Fidelity Investment Funds. Annual Report and Financial Statements

Transcription

1 Fidelity Investment Funds Annual Report and Financial Statements For the year ended 29 February 2012

2 FIDELITY INVESTMENT FUNDS ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 29 FEBRUARY 2012 CONTENTS Director s report* 2 Statement of Authorised Corporate Director s responsibilities 3 Certification of the Annual Report and Financial Statements by Directors 3 Report of the Depositary 3 Independent Auditors report 4 General information* 5 Aggregated financial statements for Fidelity Investment Funds 6 FUND MANAGER REVIEWS* AND FINANCIAL STATEMENTS Fidelity American Fund 15 Fidelity American Special Situations Fund 27 Fidelity China Consumer Fund 37 Fidelity Emerging Asia Fund 46 Fidelity Emerging Europe, Middle East and Africa Fund 57 Fidelity Enhanced Income Fund 69 Fidelity Equity Growth Defender Fund 85 Fidelity European Fund 96 Fidelity European Opportunities Fund 109 Fidelity Extra Income Fund 121 Fidelity Genesis Fund 145 Fidelity Global Dividend Fund 154 Fidelity Global Focus Fund 164 Fidelity Global Property Fund 177 Fidelity Global Real Asset Securities Fund 190 Fidelity Global Special Situations Fund 200 Fidelity International Fund 213 Fidelity Japan Fund 232 Fidelity Japan Smaller Companies Fund 243 Fidelity MoneyBuilder Balanced Fund 257 Fidelity MoneyBuilder Dividend Fund 272 Fidelity MoneyBuilder Growth Fund 283 Fidelity MoneyBuilder Income Fund 294 Fidelity MoneyBuilder UK Index Fund 319 Fidelity South-East Asia Fund 341 Fidelity Special Situations Fund 355 Fidelity Strategic Bond Fund 368 Fidelity UK Aggressive Fund 395 Fidelity UK Growth Fund 406 Fidelity UK Smaller Companies Fund 417 Further information* 429 *These collectively comprise the Authorised Corporate Director s (ACD) report. 1

3 FIDELITY INVESTMENT FUNDS ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 29 FEBRUARY 2012 DIRECTOR S REPORT We are pleased to present the annual report and financial statements for Fidelity Investment Funds, covering the year to 29 February As required by the Collective Investment Schemes sourcebook (COLL), the Authorised Corporate Director (ACD) has issued a Short Report for the Company to investors. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities; but is included for the purpose of illustration only. Investors should also note that the views expressed may no longer be current and may already have been acted upon by Fidelity. COMPANY AND STATUS Fidelity Investment Funds (the Company) is an open-ended investment company with variable capital incorporated in England and Wales under number IC8 and authorised by the Financial Services Authority (FSA) on 7 April The Company is structured as an umbrella company comprising various funds, each of which is operated as a distinct fund, with their own portfolio of investments. The funds in which shares are currently available are: Fidelity American Fund Fidelity American Special Situations Fund Fidelity China Consumer Fund Fidelity Emerging Asia Fund Fidelity Emerging Europe, Middle East and Africa Fund Fidelity Enhanced Income Fund Fidelity Equity Growth Defender Fund Fidelity European Fund Fidelity European Opportunities Fund Fidelity Extra Income Fund Fidelity Genesis Fund Fidelity Global Dividend Fund Fidelity Global Focus Fund Fidelity Global Property Fund Fidelity Global Real Asset Securities Fund Fidelity Global Special Situations Fund Fidelity International Fund Fidelity Japan Fund Fidelity Japan Smaller Companies Fund Fidelity MoneyBuilder Balanced Fund Fidelity MoneyBuilder Dividend Fund Fidelity MoneyBuilder Growth Fund Fidelity MoneyBuilder Income Fund Fidelity MoneyBuilder UK Index Fund Fidelity South-East Asia Fund Fidelity Special Situations Fund Fidelity Strategic Bond Fund Fidelity UK Aggressive Fund Fidelity UK Growth Fund Fidelity UK Smaller Companies Fund In the future there may be other funds launched. Each fund has the investment powers equivalent to those of an undertaking for collective investment in transferable securities (a UCITS) scheme as per the Prospectus. As each fund is not a separate legal entity, if the assets attributable to any fund were insufficient to meet the liabilities attributable to it, the shortfall might have to be met out of the assets attributable to one or more other funds of the Company. This means that the fund you invest in may be worth less if it has to transfer money to another fund. Shareholders are not liable for the debts of the Company. A shareholder is not liable to make any further payment to the Company after they have paid the purchase price of the shares. The Company is governed by the requirements of the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228) and the FSA s Handbook of rules and guidance, specifically the COLL. As permitted by the COLL, the Company no longer holds Annual General Meetings. OBJECTIVES The broad aim of the Company is to provide investors with revenue and/or capital growth over the medium to long term. The aim of the equity funds is to provide investors with either a combination of revenue and long term capital growth or long term capital growth from diversified and actively managed portfolios of securities in a wide range of stock markets. The revenue from these funds with a long term capital growth structure is expected to be low. The equity funds will invest primarily in equities in the markets reflected in the title of each individual fund and in companies established outside those markets but which derive a significant proportion of their earnings from those markets. The aim of the bond funds is to provide investors with relatively high revenue with the possibility of capital gains. The investment objective and a review of the investment activities of each fund during the year under review are included within the Fund Manager Reviews. CHANGES TO THE PROSPECTUS For the year ended 29 February 2012 the following significant changes were made to the Prospectus and Instrument of Incorporation: Fidelity Emerging Asia Fund was launched on 11 July Fidelity China Consumer Fund and Fidelity Global Real Asset Securities Fund both launched on 14 September Fidelity UK Opportunities Fund changed its name to Fidelity UK Smaller Companies Fund on 28 September Fidelity Income Plus Fund changed its name to Fidelity MoneyBuilder Dividend Fund on 28 September Y Gross Accumulating share class was launched on 28 November 2011 for Fidelity MoneyBuilder Income Fund. Fidelity Global Dividend Fund launched on 30 January Fidelity Growth + Income Fund was fully terminated on 16 February 2012 therefore no Financial Statements have been produced in accordance with the COLL. Y Accumulating and Y Distributing share classes were launched on 20 February 2012 for Fidelity Enhanced Income Fund. Y Distributing share class was launched on 20 February 2012 for Fidelity MoneyBuilder Dividend Fund. 2

4 FIDELITY INVESTMENT FUNDS ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 29 FEBRUARY 2012 STATEMENT OF AUTHORISED CORPORATE DIRECTOR'S (ACD) RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS OF THE COMPANY. The Open-Ended Investment Companies Regulations 2001 (SI 2001/1228) and the COLL require the ACD to prepare financial statements for each annual and half-yearly accounting period which give a true and fair view of the financial position of the Company and of its net revenue and net capital gains or losses on the property of the Company for the year. In preparing the financial statements the ACD is required to: Select suitable accounting policies and then apply them consistently Comply with the Statement of Recommended Practice for Authorised Funds issued by the IMA in October 2010, the COLL, the Prospectus and the Instrument of Incorporation Follow generally accepted accounting principles and applicable accounting standards Keep proper accounting records which enable it to demonstrate that the financial statements as prepared comply with the above requirements Prepare the financial statements on the going concern basis unless it is inappropriate to presume the Company will continue in operation Take reasonable steps for the prevention and detection of fraud or other irregularities CERTIFICATION OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS BY DIRECTORS OF THE ACD REPORT OF THE DEPOSITARY TO THE SHAREHOLDERS OF THE FIDELITY INVESTMENT FUNDS The Depositary is responsible for the safekeeping of all the property of the Company (other than tangible moveable property) which is entrusted to it and for the collection of revenue that arises from that property. It is the duty of the Depositary to take reasonable care to ensure that the Company is managed by the Authorised Corporate Director (ACD) in accordance with the Financial Services Authority s Collective Investment Schemes sourcebook (COLL), the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228) (OEIC Regulations), the Company s Instrument of Incorporation and Prospectus, as appropriate, in relation to the pricing of, and dealings in, shares in the Company; the application of revenue of the Company; and the investment and borrowing powers of the Company. Having carried out such procedures as we consider necessary to discharge our responsibilities as Depositary of the Company, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Authorised Corporate Director: (i) has carried out the issue, sale, redemption and cancellation and calculation of the price of the Company s shares and the application of the Company s revenue in accordance with the COLL and, where applicable, the OEIC Regulations and the Company s Instrument of Incorporation and Prospectus; and (ii) has observed the investment and borrowing powers and restrictions applicable to the Company. In accordance with the requirements of the COLL, the report and financial statements are approved on behalf of the Directors of FIL Investment Services (UK) Limited, the ACD. J.P. Morgan Trustee and Depositary Company Limited Bournemouth 19 June 2012 Linda Robinson Director Andrew Morris Director FIL Investment Services (UK) Limited 19 June

5 FIDELITY INVESTMENT FUNDS ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 29 FEBRUARY 2012 INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF FIDELITY INVESTMENT FUNDS We have audited the financial statements of Fidelity Investment Funds (the Company) for the year ended 29 February 2012 which comprise the aggregated Statement of Total Return, the aggregated Statement of Change in Shareholders' Net Assets, the aggregated Balance Sheet and related notes and for each of the Company s sub-funds, the Statement of Total Return, the Statements of Change in Shareholders' Net Assets, the Balance Sheet, the related notes and the distribution and/or accumulation statement. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (UKGAAP) and the Statement of Recommended Practice "Financial Statements of Authorised Funds" issued by the Investment Management Association (the "Statement of Recommended Practice for Authorised Funds"). RESPECTIVE RESPONSIBILITIES OF THE AUTHORISED CORPORATE DIRECTOR AND AUDITORS As explained more fully in the Authorised Corporate Director s Responsibilities Statement the ACD is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Company s members as a body in accordance with paragraph of the Collective Investment Schemes sourcebook as required by paragraph 67(2) of the Open-Ended Investment Companies Regulations 2001 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Authorised Corporate Director; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. OPINION ON OTHER MATTERS PRESCRIBED BY THE COLLECTIVE INVESTMENT SCHEMES SOURCEBOOK In our opinion: We have obtained all the information and explanations we consider necessary for the purposes of the audit; and The information given in the Authorised Corporate Director's Report for the financial year for which the financial statements are prepared is consistent with the financial statements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION We have nothing to report in respect of the following matters where the Collective Investment Schemes sourcebook requires us to report to you if, in our opinion; Proper accounting records for the Company have not been kept; or The financial statements are not in agreement with the accounting records and returns. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 19 June 2012 The financial statements are published at which is a website maintained by the Authorised Corporate Director. The maintenance and integrity of the Fidelity website is the responsibility of the Authorised Corporate Director. The work carried out by the independent auditors does not involve consideration of these matters, and accordingly, the independent auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction. OPINION ON FINANCIAL STATEMENTS In our opinion the financial statements: Give a true and fair view of the financial position of the Company and each of the sub-funds at 29 February 2012 and of the net revenue/(expenses) and the net capital gains/(losses) of the scheme property of the Company and each of the sub-funds for the year then ended; and Have been properly prepared in accordance with the Statement of Recommended Practice for Authorised Funds issued by the IMA in October 2010, the Collective Investment Schemes sourcebook and the Instrument of Incorporation. 4

6 FIDELITY INVESTMENT FUNDS ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 29 FEBRUARY 2012 GENERAL INFORMATION FIDELITY INVESTMENT FUNDS REGISTERED OFFICE Oakhill House 130 Tonbridge Road Hildenborough Tonbridge Kent TN11 9DZ United Kingdom Authorised and regulated in the UK by the Financial Services Authority INVESTMENT ADVISERS For funds managed wholly or principally in the United Kingdom: FIL Investment Services (UK) Limited Oakhill House 130 Tonbridge Road Hildenborough Tonbridge Kent TN11 9DZ United Kingdom Authorised and regulated in the UK by the Financial Services Authority Registered in England and Wales No For other funds: FIL Fund Management Limited Pembroke Hall 42 Crow Lane Pembroke HM19 Bermuda AUTHORISED CORPORATE DIRECTOR (ACD), GENERAL DISTRIBUTOR, ADMINISTRATOR AND REGISTRAR FIL Investment Services (UK) Limited Oakhill House 130 Tonbridge Road Hildenborough Tonbridge Kent TN11 9DZ United Kingdom The ACD is FIL Investment Services (UK) Limited and is the sole director DEPOSITARY J.P. Morgan Trustee and Depositary Company Limited Registered Office: 125 London Wall London EC2Y 5AJ United Kingdom Head Office: Chaseside Bournemouth Dorset BH7 7DA United Kingdom Authorised and regulated in the UK by the Financial Services Authority INDEPENDENT AUDITORS PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT United Kingdom 5

7 AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS STATEMENT OF TOTAL RETURN for the year ended 29 February /02/12 28/02/11 Notes Income Net capital gains/(losses) 4 (534,663) 2,280,856 Revenue 5 629, ,719 Expenses 6 (281,259) (287,993) Finance costs: Interest/other 8 (5,218) (8,183) Net revenue/(expense) before taxation 342, ,543 Taxation 7 (21,962) (26,204) Net revenue/(expense) after taxation 320, ,339 Total return before distributions (213,754) 2,525,195 Finance costs: Distributions 8 (289,315) (223,267) Change in net assets attributable to shareholders from investment activities (503,069) 2,301,928 STATEMENT OF CHANGE IN SHAREHOLDERS' NET ASSETS for the year ended 29 February /02/12 28/02/11 Notes Opening net assets attributable to shareholders 20,532,722 18,296,187 Movement due to sales and repurchases of shares Amounts receivable on creation of shares 1,694,964 2,171,480 Less: Amounts payable on cancellation of shares (2,750,291) (2,276,433) Inspecie creations 131,468 - Inspecie liquidations (131,468) - (1,055,327) (104,953) Dilution levy Stamp duty reserve tax 15 (2,706) (3,177) Change in net assets attributable to shareholders from investment activities (see above) (503,069) 2,301,928 Retained distribution on accumulation shares 8 88,612 42,304 Closing net assets attributable to shareholders 19,060,232 20,532,722 BALANCE SHEET as at 29 February /02/12 28/02/11 Notes Assets Portfolio of investments 18,498,799 19,868,952 Derivative assets 83, ,537 Debtors 9 298, ,170 Cash and bank balances , ,310 Total other assets 921, ,480 Total assets 19,503,105 20,847,969 Liabilities Derivative liabilities (84,540) (98,477) Creditors 11 (248,725) (148,131) Bank overdrafts 10 (78,743) (44,689) Net distributions payable on income shares (30,865) (23,950) Total other liabilities (358,333) (216,770) Total liabilities (442,873) (315,247) Net assets attributable to shareholders 19,060,232 20,532,722 The aggregated financial statements represent the sum of the individual funds within the umbrella Company. Further analysis of the distribution and the net asset position can be found within the financial statements of the individual funds. 6

8 AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS NOTES TO THE AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS 1 Accounting policies a) Basis of accounting - These financial statements have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with the United Kingdom Generally Accepted Accounting Practice (UKGAAP) and the Statement of Recommended Practice (SORP) for Authorised Funds issued by the Investment Management Association (IMA) in October Fidelity Growth + Income Fund was fully terminated on 16 February No financial statements have been prepared for the period in accordance with the COLL but the results to termination are included in the aggregated financial statements. b) Recognition of revenue - Dividends on quoted equities are recognised when the security is quoted ex-dividend. Interest from debt securities are accounted for on an effective yield basis. Effective yield recognises any discount or premium on the purchase of an investment as revenue over its remaining life. For some securities that are valued at significantly distressed levels or where the Authorised Corporate Director expects future cash flows to be uncertain, the discount or premium is not recognised as revenue. Deposit interest and other revenue are accounted for on an accruals basis. Underwriting commission is recognised when the issue takes place. Special dividends are treated as revenue or capital depending on the facts of each particular case. Share buy-backs are treated as a repayment of capital. c) Treatment of stock dividends - Where the fund manager has elected to receive a dividend in the form of shares rather than cash, the dividend is treated as revenue but does not form part of the distribution. d) Treatment of expenses: All expense are accounted for on an accruals basis. Management expenses - Investment management fees are charged against revenue for all the individual funds. The investment management fees for Fidelity Global Dividend Fund, Fidelity Enhanced Income Fund, Fidelity MoneyBuilder Balanced Fund, Fidelity MoneyBuilder Dividend Fund and Fidelity MoneyBuilder Growth Fund are transferred to capital for the purpose of calculating the distribution. Expenses not attributable to any one fund have been allocated by the ACD to all funds (and their classes) pro rata to the net asset values of the funds (and their classes). Other expenses - All other expenses are chargeable against revenue for distribution purposes other than those relating to purchases and sales of investments which are charged to capital. e) Allocation to multiple share classes - Charges and expenses which are directly attributable to the fund (but not to a particular class) will normally be allocated between the classes within the fund pro rata to the net asset value of the fund attributable to each class. Any charges and expenses not attributable to any one fund will normally be allocated by the ACD to all funds (and their classes) pro rata to the net asset values of the funds (and their classes), although the ACD has the discretion to allocate such charges and expenses in a different manner which it considers fair to shareholders generally. Allocations of revenue are made in accordance with the proportionate interests of the classes within the fund. f) Distribution policy - The distribution policy of the individual funds is to distribute/accumulate all available income after deduction of expenses properly chargeable against revenue. Interest from debt securities has been distributed on an accrual of coupon basis where this exceeds the amount determined on an effective yield basis. Fidelity Enhanced Income Fund, Fidelity MoneyBuilder Dividend Fund and Fidelity MoneyBuilder Balanced Fund distribute a fixed amount during the interim period and distribute the remaining revenue as a final distribution. g) Taxation - The tax accounting treatment follows that of the principal amount. Deferred tax is provided on all timing differences. Deferred tax assets arising from unutilised excess expenses or excess unrelieved foreign taxation are only recognised if they are expected to be realisable. Overseas tax is written off if it is not considered to be recoverable. h) Basis of valuation of investments - Investments have been valued using the market price at the noon valuation point on the last business day of the accounting period. Market value is defined by the SORP as fair value which is generally the bid value for each security. Suspended and unquoted securities have been valued in accordance with the fair value policy operated by the ACD. Fair value adjustments may be implemented to protect the interests of the Shareholder Funds against market timing practicies. Accordingly if a fund invests in markets that are closed for business at the time the fund is valued, the ACD may, by derogation from the provisions above, allow for the securities included in a particular portfolio to be adjusted to reflect more accurately the fair value of the fund's investments at the point of valuation. At 29 February 2012, all Japanese securities were fair valued. i) Derivatives - Where appropriate, the use of certain derivative transactions is permitted. Where such transactions are used to protect or enhance revenue, the revenue and expenses derived from them are included in Revenue or Expenses in the Statement of Total Return. Where such transactions are used to protect or enhance capital, the gains or losses are included in Net capital gains/(losses) in the Statement of Total Return. Any positions on such transactions open at the year end are reflected in the Balance Sheet at their market value. All gains and losses in the value of futures contracts, interest rate swaps, credit default swaps, equity forwards, contracts for difference, equity linked notes and options are disclosed in the Statement of Total Return under Net capital gains/(losses). 7

9 AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS NOTES TO THE AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS For futures, equity forwards and contracts for difference, the dividend element is included in revenue along with the associated finance costs of these contracts. Ongoing premia on credit default swaps are charged or credited to revenue/expenses on an accruals basis, depending on whether protection is bought or sold. Revenue receivable/payable on interest rate swaps is included in revenue on an accruals basis. The premium received on covered call options is taken to revenue over the life of the contract provided the strike price of the option is greater than the price of the underlying security at the time of trade. For Fidelity MoneyBuilder Balanced Fund, Fidelity MoneyBuilder Income Fund, Fidelity Extra Income Fund and Fidelity Strategic Bond Fund where forward currency contracts have been entered into to hedge the portfolio against exchange rate movements, any subsequent hedge gain or loss on income is taken to revenue. The reason for this is so that shareholders are not exposed to foreign exchange rate movements in their monthly distribution. For all other funds, where forward currency contracts have been entered into to hedge the portfolio against currency exchange rate movements, any subsequent hedge gain or loss is taken to capital. The difference between spot and forward contract rate, when the contract is first acquired, is recognised as revenue within the fund, over the duration of the contract. j) Exchange rates - Assets and liabilities denominated in foreign currencies have been translated into sterling at the rate of exchange ruling at the noon valuation point on the last business day of the accounting period. Revenue items denominated in foreign currency are translated into sterling at exchange rates ruling at the date of the transaction. Differences on exchange are dealt with in the Statement of Total Return. 2. Equalisation Equalisation applies only to shares purchased during the distribution year (Group 2 shares). It is the average amount of revenue included in the purchase price of all Group 2 shares and is credited to the holders of these shares as a return of capital. Being capital it is not liable to income tax but must be deducted from the cost of shares for Capital Gains Tax purposes. 3. Contingent liabilities 29/02/12 28/02/11 At the year end the fund has the following outstanding commitments: Rights issue Total commitments Net capital gains/(losses) 29/02/12 28/02/11 Gains/(losses) on non-derivative securities (476,272) 2,197,005 Gains/(losses) on derivative contracts (50,499) 53,674 Gains/(losses) on forward currency contracts (7,251) 44,037 Other currency gains/(losses) (211) (13,860) Foreign capital gains tax (430) - Net capital gains/(losses) (534,663) 2,280,856 Included in the gains/(losses) on non-derivative securities are security charges of 244,000 for the period (2011: 148,000). 5. Revenue 29/02/12 28/02/11 UK dividends 129,892 92,635 UK scrip dividends 38,843 67,123 UK property income distributions 2,811 3,133 UK property income scrip dividends 93 2,006 Overseas dividends 236, ,810 Overseas scrip dividends 20,270 9,138 Interest on securities 189, ,030 Bank interest 1,198 1,005 Underwriting commission Taxable interest 247 3,452 Non-taxable interest 2 - Derivative revenue 9,232 13,210 Total revenue 629, ,719 8

10 AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS NOTES TO THE AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS 6. Expenses 29/02/12 28/02/11 Payable to the ACD, associates of the ACD, and agents of either of them: Investment management fees* 240, ,675 Registrar fees 24,300 25,144 Service charges 9,398 9,699 Foreign exchange administration fees Other operating expenses 1,732 1, , ,566 Payable to the Depositary, associates of the Depositary, and agents of either of them: Depositary fees 1,078 1,003 Custody fees 3,390 3,231 4,468 4,234 Other expenses: Audit fee** Total expenses 281, ,993 * Of the Investment management fees above 13,005,000 (2011: 12,822,000) was transferred to capital for the purpose of calculating the distribution. ** Additional audit fees amounting to 29,000 (exclusive of VAT) have been borne by the ACD on behalf of the funds (2011: 5,315). 7. Taxation 29/02/12 28/02/11 a) Analysis of charge/(credit) for the year UK corporation tax 1, Double taxation relief (252) (9) Overseas taxation 23,177 25,241 Prior year adjustment (2,382) 3 Total taxation 21,962 26,204 Factors affecting the tax charge/(credit) for the year are shown within the financial statements of the individual funds. 8. Finance costs Further analysis of finance costs can be found within the financial statements of the individual funds. 9. Debtors 29/02/12 28/02/11 Amounts receivable for creation of shares 76,390 17,813 Sales awaiting settlement 98, ,922 Accrued revenue 113, ,291 Commission recapture receivable 889 1,843 UK corporation tax recoverable 47 - UK income tax recoverable Overseas tax recoverable 8,220 7,327 VAT recoverable - 25 Total debtors 298, , Cash and bank balances 29/02/12 28/02/11 Amounts held at futures clearing houses and brokers 67,004 29,747 Cash and bank balances 555, ,563 Bank overdrafts (78,743) (44,689) Total cash and bank balances 543, ,621 9

11 AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS NOTES TO THE AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS 11. Creditors 29/02/12 28/02/11 Amounts payable for cancellation of shares 69,874 34,432 Purchases awaiting settlement 149,769 83,339 Accrued expenses 22,774 25,333 Derivative revenue payable UK corporation tax payable UK income tax payable 5,506 4,327 Total creditors 248, , Related parties The ACD, FIL Investment Services (UK) Limited, is regarded as a related party under FRS 8 by virtue of the influence it has over the operations of the Company. The ACD acts as principal on all transactions of shares in the Company. The aggregate monies received through creations and paid through cancellations are disclosed in the Statement of Change in Shareholders' Net Assets, and the amounts due to, and from, the ACD in respect of share transactions at the year end are disclosed in Notes 9 and 11. Amounts paid to the ACD in respect of services provided are disclosed in Note 6. Amounts due at the year end of 21,622,000 (2011: 23,777,000) are included within accrued expenses in Note 11. The ACD did not enter into securities transactions with the Company during the year. At the balance sheet date, FIL Limited which is the ultimate parent company of FIL Investment Services (UK) Limted, has holdings totalling 0.10% (2011: 0.08%) in sub-funds. 13. Shareholders' fund Details of all the funds with more than one share class are outlined within the financial statements of the individual funds. 14. Financial instruments exposure In pursuing its respective investment objectives and policies, each fund within the Company may hold a number of financial instruments which may comprise: Equity shares, fixed income securities and floating rate securities Cash, liquid assets and short term debts Derivative instruments which could include forward foreign exchange contracts, futures, options, swaps, structured notes and other derivatives. Generally, the purpose of using derivatives is to manage the currency and market risks arising from the fund's investment activities. However, and as outlined in the relevant funds' investment objectives, certain funds are permitted to use derivatives and forward transactions for investment purposes. Risk framework The Board of Directors of FIL Limited, the ultimate parent company of the ACD, has established a Risk Policy, a Risk Appetite statement and a number of other risk related policies for adoption throughout the Fidelity International group of companies, including the ACD. There is a clearly defined structure operating within a corporate governance and management framework that is designed to address the related business risks, including those arising from financial instruments. Risk management policies and procedures are established by the Board and updated according to market, industry and government initiatives and regulatory developments. The Board monitors that a robust system of internal control exists to ensure compliance with rules, regulations and policies. It is the Board of Directors that is ultimately responsible for monitoring risk but day to day management of the risk process has been delegated to other areas as appropriate. Fidelity operates a 'multiple lines of defence' approach to risk management; also the risk control processes are comprehensive, multi-layered, both quantitative and qualitative and do not rely on any one risk measure or system. The primary responsibility for financial instrument risk management rests with the portfolio manager of each fund who is overseen by the relevant Chief Investment Officer (CIO). On a regular basis each fund is formally reviewed in a meeting involving the portfolio manager, the relevant CIO, Investment Management Portfolio Analytics and others; the review covers multiple aspects of the fund's profile including trading activity, turnover, performance, structure, style profile, the use of derivatives and other relevant subjects such as yield curve exposure and sector and credit rating positioning in the case of Fixed Income funds. In addition to this review there is a formal Investment Risk Oversight Committee (IROC), chaired by the head of the Investment Management Risk function, whose remit includes review of various risk and performance measures, liquidity and other investment risks. Furthermore, there is a Derivative Risk Committee that focuses on all aspects of risk arising from the use of derivative instruments. The global exposure relating to derivatives held in a fund may not exceed the net value of that fund. Global exposure calculations for all funds - unless otherwise indicated - are using the commitment approach as part of their risk management process, measure and limits. The funds in this umbrella OEIC are governed by EU UCITS rules and compliance therewith, and prospectus limits, is monitored and reported on by an independent Investment Compliance function. 10

12 AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS NOTES TO THE AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS Risk factors The main risks arising from financial instruments are market price, foreign currency, interest rate, liquidity, counterparty and credit risks. There are policies in place to ensure each of these risks is managed in an appropriate manner. Market price risk Market price risk arises from the uncertainty about future price movements on financial instruments held. It represents the potential loss each fund might suffer through holding market positions in the face of adverse price movements. The value of investments (including derivatives) is not fixed and may go down as well as up. This may be as a result of a specific factor affecting the value of an individual investment, or may be caused by general market factors. Some of the funds may invest in securities of countries experiencing rapid economic growth. Investors should appreciate that these securities may be more volatile than securities in more developed markets with the result that there may be greater risk of price fluctuation and the suspension of redemptions in such funds compared with funds in more mature markets. This volatility may stem from political and economic factors, and be exacerbated by legal, trading liquidity, settlement, currency and other factors. Some emerging market countries may have relatively prosperous economies but may be sensitive to world commodity prices or other factors. Where derivatives are used for either efficient management of the fund or for investment purposes, market price risk will exist as for any other non-derivative investments. The volatility of option prices could be greater than for other derivatives. Foreign currency risk The funds' total returns and balance sheets can be significantly affected by foreign exchange movements if the funds' assets and revenue are denominated in currencies other than the funds' base currency. Three principal areas where foreign currency risk could impact each fund have been identified as: Movements in rates affecting the value of investments Movements in rates affecting short term timing differences Movements in rates affecting the revenue received The funds may hold forward foreign exchange contracts to hedge the funds' base currency. The funds may be exposed to short term exchange rate movements, for example between the date when an investment is bought or sold and the date when settlement of the transaction occurs. The ACD may seek to manage exposure to currency movements by using forward and spot foreign exchange contracts. Revenue received in other currencies is converted into base currency on or near the date of receipt. Interest rate risk Debt securities have varying levels of sensitivity to changes in interest rates. In general, the price of a fixed rate debt security can fall when interest rates rise and can rise when interest rates fall. Securities with longer maturities can be more sensitive to interest rate changes. The fixed rate component of an interest rate swap will have a similar interest rate risk profile to that of a fixed rate debt security where the currency, fixed rate and maturity are the same. All interest rate swaps are disclosed in the Portfolio statement of each fund. The funds' investment portfolio yield and more generally the interest rate profiles are monitored by the ACD using the tools and processes outlined above under 'Market price risk'. Interest earned and paid on bank balances in the current and preceding year were at variable rates provided by the Depositary. The average interest rates earned and paid were: 29/02/12 28/02/11 Average interest rates Average interest rates Currency Earned Paid Earned Paid UK sterling 0.24% 1.75% 0.28% 1.75% Euro 0.00% 1.62% 0.38% 1.93% US dollar 0.00% 1.39% 0.00% 1.48% Liquidity risk The funds' assets comprise mainly realisable securities which can be readily sold or redeemed in normal market conditions. The funds' main liability is the redemption of any shares that investors wish to sell. In general, the ACD manages the cash to ensure it can meet its liabilities. Assets from a fund may need to be sold if insufficient cash is available to finance such redemptions. The funds' holdings are reviewed on a regular basis, with particular emphasis on the market capitalisation of the issuer (securities issued by larger capitalised companies generally have greater liquidity) and the number of days it would take to trade out of a given security position or percentage of the fund as a whole (determined by reference to available market trading volumes). Where investment cannot be realised in time to meet any potential liability, the fund may borrow up to 10% of its value to ensure settlement. 11

13 AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS NOTES TO THE AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS Counterparty risk All security transactions and derivatives are transacted with brokers and carry the risk that the counterparty to a transaction may not meet their financial obligations. All counterparties for any type of trading are assessed by an independent Credit Research and Analysis function and approved for use by any Fidelity company, including the ACD. Exposures to counterparties are monitiored and reported frequently. Margin on exchange-traded derivatives mitigates counterparty risk exposure and in the case of over-the-counter derivatives, collateral is transferred to reduce counterparty risk exposure in accordance with the terms outlined in market standard (ISDA) derivative legal contracts. Credit risk Investments may be adversely affected if any of the institutions with which money is deposited suffers insolvency or other financial difficulties. The process outlined above under 'Counterparty risk' is used to review, approve and report on exposures to institutions with which money is deposited. Credit risk also arises from the uncertainty about the payment of interest and the repayment of principal bond investments. Default risk is based on the issuer's ability to make interest payments and to repay the loan at maturity. Due to the higher possibility of default, an investment in corporate bonds is generally less secure than an investment in government bonds. Default risk may therefore vary between different government issuers as well as between different corporate issuers. In certain cases, government bonds may have higher probability of default than specific corporate issuers. The funds may hold credit default swaps to manage their credit risk profile. Credit default swaps are transacted to take advantage of expected movements in credit spreads on either individual securities or baskets of securities. Fair values of financial assets and financial liabilities There is no material difference between the value of the financial assets and liabilities, as shown in the balance sheet, and their fair value. The numerical information in respect of financial instruments disclosure is provided in the financial statements for the individual funds. 15. Stamp duty reserve tax (SDRT) HM Revenue and Customs introduced legislation in Schedule 19 of the Finance Act 1999 as a result of which the Company may become liable to a SDRT charge on the redemption of shares by investors. The maximum liability will be 0.5% of the value of the redemptions. As permitted by FSA Regulations, any SDRT arising under the regime will be charged to the capital account of the relevant fund. 12

14 AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS NOTES TO THE AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS 16. Post Balance Sheet Event Fidelity Global High Yield Fund was launched on 19 March Subsequent to the year end the published net asset value per share (NAV) of the funds has moved as follows: NAV as at NAV as at Increase/ 29/02/12 18/06/12* (decrease) (p) (p) % Fidelity American Fund - Accumulating class 1, , (5.29) - Y Acumulating class (5.18) Fidelity American Special Situations Fund (2.60) Fidelity China Consumer Fund - Accumulating class (5.66) - Y Accumulating class (5.56) Fidelity Emerging Asia Fund - Accumulating class (5.40) - Y Accumulating class (5.24) Fidelity Emerging Europe, Middle East and Africa Fund (8.00) Fidelity Enhanced Income Fund - Distributing class (5.33) - Y Distributing class (0.91) - Accumulating class (1.06) - Y Accumulating class (2.66) Fidelity Equity Growth Defender Fund (3.41) Fidelity European Fund - Distributing class (6.19) - Accumulating class 1, , (6.16) Fidelity European Opportunities Fund - Accumulating class (10.11) - Y Accumulating class (10.00) Fidelity Extra Income Fund - Net distributing class (1.04) - Gross distributing class (1.08) - Y Net distributing class (1.00) - Y Gross distributing class (1.08) - Net accumulating class Gross accumulating class Fidelity Genesis Fund (3.49) Fidelity Global Dividend Fund - Distributing class (1.95) - Y Distributing class (1.46) - Accumulating class (0.78) - Y Accumulating class (0.49) Fidelity Global Focus Fund (3.73) Fidelity Global Property Fund Fidelity Global Real Assets Securities Fund - Accumulating class (8.38) - Y Accumulating class (8.27) Fidelity Global Special Situations Fund - Accumulating class 1, , (7.17) - J Accumulating class (7.13) Fidelity International Fund (7.51) Fidelity Japan Fund (10.05) Fidelity Japan Smaller Companies Fund (4.76) Fidelity MoneyBuilder Balanced Fund (2.05) Fidelity MoneyBuilder Dividend Fund - Distributing class (2.96) - Y Distributing class (1.16) 13

15 AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS NOTES TO THE AGGREGATED FINANCIAL STATEMENTS FOR FIDELITY INVESTMENT FUNDS Fidelity MoneyBuilder Growth Fund - non ISA class (7.68) - ISA class (7.69) Fidelity MoneyBuilder Income Fund - Net distributing class Gross distributing class Y Net distributing class Y Gross distributing class Accumulating class Y Gross accumulating class 1, , Fidelity MoneyBuilder UK Index Fund (5.97) Fidelity South-East Asia Fund - Accumulating class (5.91) - Y Accumulating class (5.76) Fidelity Special Situations Fund - Accumulating class 1, , (3.39) - Y Accumulating class (3.29) Fidelity Strategic Bond Fund - Net distributing class Gross distributing class Y Net distributing class Y Gross distributing class Net accumulating class Gross accumulating class Fidelity UK Aggressive Fund - Accumulating class (6.79) - I Accumulating class (6.58) Fidelity UK Growth Fund (9.65) Fidelity UK Smaller Companies Fund - Accumulating class (6.71) - Y Accumulating class (6.58) * The latest practicable date prior to the publication of this report. The ACD has on behalf of Fidelity Investment Funds ICVC filed European Court of Justice (ECJ) claims with the French tax authorities to recover excess withholding tax suffered on dividends received in prior accounting periods. An accrual was reflected in the NAVs following the period end date of those sub-funds where entitlement to a reclaim has been confirmed. These amounts will be distributed and received in future accounting periods. The impact of these adjustments at the latest practicable date prior to this publication are as follows: Percentage of total net assets % Fidelity Enhanced Income Fund 0.01 Fidelity European Fund 0.78 Fidelity European Opportunities Fund 0.48 Fidelity Global Focus Fund 0.07 Fidelity Global Property Fund 0.03 Fidelity Global Special Situations Fund 0.05 Fidelity International Fund 0.13 Fidelity MoneyBuilder Balanced Fund 0.05 Fidelity MoneyBuilder Dividend Fund 0.15 Fidelity MoneyBuilder Growth Fund 0.05 Fidelity Special Situations Fund 0.01 Fidelity UK Aggressive Fund 0.07 Fidelity UK Growth Fund

16 FIDELITY AMERICAN FUND FUND MANAGER S COMMENTARY MARKET REVIEW US equities ended higher over a period that saw strong market moves as macroeconomic factors dominated sentiment. Investors preoccupied by the European sovereign debt crisis were relieved to see improvements in the US economy even after the second round of quantitative easing ended. The unemployment rate dropped and housing transactions, construction activity and home builder sentiment picked up. Progress in these previously weak areas of the economy alleviated immediate concerns of another recession and offset some of the reputational damage caused by Standard & Poor s downgrade of the country s AAA credit rating. PORTFOLIO ACTIVITY The fund underperformed the comparative index (S&P 500 Index Net)* over the period. An overweight stance in energy stocks detracted from returns. Uranium producer Cameco s results and production forecast disappointed and the stock was impacted by safety concerns raised by the Japanese nuclear disaster. However, the exposure to the stock was increased as uranium fundamentals are favourable given limited alternative energy competition. Elsewhere, the underweight holding in Apple relative to the comparative index held back relative returns as it continued to perform strongly. I am concerned about its reliance on new product cycles and on the sustainability of its high margins. Overweight positions in fertiliser firms Mosaic and Potash of Saskatchewan also hurt performance amid expectations that farmers could postpone fertiliser purchases due to economic uncertainty. However, such stocks provide a hedge against volatility in weather patterns and disruption in global food supplies. On a positive note, home improvement retailers Lowes and Home Depot contributed to performance after reporting encouraging quarterly earnings. They should benefit from the anticipated recovery in the housing market. Over the period, the exposure to consumer discretionary, financials and energy was reduced. The proceeds were used to fund health care, consumer staples and industrials positions. Despite selling the holdings in Baker Hughes, Nabors Industries and Transocean, the fund s largest overweight remains in energy as long term supply/demand dynamics continue to be favourable. The larger overweight in health care is due to the additions to pharmaceuticals majors Pfizer and Merck & Co, which have positive growth prospects after years of negative earnings revisions. The fund is underweight in consumer, utilities, telecommunications and technology stocks. OUTLOOK Investors are one again focusing on fundamentals. In this environment, the defensive characteristics of the US, such as its highly productive and cheap workforce and cost effective energy sources, should help the economy. Furthermore, housing starts, car sales and capital expenditure are running well below normalised levels and could drive economic growth. Nevertheless, markets may remain volatile in the near term. Longer term, the government s indebtedness level will have to be addressed and as austerity measures are implemented, growth will be dampened. I continue to invest in quality stocks with high profitability levels, strong balance sheets and a competitive advantage. Aris Vatis Fund Manager 29 February 12 PERFORMANCE RECORD PERFORMANCE OVER 12 MONTHS Over the 12 month review period to 29 February 2012, the fund returned 1.2% with net income reinvested, underperforming its comparative index return of 6.6% PERFORMANCE SINCE LAUNCH 17 December 79 to 29 February % 8000% 7000% 6000% 5000% 4000% 3000% 2000% 1000% 0% Fidelity American Fund Comparative Index 1 1. Comparative Index: S&P 500 Index (Net) DISCRETE 1 YEAR PERFORMANCE OVER THE LAST 5 YEARS TO: 29/02/08 29/02/09 29/02/10 29/02/11 29/02/12 % Fund Performance Comparative Index Source: Fidelity and RIMES, bid to bid, UK, net income reinvested. Since launch the fund has returned 8,295.8%. Over 5 years the fund has returned 29.1% compared with the comparative index return of 29.9%. Performance prior to 29/08/98 has been recalculated to take account of the conversion from Unit Trust to OEIC fund. Performance excludes initial charge. Past Performance is not a reliable indicator of future results. INVESTMENT OBJECTIVE AND POLICY The fund s investment objective is to achieve long term capital growth from a portfolio primarily made up of the shares of US companies. The portfolio is likely to have a bias towards larger and medium-sized companies, although the ACD is not restricted in its choice of company by either size or industry. RISK PROFILE If you make regular withdrawals from your investment, this may reduce your capital over time if the fund s growth does not compensate for the withdrawals. The value of your investment can go down as well as up. You may not get back the amount you invested. What you get back is not guaranteed. It will depend on investment performance. This fund invests in overseas markets. You may get back more or less as a result of currency fluctuations. The fund may invest in derivatives for the purposes of the efficient management of the fund. For funds that use derivative transactions, there is a risk that the counterparty to the transaction will wholly or partially fail to honour its contractual obligations. This may result in financial loss to the fund. Where appropriate, collateral will be required to reduce exposure to a counterparty. Some funds invest more heavily than others in smaller companies, which can carry a higher risk because their prices may be more volatile than those of larger companies. Each of our funds is operated as a separate entity with its own assets and liabilities. However, if the liabilities of one fund were to exceed its assets, the other funds within the scheme might have to transfer across money to cover the liabilities. This means that the fund you invest in may be worth less if it has to transfer money to another fund * Holdings can vary from those in the index quoted. For this reason the comparison index is used for reference only. 15