Fidelity International Disciplined Equity Currency Neutral Fund

Transcription

1 Fidelity International Disciplined Equity Currency Neutral Fund Semi-Annual Management Report of Fund Performance September 30, 2016

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 Semi-Annual Management Report of Fund Performance as at September 30, 2016 Fidelity International Disciplined Equity Currency Neutral Fund This semi-annual management report of fund performance contains financial highlights but does not contain the complete semi-annual financial statements for the investment fund. You can get a copy of the semi-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 Security holders 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 Results of Operations Units 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 International Disciplined Equity Currency Neutral Fund (Fund) invests primarily in Fidelity International Disciplined Equity Fund (Underlying Fund). The Fund uses derivatives to try to minimize the exposure to currency fluctuations between foreign currencies and the Canadian dollar. Fidelity International Disciplined Equity Currency Neutral Fund, Series O, returned 7.1% for the six-month period ended September 30, Global equities, as represented by the MSCI World Index, returned 7.6% (in Canadian dollar terms) in the same period. Market overview: Global equities performed well, supported by additional stimulus measures from China and other major economies, as well as accommodative monetary policy in the U.K. Global equities dropped sharply after the U.K. voted to leave the European Union, but global equities subsequently bounced back, erasing most of the losses. U.S. equities gained on positive economic data. European markets also posted positive returns, driven by the Bank of England s decision to lower its key interest rate and its announcement of a stimulus package. European equities were also further buoyed by a strong second-quarter earnings season, indicating that the European recovery remained on track despite Brexit uncertainty. Factors affecting performance: The Fund s benchmark, the MSCI ACWI (All Country World Index) ex USA Index Hedged CAD, returned 6.2% for the review period. The Fund outperformed its benchmark before fees and expenses. However, after fees and expenses, the Fund underperformed its benchmark. Exposure to certain information technology stocks, such as Japanese electronic gaming company Nintendo, Netherlands-based manufacturer NXP Semiconductors and South Korea-based online gaming company NCSOFT, contributed to relative performance. In addition, exposure to certain health care stocks, such as Japan-based Astellas Pharma and Denmark-based pharmaceutical company Novo Nordisk contributed to relative performance. Among other sectors, the Underlying Fund s investment in Canada-based gold producer Agnico Eagle Mines and in Brazilian financial services company ITAU Unibanco holdings contributed. In contrast, investment in certain stocks in the industrials sector, such as Luxembourg-based facility management services firm Regus and Italy-based defense hardware and systems company Leonardo Finmeccanica, detracted from relative performance. In addition, exposure to certain stocks in the consumer discretionary sector, such as U.K.-based online and broadcast network provider ITV, German automotive parts supplier Hella and U.K.-based hospitality service provider Whitbread, also detracted from relative performance. At the end of the review period, the Underlying Fund had no exposure to ITV, Hella and Whitbread. Among investments in other sectors, the Underlying Fund s exposure to both German telecommunications service provider Telefonica Deutschland and Japanese diversified real estate service provider Mitsui Fudosan detracted. Derivative Disclosure: During the period under review, the Fund engaged in forward contracts, in a manner consistent with its investment objective and strategies, to hedge as completely as possible against the effect of currency fluctuations on the Fund s investment returns. The use of forward contracts in this manner does not completely eliminate the impact of currency fluctuations on returns. The Fund s returns will differ from the local currency returns of the Fund s underlying investments. During the period, foreign currency markets remained volatile. The euro, Japanese yen, pound sterling, and U.S. dollar, which represent the Fund s largest currency exposures, all appreciated against the Canadian dollar. Portfolio changes: With respect to sector and regional positioning, the Underlying Fund is managed with a neutral approach, allowing stock selection to be the primary driver of returns. While the Underlying Fund is neutrally positioned at the sector level, the industry group allocations deviated from those of the benchmark. 1

4 Fidelity International Disciplined Equity Currency Neutral Fund Management Discussion of Fund Performance continued During the review period, the Underlying Fund s exposures to the capital goods industry and the food, beverage and tobacco industry, reduced. In the capital goods industry, portfolio manager Chandler Willett exited the Underlying Fund s position in French aero engines and rocket propulsion systems manufacturer Safran, due to its weakening growth outlook. In the food, beverage and tobacco industry, the portfolio manager reduced the allocations to Belgium-based Anheuser-Busch and to French packaged foods supplier Danone, due to their deteriorating fundamentals. In contrast, the Underlying Fund s exposures to the household and personal products industry and the commercial and professional services industry increased. In the household and personal products industry, the portfolio manager initiated an investment in South Korea-based household goods, cosmetics and beverage manufacturer LG Household and Healthcare, due to its solid growth outlook. In the commercial and professional services industry, the portfolio manager added a position in Luxembourg-based office facilities provider Regus, due to its strong business fundamentals. Recent Developments Portfolio manager Chandler Willett believes the U.S. economy remains stable, compared with other global economic markets, and that it continues to show positive signals supported by positive economic data. Steady job creation and improving consumer spending continue to support the economy as it shifts into the later part of the business cycle. Although Mr. Willett believes the current environment requires greater balance across industries within the industries making up the health care sector, he is optimistic that sources of higher relative returns can be found in the information technology, energy and materials sectors, where the dispersion of returns is greater. The manager continues to seek compelling opportunities in each sector by focusing on the fundamentals of quality companies. While maintaining sector weightings similar to those of the benchmark, the Underlying Fund held a slightly larger-than-benchmark allocation to the consumer durables and apparel industry and the software and services industry and a lower-than-benchmark allocation to the technology hardware and equipment industry. At an industry level, the banking industry accounted for the Fund s largest absolute exposure, followed by pharmaceutical, biotechnology and life sciences. As at September 30, 2016, in terms of geographic allocation, Japan accounted for the Fund s largest exposure, followed by France. The geographic allocations are a by-product of the portfolio manager s bottom-up fundamental stock selection process, reflecting his intent to add value through stock selection, instead of macro-level calls. 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. Fidelity provides investment advice with respect to the Fund s investment portfolio and arranges for the acquisition and disposition of portfolio investments, including all necessary brokerage arrangements. The Fund is only offered in Series O units and is not available for public purchase. 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. 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 International Disciplined Equity Currency Neutral Fund Series O Six-months ended September 30, Periods ended March 31, The Series Net Assets per Unit A Net assets, beginning of period B $ $ $ $ $ $ Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) Realized gains (losses).1066 (1.5747) (.1378) Unrealized gains (losses).6487 (.0325) (.6547) Total increase (decrease) from operations B.7553 (1.6030) (.5345) Distributions: From net investment income (excluding dividends) (.4962) (.5070) (.3733) From dividends (.0319) (.2947) (.2663) From capital gains Return of capital Total distributions B,C (.5281) (.5070) (.3733) (.2947) (.2663) Net assets, end of period B $ $ $ $ $ $ Ratios and Supplemental Data Net asset value (000s) D $ 505 $ 472 $ 155,378 $ 223 $ 598 $ 527 Units outstanding D 44,164 44,164 11,969,700 19,306 57,456 55,766 Management expense ratio E % % % % % % Management expense ratio before waivers or absorptions E % % % % % % Trading expense ratio F.25%.53%.36%.22%.22%.20% Portfolio turnover rate G 2.25% 29.96%.90% 7.63% 3.07% 5.99% Net asset value per unit, 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 holders of redeemable units per unit 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. B Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase (decrease) from operations is based on the weighted average number of units outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit. C Distributions were paid in cash or reinvested in additional units of the Fund, or both. Distributions are presented based on management s best estimate of the tax character. D This information is provided as at period end of the year shown. E No fees are charged to the Series. F 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. G 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 International Disciplined Equity Currency Neutral Fund 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. For each Series in the Year-by-Year Returns table below, the most recent returns stated are for the current six month period. Series O Fiscal Years Percentage (%) Commencement of Operations is November 16,

8 Fidelity International Disciplined Equity Currency Neutral Fund Summary of Investment Portfolio as at September 30, 2016 Sector Mix as of September 30, 2016 % of Fund s Net Assets Financials 21.6 Industrials 11.6 Consumer Discretionary 11.1 Consumer Staples 10.9 Information Technology 10.5 Health Care 8.6 Materials 7.2 Energy 6.3 Telecommunication Services 4.7 Real Estate 3.3 Utilities 3.2 Cash and Cash Equivalents 0.1 Net Other Assets (Liabilities) 0.9 Derivative Exposure as of September 30, 2016 % of Fund s Net Assets Forward Foreign Currency Contracts (0.6) Forward Foreign Currency Contracts percentage is calculated by dividing the net unrealized gain/loss of all contracts held by total net assets. Geographic Mix as of September 30, 2016 % of Fund s Net Assets Japan 17.4 France 8.9 United Kingdom 6.9 Germany 6.3 Canada 5.3 Bailiwick of Jersey 5.2 Korea (South) 5.0 Belgium 5.0 Netherlands 4.8 Switzerland 4.2 Sweden 3.8 Italy 3.5 Australia 3.1 Austria 2.7 Hong Kong 2.7 Brazil 2.5 United States of America 2.0 Thailand 1.9 Indonesia 1.8 New Zealand 1.8 South Africa 1.5 Ireland 1.5 Denmark 1.2 Cash and Cash Equivalents 0.1 Net Other Assets (Liabilities) 0.9 6

9 Top 25 Issuers % of Fund s Net Assets 1. NXP Semiconductors NV Rio Tinto PLC Anheuser-Busch InBev SA NV Shire PLC Andritz AG AIA Group Ltd NCSOFT Corp Nintendo Co. Ltd Itau Unibanco Holding SA Roche Holding AG East Japan Railway Co LG Household & Health Care Ltd KDDI Corp. 2.2 % of Fund s Net Assets 14. Regus PLC Alfa Laval AB Leonardo-Finmeccanica SpA Societe Generale Danone SA Aareal Bank Ag GMO Internet, Inc Royal Dutch Shell PLC LVMH Moet Hennessy Louis Vuitton SA Astellas Pharma, Inc KBC Groep NV Intact Financial Corp. 1.9 Total Fund Net Assets $505, The information in the above tables includes the Fund s pro-rata share of the investment in the Fidelity Underlying Fund. The Fund uses derivatives to try to minimize the exposure to currency fluctuations between foreign currencies in developed markets and the Canadian dollar. Because a practical and economic market for hedging emerging market currencies does not exist, the Fund currently only hedges its developed market currency exposure. 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

10

11

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 units 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-IDECN-MRFPS-1116