In Chapter 1 I argued that engagement with fictional stories proceeds by accumulating information in fictional records, understood as a corpus of what the audience think is conveyed by the author. In this chapter I introduce the notion of an internal record, that is, at the most general level, a corpus representing what audiences think is conveyed by a character in a particular fiction. We will see that internal records of this kind play a central role in both first-person and second-person stories. This chapter further introduces the idea of a derived context, which will play a central role in Part II of the book.