Fidelity®
Disruptors ETF
Semi-Annual
Report
November
30, 2023
Contents
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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
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You
may also call 1-800-FIDELITY to request a free copy of the proxy voting
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& Poor's, S&P and S&P 500 are registered service marks of The
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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.
The
information in the following tables is based on the direct Investments of the
Fund.
|
Top
Holdings (% of Fund's net
assets) |
|
|
|
Fidelity
Disruptive Communications ETF |
21.3 |
|
|
Fidelity
Disruptive Technology ETF |
21.1 |
|
|
Fidelity
Disruptive Finance ETF |
21.0 |
|
|
Fidelity
Disruptive Automation ETF |
18.4 |
|
|
Fidelity
Disruptive Medicine ETF |
18.1 |
|
|
Fidelity
Cash Central Fund 5.40% |
0.3 |
|
|
|
100.2 |
|
|
|
|
Asset
Allocation (% of Fund's net assets)
|
|
|
|
Net Other Assets (Liabilities) -
(0.2)% |
|
|
Showing
Percentage of Net Assets
|
Domestic
Equity Funds - 99.9% |
|
|
|
Shares |
Value
($)
|
|
Fidelity
Disruptive Automation ETF (a) |
|
669,660 |
15,951,294 |
|
Fidelity
Disruptive Communications ETF (a)(b) |
|
668,031 |
18,501,179 |
|
Fidelity
Disruptive Finance ETF (a) |
|
676,449 |
18,230,305 |
|
Fidelity
Disruptive Medicine ETF (a)(b) |
|
731,298 |
15,730,225 |
|
Fidelity
Disruptive Technology ETF (a)(b) |
|
679,849 |
18,281,136 |
|
TOTAL
DOMESTIC EQUITY FUNDS
(Cost
$80,564,106) |
|
|
86,694,139 |
|
|
|
|
|
|
Short-Term
Funds - 0.3% |
|
|
|
Shares |
Value
($)
|
|
Fidelity
Cash Central Fund 5.40% (c)
(Cost
$231,420)
|
|
231,373 |
231,420 |
|
|
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES - 100.2%
(Cost
$80,795,526)
|
86,925,559 |
|
NET
OTHER ASSETS (LIABILITIES) - (0.2)% |
(139,894) |
|
NET
ASSETS - 100.0% |
86,785,665 |
|
|
|
Security
Type Abbreviations
|
ETF |
- |
EXCHANGE-TRADED
FUND |
Legend
|
(c) |
Affiliated
fund that is generally available only to investment companies and other
accounts managed by Fidelity Investments. The rate quoted is the
annualized seven-day yield of the fund at period end. A complete unaudited
listing of the fund's holdings as of its most recent quarter end is
available upon request. In addition, each Fidelity Central Fund's
financial statements are available on the SEC's website or upon
request.
|
Affiliated
Central Funds
Fiscal
year to date information regarding the Fund's investments in Fidelity Central
Funds, including the ownership percentage, is presented below.
|
Affiliate
|
Value,
beginning
of
period ($) |
Purchases
($) |
Sales
Proceeds
($) |
Dividend
Income
($) |
Realized
Gain
(loss) ($) |
Change
in
Unrealized
appreciation
(depreciation)
($) |
Value,
end
of
period ($) |
%
ownership,
end
of
period |
|
Fidelity
Cash Central Fund 5.40% |
- |
2,296,732 |
2,065,312 |
8,412 |
- |
- |
231,420 |
0.0% |
|
Total |
- |
2,296,732 |
2,065,312 |
8,412 |
- |
- |
231,420 |
|
|
|
|
|
|
|
|
|
|
|
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.
Affiliated
Underlying Funds
Fiscal
year to date information regarding the Fund's investments in affiliated
Underlying Funds is presented below. Exchanges between classes of the same
affiliated Underlying Funds may occur. If an Underlying Funds changes its name,
the name presented below is the name in effect at period end.
|
Affiliate
|
Value,
beginning
of
period ($) |
Purchases
($) |
Sales
Proceeds
($) |
Dividend
Income
($) |
Realized
Gain
(loss) ($) |
Change
in
Unrealized
appreciation
(depreciation)
($) |
Value,
end
of
period ($) |
|
Fidelity
Disruptive Automation ETF |
19,063,965 |
14,473,427 |
2,419,039 |
65,754 |
528,276 |
(1,267,849) |
15,951,294 |
|
Fidelity
Disruptive Communications ETF |
19,096,640 |
20,044,285 |
3,019,959 |
- |
17,692 |
2,271,051 |
18,501,179 |
|
Fidelity
Disruptive Finance ETF |
18,203,265 |
18,836,171 |
2,885,515 |
136,437 |
259,479 |
1,649,410 |
18,230,305 |
|
Fidelity
Disruptive Medicine ETF |
18,733,959 |
20,500,945 |
2,391,640 |
- |
(76,990) |
(2,022,916) |
15,730,225 |
|
Fidelity
Disruptive Techology ETF |
20,318,052 |
18,511,060 |
4,099,187 |
- |
(155,133) |
2,007,747 |
18,281,136 |
|
|
95,415,881 |
92,365,888 |
14,815,340 |
202,191 |
573,324 |
2,637,443 |
86,694,139 |
Amounts
in the dividend income column in the above table include any capital gain
distributions from underlying funds, which are presented in the corresponding
line item in the Statement of Operations, if applicable.
Amounts
included in the purchases and sales proceeds columns may include in-kind
transactions, if applicable.
Investment
Valuation
The
following is a summary of the inputs used, as of November 30, 2023, involving
the Fund's assets and liabilities carried at fair value. The inputs or
methodology used for valuing securities may not be an indication of the risk
associated with investing in those securities. For more information on valuation
inputs, and their aggregation into the levels used below, please refer to the
Investment Valuation section in the accompanying Notes to Financial
Statements.
|
Valuation
Inputs at Reporting Date: |
|
Description |
Total
($) |
Level
1 ($) |
Level
2 ($) |
Level
3 ($) |
|
Investments
in Securities: |
|
|
|
|
|
|
|
Domestic Equity Funds |
86,694,139 |
86,694,139 |
- |
- |
|
|
|
Short-Term
Funds |
231,420 |
231,420 |
- |
- |
|
Total Investments in Securities: |
86,925,559 |
86,925,559 |
- |
- |
|
Statement
of Assets and Liabilities |
|
|
|
|
November
30, 2023
(Unaudited) |
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Investment
in securities, at value - See accompanying
schedule: |
|
|
|
|
|
Fidelity Central Funds (cost
$231,420) |
$ |
231,420 |
|
|
|
Other affiliated issuers (cost
$80,564,106) |
|
86,694,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Investment in Securities (cost $80,795,526) |
|
|
$ |
86,925,559 |
|
Receivable
for investments sold |
|
|
|
758,617 |
|
Distributions
receivable from Fidelity Central Funds |
|
|
|
1,025 |
|
Total assets |
|
|
|
87,685,201 |
|
Liabilities |
|
|
|
|
|
Payable
for investments purchased |
$ |
899,536 |
|
|
|
Total
Liabilities |
|
|
|
899,536 |
|
Net
Assets |
|
|
$ |
86,785,665 |
|
Net
Assets consist of: |
|
|
|
|
|
Paid
in capital |
|
|
$ |
94,998,406 |
|
Total
accumulated earnings (loss) |
|
|
|
(8,212,741) |
|
Net
Assets |
|
|
$ |
86,785,665 |
|
Net
Asset Value,
offering price and redemption price per share ($86,785,665 ÷ 3,525,062
shares) |
|
|
$ |
24.62 |
|
Statement
of Operations |
|
|
|
|
Six
months ended
November
30, 2023
(Unaudited) |
|
Investment
Income |
|
|
|
|
|
Dividends: |
|
|
|
|
|
Affiliated issuers |
|
|
$ |
202,191 |
|
Income
from Fidelity Central Funds |
|
|
|
8,412 |
|
Total Income |
|
|
|
210,603 |
|
Expenses |
|
|
|
|
|
Management
fee |
$ |
24,042 |
|
|
|
Independent
trustees' fees and expenses |
|
245 |
|
|
|
Total expenses before reductions |
|
24,287 |
|
|
|
Expense reductions |
|
(24,033) |
|
|
|
Total expenses after reductions |
|
|
|
254 |
|
Net
Investment income (loss) |
|
|
|
210,349 |
|
Realized
and Unrealized Gain (Loss) |
|
|
|
|
|
Net
realized gain (loss) on: |
|
|
|
|
|
Investment Securities: |
|
|
|
|
|
Redemptions in-kind |
|
1,332,620 |
|
|
|
Affiliated issuers |
|
(759,296) |
|
|
|
Total
net realized gain (loss) |
|
|
|
573,324 |
|
Change
in net unrealized appreciation (depreciation) on: |
|
|
|
|
|
Investment Securities: |
|
|
|
|
|
Affiliated issuers |
|
2,637,443 |
|
|
|
Total
change in net unrealized appreciation (depreciation) |
|
|
|
2,637,443 |
|
Net
gain (loss) |
|
|
|
3,210,767 |
|
Net
increase (decrease) in net assets resulting from
operations |
|
|
$ |
3,421,116 |
See
Organization and Merger information note regarding reorganization from mutual
fund to exchange traded fund.
|
Statement
of Changes in Net Assets |
|
|
|
|
Six
months ended
November
30, 2023
(Unaudited) |
|
Year
ended
May
31, 2023 |
|
Increase
(Decrease) in Net Assets |
|
|
|
|
|
Operations |
|
|
|
|
|
Net
investment income (loss) |
$ |
210,349 |
$ |
(438,548) |
|
Net
realized gain (loss) |
|
573,324
|
|
(11,203,876)
|
|
Change
in net unrealized appreciation (depreciation) |
|
2,637,443 |
|
14,746,550
|
|
Net
increase (decrease) in net assets resulting from
operations |
|
3,421,116
|
|
3,104,126
|
|
Distributions
to shareholders |
|
(204,878)
|
|
-
|
|
|
|
|
|
|
|
Share
transactions - net increase (decrease) |
|
-
|
|
(33,405,540)
|
|
Share
transactions |
|
|
|
|
|
Proceeds
from sales of shares |
|
619,060 |
|
- |
|
Cost
of shares redeemed |
|
(12,458,404) |
|
- |
|
|
|
|
|
|
|
Net increase (decrease) in net assets resulting from share
transactions |
|
(11,839,344)
|
|
(33,405,540)
|
|
Total
increase (decrease) in net assets |
|
(8,623,106)
|
|
(30,301,414)
|
|
|
|
|
|
|
|
Net
Assets |
|
|
|
|
|
Beginning
of period |
|
95,408,771 |
|
125,710,185
|
|
End
of period |
$ |
86,785,665 |
$ |
95,408,771 |
|
|
|
|
|
|
|
Other
Information |
|
|
|
|
|
Shares |
|
|
|
|
|
Sold |
|
25,397 |
|
4,434,170 |
|
Redeemed |
|
(527,857) |
|
(6,032,531) |
|
Net
increase (decrease) |
|
(502,460) |
|
(1,598,361) |
|
|
|
|
|
|
See
Organization and Merger information note regarding reorganization from mutual
fund to exchange traded fund.
Share
activity amounts in the Other Information section have been adjusted to reflect
the impact of the change in capital structure associated with the merger. All
financial information prior to the merger is that of the Predecessor
Fund.
Financial
Highlights
|
|
Six
months ended
(Unaudited)
November 30, 2023
A |
|
Years
ended May 31, 2023 A |
|
2022 A
|
|
2021 A |
|
2020 A,B |
|
Selected Per-Share
Data |
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning
of period |
$ |
23.69 |
$ |
22.31 |
$ |
29.44 |
$ |
20.17 |
$ |
17.43 |
|
Income from Investment
Operations |
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss) C,D |
|
.06
|
|
(.10)
|
|
(.21)
|
|
(.21)
|
|
(.02)
|
|
Net realized and unrealized gain (loss)
|
|
.93
|
|
1.48
|
|
(6.54)
|
|
9.67
|
|
2.76
|
|
Total from investment
operations |
|
.99
|
|
1.38
|
|
(6.75)
|
|
9.46
|
|
2.74
|
|
Distributions from net
investment income |
|
(.06)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Distributions from net
realized gain |
|
-
|
|
-
|
|
(.38)
|
|
(.19)
|
|
-
|
|
Total distributions |
|
(.06)
|
|
-
|
|
(.38)
|
|
(.19)
|
|
-
|
|
Net asset value, end of
period |
$ |
24.62 |
$ |
23.69 |
$ |
22.31 |
$ |
29.44 |
$ |
20.17 |
|
Total Return E,F,G |
|
4.17%
|
|
6.17%
|
|
(23.29)%
|
|
46.99%
|
|
15.70%
|
|
Ratios to Average Net Assets D,H,I |
|
|
|
|
|
|
|
|
|
|
|
Expenses before reductions
|
|
.05%
J |
|
.90%
|
|
1.00%
|
|
1.01%
K |
|
1.01%
J,K |
|
Expenses net of fee
waivers, if any |
|
-%
J,L |
|
.82%
|
|
1.00%
|
|
1.01%
K |
|
1.01%
J,K |
|
Expenses net of all
reductions |
|
-%
J,L |
|
.82%
|
|
1.00%
|
|
1.01%
K |
|
1.01%
J,K |
|
Net investment income
(loss) |
|
.47%
J |
|
(.50)%
|
|
(.69)%
|
|
(.77)%
|
|
(1.01)%
J |
|
Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period
(000 omitted) |
$ |
86,786 |
$ |
95,409 |
$ |
48,579 |
$ |
141,385 |
$ |
19,310 |
|
Portfolio turnover rate
M |
|
4%
J,N |
|
12%
|
|
22%
|
|
3%
|
|
-%
O |
AAs
further described in Organization and Merger information notes, per share
amounts have been adjusted to reflect the impact of the change in capital
structure associated with the merger. All financial information prior to the
merger is that of the Predecessor Fund.
BFor
the period April 16, 2020 (commencement of operations) through May 31,
2020.
CCalculated
based on average shares outstanding during the period.
DNet
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.
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.
GBased
on net asset value.
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.
IFees
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.
JAnnualized.
KThe
size and fluctuation of net assets and expense amounts may cause ratios to
differ from contractual rates.
LAmount
represents less than .005%.
MAmount
does not include the portfolio activity of any underlying mutual funds or
exchange-traded funds (ETFs).
NPortfolio
turnover rate excludes securities received or delivered
in-kind.
OAmount
not annualized.
For
the period ended November 30, 2023
1.
Organization.
Fidelity
Disruptors 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.
Effective
June 16, 2023, Fidelity Disruptors Fund (Predecessor Fund) reorganized into the
newly created Fidelity Disruptors ETF. The Predecessor Fund was the accounting
survivor in the reorganization, and, as such, the financial statements and
financial highlights of the Fund reflects the financial information of the
Predecessor Fund through June 16, 2023 (see Merger Information note). During the
prior fiscal year, Loyalty Class 1 and Loyalty Class 2 shares were converted to
Fidelity Disruptors Fund shares in the Predecessor Fund.
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:
Exchange-Traded
Funds (ETFs) are valued at their last 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 but the exchange reports a closing bid
level, ETFs are valued at the closing bid and would be categorized as Level 1 in
the hierarchy. In the event there was no closing bid, ETFs may be valued by
another method that the Board believes reflects fair value in accordance with
the Board's fair value pricing policies and may be categorized as Level 2 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 November 30, 2023 is included at the end of the Fund's 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 (normally 4:00 p.m. Eastern time) of the Nasdaq Stock Market 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 any underlying mutual funds or
exchange-traded funds (ETFs) are recorded on the ex-dividend date.
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. 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.
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 net operating losses, capital loss
carryforwards, losses deferred due to wash sales and excise tax
regulations.
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 |
$9,046,680 |
|
Gross
unrealized depreciation |
(3,288,869) |
|
Net
unrealized appreciation (depreciation) |
$5,757,811 |
|
Tax
cost |
$81,167,748 |
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 |
$(5,351,923) |
|
Long-term |
(8,928,765) |
|
Total
capital loss carryforward |
$(14,280,688) |
The
Fund elected to defer to its next fiscal year $249,218 of ordinary losses
recognized during the period January 1, 2023 to May 31, 2023.
4.
Purchases and Sales of Investments.
Purchases
and sales of securities, other than short-term securities and in-kind
transactions, as applicable, are noted in the table below.
|
|
Purchases
($) |
Sales
($) |
|
Fidelity
Disruptors ETF |
92,365,888 |
14,815,340 |
Securities
received and delivered in-kind through subscriptions and redemptions are noted
in the table below.
|
|
In-Kind
Subscriptions ($) |
In-Kind
Redemptions ($) |
|
Fidelity
Disruptors ETF |
- |
6,789,450 |
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. The Fund does not pay any
fees for these services. Under the management contract, the investment adviser
pays all expenses, except the compensation of the independent Trustees and
certain miscellaneous expenses such as proxy and shareholders meeting
expenses.
During
the period June 1, 2023 through June 16, 2023, the Predecessor Fund paid a
monthly all-inclusive management fee that was based on an annual rate of the
Predecessor Fund's average net assets as noted in the table below. Under the
management contract, the investment adviser paid all other expenses, except the
compensation of the independent Trustees and certain miscellaneous expenses such
as proxy and shareholder meeting expenses. Under a separate expense contract,
the investment adviser paid all other operating expenses as necessary, except
the compensation of the independent Trustees and certain miscellaneous expenses,
such as proxy and shareholder meeting expenses, so that total expenses of the
Predecessor Fund did not exceed an annual percentage of average net assets as
noted in the table below.
|
|
Management
Fee Annual % of Average Net Assets |
Expense
Contract Annual % of Average Net Assets |
|
Fidelity
Disruptors Fund |
1.00% |
.50% |
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.
6.
Committed Line of Credit.
During
the period June 1, 2023 through June 16, 2023, the Predecessor Fund participated
with other funds managed by the investment adviser 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 commitment fees on the pro-rata portion of the line of
credit were borne by the investment adviser. During the period, there were no
borrowings on this line of credit.
7.
Expense Reductions.
During
the period June 1, 2023 through June 16, 2023, the investment adviser
voluntarily agreed to waive the Predecessor Fund's management fee as
follows:
|
|
Management
Fee Waiver Annual % of Average Net Assets |
Management
Fee Waiver |
|
Fidelity
Disruptors Fund |
.50% |
$24,025 |
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 $8.
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 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.
Prior
fiscal year share transactions for each class of the Predecessor Fund were as
follows and may contain in-kind transactions, automatic conversions between
classes or exchanges between affiliated funds:
|
|
Shares |
Dollars |
|
|
Year
ended
May
31, 2023 |
Year
ended
May
31, 2023 |
|
Fidelity
Disruptors Fund |
|
|
|
Fidelity
Disruptors Fund |
|
|
|
Shares
sold |
3,703,937 |
$84,461,331 |
|
Reinvestment
of distributions |
- |
- |
|
Shares
redeemed |
(1,852,955) |
(38,815,504) |
|
Net
increase (decrease) |
1,850,982 |
$45,645,827 |
|
Loyalty
Class 1 |
|
|
|
Shares
sold |
730,233 |
$15,839,358 |
|
Reinvestment
of distributions |
- |
- |
|
Shares
redeemed |
(4,173,700) |
(94,754,589) |
|
Net
increase (decrease) |
(3,443,467) |
$(78,915,231) |
|
Loyalty
Class 2 |
|
|
|
Reinvestment
of distributions |
- |
- |
|
Shares
redeemed |
(5,876) |
(136,136) |
|
Net
increase (decrease) |
(5,876) |
$(136,136) |
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.
Merger Information.
On
June 16, 2023 the Fidelity Disruptors Fund (Predecessor Fund) reorganized into a
newly created Fidelity Disruptors ETF (ETF) pursuant to an Agreement and Plan of
Reorganization (the Agreement) approved by its Board of Trustees. Per the
Agreement, shareholders of the Predecessor Fund received ETF shares equal in
value to the shares of the Predecessor Fund they owned on the day the
reorganization was effective. The Predecessor Fund was the accounting survivor
after the reorganization. As
such, performance and financial history prior to the reorganization is that of
the Predecessor Fund. Historical share transactions and per share information
for the Predecessor Fund was retroactively adjusted to reflect the change in
capital structure due to the reorganization.
For
financial reporting purposes, the assets and liabilities of the Predecessor Fund
and shares issued by the ETF were recorded at fair value; however, the cost
basis of the investments received from the Predecessor Fund were carried forward
and will be utilized for purposes of the ETF's ongoing reporting of realized and
unrealized gains and losses to more closely align subsequent reporting of
realized gains with amounts distributable to shareholders for tax
purposes. The
reorganization qualified as a tax-free reorganization for federal income tax
purposes with no gain or loss recognized to the funds or their shareholders.
Costs incurred in connection with the reorganization were paid by the
Predecessor Fund.
|
Predecessor
Fund/Accounting Survivor |
Investments
($) |
Unrealized
appreciation (depreciation) ($) |
Net
Assets ($) |
Shares
Exchanged |
Shares
Exchanged Ratio |
|
|
|
|
|
|
|
|
Fidelity
Disruptors Fund |
98,438,042 |
8,954,987 |
98,615,698 |
3,944,631 |
.5736680000 |
|
Legal
Acquiring ETF |
Net
Assets ($) |
Total
net assets after the acquisition ($) |
|
Fidelity
Disruptors ETF |
25 |
98,615,723 |
Pro
forma results of operations of the combined entity for the entire period ended
November 30, 2023, as though the acquisition had occurred as of the beginning of
the year (rather than on the actual acquisition date), are as
follows:
|
Net
investment income (loss) |
$210,276 |
|
Total
net realized gain (loss) |
573,324 |
|
Total
change in net unrealized appreciation (depreciation) |
2,637,443 |
|
Net
increase (decrease) in net assets resulting from
operations |
$3,421,043 |
Because
the combined investment portfolios have been managed as a single portfolio since
the acquisition was completed, it is not practicable to separate the amounts of
revenue and earnings of the Predecessor Fund that has been included in the ETF's
Statement of Operations since June 16, 2023.
11.
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.
As
a shareholder, you incur two types of costs: (1) transaction costs, which may
include sales charges (loads) on purchase payments or redemption proceeds, as
applicable and (2) ongoing costs, which generally include management fees,
distribution and/or service (12b-1) fees and other Fund expenses. This Example
is intended to help you understand your ongoing costs (in dollars) of investing
in a 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 (June 1, 2023 to November 30,
2023). |
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 for a class/Fund under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during
this period. If any fund is a shareholder of any underlying mutual funds or
exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears
its proportional share of the expenses of the Underlying Funds in addition to
the direct expenses incurred presented in the table. These fees and expenses are
not included in the 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 actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
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.
If any fund is a shareholder of any Underlying Funds, such fund indirectly bears
its proportional share of the expenses of the Underlying Funds in addition to
the direct expenses as presented in the table. These fees and expenses are not
included in the 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. In addition, if
these transactional costs were included, your costs would have been
higher.
|
|
|
|
|
Annualized
Expense Ratio-
A |
|
Beginning
Account Value June 1, 2023 |
|
Ending
Account Value November 30, 2023 |
|
Expenses
Paid During Period- C
June 1, 2023 to November 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Fidelity®
Disruptors ETF |
|
|
|
-%-D |
|
|
|
|
|
|
|
Actual |
|
|
|
|
|
$
1,000 |
|
$
1,041.70 |
|
$-E
|
|
Hypothetical-B |
|
|
|
|
|
$
1,000 |
|
$
1,025.00 |
|
$-E
|
|
|
A
Annualized expense ratio
reflects expenses net of applicable fee waivers.
B
5% return per year before
expenses
C
Expenses are equal to the
annualized expense ratio, multiplied by the average account value over the
period, multiplied by 183/ 366 (to reflect the one-half year period). The fees
and expenses of any Underlying Funds are not included in each annualized expense
ratio.
D
Amount represents less
than .005%.
E
Amount represents less
than $.005.
Board
Approval of Investment Advisory Contracts and Management Fees
Fidelity®
Disruptors ETF
At
the November 2022 and January 2023 meetings, the Board of Trustees, including
the Independent Trustees (together, the Board), voted to approve the management
contract with Fidelity Management & Research Company LLC (FMR) and the
sub-advisory agreements with affiliates of FMR (together, the Advisory
Contracts) for the fund. FMR and the sub-advisers are collectively referred to
herein as the Investment Advisers. The Board, assisted by the advice of fund
counsel and Independent Trustees' counsel, considered a broad range of
information.
Nature,
Extent, and Quality of Services Provided. The
Board considered Fidelity's staffing as it relates to the fund, including the
backgrounds of investment personnel of Fidelity, and also considered the fund's
investment objective, strategies, and related investment philosophy. 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 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 that Fidelity has continued to increase the resources devoted to non-U.S.
offices, including expansion of Fidelity's global investment organization. The
Board also noted 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. The
Board also considered Fidelity's investments in business continuity planning,
and its success in continuously providing services to the Fidelity funds
notwithstanding the severe disruptions caused by the COVID-19
pandemic.
Shareholder
and Administrative Services.
The Board considered the nature, extent, quality, and cost of advisory,
administrative, and shareholder services to be performed by the Investment
Advisers and their affiliates under the Advisory Contracts and under separate
agreements covering pricing and bookkeeping, and securities lending services for
the fund. The Board also considered the nature and extent of the supervision of
third party service providers, principally transfer agent, custodians,
subcustodians, and pricing vendors.
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, and the expanded availability of Fidelity
Investor Centers.
Investment
Performance.
The fund will commence operations by acquiring the assets of the relevant
acquired fund, and the fund is to be the accounting survivor to the relevant
acquired fund. Therefore,
the Trustees were provided with performance information for the relevant
acquired fund. The Board considered the Investment Advisers' strength in
fundamental, research-driven security selection, which the Board is familiar
with through its supervision of other Fidelity funds.
Based
on its review, the Board concluded that the nature, extent, and quality of
services to be provided to the fund under the Advisory Contracts should benefit
the shareholders of the fund.
Competitiveness
of Management Fee and Total Expense Ratio. In
reviewing the Advisory Contracts, 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 FMR
under the all-inclusive arrangement. The Board noted that the fund's proposed
management fee rate is below the median fee rate of funds with similar Lipper
investment objective categories and comparable investment mandates, regardless
of whether their management fee structures are comparable. The Board also
considered that the projected total expense ratio of the fund is below the
median of those funds and classes used by the Board for management fee
comparisons.
Based
on its review, the Board concluded that the fund's management fee and projected
total expense ratio were reasonable in light of the services that the fund and
its shareholders will receive and the other factors considered.
Costs
of the Services and Profitability.
The fund will commence operations by acquiring the assets of the relevant
acquired fund, and the fund is to be the accounting survivor to the relevant
acquired fund. The
revenue, cost, or profitability data for the relevant acquired fund was
available for the Board to review in respect of the fund.
Economies
of Scale. The
Board considered economies of scale based on the operating experience of the
relevant acquired fund to permit assessment thereof. It noted that,
notwithstanding the entrepreneurial risk associated with converting a mutual
fund into an exchange-traded fund, the management fee for the fund was set at a
level normally associated, by comparison with competitors, with very high fund
net assets. The Board also considered Fidelity's assertion that the level of the
fund's fee anticipated economies of scale at lower asset levels even before, if
ever, economies of scale are achieved. The Board also noted that the fund and
its shareholders would have access to the very considerable number and variety
of services available through Fidelity and its affiliates. The Board concluded
that, because the fund will pay no management fee and FMR or an affiliate will
bear all expenses of the fund, with limited exceptions, economies of scale
cannot be realized by this fund.
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
arrangements are fair and reasonable, and that the fund's Advisory Contracts
should be approved.
1.9910204.100
DRE-SANN-0124
