Fidelity Emerging Markets Equity Investment Trust

Transcription

1 Fidelity Emerging Markets Equity Investment Trust Annual Management Report of Fund Performance March 31, 2017

2 Caution Regarding Forward-looking Statements Certain portions of this report, including, but not limited to, Results of Operations and Recent Developments, may contain forward-looking statements about the Fund, including its strategy, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, intends, plans, believes, estimates and similar forward-looking expressions or negative versions thereof. In addition, any statement that may be made concerning future performance, strategies or prospects, and possible future Fund action, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Fund and economic factors. Accordingly, assumptions concerning future economic and other factors may prove to be incorrect at a future date. Forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made by the Fund. Any number of important factors could contribute to these digressions, including, but not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. It should be stressed that the above-mentioned list of important factors is not exhaustive. You are encouraged to consider these and other factors carefully before making any investment decisions and you are urged to avoid placing undue reliance on forward-looking statements. Further, you should be aware of the fact that the Fund has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, prior to the release of the next Management Report of Fund Performance.

3 Annual Management Report of Fund Performance as at March 31, 2017 Fidelity Emerging Markets Equity Investment Trust This annual management report of fund performance contains financial highlights but does not contain the complete annual financial statements for the investment fund. You can get a copy of the annual financial statements at your request, and at no cost, by calling , by writing to us at Fidelity Investments, 483 Bay St. Suite 300, Toronto ON M5G 2N7 or by visiting our website at or SEDAR at Securityholders may also contact us using one of these methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record or quarterly portfolio disclosure relating to the investment fund. Management Discussion of Fund Performance Investment Objective and Strategies Investment Objective: Fidelity Emerging Markets Equity Investment Trust (Fund) aims to achieve long-term capital growth by investing primarily in equity securities of companies in emerging market countries. Strategies: The Fund aims to invest in sectors in approximately the same proportions as those sectors are represented in the MSCI Emerging Markets Index. Members of a team of sector portfolio managers are assigned to each sector. They choose investments for their sector based on a thorough review of a number of factors, which may include each company s management, financial conditions, industry position, strategy and potential for earnings growth over the long term. Specific investments made by the Fund may or may not be included in the MSCI Emerging Markets Index. If the investment is not classified under the Global Industry Classification Standard (GICS), the portfolio manager can decide which sector it belongs to. The Fund may also invest in equity securities and other securities of companies that are economically tied to emerging markets. It may also from time to time invest in equity securities of non-emerging market countries and may hold cash and invest in fixed-income securities. Risk The risks associated with investing in this Fund remain as discussed in the prospectus. The Fund is suitable for long-term investors wishing to gain exposure to emerging market equity securities and who can handle the volatility of returns generally associated with emerging market equity investments. To invest in the Fund, investors should be willing to accept a high level of risk. The suitability of the investment has not changed from what has been disclosed in the prospectus. Results of Operations Securities of this Fund are only available for purchase by other funds and accounts managed or advised by Fidelity and are not available for public purchase. Fidelity Emerging Markets Equity Investment Trust, Series O, returned 25.6%, after fees and expenses, for the one-year period ended March 31, Global equities, as measured by the MSCI World Index, returned 18.3%, in Canadian dollar terms, for the one-year period ended March 31, Market Overview: Global equities registered positive returns during the review period. The U.S. was the strongest-performing market, driven by positive economic data and optimism regarding the proposed policies of the new U.S. administration. Canadian markets performed well amid a recovery of prices for commodities, especially metals and oil, and an improved economic environment. European markets lagged global markets, with the consequences of the U.K. s decision to leave the European Union heightening investor concerns. Factors affecting performance: The Fund s benchmark, which is a blend of 95.0% MSCI Emerging Markets Index and 5.0% MSCI Frontier Emerging Markets Index, returned 20.8% for the period under review. The Fund outperformed its benchmark, helped most by its exposure to certain stocks in the consumer discretionary sector. In the consumer discretionary sector, the Fund s investment in Smiles, a Brazilian company that manages the Smiles loyalty program, contributed to relative performance. Among other sectors, the Fund s lack of exposure to Chinese-language Internet search provider Baidu contributed to relative performance; the company s share price declined during the review period. In addition, an investment in Taiwan-based camera lens module supplier Largan Precision contributed to relative performance. In contrast, China-based online classifieds and listing platforms provider 58.com detracted the most from relative performance. In addition, the Fund s lack of exposure to China-based commercial bank China Construction Bank detracted from relative performance, after the company s share price rose during the review period. Portfolio Changes: 1

4 Fidelity Emerging Markets Equity Investment Trust Management Discussion of Fund Performance continued The Fund is managed by a team of portfolio co-managers, each with direct responsibility for one or more sectors. During the review period, the portfolio management team kept the sector weightings close to that of the benchmark. In the information technology sector, exposure to the technology hardware and equipment industry increased as the Fund increased its investments in South Korea-based electronic products manufacturer Samsung Electronics and Taiwan-based supplier of camera lens modules Largan Precision. The portfolio management team believes these companies have strong earnings growth potential. In the consumer discretionary sector, the Fund increased its investments in retailing firms such as Chinese online direct sales company JD.com and China-based travel services provider Ctrip.com, due to their strong growth prospects. In contrast, exposure to the semiconductor and semiconductor equipment industry declined as the Fund sold down its holdings in South Koreabased SK Hynix and Taiwan-based Taiwan Semiconductor Manufacturing Company, as the portfolio management team found more attractive investment opportunities in other industries. Derivatives: During the review period, the portfolio manager team used short-term derivatives as a means of equitizing their cash position in order to remain fully invested while they actively searched for other opportunities which matched their investment criteria. Recent Developments The portfolio management team believes that emerging markets continue to offer attractive investment opportunities, driven by a growing middle class, rising consumption and increasing infrastructure investment. However, in the current uncertain economic environment, the portfolio management team is being very selective about investments. The Fund seeks to maintain sector weightings similar to those of its benchmark. One strategy of this Fund is to add value through stock picking in each sector, while minimizing the risks associated with sector timing. As at March 31, 2017, the Fund s largest absolute exposure was to the financials sector, followed by the information technology sector. The Fund diverged most from the benchmark sector weightings by having more exposure to the consumer discretionary sector and less exposure to the information technology sector. In terms of country allocations, the Fund had its largest allocation to Cayman Islands, followed by South Korea. Country-level allocations are a result of the portfolio managers bottom-up stock selection process and are not driven by top-down macro calls. Independent Review Committee Effective February 28, 2017, Helen M. Meyer retired from the Independent Review Committee and was replaced by James E. Cook as Chair. Also effective on that date, Frances Horodelski of Toronto, Ontario became a member of the Independent Review Committee. 2

5 Related Party Transactions Manager and Portfolio Adviser The Fund is managed by Fidelity Investments Canada ULC (Fidelity). Fidelity is part of a broader group of companies collectively known as Fidelity Investments. Fidelity provides or arranges for the provision of all general management and administrative services required by the Fund in its day to day operations, bookkeeping, record keeping and other administrative services for the Fund. Fidelity is the portfolio adviser to the Fund and provides investment advisory services to the Fund. The Fund is only offered in Series O securities and is not available for public purchase. The Fund was created as an underlying fund for other Fidelity products. The Fund does not pay management and advisory fees, or other operating expenses, other than certain specified fund costs, including taxes, brokerage commissions and interest charges. Brokerage Commissions The Fund may place a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Investments, including National Financial Services LLC, provided it determines that these affiliates trade execution abilities and costs are comparable to those of non affiliated, qualified brokerage firms, on an execution only basis. Commissions paid to brokerage firms that are affiliates of Fidelity Investments were less than $500 for the period ended March 31, Fidelity receives standing instructions from the IRC in respect of policies and procedures governing best execution of transactions with affiliates, which includes brokers affiliated to Fidelity Investments, at least once per year. 3

6 Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the period end of the years shown. This information is derived from the Fund s audited annual and/or unaudited semi-annual financial statements. Please see the front page for information about how you can obtain the Fund s annual or semi-annual financial statements. Fidelity Emerging Markets Equity Investment Trust Series O Periods ended March 31, The Series Net Assets per Security A Net assets, beginning of period B $ $ $ $ $ Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) (.07) (.07) (.11) (.10) Realized gains (losses) Unrealized gains (losses) 2.34 (1.29) 1.15 (.65).50 Total increase (decrease) from operations B 3.08 (.86) Distributions: From net investment income (excluding dividends) (.45) (.19) (.19) (.40) From dividends (.01) (.13) From capital gains (.24) (.03) (.40) (.06) Return of capital Total distributions B,C (.45) (.43) (.22) (.81) (.19) Net assets, end of period B $ $ $ $ $ Ratios and Supplemental Data Net asset value (000s) D $ 883,512 $ 722,363 $ 453,400 $ 222,839 $ 570,630 Securities outstanding D 59,238,022 58,847,293 32,825,882 18,181,518 49,173,412 Management expense ratio % % % % % Management expense ratio before waivers or absorptions % % % % % Trading expense ratio E.20%.27%.51%.44%.43% Portfolio turnover rate F 53.19% 57.03% % 90.90% % Net asset value per security, end of period $ $ $ $ $ A This information is derived from the Fund s audited annual and/or unaudited interim financial statements. Periods beginning on or after January 1, 2013 follow International Financial Reporting Standards (IFRS) and periods prior to January 1, 2013 follow Canadian Generally Accepted Accounting Principles (Canadian GAAP). The net assets attributable to securityholders per security presented in the financial statements may differ from the net asset value calculated for fund pricing purposes. An explanation of these differences can be found in the notes to financial statements. For reporting periods ending after January 1, 2017 per security comparative figures (except for net asset value per security, end of period) have been conformed to the current rounding presentation of two decimal places. As a result, prior period figures in the tables above may not foot due to this rounding change. B C D E F Net assets and distributions are based on the actual number of securities outstanding at the relevant time. The increase (decrease) from operations is based on the weighted average number of securities outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per security. Distributions were paid in cash or reinvested in additional securities of the Fund, or both. Distributions are presented based on management s best estimate of the tax character. This information is provided as at period end of the year shown. The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period, including the Fund s pro-rata share of estimated trading costs incurred in any underlying investment fund, if applicable. The Fund s portfolio turnover rate indicates how actively the Fund s portfolio adviser manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high portfolio turnover rate and the performance of the Fund. The portfolio turnover rate is calculated based on the lesser of purchases or sales of securities divided by the weighted average market value of the portfolio securities, excluding short-term securities. For periods greater than six months, but less than a full fiscal year, the portfolio turnover rate is annualized. 4

7 Fidelity Emerging Markets Equity Investment Trust Past Performance The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional securities of the Fund. The performance information does not take into account sales, redemption, distribution or other optional charges that would have reduced returns or performance. How the Fund has performed in the past does not necessarily indicate how it will perform in the future. Year-by-Year Returns The following bar chart shows the Fund s annual performance for each of the years shown, and illustrates how the Fund s performance was changed from year to year. In percentage terms, the bar chart shows how much an investment made on the first day of each financial year would have grown or decreased by the last day of each financial year. Series O Fiscal Years (%) Commencement of Operations is December 14, 2011 Annual Compound Returns This table shows the Fund s historical annual compound total returns for the periods indicated, compared with a broad-based benchmark, the MSCI World Index, and the Fund s benchmark, the Fidelity Emerging Markets Equity Blend Index Past 1 year Past 3 years Past 5 years Since Inception Average Annual Total Returns Fidelity Emerging Markets Equity Investment Trust Series O 25.6% 9.8% 9.5% 11.3% Fidelity Emerging Markets Equity Blend Index 20.8% 8.0% 7.1% 8.8% MSCI World Index 18.3% 12.4% 15.9% 17.2% A discussion of the performance of the Fund can be found in the Results of Operation section of this report. As of October 31, 2015, Fidelity Emerging Markets Equity Investment Trust changed its benchmark from the MSCI Emerging Markets Index to a combination of 95.0% MSCI Emerging Markets Index and 5.0% MSCI Frontier Emerging Markets Index. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI World Index is a market capitalization weighted index composed of companies representative of the market structure of developed market countries in North America, Europe and the Asia/Pacific Region. The MSCI Frontier Emerging Markets Index is a free float-adjusted, market capitalizationweighted index designed to serve as a benchmark covering all countries from the MSCI Frontier Markets Index and the lower-size spectrum of the MSCI Emerging Markets Index. The MSCI Frontier Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of frontier markets. The MSCI Frontier Markets Index consists of the following 24 frontier market country indexes: Argentina, Bahrain, Bangladesh, Bulgaria, Croatia, Estonia, Jordan, Kenya, Kuwait, Lebanon, Lithuania, Morocco, Kazakhstan, Mauritius, Nigeria, Oman, Pakistan, Romania, Serbia, Slovenia, Sri Lanka, Tunisia, Ukraine and Vietnam. 5

8 Fidelity Emerging Markets Equity Investment Trust Summary of Investment Portfolio as at March 31, 2017 Sector Mix as of March 31, 2017 % of Fund s Net Assets Financials 23.1 Information Technology 20.7 Consumer Discretionary 12.9 Consumer Staples 7.4 Materials 7.1 Energy 6.4 Industrials 6.4 Telecommunication Services 5.2 Utilities 3.2 Real Estate 2.3 Health Care 2.2 Cash and Cash Equivalents 2.5 Net Other Assets (Liabilities) 0.6 Derivative Exposure as of March 31, 2017 % of Fund s Net Assets Futures Contracts 0.9 Futures Contracts percentage is calculated by dividing the sum of the underlying face amount at value by total net assets. Geographic Mix as of March 31, 2017 % of Fund s Net Assets Cayman Islands 13.4 Korea (South) 12.6 Brazil 9.1 India 7.5 Taiwan 7.2 China 6.5 South Africa 5.6 Russia 5.4 Hong Kong 4.4 Mexico 4.1 Chile 1.8 Thailand 1.7 Indonesia 1.7 United Arab Emirates 1.6 Bermuda 1.6 Philippines 1.2 Turkey 1.2 Japan 1.1 Others (Individually Less Than 1%) 9.2 Cash and Cash Equivalents 2.5 Net Other Assets (Liabilities) 0.6 Top 25 Issuers % of Fund s Net Assets 1. Samsung Electronics Co. Ltd Tencent Holdings Ltd Naspers Ltd Taiwan Semiconductor Manufacturing Co. Ltd Cash and Cash Equivalents JD.com, Inc Sberbank of Russia Largan Precision Co. Ltd Itau Unibanco Holding SA Alibaba Group Holding Ltd China Mobile Ltd Industrial & Commercial Bank of China Ltd KB Financial Group, Inc Shinhan Financial Group Co. Ltd Lukoil PJSC Smiles SA com, Inc Reliance Industries Ltd CNOOC Ltd Ambev SA Ctrip.com International Ltd Hyundai Mobis NetEase, Inc China Life Insurance Co. Ltd Vale SA 0.7 Total Fund Net Assets $883,147,

9 The summary of investment portfolio may change due to ongoing portfolio transactions of the investment fund. The most recent annual report, semi-annual report, quarterly report, fund facts document or simplified prospectus for the investment fund and/or underlying fund is available at no cost, by calling , by writing to us at Fidelity Investments Canada ULC, 483 Bay St. Suite 300, Toronto ON M5G 2N7 or by visiting our web site at or SEDAR at 7

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12 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 Custodian State Street Trust Company of Canada Toronto, Ontario Portfolio Adviser Fidelity Investments Canada ULC 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 FMR LLC E FICL-FCEMELD-MRFPA-0617