents the security that may be put to the seller. For credit default swaps on a traded credit index, a specified credit event may affect all or individual underlying securities included in the index.
As a seller, if an underlying credit event occurs, the Fund will pay a net settlement amount of cash equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising an index. Only in the event of the industry's inability to value the underlying asset will the Fund be required to take delivery of the reference obligation or underlying securities comprising an index and pay an amount equal to the notional amount of the swap.
As a buyer, if an underlying credit event occurs, the Fund will receive a net settlement amount of cash equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising an index. Only in the event of the industry's inability to value the underlying asset will the Fund be required to deliver the reference obligation or underlying securities comprising an index in exchange for payment of an amount equal to the notional amount of the swap.
Semiannual Report
Notes to Financial Statements - continued
4. Derivative Instruments - continued
Credit Default Swaps - continued
Typically, the value of each credit default swap and credit rating disclosed for each reference obligation in the Schedule of Investments, where the Fund is the seller, can be used as measures of the current payment/performance risk of the swap. As the value of the swap changes as a positive or negative percentage of the total notional amount, the payment/performance risk may decrease or increase, respectively. In addition to these measures, FMR monitors a variety of factors including cash flow assumptions, market activity and market sentiment as part of its ongoing process of assessing payment/performance risk.
5. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $210,864,975 and $157,648,702, 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 annualized 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 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 Fees | Retained |
Class A | -% | .15% | $ 158,715 | $ 34,101 |
Class T | -% | .15% | 101,338 | 1,824 |
Class B | .65% | .25% | 32,035 | 23,229 |
Class C | .75% | .25% | 541,223 | 71,499 |
|
|
| $ 833,311 | $ 130,653 |
Semiannual Report
6. Fees and Other Transactions with Affiliates - continued
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, Class T, Class B and Class C redemptions. The deferred sales charges range from 3.00% to 1.00% for Class B shares, 1.00% for Class C shares, .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 | $ 15,999 |
Class T | 5,423 |
Class B* | 9,619 |
Class C* | 8,981 |
| $ 40,022 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
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 the respective classes of the Fund. 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 | $ 177,105 | .17 |
Class T | 115,629 | .17 |
Class B | 7,885 | .22 |
Class C | 88,565 | .16 |
Institutional Class | 442,750 | .14 |
| $ 831,934 |
|
* Annualized
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Semiannual Report
Notes to Financial Statements - continued
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 $1,431 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.
8. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is maintained at the Fund's custodian and/or invested in cash equivalents. At period end, there were no security loans outstanding. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Total security lending income during the period amounted to $289.
9. 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 expenses. During the period, these credits reduced the Fund's custody expenses by $59.
10. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| Six months ended | Year ended |
From net investment income |
|
|
Class A | $ 821,475 | $ 2,366,926 |
Class T | 522,784 | 1,612,220 |
Class B | 1,884 | 23,760 |
Class C | 9,526 | 276,779 |
Institutional Class | 3,061,670 | 9,984,988 |
Total | $ 4,417,339 | $ 14,264,673 |
Semiannual Report
11. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
| Six months ended | Year ended | Six months ended | Year ended |
Class A |
|
|
|
|
Shares sold | 4,705,623 | 11,014,249 | $ 43,980,382 | $ 102,166,877 |
Reinvestment of distributions | 72,988 | 212,888 | 682,435 | 1,974,463 |
Shares redeemed | (5,606,488) | (15,418,290) | (52,408,347) | (142,936,211) |
Net increase (decrease) | (827,877) | (4,191,153) | $ (7,745,530) | $ (38,794,871) |
Class T |
|
|
|
|
Shares sold | 1,097,456 | 3,668,518 | $ 10,267,578 | $ 34,010,430 |
Reinvestment of distributions | 50,448 | 154,693 | 472,016 | 1,435,835 |
Shares redeemed | (2,217,047) | (6,368,676) | (20,738,205) | (59,098,203) |
Net increase (decrease) | (1,069,143) | (2,545,465) | $ (9,998,611) | $ (23,651,938) |
Class B |
|
|
|
|
Shares sold | 41,215 | 303,790 | $ 385,928 | $ 2,818,839 |
Reinvestment of distributions | 176 | 2,143 | 1,646 | 19,886 |
Shares redeemed | (233,266) | (455,109) | (2,184,398) | (4,227,668) |
Net increase (decrease) | (191,875) | (149,176) | $ (1,796,824) | $ (1,388,943) |
Class C |
|
|
|
|
Shares sold | 1,446,722 | 3,509,446 | $ 13,539,771 | $ 32,577,911 |
Reinvestment of distributions | 803 | 23,322 | 7,518 | 216,245 |
Shares redeemed | (3,016,217) | (5,535,239) | (28,226,954) | (51,381,344) |
Net increase (decrease) | (1,568,692) | (2,002,471) | $ (14,679,665) | $ (18,587,188) |
Institutional Class |
|
|
|
|
Shares sold | 14,322,019 | 43,790,241 | $ 133,988,863 | $ 406,214,278 |
Reinvestment of distributions | 312,032 | 1,025,348 | 2,919,512 | 9,519,588 |
Shares redeemed | (26,493,286) | (39,647,339) | (247,593,429) | (368,323,794) |
Net increase (decrease) | (11,859,235) | 5,168,250 | $ (110,685,054) | $ 47,410,072 |
12. 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.
Semiannual Report
Notes to Financial Statements - continued
12. Other - continued
At the end of the period, the Fidelity Advisor Freedom Funds were the owners of record in the aggregate of approximately 31% of the Fund.
13. Credit Risk.
The Fund invests a portion of its assets in structured securities of issuers backed by residential mortgage loans, credit card receivables and automotive loans. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults.
Semiannual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor Short Fixed-Income Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor Short Fixed-Income Fund (the Fund), a fund of Fidelity Advisor Series II, including the schedule of investments, as of February 28, 2013, and the related statement of operations for the six months then ended, the statements of changes in net assets for the six months ended February 28, 2013 and for the year ended August 31, 2012, and the financial highlights for the six months ended February 28, 2013 and for each of the five years in the period ended August 31, 2012. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits 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 and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of February 28, 2013, by correspondence with the custodians and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Advisor Short Fixed-Income Fund as of February 28, 2013, the results of its operations for the six months then ended, the changes in its net assets for the six months ended February 28, 2013 and for the year ended August 31, 2012, and the financial highlights for the six months ended February 28, 2013 and for each of the five years in the period ended August 31, 2012, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 18, 2013
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Advisor Short Fixed-Income Fund
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established three standing committees, Operations, Audit, and Governance and Nominating, each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Operations Committee, of which all of the Independent Trustees are members, meets regularly throughout the year and, among other matters, considers matters specifically related to the annual consideration of the renewal of the fund's Advisory Contracts. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through ad hoc joint committees to discuss certain matters relevant to the Fidelity funds.
At its September 2012 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with the fund; (iv) the extent to which economies of scale exist and would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts is in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts is fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered the staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the fund's investment personnel, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the general qualifications and capabilities of the Investment Advisers' investment staff, including its size, education, experience, and resources, as well as the Investment Advisers' approach to recruiting, managing, and compensating investment personnel. The Board also noted that FMR has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. The Board also believes that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered the Investment Advisers' trading and risk management capabilities and resources, which are an integral part of the investment management process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through telephone representatives and over the Internet, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
Semiannual Report
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including (i) continuing to dedicate additional resources to investment research and support of the senior management team that oversees asset management; (ii) persisting in efforts to enhance Fidelity's research capabilities, in particular, international research; (iii) launching new funds and making other enhancements to meet client needs for global and income-oriented solutions; (iv) continuing to launch dedicated lower cost underlying funds to meet investment management's portfolio construction needs related to expanding underlying fund options, specifically for the Freedom Fund product lines; (v) adopting a sector neutral investment approach for certain funds and utilizing a team of portfolio managers to manage certain sector-neutral funds; (vi) rationalizing product lines and gaining increased efficiencies through combinations of several funds with other funds; (vii) strengthening the Spartan Index Fund product line by adding new funds and/or new low-cost institutional share classes, restructuring fund expenses to accommodate new classes, and reducing investment minimums for certain classes of shares; (viii) modifying the eligibility criteria for Institutional Class shares to increase their appeal to government entities and charitable investors; and (ix) reducing certain transfer agent fee rates.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured over multiple periods against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by Fidelity and reviewed by the Board. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2011, the cumulative total returns of Institutional Class (Class I) and Class C of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Institutional Class (Class I) and Class C show the performance of the highest and lowest performing classes, respectively (based on five-year performance). The box within each chart shows the 25th percentile return (top of box) and the 75th percentile return (bottom of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the peer group whose performance was equal to or lower than that of the class indicated.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Advisor Short Fixed-Income Fund
The Board reviewed the fund's relative investment performance against its peer group and noted that the performance of Institutional Class (Class I) of the fund was in the first quartile for the one-year period and the third quartile for the three- and five-year periods. The Board also noted that the investment performance of Institutional Class (Class I) of the fund compared favorably to its benchmark for the one- and three-year periods, although the fund's five-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes. The Board also reviewed the fund's performance since inception as well as performance in the current year.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should benefit the fund's shareholders.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Semiannual Report
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 26% means that 84% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Advisor Short Fixed-Income Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2011.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered the current and historical total expense ratios of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expense ratio of each of Class A and Class T ranked below its competitive median for 2011, the total expense ratio of each of Class B and Institutional Class ranked equal to its competitive median for 2011, and the total expense ratio of Class C ranked above its competitive median for 2011. The Board considered that various factors, including 12b-1 fees and relatively higher other expenses in the case of small fund size, can affect total expense ratios. The Board noted that the fund offers multiple classes, each of which has a different sales load and 12b-1 fee structure, and that the multiple structures are intended to offer a range of pricing options for the intermediary market. The Board also noted that the total expense ratios of the classes vary primarily by the level of their 12b-1 fees, although differences in transfer agent fees may also cause expenses to vary from class to class.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of FMR and its affiliates, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients. The Board noted the findings of the 2010 ad hoc joint committee (created with the board of other Fidelity funds), which reviewed and compared Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds, including the differences in services provided, fees charged, and costs incurred, as well as competition in their respective marketplaces.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable, although Class C was above the median of the universe presented for comparison, in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
Semiannual Report
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and was satisfied that the profitability was not excessive in the circumstances.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board also noted that in 2009, it and the board of other Fidelity funds created an ad hoc committee (the Economies of Scale Committee) to analyze whether FMR attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including: (i) Fidelity's fund profitability methodology, profitability trends for certain funds, and the impact of certain factors on fund profitability results; (ii) portfolio manager changes that have occurred during the past year and the amount of the investment that each portfolio manager has made in the Fidelity fund(s) that he or she manages; (iii) Fidelity's compensation structure for portfolio managers, research analysts, and other key personnel, including its effects on fund profitability, the rationale for the compensation structure, and the extent to which current market conditions have affected retention and recruitment; (iv) the compensation paid to fund sub-advisers on behalf of the Fidelity funds; (v) Fidelity's fee structures, including the group fee structure, and the rationale for recommending different fees among different categories of funds and classes; (vi) Fidelity's voluntary waiver of its fees to maintain minimum yields for certain money market funds and classes as well as contractual waivers in place for certain funds; (vii) regulatory and industry developments, including those affecting money market funds and target date funds, and the potential impact to Fidelity; (viii) Fidelity's transfer agent fees, expenses, and services, and drivers for determining the transfer agent fee structure of different funds and classes; (ix) management fee rates charged by FMR or Fidelity entities to other Fidelity clients; (x) the allocation of and historical trends in Fidelity's realization of fall-out benefits; and (xi) explanations regarding the relative total expense ratios of certain funds and classes, total expense competitive trends, and actions that might be taken by FMR to reduce total expense ratios for certain funds and classes or to achieve further economies of scale.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Semiannual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments Money
Management, Inc.
Fidelity Management & Research
(Hong Kong) Limited
Fidelity Management & Research
(U.K.) Inc.
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
(Fidelity Investment logo)(registered trademark)
SFII-USAN-0413 1.784906.110
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
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 Fidelity Advisor Series II's Board of Trustees.
Item 11. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the Fidelity Advisor Series II's (the "Trust") 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) | Not applicable. |
(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 Advisor Series II
By: | /s/Stephanie J. Dorsey |
| Stephanie J. Dorsey |
| President and Treasurer |
|
|
Date: | April 24, 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: | April 24, 2013 |
By: | /s/Christine Reynolds |
| Christine Reynolds |
| Chief Financial Officer |
|
|
Date: | April 24, 2013 |