Fidelity U.S. Equity Investment Trust

Transcription

1 Fidelity U.S. Equity Investment Trust Annual Report June 30, 2017

2 Fidelity U.S. Equity Investment Trust Schedule of Investments June 30, 2017 Showing Percentage of Net Assets Attributable to Securityholders (Net Assets) Equities 98.7% Shares / Units Cost (000s) Market Value (000s) Bailiwick of Jersey 0.5% CONSUMER DISCRETIONARY 0.5% Delphi Automotive PLC 5,510 $ 396 $ 626 Ireland 1.5% INDUSTRIALS 1.5% Ingersoll Rand PLC 16,300 1,096 1,932 Netherlands 1.5% INFORMATION TECHNOLOGY 0.6% NXP Semiconductors NV 5, MATERIALS 0.9% LyondellBasell Industries NV Class A 9,650 1,040 1,056 TOTAL NETHERLANDS 1,503 1,844 Singapore 1.9% INFORMATION TECHNOLOGY 1.9% Broadcom Ltd. 7,720 1,439 2,333 United States of America 93.3% CONSUMER DISCRETIONARY 11.7% Amazon.com, Inc. 1,950 1,401 2,448 Comcast Corp. Class A 33,630 1,478 1,697 Home Depot, Inc. 9, ,822 Mohawk Industries, Inc. 2, Newell Brands, Inc. 31,032 1,795 2,158 NIKE, Inc. Class B 17,410 1,264 1,332 Starbucks Corp. 15,720 1,149 1,189 The Walt Disney Co. 12,490 1,748 1,721 Time Warner, Inc. 8,530 1,127 1,111 Viacom, Inc. Class B (non vtg.) 10, TOTAL CONSUMER DISCRETIONARY 12,003 14,632 CONSUMER STAPLES 8.9% Altria Group, Inc. 19,540 1,865 1,887 Constellation Brands, Inc. Class A (sub. vtg.) 6,730 1,381 1,691 Coty, Inc. Class A 38,730 1, CVS Health Corp. 16,190 1,504 1,689 Estee Lauder Companies, Inc. Class A 8,930 1,153 1,111 Molson Coors Brewing Co. Class B 11,750 1,488 1,316 Mondelez International, Inc. 20,780 1,240 1,164 The Kraft Heinz Co. 11,410 1,408 1,267 TOTAL CONSUMER STAPLES 11,136 11,067 ENERGY 6.0% Concho Resources, Inc. 2, EOG Resources, Inc. 13,260 1,495 1,557 Halliburton Co. 17,140 1, Hess Corp. 17,820 1,426 1,014 Occidental Petroleum Corp. 13,710 1,329 1,064 Pioneer Natural Resources Co. 11,830 2,864 2,448 TOTAL ENERGY 8,787 7,489 Shares / Units Cost (000s) Market Value (000s) FINANCIALS 14.5% Capital One Financial Corp. 10,630 $ 943 $ 1,139 Citigroup, Inc. 41,050 2,618 3,560 CME Group, Inc. 12,390 1,514 2,012 Discover Financial Services 15,510 1,092 1,251 Goldman Sachs Group, Inc. 4,720 1,216 1,358 Hartford Financial Services Group, Inc. 19,640 1,199 1,339 Huntington Bancshares, Inc. 76,990 1,357 1,350 KeyCorp 56, ,383 Progressive Corp. 18, ,065 Regions Financial Corp. 103,550 1,426 1,966 Torchmark Corp. 13,790 1,132 1,368 Wells Fargo & Co. 4, TOTAL FINANCIALS 14,712 18,120 HEALTH CARE 14.2% Agilent Technologies, Inc. 18,710 1,414 1,439 Alexion Pharmaceuticals, Inc. 8,500 1,648 1,341 BioMarin Pharmaceutical, Inc. 8,710 1,007 1,026 Boston Scientific Corp. 33,740 1,188 1,213 Bristol Myers Squibb Co. 25,600 1,937 1,850 Danaher Corp. 26,000 2,401 2,845 Humana, Inc. 6,620 1,645 2,066 Merck & Co., Inc. 36,640 3,085 3,045 Vertex Pharmaceuticals, Inc. 7,600 1,108 1,270 Zimmer Biomet Holdings, Inc. 9,670 1,534 1,610 TOTAL HEALTH CARE 16,967 17,705 INDUSTRIALS 8.7% CSX Corp. 17, ,269 FedEx Corp. 4, ,311 Fortive Corp. 13, ,125 Fortune Brands Home & Security, Inc. 15,280 1,042 1,293 Lockheed Martin Corp. 5,280 1,587 1,901 The Boeing Co. 6,760 1,023 1,734 United Technologies Corp. 13,670 1,931 2,165 TOTAL INDUSTRIALS 7,971 10,798 INFORMATION TECHNOLOGY 19.6% Adobe Systems, Inc. 6, ,172 Alphabet, Inc. Class A 4,462 3,495 5,380 Apple, Inc. 17,330 1,877 3,237 Corning, Inc. 19, Facebook, Inc. Class A 5, ,067 Fidelity National Information Services, Inc. 20,190 1,650 2,236 Intel Corp. 53,760 2,612 2,352 Micron Technology, Inc. 33,640 1,072 1,303 PayPal Holdings, Inc. 26,920 1,439 1,874 Salesforce.com, Inc. 21,030 1,962 2,362 Visa, Inc. Class A 21,730 2,281 2,643 TOTAL INFORMATION TECHNOLOGY 18,133 24,401 MATERIALS 1.9% Albemarle Corp. U.S. 4, Eagle Materials, Inc. 5, Ecolab, Inc. 5, TOTAL MATERIALS 1,836 2,347 See accompanying notes which are an integral part of the financial statements. Annual Reportport 2

3 Equities continued Shares / Units Cost (000s) Market Value (000s) United States of America continued REAL ESTATE 2.7% Boston Properties, Inc. 7,370 $ 1,149 $ 1,176 Public Storage 5,660 1,610 1,531 UDR, Inc. 12, TOTAL REAL ESTATE 3,385 3,355 TELECOMMUNICATION SERVICES 2.1% AT&T, Inc. 32,390 1,736 1,585 T Mobile U.S., Inc. 2, Verizon Communications, Inc. 14, TOTAL TELECOMMUNICATION SERVICES 2,637 2,608 UTILITIES 3.0% American Electric Power Co., Inc. 24,990 1,766 2,251 PG&E Corp. 17,440 1,223 1,501 TOTAL UTILITIES 2,989 3,752 TOTAL UNITED STATES OF AMERICA 100, ,274 TOTAL EQUITIES 104, ,009 TOTAL INVESTMENT PORTFOLIO 98.7% $104, ,009 NET OTHER ASSETS (LIABILITIES) 1.3% 1,661 NET ASSETS 100% $ 124,670 Presentation Notes Cost amount includes broker commissions and other trading expenses, if any. Investment Valuation The following is a summary of the inputs used, as of June 30, 2017 and June 30, 2016, 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 in the tables below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements. Valuation Inputs at June 30, 2017: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Investments in Securities: Equities: Consumer Discretionary $ 15,258 $ 15,258 $ $ Consumer Staples 11,067 11,067 Energy 7,489 7,489 Financials 18,120 18,120 Health Care 17,705 17,705 Industrials 12,730 12,730 Information Technology 27,522 27,522 Materials 3,403 3,403 Real Estate 3,355 3,355 Telecommunication Services 2,608 2,608 Utilities 3,752 3,752 Total Investments in Securities: $123,009 $123,009 $ $ See accompanying notes which are an integral part of the financial statements. 3 Annual Report

4 Fidelity U.S. Equity Investment Trust Schedule of Investments continued Valuation Inputs at June 30, 2016: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Investments in Securities: Equities: Consumer Discretionary $ 16,259 $ 16,259 $ $ Consumer Staples 14,049 14,049 Energy 9,891 9,891 Financials 22,257 22,257 Health Care 19,600 19,600 Industrials 13,439 13,439 Information Technology 24,760 24,760 Materials 3,732 3,732 Telecommunication Services 3,709 3,709 Utilities 4,665 4,665 Total Investments in Securities: $132,361 $132,361 $ $ See accompanying notes which are an integral part of the financial statements. Annual Reportport 4

5 Financial Statements Statements of Financial Position Amounts in thousands of Canadian Dollars (except per security amounts) As at June 30, 2017 June 30, 2016 Current assets (Note 3) Investments at fair value through profit or loss (Note 8) $ 123,009 $ 132,361 Cash 2, Receivable for investments sold 304 2,859 Other receivables 4 1 Accrued interest and dividends receivable Subscriptions receivable , ,212 Current liabilities (Note 3) Payable for investments purchased 581 3,109 Redemptions payable Other payables and accrued expenses (Notes 4 and 5) ,535 Net assets attributable to securityholders (Notes 3 and 6) $ 124,670 $ 132,677 Net assets attributable to securityholders per Series and per security (Note 6) Series O: ($124,670 and $132,677, respectively) $ $ See accompanying notes which are an integral part of the financial statements. 5 Annual Report

6 Financial Statements continued Statements of Comprehensive Income Amounts in thousands of Canadian Dollars (except per security amounts) For the periods ended June 30, Investment income (Note 3) Interest $ $ 2 Dividends 2,260 3,672 Net gain (loss) on investments Net realized gain (loss) on investments 13,336 9,353 Change in net unrealized appreciation (depreciation) on investments 5,226 (12,734) 18,562 (3,381) Net gain (loss) on foreign currencies Net realized gain (loss) on foreign currency transactions 91 (308) Change in net unrealized appreciation (depreciation) on other net assets in foreign currencies (47) (8) 44 (316) Total investment income (loss) 20,866 (23) Operating expenses (Note 4) Management and advisory fees Other operating expenses Independent Review Committee fees Commissions and other portfolio costs Foreign taxes withheld (Note 5) Sales tax Total operating expenses Net increase (decrease) in net assets attributable to securityholders from operations $ 20,534 $ (501) Increase (decrease) in net assets attributable to securityholders from operations per Series (Note 3) Series O $ 20,534 $ (501) Increase (decrease) in net assets attributable to securityholders from operations per Series per security (Notes 3 and 6) Series O $ 3.22 $ (.07) See accompanying notes which are an integral part of the financial statements. Annual Reportport 6

7 Statements of Changes in Net Assets Attributable to Securityholders Amounts in thousands of Canadian Dollars For the period ended June 30, 2017 Series O Net assets attributable to securityholders, beginning of period $ 132,677 Increase (decrease) in net assets attributable to securityholders from operations 20,534 Distributions to securityholders (Note 5) From net investment income (1,837) From net realized gain (1,781) (3,618) Security transactions (Note 6) Proceeds from sale of securities 18,504 Reinvestment of distributions 3,618 Amounts paid upon redemption of securities (47,045) (24,923) Net assets attributable to securityholders, end of period $ 124,670 For the period ended June 30, 2016 Series O Net assets attributable to securityholders, beginning of period $ 146,849 Increase (decrease) in net assets attributable to securityholders from operations (501) Distributions to securityholders (Note 5) From net investment income (1,771) From net realized gain (17,038) (18,809) Security transactions (Note 6) Proceeds from sale of securities 45,625 Reinvestment of distributions 18,809 Amounts paid upon redemption of securities (59,295) 5,139 Net assets attributable to securityholders, end of period $ 132,677 See accompanying notes which are an integral part of the financial statements. 7 Annual Report

8 Financial Statements continued Statements of Cash Flows Amounts in thousands of Canadian Dollars For the periods ended June 30, Cash flows from (used in) operating activities: Purchases of investments $ (103,780) $ (136,044) Proceeds from sale and maturity of investments 131, ,702 Cash receipts from dividend income ,270 Cash receipts from interest income 2 Cash paid for operating expenses (64) (67) Net cash from (used in) operating activities 29,971 11,863 Cash flows from (used in) financing activities: Distributions to securityholders net of reinvestments (1) Proceeds from sales of securities 18,554 45,812 Amounts paid upon redemption of securities (47,139) (59,562) Net cash from (used in) financing activities (28,585) (13,751) Net change in cash 1,386 (1,888) Foreign exchange gain (loss) on cash (40) (2) Cash, beginning of period 781 2,671 Cash, end of period $ 2,127 $ 781 See accompanying notes which are an integral part of the financial statements. Annual Reportport 8

9 Notes to Financial Statements For the periods ended June 30, 2017 and 2016 (Amounts in thousands of Canadian dollars/thousands of securities (except per security amounts)) 1. Formation of the Fund Fidelity U.S. Equity Investment Trust (Fund) is a unit trust formed under the laws of Ontario and governed by a Master Declaration of Trust dated October 31, 2008 (Inception Date), as amended thereafter from time to time. The Fund is authorized to issue an unlimited number of securities. Fidelity Investments Canada ULC (Fidelity), as manager and trustee of the Fund, is responsible for the day-to-day operations and provides all general management and administrative services. The investment advisor is responsible for the investment management of the Fund s portfolio. On December 31, 2015, the investment advisor changed from FIAM LLC (formerly Pyramis Global Advisors, LLC) to Fidelity. The registered office of the Fund is located at 483 Bay Street, Suite 300, Toronto, Ontario, M5G 2N7. Currently, Fidelity mutual funds are offered in the following Series: Series A, Series C, Series T5 and Series T8 securities are available to all investors in a deferred sales charge (DSC) option. Series A, Series T5 and Series T8 securities will be converted to lower management and advisory fee Series B, Series S5 and Series S8 securities, respectively, one year after completion of their redemption schedule. Series B, Series D, Series S5 and Series S8 securities are available to all investors in an initial sales charge (ISC) option. Series C and Series D securities are available to investors who have enrolled in the rebalancing service. Series F, Series F5 and Series F8 securities are usually only available to investors who have fee based accounts with dealers who have signed an eligibility agreement with Fidelity. Series E1, Series E1T5, Series E2, Series E2T5, Series E3, Series E3T5, Series E4, Series E4T5, Series E5 and Series E5T5 securities are available only to investors who initially hold Series B and/or Series S5 securities and then become eligible to hold certain Series E securities. Series P1, Series P1T5, Series P2, Series P2T5, Series P3, Series P3T5, Series P4, Series P4T5, Series P5 and Series P5T5 securities are available only to investors who initially hold Series F and/or Series F5 securities and then become eligible to hold certain Series P securities. Series O securities are only available to selected investors who have been approved by Fidelity and have entered into a Series O Account Agreement with Fidelity. Series I, Series I5 and Series I8 securities are available to all investors who have entered into a Series I Agreement with Fidelity and are available to all investors in an initial sales charge (ISC) option. In addition, Series F5, Series F8, Series I5, Series I8, Series T5, Series T8, Series S5, Series S8, Series E1T5, Series E2T5, Series E3T5, Series E4T5, Series E5T5, Series P1T5, Series P2T5, Series P3T5, Series P4T5 and Series P5T5 securities distribute an amount comprised of net income and/or return of capital monthly, if available. The Fund meets the definition of an investment entity and its purpose is to provide investment management services to its securityholders by investing its net assets for capital growth and/or investment income and by measuring its investment performance on a fair value basis. Refer to the Financial Instruments Risk note below for the Fund s investment objective. 2. Basis of Preparation Statement of Compliance These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB). The accounting policies set out below have been applied consistently unless otherwise stated. The financial statements were authorized for issue by Fidelity s board of directors on September 7, Functional and Presentation Currency These financial statements are presented in Canadian dollars, which is the Fund s functional currency. Comparative Figures - Per security comparative figures have been conformed to the current rounding presentation of two decimal places. 3. Summary of Significant Accounting Policies Basis of Measurement These financial statements have been prepared on the historical cost basis except for investments which are measured at fair value in the Statements of Financial Position. Use of Estimates and Judgments Under IFRS, management is required to make certain estimates and judgments at the date of the financial statements. The principal financial statement components subject to significant accounting estimates and judgments include: Fair value measurements The Fund may invest in financial instruments that are not quoted in an active market. Where applicable, these instruments are categorized in Level 2 and Level 3 of the fair value hierarchy explained below. When current market prices or quotations are not readily available or reliable, valuation techniques will be applied in good faith and in accordance with procedures adopted by the manager. Factors used in determining fair value may include, but are not limited to, broker quotes from reputable pricing sources, market or security specific events, changes in interest rates and credit quality. Fair value models use observable data, to the extent practical; however, the manager is required from time to time to make estimates and assumptions that are based on the best information available at that particular time. Changes in these estimates could impact the fair values of the financial instruments, and the impact could be material. The aggregate fair value of investments measured by valuation techniques as at June 30, 2017 and June 30, 2016, is included at the end of the Fund s Schedule of Investments. 9 Annual Report

10 Notes to Financial Statements continued (Amounts in thousands of Canadian dollars/thousands of securities (except per security amounts)) Classification and measurement of financial instruments The Fund has made significant judgments when determining the classification and measurement of its financial instruments under IAS 39, Financial Instruments Recognition and Measurement (IAS 39). These judgments centre upon the determination that certain investments are held-for-trading and that the fair value measurement option can be applied to those that are not due to factors including performance evaluation and management of the Fund on a fair value basis. Presentation of financial instruments The Fund has made significant judgments when determining the classification of its redeemable securities as financial liabilities in accordance with IAS 32 Financial Instruments Presentation (IAS 32). These judgments centre upon the determination that the Fund s redeemable securities entitlements include a contractual obligation to distribute any net income and net realized capital gains at least annually in cash (at the request of the securityholder) and, therefore, the ongoing redemption feature is not the securities only contractual obligation. Investment Valuation Investments are designated at their fair value through profit or loss in accordance with IAS 39 and are carried at their fair value. The Fund categorizes the inputs to valuation techniques used to fair 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) Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. There were no significant transfers between Level 1 and Level 2 during the periods. The aggregate value of investments by input level, as at June 30, 2017 and June 30, 2016, as well as a roll forward of Level 3 securities, where applicable, is included at the end of the Fund s Schedule of Investments. Valuation techniques used to value the Fund s investments by major category are as follows: Equity securities, including restricted equity securities and Exchange-traded funds (ETFs) for which market quotations are readily available, are valued at the last sales price or official closing price as reported by an independent 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 that the last sales price or official closing price is not readily available, or is outside the bid-ask spread, the point within the bid ask spread that is most representative of fair value based on specific facts and circumstances will be used. For foreign equity securities, when significant market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, ETFs and certain indexes as well as quoted prices for similar securities are used and are categorized as Level 2 in the hierarchy in these circumstances. Utilizing these techniques may result in transfers between Level 1 and Level 2. For equity securities, including restricted equity securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy. Cash Cash is comprised of cash on deposit and may include cash equivalents which are short-term debt instruments with terms to maturity of less than 90 days at acquisition which are held for the purpose of meeting short-term cash commitments. Foreign currencies are comprised of cash amounts denominated in currencies other than Canadian dollars, which are on deposit with the custodian to facilitate the settlement of foreign denominated security transactions. Cash is carried at amortized cost which approximates its fair value. The Fund did not hold any cash equivalents as at June 30, 2017 and June 30, Impairment of Financial Assets At each reporting date, the Fund assesses whether there is objective evidence that a financial asset carried at amortized cost is impaired. If such impairment exists, the Fund recognizes the difference between the amortized cost of the financial assets and the present value of the estimated future cash flows, discounted using the instrument s original effective interest rate as an impairment loss on the Statements of Comprehensive Income. Such impairment losses are reversed in subsequent periods in the Statements of Comprehensive Income if the conditions that lead to the initial recognition of the loss diminish or cease to exist. Other Assets and Liabilities Other assets and liabilities may include amounts due to or from the custodian, affiliates or other counterparties for accrued income, investment transactions, Fund s security transactions, accrued expenses and other unsettled transactions at period end. These amounts are classified as loans and receivables or financial liabilities and are carried at amortized cost, which approximates fair value due to their short-term nature. Classification of redeemable securities issued by the Fund In accordance with IAS 32, the Fund s redeemable securities entitlements include a contractual obligation to distribute any net income and net realized capital gains at least annually in cash (at the request of the securityholder) and, therefore, the ongoing redemption feature is not the securities only contractual obligation. Therefore, the Fund s redeemable securities do not meet the criteria for classification as equity and have been classified as financial liabilities on the Statements of Financial Position. The Fund s obligation for net assets attributable to securityholders is recorded at the redemption amount. As at June 30, 2017 and June 30, 2016, the Fund s net asset value per security may differ by less than $0.01 from its net assets attributable to securityholders per securities calculated in accordance with IFRS as a result of normal reporting period end procedures to close off the books and records. Annual Reportport 10

11 Investment Transactions, Income Recognition and Transaction Costs - Regular way purchases and sales of financial assets are recognized at their trade date. The cost of investments is determined on an average cost basis, excluding commissions and other portfolio transaction costs. Net realized gains and losses from the sale of investments (which may include proceeds received from litigation) and change in net unrealized appreciation (depreciation) on investments are calculated with reference to average cost of the related investment securities. Interest income is accrued as earned Dividend income is recognized on the ex-dividend date except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Distributions received from investment trusts are recorded as income, capital gains or a return of capital based on the best information available. Due to the nature of these investments, actual allocations could vary from this information. Distributions from investment trusts treated as a return of capital reduce the average cost of the underlying investment trust. Transaction costs, such as brokerage commissions, incurred in the purchase and sale of investment securities by the Fund are recognized as Commissions and other portfolio costs in the Statements of Comprehensive Income. Foreign Currency Translation Securities and other assets and liabilities denominated in a foreign currency are translated into Canadian dollars at the period-end exchange rates. Purchases and sales of securities, income and expenses denominated in foreign currencies are translated into Canadian dollars at the exchange rate on the date of the respective transaction. The effects of exchange rate fluctuations on investments are included in the Net realized gain (loss) and change in net unrealized appreciation (depreciation) on investments and exchange rate fluctuations on other foreign currency transactions are included in the Net realized gain (loss) on foreign currency transactions and Change in net unrealized appreciation (depreciation) on other net assets in foreign currencies in the Statements of Comprehensive Income. Per Security from Operations - The increase (decrease) in net assets attributable to securityholders resulting from operations per security in the Statements of Comprehensive Income represent the operational increase (decrease) for the Fund, divided by the relevant weighted average securities outstanding during the period. Refer to the Security Transactions Note for the Fund s weighted average securities outstanding. Statements of Cash Flows When preparing the Statements of Cash Flows, the Fund nets the rollover activity of its short-term investments, and includes only the net cash flow impact in Purchases of investments or Proceeds from sale and maturity of investments, as applicable. Additionally, in accordance with IFRS, the Fund s Statements of Cash Flows excludes non-cash transactions from its operating and financing activities. Recent Accounting Pronouncements The final version of IFRS 9, Financial Instruments, was issued by the IASB in July 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces a model for classification and measurement, a single, forward-looking expected loss impairment model and a substantially reformed approach to hedge accounting. The new single, principle based approach for determining the classification of financial assets is driven by cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being applied to all financial instruments, which will require more timely recognition of expected credit losses. It also includes changes in respect of an entity s own credit risk in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of an entity s own credit risk on such liabilities are no longer recognised in profit or loss. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, however is available for early adoption. In addition, the entity s own credit risk changes can be early applied in isolation without otherwise changing the accounting for financial instruments. The Fund is in the process of assessing the impact of IFRS 9 and does not plan to adopt the new standard early. 4. Expenses and Other Related Party Transactions Management and Advisory Fees - Fidelity serves as the manager and investment advisor of the Fund. Fidelity is part of a broader group of companies collectively known as Fidelity Investments. Fidelity has entered into sub-advisory agreements with a number of entities including FIAM LLC, to provide investment advice with respect to all or a portion of the investments of the Fund. The sub-advisors arrange for acquisition and disposition of portfolio investments, including all necessary brokerage arrangements. The Fund pays Fidelity a monthly management and advisory fee for their services and the provision of key management personnel to the Fund, based on the net asset value of the Fund, calculated daily and payable monthly. No management and advisory fees are charged with respect to the Series O securities, but investors will be charged a negotiated management fee. Independent Review Committee Fees - The Independent Review Committee (IRC), as required under National Instrument , reviews conflict of interest matters referred to it by the manager and provides recommendations or approves actions, as appropriate, that are in the best interest of the funds. There are currently four members of the IRC who are independent of Fidelity and its affiliates. IRC members are compensated by way of an annual retainer fee and a per meeting attendance fee, as well as reimbursed for expenses associated with IRC duties. These costs are allocated among the individual funds proportionately by assets. No IRC fees are charged with respect to the Series O securities. Sales Tax - Certain provinces have harmonized their Provincial Sales Tax (PST) with the federal Goods and Services Tax (GST). The Harmonized Sales Tax (HST) combines the GST rate of 5% with the PST rate of certain provinces. The Provincial GST/HST liability or refund is calculated using the residency of securityholders and the value of their interests in the Fund as at specific times, rather than the physical location of the Fund. The effective GST/HST rate charged to the Fund is based on the securityholders proportionate investments by province, using 11 Annual Report

12 Notes to Financial Statements continued (Amounts in thousands of Canadian dollars/thousands of securities (except per security amounts)) each province s HST rate or GST rate in the case of non-participating provinces. All amounts are included in the Statements of Comprehensive Income as Sales tax. Other Expenses - Fidelity is responsible for the payment of all expenses relating to the operation of the Fund except for its share of certain fund costs as outlined in the simplified prospectus. Commissions and Other Portfolio Costs - Commissions and other portfolio costs paid for security transactions during the period were $64 (June 30, 2016: $84), of which $1 (June 30, 2016: $-) were paid to brokerage firms that are affiliates of Fidelity Investments. The Fund may execute certain portfolio trades with brokers who reimbursed a portion of their commissions to the Fund. Reimbursement estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known. Commissions reimbursed under this arrangement were $5 (June 30, 2016: $11) and are included in Commissions and other portfolio costs in the Statements of Comprehensive Income. In addition, a portion of commissions may be paid for research. The total of such payments was $29 (June 30, 2016: $44). Amounts paid for research provided to the Fund by executing brokers are estimates made by Fidelity. Fidelity has established procedures to assist them in making a good faith determination that the Fund received a reasonable benefit considering the value of research goods and services and the amount of brokerage commissions paid. 5. Taxation and Distributions The Fund qualifies as a unit trust under the provisions of the Income Tax Act (Canada). For tax purposes, the Fund has a December year end. In each tax year, the Fund declares and credits as due and payable sufficient net investment income and net realized capital gains to securityholders such that the Fund will not be subject to income taxes. As a result, the Fund does not record income taxes under IAS 12 Income Taxes (IAS 12) and accordingly does not recognize the deferred tax benefit associated with tax loss carry forwards and other taxable temporary differences. Foreign withholding taxes are imposed by certain countries on investment income and are estimated based on the tax rules and actual rates that exist in the foreign markets. Investment income is recorded gross of foreign taxes withheld. Foreign withholding taxes are accrued for in conjunction with the accrual for the related investment income and are included in Foreign taxes withheld on the Statements of Comprehensive Income and Other payables and accrued expenses on the Statements of Financial Position. Distributions are taxable in securityholders hands. At the end of each tax year, the character of the distributions is determined for tax purposes. Under the terms of the Declaration of Trust, the trustee may capitalize any distribution amount without any increase in the number of securities outstanding. Capital losses may be carried forward indefinitely to reduce future realized capital gains. As at the last taxation year-end, the Fund had no capital losses available to be carried forward. Non capital losses may be carried forward for up to 20 tax years to reduce future taxable income, but expire in December of the year noted. As at the last taxation year-end, the Fund had no non capital losses available to be carried forward. 6. Capital Risk Management Securities issued and outstanding are considered to be the capital of the Fund. The capital of each series of the Fund is divided into an unlimited number of securities of equal value, with no par value. All securities in a series of the Fund rank equally with respect to distributions. A securityholder of the Fund is entitled to one vote for each one dollar in value of securities owned. Fractional securities are proportionately entitled to these rights. The Fund generally has no restrictions or specific capital requirements on the subscriptions and redemptions of securities other than minimum subscription requirements; although, on rare occasions, Fidelity may temporarily suspend securityholders right to redeem securities and postpone paying sale proceeds. The relevant movements attributable to securityholders are shown in the Statements of Changes in Net Assets Attributable to Securityholders. In accordance with the objectives and the risk management policies outlined in the Financial Instruments Risk notes, the Fund endeavors to invest the subscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions. Such liquidity is managed by investing the majority of assets in investments that can be readily disposed and via the Fund s ability to borrow up to 5% of its net asset value. Security Transactions - Security transactions and weighted average securities for each Series were as follows: Securities Outstanding, Beginning of Period Issued Reinvested Redeemed Securities Outstanding, End of Period Weighted Average Securities Period ended June 30, 2017 Series O 7, (2,302) 5,829 6,376 Period ended June 30, 2016 Annual Reportport 12

13 Series O 6,891 2, (3,051) 7,043 7,164 Affiliated Ownership - As at June 30, 2017, Fidelity and its affiliates held 100% of the Fund. As at June 30, 2016, Fidelity and its affiliates held 100% of the Fund. 7. Financial Instruments Risk The Fund s activities expose it to a variety of financial instruments risks: credit risk, liquidity risk, other price risk, interest rate risk and currency risk. Fidelity seeks to minimize potential adverse effects of these performance risks by employing professional, experienced portfolio advisors, by daily monitoring of positions and market events, and by diversifying the investment portfolio within the constraints of the investment mandate. Derivative financial instruments may be used to moderate certain risk exposures. Risk, as defined by Fidelity, is the mismatch of certain risk factors, such as the market capitalization, beta, common factors such as size, priceearnings ratio, price-to-book ratio and industry exposures, between a portfolio and its benchmark. Such mismatches may result in divergence of returns relative to the benchmark. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. A beta of 1 indicates that the security s price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security s price will be more volatile than the market. For example, if a stock s beta is 1.2, it s theoretically 20% more volatile than the market. Fidelity s objective is to provide consistent value-added return over the benchmark. Unsystematic risk is mitigated primarily through investments in a diverse portfolio of securities across many sectors, styles or regions of the market. Fidelity s qualitative fundamental security selection is also well diversified across many analysts. Rather than relying on a single valuation process or quantitative model that implicitly assumes that past value-added returns of some sectors or styles will persist into the future, Fidelity s analysts select securities based on their own unique valuation processes. The Fund aims to seek long-term capital appreciation by investing primarily in U.S. large cap equities. The Fund s benchmark is the S&P 500 Index. Portfolio risk is monitored daily and reviewed monthly by an investment compliance group. In addition, there is a formal quarterly review of each fund. The investment compliance group, portfolio managers and the senior analysts attend a quarterly portfolio review. Portfolios within each strategy are reviewed relative to each other and to their benchmark. Active industry and security allocations are analyzed. Credit Risk - Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Fund. The Fund s own credit risk in the case of financial liabilities and a counterparty s credit risk, both indirect and direct, are considered, where applicable, in determining the fair value of financial assets and financial liabilities. In addition, as part of its cash management, the Fund limits its direct exposure to credit loss by placing its cash with high credit quality financial institutions. The carrying amount of investments and other assets represents the maximum credit risk exposure as at June 30, 2017 and June 30, Other than outlined above, there were no significant concentrations of credit risk to counterparties as at June 30, 2017 and June 30, Concentration Risk - The Fund may be exposed to risk based on the concentration levels of its financial instruments in various sectors, geographic regions, asset weightings and market capitalization, as applicable. Fidelity analyzes and monitors these concentration risks regularly. Refer to the Sector Mix and Market Capitalization tables in the Summary of Investment Portfolio of the Fund s Annual Management Report of Fund Performance as at June 30, 2017, which summarize the investment concentration risks that are relevant for the Fund. Liquidity Risk - Liquidity risk is defined as the risk that the Fund may not be able to settle or meet its obligations on time or at a reasonable price. The Fund is exposed to daily cash redemptions of its redeemable securities. Redeemable securities are redeemed on demand at the securityholder s option based on the Fund s net asset value per security (NAVPS) at the time of redemption. The Fund may be exposed to indirect liquidity risk through its investments. In accordance with securities regulations, investment funds must maintain at least 90% of assets in liquid investments; investments that are traded in an active market and can be readily disposed of. In addition, the Fund aims to retain sufficient cash and short-term investments to maintain liquidity, and has the ability to borrow up to 5% of its net asset value from the custodian for the purpose of funding redemptions. The liquidity position is monitored on a daily basis. As at June 30, 2017 and June 30, 2016, the Fund did not have financial liabilities with maturities greater than 3 months. Other Price Risk - Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk on monetary instruments), whether caused by factors specific to an individual investment, its issuer, or other factors affecting all instruments traded in a market or market segment. All financial instruments present a risk of loss of capital. This risk is moderated through a careful selection of securities and other financial instruments within the parameters of the investment strategy. The maximum risk resulting from financial instruments is equivalent to their fair value except for possible losses from options written 13 Annual Report

14 Notes to Financial Statements continued (Amounts in thousands of Canadian dollars/thousands of securities (except per security amounts)) and future contracts which can be unlimited. Investments and derivatives, if applicable, are susceptible to other price risk arising from uncertainties about future prices of the instruments. If the benchmark had increased or decreased by 5% on June 30, 2017 and June 30, 2016, with all other variables held constant, the net assets attributable to securityholders of the Fund would have increased or decreased by approximately $6,396 (June 30, 2016: $7,015). This change is estimated using the Fund s beta which is calculated based on the historical correlation between the return of the Fund as compared to the return of the benchmark. In practice, the actual trading results may differ from this sensitivity analysis and the difference could be material. Interest Rate Risk - Interest rate risk arises on interest-bearing financial instruments held directly or indirectly in the investment portfolio such as bonds. The Fund is exposed to the risk that the fair value or the future cash flows of interest-bearing financial instruments will fluctuate due to changes in the prevailing levels of market interest rates. Any excess cash may be invested in short-term investments at market interest rates. The majority of the Fund s financial instrument exposure is non-interest bearing. As a result, the Fund is not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. Currency Risk - Currency risk arises from financial instruments that are denominated in a currency other than Canadian dollar, which is the Fund s functional currency. The Fund is exposed to the risk that the value of financial instruments will fluctuate due to changes in exchange rates. Currency risk is not considered to arise from financial instruments that are non-monetary items such as equity investments, or forward foreign exchange contracts related to such non-monetary items. Foreign exchange exposure relating to non-monetary assets and liabilities is considered to be a component of other price risk, not foreign currency risk. As at June 30, 2017 and June 30, 2016, the majority of the Fund s monetary assets and liabilities are denominated in Canadian dollars. As a result, the Fund is not subject to significant amounts of risk due to fluctuations in exchange rates. Annual Reportport 14

15 Management Report and Independent Auditor s Report Management Responsibility for Financial Reporting To the Securityholders and Trustee of Fidelity U.S. Equity Investment Trust (Fund) The accompanying financial statements have been prepared by Fidelity Investments Canada ULC (Fidelity), as manager of the Fund. Fidelity is responsible for the information and representations contained in these financial statements. The Board of Directors of Fidelity is responsible for reviewing and approving the financial statements. Fidelity maintains appropriate processes to ensure that relevant and reliable financial information is produced. The financial statements have been prepared in accordance with International Financial Reporting Standards and include certain amounts and disclosures that are based on estimates and judgments. The significant accounting policies, which management believes are appropriate for the Fund, are described in Note 3 to the financial statements. PricewaterhouseCoopers LLP is the external auditor of the Fund. They have audited the financial statements in accordance with Canadian generally accepted auditing standards to enable them to express to the securityholders their opinion on the financial statements. Their report is set out below. Brock Dunlop Vice President and Fund Treasurer Fidelity Investments Canada ULC September 7, 2017 Independent Auditor s Report To the Securityholders and Trustee of Fidelity U.S. Equity Investment Trust (Fund) We have audited the accompanying financial statements of the Fund, which comprise the statements of financial position as at June 30, 2017 and 2016 and the statements of comprehensive income, changes in net assets attributable to securityholders and cash flows for the years ended June 30, 2017 and 2016, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as at June 30, 2017 and 2016 and its financial performance and its cash flows for the years ended June 30, 2017 and 2016 in accordance with International Financial Reporting Standards. PricewaterhouseCoopers LLP Chartered Professional Accountants, Licensed Public Accountants Toronto, Ontario September 7, Annual Report

16 Fidelity Investments Canada ULC 483 Bay Street, Suite 300 Toronto, Ontario M5G 2N7 Manager, Transfer Agent and Registrar Fidelity Investments Canada ULC 483 Bay Street, Suite 300 Toronto, Ontario M5G 2N7 Portfolio Adviser Fidelity Investments Canada ULC Toronto, Ontario Custodian State Street Trust Company of Canada Toronto, Ontario Auditor PricewaterhouseCoopers LLP Toronto, Ontario Visit us online at or call Fidelity Client Services at Fidelity s mutual funds are sold by registered Investment Professionals. Each Fund has a simplified prospectus, which contains important information on the Fund, including its investment objective, purchase options, and applicable charges. Please obtain a copy of the prospectus, read it carefully, and consult your Investment Professional before investing. As with any investment, there are risks to investing in mutual funds. There is no assurance that any Fund will achieve its investment objective, and its net asset value, yield, and investment return will fluctuate from time to time with market conditions. Investors may experience a gain or loss when they sell their securities in any Fidelity Fund. Fidelity Global Funds may be more volatile than other Fidelity Funds as they concentrate investments in one sector and in fewer issuers; no single Fund is intended to be a complete diversified investment program. Past performance is no assurance or indicator of future returns. There is no assurance that either Fidelity Canadian Money Market Fund or Fidelity U.S. Money Market Fund will be able to maintain its net asset value at a constant amount. The breakdown of Fund investments is presented to illustrate the way in which a Fund may invest, and may not be representative of a Fund s current or future investments. A Fund s investments may change at any time. Fidelity Investments is a registered trademark of Fidelity Investments Canada ULC E FICL-UET-ANN-0917