Notes
to
Consolidated Financial Statements
For the period ended January 31, 2014
1. Organization.
Fidelity Series Commodity Strategy Fund (the Fund) is a non-diversified fund of Fidelity Oxford Street Trust (the Trust) (formerly a fund of
Fidelity Salem Street Trust) and is authorized to issue an unlimited number of shares. Shares of the Fund are only available for purchase by mutual
funds and accounts for which Fidelity Management & Research Company (FMR) or an affiliate serves as an investment manager. The Trust is
registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as
a Massachusetts business trust. The Fund offers Series Commodity Strategy and Class F shares, each of which has equal rights as to assets and
voting privileges. Each class has exclusive voting rights with respect to matters that affect that class.
2. Consolidated Subsidiary.
The Fund invests in certain commodity-related investments through Fidelity Series Commodity Return Cayman Ltd., a wholly owned subsidiary
(the "Subsidiary"). As of January 31, 2014, the Fund held an investment of $489,235,278 in the Subsidiary, representing 17.9% 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 .01%.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the
SEC) website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds, which are not covered by the Fund's Report of
Independent Registered Public Accounting Firm, are available on the SEC website or upon request.
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4. Significant Accounting Policies.
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. In accordance with valuation
policies and procedures approved by the Board of Trustees (the Board), the Fund attempts to obtain prices from one or more third party pricing
vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or
reliable, investments will be fair valued in good faith by the FMR Fair Value Committee (the Committee), in accordance with procedures adopted
by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events, changes in
interest rates and credit quality. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant
extent. The Committee oversees the Fund's valuation policies and procedures and is responsible for approving and reporting to the Board all fair
value determinations.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as
shown below:
Level 1 - quoted prices in active markets for identical investments
Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
Level 3 - unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who
make markets in such securities. 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. For commodity-linked notes,
pricing vendors generally consider the movement of an underlying commodity index as well as other terms of the contract including the leverage
factor and any fee and/or interest components of the note. Swaps are marked-to-market daily based on
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Notes to Consolidated Financial Statements - continued
4. Significant Accounting Policies - continued
Investment Valuation - continued
valuations from third party pricing vendors, registered derivatives clearing organizations (clearinghouses) or broker-supplied valuations. These
pricing sources may utilize inputs such as movements in the underlying index, interest rate curves, credit spread curves, default possibilities and
recovery rates. When independent prices are unavailable or unreliable, debt securities and swaps may be valued utilizing pricing methodologies
which consider similar factors that would be used by third party pricing vendors. Debt securities and swaps are generally categorized as Level 2 in
the hierarchy but may be Level 3 depending on the circumstances.
Futures contracts are valued at the settlement price 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, 2014 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. Interest income and distributions from the Fidelity
Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt
securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and
Expenses.
Investment income, realized and unrealized capital gains and losses, common expenses of the Fund, and
certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the
total net assets of the Fund. Each class differs with respect to transfer agent fees incurred. Certain expense reductions may also differ by class. For
the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of
recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund.
Expenses attributable to more than one fund are allocated
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4. Significant Accounting Policies - continued
Class Allocations and Expenses - continued
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 dividends and capital gain distributions are declared separately for each
class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the 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 the short-term gain distributions from the Fidelity Central Funds, controlled foreign corporation, net
operating losses, capital loss carryforwards and losses deferred due to excise tax regulations.
The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end on an unconsolidated basis were as
follows:
Gross unrealized appreciation
|
$ -
|
Gross unrealized depreciation
|
(2,558,376,794
)
|
Net unrealized appreciation (depreciation) on securities and other investments
|
$ (2,558,376,794
)
|
Tax cost
|
$ 5,236,997,406
|
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Notes to Consolidated Financial Statements - continued
4. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited.
Under the Regulated Investment Company Modernization Act of 2010 (the Act), the Fund is permitted to carry forward capital losses incurred in
taxable years beginning after December 22, 2010 for an unlimited period and such capital losses are required to be used prior to any losses that
expire. 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
|
$ (46,957,719)
|
Long-term
|
(13,351,794
)
|
Total capital loss carryforward
|
$ (60,309,513
)
|
Indexed Securities.
The Fund may invest in indexed securities whose values, interest rates and/or redemption prices are linked either directly or
inversely to changes in foreign currencies, interest rates, commodities, indices, or other underlying instruments. These securities may be used to
increase or decrease its exposure to different underlying instruments and to gain exposure to markets that might be difficult to invest in through
conventional securities. Indexed securities may be leveraged, increasing their volatility relative to changes in their underlying instruments, but any
loss is limited to the amount of the original investment. Gains (losses) realized upon the sale of indexed securities are included in realized gains
(losses) on investment securities in the Consolidated Statement of Operations.
Restricted Securities.
The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally
may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve
time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is
included at the end of the Fund's Consolidated Schedule of Investments.
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 and swaps. 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
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5. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
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, to gain exposure to certain types of assets and to manage exposure to certain risks as
defined below. The success of any strategy involving derivatives depends on analysis of numerous economic factors, and if the strategies for investment do not work as intended, the Fund may not achieve its objectives.
The Fund's use of derivatives increased or decreased its exposure to the following risk:
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. Derivative counterparty credit risk is managed through formal evaluation of the
creditworthiness of all potential counterparties. On certain OTC derivatives such as bi-lateral swaps, the Fund attempts to reduce its exposure to
counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement with each of its
counterparties. The ISDA Master Agreement gives the Fund the right to terminate all transactions traded under such agreement upon the deterioration in the credit quality of the counterparty beyond specified levels. The ISDA Master Agreement gives each party the right, upon an event of
default by the other party or a termination of the agreement, to close out all transactions traded under such agreement and to net amounts owed
under each transaction to one net payable by one party to the other. Upon entering into a swap, the Fund is required to post an initial collateral
amount (referred to as "Independent Amount"), as defined in the ISDA Master Agreement. The Fund is required to post additional collateral for
the benefit of counterparties to meet the counterparty's unrealized appreciation on outstanding swap contracts and any such posted collateral is
identified on the Consolidated Schedule of Investments. To mitigate counterparty credit risk on bi-lateral OTC derivatives, the Fund receives
collateral in the form of cash or securities once the Fund's net unrealized appreciation on outstanding derivative contracts under an ISDA Master
Agreement exceeds certain applicable thresholds, subject to certain minimum transfer provisions. The collateral received is held in segregated
accounts with the Fund's custodian bank in accordance with the
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Notes to Consolidated Financial Statements - continued
5. Derivative Instruments - continued
Risk Exposures and the Use of Derivative Instruments - continued
collateral agreements entered into between the Fund, the counterparty and the Fund's custodian bank. The Fund could experience delays and
costs in gaining access to the collateral even though it is held by the Fund's custodian bank. The Fund's maximum risk of loss from counterparty
credit risk related to bi-lateral OTC derivatives is generally the aggregate unrealized appreciation and unpaid counterparty payments in excess of
any collateral pledged by the counterparty to the Fund. Exchange-traded futures contracts are not covered by the ISDA Master Agreement; however counterparty credit risk may be mitigated by the protection provided by the exchange's clearinghouse. A summary of the Fund's derivatives
inclusive of 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.
Net Realized Gain (Loss) and Change in Net Unrealized Appreciation (Depreciation) on Derivatives.
The table below, which reflects the
impacts of derivatives on the financial performance of the Fund, summarizes the net realized gain (loss) and change in net unrealized appreciation (depreciation) for derivatives during the period as presented in the Consolidated Statement of Operations.
Primary Risk Exposure / Derivative Type
|
Net Realized Gain (Loss)
|
Change in Net Unrealized Appreciation
(Depreciation)
|
Commodity Risk
|
|
|
Futures Contracts
|
$ (39,727,316)
|
$ 32,426,481
|
Swaps
|
(367,205,224
)
|
292,779,855
|
Totals
|
$ (406,932,540
)
|
$ 325,206,336
|
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
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5. Derivative Instruments - continued
Futures Contracts - continued
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 for derivative instruments 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 included 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
underlying face 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.
Swaps.
A swap is a contract between two parties to exchange future cash flows at periodic intervals based on a notional principal amount. A
bi-lateral OTC swap is a transaction between a fund and a dealer counterparty where cash flows are exchanged between the two parties for the life
of the swap.
Bi-lateral OTC swaps are marked-to-market daily and changes in value are reflected in the Consolidated Statement of Assets and Liabilities in the
bi-lateral OTC swaps at value line items.
Payments are exchanged at specified intervals, accrued daily commencing with the effective date of the contract and recorded as realized gain or
(loss). Realized gain or (loss) is also recorded in the event of an early termination of a swap. The net realized gain (loss) and change in net unrealized appreciation (depreciation) on swaps during the period is included in the Consolidated Statement of Operations.
Any open swaps at period end are included in the Consolidated Schedule of Investments under the caption "Swaps."
Total Return Swaps.
Total return swaps are agreements between counterparties to exchange cash flows, one based on a market-linked return of
an individual asset or a basket of assets (i.e., an index), and the other on a fixed or floating rate. To the extent the total return of the instrument or
index underlying the transaction exceeds or falls short of the offsetting payment obligation, the Fund will receive a payment from or make a
payment to the counterparty. The Fund entered into total return swaps to manage its commodities market exposure.
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Notes to Consolidated Financial Statements - continued
6. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $10,000,000 and $127,347,002,
respectively.
7. 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 for which the Fund pays a monthly management fee that is based on an annual rate of .40% of the Fund's average
net assets. Under the management contract, the investment adviser pays all other fund-level expenses, except the compensation of the independent Trustees and certain other expenses such as interest expense, including commitment fees.
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.
During the period, the investment adviser waived a portion of its management fee as described in the Expense Reductions note.
Transfer Agent Fees.
Fidelity Investments Institutional Operations Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives an asset-based fee of Series Commodity Strategy's average net
assets. FIIOC receives no fees for providing transfer agency services to Class F. FIIOC pays for typesetting, printing and mailing of shareholder
reports, except proxy statements.
For the period, transfer agent fees for each applicable class were as follows:
|
Amount
|
% of
Average
Net Assets
*
|
Series Commodity Strategy
|
$ 4,743,294
|
.20
|
*
Annualized
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8. Committed Line of Credit.
The Fund participates with funds managed by FMR or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or
emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on
its pro-rata portion of the line of credit, which amounted to $8,233 and is reflected in Miscellaneous expenses on the Consolidated Statement of
Operations. During the period, there were no borrowings on this line of credit.
9. Expense Reductions.
The investment adviser has contractually agreed to waive the Fund's management fee in an amount equal to the management fee paid by the
Subsidiary. During the period, this waiver reduced the Fund's management fee by $1,987,933.
In addition, through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the
Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $493.
10. Share Transactions.
Transactions for each class of shares were as follows:
|
Shares
|
Dollars
|
|
Six months ended January 31,
2014
|
Year ended
July 31,
2013
|
Six months ended January 31,
2014
|
Year ended
July 31,
2013
|
Series Commodity Strategy
|
|
|
|
|
Shares sold
|
35,500,110
|
227,443,896
|
$ 283,135,917
|
$ 1,933,821,688
|
Shares redeemed
|
(616,281,807
)
|
(103,157,547
)
|
(4,857,342,172
)
|
(912,500,155
)
|
Net increase (decrease)
|
(580,781,697
)
|
124,286,349
|
$ (4,574,206,255
)
|
$ 1,021,321,533
|
Class F
|
|
|
|
|
Shares sold
|
44,240,312
|
274,013,387
|
$ 355,874,054
|
$ 2,380,785,650
|
Shares redeemed
|
(658,213,128
)
|
(23,519,971
)
|
(5,217,529,031
)
|
(201,531,301
)
|
Net increase (decrease)
|
(613,972,816
)
|
250,493,416
|
$ (4,861,654,977
)
|
$ 2,179,254,349
|
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Notes to Consolidated Financial Statements - continued
11. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in
connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide
general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that
may be made against the Fund. The risk of material loss from such claims is considered remote.
At the end of the period, mutual funds and accounts managed by FMR or its affiliates were the owners of record of all of the outstanding shares of
the Fund.
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