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 811-07319
Fidelity Covington Trust
(Exact name of registrant as specified in charter)
245 Summer St., Boston, Massachusetts 02210
(Address of principal executive offices) (Zip code)
Nicole Macarchuk, Secretary
245 Summer St.
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant's telephone number, including area code:
617-563-7000
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Date of fiscal year end: | August 31 |
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Date of reporting period: | August 31, 2024 |
Item 1.
Reports to Stockholders
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| | ANNUAL SHAREHOLDER REPORT | AS OF AUGUST 31, 2024 | |
| | Fidelity® Preferred Securities & Income ETF Fidelity® Preferred Securities & Income ETF : FPFD Principal U.S. Listing Exchange :CboeBZX Cboe BZX Exchange, Inc. |
| | | |
This annual shareholder report contains information about Fidelity® Preferred Securities & Income ETF for the period September 1, 2023 to August 31, 2024. You can find additional information about the Fund at fundresearch.fidelity.com/prospectus/sec. You can also request this information by contacting us at 1-800-FIDELITY or by sending an e-mail to fidfunddocuments@fidelity.com.
What were your Fund costs for the last year?(based on hypothetical $10,000 investment)
FUND COST (PREVIOUS YEAR)
| | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment | |
| Fidelity® Preferred Securities & Income ETF | $ 64 | 0.60% | |
What affected the Fund's performance this period?
•U.S. equities gained for the 12 months ending August 31, 2024, driven by a resilient economy, a frenzy over generative artificial intelligence and the Federal Reserve's likely pivot to cutting interest rates later in 2024. U.S. taxable investment-grade bonds posted a strong advance for the 12 months, as the bond market reflected anticipated interest-rate reductions by the U.S. Federal Reserve.
•Against this backdrop, the fund's core investment in preferred securities gained 14.87% and modestly contributed to performance versus the benchmark, the ICE U.S. All Capital Securities Constrained Custom Index.
•The primary detractor from relative performance was a non-benchmark allocation to U.S. Treasury bonds. This was an investment we established this period, and it was the fund's largest holding as of August 31.
•By industry, an underweight in retail hampered the fund's relative result. The fund's position in cash also detracted.
•The biggest individual relative detractor this period was avoiding Rakuten Group, a benchmark component that gained roughly 83%. Overweights in JPMorgan Chase (+7%) and Duke Energy (+7%) also hurt.
•In contrast, the primary contributor to performance versus the benchmark was security selection in financial services. Our picks in utility also boosted the fund's relative performance, as did security selection in energy.
•The top individual relative contributors were overweights in Ally Financial (+37%), Aircastle (+33%) and Capital One Financial (+26%). This period we increased our investment in Aircastle.
•By quality, positioning in bonds rated BBB helped most, whereas those rated A and higher hurt most.
•Notable changes in positioning include a higher allocation to the energy industry and reduced exposure to utility.
How did the Fund perform over the life of Fund?
CUMULATIVE PERFORMANCE
June 15, 2021 through August 31, 2024.
Initial investment of $10,000.
Fidelity® Preferred Securities & Income ETF | $10,000 | $10,144 | $8,673 | $8,863 |
ICE® BofA® US All Capital Securities Index | $10,000 | $10,116 | $8,958 | $8,941 |
ICE U.S. All Capital Securities Constrained Custom Index | $10,000 | $10,118 | $8,948 | $8,898 |
Bloomberg U.S. Universal Bond Index | $10,000 | $10,125 | $8,925 | $8,890 |
| | 2021 | 2022 | 2023 | 2024 |
AVERAGE ANNUAL TOTAL RETURNS: | | 1 Year | Life of Fund |
Fidelity® Preferred Securities & Income ETF - NAV A | 14.31% | 0.41% |
Fidelity® Preferred Securities & Income ETF - Market Price B | 14.07% | 0.49% |
ICE® BofA® US All Capital Securities Index A | 14.56% | 0.75% |
ICE U.S. All Capital Securities Constrained Custom Index A | 14.59% | 0.60% |
Bloomberg U.S. Universal Bond Index A | 7.92% | -1.28% |
A From June 15, 2021
B From June 17, 2021, date initially listed on the Cboe BZX Exchange, Inc. exchange
Visit www.fidelity.com for more recent performance information. |
The Fund's past performance is not a good predictor of the Fund's future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
Key Fund Statistics (as of August 31, 2024)
KEY FACTS | | |
| Fund Size | $42,523,403 | |
| Number of Holdings | 209 | |
| Total Advisory Fee | $205,063 | |
| Portfolio Turnover | 28% | |
What did the Fund invest in?
(as of August 31, 2024)
| U.S. Government and U.S. Government Agency Obligations | 7.4 |
| A | 6.2 |
| BBB | 32.9 |
| BB | 26.2 |
| Equities | 24.9 |
| Short-Term Investments and Net Other Assets (Liabilities) | 2.4 |
QUALITY DIVERSIFICATION (% of Fund's net assets) |
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| 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. |
| Preferred Securities | 48.4 |
| Preferred Stocks | 24.9 |
| Corporate Bonds | 16.9 |
| U.S. Treasury Obligations | 7.4 |
| Short-Term Investments and Net Other Assets (Liabilities) | 2.4 |
ASSET ALLOCATION (% of Fund's net assets) |
|
|
| United States | 89.7 |
| Canada | 3.9 |
| Japan | 3.6 |
| United Kingdom | 1.0 |
| France | 0.5 |
| Ireland | 0.5 |
| Germany | 0.5 |
| Netherlands | 0.2 |
| Bermuda | 0.1 |
GEOGRAPHIC DIVERSIFICATION (% of Fund's net assets) |
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TOP HOLDINGS (% of Fund's net assets) | | |
| US Treasury Bonds | 7.4 | |
| Energy Transfer LP | 4.9 | |
| Bank of America Corp | 3.3 | |
| Citigroup Inc | 3.2 | |
| Bank of New York Mellon Corp/The | 2.7 | |
| Goldman Sachs Group Inc/The | 2.5 | |
| Charles Schwab Corp/The | 2.4 | |
| Wells Fargo & Co | 2.2 | |
| Wells Fargo & Co Series L, 7.5% | 2.2 | |
| JPMorgan Chase & Co | 2.2 | |
| | 33.0 | |
| Fidelity, the Fidelity Investments Logo and all other Fidelity trademarks or service marks used herein are trademarks or service marks of FMR LLC. Any third-party marks that are used herein are trademarks or service marks of their respective owners. © 2024 FMR LLC. All rights reserved. |
| | For additional information about the Fund; including its prospectus, financial information, holdings and proxy information, scan the QR code or visit fundresearch.fidelity.com/prospectus/sec 1.9913676.100 6414-TSRA-1024 |
| |
| | ANNUAL SHAREHOLDER REPORT | AS OF AUGUST 31, 2024 | This report describes changes to the Fund that occurred during the reporting period. |
| | Fidelity® Enhanced High Yield ETF Fidelity® Enhanced High Yield ETF : FDHY Principal U.S. Listing Exchange :NYSEArca NYSE Arca, Inc. |
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This annual shareholder report contains information about Fidelity® Enhanced High Yield ETF for the period September 1, 2023 to August 31, 2024. You can find additional information about the Fund at fundresearch.fidelity.com/prospectus/sec. You can also request this information by contacting us at 1-800-FIDELITY or by sending an e-mail to fidfunddocuments@fidelity.com.
What were your Fund costs for the last year?(based on hypothetical $10,000 investment)
FUND COST (PREVIOUS YEAR)
| | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment | |
| Fidelity® Enhanced High Yield ETF | $ 48 | 0.46% | |
What affected the Fund's performance this period?
•High-yield bonds gained for the 12 months ending August 31, 2024, driven by a resilient economy and corporate profits, the perception that credit risk has fallen amid elevated coupon yields, and the Federal Reserve's likely pivot to cutting interest rates in late 2024.
•Against this backdrop, the fund's core investment in high-yield bonds rose 12.71% and contributed to performance versus the ICE BofA BB-B US High Yield Constrained Index for the fiscal year.
•By industry, security selection was the primary contributor, led by telecommunications. Security selection in capital goods and consumer goods also boosted the fund's relative performance.
•The top individual relative contributor was an underweight in CenturyLink (-21%). The second-largest relative contributor was an overweight in Vector (+23%). The company was among the fund's biggest holdings at period end. An underweight in Altice USA (-2%) also helped.
•In contrast, the primary detractor from performance versus the benchmark was security selection in basic industry. Security selection in transportation also hampered the fund's result. Also detracting from our result was an underweight in healthcare.
•The fund's non-benchmark stake in First Quantum Minerals gained roughly 5% and was the biggest individual relative detractor. The second-largest relative detractor was our stake in Spirit Airlines (-22%). Another notable relative detractor was our stake in New Fortress Energy (+1%). It was one of the fund's largest holdings this period.
•By quality, positioning in bonds rated BB added the most value.
•Notable changes in positioning include higher allocations to the real estate and financial services industries.
How did the Fund perform over the life of Fund?
CUMULATIVE PERFORMANCE
June 12, 2018 through August 31, 2024.
Initial investment of $10,000.
Fidelity® Enhanced High Yield ETF | $10,000 | $10,159 | $11,122 | $12,191 | $13,246 | $11,677 | $12,483 |
ICE® BofA® BB-B US High Yield Constrained Index | $10,000 | $10,149 | $10,965 | $11,488 | $12,461 | $11,189 | $11,941 |
Bloomberg U.S. Universal Bond Index | $10,000 | $10,113 | $11,132 | $11,846 | $11,950 | $10,534 | $10,492 |
| | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
AVERAGE ANNUAL TOTAL RETURNS: | | 1 Year | 5 Year | Life of Fund |
Fidelity® Enhanced High Yield ETF - NAV A | 12.20% | 4.72% | 5.56% |
Fidelity® Enhanced High Yield ETF - Market Price B | 12.21% | 4.67% | 5.53% |
ICE® BofA® BB-B US High Yield Constrained Index A | 11.95% | 4.04% | 4.77% |
Bloomberg U.S. Universal Bond Index A | 7.92% | 0.34% | 2.02% |
A From June 12, 2018
B From June 14, 2018, date initially listed on the NYSE Arca, Inc. exchange
Visit www.fidelity.com for more recent performance information. |
The Fund's past performance is not a good predictor of the Fund's future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
Key Fund Statistics (as of August 31, 2024)
KEY FACTS | | |
| Fund Size | $334,153,829 | |
| Number of Holdings | 418 | |
| Total Advisory Fee | $1,322,817 | |
| Portfolio Turnover | 51% | |
What did the Fund invest in?
(as of August 31, 2024)
| BBB | 1.3 |
| BB | 47.5 |
| B | 47.9 |
| CCC,CC,C | 1.2 |
| Short-Term Investments and Net Other Assets (Liabilities) | 2.1 |
QUALITY DIVERSIFICATION (% of Fund's net assets) |
|
| |
| 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. |
| Corporate Bonds | 97.9 |
| Short-Term Investments and Net Other Assets (Liabilities) | 2.1 |
ASSET ALLOCATION (% of Fund's net assets) |
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| United States | 84.7 |
| Australia | 5.6 |
| Canada | 4.1 |
| United Kingdom | 1.8 |
| Japan | 0.6 |
| Italy | 0.6 |
| Luxembourg | 0.5 |
| France | 0.4 |
| Ireland | 0.4 |
| Others | 1.3 |
GEOGRAPHIC DIVERSIFICATION (% of Fund's net assets) |
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TOP HOLDINGS (% of Fund's net assets) | | |
| Mineral Resources Ltd | 3.0 | |
| FMG Resources August 2006 Pty Ltd | 2.2 | |
| CCO Holdings LLC / CCO Holdings Capital Corp | 1.9 | |
| Northern Oil & Gas Inc | 1.7 | |
| Vector Group Ltd | 1.6 | |
| DaVita Inc | 1.6 | |
| Delek Logistics Partners LP / Delek Logistics Finance Corp | 1.5 | |
| CVR Energy Inc | 1.5 | |
| TransDigm Inc | 1.4 | |
| Nexstar Media Inc | 1.4 | |
| | 17.8 | |
How has the Fund changed?
This is a summary of certain changes to the Fund since September 1, 2023. For more complete information, you may review the Fund's next prospectus, which we expect to be available by November 29, 2024 at fundresearch.fidelity.com/prospectus/sec or upon request at 1-800-FIDELITY or by sending an e-mail to fidfunddocuments@fidelity.com.
Effective October 10, 2024, the fund's name changed from Fidelity® High Yield Factor ETF to Fidelity® Enhanced High Yield ETF. | |
| Fidelity, the Fidelity Investments Logo and all other Fidelity trademarks or service marks used herein are trademarks or service marks of FMR LLC. Any third-party marks that are used herein are trademarks or service marks of their respective owners. © 2024 FMR LLC. All rights reserved. |
| | For additional information about the Fund; including its prospectus, financial information, holdings and proxy information, scan the QR code or visit fundresearch.fidelity.com/prospectus/sec 1.9913656.100 3088-TSRA-1024 |
| |
| | ANNUAL SHAREHOLDER REPORT | AS OF AUGUST 31, 2024 | |
| | Fidelity® Sustainable High Yield ETF Fidelity® Sustainable High Yield ETF : FSYD Principal U.S. Listing Exchange :NYSEArca NYSE Arca, Inc. |
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This annual shareholder report contains information about Fidelity® Sustainable High Yield ETF for the period September 1, 2023 to August 31, 2024. You can find additional information about the Fund at fundresearch.fidelity.com/prospectus/sec. You can also request this information by contacting us at 1-800-FIDELITY or by sending an e-mail to fidfunddocuments@fidelity.com.
What were your Fund costs for the last year?(based on hypothetical $10,000 investment)
FUND COST (PREVIOUS YEAR)
| | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment | |
| Fidelity® Sustainable High Yield ETF | $ 59 | 0.56% | |
What affected the Fund's performance this period?
•High-yield bonds gained for the 12 months ending August 31, 2024, driven by a resilient economy and corporate profits, the perception that credit risk has fallen amid elevated coupon yields, and the Federal Reserve's likely pivot to cutting interest rates in late 2024.
•Against this backdrop, the fund's core investment in high-yield bonds rose 12.88% and contributed to performance versus the ICE BofA US High Yield Constrained Index for the fiscal year.
•By industry, market selection was the primary contributor, led by an underweight in media. Security selection in basic industry also boosted the fund's relative performance. Also helping our relative result were security selection and an underweight in transportation.
•The top individual relative contributor was an overweight in Emergent BioSolutions (+67%). This period we increased our position in Emergent BioSolutions. The second-largest relative contributor was an overweight in Community Health Systems (+26%). The company was one of our biggest holdings. Another notable relative contributor was an overweight in Coherent (+99%).
•In contrast, the primary detractor from performance versus the benchmark was security selection in services. Also hurting our result was security selection in retail and capital goods.
•The biggest individual relative detractor was an overweight in Cano Health (-60%). A second notable relative detractor was an underweight in Bausch Health (+32%). Another notable relative detractor was an overweight in New Fortress Energy (-5%). The company was among our biggest holdings this period.
•By quality, positioning in bonds rated BB added the most value, whereas those rated B hurt the most.
•Notable changes in positioning include higher allocations to the utility and financial services industries, as well as decreased exposure to energy.
Application of FMR's environmental, social and governance (ESG) ratings process and/or its sustainable investing exclusion criteria may affect the fund's exposure to certain issuers, sectors, regions and countries and may affect the fund's performance.
How did the Fund perform over the life of Fund?
CUMULATIVE PERFORMANCE
February 15, 2022 through August 31, 2024.
Initial investment of $10,000.
Fidelity® Sustainable High Yield ETF | $10,000 | $9,322 | $9,959 |
ICE® BofA® US High Yield Constrained Index | $10,000 | $9,295 | $9,948 |
ICE US High Yield Best-in-Class ESG Index | $10,000 | $9,248 | $9,853 |
Bloomberg U.S. Universal Bond Index | $10,000 | $9,276 | $9,239 |
| | 2022 | 2023 | 2024 |
AVERAGE ANNUAL TOTAL RETURNS: | | 1 Year | Life of Fund |
Fidelity® Sustainable High Yield ETF - NAV A | 12.33% | 4.51% |
Fidelity® Sustainable High Yield ETF - Market Price B | 12.16% | 4.58% |
ICE® BofA® US High Yield Constrained Index A | 12.47% | 4.52% |
ICE US High Yield Best-in-Class ESG Index A | 12.69% | 4.21% |
Bloomberg U.S. Universal Bond Index A | 7.92% | -0.11% |
A From February 15, 2022
B From February 17, 2022, date initially listed on the NYSE Arca, Inc. exchange
Visit www.fidelity.com for more recent performance information. |
The Fund's past performance is not a good predictor of the Fund's future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
Key Fund Statistics (as of August 31, 2024)
KEY FACTS | | |
| Fund Size | $27,304,067 | |
| Number of Holdings | 385 | |
| Total Advisory Fee | $87,233 | |
| Portfolio Turnover | 71% | |
What did the Fund invest in?
(as of August 31, 2024)
| BBB | 2.9 |
| BB | 40.8 |
| B | 39.5 |
| CCC,CC,C | 13.1 |
| Not Rated | 1.6 |
| Equities | 0.7 |
| Short-Term Investments and Net Other Assets (Liabilities) | 1.4 |
QUALITY DIVERSIFICATION (% of Fund's net assets) |
|
| |
| 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. |
| Corporate Bonds | 95.7 |
| Bank Loan Obligations | 1.6 |
| Common Stocks | 0.7 |
| Preferred Securities | 0.6 |
| Short-Term Investments and Net Other Assets (Liabilities) | 1.4 |
ASSET ALLOCATION (% of Fund's net assets) |
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| United States | 82.2 |
| Canada | 4.3 |
| France | 2.2 |
| Australia | 1.9 |
| Ireland | 1.5 |
| United Kingdom | 1.2 |
| Tanzania | 0.8 |
| Zambia | 0.5 |
| Germany | 0.5 |
| Others | 4.9 |
GEOGRAPHIC DIVERSIFICATION (% of Fund's net assets) |
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TOP HOLDINGS (% of Fund's net assets) | | |
| Block Inc | 2.3 | |
| CCO Holdings LLC / CCO Holdings Capital Corp | 2.2 | |
| Brand Industrial Services Inc | 2.0 | |
| AECOM | 2.0 | |
| CHS/Community Health Systems Inc | 2.0 | |
| Clear Channel Outdoor Holdings Inc | 1.8 | |
| Reworld Holding Corp | 1.7 | |
| DPL Inc | 1.7 | |
| Tenet Healthcare Corp | 1.6 | |
| Yum! Brands Inc | 1.6 | |
| | 18.9 | |
| Fidelity, the Fidelity Investments Logo and all other Fidelity trademarks or service marks used herein are trademarks or service marks of FMR LLC. Any third-party marks that are used herein are trademarks or service marks of their respective owners. © 2024 FMR LLC. All rights reserved. |
| | For additional information about the Fund; including its prospectus, financial information, holdings and proxy information, scan the QR code or visit fundresearch.fidelity.com/prospectus/sec 1.9913683.100 6508-TSRA-1024 |
Item 2.
Code of Ethics
As of the end of the period, August 31, 2024, Fidelity Covington Trust (the trust) has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
Item 3.
Audit Committee Financial Expert
The Board of Trustees of the trust has determined that Donald F. Donahue is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mr. Donahue is independent for purposes of Item 3 of Form N-CSR.
Item 4.
Principal Accountant Fees and Services
Fees and Services
The following table presents fees billed by PricewaterhouseCoopers LLP (“PwC”) in each of the last two fiscal years for services rendered to Fidelity High Yield Factor ETF, Fidelity Preferred Securities & Income ETF, and Fidelity Sustainable High Yield ETF (the “Funds”):
Services Billed by PwC
August 31, 2024 FeesA
| | | | |
| Audit Fees | Audit-Related Fees | Tax Fees | All Other Fees |
Fidelity High Yield Factor ETF | $37,700 | $- | $7,600 | $1,200 |
Fidelity Preferred Securities & Income ETF | $38,100 | $- | $7,600 | $1,200 |
Fidelity Sustainable High Yield ETF | $37,000 | $- | $7,700 | $1,200 |
| | | | |
| Audit Fees | Audit-Related Fees | Tax Fees | All Other Fees |
Fidelity High Yield Factor ETF | $37,900 | $- | $7,600 | $1,200 |
Fidelity Preferred Securities & Income ETF | $38,200 | $- | $7,600 | $1,200 |
Fidelity Sustainable High Yield ETF | $37,100 | $- | $7,700 | $1,100 |
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A Amounts may reflect rounding.
The following table(s) present(s) fees billed by PwC that were required to be approved by the Audit Committee for services that relate directly to the operations and financial reporting of the Fund(s) and that are rendered on behalf of Fidelity Management & Research Company LLC ("FMR") and entities controlling, controlled by, or under common control with FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund(s) (“Fund Service Providers”):
Services Billed by PwC
| | |
| August 31, 2024A | August 31, 2023A |
Audit-Related Fees | $9,437,800 | $8,379,200 |
Tax Fees | $61,000 | $1,000 |
All Other Fees | $35,000 | $- |
A Amounts may reflect rounding.
“Audit-Related Fees” represent fees billed for assurance and related services that are reasonably related to the performance of the fund audit or the review of the fund's financial statements and that are not reported under Audit Fees.
“Tax Fees” represent fees billed for tax compliance, tax advice or tax planning that relate directly to the operations and financial reporting of the fund.
“All Other Fees” represent fees billed for services provided to the fund or Fund Service Provider, a significant portion of which are assurance related, that relate directly to the operations and financial reporting of the fund, excluding those services that are reported under Audit Fees, Audit-Related Fees or Tax Fees.
Assurance services must be performed by an independent public accountant.
* * *
The aggregate non-audit fees billed by PwC for services rendered to the Fund(s), FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any Fund Service Provider for each of the last two fiscal years of the Fund(s) are as follows:
| | | |
Billed By | August 31, 2024A | August 31, 2023A |
PwC | $15,034,900 | $13,859,400 |
A Amounts may reflect rounding.
The trust's Audit Committee has considered non-audit services that were not pre-approved that were provided by PwC to Fund Service Providers to be compatible with maintaining the independence of PwC in its(their) audit of the Fund(s), taking into account representations from PwC, in accordance with Public Company Accounting Oversight Board rules, regarding its independence from the Fund(s) and its(their) related entities and FMR’s review of the appropriateness and permissibility under applicable law of such non-audit services prior to their provision to the Fund(s) Service Providers.
Audit Committee Pre-Approval Policies and Procedures
The trust’s Audit Committee must pre-approve all audit and non-audit services provided by a fund’s independent registered public accounting firm relating to the operations or financial reporting of the fund. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee’s consideration of non-audit services by the audit firms that audit the Fidelity funds. The policies and procedures require that any non-audit service provided by a fund audit firm to a Fidelity fund and any non-audit service provided by a fund auditor to a Fund Service Provider that relates directly to the operations and financial reporting of a Fidelity fund (“Covered Service”) are subject to approval by the Audit Committee before such service is provided.
All Covered Services must be approved in advance of provision of the service either: (i) by formal resolution of the Audit Committee, or (ii) by oral or written approval of the service by the Chair of the Audit Committee (or if the Chair is unavailable, such other member of the Audit Committee as may be designated by the Chair to act in the Chair’s absence). The approval contemplated by (ii) above is permitted where the Treasurer determines that action on such an engagement is necessary before the next meeting of the Audit Committee.
Non-audit services provided by a fund audit firm to a Fund Service Provider that do not relate directly to the operations and financial reporting of a Fidelity fund are reported to the Audit Committee periodically.
Non-Audit Services Approved Pursuant to Rule 2-01(c)(7)(i)(C) and (ii) of Regulation S-X (“De Minimis Exception”)
There were no non-audit services approved or required to be approved by the Audit Committee pursuant to the De Minimis Exception during the Fund’s(s’) last two fiscal years relating to services provided to (i) the Fund(s) or (ii) any Fund Service Provider that relate directly to the operations and financial reporting of the Fund(s).
The Registrant has not retained, for the preparation of the audit report on the financial statements included in the Form N-CSR, a registered public accounting firm that has a branch or office that is located in a foreign jurisdiction and that the Public Company Accounting Oversight Board (the “PCAOB”) has determined that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction.
The Registrant is not a “foreign issuer,” as defined in 17 CFR 240.3b-4.
Item 5.
Audit Committee of Listed Registrants
The Audit Committee is a separately-designated standing audit committee in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. As of August 31, 2024, the members of the Audit Committee were Donald F. Donahue, Vijay C. Advani, Thomas A. Kennedy, Karen B. Peetz, and Susan Tomasky.
Item 6.
Investments
(a)
Not applicable.
(b)
Not applicable.
Item 7.
Financial Statements and Financial Highlights for Open-End Management Investment Companies
Fidelity® Enhanced High Yield ETF
Fidelity® Preferred Securities & Income ETF
(Fidelity Enhanced High Yield ETF formerly Fidelity High Yield Factor ETF)
Annual Report
August 31, 2024
Contents
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-FIDELITY 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. © 2024 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Funds. This report is not authorized for distribution to prospective investors in the Funds 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-PORT. Forms N-PORT are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-PORT 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.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Funds nor Fidelity Distributors Corporation is a bank.
Item 7: Financial Statements and Financial Highlights for Open-End Management Investment Companies (Annual Report)
Fidelity® Enhanced High Yield ETF
Schedule of Investments August 31, 2024
Showing Percentage of Net Assets
| Nonconvertible Bonds - 97.9% |
| | | Principal Amount (a) | Value ($) |
| Aerospace - 2.1% | | | |
| Bombardier, Inc.: | | | |
| 7.25% 7/1/31 (b) | | 430,000 | 451,367 |
| 7.5% 2/1/29 (b) | | 347,000 | 364,551 |
| 7.875% 4/15/27 (b) | | 124,000 | 124,422 |
| Hexcel Corp. 4.95% 8/15/25 | | 269,000 | 267,464 |
| Spirit Aerosystems, Inc. 9.75% 11/15/30 (b) | | 597,000 | 668,128 |
| TransDigm, Inc.: | | | |
| 4.875% 5/1/29 | | 2,525,000 | 2,441,748 |
| 6.875% 12/15/30 (b) | | 2,192,000 | 2,288,957 |
| VistaJet Malta Finance PLC / XO Management Holding, Inc. 9.5% 6/1/28 (b) | | 500,000 | 467,590 |
TOTAL AEROSPACE | | | 7,074,227 |
| Air Transportation - 1.3% | | | |
| Air Canada 3.875% 8/15/26 (b) | | 600,000 | 578,960 |
| Allegiant Travel Co. 7.25% 8/15/27 (b)(c) | | 408,000 | 387,353 |
| American Airlines, Inc. 7.25% 2/15/28 (b)(c) | | 265,000 | 266,648 |
| American Airlines, Inc. / AAdvantage Loyalty IP Ltd. 5.5% 4/20/26 (b) | | 376,620 | 374,669 |
| Bristow Group, Inc. 6.875% 3/1/28 (b) | | 166,000 | 166,177 |
| JetBlue Airways Corp./JetBlue Loyalty LP 9.875% 9/20/31 (b) | | 500,000 | 494,185 |
| Rand Parent LLC 8.5% 2/15/30 (b)(c) | | 300,000 | 300,005 |
| United Airlines Holdings, Inc. 4.875% 1/15/25 | | 369,000 | 367,163 |
| United Airlines, Inc.: | | | |
| 4.375% 4/15/26 (b) | | 1,026,900 | 1,002,120 |
| 4.625% 4/15/29 (b) | | 500,000 | 475,950 |
TOTAL AIR TRANSPORTATION | | | 4,413,230 |
| Automotive & Auto Parts - 1.7% | | | |
| Allison Transmission, Inc.: | | | |
| 3.75% 1/30/31 (b) | | 2,895,000 | 2,630,879 |
| 5.875% 6/1/29 (b) | | 10,000 | 10,027 |
| Champions Financing, Inc. 8.75% 2/15/29 (b) | | 300,000 | 307,697 |
| Garrett Motion Holdings, Inc. / Garrett LX I Sarl 7.75% 5/31/32 (b) | | 556,000 | 575,397 |
| Jaguar Land Rover Automotive PLC 7.75% 10/15/25 (b) | | 175,000 | 175,633 |
| LCM Investments Holdings 8.25% 8/1/31 (b) | | 365,000 | 388,087 |
| Macquarie AirFinance Holdings: | | | |
| 6.4% 3/26/29 (b) | | 100,000 | 104,071 |
| 8.125% 3/30/29 (b) | | 460,000 | 488,852 |
| Tenneco, Inc. 8% 11/17/28 (b) | | 550,000 | 514,259 |
| Thor Industries, Inc. 4% 10/15/29 (b) | | 643,000 | 587,030 |
TOTAL AUTOMOTIVE & AUTO PARTS | | | 5,781,932 |
| Banks & Thrifts - 1.4% | | | |
| AG TTMT Escrow Issuer LLC 8.625% 9/30/27 (b) | | 640,000 | 660,927 |
| Ally Financial, Inc. 5.75% 11/20/25 (c) | | 500,000 | 501,329 |
| Freedom Mortgage Hold 9.25% 2/1/29 (b) | | 930,000 | 952,651 |
| PennyMac Financial Services, Inc.: | | | |
| 5.75% 9/15/31 (b) | | 900,000 | 867,912 |
| 7.875% 12/15/29 (b) | | 1,115,000 | 1,183,190 |
| UniCredit SpA: | | | |
| 5.459% 6/30/35 (b)(d) | | 150,000 | 146,401 |
| 7.296% 4/2/34 (b)(d) | | 149,693 | 157,343 |
| VFH Parent LLC / Valor Co-Issuer, Inc. 7.5% 6/15/31 (b) | | 360,000 | 373,467 |
TOTAL BANKS & THRIFTS | | | 4,843,220 |
| Broadcasting - 3.4% | | | |
| AMC Networks, Inc. 10.25% 1/15/29 (b) | | 850,000 | 854,250 |
| Gray Television, Inc.: | | | |
| 5.375% 11/15/31 (b) | | 600,000 | 343,675 |
| 7% 5/15/27 (b) | | 30,000 | 28,935 |
| Nexstar Media, Inc.: | | | |
| 4.75% 11/1/28 (b)(c) | | 3,742,000 | 3,496,250 |
| 5.625% 7/15/27 (b) | | 1,160,000 | 1,133,560 |
| Sinclair Television Group, Inc. 4.125% 12/1/30 (b) | | 258,000 | 182,053 |
| Sirius XM Radio, Inc. 3.125% 9/1/26 (b) | | 229,000 | 218,909 |
| TEGNA, Inc.: | | | |
| 4.625% 3/15/28 (c) | | 1,351,000 | 1,269,825 |
| 5% 9/15/29 | | 891,000 | 827,563 |
| Univision Communications, Inc.: | | | |
| 7.375% 6/30/30 (b)(c) | | 1,576,000 | 1,512,708 |
| 8% 8/15/28 (b) | | 920,000 | 930,796 |
| WMG Acquisition Corp. 3% 2/15/31 (b)(c) | | 550,000 | 489,101 |
TOTAL BROADCASTING | | | 11,287,625 |
| Building Materials - 1.0% | | | |
| AmeriTex Holdco Intermediate LLC 10.25% 10/15/28 (b) | | 300,000 | 319,166 |
| Eco Material Technologies, Inc. 7.875% 1/31/27 (b) | | 165,000 | 167,121 |
| EMRLD Borrower LP / Emerald Co. 6.75% 7/15/31 (b) | | 375,000 | 386,435 |
| Griffon Corp. 5.75% 3/1/28 | | 1,220,000 | 1,196,019 |
| Jeld-Wen, Inc. 4.625% 12/15/25 (b) | | 235,000 | 234,971 |
| MasterBrand, Inc. 7% 7/15/32 (b) | | 250,000 | 257,502 |
| MITER Brands Acquisition Holdco, Inc. / MIWD Borrower LLC 6.75% 4/1/32 (b) | | 240,000 | 246,636 |
| Smyrna Ready Mix Concrete LLC 8.875% 11/15/31 (b) | | 600,000 | 644,039 |
TOTAL BUILDING MATERIALS | | | 3,451,889 |
| Cable/Satellite TV - 3.0% | | | |
| CCO Holdings LLC/CCO Holdings Capital Corp.: | | | |
| 4.25% 2/1/31 (b) | | 75,000 | 65,078 |
| 4.25% 1/15/34 (b) | | 1,061,000 | 855,602 |
| 4.5% 5/1/32 | | 3,097,000 | 2,644,387 |
| 6.375% 9/1/29 (b) | | 1,168,000 | 1,153,687 |
| 7.375% 3/1/31 (b)(c) | | 1,550,000 | 1,577,699 |
| DIRECTV Financing LLC 8.875% 2/1/30 (b)(c) | | 450,000 | 456,533 |
| DIRECTV Financing LLC / DIRECTV Financing Co-Obligor, Inc. 5.875% 8/15/27 (b) | | 1,133,000 | 1,097,105 |
| Midcontinent Communications 8% 8/15/32 (b) | | 500,000 | 498,126 |
| Virgin Media Vendor Financing Notes IV DAC 5% 7/15/28 (b) | | 450,000 | 426,842 |
| Ziggo BV 4.875% 1/15/30 (b) | | 1,261,000 | 1,175,652 |
TOTAL CABLE/SATELLITE TV | | | 9,950,711 |
| Capital Goods - 1.7% | | | |
| ATS Corp. 4.125% 12/15/28 (b) | | 440,000 | 411,748 |
| Chart Industries, Inc. 7.5% 1/1/30 (b) | | 15,000 | 15,761 |
| EnerSys 4.375% 12/15/27 (b)(c) | | 1,238,000 | 1,209,338 |
| ESAB Corp. 6.25% 4/15/29 (b) | | 2,000,000 | 2,054,586 |
| Husky Injection / Titan 9% 2/15/29 (b) | | 778,000 | 797,513 |
| Patrick Industries, Inc. 4.75% 5/1/29 (b)(c) | | 886,000 | 831,651 |
| Trinity Industries, Inc. 7.75% 7/15/28 (b) | | 500,000 | 523,947 |
TOTAL CAPITAL GOODS | | | 5,844,544 |
| Chemicals - 2.4% | | | |
| Avient Corp. 5.75% 5/15/25 (b) | | 1,141,000 | 1,141,770 |
| Axalta Coating Systems LLC 3.375% 2/15/29 (b)(c) | | 550,000 | 510,033 |
| CVR Partners LP/CVR Nitrogen Finance Corp. 6.125% 6/15/28 (b) | | 380,000 | 368,874 |
| INEOS Finance PLC 7.5% 4/15/29 (b) | | 536,000 | 554,014 |
| INEOS Quattro Finance 2 PLC: | | | |
| 3.375% 1/15/26 (b) | | 480,000 | 465,213 |
| 9.625% 3/15/29 (b) | | 500,000 | 539,298 |
| NOVA Chemicals Corp.: | | | |
| 8.5% 11/15/28 (b) | | 380,000 | 405,132 |
| 9% 2/15/30 (b) | | 780,000 | 837,824 |
| Nufarm Australia Ltd. 5% 1/27/30 (b) | | 605,000 | 560,732 |
| Olympus Water U.S. Holding Corp.: | | | |
| 7.25% 6/15/31 (b) | | 550,000 | 568,475 |
| 9.75% 11/15/28 (b) | | 900,000 | 958,669 |
| The Chemours Co. LLC 5.75% 11/15/28 (b)(c) | | 1,120,000 | 1,049,542 |
TOTAL CHEMICALS | | | 7,959,576 |
| Consumer Products - 2.2% | | | |
| Alta Equipment Group, Inc. 9% 6/1/29 (b) | | 200,000 | 181,726 |
| BlueLinx Corp. 6% 11/15/29 (b) | | 575,000 | 553,048 |
| Energizer Holdings, Inc. 4.75% 6/15/28 (b)(c) | | 500,000 | 481,894 |
| Grubhub Holdings, Inc. 5.5% 7/1/27 (b) | | 101,000 | 96,516 |
| Rakuten Group, Inc. 11.25% 2/15/27 (b) | | 1,900,000 | 2,062,507 |
| Tempur Sealy International, Inc. 3.875% 10/15/31 (b) | | 3,553,000 | 3,124,803 |
| Verde Purchaser LLC 10.5% 11/30/30 (b) | | 700,000 | 753,855 |
TOTAL CONSUMER PRODUCTS | | | 7,254,349 |
| Containers - 1.7% | | | |
| Graphic Packaging International, Inc. 6.375% 7/15/32 (b)(c) | | 2,000,000 | 2,044,858 |
| LABL, Inc. 9.5% 11/1/28 (b) | | 325,000 | 332,155 |
| Mauser Packaging Solutions Holding Co. 7.875% 4/15/27 (b)(c) | | 730,000 | 754,769 |
| Pactiv Evergreen Group Issuer, Inc./Pactiv Evergreen Group Issuer LLC 4% 10/15/27 (b)(c) | | 500,000 | 477,356 |
| Sealed Air Corp. 6.5% 7/15/32 (b) | | 2,000,000 | 2,045,836 |
TOTAL CONTAINERS | | | 5,654,974 |
| Diversified Financial Services - 9.4% | | | |
| BrightSphere Investment Group, Inc. 4.8% 7/27/26 | | 1,770,000 | 1,725,490 |
| Castlelake Aviation Finance 5% 4/15/27 (b) | | 414,000 | 404,063 |
| Credit Acceptance Corp. 6.625% 3/15/26 | | 851,000 | 849,854 |
| Encore Capital Group, Inc. 8.5% 5/15/30 (b) | | 500,000 | 523,212 |
| Enova International, Inc. 9.125% 8/1/29 (b) | | 400,000 | 406,082 |
| First Cash Financial Services, Inc. 5.625% 1/1/30 (b)(c) | | 2,702,000 | 2,669,608 |
| Fortress Transportation & Infrastructure Investors LLC: | | | |
| 7% 5/1/31 (b) | | 2,100,000 | 2,199,630 |
| 7.875% 12/1/30 (b) | | 465,000 | 499,033 |
| Freedom Mortgage Corp.: | | | |
| 12% 10/1/28 (b) | | 734,000 | 799,049 |
| 12.25% 10/1/30 (b) | | 300,000 | 332,881 |
| GGAM Finance Ltd.: | | | |
| 6.875% 4/15/29 (b) | | 380,000 | 392,139 |
| 8% 2/15/27 (b) | | 775,000 | 807,918 |
| Global Aircraft Leasing Co. Ltd. 8.75% 9/1/27 (b) | | 500,000 | 505,004 |
| Gn Bondco LLC 9.5% 10/15/31 (b)(c) | | 230,000 | 234,111 |
| goeasy Ltd.: | | | |
| 7.625% 7/1/29 (b) | | 1,000,000 | 1,031,331 |
| 9.25% 12/1/28 (b) | | 1,275,000 | 1,370,921 |
| Howden UK Refinance PLC / Howden UK Refinance 2 PLC / Howden U.S. Finance LLC 7.25% 2/15/31 (b) | | 550,000 | 566,048 |
| Icahn Enterprises LP/Icahn Enterprises Finance Corp.: | | | |
| 4.375% 2/1/29 | | 1,728,000 | 1,515,990 |
| 5.25% 5/15/27 | | 150,000 | 144,563 |
| Jefferson Capital Holding 9.5% 2/15/29 (b) | | 500,000 | 532,182 |
| Ladder Capital Finance Holdings LLLP/Ladder Capital Finance Corp.: | | | |
| 4.25% 2/1/27 (b) | | 450,000 | 436,699 |
| 4.75% 6/15/29 (b) | | 213,000 | 205,303 |
| 7% 7/15/31 (b)(c) | | 500,000 | 519,863 |
| MidCap Financial Issuer Trust 5.625% 1/15/30 (b) | | 840,000 | 765,294 |
| Nationstar Mortgage Holdings, Inc.: | | | |
| 5.125% 12/15/30 (b) | | 500,000 | 474,681 |
| 5.5% 8/15/28 (b) | | 933,000 | 916,240 |
| 5.75% 11/15/31 (b)(c) | | 1,750,000 | 1,700,281 |
| Navient Corp.: | | | |
| 9.375% 7/25/30 | | 758,000 | 822,740 |
| 11.5% 3/15/31 | | 600,000 | 673,465 |
| OneMain Finance Corp.: | | | |
| 3.875% 9/15/28 | | 1,857,000 | 1,710,085 |
| 6.625% 1/15/28 | | 731,000 | 745,080 |
| 7.875% 3/15/30 | | 450,000 | 470,646 |
| 9% 1/15/29 (c) | | 792,000 | 841,488 |
| Optics Bidco SpA 7.2% 7/18/36 (b) | | 1,154,000 | 1,212,044 |
| PRA Group, Inc.: | | | |
| 8.375% 2/1/28 (b) | | 937,000 | 956,461 |
| 8.875% 1/31/30 (b) | | 515,000 | 532,302 |
| Shift4 Payments LLC / Shift4 Payments Finance Sub, Inc. 6.75% 8/15/32 (b) | | 1,000,000 | 1,031,665 |
TOTAL DIVERSIFIED FINANCIAL SERVICES | | | 31,523,446 |
| Diversified Media - 0.2% | | | |
| Lamar Media Corp. 3.75% 2/15/28 | | 500,000 | 479,055 |
| Outfront Media Capital LLC / Corp. 4.25% 1/15/29 (b) | | 75,000 | 70,788 |
TOTAL DIVERSIFIED MEDIA | | | 549,843 |
| Energy - 17.2% | | | |
| Aethon United BR LP / Aethon United Finance Corp. 8.25% 2/15/26 (b) | | 185,000 | 187,559 |
| AmeriGas Partners LP/AmeriGas Finance Corp. 9.375% 6/1/28 (b) | | 715,000 | 750,679 |
| Antero Resources Corp. 8.375% 7/15/26 (b) | | 275,000 | 284,328 |
| Archrock Partners LP / Archrock Partners Finance Corp. 6.625% 9/1/32 (b) | | 1,000,000 | 1,012,473 |
| Baytex Energy Corp. 8.5% 4/30/30 (b) | | 788,000 | 839,683 |
| Blue Racer Midstream LLC/Blue Racer Finance Corp. 7% 7/15/29 (b) | | 1,000,000 | 1,040,161 |
| Buckeye Partners LP: | | | |
| 4.5% 3/1/28 (b) | | 1,530,000 | 1,466,605 |
| 6.875% 7/1/29 (b) | | 500,000 | 511,355 |
| California Resources Corp.: | | | |
| 7.125% 2/1/26 (b) | | 54,000 | 54,210 |
| 8.25% 6/15/29 (b) | | 1,795,000 | 1,851,412 |
| Chord Energy Corp. 6.375% 6/1/26 (b) | | 558,000 | 561,130 |
| Citgo Petroleum Corp.: | | | |
| 6.375% 6/15/26 (b) | | 715,000 | 719,023 |
| 7% 6/15/25 (b) | | 124,000 | 124,075 |
| 8.375% 1/15/29 (b) | | 675,000 | 701,130 |
| Civitas Resources, Inc.: | | | |
| 5% 10/15/26 (b) | | 1,131,000 | 1,115,117 |
| 8.375% 7/1/28 (b) | | 450,000 | 474,419 |
| CNX Midstream Partners LP 4.75% 4/15/30 (b) | | 553,000 | 515,775 |
| CNX Resources Corp. 7.25% 3/1/32 (b) | | 400,000 | 418,830 |
| Comstock Resources, Inc.: | | | |
| 6.75% 3/1/29 (b) | | 1,100,000 | 1,079,376 |
| 6.75% 3/1/29 (b)(c) | | 350,000 | 344,274 |
| Coronado Finance Pty Ltd. 10.75% 5/15/26 (b) | | 160,000 | 165,807 |
| CPI CG, Inc. 10% 7/15/29 (b) | | 165,000 | 173,536 |
| CQP Holdco LP / BIP-V Chinook Holdco LLC 7.5% 12/15/33 (b) | | 365,000 | 394,363 |
| Crescent Energy Finance LLC 7.625% 4/1/32 (b) | | 50,000 | 51,558 |
| CVR Energy, Inc.: | | | |
| 5.75% 2/15/28 (b) | | 2,910,000 | 2,744,254 |
| 8.5% 1/15/29 (b) | | 2,231,000 | 2,272,942 |
| Delek Logistics Partners LP/Delek Logistics Finance Corp.: | | | |
| 7.125% 6/1/28 (b)(c) | | 2,530,000 | 2,549,618 |
| 8.625% 3/15/29 (b) | | 2,500,000 | 2,628,693 |
| Encino Acquisition Partners Holdings LLC 8.75% 5/1/31 (b) | | 500,000 | 531,123 |
| EQM Midstream Partners LP 6.375% 4/1/29 (b) | | 1,000,000 | 1,028,057 |
| Ferrellgas LP/Ferrellgas Finance Corp. 5.375% 4/1/26 (b) | | 556,000 | 557,637 |
| Genesis Energy LP/Genesis Energy Finance Corp.: | | | |
| 8.25% 1/15/29 | | 450,000 | 467,582 |
| 8.875% 4/15/30 | | 1,552,000 | 1,647,356 |
| Global Partners LP/GLP Finance Corp. 8.25% 1/15/32 (b) | | 335,000 | 348,256 |
| Harvest Midstream I LP: | | | |
| 7.5% 9/1/28 (b) | | 50,000 | 51,170 |
| 7.5% 5/15/32 (b) | | 565,000 | 593,959 |
| Hess Midstream Operations LP 6.5% 6/1/29 (b) | | 2,000,000 | 2,063,588 |
| Hilcorp Energy I LP/Hilcorp Finance Co. 6.875% 5/15/34 (b) | | 1,000,000 | 1,011,502 |
| Howard Midstream Energy Partners LLC 8.875% 7/15/28 (b) | | 500,000 | 533,024 |
| Matador Resources Co. 6.5% 4/15/32 (b) | | 1,000,000 | 1,014,885 |
| Moss Creek Resources Holdings, Inc. 8.25% 9/1/31 (b) | | 500,000 | 504,302 |
| Nabors Industries, Inc.: | | | |
| 7.375% 5/15/27 (b) | | 200,000 | 202,330 |
| 9.125% 1/31/30 (b) | | 230,000 | 246,466 |
| New Fortress Energy, Inc. 6.5% 9/30/26 (b)(c) | | 946,000 | 818,883 |
| NGL Energy Operating LLC/NGL Energy Finance Corp.: | | | |
| 8.125% 2/15/29 (b) | | 1,050,000 | 1,073,854 |
| 8.375% 2/15/32 (b) | | 450,000 | 463,107 |
| Noble Finance II LLC 8% 4/15/30 (b) | | 500,000 | 518,426 |
| Northern Oil & Gas, Inc.: | | | |
| 8.125% 3/1/28 (b) | | 1,301,000 | 1,330,213 |
| 8.75% 6/15/31 (b) | | 4,107,000 | 4,386,781 |
| NuStar Logistics LP 5.625% 4/28/27 | | 160,000 | 160,428 |
| PBF Holding Co. LLC/PBF Finance Corp. 7.875% 9/15/30 (b) | | 473,000 | 491,855 |
| Perenti Finance Pty Ltd. 6.5% 10/7/25 (b) | | 260,096 | 259,920 |
| Prairie Acquiror LP 9% 8/1/29 (b) | | 500,000 | 522,970 |
| Seadrill Finance Ltd. 8.375% 8/1/30 (b) | | 120,000 | 126,669 |
| Sitio Royalties OP / Sitio Finance Corp. 7.875% 11/1/28 (b) | | 500,000 | 526,612 |
| SM Energy Co. 6.75% 8/1/29 (b) | | 500,000 | 507,803 |
| Sunnova Energy Corp. 11.75% 10/1/28 (b) | | 200,000 | 185,696 |
| Sunoco Logistics Partners, LP 7% 5/1/29 (b) | | 135,000 | 140,628 |
| Sunoco LP/Sunoco Finance Corp. 7% 9/15/28 (b) | | 429,000 | 446,742 |
| Tallgrass Energy Partners LP / Tallgrass Energy Finance Corp. 6% 9/1/31 (b) | | 500,000 | 473,854 |
| Talos Production, Inc. 9% 2/1/29 (b) | | 285,000 | 302,764 |
| Transocean Aquila Ltd. 8% 9/30/28 (b) | | 1,139,000 | 1,171,299 |
| Transocean Titan Finance Ltd. 8.375% 2/1/28 (b) | | 1,040,000 | 1,078,437 |
| Transocean, Inc. 8.75% 2/15/30 (b) | | 595,000 | 628,520 |
| Valaris Ltd. 8.375% 4/30/30 (b) | | 300,000 | 312,970 |
| Venture Global LNG, Inc.: | | | |
| 8.125% 6/1/28 (b) | | 924,000 | 967,661 |
| 9.5% 2/1/29 (b) | | 650,000 | 732,510 |
| 9.875% 2/1/32 (b) | | 972,000 | 1,079,892 |
| Vital Energy, Inc.: | | | |
| 7.75% 7/31/29 (b) | | 214,000 | 216,573 |
| 7.875% 4/15/32 (b) | | 1,000,000 | 1,023,790 |
| Weatherford International Ltd. 8.625% 4/30/30 (b) | | 1,472,000 | 1,527,960 |
TOTAL ENERGY | | | 57,310,439 |
| Entertainment/Film - 1.0% | | | |
| Cinemark U.S.A., Inc.: | | | |
| 5.25% 7/15/28 (b) | | 30,000 | 29,470 |
| 7% 8/1/32 (b)(c) | | 500,000 | 518,983 |
| Live Nation Entertainment, Inc.: | | | |
| 4.75% 10/15/27 (b)(c) | | 500,000 | 487,063 |
| 4.875% 11/1/24 (b)(c) | | 1,195,000 | 1,191,284 |
| 6.5% 5/15/27 (b) | | 500,000 | 508,611 |
| Resorts World Las Vegas LLC / RWLV Capital, Inc. 8.45% 7/27/30 (b) | | 588,000 | 620,969 |
TOTAL ENTERTAINMENT/FILM | | | 3,356,380 |
| Environmental - 1.1% | | | |
| GFL Environmental, Inc. 4% 8/1/28 (b) | | 3,780,000 | 3,603,282 |
| Food & Drug Retail - 1.2% | | | |
| Albertsons Companies LLC/Safeway, Inc./New Albertson's, Inc./Albertson's LLC 6.5% 2/15/28 (b)(c) | | 378,000 | 382,869 |
| Murphy Oil U.S.A., Inc. 4.75% 9/15/29 | | 2,526,000 | 2,450,424 |
| Parkland Corp. 6.625% 8/15/32 (b) | | 1,000,000 | 1,010,474 |
| Walgreens Boots Alliance, Inc. 8.125% 8/15/29 | | 220,000 | 220,248 |
TOTAL FOOD & DRUG RETAIL | | | 4,064,015 |
| Food/Beverage/Tobacco - 4.7% | | | |
| B&G Foods, Inc. 8% 9/15/28 (b) | | 300,000 | 311,891 |
| HLF Financing SARL LLC / Herbalife International, Inc.: | | | |
| 4.875% 6/1/29 (b) | | 200,000 | 125,499 |
| 12.25% 4/15/29 (b) | | 300,000 | 299,939 |
| KeHE Distributor / Nextwave 9% 2/15/29 (b) | | 606,000 | 632,225 |
| Performance Food Group, Inc.: | | | |
| 4.25% 8/1/29 (b) | | 4,521,000 | 4,266,624 |
| 5.5% 10/15/27 (b) | | 50,000 | 49,715 |
| Post Holdings, Inc.: | | | |
| 4.625% 4/15/30 (b) | | 40,000 | 38,016 |
| 5.625% 1/15/28 (b) | | 14,000 | 13,964 |
| 6.25% 2/15/32 (b) | | 1,850,000 | 1,897,195 |
| 6.375% 3/1/33 (b) | | 1,000,000 | 1,007,300 |
| Turning Point Brands, Inc. 5.625% 2/15/26 (b) | | 1,696,000 | 1,684,118 |
| U.S. Foods, Inc. 4.75% 2/15/29 (b) | | 45,000 | 43,877 |
| Vector Group Ltd. 5.75% 2/1/29 (b) | | 5,137,000 | 5,207,624 |
TOTAL FOOD/BEVERAGE/TOBACCO | | | 15,577,987 |
| Gaming - 1.5% | | | |
| Caesars Entertainment, Inc. 8.125% 7/1/27 (b) | | 394,000 | 402,369 |
| Churchill Downs, Inc. 5.5% 4/1/27 (b) | | 392,000 | 390,159 |
| International Game Technology PLC 4.125% 4/15/26 (b) | | 205,000 | 201,180 |
| Light & Wonder International, Inc.: | | | |
| 7% 5/15/28 (b) | | 706,000 | 713,966 |
| 7.25% 11/15/29 (b) | | 45,000 | 46,630 |
| Melco Resorts Finance Ltd. 7.625% 4/17/32 (b) | | 1,000,000 | 1,001,656 |
| MGM Resorts International 6.5% 4/15/32 (c) | | 1,000,000 | 1,007,149 |
| Ontario Gaming GTA LP / OTG Co. issuer, Inc. 8% 8/1/30 (b) | | 145,000 | 149,451 |
| Raptor Acquisition Corp. / Raptor Co-Issuer LLC 4.875% 11/1/26 (b) | | 677,000 | 654,169 |
| Wynn Resorts Finance LLC / Wynn Resorts Capital Corp. 7.125% 2/15/31 (b)(c) | | 377,000 | 400,123 |
TOTAL GAMING | | | 4,966,852 |
| Healthcare - 5.8% | | | |
| AMN Healthcare 4% 4/15/29 (b)(c) | | 866,000 | 807,814 |
| Bausch + Lomb Corp. 8.375% 10/1/28 (b) | | 539,000 | 566,066 |
| Bausch Health Companies, Inc. 4.875% 6/1/28 (b) | | 1,825,000 | 1,363,275 |
| CHS/Community Health Systems, Inc.: | | | |
| 4.75% 2/15/31 (b) | | 578,000 | 492,991 |
| 10.875% 1/15/32 (b) | | 1,200,000 | 1,299,025 |
| Concentra Escrow Issuer 6.875% 7/15/32 (b)(c) | | 500,000 | 523,046 |
| CTR Partnership LP/CareTrust Capital Corp. 3.875% 6/30/28 (b) | | 545,000 | 512,683 |
| DaVita, Inc.: | | | |
| 3.75% 2/15/31 (b) | | 600,000 | 534,061 |
| 4.625% 6/1/30 (b) | | 4,867,000 | 4,589,091 |
| Encompass Health Corp. 4.75% 2/1/30 (c) | | 500,000 | 484,773 |
| Endo Finance Holdings, Inc. 8.5% 4/15/31 (b)(c) | | 460,000 | 488,419 |
| Jazz Securities DAC 4.375% 1/15/29 (b) | | 1,000,000 | 951,671 |
| LifePoint Health, Inc.: | | | |
| 9.875% 8/15/30 (b) | | 300,000 | 329,004 |
| 11% 10/15/30 (b)(c) | | 800,000 | 901,597 |
| Medline Borrower LP 5.25% 10/1/29 (b) | | 345,000 | 338,837 |
| Medline Borrower LP / Medline Co. 6.25% 4/1/29 (b) | | 1,630,000 | 1,680,245 |
| Organon & Co. / Organon Foreign Debt Co-Issuer BV: | | | |
| 5.125% 4/30/31 (b) | | 594,000 | 556,307 |
| 6.75% 5/15/34 (b)(c) | | 300,000 | 310,900 |
| 7.875% 5/15/34 (b) | | 300,000 | 316,104 |
| Owens & Minor, Inc. 6.625% 4/1/30 (b)(c) | | 195,000 | 188,718 |
| Prime Healthcare Services 9.375% 9/1/29 (b) | | 500,000 | 504,043 |
| Sotera Health Holdings LLC 7.375% 6/1/31 (b) | | 500,000 | 522,919 |
| Star Parent, Inc. 9% 10/1/30 (b) | | 400,000 | 427,011 |
| Tenet Healthcare Corp. 5.125% 11/1/27 | | 99,500 | 98,634 |
| U.S. Acute Care Solutions 9.75% 5/15/29 (b) | | 626,000 | 640,403 |
TOTAL HEALTHCARE | | | 19,427,637 |
| Homebuilders/Real Estate - 5.4% | | | |
| Anywhere Real Estate Group LLC 7% 4/15/30 (b)(c) | | 381,000 | 337,807 |
| Arcosa, Inc.: | | | |
| 4.375% 4/15/29 (b) | | 230,000 | 218,114 |
| 6.875% 8/15/32 (b) | | 1,000,000 | 1,042,434 |
| Ardonagh Finco Ltd. 7.75% 2/15/31 (b) | | 324,000 | 334,477 |
| Brookfield Property REIT, Inc./BPR Nimbus LLC/BPR Cumulus LLC/GGSI Sellco LLC: | | | |
| 4.5% 4/1/27 (b) | | 436,000 | 420,370 |
| 5.75% 5/15/26 (b) | | 832,000 | 829,971 |
| Cushman & Wakefield U.S. Borrower LLC: | | | |
| 6.75% 5/15/28 (b) | | 28,000 | 28,403 |
| 8.875% 9/1/31 (b) | | 535,000 | 579,323 |
| Empire Communities Corp. 9.75% 5/1/29 (b) | | 334,000 | 351,952 |
| Greystar Real Estate Partners 7.75% 9/1/30 (b)(c) | | 130,000 | 138,330 |
| Howard Hughes Corp.: | | | |
| 4.125% 2/1/29 (b) | | 1,300,000 | 1,197,606 |
| 4.375% 2/1/31 (b) | | 550,000 | 492,990 |
| Kennedy-Wilson, Inc.: | | | |
| 4.75% 3/1/29 | | 470,000 | 424,250 |
| 4.75% 2/1/30 | | 306,000 | 270,025 |
| Landsea Homes Corp. 8.875% 4/1/29 (b) | | 981,000 | 1,015,377 |
| LGI Homes, Inc.: | | | |
| 4% 7/15/29 (b)(c) | | 883,000 | 801,704 |
| 8.75% 12/15/28 (b) | | 525,000 | 559,361 |
| MPT Operating Partnership LP/MPT Finance Corp. 3.5% 3/15/31 | | 1,000,000 | 683,053 |
| Panther Escrow Issuer LLC 7.125% 6/1/31 (b) | | 500,000 | 520,806 |
| RHP Hotel Properties LP/RHP Finance Corp.: | | | |
| 6.5% 4/1/32 (b) | | 3,000,000 | 3,090,054 |
| 7.25% 7/15/28 (b) | | 573,000 | 595,849 |
| Service Properties Trust: | | | |
| 4.75% 10/1/26 (c) | | 889,000 | 849,629 |
| 5.25% 2/15/26 | | 181,000 | 176,482 |
| 8.375% 6/15/29 (c) | | 641,000 | 634,880 |
| 8.625% 11/15/31 (b) | | 100,000 | 106,973 |
| Starwood Property Trust, Inc. 4.375% 1/15/27 (b) | | 502,000 | 487,644 |
| Uniti Group LP/Uniti Group Finance, Inc./CSL Capital LLC: | | | |
| 4.75% 4/15/28 (b) | | 550,000 | 483,592 |
| 10.5% 2/15/28 (b) | | 1,323,000 | 1,357,472 |
TOTAL HOMEBUILDERS/REAL ESTATE | | | 18,028,928 |
| Hotels - 1.4% | | | |
| Carnival Holdings (Bermuda) Ltd. 10.375% 5/1/28 (b) | | 75,000 | 81,140 |
| Hilton Grand Vacations Borrower Escrow LLC 6.625% 1/15/32 (b)(c) | | 2,000,000 | 2,024,104 |
| Park Intermediate Holdings LLC / PK Domestic Property LLC / PK Finance Co.-Issuer: | | | |
| 4.875% 5/15/29 (b)(c) | | 1,000,000 | 954,001 |
| 7% 2/1/30 (b) | | 210,000 | 215,255 |
| Travel+Leisure Co.: | | | |
| 4.5% 12/1/29 (b) | | 165,000 | 153,859 |
| 6.625% 7/31/26 (b) | | 370,000 | 376,584 |
| Wyndham Hotels & Resorts, Inc. 4.375% 8/15/28 (b) | | 855,000 | 818,359 |
TOTAL HOTELS | | | 4,623,302 |
| Insurance - 0.7% | | | |
| Acrisure LLC / Acrisure Finance, Inc. 7.5% 11/6/30 (b) | | 1,055,000 | 1,082,854 |
| Alliant Holdings Intermediate LLC/Alliant Holdings Co.-Issuer 7% 1/15/31 (b) | | 725,000 | 749,324 |
| AmWINS Group, Inc. 6.375% 2/15/29 (b)(c) | | 500,000 | 512,661 |
TOTAL INSURANCE | | | 2,344,839 |
| Leisure - 1.2% | | | |
| Carnival Corp.: | | | |
| 4% 8/1/28 (b) | | 1,408,000 | 1,341,220 |
| 7.625% 3/1/26 (b) | | 102,000 | 103,033 |
| NCL Corp. Ltd. 8.125% 1/15/29 (b) | | 80,000 | 85,568 |
| Royal Caribbean Cruises Ltd. 5.5% 8/31/26 (b) | | 1,202,000 | 1,203,703 |
| Six Flags Entertainment Corp. 6.625% 5/1/32 (b)(c) | | 1,000,000 | 1,029,278 |
| Viking Cruises Ltd. 9.125% 7/15/31 (b) | | 300,000 | 329,117 |
TOTAL LEISURE | | | 4,091,919 |
| Metals/Mining - 6.2% | | | |
| Alliance Resource Operating Partners LP / Alliance Resource Finance Corp. 8.625% 6/15/29 (b) | | 500,000 | 525,660 |
| Arsenal AIC Parent LLC 8% 10/1/30 (b) | | 170,000 | 182,775 |
| Cleveland-Cliffs, Inc.: | | | |
| 5.875% 6/1/27 | | 676,000 | 674,646 |
| 7% 3/15/32 (b) | | 295,000 | 296,255 |
| Constellium NV 6.375% 8/15/32 (b) | | 500,000 | 507,501 |
| Eldorado Gold Corp. 6.25% 9/1/29 (b) | | 352,000 | 347,681 |
| First Quantum Minerals Ltd. 9.375% 3/1/29 (b) | | 330,000 | 351,121 |
| FMG Resources August 2006 Pty Ltd.: | | | |
| 4.375% 4/1/31 (b) | | 353,000 | 323,869 |
| 5.875% 4/15/30 (b) | | 7,058,000 | 7,046,819 |
| HudBay Minerals, Inc. 4.5% 4/1/26 (b) | | 282,000 | 278,103 |
| Mineral Resources Ltd.: | | | |
| 8% 11/1/27 (b) | | 1,200,000 | 1,218,871 |
| 8.125% 5/1/27 (b) | | 1,059,000 | 1,068,044 |
| 8.5% 5/1/30 (b) | | 2,706,000 | 2,813,996 |
| 9.25% 10/1/28 (b) | | 4,693,000 | 4,957,900 |
TOTAL METALS/MINING | | | 20,593,241 |
| Paper - 0.5% | | | |
| Ardagh Metal Packaging Finance U.S.A. LLC/Ardagh Metal Packaging Finance PLC 6% 6/15/27 (b) | | 360,000 | 358,946 |
| Clydesdale Acquisition Holdings, Inc. 6.875% 1/15/30 (b) | | 500,000 | 501,843 |
| Louisiana-Pacific Corp. 3.625% 3/15/29 (b)(c) | | 533,000 | 494,996 |
| Mercer International, Inc. 12.875% 10/1/28 (b) | | 200,000 | 208,093 |
TOTAL PAPER | | | 1,563,878 |
| Publishing/Printing - 0.2% | | | |
| Mcgraw-Hill Education, Inc. 7.375% 9/1/31 (b) | | 500,000 | 516,388 |
| Railroad - 0.5% | | | |
| Brightline East LLC 11% 1/31/30 (b) | | 500,000 | 455,978 |
| Genesee & Wyoming, Inc. 6.25% 4/15/32 (b)(c) | | 965,000 | 986,297 |
| Watco Companies LLC / Watco Finance Corp. 7.125% 8/1/32 (b) | | 300,000 | 310,648 |
TOTAL RAILROAD | | | 1,752,923 |
| Restaurants - 0.6% | | | |
| 1011778 BC Unlimited Liability Co./New Red Finance, Inc. 6.125% 6/15/29 (b) | | 2,000,000 | 2,042,550 |
| Services - 6.0% | | | |
| Allied Universal Holdco LLC 7.875% 2/15/31 (b) | | 800,000 | 812,227 |
| Aramark Services, Inc. 5% 4/1/25 (b) | | 298,000 | 297,405 |
| Artera Services LLC 8.5% 2/15/31 (b) | | 300,000 | 300,341 |
| Avis Budget Car Rental LLC/Avis Budget Finance, Inc. 5.75% 7/15/27 (b) | | 418,000 | 407,335 |
| Brand Industrial Services, Inc. 10.375% 8/1/30 (b) | | 400,000 | 435,829 |
| Bread Financial Holdings, Inc. 9.75% 3/15/29 (b) | | 700,000 | 755,105 |
| Herc Holdings, Inc. 6.625% 6/15/29 (b) | | 550,000 | 565,698 |
| Hertz Corp. 12.625% 7/15/29 (b)(c) | | 70,000 | 74,562 |
| Iron Mountain, Inc.: | | | |
| 4.5% 2/15/31 (b) | | 900,000 | 844,859 |
| 4.875% 9/15/27 (b) | | 10,000 | 9,819 |
| 5% 7/15/28 (b)(c) | | 2,489,000 | 2,442,878 |
| 5.25% 7/15/30 (b) | | 1,054,000 | 1,027,382 |
| 7% 2/15/29 (b) | | 10,000 | 10,386 |
| Neptune BidCo U.S., Inc. 9.29% 4/15/29 (b)(c) | | 700,000 | 699,125 |
| NorthRiver Midstream Finance LP 6.75% 7/15/32 (b) | | 1,000,000 | 1,032,498 |
| Ritchie Bros. Holdings, Inc. 7.75% 3/15/31 (b) | | 1,392,000 | 1,479,638 |
| Sabre GLBL, Inc. 8.625% 6/1/27 (b) | | 506,000 | 486,424 |
| Staples, Inc. 10.75% 9/1/29 (b) | | 724,000 | 681,939 |
| The Brink's Co. 6.5% 6/15/29 (b) | | 590,000 | 610,497 |
| The GEO Group, Inc.: | | | |
| 8.625% 4/15/29 | | 1,200,000 | 1,244,847 |
| 10.25% 4/15/31 | | 450,000 | 475,417 |
| TriNet Group, Inc. 3.5% 3/1/29 (b) | | 2,322,000 | 2,148,030 |
| WASH Multifamily Acquisition, Inc. 5.75% 4/15/26 (b) | | 601,000 | 598,239 |
| Williams Scotsman, Inc. 4.625% 8/15/28 (b) | | 2,557,000 | 2,465,644 |
TOTAL SERVICES | | | 19,906,124 |
| Steel - 0.7% | | | |
| ATI, Inc. 7.25% 8/15/30 (c) | | 1,074,000 | 1,140,496 |
| Carpenter Technology Corp. 7.625% 3/15/30 | | 540,000 | 560,433 |
| Infrabuild Australia Pty Ltd. 14.5% 11/15/28 (b) | | 200,000 | 203,000 |
| Vallourec SA 7.5% 4/15/32 (b) | | 295,000 | 310,642 |
TOTAL STEEL | | | 2,214,571 |
| Super Retail - 1.3% | | | |
| Bath & Body Works, Inc.: | | | |
| 6.875% 11/1/35 | | 187,000 | 193,143 |
| 9.375% 7/1/25 (b) | | 408,000 | 420,396 |
| EG Global Finance PLC 12% 11/30/28 (b) | | 300,000 | 327,247 |
| Gap, Inc. 3.625% 10/1/29 (b) | | 597,000 | 534,968 |
| Group 1 Automotive, Inc. 4% 8/15/28 (b) | | 2,289,000 | 2,165,095 |
| QVC, Inc. 4.375% 9/1/28 | | 500,000 | 376,246 |
| Sonic Automotive, Inc. 4.625% 11/15/29 (b) | | 207,000 | 193,447 |
TOTAL SUPER RETAIL | | | 4,210,542 |
| Technology - 3.9% | | | |
| Amentum Escrow Corp. 7.25% 8/1/32 (b) | | 385,000 | 402,555 |
| Clarivate Science Holdings Corp. 4.875% 7/1/29 (b) | | 250,000 | 240,719 |
| Cloud Software Group, Inc.: | | | |
| 6.5% 3/31/29 (b) | | 1,009,000 | 994,616 |
| 8.25% 6/30/32 (b) | | 500,000 | 523,517 |
| CNT PRNT/CDK GLO II/FIN 8% 6/15/29 (b) | | 300,000 | 309,747 |
| Consensus Cloud Solutions, Inc. % (b)(c) | | 141,000 | 139,313 |
| Entegris, Inc. 4.75% 4/15/29 (b) | | 500,000 | 490,656 |
| Gen Digital, Inc.: | | | |
| 5% 4/15/25 (b) | | 193,000 | 192,258 |
| 6.75% 9/30/27 (b) | | 10,000 | 10,242 |
| Iliad Holding SAS 8.5% 4/15/31 (b) | | 1,046,000 | 1,108,412 |
| Insight Enterprises, Inc. 6.625% 5/15/32 (b) | | 250,000 | 258,777 |
| ION Trading Technologies Ltd. 9.5% 5/30/29 (b) | | 300,000 | 318,549 |
| Iron Mountain Information Management Services, Inc. 5% 7/15/32 (b) | | 3,282,000 | 3,123,592 |
| Lightning Power LLC 7.25% 8/15/32 (b) | | 305,000 | 315,156 |
| MicroStrategy, Inc. 6.125% 6/15/28 (b) | | 345,000 | 336,285 |
| NCR Atleos Corp. 9.5% 4/1/29 (b) | | 2,080,000 | 2,291,170 |
| PTC, Inc. 3.625% 2/15/25 (b) | | 440,000 | 436,195 |
| Seagate HDD Cayman 3.125% 7/15/29 | | 203 | 179 |
| Sensata Technologies, Inc. 6.625% 7/15/32 (b)(c) | | 340,000 | 351,804 |
| SS&C Technologies, Inc. 6.5% 6/1/32 (b) | | 1,000,000 | 1,032,198 |
| Xerox Corp. 4.8% 3/1/35 | | 250,000 | 178,506 |
| Xerox Holdings Corp. 5% 8/15/25 (b) | | 36,000 | 35,433 |
TOTAL TECHNOLOGY | | | 13,089,879 |
| Telecommunications - 3.4% | | | |
| C&W Senior Finance Ltd. 6.875% 9/15/27 (b) | | 165,000 | 162,436 |
| Cogent Communications Group, Inc. 7% 6/15/27 (b)(c) | | 2,356,000 | 2,384,470 |
| Consolidated Communications, Inc.: | | | |
| 5% 10/1/28 (b) | | 450,000 | 392,837 |
| 6.5% 10/1/28 (b) | | 18,000 | 16,475 |
| Dycom Industries, Inc. 4.5% 4/15/29 (b) | | 1,125,000 | 1,077,971 |
| Frontier Communications Holdings LLC: | | | |
| 5% 5/1/28 (b) | | 1,216,000 | 1,180,803 |
| 8.75% 5/15/30 (b) | | 583,000 | 614,016 |
| Intelsat Jackson Holdings SA 6.5% 3/15/30 (b) | | 700,000 | 672,139 |
| Level 3 Financing, Inc.: | | | |
| 10.5% 5/15/30 (b)(c) | | 731,000 | 783,245 |
| 11% 11/15/29 (b) | | 98,628 | 108,127 |
| Sabre GLBL, Inc. 9.25% 4/15/25 (b) | | 900 | 883 |
| Telecom Italia Capital SA 7.2% 7/18/36 | | 387,000 | 397,207 |
| ViaSat, Inc.: | | | |
| 5.625% 4/15/27 (b) | | 223,000 | 211,629 |
| 7.5% 5/30/31 (b) | | 200,000 | 152,975 |
| Virgin Media Secured Finance PLC 5.5% 5/15/29 (b) | | 1,550,000 | 1,469,258 |
| VMED O2 UK Financing I PLC 7.75% 4/15/32 (b) | | 1,022,000 | 1,039,017 |
| Windstream Escrow LLC 7.75% 8/15/28 (b) | | 500,000 | 488,053 |
| Zayo Group Holdings, Inc. 4% 3/1/27 (b)(c) | | 400,000 | 349,134 |
TOTAL TELECOMMUNICATIONS | | | 11,500,675 |
| Textiles/Apparel - 0.0% | | | |
| Foot Locker, Inc. 4% 10/1/29 (b) | | 127,000 | 110,559 |
| Transportation Ex Air/Rail - 0.7% | | | |
| RXO, Inc. 7.5% 11/15/27 (b) | | 1,845,000 | 1,912,103 |
| Stena International SA 7.625% 2/15/31 (b) | | 522,000 | 538,919 |
TOTAL TRANSPORTATION EX AIR/RAIL | | | 2,451,022 |
| Utilities - 1.2% | | | |
| Calpine Corp. 5.25% 6/1/26 (b) | | 105,000 | 104,380 |
| NRG Energy, Inc. 3.375% 2/15/29 (b) | | 834,000 | 765,337 |
| PG&E Corp. 5.25% 7/1/30 | | 2,340,000 | 2,291,055 |
| Vistra Operations Co. LLC: | | | |
| 5.625% 2/15/27 (b) | | 901,000 | 899,645 |
| 6.875% 4/15/32 (b) | | 100,000 | 103,869 |
TOTAL UTILITIES | | | 4,164,286 |
| TOTAL NONCONVERTIBLE BONDS (Cost $319,663,527) | | | 327,101,784 |
| | | | |
| Money Market Funds - 6.4% |
| | | Shares | Value ($) |
| Fidelity Cash Central Fund 5.39% (e) | | 3,485,007 | 3,485,704 |
| Fidelity Securities Lending Cash Central Fund 5.39% (e)(f) | | 18,001,967 | 18,003,768 |
| TOTAL MONEY MARKET FUNDS (Cost $21,489,472) | | | 21,489,472 |
| | | | |
| TOTAL INVESTMENT IN SECURITIES - 104.3% (Cost $341,152,999) | 348,591,256 |
NET OTHER ASSETS (LIABILITIES) - (4.3)% | (14,437,427) |
| NET ASSETS - 100.0% | 334,153,829 |
| | |
Legend
| (a) | Amount is stated in United States dollars unless otherwise noted. |
| (b) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $290,500,742 or 86.9% of net assets. |
| (c) | Security or a portion of the security is on loan at period end. |
| (d) | Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
| (e) | Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request. |
| (f) | Investment made with cash collateral received from securities on loan. |
Affiliated Central Funds
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Affiliate | Value, beginning of period ($) | 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% | 6,320,516 | 115,542,697 | 118,377,886 | 210,111 | 377 | - | 3,485,704 | 0.0% |
| Fidelity Securities Lending Cash Central Fund 5.39% | - | 36,841,346 | 18,837,578 | 8,681 | - | - | 18,003,768 | 0.1% |
| Total | 6,320,516 | 152,384,043 | 137,215,464 | 218,792 | 377 | - | 21,489,472 | |
| | | | | | | | | |
Amounts in the dividend income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line item in the Statement of Operations, if applicable.
Amounts in the dividend income column for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Amounts included in the purchases and sales proceeds columns may include in-kind transactions, if applicable.
Investment Valuation
The following is a summary of the inputs used, as of August 31, 2024, 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 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 | 327,101,784 | - | 327,101,784 | - |
|
| Money Market Funds | 21,489,472 | 21,489,472 | - | - |
| Total Investments in Securities: | 348,591,256 | 21,489,472 | 327,101,784 | - |
Fidelity® Enhanced High Yield ETF
Financial Statements
| Statement of Assets and Liabilities |
As of August 31, 2024 |
| Assets | | | | |
| Investment in securities, at value (including securities loaned of $17,329,358) - See accompanying schedule: | | | | |
Unaffiliated issuers (cost $319,663,527) | $ | 327,101,784 | | |
Fidelity Central Funds (cost $21,489,472) | | 21,489,472 | | |
| | | | | |
| | | | | |
| Total Investment in Securities (cost $341,152,999) | | | $ | 348,591,256 |
| Interest receivable | | | | 5,500,673 |
| Distributions receivable from Fidelity Central Funds | | | | 21,069 |
| Other receivables | | | | 200 |
Total assets | | | | 354,113,198 |
| Liabilities | | | | |
| Payable to custodian bank | $ | 398 | | |
| Distributions payable | | 1,813,950 | | |
| Accrued management fee | | 124,372 | | |
| Other payables and accrued expenses | | 16,881 | | |
| Collateral on securities loaned | | 18,003,768 | | |
| Total liabilities | | | | 19,959,369 |
| Net Assets | | | $ | 334,153,829 |
| Net Assets consist of: | | | | |
| Paid in capital | | | $ | 359,788,001 |
| Total accumulated earnings (loss) | | | | (25,634,172) |
| Net Assets | | | $ | 334,153,829 |
Net Asset Value, offering price and redemption price per share ($334,153,829 ÷ 6,850,000 shares) | | | $ | 48.78 |
| Statement of Operations |
| Year ended August 31, 2024 |
| Investment Income | | | | |
| Interest | | | $ | 21,007,724 |
| Income from Fidelity Central Funds (including $8,681 from security lending) | | | | 218,792 |
| Total income | | | | 21,226,516 |
| Expenses | | | | |
| Management fee | $ | 1,322,817 | | |
| Independent trustees' fees and expenses | | 1,349 | | |
| Miscellaneous | | 16,881 | | |
| Total expenses before reductions | | 1,341,047 | | |
| Expense reductions | | (1,296) | | |
| Total expenses after reductions | | | | 1,339,751 |
| Net Investment income (loss) | | | | 19,886,765 |
| Realized and Unrealized Gain (Loss) | | | | |
| Net realized gain (loss) on: | | | | |
| Investment Securities: | | | | |
| Unaffiliated issuers | | (3,606,705) | | |
| Redemptions in-kind | | 388,506 | | |
| Fidelity Central Funds | | 377 | | |
| Total net realized gain (loss) | | | | (3,217,822) |
| Change in net unrealized appreciation (depreciation) on investment securities | | | | 16,281,667 |
| Net gain (loss) | | | | 13,063,845 |
| Net increase (decrease) in net assets resulting from operations | | | $ | 32,950,610 |
| Statement of Changes in Net Assets |
| |
| | Year ended August 31, 2024 | | Year ended August 31, 2023 |
| Increase (Decrease) in Net Assets | | | | |
| Operations | | | | |
| Net investment income (loss) | $ | 19,886,765 | $ | 16,330,455 |
| Net realized gain (loss) | | (3,217,822) | | (17,127,374) |
| Change in net unrealized appreciation (depreciation) | | 16,281,667 | | 18,328,525 |
| Net increase (decrease) in net assets resulting from operations | | 32,950,610 | | 17,531,606 |
| Distributions to shareholders | | (19,768,000) | | (16,489,950) |
| | | | | |
| Share transactions | | | | |
| Proceeds from sales of shares | | 109,808,672 | | 46,271,158 |
| Cost of shares redeemed | | (77,087,375) | | (34,058,789) |
| | | | | |
Net increase (decrease) in net assets resulting from share transactions | | 32,721,297 | | 12,212,369 |
| Total increase (decrease) in net assets | | 45,903,907 | | 13,254,025 |
| | | | | |
| Net Assets | | | | |
| Beginning of period | | 288,249,922 | | 274,995,897 |
| End of period | $ | 334,153,829 | $ | 288,249,922 |
| | | | | |
| Other Information | | | | |
| Shares | | | | |
| Sold | | 2,300,000 | | 1,000,000 |
| Redeemed | | (1,650,000) | | (750,000) |
| Net increase (decrease) | | 650,000 | | 250,000 |
| | | | | |
Financial Highlights
Fidelity® Enhanced High Yield ETF |
| |
| Years ended August 31, | | 2024 | | 2023 | | 2022 | | 2021 | | 2020 |
Selected Per-Share Data | | | | | | | | | | |
| Net asset value, beginning of period | $ | 46.49 | $ | 46.22 | $ | 56.07 | $ | 54.49 | $ | 52.32 |
| Income from Investment Operations | | | | | | | | | | |
Net investment income (loss) A,B | | 3.198 | | 2.781 | | 2.383 | | 2.250 | | 2.518 |
| Net realized and unrealized gain (loss) | | 2.264 | | .297 | | (8.748) | | 2.335 | | 2.323 |
| Total from investment operations | | 5.462 | | 3.078 | | (6.365) | | 4.585 | | 4.841 |
| Distributions from net investment income | | (3.172) | | (2.808) | | (2.355) | | (2.195) | | (2.429) |
| Distributions from net realized gain | | - | | - | | (1.128) | | (.808) | | (.242) |
| Total distributions | | (3.172) | | (2.808) | | (3.483) | | (3.003) | | (2.671) |
| Net asset value, end of period | $ | 48.78 | $ | 46.49 | $ | 46.22 | $ | 56.07 | $ | 54.49 |
Total Return C,D | | | | 6.90% | | (11.85)% | | 8.66% | | 9.61% |
Ratios to Average Net Assets B,E,F | | | | | | | | | | |
| Expenses before reductions | | .46% | | .45% | | .45% | | .45% | | .45% |
| Expenses net of fee waivers, if any | | | | .45% | | .45% | | .45% | | .45% |
| Expenses net of all reductions | | .46% | | .45% | | .45% | | .45% | | .45% |
| Net investment income (loss) | | 6.76% | | 6.02% | | 4.64% | | 4.07% | | 4.84% |
| Supplemental Data | | | | | | | | | | |
| Net assets, end of period (000 omitted) | $ | 334,154 | $ | 288,250 | $ | 274,996 | $ | 277,532 | $ | 114,421 |
Portfolio turnover rate G | | | | 84% H | | 72% H | | 177% H | | 179% H |
ACalculated based on average shares outstanding during the period.
BNet investment income (loss) is affected by the timing of the declaration of dividends by any underlying mutual funds or exchange-traded funds (ETFs). Net investment income (loss) of any mutual funds or ETFs is not included in the Fund's net investment income (loss) ratio.
CTotal returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
DBased on net asset value.
EFees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
FExpense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
GAmount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
HPortfolio turnover rate excludes securities received or delivered in-kind.
Fidelity® Preferred Securities & Income ETF
Schedule of Investments August 31, 2024
Showing Percentage of Net Assets
| Nonconvertible Bonds - 16.9% |
| | | Principal Amount (a) | Value ($) |
| COMMUNICATION SERVICES - 1.4% | | | |
| Media - 0.4% | | | |
| Paramount Global: | | | |
| 6.25% 2/28/57 (b) | | 80,000 | 69,069 |
| 6.375% 3/30/62 (b) | | 125,000 | 114,292 |
| | | | 183,361 |
| Wireless Telecommunication Services - 1.0% | | | |
| Vodafone Group PLC 7% 4/4/79 (b) | | 400,000 | 418,788 |
TOTAL COMMUNICATION SERVICES | | | 602,149 |
| ENERGY - 2.7% | | | |
| Oil, Gas & Consumable Fuels - 2.7% | | | |
| Enbridge, Inc. 8.5% 1/15/84 (b) | | 250,000 | 274,003 |
| Energy Transfer LP 8% 5/15/54 (b) | | 35,000 | 37,238 |
| Enterprise Products Operating LP: | | | |
| CME Term SOFR 3 Month Index + 2.980% 8.3431% 8/16/77 (b)(c) | | 33,000 | 32,583 |
| 5.25% 8/16/77 (b) | | 126,000 | 122,839 |
| 5.375% 2/15/78 (b) | | 67,000 | 62,919 |
| Transcanada Trust: | | | |
| 5.3% 3/15/77 (b) | | 161,000 | 154,074 |
| 5.5% 9/15/79 (b) | | 128,000 | 120,061 |
| 5.6% 3/7/82 (b) | | 200,000 | 190,507 |
| 5.875% 8/15/76 (b) | | 129,000 | 126,881 |
| | | | 1,121,105 |
| FINANCIALS - 9.1% | | | |
| Capital Markets - 0.2% | | | |
| Ares Finance Co. III LLC 4.125% 6/30/51 (b)(d) | | 75,000 | 70,547 |
| Consumer Finance - 0.4% | | | |
| AerCap Ireland Capital Ltd./AerCap Global Aviation Trust 6.95% 3/10/55 (b) | | 150,000 | 154,745 |
| Financial Services - 0.7% | | | |
| Apollo Management Holdings LP 4.95% 1/14/50 (b)(d) | | 324,000 | 321,570 |
| Insurance - 7.8% | | | |
| American International Group, Inc. 5.75% 4/1/48 (b) | | 129,000 | 127,838 |
| Assurant, Inc. 7% 3/27/48 (b) | | 61,000 | 61,992 |
| Liberty Mutual Group, Inc.: | | | |
| 4.125% 12/15/51 (b)(d) | | 150,000 | 140,753 |
| 4.3% 2/1/61 (d) | | 125,000 | 81,845 |
| Meiji Yasuda Life Insurance Co.: | | | |
| 5.1% 4/26/48 (b)(d) | | 200,000 | 198,749 |
| 5.2% 10/20/45 (b)(d) | | 200,000 | 198,710 |
| MetLife, Inc.: | | | |
| 6.4% 12/15/66 (b) | | 319,000 | 335,565 |
| 10.75% 8/1/69 (b) | | 128,000 | 175,629 |
| Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen 5.875% 5/23/42 (b)(d) | | 200,000 | 205,306 |
| Nippon Life Insurance Co.: | | | |
| 2.75% 1/21/51 (b)(d) | | 200,000 | 172,690 |
| 3.4% 1/23/50 (b)(d) | | 100,000 | 91,625 |
| 4.7% 1/20/46 (b)(d) | | 200,000 | 197,979 |
| 6.25% 9/13/53 (b)(d) | | 200,000 | 213,640 |
| PartnerRe Finance B LLC 4.5% 10/1/50 (b) | | 67,000 | 61,238 |
| Prudential Financial, Inc.: | | | |
| 3.7% 10/1/50 (b) | | 200,000 | 179,192 |
| 5.125% 3/1/52 (b) | | 150,000 | 146,152 |
| 6% 9/1/52 (b) | | 200,000 | 205,167 |
| 6.75% 3/1/53 (b) | | 250,000 | 265,678 |
| Sumitomo Life Insurance Co. 4% 9/14/77 (b)(d) | | 270,000 | 260,789 |
| | | | 3,320,537 |
TOTAL FINANCIALS | | | 3,867,399 |
| UTILITIES - 3.7% | | | |
| Electric Utilities - 1.8% | | | |
| Edison International 7.875% 6/15/54 (b) | | 15,000 | 15,740 |
| Emera, Inc. 6.75% 6/15/76 (b) | | 125,000 | 125,410 |
| NextEra Energy Capital Holdings, Inc. 5.65% 5/1/79 (b) | | 104,000 | 100,923 |
| Southern Co.: | | | |
| 3.75% 9/15/51 (b) | | 125,000 | 119,130 |
| 4% 1/15/51 (b) | | 400,000 | 391,130 |
| | | | 752,333 |
| Multi-Utilities - 1.9% | | | |
| CMS Energy Corp.: | | | |
| 3.75% 12/1/50 (b) | | 409,000 | 349,984 |
| 4.75% 6/1/50 (b) | | 300,000 | 282,013 |
| Sempra 4.125% 4/1/52 (b) | | 210,000 | 195,359 |
| | | | 827,356 |
TOTAL UTILITIES | | | 1,579,689 |
| TOTAL NONCONVERTIBLE BONDS (Cost $7,029,040) | | | 7,170,342 |
| | | | |
| U.S. Treasury Obligations - 7.4% |
| | | Principal Amount (a) | Value ($) |
| U.S. Treasury Bonds: | | | |
| 3.875% 2/15/43 | | 675,000 | 638,798 |
| 3.875% 5/15/43 | | 500,000 | 471,953 |
| 4.25% 2/15/54 | | 2,045,000 | 2,052,985 |
| TOTAL U.S. TREASURY OBLIGATIONS (Cost $3,105,121) | | | 3,163,736 |
| | | | |
| Preferred Stocks - 24.9% |
| | | Shares | Value ($) |
| Convertible Preferred Stocks - 2.1% | | | |
| FINANCIALS - 2.1% | | | |
| Banks - 2.1% | | | |
| Wells Fargo & Co. 7.50% | | 750 | 918,838 |
| Nonconvertible Preferred Stocks - 22.8% | | | |
| COMMUNICATION SERVICES - 2.3% | | | |
| Diversified Telecommunication Services - 1.2% | | | |
| AT&T, Inc.: | | | |
| 4.75% | | 21,000 | 436,800 |
| 5.35% | | 3,500 | 83,790 |
| | | | 520,590 |
| Wireless Telecommunication Services - 1.1% | | | |
| Telephone & Data Systems, Inc.: | | | |
| 6.00% | | 3,500 | 65,275 |
| 6.625% | | 1,500 | 31,350 |
| U.S. Cellular Corp. | | 3,500 | 73,570 |
| U.S. Cellular Corp.: | | | |
| 5.50% | | 3,500 | 73,675 |
| 6.25% | | 8,500 | 192,015 |
| | | | 435,885 |
TOTAL COMMUNICATION SERVICES | | | 956,475 |
| | | | |
| FINANCIALS - 15.5% | | | |
| Banks - 5.4% | | | |
| Bank of America Corp.: | | | |
| 4.25% | | 5,500 | 108,735 |
| 4.375% | | 19,000 | 384,560 |
| Cadence Bank 5.50% | | 2,000 | 42,500 |
| Citizens Financial Group, Inc. Series E, 5.00% | | 2,000 | 42,880 |
| Fifth Third Bancorp Series K 4.95% | | 800 | 16,912 |
| JPMorgan Chase & Co.: | | | |
| 4.55% | | 22,900 | 493,724 |
| Series MM, 4.20% | | 32,600 | 661,454 |
| KeyCorp: | | | |
| 6.125%(b) | | 3,000 | 74,430 |
| 6.20%(b) | | 2,000 | 48,600 |
| Regions Financial Corp.: | | | |
| 4.45% | | 500 | 9,265 |
| 5.75%(b) | | 3,000 | 71,625 |
| U.S. Bancorp Series M, 4.00% | | 2,000 | 37,380 |
| Webster Financial Corp. Series F, 5.25% | | 750 | 15,863 |
| Wells Fargo & Co. 4.70% | | 9,400 | 197,588 |
| Western Alliance Bancorp. (b) | | 1,500 | 30,015 |
| Wintrust Financial Corp. 6.50% (b) | | 2,000 | 49,700 |
| | | | 2,285,231 |
| Capital Markets - 5.2% | | | |
| Affiliated Managers Group, Inc. 4.75% | | 3,000 | 58,770 |
| Brookfield Oaktree Holdings Ll: | | | |
| 6.55% | | 7,000 | 157,360 |
| Series A, 6.625% | | 7,000 | 162,400 |
| Charles Schwab Corp. 4.45% | | 4,500 | 96,075 |
| Morgan Stanley: | | | |
| 6.625% | | 33,500 | 896,125 |
| Series K, 5.85%(b) | | 16,000 | 396,000 |
| Series O, 4.50% | | 4,300 | 83,678 |
| Northern Trust Corp. Series E, 4.70% | | 1,500 | 32,685 |
| SCE Trust III adj. rate (b)(c) | | 1,550 | 39,525 |
| State Street Corp. Series G, 5.35% (b) | | 1,000 | 24,740 |
| Stifel Financial Corp. Series D, 4.50% | | 13,000 | 249,600 |
| | | | 2,196,958 |
| Consumer Finance - 0.1% | | | |
| Navient Corp. 6.00% | | 1,500 | 29,610 |
| Financial Services - 0.8% | | | |
| Carlyle Finance LLC 4.625% | | 2,500 | 49,375 |
| Equitable Holdings, Inc.: | | | |
| 4.30% | | 1,000 | 19,800 |
| Series A 5.25% | | 3,000 | 68,790 |
| KKR Group Finance Co. IX LLC 4.625% | | 5,000 | 102,300 |
| Voya Financial, Inc. Series B, 5.35% (b) | | 5,000 | 128,600 |
| | | | 368,865 |
| Insurance - 4.0% | | | |
| Aegon Funding Co. LLC 5.10% | | 3,950 | 86,979 |
| Allstate Corp.: | | | |
| 5.10% | | 10,000 | 234,200 |
| Series I, 4.75% | | 2,000 | 44,300 |
| American Financial Group, Inc. 4.50% | | 6,000 | 122,040 |
| Arch Capital Group Ltd.: | | | |
| 5.45% | | 2,000 | 46,400 |
| Series G, 4.55% | | 2,250 | 45,405 |
| Assurant, Inc. 5.25% | | 2,500 | 54,900 |
| Athene Holding Ltd.: | | | |
| 7.25%(b) | | 8,800 | 222,024 |
| Series A, 6.35%(b) | | 2,500 | 62,675 |
| Series D, 4.875% | | 4,000 | 76,640 |
| Brighthouse Financial, Inc. | | 4,000 | 75,880 |
| Brighthouse Financial, Inc.: | | | |
| Series A, 6.60% | | 2,000 | 48,360 |
| Series B, 6.75% | | 2,000 | 50,300 |
| Series D, 0.00% | | 4,000 | 66,960 |
| Hartford Financial Services Group, Inc. Series G, 6.00% | | 3,800 | 94,468 |
| Prudential Financial, Inc. 5.625% | | 1,500 | 37,065 |
| Reinsurance Group of America, Inc. 7.125% (b) | | 4,000 | 103,920 |
| RenaissanceRe Holdings Ltd. Series G, 4.20% | | 1,550 | 28,210 |
| Unum Group 6.25% | | 3,500 | 87,010 |
| W.R. Berkley Corp. 4.25% | | 5,000 | 100,550 |
| | | | 1,688,286 |
TOTAL FINANCIALS | | | 6,568,950 |
| | | | |
| INDUSTRIALS - 1.3% | | | |
| Trading Companies & Distributors - 1.3% | | | |
| FTAI Aviation Ltd.: | | | |
| 8.00%(b) | | 2,000 | 50,960 |
| 8.25%(b) | | 2,000 | 51,100 |
| 8.25%(b) | | 8,000 | 206,000 |
| WESCO International, Inc. (b) | | 9,000 | 235,710 |
| | | | 543,770 |
| REAL ESTATE - 1.8% | | | |
| Equity Real Estate Investment Trusts (REITs) - 1.8% | | | |
| American Homes 4 Rent 6.25% | | 1,000 | 24,680 |
| Digital Realty Trust, Inc.: | | | |
| 5.25% | | 1,750 | 41,073 |
| Series L, 5.20% | | 10,000 | 231,500 |
| Public Storage Operating Co.: | | | |
| 4.00% | | 20,000 | 375,400 |
| Series H, 5.60% | | 1,500 | 37,440 |
| Series I, 4.875% | | 1,500 | 34,140 |
| SITE Centers Corp. 6.375% | | 1,000 | 23,565 |
| Summit Hotel Properties, Inc. Series F, 5.875% | | 775 | 16,027 |
| | | | 783,825 |
| UTILITIES - 1.9% | | | |
| Electric Utilities - 1.2% | | | |
| Entergy Louisiana LLC 4.875% | | 1,000 | 22,460 |
| SCE Trust V 5.45% (b) | | 1,550 | 38,084 |
| SCE Trust VII: | | | |
| 6.95% | | 6,000 | 156,420 |
| 7.75% | | 5,000 | 131,950 |
| Southern Co.: | | | |
| 4.20% | | 3,500 | 73,045 |
| Series A, 4.95% | | 5,000 | 115,400 |
| | | | 537,359 |
| Independent Power and Renewable Electricity Producers - 0.1% | | | |
| Brookfield Renewable Partners LP 5.25% | | 2,395 | 48,403 |
| Multi-Utilities - 0.6% | | | |
| Algonquin Power & Utilities Corp. Series A, adj. rate (b)(c) | | 3,000 | 76,590 |
| Brookfield Infrastructure Partners LP: | | | |
| 5.125% | | 825 | 15,791 |
| Class A 5.00% | | 825 | 14,685 |
| DTE Energy Co.: | | | |
| 4.375% | | 2,825 | 57,602 |
| 4.375% | | 1,000 | 20,470 |
| SCE Trust VI 5.00% | | 2,375 | 47,856 |
| | | | 232,994 |
TOTAL UTILITIES | | | 818,756 |
| | | | |
| TOTAL NONCONVERTIBLE PREFERRED STOCKS | | | 9,671,776 |
| TOTAL PREFERRED STOCKS (Cost $10,409,490) | | | 10,590,614 |
| | | | |
| Preferred Securities - 48.4% |
| | | Principal Amount (a) | Value ($) |
| CONSUMER DISCRETIONARY - 0.6% | | | |
| Automobiles - 0.6% | | | |
| General Motors Financial Co., Inc. 5.7% (b)(e) | | 252,000 | 247,617 |
| ENERGY - 8.4% | | | |
| Oil, Gas & Consumable Fuels - 8.4% | | | |
| BP Capital Markets PLC: | | | |
| 4.375% (b)(e) | | 125,000 | 125,391 |
| 4.875% (b)(e) | | 525,000 | 519,237 |
| 6.45% (b)(e) | | 215,000 | 230,601 |
| Enbridge, Inc.: | | | |
| 5.5% 7/15/77 (b) | | 126,000 | 122,317 |
| 5.75% 7/15/80 (b) | | 126,000 | 121,408 |
| 6% 1/15/77 (b) | | 68,000 | 66,980 |
| 6.25% 3/1/78 (b) | | 123,000 | 124,249 |
| 8.25% 1/15/84 (b) | | 100,000 | 105,704 |
| Energy Transfer LP: | | | |
| 6.625% (b)(e) | | 1,275,000 | 1,243,940 |
| 6.75% (b)(e) | | 270,000 | 273,944 |
| 7.125% (b)(e) | | 500,000 | 510,638 |
| EnLink Midstream Partners LP CME Term SOFR 3 Month Index + 4.370% 9.7156% (b)(c)(e) | | 30,000 | 30,553 |
| Plains All American Pipeline LP CME Term SOFR 3 Month Index + 4.110% 9.4897% (b)(c)(e) | | 100,000 | 99,948 |
| | | | 3,574,910 |
| FINANCIALS - 31.8% | | | |
| Banks - 16.6% | | | |
| Bank of America Corp.: | | | |
| 5.875% (b)(e) | | 1,073,000 | 1,094,685 |
| 6.1% (b)(e) | | 200,000 | 205,269 |
| 6.125% (b)(e) | | 100,000 | 101,571 |
| Citigroup, Inc.: | | | |
| 3.875% (b)(e) | | 400,000 | 384,915 |
| 4.15% (b)(e) | | 89,000 | 84,248 |
| 5.95% (b)(e) | | 393,000 | 399,712 |
| 7% (b)(e) | | 270,000 | 283,853 |
| 7.125% (b)(e) | | 220,000 | 229,167 |
| Fifth Third Bancorp 4.5% (b)(e) | | 50,000 | 49,379 |
| Huntington Bancshares, Inc. 5.625% (b)(e) | | 226,000 | 225,413 |
| JPMorgan Chase & Co.: | | | |
| 4% (b)(e) | | 130,000 | 129,886 |
| 4.6% (b)(e) | | 300,000 | 299,574 |
| 6.1% (b)(e) | | 321,000 | 329,131 |
| 6.875% (b)(e) | | 145,000 | 156,173 |
| KeyCorp 5% (b)(e) | | 100,000 | 96,168 |
| M&T Bank Corp. 5.125% (b)(e) | | 50,000 | 49,489 |
| PNC Financial Services Group, Inc.: | | | |
| 3.4% (b)(e) | | 195,000 | 173,250 |
| 5% (b)(e) | | 542,000 | 540,799 |
| 6.25% (b)(e) | | 160,000 | 161,364 |
| Regions Financial Corp. 5.75% 12/31/99 (b) | | 75,000 | 75,511 |
| Truist Financial Corp.: | | | |
| 4.95% (b)(e) | | 135,000 | 134,619 |
| 5.1% (b)(e) | | 403,000 | 401,441 |
| 5.125% (b)(e) | | 60,000 | 58,501 |
| U.S. Bancorp: | | | |
| 3.7% (b)(e) | | 400,000 | 355,543 |
| 5.3% (b)(e) | | 115,000 | 114,552 |
| Wells Fargo & Co.: | | | |
| 3.9% (b)(e) | | 876,000 | 859,010 |
| 7.625% (b)(e) | | 75,000 | 81,822 |
| | | | 7,075,045 |
| Capital Markets - 10.0% | | | |
| Bank of New York Mellon Corp.: | | | |
| 3.7% (b)(e) | | 830,000 | 804,967 |
| 3.75% (b)(e) | | 96,000 | 89,288 |
| 4.625% (b)(e) | | 200,000 | 199,123 |
| 4.7% (b)(e) | | 65,000 | 65,441 |
| Charles Schwab Corp.: | | | |
| 4% (b)(e) | | 831,000 | 731,376 |
| 4% (b)(e) | | 200,000 | 190,092 |
| 5% (b)(e) | | 100,000 | 97,612 |
| Goldman Sachs Group, Inc.: | | | |
| 4.125% (b)(e) | | 324,000 | 311,313 |
| 4.4% (b)(e) | | 500,000 | 493,927 |
| 5.3% (b)(e) | | 79,000 | 80,270 |
| 7.5% (b)(e) | | 160,000 | 172,134 |
| Morgan Stanley 5.875% (b)(e) | | 585,000 | 595,766 |
| Northern Trust Corp. 4.6% (b)(e) | | 155,000 | 154,051 |
| State Street Corp. CME Term SOFR 3 Month Index + 2.800% 8.1398% (b)(c)(e) | | 248,000 | 252,271 |
| | | | 4,237,631 |
| Consumer Finance - 3.4% | | | |
| Ally Financial, Inc.: | | | |
| 4.7% (b)(e) | | 470,000 | 428,161 |
| 4.7% (b)(e) | | 220,000 | 183,637 |
| American Express Co. 3.55% (b)(e) | | 217,000 | 204,745 |
| Capital One Financial Corp. 3.95% (b)(e) | | 560,000 | 524,177 |
| Discover Financial Services 5.5% (b)(e) | | 100,000 | 95,324 |
| | | | 1,436,044 |
| Financial Services - 0.2% | | | |
| Equitable Holdings, Inc. 4.95% (b)(e) | | 75,000 | 74,610 |
| Insurance - 1.6% | | | |
| Dai-Ichi Life Insurance Co. Ltd. 4% (b)(d)(e) | | 200,000 | 195,411 |
| Markel Group, Inc. 6% (b)(e) | | 200,000 | 202,305 |
| MetLife, Inc. 3.85% (b)(e) | | 275,000 | 273,915 |
| SBL Holdings, Inc. 6.5% (b)(d)(e) | | 34,000 | 29,154 |
| | | | 700,785 |
TOTAL FINANCIALS | | | 13,524,115 |
| INDUSTRIALS - 2.4% | | | |
| Trading Companies & Distributors - 2.4% | | | |
| AerCap Holdings NV 5.875% 10/10/79 (b) | | 50,000 | 51,089 |
| Air Lease Corp.: | | | |
| 4.125% (b)(e) | | 261,000 | 240,287 |
| 4.65% (b)(e) | | 300,000 | 292,122 |
| Aircastle Ltd. 5.25% (b)(d)(e) | | 416,000 | 418,812 |
| | | | 1,002,310 |
| UTILITIES - 5.2% | | | |
| Electric Utilities - 2.9% | | | |
| Duke Energy Corp. 4.875% (b)(e) | | 325,000 | 331,426 |
| Edison International: | | | |
| 5% (b)(e) | | 324,000 | 320,904 |
| 5.375% (b)(e) | | 366,000 | 367,654 |
| Electricite de France SA 9.125% (b)(d)(e) | | 200,000 | 229,864 |
| | | | 1,249,848 |
| Independent Power and Renewable Electricity Producers - 1.4% | | | |
| Vistra Corp.: | | | |
| 7% (b)(d)(e) | | 470,000 | 481,868 |
| 8% (b)(d)(e) | | 100,000 | 106,451 |
| | | | 588,319 |
| Multi-Utilities - 0.9% | | | |
| Dominion Energy, Inc. 4.35% (b)(e) | | 225,000 | 218,746 |
| Sempra 4.875% (b)(e) | | 170,000 | 169,685 |
| | | | 388,431 |
TOTAL UTILITIES | | | 2,226,598 |
| TOTAL PREFERRED SECURITIES (Cost $20,159,175) | | | 20,575,550 |
| | | | |
| Money Market Funds - 0.6% |
| | | Shares | Value ($) |
Fidelity Cash Central Fund 5.39% (f) (Cost $271,437) | | 271,383 | 271,437 |
| | | | |
| TOTAL INVESTMENT IN SECURITIES - 98.2% (Cost $40,974,263) | 41,771,679 |
NET OTHER ASSETS (LIABILITIES) - 1.8% | 751,724 |
| NET ASSETS - 100.0% | 42,523,403 |
| | |
Legend
| (a) | Amount is stated in United States dollars unless otherwise noted. |
| (b) | Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
| (c) | Coupon is indexed to a floating interest rate which may be multiplied by a specified factor and/or subject to caps or floors. |
| (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 $3,615,763 or 8.5% of net assets. |
| (e) | Security is perpetual in nature with no stated maturity date. |
| (f) | Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request. |
Affiliated Central Funds
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Affiliate | Value, beginning of period ($) | 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% | 325,515 | 9,339,644 | 9,393,724 | 39,064 | 2 | - | 271,437 | 0.0% |
| Total | 325,515 | 9,339,644 | 9,393,724 | 39,064 | 2 | - | 271,437 | |
| | | | | | | | | |
Amounts in the dividend income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line item in the Statement of Operations, if applicable.
Amounts included in the purchases and sales proceeds columns may include in-kind transactions, if applicable.
Investment Valuation
The following is a summary of the inputs used, as of August 31, 2024, 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 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: | | | | |
|
| Equities: | | | | |
Communication Services | 956,475 | 956,475 | - | - |
Financials | 7,487,788 | 6,346,926 | 1,140,862 | - |
Industrials | 543,770 | 543,770 | - | - |
Real Estate | 783,825 | 783,825 | - | - |
Utilities | 818,756 | 818,756 | - | - |
|
| Corporate Bonds | 7,170,342 | - | 7,170,342 | - |
|
| U.S. Government and Government Agency Obligations | 3,163,736 | - | 3,163,736 | - |
|
| Preferred Securities | 20,575,550 | - | 20,575,550 | - |
|
| Money Market Funds | 271,437 | 271,437 | - | - |
| Total Investments in Securities: | 41,771,679 | 9,721,189 | 32,050,490 | - |
Fidelity® Preferred Securities & Income ETF
Financial Statements
| Statement of Assets and Liabilities |
As of August 31, 2024 |
| Assets | | | | |
| Investment in securities, at value - See accompanying schedule: | | | | |
Unaffiliated issuers (cost $40,702,826) | $ | 41,500,242 | | |
Fidelity Central Funds (cost $271,437) | | 271,437 | | |
| | | | | |
| | | | | |
| Total Investment in Securities (cost $40,974,263) | | | $ | 41,771,679 |
| Cash | | | | 6,620 |
| Receivable for fund shares sold | | | | 1,094,190 |
| Dividends receivable | | | | 42,389 |
| Interest receivable | | | | 121,708 |
| Distributions receivable from Fidelity Central Funds | | | | 6,099 |
Total assets | | | | 43,042,685 |
| Liabilities | | | | |
| Payable for investments purchased | $ | 329,363 | | |
| Distributions payable | | 167,200 | | |
| Accrued management fee | | 19,975 | | |
| Other payables and accrued expenses | | 2,744 | | |
| Total liabilities | | | | 519,282 |
| Net Assets | | | $ | 42,523,403 |
| Net Assets consist of: | | | | |
| Paid in capital | | | $ | 46,638,910 |
| Total accumulated earnings (loss) | | | | (4,115,507) |
| Net Assets | | | $ | 42,523,403 |
Net Asset Value, offering price and redemption price per share ($42,523,403 ÷ 1,950,000 shares) | | | $ | 21.81 |
| Statement of Operations |
| Year ended August 31, 2024 |
| Investment Income | | | | |
| Dividends | | | $ | 1,480,492 |
| Interest | | | | 410,303 |
| Income from Fidelity Central Funds | | | | 39,064 |
| Total income | | | | 1,929,859 |
| Expenses | | | | |
| Management fee | $ | 205,063 | | |
| Independent trustees' fees and expenses | | 157 | | |
| Miscellaneous | | 2,744 | | |
| Total expenses before reductions | | 207,964 | | |
| Expense reductions | | (519) | | |
| Total expenses after reductions | | | | 207,445 |
| Net Investment income (loss) | | | | 1,722,414 |
| Realized and Unrealized Gain (Loss) | | | | |
| Net realized gain (loss) on: | | | | |
| Investment Securities: | | | | |
| Unaffiliated issuers | | (204,024) | | |
| Fidelity Central Funds | | 2 | | |
| Total net realized gain (loss) | | | | (204,022) |
| Change in net unrealized appreciation (depreciation) on investment securities | | | | 3,169,001 |
| Net gain (loss) | | | | 2,964,979 |
| Net increase (decrease) in net assets resulting from operations | | | $ | 4,687,393 |
| Statement of Changes in Net Assets |
| |
| | Year ended August 31, 2024 | | Year ended August 31, 2023 |
| Increase (Decrease) in Net Assets | | | | |
| Operations | | | | |
| Net investment income (loss) | $ | 1,722,414 | $ | 1,456,762 |
| Net realized gain (loss) | | (204,022) | | (3,256,717) |
| Change in net unrealized appreciation (depreciation) | | 3,169,001 | | 2,451,438 |
| Net increase (decrease) in net assets resulting from operations | | 4,687,393 | | 651,483 |
| Distributions to shareholders | | (1,751,050) | | (1,416,301) |
| Distributions to shareholders from tax return of capital | | - | | (195,299) |
| | | | | |
| Total Distributions | | (1,751,050) | | (1,611,600) |
| Share transactions | | | | |
| Proceeds from sales of shares | | 7,491,822 | | 1,002,305 |
| Cost of shares redeemed | | - | | (1,015,599) |
| | | | | |
Net increase (decrease) in net assets resulting from share transactions | | 7,491,822 | | (13,294) |
| Total increase (decrease) in net assets | | 10,428,165 | | (973,411) |
| | | | | |
| Net Assets | | | | |
| Beginning of period | | 32,095,238 | | 33,068,649 |
| End of period | $ | 42,523,403 | $ | 32,095,238 |
| | | | | |
| Other Information | | | | |
| Shares | | | | |
| Sold | | 350,000 | | 50,000 |
| Redeemed | | - | | (50,000) |
| Net increase (decrease) | | 350,000 | | - |
| | | | | |
Financial Highlights
Fidelity® Preferred Securities & Income ETF |
| |
| Years ended August 31, | | 2024 | | 2023 | | 2022 | | 2021 A |
Selected Per-Share Data | | | | | | | | |
| Net asset value, beginning of period | $ | 20.06 | $ | 20.67 | $ | 25.20 | $ | 25.00 |
| Income from Investment Operations | | | | | | | | |
Net investment income (loss) B,C | | 1.034 | | .937 | | .886 | | .170 |
| Net realized and unrealized gain (loss) | | 1.765 | | (.510) | | (4.485) | | .187 |
| Total from investment operations | | 2.799 | | .427 | | (3.599) | | .357 |
| Distributions from net investment income | | (1.049) | | (.856) | | (.931) | | (.157) |
| Distributions from tax return of capital | | - | | (.181) | | - | | - |
| Total distributions | | (1.049) | | (1.037) | | (.931) | | (.157) |
| Net asset value, end of period | $ | 21.81 | $ | 20.06 | $ | 20.67 | $ | 25.20 |
Total Return D,E | | | | 2.19% | | (14.50)% | | 1.44% |
Ratios to Average Net Assets C,F,G | | | | | | | | |
| Expenses before reductions | | .60% | | .59% | | .59% | | .59% H |
| Expenses net of fee waivers, if any | | | | .59% | | .59% | | .59% H |
| Expenses net of all reductions | | .60% | | .59% | | .59% | | .59% H |
| Net investment income (loss) | | 4.95% | | 4.65% | | 3.98% | | 3.16% H |
| Supplemental Data | | | | | | | | |
| Net assets, end of period (000 omitted) | $ | 42,523 | $ | 32,095 | $ | 33,069 | $ | 6,300 |
Portfolio turnover rate I | | | | 50% | | 21% | | 0% |
AFor the period June 15, 2021 (commencement of operations) through August 31, 2021.
BCalculated based on average shares outstanding during the period.
CNet investment income (loss) is affected by the timing of the declaration of dividends by any underlying mutual funds or exchange-traded funds (ETFs). Net investment income (loss) of any mutual funds or ETFs is not included in the Fund's net investment income (loss) ratio.
DTotal returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
EBased on net asset value.
FFees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
GExpense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
HAnnualized.
IAmount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
Notes to Financial Statements
For the period ended August 31, 2024
1. Organization.
Fidelity Enhanced High Yield ETF (formerly Fidelity High Yield Factor ETF) and Fidelity Preferred Securities & Income ETF (the Funds) are exchange-traded funds of Fidelity Covington Trust (the Trust) and are authorized to issue an unlimited number of shares. Fidelity Preferred Securities & Income ETF is a non-diversified exchange-traded fund. 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.
During September 2024 the Board approved to change the name of Fidelity High Yield Factor ETF to Fidelity Enhanced High Yield ETF effective October 10, 2024.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing 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 investing fund. These strategies are consistent with the investment objectives of the investing 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 investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense RatioA |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% |
A Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds, which are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
Each Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. 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. Each Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of each Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has designated each 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, each 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 each Fund's fair valuation practices and maintains the fair valuation policies and procedures. Each Fund's investment adviser reports to the Board information regarding the fair valuation process and related material matters.
Each 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 - 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 each 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 services or from brokers who make markets in such securities. Corporate bonds and preferred securities are valued by pricing services who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing services. For foreign debt securities, when significant market or security specific events arise, valuations may be determined in good faith in accordance with procedures adopted by the Board. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances. The Fund invests a significant portion of its assets in below investment grade securities. The value of these securities can be more volatile due to changes in the credit quality of the issuer and is sensitive to changes in economic, market and regulatory conditions.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing service on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, ETFs and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 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.
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 August 31, 2024 is included at the end of each Fund's Schedule of Investments.
Investment Transactions and Income. For financial reporting purposes and for processing shareholder transactions, the Funds' investment holdings and NAV include trades executed through the end of the last business day of the period and prior business day, respectively. The NAV per share for processing shareholder transactions is calculated as of the close of business (normally 4:00 p.m. Eastern time) of the New York Stock Exchange, Archipelago Exchange (NYSE Arca) for Fidelity High Yield Factor ETF, and of the Cboe BZX Exchange, Inc. (CboeBZX) for Fidelity Preferred Securities & Income ETF. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Funds are informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Funds represent a return of capital or capital gain. The Funds determine the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Interest income is accrued as earned and includes coupon interest and amortization of premium and accretion of discount on debt securities as applicable. 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. Realized gain or loss resulting from in-kind redemptions is not taxable to the Funds and is not distributed to shareholders of the Funds.
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. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. 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, each 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 U.S. Federal income taxes is required. As of August 31, 2024, each Fund did not have any unrecognized tax benefits in the financial statements; nor is each Fund aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Each Fund files a U.S. federal tax return, in addition to state and local tax returns as required. Each 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. Realized gain or loss resulting from in-kind redemptions is not taxable to the Funds and is not distributed to shareholders of the Funds.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
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. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to passive foreign investment companies (PFIC), prior period premium and discount on debt securities. equity-debt classifications, redemptions in kind, partnerships, capital loss carryforwards and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows for each Fund:
| | Tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized depreciation ($) | Net unrealized appreciation (depreciation)($) |
| Fidelity Enhanced High Yield ETF | 341,104,612 | 9,932,868 | (2,446,224) | 7,486,644 |
Fidelity Preferred Securities & Income ETF | 40,986,633 | 1,901,410 | (1,116,364) | 785,046 |
The tax-based components of distributable earnings as of period end were as follows for each Fund:
| | Undistributed ordinary income ($) | Capital loss carryforward ($) | Net unrealized appreciation (depreciation) on securities and other investments ($) |
| Fidelity Enhanced High Yield ETF | 58,252 | (33,179,068) | 7,486,644 |
Fidelity Preferred Securities & Income ETF | 0 | (4,725,884) | 785,046 |
Capital loss carryforwards are only available to offset future capital gains of the Funds to the extent provided by regulations and may be limited. The capital loss carryforward information presented below, including any applicable limitation, is estimated as of fiscal period end and is subject to adjustment.
| | Short-term ($) | Long-term ($) | Total capital loss carryforward ($) |
| Fidelity Enhanced High Yield ETF | (12,489,183) | (20,689,885) | (33,179,068) |
Fidelity Preferred Securities & Income ETF | (1,960,101) | (2,765,783) | (4,725,884) |
The tax character of distributions paid was as follows:
| August 31, 2024 | |
| | Ordinary Income ($) |
| Fidelity Enhanced High Yield ETF | 19,768,000 |
Fidelity Preferred Securities & Income ETF | 1,751,050 |
| August 31, 2023 | | | |
| | Ordinary Income ($) | Tax Return of Capital ($) | Total ($) |
| Fidelity Enhanced High Yield ETF | 16,489,950 | - | 16,489,950 |
Fidelity Preferred Securities & Income ETF | 1,416,301 | 195,299 | 1,611,600 |
Restricted Securities (including Private Placements). Funds 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 held at period end is included at the end of the Schedule of Investments, if applicable.
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, U.S. government securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| Fidelity Enhanced High Yield ETF | 141,600,007 | 143,144,164 |
| Fidelity Preferred Securities & Income ETF | 12,384,021 | 8,645,899 |
Securities received and delivered in-kind through subscriptions and redemptions are noted in the table below.
| | In-Kind Subscriptions ($) | In-Kind Redemptions ($) |
| Fidelity Enhanced High Yield ETF | 106,926,224 | 75,051,803 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) provides the Funds with investment management related services for which the Funds pay a monthly management fee that is based on an annual rate of each Fund's average net assets as noted in the table below. Under the management contract, the investment adviser pays all other expenses, except the compensation of the independent Trustees and certain miscellaneous expenses such as proxy and shareholder meeting expenses.
| | Fee Rate |
| Fidelity Enhanced High Yield ETF | .45% |
| Fidelity Preferred Securities & Income ETF | .59% |
During September 2024, the Board approved a change in the management fee rate for Fidelity Enhanced High Yield ETF to .35% effective October 1, 2024.
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount ($) |
| Fidelity Preferred Securities & Income ETF | 153 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note. During the period, there were no interfund trades.
Sub-Advisory Arrangements. Effective March 1, 2024, each Fund's sub-advisory agreements with FMR Investment Management (UK) Limited, Fidelity Management & Research (Hong Kong) Limited, and Fidelity Management & Research (Japan) Limited were amended to provide that the investment adviser pays each sub-adviser monthly fees equal to 110% of the sub-adviser's costs for providing sub-advisory services.
6. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a 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 a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS ($) | Security Lending Income From Securities Loaned to NFS ($) | Value of Securities Loaned to NFS at Period End ($) |
| Fidelity Enhanced High Yield ETF | 903 | - | - |
7. Expense Reductions.
Through arrangements with each applicable Fund's custodian, credits realized as a result of certain uninvested cash balances were used to reduce each applicable Fund's expenses. All of the applicable expense reductions are noted in the table below.
| | Custodian credits ($) |
| Fidelity Enhanced High Yield ETF | 1,296 |
Fidelity Preferred Securities & Income ETF | 519 |
8. Share Transactions.
Funds issue and redeem shares at NAV only with certain authorized participants in large increments known as Creation Units. Purchases of Creation Units are made by tendering a basket of designated securities and/or cash to a fund and redemption proceeds are paid with a basket of securities from a fund's portfolio with a balancing cash component to equate the market value of the basket of securities delivered or redeemed to the NAV per Creation Unit on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery. A fund's shares are available in smaller increments to investors in the secondary market at market prices and may be subject to commissions. Authorized participants pay a transaction fee to the shareholder servicing agent when purchasing and redeeming Creation Units of a fund. The transaction fee is used to offset the costs associated with the issuance and redemption of Creation Units.
9. Other.
A 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, a fund may also enter into contracts that provide general indemnifications. A fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against a fund. The risk of material loss from such claims is considered remote.
10. Risk and Uncertainties.
Many factors affect a fund's performance. Developments that disrupt global economies and financial markets, such as pandemics, epidemics, outbreaks of infectious diseases, war, terrorism, and environmental disasters, may significantly affect a fund's investment performance. The effects of these developments to a fund will be impacted by the types of securities in which a fund invests, the financial condition, industry, economic sector, and geographic location of an issuer, and a fund's level of investment in the securities of that issuer. Significant concentrations in security types, issuers, industries, sectors, and geographic locations may magnify the factors that affect a fund's performance.
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Fidelity Covington Trust and Shareholders of Fidelity Enhanced High Yield ETF and Fidelity Preferred Securities & Income ETF
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Fidelity Enhanced High Yield ETF and Fidelity Preferred Securities & Income ETF (two of the funds constituting Fidelity Covington Trust, hereafter collectively referred to as the "Funds") as of August 31, 2024, the related statements of operations for the year ended August 31, 2024, the statements of changes in net assets for each of the two years in the period ended August 31, 2024, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of August 31, 2024, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended August 31, 2024 and each of the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinions
These financial statements are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of August 31, 2024 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
October 18, 2024
We have served as the auditor of one or more investment companies in the Fidelity group of funds since 1932.
Distributions
(Unaudited)The dividend and capital gains distributions for the fund(s) are available on Fidelity.com or Institutional.Fidelity.com.
A percentage of the dividends distributed during the fiscal year for the following funds were derived from interest on U.S. Government securities which is generally exempt from state income tax:
| Fidelity Enhanced High Yield ETF | 0.22% |
| Fidelity Preferred Securities & Income ETF | 3.93% |
A percentage of the dividends distributed during the fiscal year for the following funds qualify for the dividends-received deduction for corporate shareholders:
| Fidelity Preferred Securities & Income ETF | |
September 2023 October 2023 November 2023 December 2023 January 2024 February 2024 March 2024 April 2024 May 2024 June 2024 July 2024 August 2024 | 22% 22% 22% 22% 20% 20% 20% 20% 20% 20% 20% 20% |
A percentage of the dividends distributed during the fiscal year for the following funds may be taken into account as a dividend for purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
| Fidelity Preferred Securities & Income ETF | |
September 2023 October 2023 November 2023 December 2023 January 2024 February 2024 March 2024 April 2024 May 2024 June 2024 July 2024 August 2024 | 23.57% 23.57% 23.57% 23.57% 19.78% 19.78% 19.78% 19.78% 19.78% 19.78% 19.78% 19.78% |
A percentage of the dividends distributed during the fiscal year for the following funds qualify as a section 199A dividend:
| Fidelity Preferred Securities & Income ETF | |
September 2023 October 2023 November 2023 December 2023 January 2024 February 2024 March 2024 April 2024 May 2024 June 2024 July 2024 August 2024 | 3.33% 3.33% 3.33% 3.33% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% |
The funds hereby designate the amounts noted below as distributions paid in the calendar year 2023 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders:
| Fidelity Enhanced High Yield ETF | $13,940,505 |
| Fidelity Preferred Securities & Income ETF | $45,905 |
The funds hereby designate the amounts noted below as distributions paid during the fiscal year ended 2024 as qualifying to be taxed as section 163(j) interest dividends:
| Fidelity Enhanced High Yield ETF | $19,411,235 |
| Fidelity Preferred Securities & Income ETF | $1,283,188 |
The funds will notify shareholders in January 2025 of amounts for use in preparing 2024 income tax returns.
Item 8: Changes in and Disagreements with Accountants for Open-End Management Investment Companies
(Unaudited)
Note: This is not applicable for any fund included in this document.
Item 9: Proxy Disclosures for Open-End Management Investment Companies
(Unaudited)
| A special meeting of shareholders was held on July 16, 2024. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting. |
| Proposal 1 |
| To elect a Board of Trustees. |
| | # of Votes | % of Votes |
| Bettina Doulton |
| Affirmative | 38,080,283,823.03 | 97.17 |
| Withheld | 1,109,333,237.47 | 2.83 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Robert A. Lawrence |
| Affirmative | 37,781,807,251.33 | 96.41 |
| Withheld | 1,407,809,809.17 | 3.59 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Vijay C. Advani |
| Affirmative | 37,869,526,083.09 | 96.63 |
| Withheld | 1,320,090,977.41 | 3.37 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Thomas P. Bostick |
| Affirmative | 38,025,875,898.31 | 97.03 |
| Withheld | 1,163,741,162.19 | 2.97 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Donald F. Donahue |
| Affirmative | 37,825,198,238.79 | 96.52 |
| Withheld | 1,364,418,821.71 | 3.48 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Vicki L. Fuller |
| Affirmative | 38,031,768,119.99 | 97.05 |
| Withheld | 1,157,848,940.51 | 2.95 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Patricia L. Kampling |
| Affirmative | 38,062,391,881.90 | 97.12 |
| Withheld | 1,127,225,178.60 | 2.88 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Thomas A. Kennedy |
| Affirmative | 37,891,434,776.27 | 96.69 |
| Withheld | 1,298,182,284.23 | 3.31 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Oscar Munoz |
| Affirmative | 37,976,932,673.73 | 96.91 |
| Withheld | 1,212,684,386.77 | 3.09 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Karen B. Peetz |
| Affirmative | 38,011,822,212.28 | 96.99 |
| Withheld | 1,177,794,848.22 | 3.01 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| David M. Thomas |
| Affirmative | 37,976,058,118.16 | 96.90 |
| Withheld | 1,213,558,942.34 | 3.10 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Susan Tomasky |
| Affirmative | 37,845,471,684.67 | 96.57 |
| Withheld | 1,344,145,375.83 | 3.43 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Michael E. Wiley |
| Affirmative | 37,736,569,620.69 | 96.29 |
| Withheld | 1,453,047,439.81 | 3.71 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| | | |
| Proposal 1 reflects trust-wide proposal and voting results. |
Item 10: Remuneration Paid to Directors, Officers, and others of Open-End Management Investment Companies
(Unaudited)
Note: This information is disclosed as part of the financial statements for each Fund as part of Item 7: Financial Statements and Financial Highlights for Open-End Management Investment companies.
Item 11: Statement Regarding Basis for Approval of Investment Advisory Contract
(Unaudited)
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity High Yield Factor ETF
Fidelity Preferred Securities & Income ETF
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), considers the renewal of each fund's management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for each fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. 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 each fund's Advisory Contracts, including the services and support provided to each fund and its shareholders. The Board, acting directly and through its Committees (each of which is composed of and chaired by Independent Trustees), requests and receives information concerning the annual consideration of the renewal of each fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
At its May 2024 meeting, the Board unanimously determined to renew each 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 provided to each fund and its shareholders (including the investment performance of each fund); (ii) the competitiveness relative to peer funds of each fund's management fee and total expense ratio; (iii) the total costs of the services provided by and the profits realized by FMR and its affiliates (Fidelity) from its relationships with each fund; and (iv) the extent to which, if any, economies of scale exist and are realized as each fund grows, and whether any economies of scale are appropriately shared with fund shareholders. The Board also considered the broad range of investment choices available to shareholders from FMR's competitors and that each fund's shareholders have chosen to invest in the fund, which is part of the Fidelity family of funds. The Board's decision to renew the Advisory Contracts was not based on any single factor.
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 was in the best interests of each fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable, in light of all of the surrounding circumstances.
Nature, Extent, and Quality of Services Provided. The Board considered staffing as it relates to the funds, including the backgrounds and experience of investment personnel of the Investment Advisers, and also considered the Investment Advisers' implementation of each fund's investment program. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of each fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted the resources devoted to expansion of Fidelity's global investment organization, and 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. Further, the Board considered 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 Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory and administrative services provided by the Investment Advisers and their affiliates under the Advisory Contracts and under a separate agreement covering pricing and bookkeeping services for each fund; (ii) the nature and extent of Fidelity's supervision of third party service providers, principally State Street Bank and Trust Company, each fund's transfer agent and custodian; and (iii) the resources devoted by Fidelity to, and the record of compliance with, each fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered each fund's securities lending activities and any payments made to Fidelity relating to securities lending under a separate agreement.
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 and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials, and asset allocation tools. The Board also considered that it reviews customer service metrics such as telephone response times, continuity of services on the website and metrics addressing services at Fidelity Investor Centers.
Investment in a Large Fund Family. The Board considered the benefits to shareholders 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 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 and/or the Fidelity funds in general.
Investment Performance. The Board took into account discussions that occur with representatives of the Investment Advisers, and reports that it receives, at Board meetings throughout the year with representatives of the Investment Advisers relating to fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considered annualized return information for each fund for different time periods, measured against an appropriate securities market index (benchmark index) and, for Fidelity High Yield Factor ETF, an appropriate peer group of funds with similar objectives (peer group). The Board also considered information about performance attribution. In its ongoing evaluation of fund investment performance, the Board gives particular attention to information indicating changes in performance of the funds over different time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance. The Board also considered information on each fund's bid-ask spread and premium/discount.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of the fund compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, and compared to peer groups, as applicable, over the same periods, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to each fund under the Advisory Contracts should continue to benefit the shareholders of each fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board was provided with information regarding industry trends in management fees and expenses. In its review of each fund's management fee and total expense ratio, the Board considered each fund's all-inclusive fee rate and also considered other expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees, paid by FMR under each fund's all-inclusive arrangement. The Board noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund.
Comparisons of Management Fees and Total Expense Ratios. Among other things, the Board reviewed data for selected groups of competitive funds and classes (referred to as "mapped groups") that were compiled by Fidelity based on combining similar investment objective categories (as classified by Morningstar) that have comparable investment mandates. The data reviewed by the Board included (i) gross management fee comparisons (before taking into account expense reimbursements or caps) relative to the total universe of funds within the mapped group; (ii) gross management fee comparisons relative to a subset of non-Fidelity funds in the mapped group that are similar in size and management fee structure to each fund (referred to as the "asset size peer group"); (iii) total expense comparisons of each fund relative to funds and classes in the mapped group that have a similar load structure to the fund (referred to as the "similar load structure group"); and (iv) total expense comparisons of each fund relative to funds and classes in the similar load structure group that are similar in size and management fee structure to the fund (referred to as the "total expense asset size peer group"). The total expense asset size peer group comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
For Fidelity High Yield Factor ETF, the information provided to the Board indicated that the fund's management fee rate ranked below the competitive median of the mapped group for the 12-month period ended September 30, 2023 and below the competitive median of the asset size peer group for the 12-month period ended September 30, 2023. Further, the information provided to the Board indicated that the total expense ratio of the fund ranked below the competitive median of the similar load structure group for the 12-month period ended September 30, 2023 and below the competitive median of the total expense asset size peer group for the 12-month period ended September 30, 2023.
For Fidelity Preferred Securities & Income ETF, the information provided to the Board indicated that the fund's management fee rate ranked above the competitive median of the mapped group for the 12-month period ended September 30, 2023 and above the competitive median of the asset size peer group for the 12-month period ended September 30, 2023. Further, the information provided to the Board indicated that the total expense ratio of the fund ranked above the competitive median of the similar load structure group for the 12-month period ended September 30, 2023 and above the competitive median of the total expense asset size peer group for the 12-month period ended September 30, 2023. The Board considered that the fund's mapped group is dominated by ETFs that focus on investment grade securities. The Board noted that, when compared to the subset of ETFs with a preferred stock strategy, Fidelity Preferred Securities & Income ETF ranked below the subset's median total expense ratio.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review, the Board concluded that each fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered. Further, based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that each fund's total expense ratio 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 each fund and servicing each fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with each fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information 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 and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the 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 potential indirect benefits such businesses may have received as a result of their association with Fidelity's fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board's consideration of these matters was informed by the findings of a joint ad hoc committee created by it and the boards of other Fidelity funds to evaluate potential fall-out benefits.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of each fund and was satisfied that the profitability was not excessive.
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 each 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 each fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board recognized that, due to each fund's current contractual arrangements, its expense ratio will not decline if the fund's operating costs decrease as assets grow, or rise as assets decrease. The Board also noted that a committee created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity 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 concluded, taking into account the analysis of the 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 but not limited to: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) the operation of performance fees and the rationale for implementing performance fees on certain categories of funds but not others; (iii) Fidelity's pricing philosophy compared to competitors; (iv) fund profitability methodology and data; (v) evaluation of competitive fund data and peer group classifications and fee and expense comparisons; (vi) the management fee and expense structures for different funds and classes and information about the differences between various fee and expense structures; (vii) the variable management fee implemented for certain funds effective March 1, 2024; and (viii) information regarding other accounts managed by Fidelity and the funds' sub-advisory arrangements.
Conclusion. Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board, including the Independent Trustees, concluded that the advisory and sub-advisory fee arrangements are fair and reasonable in light of all of the surrounding circumstances and that each fund's Advisory Contracts should be renewed through May 31, 2025.
1.9887634.106
HIE-ANN-1024
Fidelity® Sustainable High Yield ETF
Annual Report
August 31, 2024
Contents
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-FIDELITY to request a free copy of the proxy voting guidelines.
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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. © 2024 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-PORT. Forms N-PORT are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-PORT 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.institutional.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.
Item 7: Financial Statements and Financial Highlights for Open-End Management Investment Companies (Annual Report)
Fidelity® Sustainable High Yield ETF
Schedule of Investments August 31, 2024
Showing Percentage of Net Assets
| Corporate Bonds - 95.7% |
| | | Principal Amount (a) | Value ($) |
| Convertible Bonds - 1.1% | | | |
| Broadcasting - 0.3% | | | |
| DISH Network Corp. 3.375% 8/15/26 | | 106,000 | 65,994 |
| Energy - 0.2% | | | |
| NextEra Energy Partners LP 2.5% 6/15/26 (b) | | 46,000 | 42,438 |
| Sunnova Energy International, Inc.: | | | |
| 0.25% 12/1/26 | | 16,000 | 12,119 |
| 2.625% 2/15/28 | | 4,000 | 2,582 |
| | | | 57,139 |
| Homebuilders/Real Estate - 0.3% | | | |
| Realogy Group LLC/Realogy Co-Issuer Corp. 0.25% 6/15/26 | | 16,000 | 13,600 |
| Redfin Corp. 0.5% 4/1/27 | | 107,000 | 73,295 |
| | | | 86,895 |
| Super Retail - 0.1% | | | |
| Wayfair LLC 0.625% 10/1/25 | | 12,000 | 11,310 |
| Technology - 0.2% | | | |
| MKS Instruments, Inc. 1.25% 6/1/30 (b) | | 21,000 | 21,620 |
| Wolfspeed, Inc. 1.875% 12/1/29 | | 110,000 | 41,932 |
| | | | 63,552 |
| Utilities - 0.0% | | | |
| PG&E Corp. 4.25% 12/1/27 (b) | | 9,000 | 9,603 |
TOTAL CONVERTIBLE BONDS | | | 294,493 |
| Nonconvertible Bonds - 94.6% | | | |
| Aerospace - 1.2% | | | |
| ATI, Inc. 4.875% 10/1/29 | | 79,000 | 76,605 |
| Bombardier, Inc.: | | | |
| 6% 2/15/28 (b) | | 79,000 | 79,042 |
| 7% 6/1/32 (b) | | 5,000 | 5,205 |
| 7.25% 7/1/31 (b) | | 33,000 | 34,640 |
| Spirit Aerosystems, Inc. 9.75% 11/15/30 (b) | | 52,000 | 58,195 |
| TransDigm, Inc.: | | | |
| 4.875% 5/1/29 | | 40,000 | 38,681 |
| 6.375% 3/1/29 (b) | | 28,000 | 28,856 |
| 6.625% 3/1/32 (b) | | 11,000 | 11,440 |
| | | | 332,664 |
| Air Transportation - 0.7% | | | |
| Hawaiian Brand Intellectual Property Ltd. / HawaiianMiles Loyalty Ltd. 11% 4/15/29 (b) | | 44,750 | 45,547 |
| JetBlue Airways Corp./JetBlue Loyalty LP 9.875% 9/20/31 (b) | | 30,000 | 29,651 |
| Rand Parent LLC 8.5% 2/15/30 (b) | | 108,000 | 108,002 |
| Spirit Loyalty Cayman Ltd. / Spirit IP Cayman Ltd. 8% 9/20/25 (b) | | 10,000 | 6,245 |
| | | | 189,445 |
| Automotive & Auto Parts - 1.3% | | | |
| Arko Corp. 5.125% 11/15/29 (b) | | 20,000 | 17,764 |
| Champions Financing, Inc. 8.75% 2/15/29 (b) | | 50,000 | 51,283 |
| Macquarie AirFinance Holdings: | | | |
| 6.4% 3/26/29 (b) | | 25,000 | 26,018 |
| 6.5% 3/26/31 (b) | | 25,000 | 26,359 |
| 8.375% 5/1/28 (b) | | 16,000 | 16,953 |
| McLaren Finance PLC 7.5% 8/1/26 (b) | | 35,000 | 30,747 |
| Rivian Holdco & Rivian LLC & Rivian Automotive LLC CME Term SOFR 6 Month Index + 6.050% 11.3595% 10/15/26 (b)(c)(d) | | 99,000 | 99,008 |
| ZF North America Capital, Inc.: | | | |
| 4.75% 4/29/25 (b) | | 55,000 | 54,517 |
| 6.75% 4/23/30 (b) | | 27,000 | 27,755 |
| | | | 350,404 |
| Banks & Thrifts - 1.0% | | | |
| Ally Financial, Inc. 5.75% 11/20/25 | | 174,000 | 174,462 |
| UniCredit SpA: | | | |
| 5.459% 6/30/35 (b)(c) | | 3,000 | 2,928 |
| 5.861% 6/19/32 (b)(c) | | 19,000 | 18,957 |
| VFH Parent LLC / Valor Co-Issuer, Inc. 7.5% 6/15/31 (b) | | 25,000 | 25,935 |
| Western Alliance Bancorp. 3% 6/15/31 (c) | | 41,000 | 37,076 |
| | | | 259,358 |
| Broadcasting - 3.0% | | | |
| Clear Channel Outdoor Holdings, Inc.: | | | |
| 5.125% 8/15/27 (b) | | 91,000 | 88,899 |
| 7.5% 6/1/29 (b) | | 96,000 | 80,949 |
| 7.875% 4/1/30 (b) | | 28,000 | 29,256 |
| 9% 9/15/28 (b) | | 280,000 | 297,631 |
| DISH Network Corp. 11.75% 11/15/27 (b) | | 55,000 | 55,922 |
| Univision Communications, Inc.: | | | |
| 7.375% 6/30/30 (b) | | 61,000 | 58,550 |
| 8% 8/15/28 (b) | | 26,000 | 26,305 |
| 8.5% 7/31/31 (b) | | 192,000 | 191,619 |
| | | | 829,131 |
| Building Materials - 1.3% | | | |
| Advanced Drain Systems, Inc. 6.375% 6/15/30 (b) | | 50,000 | 50,825 |
| Beacon Roofing Supply, Inc. 6.5% 8/1/30 (b) | | 28,000 | 28,754 |
| Builders FirstSource, Inc. 6.375% 3/1/34 (b) | | 10,000 | 10,267 |
| Cornerstone Building Brands, Inc. 6.125% 1/15/29 (b) | | 147,000 | 122,618 |
| Eco Material Technologies, Inc. 7.875% 1/31/27 (b) | | 25,000 | 25,321 |
| EMRLD Borrower LP / Emerald Co. 6.75% 7/15/31 (b) | | 41,000 | 42,250 |
| MasterBrand, Inc. 7% 7/15/32 (b) | | 20,000 | 20,600 |
| Oscar Acquisition Co. LLC / Oscar Finance, Inc. 9.5% 4/15/30 (b) | | 44,000 | 41,316 |
| | | | 341,951 |
| Cable/Satellite TV - 2.9% | | | |
| CCO Holdings LLC/CCO Holdings Capital Corp.: | | | |
| 4.25% 1/15/34 (b) | | 165,000 | 133,058 |
| 4.75% 3/1/30 (b) | | 47,000 | 42,842 |
| 4.75% 2/1/32 (b) | | 210,000 | 182,980 |
| 5.375% 6/1/29 (b) | | 194,000 | 184,021 |
| 5.5% 5/1/26 (b) | | 47,000 | 46,880 |
| CSC Holdings LLC: | | | |
| 3.375% 2/15/31 (b) | | 171,000 | 109,960 |
| 4.625% 12/1/30 (b) | | 108,000 | 42,227 |
| DISH DBS Corp.: | | | |
| 5.75% 12/1/28 (b) | | 33,000 | 25,390 |
| 5.875% 11/15/24 | | 25,000 | 24,267 |
| VTR Finance BV 6.375% 7/15/28 (b) | | 5,000 | 4,575 |
| Ziggo Bond Co. BV 6% 1/15/27 (b) | | 6,000 | 5,983 |
| | | | 802,183 |
| Capital Goods - 1.0% | | | |
| Chart Industries, Inc. 9.5% 1/1/31 (b) | | 169,000 | 183,554 |
| Resideo Funding, Inc. 6.5% 7/15/32 (b) | | 81,000 | 82,463 |
| TK Elevator Holdco GmbH 7.625% 7/15/28 (b) | | 14,000 | 14,021 |
| | | | 280,038 |
| Chemicals - 4.5% | | | |
| Axalta Coating Systems LLC 3.375% 2/15/29 (b) | | 23,000 | 21,329 |
| Consolidated Energy Finance SA 12% 2/15/31 (b) | | 71,000 | 69,880 |
| Herens HoldCo Sarl 4.75% 5/15/28 (b) | | 10,000 | 8,722 |
| Kobe U.S. Midco 2, Inc. 9.25% 11/1/26 pay-in-kind (b)(c) | | 67,287 | 55,175 |
| Methanex Corp. 5.65% 12/1/44 | | 187,000 | 167,029 |
| NOVA Chemicals Corp.: | | | |
| 4.25% 5/15/29 (b) | | 159,000 | 145,024 |
| 8.5% 11/15/28 (b) | | 113,000 | 120,473 |
| 9% 2/15/30 (b) | | 18,000 | 19,334 |
| Olin Corp. 5% 2/1/30 | | 96,000 | 92,798 |
| Olympus Water U.S. Holding Corp.: | | | |
| 6.25% 10/1/29 (b) | | 186,000 | 174,706 |
| 9.75% 11/15/28 (b) | | 68,000 | 72,433 |
| SCIH Salt Holdings, Inc. 6.625% 5/1/29 (b) | | 15,000 | 14,355 |
| The Chemours Co. LLC 4.625% 11/15/29 (b) | | 316,000 | 277,988 |
| | | | 1,239,246 |
| Consumer Products - 0.3% | | | |
| Kohl's Corp. 4.25% 7/17/25 | | 91,000 | 90,134 |
| Newell Brands, Inc. 6.875% 4/1/36 (e) | | 5,000 | 4,755 |
| | | | 94,889 |
| Containers - 1.1% | | | |
| Ardagh Packaging Finance PLC/Ardagh MP Holdings U.S.A., Inc.: | | | |
| 4.125% 8/15/26 (b) | | 10,000 | 8,624 |
| 5.25% 8/15/27 (b) | | 5,000 | 3,008 |
| Ball Corp. 6% 6/15/29 | | 13,000 | 13,376 |
| Crown Americas LLC/Crown Americas Capital Corp. IV 4.75% 2/1/26 | | 90,000 | 89,146 |
| Graphic Packaging International, Inc.: | | | |
| 4.75% 7/15/27 (b) | | 42,000 | 41,316 |
| 6.375% 7/15/32 (b) | | 20,000 | 20,449 |
| Owens-Brockway Glass Container, Inc. 7.375% 6/1/32 (b) | | 22,000 | 22,099 |
| Sealed Air Corp. 6.5% 7/15/32 (b) | | 87,000 | 88,994 |
| | | | 287,012 |
| Diversified Financial Services - 4.1% | | | |
| Coinbase Global, Inc. 3.625% 10/1/31 (b) | | 41,000 | 33,786 |
| Encore Capital Group, Inc. 8.5% 5/15/30 (b) | | 69,000 | 72,203 |
| FLY Leasing Ltd. 7% 10/15/24 (b) | | 3,000 | 2,981 |
| GGAM Finance Ltd.: | | | |
| 6.875% 4/15/29 (b) | | 5,000 | 5,160 |
| 7.75% 5/15/26 (b) | | 50,000 | 51,304 |
| 8% 2/15/27 (b) | | 219,000 | 228,302 |
| 8% 6/15/28 (b) | | 76,000 | 81,239 |
| Global Aircraft Leasing Co. Ltd. 8.75% 9/1/27 (b) | | 30,000 | 30,300 |
| Gn Bondco LLC 9.5% 10/15/31 (b) | | 31,000 | 31,554 |
| Ladder Capital Finance Holdings LLLP/Ladder Capital Finance Corp. 5.25% 10/1/25 (b) | | 80,000 | 79,714 |
| OneMain Finance Corp.: | | | |
| 3.875% 9/15/28 | | 315,000 | 290,079 |
| 9% 1/15/29 | | 3,000 | 3,187 |
| PRA Group, Inc. 8.875% 1/31/30 (b) | | 11,000 | 11,370 |
| Shift4 Payments LLC / Shift4 Payments Finance Sub, Inc. 6.75% 8/15/32 (b) | | 75,000 | 77,375 |
| SLM Corp. 4.2% 10/29/25 | | 52,000 | 51,396 |
| Williams Scotsman, Inc. 6.625% 6/15/29 (b) | | 74,000 | 76,400 |
| | | | 1,126,350 |
| Diversified Media - 0.6% | | | |
| Advantage Sales & Marketing, Inc. 6.5% 11/15/28 (b) | | 142,000 | 133,134 |
| Outfront Media Capital LLC / Corp. 7.375% 2/15/31 (b) | | 26,000 | 27,635 |
| | | | 160,769 |
| Energy - 9.6% | | | |
| Archrock Partners LP / Archrock Partners Finance Corp.: | | | |
| 6.25% 4/1/28 (b) | | 201,000 | 201,849 |
| 6.625% 9/1/32 (b) | | 26,000 | 26,324 |
| California Resources Corp.: | | | |
| 7.125% 2/1/26 (b) | | 130,000 | 130,506 |
| 8.25% 6/15/29 (b) | | 70,000 | 72,200 |
| Canacol Energy Ltd. 5.75% 11/24/28 (b) | | 61,000 | 35,151 |
| CNX Midstream Partners LP 4.75% 4/15/30 (b) | | 80,000 | 74,615 |
| CNX Resources Corp.: | | | |
| 6% 1/15/29 (b) | | 69,000 | 69,191 |
| 7.25% 3/1/32 (b) | | 27,000 | 28,271 |
| 7.375% 1/15/31 (b) | | 6,000 | 6,270 |
| CPI CG, Inc. 10% 7/15/29 (b) | | 10,000 | 10,517 |
| CQP Holdco LP / BIP-V Chinook Holdco LLC 7.5% 12/15/33 (b) | | 32,000 | 34,574 |
| CVR Energy, Inc. 5.75% 2/15/28 (b) | | 29,000 | 27,348 |
| Energean Israel Finance Ltd. 5.375% 3/30/28 (Reg. S) (b) | | 10,000 | 9,033 |
| Energean PLC 6.5% 4/30/27 (b) | | 122,000 | 120,431 |
| Global Partners LP/GLP Finance Corp. 6.875% 1/15/29 | | 203,000 | 204,452 |
| Gran Tierra Energy, Inc. 9.5% 10/15/29 (b) | | 42,000 | 40,819 |
| Harbour Energy PLC 5.5% 10/15/26 (b) | | 122,000 | 121,102 |
| Kosmos Energy Ltd.: | | | |
| 7.5% 3/1/28 (b) | | 8,000 | 7,750 |
| 7.75% 5/1/27 (b) | | 6,000 | 5,934 |
| MEG Energy Corp. 5.875% 2/1/29 (b) | | 125,000 | 123,778 |
| Nabors Industries, Inc. 8.875% 8/15/31 (b) | | 15,000 | 15,030 |
| New Fortress Energy, Inc.: | | | |
| 6.5% 9/30/26 (b) | | 165,000 | 142,828 |
| 6.75% 9/15/25 (b) | | 75,000 | 73,135 |
| Northern Oil & Gas, Inc. 8.125% 3/1/28 (b) | | 79,000 | 80,774 |
| Oceaneering International, Inc. 6% 2/1/28 | | 90,000 | 91,175 |
| Prairie Acquiror LP 9% 8/1/29 (b) | | 10,000 | 10,459 |
| Southwestern Energy Co. 5.375% 3/15/30 | | 25,000 | 24,782 |
| Sunnova Energy Corp. 5.875% 9/1/26 (b) | | 211,000 | 198,224 |
| Sunoco LP/Sunoco Finance Corp. 4.5% 5/15/29 | | 264,000 | 253,468 |
| Tallgrass Energy Partners LP / Tallgrass Energy Finance Corp.: | | | |
| 6% 3/1/27 (b) | | 100,000 | 99,718 |
| 6% 12/31/30 (b) | | 60,000 | 57,219 |
| 6% 9/1/31 (b) | | 14,000 | 13,268 |
| Tullow Oil PLC: | | | |
| 7% 3/1/25 (b) | | 30,000 | 29,231 |
| 10.25% 5/15/26 (b) | | 30,000 | 29,031 |
| Viridien 8.75% 4/1/27 (b) | | 147,000 | 140,830 |
| | | | 2,609,287 |
| Environmental - 1.8% | | | |
| Darling Ingredients, Inc. 6% 6/15/30 (b) | | 7,000 | 7,086 |
| Reworld Holding Corp. 4.875% 12/1/29 (b) | | 513,000 | 476,021 |
| | | | 483,107 |
| Food & Drug Retail - 0.9% | | | |
| Albertsons Companies LLC/Safeway, Inc./New Albertson's, Inc./Albertson's LLC 4.875% 2/15/30 (b) | | 126,000 | 123,148 |
| Emergent BioSolutions, Inc. 3.875% 8/15/28 (b) | | 126,000 | 93,552 |
| Murphy Oil U.S.A., Inc. 3.75% 2/15/31 (b) | | 25,000 | 22,619 |
| Walgreens Boots Alliance, Inc. 8.125% 8/15/29 | | 15,000 | 15,017 |
| | | | 254,336 |
| Food/Beverage/Tobacco - 2.4% | | | |
| C&S Group Enterprises LLC 5% 12/15/28 (b) | | 86,000 | 64,965 |
| KeHE Distributor / Nextwave 9% 2/15/29 (b) | | 99,000 | 103,284 |
| Performance Food Group, Inc. 4.25% 8/1/29 (b) | | 23,000 | 21,706 |
| Post Holdings, Inc.: | | | |
| 4.5% 9/15/31 (b) | | 55,000 | 51,178 |
| 4.625% 4/15/30 (b) | | 34,000 | 32,314 |
| 6.25% 2/15/32 (b) | | 30,000 | 30,765 |
| 6.375% 3/1/33 (b) | | 125,000 | 125,913 |
| Sigma Holdco BV 7.875% 5/15/26 (b) | | 66,000 | 65,104 |
| Triton Water Holdings, Inc. 6.25% 4/1/29 (b) | | 64,000 | 63,291 |
| U.S. Foods, Inc. 4.625% 6/1/30 (b) | | 100,000 | 95,719 |
| United Natural Foods, Inc. 6.75% 10/15/28 (b) | | 5,000 | 4,696 |
| | | | 658,935 |
| Gaming - 0.1% | | | |
| Station Casinos LLC 6.625% 3/15/32 (b) | | 15,000 | 15,301 |
| Healthcare - 7.3% | | | |
| AdaptHealth LLC 5.125% 3/1/30 (b) | | 136,000 | 124,348 |
| Akumin, Inc. 8% 8/1/28 (b) | | 49,000 | 40,670 |
| AMN Healthcare 4% 4/15/29 (b) | | 93,000 | 86,751 |
| Charles River Laboratories International, Inc. 3.75% 3/15/29 (b) | | 10,000 | 9,371 |
| CHS/Community Health Systems, Inc.: | | | |
| 4.75% 2/15/31 (b) | | 133,000 | 113,439 |
| 5.25% 5/15/30 (b) | | 192,000 | 172,154 |
| 6.125% 4/1/30 (b) | | 44,000 | 34,844 |
| 6.875% 4/15/29 (b) | | 99,000 | 85,193 |
| 10.875% 1/15/32 (b) | | 111,000 | 120,160 |
| DaVita, Inc.: | | | |
| 3.75% 2/15/31 (b) | | 76,000 | 67,648 |
| 6.875% 9/1/32 (b) | | 60,000 | 61,383 |
| Embecta Corp. 5% 2/15/30 (b) | | 10,000 | 9,016 |
| Encompass Health Corp. 4.625% 4/1/31 | | 72,000 | 68,176 |
| IQVIA, Inc.: | | | |
| 5% 10/15/26 (b) | | 11,000 | 10,924 |
| 5% 5/15/27 (b) | | 50,000 | 49,638 |
| LifePoint Health, Inc. 10% 6/1/32 (b) | | 16,000 | 17,365 |
| Medline Borrower LP / Medline Co. 6.25% 4/1/29 (b) | | 30,000 | 30,925 |
| ModivCare Escrow Issuer, Inc. 5% 10/1/29 (b) | | 26,000 | 18,602 |
| Omega Healthcare Investors, Inc. 3.25% 4/15/33 | | 17,000 | 14,384 |
| Organon & Co. / Organon Foreign Debt Co-Issuer BV: | | | |
| 5.125% 4/30/31 (b) | | 119,000 | 111,449 |
| 6.75% 5/15/34 (b) | | 11,000 | 11,400 |
| Owens & Minor, Inc. 6.625% 4/1/30 (b) | | 25,000 | 24,195 |
| Pediatrix Medical Group, Inc. 5.375% 2/15/30 (b) | | 143,000 | 136,748 |
| Prime Healthcare Services 9.375% 9/1/29 (b) | | 15,000 | 15,121 |
| Radiology Partners, Inc. 7.775% 1/31/29 pay-in-kind (b)(c) | | 59,547 | 57,240 |
| Surgery Center Holdings, Inc. 7.25% 4/15/32 (b) | | 35,000 | 36,761 |
| Tenet Healthcare Corp. 6.125% 10/1/28 | | 443,000 | 443,815 |
| U.S. Acute Care Solutions 9.75% 5/15/29 (b) | | 16,000 | 16,368 |
| | | | 1,988,088 |
| Homebuilders/Real Estate - 5.0% | | | |
| Anywhere Real Estate Group LLC 7% 4/15/30 (b) | | 32,000 | 28,372 |
| ATP Tower Holdings LLC/Andean Tower Partners 4.05% 4/27/26 (b) | | 46,000 | 44,009 |
| Beazer Homes U.S.A., Inc. 7.5% 3/15/31 (b) | | 24,000 | 24,432 |
| HAT Holdings I LLC/HAT Holdings II LLC: | | | |
| 3.375% 6/15/26 (b) | | 184,000 | 176,264 |
| 8% 6/15/27 (b) | | 18,000 | 18,860 |
| Howard Hughes Corp. 4.375% 2/1/31 (b) | | 69,000 | 61,848 |
| Landsea Homes Corp. 8.875% 4/1/29 (b) | | 15,000 | 15,526 |
| LGI Homes, Inc. 8.75% 12/15/28 (b) | | 5,000 | 5,327 |
| MPT Operating Partnership LP/MPT Finance Corp.: | | | |
| 4.625% 8/1/29 | | 105,000 | 80,742 |
| 5% 10/15/27 | | 292,000 | 247,827 |
| 5.25% 8/1/26 | | 15,000 | 14,110 |
| Railworks Holdings LP 8.25% 11/15/28 (b) | | 30,000 | 30,650 |
| Realogy Group LLC/Realogy Co-Issuer Corp. 5.75% 1/15/29 (b) | | 48,000 | 34,451 |
| Rithm Capital Corp. 8% 4/1/29 (b) | | 10,000 | 9,952 |
| Starwood Property Trust, Inc.: | | | |
| 3.625% 7/15/26 (b) | | 25,000 | 24,061 |
| 3.75% 12/31/24 (b) | | 77,000 | 76,309 |
| 4.75% 3/15/25 | | 5,000 | 4,967 |
| 7.25% 4/1/29 (b) | | 11,000 | 11,450 |
| Taylor Morrison Communities, Inc./Monarch Communities, Inc. 5.125% 8/1/30 (b) | | 290,000 | 286,588 |
| TRI Pointe Homes, Inc. 5.25% 6/1/27 | | 50,000 | 49,755 |
| Uniti Group LP/Uniti Group Finance, Inc./CSL Capital LLC: | | | |
| 10.5% 2/15/28 (b) | | 88,000 | 90,293 |
| 10.5% 2/15/28 (b) | | 17,000 | 17,443 |
| VICI Properties LP: | | | |
| 5.75% 4/1/34 | | 2,000 | 2,060 |
| 6.125% 4/1/54 | | 15,000 | 15,299 |
| | | | 1,370,595 |
| Hotels - 1.3% | | | |
| Hilton Domestic Operating Co., Inc.: | | | |
| 3.625% 2/15/32 (b) | | 346,000 | 310,131 |
| 5.875% 4/1/29 (b) | | 15,000 | 15,286 |
| 6.125% 4/1/32 (b) | | 15,000 | 15,379 |
| Park Intermediate Holdings LLC / PK Domestic Property LLC / PK Finance Co.-Issuer 7% 2/1/30 (b) | | 15,000 | 15,375 |
| | | | 356,171 |
| Insurance - 0.1% | | | |
| AssuredPartners, Inc. 7.5% 2/15/32 (b) | | 24,000 | 24,482 |
| Leisure - 1.8% | | | |
| Amer Sports Co. 6.75% 2/16/31 (b) | | 127,000 | 129,062 |
| ClubCorp Holdings, Inc. 8.5% 9/15/25 (b) | | 30,000 | 27,900 |
| MajorDrive Holdings IV LLC 6.375% 6/1/29 (b) | | 121,000 | 114,074 |
| Royal Caribbean Cruises Ltd.: | | | |
| 6% 2/1/33 (b) | | 120,000 | 122,927 |
| 6.25% 3/15/32 (b) | | 107,000 | 110,501 |
| | | | 504,464 |
| Metals/Mining - 3.4% | | | |
| Cleveland-Cliffs, Inc. 7% 3/15/32 (b) | | 25,000 | 25,106 |
| Eldorado Gold Corp. 6.25% 9/1/29 (b) | | 64,000 | 63,215 |
| ERO Copper Corp. 6.5% 2/15/30 (b) | | 75,000 | 73,087 |
| First Quantum Minerals Ltd.: | | | |
| 6.875% 10/15/27 (b) | | 28,000 | 27,694 |
| 9.375% 3/1/29 (b) | | 110,000 | 117,040 |
| FMG Resources August 2006 Pty Ltd. 6.125% 4/15/32 (b) | | 318,000 | 317,589 |
| HudBay Minerals, Inc.: | | | |
| 4.5% 4/1/26 (b) | | 25,000 | 24,654 |
| 6.125% 4/1/29 (b) | | 68,000 | 68,632 |
| Mineral Resources Ltd. 8.5% 5/1/30 (b) | | 194,000 | 201,743 |
| | | | 918,760 |
| Paper - 3.1% | | | |
| Ardagh Metal Packaging Finance U.S.A. LLC/Ardagh Metal Packaging Finance PLC: | | | |
| 4% 9/1/29 (b) | | 107,000 | 92,207 |
| 6% 6/15/27 (b) | | 101,000 | 100,704 |
| Berry Global, Inc. 5.625% 7/15/27 (b) | | 319,000 | 318,508 |
| Clydesdale Acquisition Holdings, Inc.: | | | |
| 6.625% 4/15/29 (b) | | 107,000 | 106,853 |
| 6.875% 1/15/30 (b) | | 120,000 | 120,442 |
| 8.75% 4/15/30 (b) | | 66,000 | 65,852 |
| Mercer International, Inc. 5.125% 2/1/29 | | 45,000 | 36,785 |
| | | | 841,351 |
| Publishing/Printing - 0.0% | | | |
| Cimpress PLC 7% 6/15/26 | | 5,000 | 4,984 |
| Restaurants - 1.7% | | | |
| 1011778 BC Unlimited Liability Co./New Red Finance, Inc. 6.125% 6/15/29 (b) | | 29,000 | 29,617 |
| Yum! Brands, Inc. 4.625% 1/31/32 | | 468,000 | 443,555 |
| | | | 473,172 |
| Services - 9.8% | | | |
| AECOM 5.125% 3/15/27 | | 537,000 | 537,509 |
| APX Group, Inc.: | | | |
| 5.75% 7/15/29 (b) | | 44,000 | 43,595 |
| 6.75% 2/15/27 (b) | | 182,000 | 182,339 |
| Aramark Services, Inc. 5% 2/1/28 (b) | | 60,000 | 58,850 |
| Artera Services LLC 8.5% 2/15/31 (b) | | 407,000 | 407,463 |
| Avis Budget Car Rental LLC/Avis Budget Finance, Inc.: | | | |
| 5.375% 3/1/29 (b) | | 52,000 | 47,644 |
| 5.75% 7/15/27 (b) | | 221,000 | 215,934 |
| Brand Industrial Services, Inc. 10.375% 8/1/30 (b) | | 507,000 | 552,413 |
| Hertz Corp. 12.625% 7/15/29 (b) | | 3,000 | 3,196 |
| Neptune BidCo U.S., Inc. 9.29% 4/15/29 (b) | | 15,000 | 14,981 |
| Sotheby's 7.375% 10/15/27 (b) | | 76,000 | 72,576 |
| Staples, Inc.: | | | |
| 10.75% 9/1/29 (b) | | 50,000 | 47,095 |
| 12.75% 1/15/30 (b) | | 63,538 | 49,107 |
| StoneMor, Inc. 8.5% 5/15/29 (b) | | 98,000 | 87,201 |
| Uber Technologies, Inc. 4.5% 8/15/29 (b) | | 268,000 | 262,837 |
| United Rentals North America, Inc. 6.125% 3/15/34 (b) | | 35,000 | 35,752 |
| WASH Multifamily Acquisition, Inc. 5.75% 4/15/26 (b) | | 65,000 | 64,701 |
| | | | 2,683,193 |
| Steel - 0.5% | | | |
| ATI, Inc. 7.25% 8/15/30 | | 21,000 | 22,300 |
| Vallourec SA 7.5% 4/15/32 (b) | | 117,000 | 123,204 |
| | | | 145,504 |
| Super Retail - 1.8% | | | |
| At Home Group, Inc. 4.875% 7/15/28 (b) | | 14,000 | 4,455 |
| Carvana Co.: | | | |
| 4.875% 9/1/29 (b) | | 25,000 | 21,026 |
| 5.625% 10/1/25 (b) | | 40,000 | 39,100 |
| 12% 12/1/28 pay-in-kind (b)(c) | | 16,421 | 17,044 |
| 13% 6/1/30 pay-in-kind (b)(c) | | 65,847 | 70,295 |
| 14% 6/1/31 pay-in-kind (b)(c) | | 86,167 | 98,132 |
| EG Global Finance PLC 12% 11/30/28 (b) | | 82,000 | 89,447 |
| Group 1 Automotive, Inc. 6.375% 1/15/30 (b) | | 20,000 | 20,346 |
| LBM Acquisition LLC 6.25% 1/15/29 (b) | | 50,000 | 45,198 |
| Michaels Companies, Inc. 5.25% 5/1/28 (b) | | 19,000 | 14,918 |
| Nordstrom, Inc. 4.375% 4/1/30 | | 63,000 | 57,856 |
| Sally Holdings LLC 6.75% 3/1/32 | | 20,000 | 20,401 |
| | | | 498,218 |
| Technology - 11.6% | | | |
| Ahead DB Holdings LLC 6.625% 5/1/28 (b) | | 20,000 | 19,189 |
| Atkore, Inc. 4.25% 6/1/31 (b) | | 70,000 | 63,531 |
| Block, Inc.: | | | |
| 3.5% 6/1/31 | | 666,000 | 601,196 |
| 6.5% 5/15/32 (b) | | 30,000 | 31,110 |
| Cloud Software Group, Inc.: | | | |
| 6.5% 3/31/29 (b) | | 36,000 | 35,487 |
| 8.25% 6/30/32 (b) | | 45,000 | 47,116 |
| 9% 9/30/29 (b) | | 192,000 | 193,241 |
| Cogent Communications Group, Inc. 7% 6/15/27 (b) | | 35,000 | 35,406 |
| Elastic NV 4.125% 7/15/29 (b) | | 105,000 | 97,828 |
| Entegris, Inc.: | | | |
| 3.625% 5/1/29 (b) | | 66,000 | 60,767 |
| 5.95% 6/15/30 (b) | | 332,000 | 336,502 |
| Gen Digital, Inc.: | | | |
| 5% 4/15/25 (b) | | 90,000 | 89,654 |
| 7.125% 9/30/30 (b) | | 124,000 | 129,551 |
| Go Daddy Operating Co. LLC / GD Finance Co., Inc. 3.5% 3/1/29 (b) | | 205,000 | 190,611 |
| GrafTech Global Enterprises, Inc. 9.875% 12/15/28 (b) | | 5,000 | 4,012 |
| HTA Group Ltd. 7.5% 6/4/29 (b) | | 140,000 | 140,903 |
| Iliad Holding SAS: | | | |
| 7% 10/15/28 (b) | | 70,000 | 71,046 |
| 8.5% 4/15/31 (b) | | 68,000 | 72,057 |
| Insight Enterprises, Inc. 6.625% 5/15/32 (b) | | 18,000 | 18,632 |
| Lightning Power LLC 7.25% 8/15/32 (b) | | 25,000 | 25,832 |
| NCR Voyix Corp. 5.125% 4/15/29 (b) | | 87,000 | 85,317 |
| ON Semiconductor Corp. 3.875% 9/1/28 (b) | | 43,000 | 40,866 |
| Open Text Corp.: | | | |
| 3.875% 2/15/28 (b) | | 47,000 | 44,562 |
| 3.875% 12/1/29 (b) | | 195,000 | 179,773 |
| Open Text Holdings, Inc.: | | | |
| 4.125% 2/15/30 (b) | | 12,000 | 11,142 |
| 4.125% 12/1/31 (b) | | 18,000 | 16,390 |
| Rackspace Finance LLC 3.5% 5/15/28 (b) | | 12,525 | 5,661 |
| Seagate HDD Cayman: | | | |
| 4.125% 1/15/31 | | 30,000 | 27,236 |
| 4.75% 1/1/25 | | 132,000 | 131,394 |
| 5.75% 12/1/34 | | 28,000 | 28,016 |
| 8.25% 12/15/29 | | 47,000 | 50,944 |
| Sensata Technologies BV 4% 4/15/29 (b) | | 33,000 | 31,071 |
| TTM Technologies, Inc. 4% 3/1/29 (b) | | 54,000 | 50,963 |
| UKG, Inc. 6.875% 2/1/31 (b) | | 26,000 | 26,895 |
| Unisys Corp. 6.875% 11/1/27 (b) | | 6,000 | 5,616 |
| Veritas U.S., Inc./Veritas Bermuda Ltd. 7.5% 9/1/25 (b) | | 14,000 | 12,798 |
| Virtusa Corp. 7.125% 12/15/28 (b) | | 10,000 | 9,412 |
| Western Digital Corp.: | | | |
| 2.85% 2/1/29 | | 70,000 | 62,802 |
| 3.1% 2/1/32 | | 86,000 | 72,365 |
| 4.75% 2/15/26 | | 5,000 | 4,955 |
| | | | 3,161,849 |
| Telecommunications - 4.9% | | | |
| Altice Financing SA 5.75% 8/15/29 (b) | | 100,000 | 77,030 |
| Altice France Holding SA 6% 2/15/28 (b) | | 32,000 | 10,306 |
| Altice France SA 5.125% 7/15/29 (b) | | 268,000 | 186,980 |
| AXIAN Telecom 7.375% 2/16/27 (b) | | 15,000 | 14,967 |
| C&W Senior Finance Ltd. 6.875% 9/15/27 (b) | | 120,000 | 118,135 |
| Connect Finco SARL / Connect U.S. Finco LLC 6.75% 10/1/26 (b) | | 28,000 | 27,788 |
| Frontier Communications Holdings LLC 8.75% 5/15/30 (b) | | 78,000 | 82,150 |
| IHS Holding Ltd.: | | | |
| 5.625% 11/29/26 (b) | | 47,000 | 45,649 |
| 6.25% 11/29/28 (b) | | 6,000 | 5,516 |
| IHS Netherlands Holdco BV 8% 9/18/27 (b) | | 47,000 | 46,853 |
| LCPR Senior Secured Financing DAC: | | | |
| 5.125% 7/15/29 (b) | | 5,000 | 4,038 |
| 6.75% 10/15/27 (b) | | 40,000 | 36,572 |
| Level 3 Financing, Inc.: | | | |
| 3.875% 10/15/30 (b) | | 5,000 | 3,402 |
| 4% 4/15/31 (b) | | 85,000 | 56,949 |
| 4.5% 4/1/30 (b) | | 71,000 | 52,045 |
| 11% 11/15/29 (b) | | 11,698 | 12,825 |
| Liquid Telecommunications Financing PLC 5.5% 9/4/26 (b) | | 55,000 | 34,198 |
| Millicom International Cellular SA 4.5% 4/27/31 (b) | | 5,000 | 4,447 |
| SBA Communications Corp. 3.125% 2/1/29 | | 222,000 | 204,288 |
| Sitios Latinoamerica S.A.B. de CV 5.375% 4/4/32 (b) | | 35,000 | 33,215 |
| Uniti Group LP/Uniti Fiber Holdings, Inc./CSL Capital LLC 6% 1/15/30 (b) | | 223,000 | 163,365 |
| ViaSat, Inc. 5.625% 9/15/25 (b) | | 59,000 | 58,412 |
| Zayo Group Holdings, Inc. 4% 3/1/27 (b) | | 55,000 | 48,006 |
| | | | 1,327,136 |
| Textiles/Apparel - 0.1% | | | |
| Crocs, Inc. 4.125% 8/15/31 (b) | | 17,000 | 15,280 |
| Transportation Ex Air/Rail - 0.2% | | | |
| Golar LNG Ltd. 7% 10/20/25 (b) | | 17,000 | 16,988 |
| Seaspan Corp. 5.5% 8/1/29 (b) | | 30,000 | 28,575 |
| | | | 45,563 |
| Utilities - 4.2% | | | |
| Algonquin Power & Utilities Corp. 4.75% 1/18/82 (c) | | 107,000 | 99,360 |
| DPL, Inc.: | | | |
| 4.125% 7/1/25 | | 147,000 | 144,305 |
| 4.35% 4/15/29 | | 325,000 | 303,857 |
| NextEra Energy Partners LP 4.5% 9/15/27 (b) | | 93,000 | 89,822 |
| PG&E Corp. 5.25% 7/1/30 | | 335,000 | 327,993 |
| TerraForm Power Operating LLC % (b) | | 202,000 | 190,758 |
| | | | 1,156,095 |
TOTAL NONCONVERTIBLE BONDS | | | 25,829,311 |
| TOTAL CORPORATE BONDS (Cost $25,690,104) | | | 26,123,804 |
| | | | |
| Common Stocks - 0.7% |
| | | Shares | Value ($) |
| Energy - 0.1% | | | |
| Cheniere Energy, Inc. | | 200 | 37,052 |
| Healthcare - 0.1% | | | |
| Cano Health, Inc. (f) | | 981 | 10,879 |
| Cano Health, Inc. warrants (f)(g) | | 107 | 389 |
| Centene Corp. (g) | | 205 | 16,160 |
TOTAL HEALTHCARE | | | 27,428 |
| Leisure - 0.0% | | | |
| Topgolf Callaway Brands Corp. (g) | | 1,000 | 10,060 |
| Steel - 0.1% | | | |
| Vallourec SA (g) | | 700 | 11,208 |
| Technology - 0.1% | | | |
| Coherent Corp. (g) | | 285 | 22,216 |
| ON Semiconductor Corp. (g) | | 190 | 14,795 |
TOTAL TECHNOLOGY | | | 37,011 |
| Telecommunications - 0.3% | | | |
| Helios Towers PLC (g) | | 47,600 | 70,890 |
| TOTAL COMMON STOCKS (Cost $197,220) | | | 193,649 |
| | | | |
| Bank Loan Obligations - 1.6% |
| | | Principal Amount (a) | Value ($) |
| Automotive & Auto Parts - 0.0% | | | |
| Power Stop LLC 1LN, term loan CME Term SOFR 3 Month Index + 4.750% 9.9072% 1/26/29 (c)(d)(h) | | 14,961 | 14,363 |
| Chemicals - 0.1% | | | |
| Hexion, Inc. 2LN, term loan CME Term SOFR 1 Month Index + 7.430% 12.7842% 3/15/30 (c)(d)(h) | | 5,000 | 4,479 |
| M2S Group Intermediate Holding Tranche B 1LN, term loan CME Term SOFR 1 Month Index + 4.750% 9.8518% 8/25/31 (c)(d)(h) | | 30,000 | 28,125 |
TOTAL CHEMICALS | | | 32,604 |
| Consumer Products - 0.1% | | | |
| Mattress Firm, Inc. Tranche B 1LN, term loan CME Term SOFR 3 Month Index + 4.250% 9.8462% 9/24/28 (c)(d)(h) | | 15,000 | 14,992 |
| Diversified Financial Services - 0.1% | | | |
| Nexus Buyer LLC Tranche B 1LN, term loan CME Term SOFR 1 Month Index + 4.000% 9.3437% 7/18/31 (c)(d)(h) | | 20,000 | 19,804 |
| Energy - 0.3% | | | |
| EG America LLC Tranche BC 1LN, term loan CME Term SOFR 1 Month Index + 5.500% 11.0716% 2/7/28 (c)(d)(h) | | 4,987 | 4,971 |
| Enstall Group BV Tranche B 1LN, term loan CME Term SOFR 3 Month Index + 4.750% 10.5962% 8/27/28 (c)(d)(f)(h) | | 59,795 | 56,506 |
| Win Waste Innovations Holdings Tranche B 1LN, term loan CME Term SOFR 1 Month Index + 2.750% 8.1112% 3/25/28 (c)(d)(h) | | 15,000 | 14,008 |
TOTAL ENERGY | | | 75,485 |
| Healthcare - 0.1% | | | |
| Cano Health, Inc. 1LN, term loan CME Term SOFR 1 Month Index + 8.000% 13.3346% 6/28/29 (c)(d)(f)(h) | | 5,751 | 5,737 |
| Modivcare, Inc. Tranche B 1LN, term loan CME Term SOFR 3 Month Index + 4.750% 10.0816% 7/1/31 (c)(d)(h) | | 20,000 | 19,475 |
TOTAL HEALTHCARE | | | 25,212 |
| Leisure - 0.3% | | | |
| Bulldog Purchaser, Inc. Tranche B 2LN, term loan CME Term SOFR 3 Month Index + 6.750% 12.0846% 6/14/32 (c)(d)(h) | | 5,000 | 4,958 |
| ClubCorp Holdings, Inc. Tranche B 1LN, term loan CME Term SOFR 3 Month Index + 5.000% 10.5962% 9/18/26 (c)(d)(h) | | 11,431 | 11,443 |
| United PF Holdings LLC 1LN, term loan CME Term SOFR 3 Month Index + 4.000% 9.5137% 12/30/26 (c)(d)(h) | | 70,756 | 64,317 |
TOTAL LEISURE | | | 80,718 |
| Metals/Mining - 0.0% | | | |
| American Rock Salt Co. LLC 1LN, term loan CME Term SOFR 3 Month Index + 4.000% 9.3188% 6/4/28 (c)(d)(h) | | 4,974 | 3,920 |
| Services - 0.4% | | | |
| Ascend Learning LLC 2LN, term loan CME Term SOFR 1 Month Index + 5.750% 11.0967% 12/10/29 (c)(d)(h) | | 5,000 | 4,788 |
| Brand Industrial Services, Inc. Tranche B 1LN, term loan CME Term SOFR 3 Month Index + 4.500% 9.7477% 8/1/30 (c)(d)(h) | | 5,000 | 4,956 |
| Spin Holdco, Inc. Tranche B 1LN, term loan CME Term SOFR 3 Month Index + 4.000% 9.6001% 3/4/28 (c)(d)(h) | | 99,692 | 84,389 |
| Staples, Inc. Tranche B 1LN, term loan CME Term SOFR 3 Month Index + 5.750% 11.0844% 9/10/29 (c)(d)(h) | | 15,000 | 13,650 |
TOTAL SERVICES | | | 107,783 |
| Technology - 0.2% | | | |
| Leia Finco U.S. LLC: | | | |
| 1LN, term loan CME Term SOFR 1 Month Index + 3.250% 7/2/31 (d)(h)(i) | | 25,000 | 24,755 |
| 2LN, term loan CME Term SOFR 1 Month Index + 5.250% 7/2/32 (d)(h)(i) | | 10,000 | 9,783 |
| Polaris Newco LLC: | | | |
| 2LN, term loan CME Term SOFR 1 Month Index + 2.000% 7.4321% 6/4/29 (c)(d)(h) | | 20,000 | 19,669 |
| Tranche B 1LN, term loan CME Term SOFR 3 Month Index + 4.000% 9.5137% 6/2/28 (c)(d)(h) | | 5,000 | 4,958 |
TOTAL TECHNOLOGY | | | 59,165 |
| TOTAL BANK LOAN OBLIGATIONS (Cost $439,703) | | | 434,046 |
| | | | |
| Preferred Securities - 0.6% |
| | | Principal Amount (a) | Value ($) |
| Air Transportation - 0.1% | | | |
| AerCap Holdings NV 5.875% 10/10/79 (c) | | 30,000 | 30,653 |
| Banks & Thrifts - 0.4% | | | |
| Ally Financial, Inc. 4.7% (c)(j) | | 55,000 | 50,104 |
| Citigroup, Inc. 7.125% (c)(j) | | 22,000 | 22,917 |
| M&T Bank Corp.: | | | |
| 3.5% (c)(j) | | 5,000 | 4,423 |
| 5.125% (c)(j) | | 10,000 | 9,898 |
| Wells Fargo & Co. 6.85% (c)(j) | | 20,000 | 20,701 |
TOTAL BANKS & THRIFTS | | | 108,043 |
| Diversified Financial Services - 0.0% | | | |
| Aircastle Ltd. 5.25% (b)(c)(j) | | 10,000 | 10,068 |
| Energy - 0.1% | | | |
| Energy Transfer LP 6.625% (c)(j) | | 15,000 | 14,634 |
| EnLink Midstream Partners LP CME Term SOFR 3 Month Index + 4.370% 9.7156% (c)(d)(j) | | 5,000 | 5,092 |
TOTAL ENERGY | | | 19,726 |
| TOTAL PREFERRED SECURITIES (Cost $165,665) | | | 168,490 |
| | | | |
| Money Market Funds - 0.2% |
| | | Shares | Value ($) |
Fidelity Cash Central Fund 5.39% (k) (Cost $65,848) | | 65,835 | 65,848 |
| | | | |
| TOTAL INVESTMENT IN SECURITIES - 98.8% (Cost $26,558,540) | 26,985,837 |
NET OTHER ASSETS (LIABILITIES) - 1.2% | 318,230 |
| NET ASSETS - 100.0% | 27,304,067 |
| | |
Legend
| (a) | Amount is stated in United States dollars unless otherwise noted. |
| (b) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $20,047,919 or 73.4% of net assets. |
| (c) | Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
| (d) | Coupon is indexed to a floating interest rate which may be multiplied by a specified factor and/or subject to caps or floors. |
| (e) | Security initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
| (h) | Remaining maturities of bank loan obligations may be less than the stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. |
| (i) | The coupon rate will be determined upon settlement of the loan after period end. |
| (j) | Security is perpetual in nature with no stated maturity date. |
| (k) | Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request. |
Affiliated Central Funds
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Affiliate | Value, beginning of period ($) | 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% | 76,427 | 4,976,711 | 4,987,336 | 7,398 | 46 | - | 65,848 | 0.0% |
| Total | 76,427 | 4,976,711 | 4,987,336 | 7,398 | 46 | - | 65,848 | |
| | | | | | | | | |
Amounts in the dividend income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line item in the Statement of Operations, if applicable.
Amounts included in the purchases and sales proceeds columns may include in-kind transactions, if applicable.
Investment Valuation
The following is a summary of the inputs used, as of August 31, 2024, 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 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: | | | | |
|
| Equities: | | | | |
Communication Services | 70,890 | 70,890 | - | - |
Consumer Discretionary | 10,060 | 10,060 | - | - |
Energy | 48,260 | 48,260 | - | - |
Health Care | 27,428 | 16,160 | - | 11,268 |
Information Technology | 37,011 | 37,011 | - | - |
|
| Corporate Bonds | 26,123,804 | - | 26,123,804 | - |
|
| Bank Loan Obligations | 434,046 | - | 371,803 | 62,243 |
|
| Preferred Securities | 168,490 | - | 168,490 | - |
|
| Money Market Funds | 65,848 | 65,848 | - | - |
| Total Investments in Securities: | 26,985,837 | 248,229 | 26,664,097 | 73,511 |
Financial Statements
| Statement of Assets and Liabilities |
As of August 31, 2024 |
| Assets | | | | |
| Investment in securities, at value - See accompanying schedule: | | | | |
Unaffiliated issuers (cost $26,492,692) | $ | 26,919,989 | | |
Fidelity Central Funds (cost $65,848) | | 65,848 | | |
| | | | | |
| | | | | |
| Total Investment in Securities (cost $26,558,540) | | | $ | 26,985,837 |
| Cash | | | | 7,689 |
| Receivable for investments sold | | | | 206,825 |
| Interest receivable | | | | 427,541 |
| Distributions receivable from Fidelity Central Funds | | | | 1,372 |
| Other receivables | | | | 4 |
Total assets | | | | 27,629,268 |
| Liabilities | | | | |
| Payable for investments purchased | $ | 157,799 | | |
| Distributions payable | | 148,925 | | |
| Accrued management fee | | 12,084 | | |
| Other payables and accrued expenses | | 6,393 | | |
| Total liabilities | | | | 325,201 |
| Net Assets | | | $ | 27,304,067 |
| Net Assets consist of: | | | | |
| Paid in capital | | | $ | 27,469,675 |
| Total accumulated earnings (loss) | | | | (165,608) |
| Net Assets | | | $ | 27,304,067 |
Net Asset Value, offering price and redemption price per share ($27,304,067 ÷ 575,000 shares) | | | $ | 47.49 |
| Statement of Operations |
| Year ended August 31, 2024 |
| Investment Income | | | | |
| Dividends | | | $ | 9,310 |
| Interest | | | | 1,179,207 |
| Income from Fidelity Central Funds | | | | 7,398 |
| Total income | | | | 1,195,915 |
| Expenses | | | | |
| Management fee | $ | 87,233 | | |
| Independent trustees' fees and expenses | | 62 | | |
| Miscellaneous | | 1,826 | | |
| Total expenses before reductions | | 89,121 | | |
| Expense reductions | | (505) | | |
| Total expenses after reductions | | | | 88,616 |
| Net Investment income (loss) | | | | 1,107,299 |
| Realized and Unrealized Gain (Loss) | | | | |
| Net realized gain (loss) on: | | | | |
| Investment Securities: | | | | |
| Unaffiliated issuers | | (80,780) | | |
| Fidelity Central Funds | | 46 | | |
| Foreign currency transactions | | 24 | | |
| Total net realized gain (loss) | | | | (80,710) |
| Change in net unrealized appreciation (depreciation) on investment securities | | | | 897,906 |
| Net gain (loss) | | | | 817,196 |
| Net increase (decrease) in net assets resulting from operations | | | $ | 1,924,495 |
| Statement of Changes in Net Assets |
| |
| | Year ended August 31, 2024 | | Year ended August 31, 2023 |
| Increase (Decrease) in Net Assets | | | | |
| Operations | | | | |
| Net investment income (loss) | $ | 1,107,299 | $ | 609,041 |
| Net realized gain (loss) | | (80,710) | | (359,381) |
| Change in net unrealized appreciation (depreciation) | | 897,906 | | 341,668 |
| Net increase (decrease) in net assets resulting from operations | | 1,924,495 | | 591,328 |
| Distributions to shareholders | | (1,107,175) | | (596,600) |
| | | | | |
| Share transactions | | | | |
| Proceeds from sales of shares | | 17,440,514 | | - |
| | | | | |
Net increase (decrease) in net assets resulting from share transactions | | 17,440,514 | | - |
| Total increase (decrease) in net assets | | 18,257,834 | | (5,272) |
| | | | | |
| Net Assets | | | | |
| Beginning of period | | 9,046,233 | | 9,051,505 |
| End of period | $ | 27,304,067 | $ | 9,046,233 |
| | | | | |
| Other Information | | | | |
| Shares | | | | |
| Sold | | 375,000 | | - |
| Net increase (decrease) | | 375,000 | | - |
| | | | | |
Financial Highlights
Fidelity® Sustainable High Yield ETF |
| |
| Years ended August 31, | | 2024 | | 2023 | | 2022 A |
Selected Per-Share Data | | | | | | |
| Net asset value, beginning of period | $ | 45.23 | $ | 45.26 | $ | 50.00 |
| Income from Investment Operations | | | | | | |
Net investment income (loss) B,C | | 3.195 | | 3.045 | | 1.404 |
| Net realized and unrealized gain (loss) | | 2.168 | | (.092) | | (4.758) |
| Total from investment operations | | 5.363 | | 2.953 | | (3.354) |
| Distributions from net investment income | | (3.103) | | (2.983) | | (1.386) |
| Total distributions | | (3.103) | | (2.983) | | (1.386) |
| Net asset value, end of period | $ | 47.49 | $ | 45.23 | $ | 45.26 |
Total Return D,E,F | | | | 6.83% | | (6.78)% |
Ratios to Average Net Assets C,G,H | | | | | | |
| Expenses before reductions | | .56% | | .55% | | .55% I |
| Expenses net of fee waivers, if any | | | | .55% | | .55% I |
| Expenses net of all reductions | | .56% | | .55% | | .55% I |
| Net investment income (loss) | | 6.95% | | 6.78% | | 5.49% I |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $ | 27,304 | $ | 9,046 | $ | 9,052 |
Portfolio turnover rate J | | | | 48% | | 24% L |
AFor the period February 15, 2022 (commencement of operations) through August 31, 2022.
BCalculated based on average shares outstanding during the period.
CNet investment income (loss) is affected by the timing of the declaration of dividends by any underlying mutual funds or exchange-traded funds (ETFs). Net investment income (loss) of any mutual funds or ETFs is not included in the Fund's net investment income (loss) ratio.
DBased on net asset value.
ETotal returns for periods of less than one year are not annualized.
FTotal returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
GFees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
HExpense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
IAnnualized.
JAmount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
KPortfolio turnover rate excludes securities received or delivered in-kind.
LAmount not annualized.
Notes to Financial Statements
For the period ended August 31, 2024
1. Organization.
Fidelity Sustainable High Yield ETF (the Fund) is an exchange-traded fund of Fidelity Covington Trust (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing 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 investing fund. These strategies are consistent with the investment objectives of the investing 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 investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense RatioA |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% |
A Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds, which are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. 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 Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. 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. 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 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 - 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 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 services or from brokers who make markets in such securities. Corporate bonds, bank loan obligations and preferred securities are valued by pricing services who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing services. For foreign debt securities, when significant market or security specific events arise, valuations may be determined in good faith in accordance with procedures adopted by the Board. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances. The Fund invests a significant portion of its assets in below investment grade securities. The value of these securities can be more volatile due to changes in the credit quality of the issuer and is sensitive to changes in economic, market and regulatory conditions.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing service on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, Exchange-Traded Funds (ETFs) and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 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.
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 August 31, 2024 is included at the end of the Fund's Schedule of Investments.
Foreign Currency. Certain Funds may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received, and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes and for processing shareholder transactions, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period and prior business day, respectively. The NAV per share for processing shareholder transactions is calculated as of the close of business (normally 4:00 p.m. Eastern time) of the New York Stock Exchange, Archipelago Exchange (NYSE Arca). Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Interest income is accrued as earned and includes coupon interest and amortization of premium and accretion of discount on debt securities as applicable. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 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. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. 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 U.S. Federal income taxes is required. As of August 31, 2024, the Fund did not have any unrecognized tax benefits in the financial statements; nor is the Fund aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The 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. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
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. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC), partnerships, certain conversion ratio adjustments, prior period premium and discount on debt securities, capital loss carryforwards and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $738,662 |
| Gross unrealized depreciation | (314,049) |
| Net unrealized appreciation (depreciation) | $424,613 |
| Tax Cost | $26,561,224 |
The tax-based components of distributable earnings as of period end were as follows:
| Undistributed ordinary income | $18,284 |
| Capital loss carryforward | $(608,504) |
| Net unrealized appreciation (depreciation) on securities and other investments | $424,613 |
Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. The capital loss carryforward information presented below, including any applicable limitation, is estimated as of fiscal period end and is subject to adjustment.
Short-term | $(253,982) |
Long-term | (354,522) |
| Total capital loss carryforward | $(608,504) |
The tax character of distributions paid was as follows:
| | August 31, 2024 | August 31, 2023 |
| Ordinary Income | $1,107,175 | $596,600 |
Restricted Securities (including Private Placements). Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities held at period end is included at the end of the Schedule of Investments, if applicable.
Loans and Other Direct Debt Instruments. Direct debt instruments are interests in amounts owed to lenders by corporate or other borrowers. These instruments may be in the form of loans, trade claims or other receivables and may include standby financing commitments such as revolving credit facilities that obligate a fund to supply additional cash to the borrower on demand. Loans may be acquired through assignment, participation, or may be made directly to a borrower. Such instruments are presented in the Bank Loan Obligations section in the Schedule of Investments. Certain funds may also invest in unfunded loan commitments, which are contractual obligations for future funding. Information regarding unfunded commitments is included at the end of the Schedule of Investments, if applicable.
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| Fidelity Sustainable High Yield ETF | 9,917,240 | 10,099,573 |
Securities received and delivered in-kind through subscriptions and redemptions are noted in the table below.
| | In-Kind Subscriptions ($) | In-Kind Redemptions ($) | |
| Fidelity Sustainable High Yield ETF | 17,094,067 | - | |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) provides the Fund with investment management related services for which the Funds pay a monthly management fee that is based on an annual rate of .55% of average net assets. Under the management contract, the investment adviser pays all other expenses, except the compensation of the independent Trustees and certain miscellaneous expenses such as proxy and shareholders meeting expenses.
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount ($) |
| Fidelity Sustainable High Yield ETF | 4 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note. Interfund trades during the period are noted in the table below.
| | Purchases ($) | Sales ($) | Realized Gain (Loss)($) |
| Fidelity Sustainable High Yield ETF | 27,439 | 7,164 | 2,962 |
Sub-Advisory Arrangements. Effective March 1, 2024, each Fund's sub-advisory agreements with FMR Investment Management (UK) Limited, Fidelity Management & Research (Hong Kong) Limited, and Fidelity Management & Research (Japan) Limited were amended to provide that the investment adviser pays each sub-adviser monthly fees equal to 110% of the sub-adviser's costs for providing sub-advisory services.
6. Expense Reductions.
Through arrangements with the Fund's custodian, credits realized as a result of certain uninvested cash balances were used to reduce the Fund's expenses by $505.
7. Share Transactions.
Funds issue and redeem shares at NAV only with certain authorized participants in large increments known as Creation Units. Purchases of Creation Units are made by tendering a basket of designated securities and/or cash to a fund and redemption proceeds are paid with a basket of securities from a fund's portfolio with a balancing cash component to equate the market value of the basket of securities delivered or redeemed to the NAV per Creation Unit on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery. A fund's shares are available in smaller increments to investors in the secondary market at market prices and may be subject to commissions. Authorized participants pay a transaction fee to the shareholder servicing agent when purchasing and redeeming Creation Units of a fund. The transaction fee is used to offset the costs associated with the issuance and redemption of Creation Units.
8. Other.
A 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, a fund may also enter into contracts that provide general indemnifications. A fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against a fund. The risk of material loss from such claims is considered remote.
9. Risk and Uncertainties.
Many factors affect a fund's performance. Developments that disrupt global economies and financial markets, such as pandemics, epidemics, outbreaks of infectious diseases, war, terrorism, and environmental disasters, may significantly affect a fund's investment performance. The effects of these developments to a fund will be impacted by the types of securities in which a fund invests, the financial condition, industry, economic sector, and geographic location of an issuer, and a fund's level of investment in the securities of that issuer. Significant concentrations in security types, issuers, industries, sectors, and geographic locations may magnify the factors that affect a fund's performance.
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Fidelity Covington Trust and Shareholders of Fidelity Sustainable High Yield ETF
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Fidelity Sustainable High Yield ETF (one of the funds constituting Fidelity Covington Trust, referred to hereafter as the "Fund") as of August 31, 2024, the related statement of operations for the year ended August 31, 2024, the statement of changes in net assets for each of the two years in the period ended August 31, 2024, including the related notes, and the financial highlights for each of the two years in the period ended August 31, 2024 and for the period February 15, 2022 (commencement of operations) through August 31, 2022 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of August 31, 2024, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended August 31, 2024 and the financial highlights for each of the two years in the period ended August 31, 2024 and for the period February 15, 2022 (commencement of operations) through August 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of August 31, 2024 by correspondence with the custodian, issuers of privately offered securities, agent banks and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
October 14, 2024
We have served as the auditor of one or more investment companies in the Fidelity group of funds since 1932.
Distributions
(Unaudited)
The dividend and capital gains distributions for the fund(s) are available on Fidelity.com or Institutional.Fidelity.com.
A total of 0.15% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund designates $472,975 of distributions paid in the calendar year 2023 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.
The fund designates $1,096,238 of distributions paid during the fiscal year ended 2024 as qualifying to be taxed as section 163(j) interest dividends.
The fund will notify shareholders in January 2025 of amounts for use in preparing 2024 income tax returns.
Item 8: Changes in and Disagreements with Accountants for Open-End Management Investment Companies
(Unaudited)
Note: This is not applicable for any fund included in this document.
Item 9: Proxy Disclosures for Open-End Management Investment Companies
(Unaudited)
| A special meeting of shareholders was held on July 16, 2024. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting. |
| Proposal 1 |
| To elect a Board of Trustees. |
| | # of Votes | % of Votes |
| Bettina Doulton |
| Affirmative | 38,080,283,823.03 | 97.17 |
| Withheld | 1,109,333,237.47 | 2.83 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Robert A. Lawrence |
| Affirmative | 37,781,807,251.33 | 96.41 |
| Withheld | 1,407,809,809.17 | 3.59 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Vijay C. Advani |
| Affirmative | 37,869,526,083.09 | 96.63 |
| Withheld | 1,320,090,977.41 | 3.37 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Thomas P. Bostick |
| Affirmative | 38,025,875,898.31 | 97.03 |
| Withheld | 1,163,741,162.19 | 2.97 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Donald F. Donahue |
| Affirmative | 37,825,198,238.79 | 96.52 |
| Withheld | 1,364,418,821.71 | 3.48 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Vicki L. Fuller |
| Affirmative | 38,031,768,119.99 | 97.05 |
| Withheld | 1,157,848,940.51 | 2.95 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Patricia L. Kampling |
| Affirmative | 38,062,391,881.90 | 97.12 |
| Withheld | 1,127,225,178.60 | 2.88 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Thomas A. Kennedy |
| Affirmative | 37,891,434,776.27 | 96.69 |
| Withheld | 1,298,182,284.23 | 3.31 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Oscar Munoz |
| Affirmative | 37,976,932,673.73 | 96.91 |
| Withheld | 1,212,684,386.77 | 3.09 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Karen B. Peetz |
| Affirmative | 38,011,822,212.28 | 96.99 |
| Withheld | 1,177,794,848.22 | 3.01 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| David M. Thomas |
| Affirmative | 37,976,058,118.16 | 96.90 |
| Withheld | 1,213,558,942.34 | 3.10 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Susan Tomasky |
| Affirmative | 37,845,471,684.67 | 96.57 |
| Withheld | 1,344,145,375.83 | 3.43 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| Michael E. Wiley |
| Affirmative | 37,736,569,620.69 | 96.29 |
| Withheld | 1,453,047,439.81 | 3.71 |
| TOTAL | 39,189,617,060.50 | 100.00 |
| | | |
| Proposal 1 reflects trust-wide proposal and voting results. |
Item 10: Remuneration Paid to Directors, Officers, and others of Open-End Management Investment Companies
(Unaudited)
Note: This information is disclosed as part of the financial statements for each Fund as part of Item 7: Financial Statements and Financial Highlights for Open-End Management Investment companies.
Item 11: Statement Regarding Basis for Approval of Investment Advisory Contract
(Unaudited)
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Sustainable High Yield ETF
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), considers the renewal of the fund's management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. 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, acting directly and through its Committees (each of which is composed of and chaired by Independent Trustees), requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
At its May 2024 meeting, the Board 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 provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness relative to peer funds of the fund's management fee and total expense ratio; (iii) the total costs of the services provided by and the profits realized by FMR and its affiliates (Fidelity) from their respective relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders. The Board also considered the broad range of investment choices available to shareholders from FMR's competitors and that the fund's shareholders have chosen to invest in the fund, which is part of the Fidelity family of funds. The Board's decision to renew the Advisory Contracts was not based on any single factor.
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 Contract was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contract was fair and reasonable in light of all of the surrounding circumstances.
Nature, Extent, and Quality of Services Provided. The Board considered staffing as it relates to the fund, including the backgrounds and experience of investment personnel of the Investment Advisers, and also considered the Investment Advisers' implementation of the fund's investment program. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation programs and whether the structures provide appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted the resources devoted to expansion of Fidelity's global investment organization, and 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. Further, the Board considered 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 Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory and administrative services provided by the Investment Advisers and their affiliates under the Advisory Contracts and under a separate agreement covering pricing and bookkeeping services for each fund; (ii) the nature and extent of Fidelity's supervision of third party service providers, principally State Street Bank and Trust Company, each fund's transfer agent and custodian; and (iii) the resources devoted by Fidelity to, and the record of compliance with, each fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered each fund's securities lending activities and any payments made to Fidelity relating to securities lending under a separate agreement.
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 and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials, and asset allocation tools. The Board also considered that it reviews customer service metrics such as telephone response times, continuity of services on the website and metrics addressing services at Fidelity Investor Centers.
Investment in a Large Fund Family. The Board considered the benefits to shareholders 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 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 and/or the Fidelity funds in general.
Investment Performance. The Board took into account discussions that occur with representatives of the Investment Advisers, and reports that it receives, at Board meetings throughout the year, relating to fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considered annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). The Board also considered information about performance attribution. In its ongoing evaluation of fund investment performance, the Board gives particular attention to information indicating changes in performance of the funds over different time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. The Independent Trustees generally give greater weight to fund performance over longer time periods than over shorter time periods. Depending on the circumstances, the Independent Trustees may be satisfied with a fund's performance notwithstanding that it lags its benchmark index or peer group for certain periods.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board was provided with information regarding industry trends in management fees and expenses. In its review of the fund's management fee and total expense ratio, the Board considered the fund's all-inclusive fee rate. The Board also considered other expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees, paid by the investment adviser under the all-inclusive arrangement. The Board noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund.
Comparisons of Management Fees and Total Expense Ratios. Among other things, the Board reviewed data for selected groups of competitive funds and classes (referred to as "mapped groups") that were compiled by Fidelity based on combining similar investment objective categories (as classified by Morningstar) that have comparable investment mandates. The data reviewed by the Board included (i) gross management fee comparisons (before taking into account expense reimbursements or caps) relative to the total universe of funds within the mapped group; (ii) gross management fee comparisons relative to a subset of non-Fidelity funds in the mapped group that are similar in size and management fee structure to the fund (referred to as the "asset size peer group"); (iii) total expense comparisons of the fund relative to funds and classes in the mapped group that have a similar sales load structure to the fund (referred to as the "similar sales load structure group"); and (iv) total expense comparisons of the fund relative to funds and classes in the similar sales load structure group that are similar in size and management fee structure to the fund (referred to as the "total expense asset size peer group"). The total expense asset size peer group comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The information provided to the Board indicated that the fund's management fee rate ranked above the competitive median of the mapped group for the 12-month period ended September 30, 2023 and above the competitive median of the asset size peer group for the 12-month period ended September 30, 2023. Further, the information provided to the Board indicated that the total expense ratio of the fund ranked above the competitive median of the similar sales load structure group for the 12-month period ended September 30, 2023 and above the competitive median of the total expense asset size peer group for the 12-month period ended September 30, 2023.
The Board considered that the fund has an all-inclusive management fee structure, which covers expenses for services beyond portfolio management, and that Fidelity believes that management fee comparisons are particularly unhelpful in the context of this fund and that total expense comparisons are more useful. The Board noted that Fidelity believes that, although the fund's total expenses rank above median, the fees that the fund is charged are reasonable for the overall value of services shareholders receive.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
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. Further, based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the fund's total expense ratio 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 servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information 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 and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the 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 potential indirect benefits such businesses may have received as a result of their association with Fidelity's fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board's consideration of these matters was informed by the findings of a joint ad hoc committee created by it and the boards of other Fidelity funds to evaluate potential fall-out benefits.
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.
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 as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board recognized that, due to the fund's current contractual arrangements, its expense ratio will not decline if the fund's operating costs decrease as assets grow, or rise as assets decrease. The Board also noted that a committee created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity 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 concluded, taking into account the analysis of the 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, but not limited to: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) the operation of performance fees and the rationale for implementing performance fees on certain categories of funds but not others; (iii) Fidelity's pricing philosophy compared to competitors; (iv) fund profitability methodology and data; (v) evaluation of competitive fund data and peer group classifications and fee and expense comparisons; (vi) the management fee and expense structures for different funds and classes and information about the differences between various fee and expense structures; (vii) the variable management fee implemented for certain funds effective March 1, 2024; and (viii) information regarding other accounts managed by Fidelity and the funds' sub-advisory arrangements.
Conclusion. Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board, including the Independent Trustees, concluded that the advisory and sub-advisory fee arrangements are fair and reasonable in light of all of the surrounding circumstances and that the fund's Advisory Contracts should be renewed through May 31, 2025.
1.9904449.102
SHY-ANN-1024
Item 8.
Changes in and Disagreements with Accountants for Open-End Management Investment Companies
See Item 7.
Item 9.
Proxy Disclosures for Open-End Management Investment Companies
See Item 7.
Item 10.
Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies
See Item 7.
Item 11.
Statement Regarding Basis for Approval of Investment Advisory Contract
See Item 7.
Item 12.
Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 13.
Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 14.
Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 15.
Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the trust’s Board of Trustees.
Item 16.
Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the trust’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(a)(ii) There was no change in the trust’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the 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 17.
Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable.
Item 18.
Recovery of Erroneously Awarded Compensation
(a)
Not applicable.
(b)
Not applicable.
Item 19.
Exhibits
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 Covington Trust
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By: | /s/Stacie M. Smith |
| Stacie M. Smith |
| President and Treasurer (Principal Executive Officer) |
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Date: | October 23, 2024 |
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.
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By: | /s/Stacie M. Smith |
| Stacie M. Smith |
| President and Treasurer (Principal Executive Officer) |
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Date: | October 23, 2024 |
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By: | /s/John J. Burke III |
| John J. Burke III |
| Chief Financial Officer (Principal Financial Officer) |
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Date: | October 23, 2024 |
