Fidelity® Commodity Strategy Central Fund
Semi-Annual Report January 31, 2018 |
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Contents
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A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
Consolidated Investment Summary (Unaudited)
The information in the following tables is based on the Fund's commodity-linked investments and excludes short-term investment-grade debt securities, cash and cash equivalents.
Commodity Instruments as of January 31, 2018*
| % of fund’s total commodity-linked investments |
| | Commodity Futures | 100.0% |
Commodity Sector Diversification as of January 31, 2018*
| % of fund’s total commodity-linked investments |
| | Energy | 34.0% |
| | Agriculture | 25.1% |
| | Precious Metals | 15.3% |
| | Industrial Metals | 19.1% |
| | Livestock | 6.5% |
* The Fund does not invest directly in physical commodities.
Consolidated Schedule of Investments January 31, 2018 (Unaudited)
Showing Percentage of Net Assets
| U.S. Treasury Obligations - 5.9% | | | |
| | | Principal Amount | Value |
| U.S. Treasury Bills, yield at date of purchase 1.1% to 1.32% 4/26/18 (a) | | | |
| (Cost $44,869,520) | | 45,000,000 | 44,851,163 |
| | | Shares | Value |
|
| Money Market Funds - 93.5% | | | |
| Fidelity Cash Central Fund, 1.39% (b) | | | |
| (Cost $712,153,879) | | 712,088,429 | 712,230,847 |
| TOTAL INVESTMENT IN SECURITIES - 99.4% | | | |
| (Cost $757,023,399) | | | 757,082,010 |
| NET OTHER ASSETS (LIABILITIES) - 0.6% | | | 4,685,573 |
| NET ASSETS - 100% | | | $761,767,583 |
| Futures Contracts | | | | | |
| | Number of contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/(Depreciation) |
| Purchased | | | | | |
| Commodity Futures Contracts | | | | | |
| CBOT Corn Contracts (United States) | 420 | July 2018 | $7,922,250 | $(32,696) | $(32,696) |
| CBOT Corn Contracts (United States) | 936 | March 2018 | 16,918,200 | 282,911 | 282,911 |
| CBOT Corn Contracts (United States) | 857 | May 2018 | 15,833,075 | 589,957 | 589,957 |
| CBOT KC HRW Wheat Contracts (United States) | 145 | May 2018 | 3,494,500 | 303,900 | 303,900 |
| CBOT KC HRW Wheat Contracts (United States) | 136 | Sept. 2018 | 3,483,300 | 155,483 | 155,483 |
| CBOT Soybean Contracts (United States) | 450 | Nov. 2018 | 22,753,125 | 620,550 | 620,550 |
| CBOT Soybean Contracts (United States) | 260 | May 2018 | 13,091,000 | 64,082 | 64,082 |
| CBOT Soybean Meal Contracts (United States) | 570 | Dec. 2018 | 19,328,700 | 360,718 | 360,718 |
| CBOT Soybean Meal Contracts (United States) | 59 | March 2018 | 1,993,020 | 122,131 | 122,131 |
| CBOT Soybean Meal Contracts (United States) | 15 | May 2018 | 512,250 | (1,402) | (1,402) |
| CBOT Soybean Oil Contracts (United States) | 490 | May 2018 | 9,784,320 | 93,067 | 93,067 |
| CBOT Soybean Oil Contracts (United States) | 496 | Dec. 2018 | 10,049,952 | 115,681 | 115,681 |
| CBOT Wheat Contracts (United States) | 50 | March 2018 | 1,129,375 | 22,607 | 22,607 |
| CBOT Wheat Contracts (United States) | 581 | May 2018 | 13,522,775 | 714,555 | 714,555 |
| CBOT Wheat Contracts (United States) | 346 | Sept. 2018 | 8,515,925 | 112,927 | 112,927 |
| CME Lean Hogs Contracts (United States) | 186 | Oct. 2018 | 5,209,860 | (72,963) | (72,963) |
| CME Lean Hogs Contracts (United States) | 179 | April 2018 | 5,173,100 | 107,898 | 107,898 |
| CME Live Cattle Contracts (United States) | 569 | April 2018 | 27,977,730 | 697,149 | 697,149 |
| CME Live Cattle Contracts (United States) | 238 | June 2018 | 10,955,140 | 208,939 | 208,939 |
| COMEX Copper Contracts (United States) | 170 | March 2018 | 13,612,750 | 2,113,812 | 2,113,812 |
| COMEX Copper Contracts (United States) | 266 | May 2018 | 21,436,275 | (104,890) | (104,890) |
| COMEX Copper Contracts (United States) | 216 | July 2018 | 17,494,363 | 754,890 | 754,890 |
| COMEX Gold 100 oz. Contracts (United States) | 663 | April 2018 | 89,453,790 | 1,469,372 | 1,469,372 |
| COMEX Silver Contracts (United States) | 312 | March 2018 | 27,012,880 | 379,857 | 379,857 |
| ICE Brent Crude Contracts (United Kingdom) | 970 | March 2018 | 66,493,400 | 167,296 | 167,296 |
| ICE Coffee 'C' Contracts (United States) | 199 | May 2018 | 9,268,425 | (114,577) | (114,577) |
| ICE Cotton No. 2 Contracts (United States) | 364 | March 2018 | 14,064,960 | 360,506 | 360,506 |
| ICE Cotton No. 2 Contracts (United States) | 136 | Dec. 2018 | 5,066,680 | 141,078 | 141,078 |
| ICE Sugar No. 11 Contracts (United States) | 931 | May 2018 | 13,941,166 | (341,124) | (341,124) |
| LME Aluminum Contracts (United Kingdom) | 204 | July 2018 | 11,373,000 | 851,017 | 851,017 |
| LME Aluminum Contracts (United Kingdom) | 515 | May 2018 | 28,617,906 | (163,307) | (163,307) |
| LME Nickel Contracts (United Kingdom) | 93 | July 2018 | 7,615,863 | 1,308,477 | 1,308,477 |
| LME Nickel Contracts (United Kingdom) | 180 | May 2018 | 14,700,420 | (77,340) | (77,340) |
| LME Zinc Contracts (United Kingdom) | 94 | July 2018 | 8,288,450 | 812,785 | 812,785 |
| LME Zinc Contracts (United Kingdom) | 252 | May 2018 | 22,292,550 | 293,081 | 293,081 |
| NYMEX Gasoline RBOB Contracts (United States) | 40 | Sept. 2018 | 3,317,328 | 197,574 | 197,574 |
| NYMEX Gasoline RBOB Contracts (United States) | 183 | March 2018 | 14,551,904 | 344,594 | 344,594 |
| NYMEX Natural Gas Contracts (United States) | 935 | Feb. 2018 | 27,760,150 | (632,929) | (632,929) |
| NYMEX Natural Gas Contracts (United States) | 778 | April 2018 | 22,095,200 | 1,256,443 | 1,256,443 |
| NYMEX Natural Gas Contracts (United States) | 765 | June 2018 | 22,260,800 | 1,501,074 | 1,501,074 |
| NYMEX NY Harbor ULSD Contracts (United States) | 99 | March 2018 | 8,590,793 | 906,703 | 906,703 |
| NYMEX NY Harbor ULSD Contracts (United States) | 324 | May 2018 | 27,787,536 | 859,921 | 859,921 |
| NYMEX WTI Crude Oil Contracts (United States) | 452 | August 2018 | 28,225,839 | 2,743,154 | 2,743,154 |
| NYMEX WTI Crude Oil Contracts (United States) | 165 | Feb. 2018 | 10,695,660 | 1,172,506 | 1,172,506 |
| NYMEX WTI Crude Oil Contracts (United States) | 411 | April 2018 | 26,447,850 | (379,319) | (379,319) |
| TOTAL FUTURES CONTRACTS | | | | | $20,286,148 |
The notional amount of futures purchased as a percentage of Net Assets is 99.8%
For the period, the average monthly underlying face amount at value for futures contracts in the aggregate was $725,916,000
Legend
(a) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At period end, the value of securities pledged amounted to $26,874,817.
(b) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $4,048,174 |
| Total | $4,048,174 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Consolidated Statement of Operations if applicable.
Consolidated Subsidiary
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Dividend Income | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period |
| Geode Commodity Return Central Cayman Ltd. | $105,062,037 | $-- | $-- | $-- | $-- | $60,056,570 | $165,118,607 |
Investment Valuation
The following is a summary of the inputs used, as of January 31, 2018, 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 Consolidated Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| U.S. Government and Government Agency Obligations | $44,851,163 | $-- | $44,851,163 | $-- |
| Money Market Funds | 712,230,847 | 712,230,847 | -- | -- |
| Total Investments in Securities: | $757,082,010 | $712,230,847 | $44,851,163 | $-- |
| Derivative Instruments: | | | | |
| Assets | | | | |
| Futures Contracts | $22,206,695 | $22,206,695 | $-- | $-- |
| Total Assets | $22,206,695 | $22,206,695 | $-- | $-- |
| Liabilities | | | | |
| Futures Contracts | $(1,920,547) | $(1,920,547) | $-- | $-- |
| Total Liabilities | $(1,920,547) | $(1,920,547) | $-- | $-- |
| Total Derivative Instruments: | $20,286,148 | $20,286,148 | $-- | $-- |
Value of Derivative Instruments
The following table is a summary of the Fund's value of derivative instruments by primary risk exposure as of January 31, 2018. For additional information on derivative instruments, please refer to the Derivative Instruments section in the accompanying Notes to Consolidated Financial Statements.
| Primary Risk Exposure / Derivative Type | Value |
| | Asset | Liability |
| Commodity Risk | | |
| Futures Contracts(a) | $22,206,695 | $(1,920,547) |
| Total Commodity Risk | 22,206,695 | (1,920,547) |
| Total Value of Derivatives | $22,206,695 | $(1,920,547) |
(a) Reflects gross cumulative appreciation (depreciation) on futures contracts as presented in the Consolidated Schedule of Investments. In the Consolidated Statement of Assets and Liabilities, the period end daily variation margin is included in receivable or payable for daily variation margin on futures contracts, and the net cumulative appreciation (depreciation) is included in net unrealized appreciation (depreciation).
The following table is a summary of the Fund's derivatives inclusive of potential netting arrangements.
| Counterparty | Value of Derivative Assets | Value of Derivative Liabilities | Collateral Received(a) | Collateral Pledged(a) | Net(b) |
| Exchange Traded Futures | $22,206,695 | $(1,920,547) | $-- | $-- | $20,286,148 |
| Total | $22,206,695 | $(1,920,547) | | | |
(a) Reflects collateral received from or pledged to an individual counterparty, excluding any excess or initial collateral amounts.
(b) Net represents the receivable / (payable) that would be due from / (to) the counterparty in an event of default. Netting may be allowed across transactions traded under the same legal agreement with the same legal entity. Please refer to Derivative Instruments - Risk Exposures and the Use of Derivative Instruments section in the accompanying Notes to Consolidated Financial Statements.
See accompanying notes which are an integral part of the consolidated financial statements.
Consolidated Financial Statements
Consolidated Statement of Assets and Liabilities
| | | January 31, 2018 (Unaudited) |
| Assets | | |
Investment in securities, at value — See accompanying schedule:
Unaffiliated issuers (cost $44,869,520) | $44,851,163 | |
| Fidelity Central Funds (cost $712,153,879) | 712,230,847 | |
| Total Investment in Securities (cost $757,023,399) | | $757,082,010 |
| Receivable for fund shares sold | | 318,746 |
| Distributions receivable from Fidelity Central Funds | | 853,641 |
| Receivable for daily variation margin on futures contracts | | 8,826,918 |
| Prepaid expenses | | 6,250 |
| Other receivables | | 43 |
| Total assets | | 767,087,608 |
| Liabilities | | |
| Payable for fund shares redeemed | $5,280,149 | |
| Accrued management fee | 39,337 | |
| Other payables and accrued expenses | 539 | |
| Total liabilities | | 5,320,025 |
| Net Assets | | $761,767,583 |
| Net Assets consist of: | | |
| Paid in capital | | $731,518,082 |
| Undistributed net investment income | | 1,101,277 |
| Accumulated undistributed net realized gain (loss) on investments | | 8,803,465 |
| Net unrealized appreciation (depreciation) on investments | | 20,344,759 |
| Net Assets, for 109,334,644 shares outstanding | | $761,767,583 |
| Net Asset Value, offering price and redemption price per share ($761,767,583 ÷ 109,334,644 shares) | | $6.97 |
See accompanying notes which are an integral part of the consolidated financial statements.
Consolidated Statement of Operations
| | | Six months ended January 31, 2018 (Unaudited) |
| Investment Income | | |
| Interest | | $244,175 |
| Income from Fidelity Central Funds | | 4,048,174 |
| Total income | | 4,292,349 |
| Expenses | | |
| Management fee | $187,826 | |
| Custodian fees and expenses | 1,540 | |
| Independent trustees' fees and expenses | 1,335 | |
| Subsidiary directors' fees | 7,500 | |
| Total expenses before reductions | 198,201 | |
| Expense reductions | (425) | 197,776 |
| Net investment income (loss) | | 4,094,573 |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | (3,850) | |
| Futures contracts | 61,236,352 | |
| Total net realized gain (loss) | | 61,232,502 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | (15,245) | |
| Futures contracts | (1,676,012) | |
| Total change in net unrealized appreciation (depreciation) | | (1,691,257) |
| Net gain (loss) | | 59,541,245 |
| Net increase (decrease) in net assets resulting from operations | | $63,635,818 |
See accompanying notes which are an integral part of the consolidated financial statements.
Consolidated Statement of Changes in Net Assets
| | Six months ended January 31, 2018 (Unaudited) | Year ended July 31, 2017 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $4,094,573 | $3,645,609 |
| Net realized gain (loss) | 61,232,502 | (27,961,301) |
| Change in net unrealized appreciation (depreciation) | (1,691,257) | 25,314,082 |
| Net increase (decrease) in net assets resulting from operations | 63,635,818 | 998,390 |
| Distributions to shareholders from net investment income | (5,458,833) | (1,603,189) |
| Share transactions | | |
| Proceeds from sales of shares | 52,365,430 | 405,139,405 |
| Reinvestment of distributions | 3,945,500 | 952,469 |
| Cost of shares redeemed | (60,655,626) | (121,706,924) |
| Net increase (decrease) in net assets resulting from share transactions | (4,344,696) | 284,384,950 |
| Total increase (decrease) in net assets | 53,832,289 | 283,780,151 |
| Net Assets | | |
| Beginning of period | 707,935,294 | 424,155,143 |
| End of period | $761,767,583 | $707,935,294 |
| Other Information | | |
| Undistributed net investment income end of period | $1,101,277 | $2,465,537 |
| Shares | | |
| Sold | 7,843,514 | 62,323,473 |
| Issued in reinvestment of distributions | 607,537 | 148,860 |
| Redeemed | (9,129,919) | (19,409,354) |
| Net increase (decrease) | (678,868) | 43,062,979 |
See accompanying notes which are an integral part of the consolidated financial statements.
Consolidated Financial Highlights
Fidelity Commodity Strategy Central Fund
| | Six months ended (Unaudited) January 31, | Years endedJuly 31, | | | | |
| | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $6.43 | $6.34 | $6.90 | $9.65 | $9.54 | $10.92 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .04 | .04 | .02 | .01 | .01 | .01 |
| Net realized and unrealized gain (loss) | .55 | .07B | (.57) | (2.75) | .11 | (1.38) |
| Total from investment operations | .59 | .11 | (.55) | (2.74) | .12 | (1.37) |
| Distributions from net investment income | (.05) | (.02) | (.01) | (.01) | (.01) | (.01) |
| Distributions from net realized gain | – | – | – | – | –C | –C |
| Total distributions | (.05) | (.02) | (.01) | (.01) | (.01) | (.01) |
| Net asset value, end of period | $6.97 | $6.43 | $6.34 | $6.90 | $9.65 | $9.54 |
| Total ReturnD,E | 9.23% | 1.77% | (7.97)% | (28.42)% | 1.27% | (12.52)% |
| Ratios to Average Net AssetsF,G | | | | | | |
| Expenses before reductions | .05%H | .04% | .06% | .05% | .05% | .05% |
| Expenses net of fee waivers, if any | .05%H | .04% | .06% | .05% | .05% | .05% |
| Expenses net of all reductions | .05%H | .04% | .06% | .05% | .05% | .05% |
| Net investment income (loss) | 1.13%H | .63% | .26% | .07% | .05% | .10% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $761,768 | $707,935 | $424,155 | $296,792 | $361,886 | $356,216 |
| Portfolio turnover rateI | 0% | 0% | 0% | 0% | 0% | 65% |
A Calculated based on average shares outstanding during the period.
B The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
C Amount represents less than $.005 per share.
D Total returns for periods of less than one year are not annualized.
E Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Expense ratios reflect operating expenses of the Fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the Fund during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the Fund.
H Annualized
I Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
See accompanying notes which are an integral part of the consolidated financial statements.
Notes to Consolidated Financial Statements (Unaudited)
For the period ended January 31, 2018
1. Organization.
Fidelity Commodity Strategy Central Fund (the Fund) is a non-diversified fund of Fidelity Oxford Street Trust II (the Trust) and is authorized to issue an unlimited number of shares. Shares of the Fund are only offered to other investment companies and accounts managed by Fidelity Management & Research Company (FMR), or its affiliates (the Investing Funds). 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. Consolidated Subsidiary.
The Fund invests in certain commodity-related investments through Geode Commodity Return Central Cayman Ltd., a wholly owned subsidiary (the "Subsidiary"). As of period end, the Fund held an investment of $165,118,607 in the Subsidiary, representing 21.7% of the Fund's net assets.
The financial statements have been consolidated and include accounts of the Fund and the Subsidiary. Accordingly, all inter-company transactions and balances have been eliminated.
3. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by FMR and its affiliates. The Fund's Consolidated Schedule of Investments lists each of the Fidelity Central Funds held as of period end, if any, as an investment of the Fund, but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
The Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. Annualized expenses of the Money Market Central Funds as of their most recent shareholder report date are less than .005%.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds are available on the SEC website or upon request.
4. 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 – Investments Companies. The consolidated 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 consolidated financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the consolidated financial statements were issued have been evaluated in the preparation of the consolidated financial statements. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events, changes in interest rates and credit quality. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. U.S. government and government agency obligations are valued by pricing vendors 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 vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Futures contracts are valued at the settlement price or official closing price established each day by the board of trade or exchange on which they are traded and are categorized as Level 1 in the hierarchy. Investments in 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 January 31, 2018 is included at the end of the Fund's Consolidated Schedule of Investments.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. 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.
Expenses. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. 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.
The Subsidiary is classified as a controlled foreign corporation under Subchapter N of the Internal Revenue Code. Therefore, the Fund is required to increase its taxable income by its share of the Subsidiary's income. Net investment losses of the Subsidiary cannot be deducted by the Fund in the current period nor carried forward to offset taxable income in future periods.
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 consolidated 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 controlled foreign corporations and capital loss carryforwards.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes on an unconsolidated basis were as follows:
| Gross unrealized appreciation | $22,283,664 |
| Gross unrealized depreciation | (294,267,733) |
| Net unrealized appreciation (depreciation) | $(271,984,069) |
| Tax cost | $1,058,289,102 |
Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. Under the Regulated Investment Company Modernization Act of 2010 (the Act), the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital losses are required to be used prior to any losses that expire. The capital loss carryforward information presented below, including any applicable limitation, is estimated as of prior fiscal period end and is subject to adjustment.
| No expiration | |
| Short-term | $(34,622,368) |
| Long-term | (61,131) |
| Total capital loss carryforward | $(34,683,499) |
Due to large subscriptions in a prior period, $34,683,499 of capital losses that will be available to offset future capital gains of the Fund will be limited to approximately $10,757,100 per year.
5. Derivative Instruments.
Risk Exposures and the Use of Derivative Instruments. The Fund's investment objective allows the Fund to enter into various types of derivative contracts, including futures contracts. Derivatives are investments whose value is primarily derived from underlying assets, indices or reference rates and may be transacted on an exchange or over-the-counter (OTC). Derivatives may involve a future commitment to buy or sell a specified asset based on specified terms, to exchange future cash flows at periodic intervals based on a notional principal amount, or for one party to make one or more payments upon the occurrence of specified events in exchange for periodic payments from the other party.
The Fund primarily used derivatives to increase returns and to manage exposure to certain risks as defined below. The success of any strategy involving derivatives depends on analysis of numerous economic factors, and if the strategies for investment do not work as intended, the Fund may not achieve its objectives.
The Fund's use of derivatives increased or decreased its exposure to the following risk:
| Commodity Risk | Commodity risk is the risk that the value of a commodity will fluctuate as a result of changes in market prices.
|
The Fund is also exposed to additional risks from investing in derivatives, such as liquidity risk and counterparty credit risk. Liquidity risk is the risk that the Fund will be unable to close out the derivative in the open market in a timely manner. Counterparty credit risk is the risk that the counterparty will not be able to fulfill its obligation to the Fund. Counterparty credit risk related to exchange-traded futures contracts may be mitigated by the protection provided by the exchange's clearinghouse. A summary of the Fund's derivatives inclusive of the potential netting arrangements is presented at the end of the Consolidated Schedule of Investments.
Investing in derivatives may involve greater risks than investing in the underlying assets directly and, to varying degrees, may involve risk of loss in excess of any initial investment and collateral received and amounts recognized in the Consolidated Statement of Assets and Liabilities. In addition, there may be the risk that the change in value of the derivative contract does not correspond to the change in value of the underlying instrument.
Futures Contracts. A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a fixed price at a specified future date. The Fund used futures contracts to manage its exposure to the commodities market.
Upon entering into a futures contract, a fund is required to deposit either cash or securities (initial margin) with a clearing broker in an amount equal to a certain percentage of the face value of the contract. Futures contracts are marked-to-market daily and subsequent daily payments are made or received by a fund depending on the daily fluctuations in the value of the futures contracts and are recorded as unrealized appreciation or (depreciation). This receivable and/or payable, if any, is included in daily variation margin on futures contracts in the Consolidated Statement of Assets and Liabilities. Realized gain or (loss) is recorded upon the expiration or closing of a futures contract. The net realized gain (loss) and change in net unrealized appreciation (depreciation) on futures contracts during the period is presented in the Consolidated Statement of Operations.
Any open futures contracts at period end are presented in the Consolidated Schedule of Investments under the caption "Futures Contracts". The notional amount at value reflects each contract's exposure to the underlying instrument or index at period end. Securities deposited to meet initial margin requirements are identified in the Consolidated Schedule of Investments.
6. Fees and Other Transactions with Affiliates.
Management Fee and Administration Agreement. Geode Capital Management, LLC (the investment adviser) provides the Fund with investment management services and the Fund does not pay any fees for these services. Pursuant to the Fund's management contract, the investment adviser receives fees from FMR for investment management services provided to the Fund. Under the management contract, the investment adviser pays all other expenses, except custody fees, the compensation of the independent Trustees and certain miscellaneous expenses such as proxy and shareholder meeting expenses.
FMR provides administrative services to the Fund and the investment adviser pays for these services.
The investment adviser also provides investment management services to the Subsidiary. The Subsidiary pays the investment adviser a monthly management fee at an annual rate of .30% of its net assets. The Subsidiary also pays certain other expenses including custody and directors' fees.
Interfund Trades. The Fund 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.
7. Expense Reductions.
FMR has voluntarily agreed to reimburse a portion of the Fund's operating expenses. For the period, the reimbursement reduced the expenses by $425.
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
At the end of the period, mutual funds managed by FMR or its affiliates were the owners of record of all of the outstanding shares of the Fund.
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (August 1, 2017 to January 31, 2018).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
August 1, 2017 | Ending
Account Value
January 31, 2018 | Expenses Paid
During Period-B
August 1, 2017
to January 31, 2018 |
| Actual | .0547% | $1,000.00 | $1,092.30 | $.29 |
| Hypothetical-C | | $1,000.00 | $1,024.93 | $.28 |
A Annualized expense ratio reflects consolidated expenses net of applicable fee waivers.
B Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Commodity Strategy Central Fund
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract (the Advisory Contract) with Geode Capital Management, LLC (Geode) and the administration agreement with Fidelity Management & Research Company (FMR) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contract and administration agreement 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 Contract and administration agreement, including the services and support provided to the fund and its shareholders. The Board has established four standing committees (Committees) — Operations, Audit, Fair Valuation, and Governance and Nominating — each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Operations Committee, of which all of the Independent Trustees are members, meets regularly throughout the year and considers, among other matters, information specifically related to the annual consideration of the renewal of the fund's Advisory Contract and administration agreement. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contract and administration agreement. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contract and administration agreement. Members of the Board may also meet with trustees of other Fidelity funds through ad hoc joint committees to discuss certain matters relevant to all of the Fidelity funds.
At its September 2017 meeting, the Board unanimously determined to renew the fund's Advisory Contract and administration agreement. In reaching its determination, the Board considered all factors it believed relevant and 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 the fact that no fee is payable under the Advisory Contract was fair and reasonable.
Nature, Extent, and Quality of Services Provided. The Board considered staffing as it relates to the fund, including the backgrounds of investment personnel of Geode, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with Geode's senior management. 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 the fund.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the general qualifications and capabilities of Geode's investment staff, including its size, education, experience, and resources. The Board also noted that Geode'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 Geode's investment professionals have sufficient access to 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. The Board also noted the extensive resources devoted by Fidelity to providing non-advisory services to the fund. Additionally, in its deliberations, the Board considered Geode's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process.
Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory services performed by Geode under the Advisory Contract and administrative services performed by Fidelity under separate agreements covering administration, transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions. The Board reviewed the fund's absolute investment performance, as well as the fund's relative investment performance. In this regard, the Board noted that the fund is designed to offer a liquid investment option for other Fidelity funds and accounts and ultimately to enhance the performance of those funds and accounts.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contract should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered that while the fund does not pay a management fee, FMR pays Geode a management fee for providing services to the fund and that FMR receives fees for providing services to funds that invest in the fund. The Board also noted that FMR bears all expenses of the fund, except expenses related to the fund's investment activities (primarily custody expenses and expenses associated with investments in wholly-owned subsidiaries). Based on its review, the Board concluded that the management fee received by Geode for providing services to the fund and the fund's total expense ratio were 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 level of Fidelity's profits in respect of all the Fidelity funds, as well as the profitability of the funds that invest in this fund.
PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of the fund profitability information and its conformity to established allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board concluded that the costs of the services provided by and the profits realized by Geode and Fidelity in connection with the operation of the fund were not relevant to the renewal of the Advisory Contract because the fund pays no advisory fees and FMR bears all expenses of the fund, except expenses related to the fund's investment activities.
Economies of Scale. The Board concluded that because the fund pays no advisory fees and FMR bears all expenses of the fund, except expenses related to the fund's investment activities, economies of scale cannot be realized by the fund.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) Fidelity's fund profitability methodology, profitability trends for certain funds, and the impact of certain factors on fund profitability results; (ii) portfolio manager changes that have occurred during the past year and the amount of the investment that each portfolio manager has made in the Fidelity fund(s) that he or she manages; (iii) Fidelity's compensation structure for portfolio managers, research analysts, and other key personnel, including its effects on fund profitability, the rationale for the compensation structure, and the extent to which current market conditions have affected retention and recruitment; (iv) the arrangements with and compensation paid to certain fund sub-advisers on behalf of the Fidelity funds; (v) the terms of Fidelity's contractual and voluntary expense cap and waiver arrangements with the funds; (vi) the methodology with respect to competitive fund data and peer group classifications; (vii) Fidelity's transfer agent fee, expense, and service structures for different funds and classes relative to competitive trends, and the impact of the increased use of omnibus accounts; (viii) Fidelity's long-term expectations for its offerings in the workplace investing channel; (ix) new developments in the retail and institutional marketplaces and the competitive positioning of the funds relative to other investment products and services; (x) the approach to considering "fall-out" benefits; (xi) the impact of money market reform on Fidelity's money market funds, including with respect to costs and profitability; (xii) the funds' share class structures and distribution channels, including the impact of the Department of Labor's new fiduciary rule on the funds' distribution arrangements; and (xiii) explanations regarding the relative total expense ratios of certain funds and classes, total expense competitive trends and methodologies for total expense competitive comparisons, and actions that might be taken by Fidelity to reduce total expense ratios for certain classes. In addition, the Board considered its discussions with Fidelity throughout the year regarding enhanced information security initiatives and the funds' fair valuation policies.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contract should be renewed.
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