sequential payer Series 2020-NNN Class AFX, 2.8123% 1/16/37 (f)
670,000
596,300
Series 2013-LC11 Class A/S, 3.216% 4/15/46
83,133
76,324
Series 2018-WPT Class AFX, 4.2475% 7/5/33 (f)
59,000
54,575
Life Financial Services Trust floater Series 2022-BMR2 Class B, CME Term SOFR 1 Month Index + 1.790% 7.1107% 5/15/39 (f)(h)(i)
400,000
391,000
Morgan Stanley BAML Trust sequential payer:
Series 2014-C19 Class ASB, 3.326% 12/15/47
32,991
32,911
Series 2016-C28 Class A3, 3.272% 1/15/49
75,875
73,152
Series 2016-C30 Class ASB, 2.729% 9/15/49
361,070
352,185
Morgan Stanley Capital I Trust:
floater sequential payer Series 2019-NUGS Class A, CME Term SOFR 1 Month Index + 1.060% 6.3815% 12/15/36 (f)(h)(i)
1,000,000
816,981
sequential payer:
Series 2017-H1 Class A4, 3.259% 6/15/50
700,000
661,056
Series 2017-HR2:
Class A3, 3.33% 12/15/50
297,242
276,102
Class A4, 3.587% 12/15/50
340,000
317,245
Series 2019-L2 Class A3, 3.806% 3/15/52
500,000
466,249
Series 2019-MEAD Class A, 3.17% 11/10/36 (f)
279,000
263,321
Series 2018-H4 Class A4, 4.31% 12/15/51
600,000
568,909
Series 2019-MEAD Class B, 3.1771% 11/10/36 (f)(h)
26,000
24,279
Series 2021-L6 Class XA, 1.2029% 6/15/54 (g)(h)
975,210
50,842
Natixis Commercial Mortgage Securities Trust sequential payer Series 2020-2PAC Class A, 2.966% 12/15/38 (f)
790,017
721,852
Open Trust 2023-Air sequential payer Series 2023-AIR Class A, CME Term SOFR 1 Month Index + 3.080% 8.4059% 10/15/28 (f)(h)(i)
298,199
302,486
OPG Trust floater Series 2021-PORT Class A, CME Term SOFR 1 Month Index + 0.590% 5.9155% 10/15/36 (f)(h)(i)
599,538
593,603
RLGH Trust floater Series 2021-TROT Class A, CME Term SOFR 1 Month Index + 0.910% 6.2315% 4/15/36 (f)(h)(i)
1,900,000
1,879,347
SREIT Trust floater:
Series 2021-FLWR Class A, CME Term SOFR 1 Month Index + 0.690% 6.008% 7/15/36 (f)(h)(i)
212,000
210,149
Series 2021-MFP:
Class A, CME Term SOFR 1 Month Index + 0.840% 6.1621% 11/15/38 (f)(h)(i)
1,722,353
1,715,956
Class B, CME Term SOFR 1 Month Index + 1.190% 6.5111% 11/15/38 (f)(h)(i)
216,251
214,899
UBS Commercial Mortgage Trust sequential payer:
Series 2017-C1 Class ASB, 3.462% 11/15/50
68,890
66,661
Series 2017-C3 Class ASB, 3.215% 8/15/50
910,220
877,987
Series 2018-C12 Class ASB, 4.1945% 8/15/51
1,612,278
1,572,929
VLS Commercial Mortgage Trust Series 2020-LAB Class X, 0.4294% 10/10/42 (f)(g)(h)
1,600,000
35,446
Wells Fargo Commercial Mortgage Trust:
floater:
Series 2016-C32 Class A3FL, CME Term SOFR 1 Month Index + 1.530% 6.855% 1/15/59 (h)(i)
965,518
972,199
Series 2021-FCMT Class A, CME Term SOFR 1 Month Index + 1.310% 6.6315% 5/15/31 (f)(h)(i)
845,000
829,949
sequential payer Series 2021-C61 Class ASB, 2.525% 11/15/54
100,000
88,224
Series 2018-C46 Class XA, 0.9139% 8/15/51 (g)(h)
890,324
18,816
Series 2019-C54 Class XA, 0.816% 12/15/52 (g)(h)
5,845,608
208,318
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $73,270,991)
72,163,663
Money Market Funds - 6.2%
Shares
Value ($)
Fidelity Cash Central Fund 5.39% (k)
(Cost $34,330,693)
34,323,828
34,330,693
Purchased Swaptions - 0.4%
Expiration
Date
Notional
Amount (a)
Value ($)
Put Options - 0.2%
Option on an interest rate swap with Bank of America N.A. to pay annually a fixed rate of 3.94% and receive annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring May 2034.
5/10/29
1,700,000
67,870
Option on an interest rate swap with Bank of America N.A. to pay annually a fixed rate of 4.05% and receive annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring April 2034.
4/23/29
9,800,000
374,852
Option on an interest rate swap with Citibank N.A. to pay annually a fixed rate of 3.755% and receive annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring March 2034.
3/19/29
3,200,000
137,143
Option on an interest rate swap with Goldman Sachs Bank U.S.A. to pay annually a fixed rate of 3.3525% and receive annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring February 2035.
2/03/25
1,800,000
110,615
Option on an interest rate swap with Goldman Sachs Bank U.S.A. to pay annually a fixed rate of 3.865% and receive annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring May 2035.
5/15/25
1,500,000
55,793
Option on an interest rate swap with JPMorgan Chase Bank N.A. to pay annually a fixed rate of 3.8225% and receive annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring February 2035.
2/24/25
6,400,000
232,588
Option on an interest rate swap with JPMorgan Chase Bank N.A. to pay annually a fixed rate of 3.9625% and receive annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring May 2034.
5/14/29
1,700,000
68,270
TOTAL PUT OPTIONS
1,047,131
Call Options - 0.2%
Option on an interest rate swap with Bank of America N.A. to receive annually a fixed rate of 3.94% and pay annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring May 2034.
5/10/29
1,700,000
67,632
Option on an interest rate swap with Bank of America N.A. to receive annually a fixed rate of 4.05% and pay annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring April 2034.
4/23/29
9,800,000
413,903
Option on an interest rate swap with Citibank N.A. to receive annually a fixed rate of 3.755% and pay annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring March 2034.
3/19/29
3,200,000
115,456
Option on an interest rate swap with Goldman Sachs Bank U.S.A. to receive annually a fixed rate of 3.3525% and pay annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring February 2035.
2/03/25
1,800,000
16,484
Option on an interest rate swap with Goldman Sachs Bank U.S.A. to receive annually a fixed rate of 3.865% and pay annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring May 2035.
5/15/25
1,500,000
41,581
Option on an interest rate swap with JPMorgan Chase Bank N.A. to receive annually a fixed rate of 3.8225% and pay annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring February 2035.
2/24/25
6,400,000
138,909
Option on an interest rate swap with JPMorgan Chase Bank N.A. to receive annually a fixed rate of 3.9625% and pay annually a floating rate based on the U.S. Secured Overnight Fin. Rate (SOFR) Index, expiring May 2034.
5/14/29
1,700,000
67,166
TOTAL CALL OPTIONS
861,131
TOTAL PURCHASED SWAPTIONS
(Cost $2,042,374)
1,908,262
TOTAL INVESTMENT IN SECURITIES - 172.8%
(Cost $998,439,303)
958,256,963
NET OTHER ASSETS (LIABILITIES) - (72.8)%
(403,636,647)
NET ASSETS - 100.0%
554,620,316
TBA Sale Commitments
Principal
Amount (a)
Value ($)
Ginnie Mae
2% 6/1/54
(2,500,000)
(2,001,696)
2% 6/1/54
(1,300,000)
(1,040,882)
2% 6/1/54
(9,800,000)
(7,846,649)
2.5% 6/1/54
(6,800,000)
(5,663,916)
2.5% 6/1/54
(25,000)
(20,823)
3.5% 6/1/54
(7,750,000)
(6,912,974)
3.5% 6/1/54
(6,800,000)
(6,065,578)
4.5% 6/1/54
(2,900,000)
(2,739,725)
5.5% 6/1/54
(3,300,000)
(3,272,704)
5.5% 6/1/54
(2,900,000)
(2,876,013)
6% 6/1/54
(950,000)
(956,249)
6% 6/1/54
(850,000)
(855,591)
6% 6/1/54
(700,000)
(704,604)
6% 6/1/54
(850,000)
(855,591)
6% 6/1/54
(700,000)
(704,604)
6% 6/1/54
(3,350,000)
(3,372,036)
6% 6/1/54
(250,000)
(251,644)
6% 6/1/54
(450,000)
(452,960)
TOTAL GINNIE MAE
(46,594,239)
Uniform Mortgage Backed Securities
2% 6/1/54
(28,700,000)
(22,123,650)
2% 6/1/54
(500,000)
(385,429)
2% 6/1/54
(3,000,000)
(2,312,577)
2% 6/1/54
(8,400,000)
(6,475,215)
2% 6/1/54
(6,700,000)
(5,164,755)
2% 6/1/54
(9,700,000)
(7,477,331)
2% 6/1/54
(6,525,000)
(5,029,854)
2% 6/1/54
(5,050,000)
(3,892,837)
2.5% 6/1/54
(1,000,000)
(806,914)
2.5% 6/1/54
(10,100,000)
(8,149,833)
2.5% 6/1/54
(3,800,000)
(3,066,274)
2.5% 6/1/54
(1,900,000)
(1,533,137)
2.5% 6/1/54
(3,800,000)
(3,066,274)
2.5% 6/1/54
(2,900,000)
(2,340,051)
2.5% 6/1/54
(1,600,000)
(1,291,063)
2.5% 6/1/54
(850,000)
(685,877)
2.5% 6/1/54
(1,900,000)
(1,533,137)
3% 6/1/54
(1,050,000)
(882,574)
3% 6/1/54
(3,850,000)
(3,236,106)
3% 6/1/54
(1,050,000)
(882,574)
3% 6/1/54
(2,850,000)
(2,395,559)
3% 6/1/54
(1,700,000)
(1,428,930)
3.5% 6/1/54
(3,000,000)
(2,628,868)
3.5% 6/1/54
(6,300,000)
(5,520,623)
3.5% 6/1/54
(2,450,000)
(2,146,909)
3.5% 6/1/54
(1,175,000)
(1,029,640)
3.5% 6/1/54
(11,750,000)
(10,296,400)
4% 6/1/54
(1,400,000)
(1,269,789)
4% 6/1/54
(1,400,000)
(1,269,789)
4% 6/1/54
(4,800,000)
(4,353,561)
4.5% 6/1/54
(4,800,000)
(4,493,440)
4.5% 6/1/54
(500,000)
(468,067)
4.5% 6/1/54
(6,050,000)
(5,663,607)
4.5% 6/1/54
(2,300,000)
(2,153,107)
4.5% 6/1/54
(2,500,000)
(2,340,334)
4.5% 6/1/54
(500,000)
(468,067)
5.5% 6/1/54
(1,150,000)
(1,131,177)
5.5% 7/1/54
(1,150,000)
(1,130,998)
6% 6/1/54
(700,000)
(700,902)
6% 6/1/54
(700,000)
(700,902)
6% 6/1/54
(2,900,000)
(2,903,737)
6% 6/1/54
(11,300,000)
(11,314,561)
6% 6/1/54
(3,950,000)
(3,955,090)
TOTAL UNIFORM MORTGAGE BACKED SECURITIES
(150,099,519)
TOTAL TBA SALE COMMITMENTS
(Proceeds $197,136,941)
(196,693,758)
Futures Contracts
Number
of contracts
Expiration
Date
Notional
Amount ($)
Value ($)
Unrealized
Appreciation/
(Depreciation) ($)
Purchased
Treasury Contracts
CBOT 2-Year U.S. Treasury Note Contracts (United States)
28
Sep 2024
5,703,688
(5,298)
(5,298)
CBOT Ultra Long Term U.S. Treasury Bond Contracts (United States)
7
Sep 2024
857,063
(14,662)
(14,662)
TOTAL PURCHASED
(19,960)
Sold
Treasury Contracts
CBOT 10-Year U.S. Treasury Note Contracts (United States)
146
Sep 2024
15,884,344
67,228
67,228
CBOT 5-Year U.S. Treasury Note Contracts (United States)
151
Sep 2024
15,975,328
46,679
46,679
CBOT Long Term U.S. Treasury Bond Contracts (United States)
69
Sep 2024
8,008,313
93,663
93,663
TOTAL SOLD
207,570
TOTAL FUTURES CONTRACTS
187,610
The notional amount of futures purchased as a percentage of Net Assets is 1.2%
The notional amount of futures sold as a percentage of Net Assets is 7.2%
Credit Default Swaps
Underlying Reference
Rating(1)
Maturity
Date
Clearinghouse /
Counterparty
Fixed
Payment
Received/
(Paid)
Payment
Frequency
Notional
Amount(2)(3)
Value ($)(1)
Upfront
Premium
Received/
(Paid) ($)
Unrealized
Appreciation/
(Depreciation) ($)
Buy Protection
CMBX N.A. AAA Index Series 13
Dec 2072
Citigroup Global Markets Ltd.
(0.5%)
Monthly
20,000
104
(59)
45
CMBX N.A. AAA Index Series 13
Dec 2072
Citigroup Global Markets Ltd.
(0.5%)
Monthly
350,000
1,818
(3,138)
(1,320)
CMBX N.A. AAA Index Series 13
Dec 2072
Citigroup Global Markets Ltd.
(0.5%)
Monthly
1,020,000
5,298
(10,954)
(5,656)
CMBX N.A. AAA Index Series 13
Dec 2072
Morgan Stanley Capital Services LLC
(0.5%)
Monthly
1,300,000
6,752
(8,667)
(1,915)
CMBX N.A. AAA Index Series 13
Dec 2072
Morgan Stanley Capital Services LLC
(0.5%)
Monthly
1,410,000
7,324
(9,784)
(2,460)
CMBX N.A. BBB- Index Series 16
Apr 2065
Citigroup Global Markets Ltd.
(3%)
Monthly
230,000
34,288
(51,355)
(17,067)
CMBX N.A. BBB- Index Series 16
Apr 2065
Citigroup Global Markets Ltd.
(3%)
Monthly
240,000
35,778
(66,005)
(30,227)
CMBX N.A. BBB- Index Series 16
Apr 2065
Citigroup Global Markets Ltd.
(3%)
Monthly
80,000
11,926
(21,054)
(9,128)
CMBX N.A. BBB- Index Series 16
Apr 2065
Citigroup Global Markets Ltd.
(3%)
Monthly
170,000
25,343
(51,255)
(25,912)
CMBX N.A. BBB- Index Series 16
Apr 2065
Citigroup Global Markets Ltd.
(3%)
Monthly
160,000
23,852
(36,949)
(13,097)
CMBX N.A. BBB- Index Series 16
Apr 2065
Goldman Sachs & Co. LLC
(3%)
Monthly
100,000
14,908
(19,413)
(4,505)
CMBX N.A. BBB- Index Series 16
Apr 2065
Goldman Sachs & Co. LLC
(3%)
Monthly
200,000
29,815
(32,970)
(3,155)
CMBX N.A. BBB- Index Series 16
Apr 2065
Goldman Sachs & Co. LLC
(3%)
Monthly
160,000
23,852
(42,087)
(18,235)
CMBX N.A. BBB- Index Series 16
Apr 2065
Goldman Sachs & Co. LLC
(3%)
Monthly
80,000
11,926
(18,670)
(6,744)
CMBX N.A. BBB- Index Series 16
Apr 2065
JPMorgan Securities LLC
(3%)
Monthly
160,000
23,852
(45,760)
(21,908)
CMBX N.A. BBB- Index Series 16
Apr 2065
JPMorgan Securities LLC
(3%)
Monthly
140,000
20,871
(39,561)
(18,690)
CMBX N.A. BBB- Index Series 16
Apr 2065
JPMorgan Securities LLC
(3%)
Monthly
170,000
25,343
(47,629)
(22,286)
CMBX N.A. BBB- Index Series 16
Apr 2065
JPMorgan Securities LLC
(3%)
Monthly
110,000
16,398
(29,077)
(12,679)
CMBX N.A. BBB- Index Series 16
Apr 2065
Morgan Stanley Capital Services LLC
(3%)
Monthly
80,000
11,926
(18,928)
(7,002)
CMBX N.A. BBB- Index Series 16
Apr 2065
Morgan Stanley Capital Services LLC
(3%)
Monthly
110,000
16,398
(25,327)
(8,929)
CMBX N.A. BBB- Index Series 16
Apr 2065
Morgan Stanley Capital Services LLC
(3%)
Monthly
100,000
14,908
(16,855)
(1,947)
CMBX N.A. BBB- Index Series 16
Apr 2065
Morgan Stanley Capital Services LLC
(3%)
Monthly
210,000
31,306
(53,136)
(21,830)
CMBX N.A. BBB- Index Series 16
Apr 2065
Morgan Stanley Capital Services LLC
(3%)
Monthly
320,000
47,705
(79,535)
(31,830)
CMBX N.A. BBB- Index Series 17
Dec 2056
Goldman Sachs & Co. LLC
(3%)
Monthly
100,000
11,417
(14,385)
(2,968)
CMBX N.A. BBB- Index Series 17
Dec 2056
Goldman Sachs & Co. LLC
(3%)
Monthly
100,000
11,417
(14,129)
(2,712)
CMBX N.A. BBB- Index Series 17
Dec 2056
JPMorgan Securities LLC
(3%)
Monthly
100,000
11,417
(13,269)
(1,852)
CMBX N.A. BBB- Index Series 17
Dec 2056
Morgan Stanley Capital Services LLC
(3%)
Monthly
100,000
11,417
(14,035)
(2,618)
TOTAL BUY PROTECTION
487,359
(783,986)
(296,627)
Sell Protection
CMBX N.A. AAA Index Series 13
NR
Dec 2072
Morgan Stanley Capital Services LLC
0.5%
Monthly
2,040,000
(10,596)
46,230
35,634
CMBX N.A. AAA Index Series 13
NR
Dec 2072
Morgan Stanley Capital Services LLC
0.5%
Monthly
2,060,000
(10,700)
48,010
37,310
CMBX N.A. AAA Index Series 15
NR
Nov 2064
Citigroup Global Markets Ltd.
0.5%
Monthly
1,900,000
(21,428)
19,017
(2,411)
CMBX N.A. AAA Index Series 16
NR
Apr 2065
Goldman Sachs & Co. LLC
0.5%
Monthly
800,000
(11,892)
10,603
(1,289)
TOTAL SELL PROTECTION
(54,616)
123,860
69,244
TOTAL CREDIT DEFAULT SWAPS
432,743
(660,126)
(227,383)
(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 credit rating or value can be measures of the current 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.
(3)Notional amount is stated in U.S. Dollars unless otherwise noted.
Interest Rate Swaps
Payment Received
Payment
Frequency
Payment Paid
Payment
Frequency
Clearinghouse /
Counterparty(1)
Maturity
Date
Notional
Amount(2)
Value ($)
Upfront
Premium
Received/
(Paid) ($)(3)
Unrealized
Appreciation/
(Depreciation) ($)
U.S. Secured Overnight Fin. Rate (SOFR) Index(4)
Annual
4%
Annual
LCH
Jun 2026
24,049,000
223,571
0
223,571
U.S. Secured Overnight Fin. Rate (SOFR) Index(4)
Annual
4%
Annual
LCH
Jun 2027
6,269,000
80,211
0
80,211
U.S. Secured Overnight Fin. Rate (SOFR) Index(4)
Annual
3.75%
Annual
LCH
Jun 2029
1,032,000
18,787
0
18,787
U.S. Secured Overnight Fin. Rate (SOFR) Index(4)
Annual
3.75%
Annual
LCH
Jun 2031
15,838,000
362,741
0
362,741
3.75%
Annual
U.S. Secured Overnight Fin. Rate (SOFR) Index(4)
Annual
LCH
Jun 2034
1,380,000
5,901
0
5,901
U.S. Secured Overnight Fin. Rate (SOFR) Index(4)
Annual
3.75%
Annual
LCH
Jun 2044
2,972,000
133,612
0
133,612
3.5%
Annual
U.S. Secured Overnight Fin. Rate (SOFR) Index(4)
Annual
LCH
Jun 2054
300,000
(269)
0
(269)
TOTAL INTEREST RATE SWAPS
824,554
0
824,554
(1)Swaps with LCH Clearnet Group (LCH) are centrally cleared swaps.
(2)Notional amount is stated in U.S. Dollars unless otherwise noted.
(3)Any premiums for centrally cleared swaps are recorded periodically throughout the term of the swap to variation margin and included in unrealized appreciation (depreciation).
(4)Represents floating rate.
Legend
(a)
Amount is stated in United States dollars unless otherwise noted.
(b)
Security or a portion of the security was pledged to cover margin requirements for centrally cleared swaps. At period end, the value of securities pledged amounted to $1,350,120.
(c)
Security or a portion of the security was pledged to cover margin requirements for futures contracts. At period end, the value of securities pledged amounted to $908,880.
(d)
Security or a portion of the security has been segregated as collateral for mortgage-backed or asset-backed securities purchased on a delayed delivery or when-issued basis. At period end, the value of securities pledged amounted to $1,013,360.
(e)
Security or a portion of the security purchased on a delayed delivery or when-issued basis.
(f)
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 $55,136,761 or 9.9% of net assets.
(g)
Interest Only (IO) security represents the right to receive only monthly interest payments on an underlying pool of mortgages or assets. Principal shown is the outstanding par amount of the pool as of the end of the period.
(h)
Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end.
(i)
Coupon is indexed to a floating interest rate which may be multiplied by a specified factor and/or subject to caps or floors.
(j)
Represents an investment in an underlying pool of reverse mortgages which typically do not require regular principal and interest payments as repayment is deferred until a maturity event.
(k)
Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
Affiliated Central Funds
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
Affiliate
Value,
beginning
of period ($)
Purchases ($)
Sales
Proceeds ($)
Dividend
Income ($)
Realized
Gain (loss) ($)
Change in
Unrealized
appreciation
(depreciation) ($)
Value,
end
of period ($)
% ownership,
end
of period
Fidelity Cash Central Fund 5.39%
12,836,862
231,888,272
210,394,091
745,454
(350)
-
34,330,693
0.1%
Total
12,836,862
231,888,272
210,394,091
745,454
(350)
-
34,330,693
Amounts in the dividend income column in the above table include any capital gain distributions from underlying funds.
Investment Valuation
Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. Securities transactions are accounted for as of trade date. The Board of Trustees (the Board) has designated the Fund's investment adviser as the valuation designee responsible for the fair valuation function and performing fair value determinations as needed. The investment adviser has established a Fair Value Committee (the Committee) to carry out the day-to-day fair valuation responsibilities and has adopted policies and procedures to govern the fair valuation process and the activities of the Committee. In accordance with these fair valuation policies and procedures, which have been approved by the Board, the Fund attempts to obtain prices from one or more third party pricing services or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with the policies and procedures. Factors used in determining fair value vary by investment type and may include market or investment specific events, transaction data, estimated cash flows, and market observations of comparable investments. The frequency that the fair valuation procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee manages the Fund's fair valuation practices and maintains the fair valuation policies and procedures. The Fund's investment adviser reports to the Board information regarding the fair valuation process and related material matters.
The inputs to valuation techniques used to value investments are categorized into a disclosure hierarchy consisting of three levels as shown below:
Level 1 - Unadjusted quoted prices in active markets for identical investments
Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
Level 3 - unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing services or from brokers who make markets in such securities. U.S. Treasury Obligations are valued by pricing services who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. U.S. Government Agency - Mortgage Securities, Asset-Backed Securities, Collateralized Mortgage Obligations and Commercial Mortgage Securities are valued by pricing services who utilize matrix pricing which considers prepayment speed assumptions, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing services. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Swaps are marked-to-market daily based on valuations from third party pricing services, registered derivatives clearing organizations (clearinghouses) or broker-supplied valuations. These pricing sources may utilize inputs such as interest rate curves, credit spread curves, default possibilities and recovery rates. When independent prices are unavailable or unreliable, swaps may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing services. Swaps are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded and are categorized as Level 1 in the hierarchy.
Options traded over-the-counter are valued using service or broker-supplied valuations and are categorized as Level 2 in the hierarchy.
Investments in any open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Derivative Instruments
Risk Exposures and the Use of Derivative Instruments: The Fund's investment objectives allow the Fund to enter into various types of derivative contracts. Derivatives are investments whose value is primarily derived from underlying assets, indices or reference rates and may be transacted on an exchange or over-the-counter (OTC). Derivatives may involve a future commitment to buy or sell a specified asset based on specified terms, to exchange future cash flows at periodic intervals based on a notional principal amount, or for one party to make one or more payments upon the occurrence of specified events in exchange for periodic payments from the other party.
The Fund used derivatives to increase returns, to gain exposure to certain types of assets and/or to manage exposure to certain risks as defined below. The success of any strategy involving derivatives depends on analysis of numerous economic factors, and if the strategies for investment do not work as intended, the Fund may not achieve its objectives.
The Fund's use of derivatives increased or decreased its exposure to the following risk(s):
Credit Risk - Credit risk relates to the ability of the issuer of a financial instrument to make further principal or interest payments on an obligation or commitment that it has to the Fund.
Interest Rate Risk - Interest rate risk relates to the fluctuations in the value of interest-bearing securities due to changes in the prevailing levels of market interest rates.
The Fund is also exposed to additional risks from investing in derivatives, such as liquidity risk and counterparty credit risk. Liquidity risk is the risk that the Fund will be unable to close out the derivative in the open market in a timely manner. Counterparty credit risk is the risk that the counterparty will not be able to fulfill its obligation to the Fund.
Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain OTC derivatives, the Fund attempts to reduce its exposure to counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement with each of its counterparties. The ISDA Master Agreement gives the Fund the right to terminate all transactions traded under such agreement upon the deterioration in the credit quality of the counterparty beyond specified levels. The ISDA Master Agreement gives each party the right, upon an event of default by the other party or a termination of the agreement, to close out all transactions traded under such agreement and to net the amounts owed under each transaction to one net payable by one party to the other. To mitigate counterparty credit risk on bi-lateral OTC derivatives, the Fund receives collateral in the form of cash or securities once the Fund's net unrealized appreciation on outstanding derivative contracts under an ISDA Master Agreement exceeds certain applicable thresholds, subject to certain minimum transfer provisions. The collateral received is held in segregated accounts with the Fund's custodian bank in accordance with the collateral agreements entered into between the Fund, the counterparty and the Fund's custodian bank. The Fund could experience delays and costs in gaining access to the collateral even though it is held by the Fund's custodian bank. The Fund's maximum risk of loss from counterparty credit risk related to bi-lateral OTC derivatives is generally the aggregate unrealized appreciation and unpaid counterparty payments in excess of any collateral pledged by the counterparty to the Fund. For OTC written options with upfront premiums received, the Fund is obligated to perform and therefore does not have counterparty risk. For OTC written options with premiums to be received at a future date, the maximum risk of loss from counterparty credit risk is the amount of the premium in excess of any collateral pledged by the counterparty. The Fund may be required to pledge collateral for the benefit of the counterparties on bi-lateral OTC derivatives in an amount not less than each counterparty's unrealized appreciation on outstanding derivative contracts, subject to certain minimum transfer provisions, and any such pledged collateral is identified in the Schedule of Investments. Exchange-traded contracts are not covered by the ISDA Master Agreement; however counterparty credit risk related to these contracts may be mitigated by the protection provided by the exchange on which they trade. Counterparty credit risk related to centrally cleared swaps may be mitigated by the protection provided by the clearinghouse.
Investing in derivatives may involve greater risks than investing in the underlying assets directly and, to varying degrees, may involve risk of loss in excess of any initial investment and collateral received. In addition, there may be the risk that the change in value of the derivative contract does not correspond to the change in value of the underlying instrument.
Futures Contracts: A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a specified price at a specified future date.
The Fund used futures contracts to manage its exposure to the bond market and fluctuations in interest rates.
Open futures contracts at period end are presented in the Schedule of Investments under the caption "Futures Contracts". The underlying face amount at value reflects each contract's exposure to the underlying instrument or index at period end. Any securities and/or cash deposited to meet initial margin requirements are identified in the Schedule of Investments.
Options: Options give the purchaser the right, but not the obligation, to buy (call) or sell (put) an underlying security or financial instrument at an agreed exercise or strike price between or on certain dates. Options obligate the seller (writer) to buy (put) or sell (call) an underlying instrument at the exercise or strike price or cash settle an underlying derivative instrument if the holder exercises the option on or before the expiration date.
The Fund used OTC options, such as swaptions, which are options where the underlying instrument is a swap, to manage its exposure to fluctuations in interest rates and/or potential credit events.
Open options at period end are presented in the Schedule of Investments under the captions "Purchased Options," "Purchased Swaptions," "Written Options" and "Written Swaptions." Writing puts and buying calls tend to increase exposure to the underlying instrument while buying puts and writing calls tend to decrease exposure to the underlying instrument. For purchased options, risk of loss is limited to the premium paid, and for written options, risk of loss is the change in value in excess of the premium received.
Swaps: A swap is a contract between two parties to exchange future cash flows at periodic intervals based on a notional principal amount.
A centrally cleared swap is a transaction executed between a fund and a dealer counterparty, then cleared by a futures commission merchant (FCM) through a clearinghouse. Once cleared, the clearinghouse serves as a central counterparty, with whom a fund exchanges cash flows for the life of the transaction, similar to transactions in futures contracts.
A bi-lateral OTC swap is a transaction between a fund and a dealer counterparty where cash flows are exchanged between the two parties for the life of the swap.
Credit Default Swaps: Credit default swaps enable the Fund to buy or sell protection against specified credit events on a single-name issuer or a traded credit index. Under the terms of a credit default swap the buyer of protection (buyer) receives credit protection in exchange for making periodic payments to the seller of protection (seller) based on a fixed percentage applied to a notional principal amount. In return for these payments, the seller will be required to make a payment upon the occurrence of one or more specified credit events. The Fund enters into credit default swaps as a seller to gain credit exposure to an issuer and/or as a buyer to obtain a measure of protection against defaults of an issuer. Periodic payments are made over the life of the contract by the buyer provided that no credit event occurs. For credit default swaps on most corporate and sovereign issuers, credit events include bankruptcy, failure to pay or repudiation/moratorium. For credit default swaps on corporate or sovereign issuers, the obligation that may be put to the seller is not limited to the specific reference obligation described in the Schedule of Investments. For credit default swaps on asset-backed securities, a credit event may be triggered by events such as failure to pay principal, maturity extension, rating downgrade or write-down. For credit default swaps on asset-backed securities, the reference obligation described represents the security that may be put to the seller. For credit default swaps on a traded credit index, a specified credit event may affect all or individual underlying securities included in the index. Typically, the value of each credit default swap and credit rating disclosed for each reference obligation in the Schedule of Investments, where the Fund is the seller, can be used as measures of the current payment/performance risk of the swap. As the value of the swap changes as a positive or negative percentage of the total notional amount, the payment/performance risk may decrease or increase, respectively. In addition to these measures, FMR monitors a variety of factors including cash flow assumptions, market activity and market sentiment as part of its ongoing process of assessing payment/ performance risk.
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.
Open swaps at period end are included in the Schedule of Investments under the caption Credit Default Swaps, Interest Rate Swaps and/or Total Return Swaps, as applicable.
For additional information on the Fund's significant accounting policies, please refer to the Fund's most recent semiannual or annual shareholder report.
The fund's schedule of investments as of the date on the cover of this report has not been audited. This report is provided for the general information of the fund's shareholders. For more information regarding the fund and its holdings, please see the fund's most recent prospectus and annual report.
Third party trademarks and service marks are the property of their respective owners. All other trademarks and service marks are the property of FMR LLC or an affiliate.
We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.
