Download Fidelity Convertible Securities Investment Trust

Fidelity Convertible Securities Investment Trust
Semi-Annual
Management Report
of Fund Performance
December 31, 2016
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.
Semi-Annual Management Report of Fund Performance
as at December 31, 2016
Fidelity Convertible Securities Investment Trust
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 1-800-263-4077, by writing to us at Fidelity Investments, 483 Bay St. Suite 300, Toronto ON M5G 2N7 or by visiting our website at
www.fidelity.ca or SEDAR at www.sedar.com.
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 Convertible Securities Investment Trust (Fund), Series O, returned 10.6% for the six-month period ended December 31, 2016, after fees
and expenses. The Bloomberg Barclays U.S. Aggregate Bond Index, broadly representative of U.S. investment-grade bonds, returned 0.7% for the
six-month period ended December 31, 2016.
Market Overview:
U.S. fixed-income markets registered positive returns amid improved investor sentiment in the U.S., accommodative monetary policies from
global central banks and the stabilization of commodity prices. A stronger labour market, increased government spending and robust consumption also helped the U.S. economy. However, optimism regarding the President-elect’s fiscal policies, which were generally viewed as positive for
equity markets, did not support the bond markets toward the end of the review period. Additionally, U.S. bond markets weakened in a risinginterest-rate environment. The U.S. Federal Reserve increased its key interest rate in December by 25 basis points to 0.75%.
The convertible securities market performed strongly, with demand for most risk assets increasing in anticipation of improved corporate earnings, given prospects of decreased regulation, positive tax reform and increased fiscal spending in the U.S. The broad-based Bloomberg Barclays
U.S. Aggregate Bond Index is a market value-weighted performance benchmark for U.S. investment-grade fixed-rate debt issues, including
government, corporate, asset-backed and mortgage-backed securities with maturities of at least one year. In contrast, the Fund invests primarily in convertible securities in the U.S.
Factors Affecting Performance:
The Fund’s benchmark, the BofA Merrill Lynch All U.S. Convertibles Index, returned 11.8% for the same period (in Canadian dollar terms). The
Fund underperformed its benchmark due to investments in the information technology and health care sectors. Having lower-than-benchmark
exposure to visual computing company NVIDIA detracted from relative performance. In the health care sector, exposure to Envision Healthcare
and Teva Pharmaceuticals detracted from relative performance. Exposure to utility company Dynegy also detracted from relative returns.
Conversely, exposure to Peabody Energy contributed to relative returns; however, the security was not held in the portfolio at the end of the
review period. Exposure to technology hardware and equipment company Interdigital, which develops wireless technologies for mobile devices,
networks, and services, also contributed to relative returns.
Portfolio Changes:
During the review period, portfolio manager Adam Kramer increased the Fund’s exposures to the energy and consumer discretionary sectors,
where he found investment opportunities at attractive valuations. In contrast, the Fund’s exposures to the health care and information technology sectors were reduced; the manager found better relative value opportunities in other sectors.
As at the end of the review period, the Fund’s largest absolute exposure was to the health care sector, followed by the financials sector.
Recent Developments
Portfolio manager Adam Kramer is positive on the overall convertible securities market, with the U.S. economy continuing to grow at a gradual
pace. He believes there is enough supply at attractive valuations in the market, and that the U.S. Federal Reserve’s interest rate hikes should
bode well for the asset class as investors begin to seek higher-yielding assets. In the long run, the manager believes the convertible securities
market may offer an attractive risk/reward profile, given its defensive equity characteristics: current income with typically lower volatility than
the equity markets.
1
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 has entered into sub-advisory agreements with a number of entities including FMR Co., Inc.,
to provide investment advice with respect to all or a portion of the investments of the Fund. The sub-advisors arrange for acquisition and disposition of portfolio investments, including all necessary brokerage arrangements.
The Fund pays Fidelity a monthly management and advisory fee for their services, based on the net asset value of each Series, calculated daily
and payable monthly. The Fund paid Fidelity management and advisory fees of less than $500 for the period ended December 31, 2016.
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 $3,000
for the period ended December 31, 2016. 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.
2
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 Convertible Securities Investment Trust Series O
Six-months ended
December 31,
The Series’ Net Assets per
Security B
Net assets, beginning of period
C
Increase (decrease) from
operations:
Total revenue
Total expenses (excluding
distributions)
Realized gains (losses)
Unrealized gains (losses)
Total increase (decrease) from
operationsC
Distributions:
From net investment income
(excluding dividends)
From dividends
From capital gains
Return of capital
Total distributionsC,D
Net assets, end of periodC
Ratios and Supplemental Data
Net asset value (000s) E
Securities outstandingE
Management expense ratio F
Management expense
ratio before waivers or
absorptions F
Trading expense ratioG
Portfolio turnover rateH
Net asset value per security,
end of period
Periods ended June
30,
2016
2016
2015
2014
2013
2012A
$12.0861
$13.3410
$13.1823
$12.0094
$10.0772
$10.0000
.0775
.4719
.1990
.0835
.0454
(.0314)
(.0153)
.3537
.8478
(.0343)
.1039
(.2181)
(.0277)
2.8512
(1.2929)
(.0022)
2.0838
.3471
–
.7861
1.5509
–
.1794
.1493
1.2637
.3234
1.7296
2.5122
2.3824
.2973
(.1982)
(.0006)
(.3920)
–
(.5908)
$12.7732
(.4891)
(.0011)
(1.1244)
–
(1.6146)
$12.0861
(.4543)
–
(1.1520)
–
(1.6063)
$13.3410
(.3899)
–
(.9222)
–
(1.3121)
$13.1823
(.3573)
–
(.0726)
–
(.4299)
$12.0023
(.1797)
–
–
–
(.1797)
$10.0772
$1,417,337
110,909,931
–%
$1,226,307
102,296,838
–%
$1,189,137
89,806,358
–%
$1,533,471
117,218,910
—%
$1,049,081
87,354,964
—%
$806,358
80,008,659
—%
—%
.02%
49.30%
—%
.02%
100.36%
—%
.01%
84.00%
—%
—%
74.61%
—%
.01%
87.43%
—%
.01%
76.58%
$12.7728
$12.0862
$13.3412
$13.1823
$12.0094
$10.0784
A
For the period December 1, 2011 (inception date) to June 30, 2012.
B
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 securities 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.
C
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.
D
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.
E
This information is provided as at period end of the year shown.
F
No fees are charged to the Series.
G
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.
H
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.
3
Fidelity Convertible Securities 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. 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 (%)
30
20
10
0
-10
Commencement of Operations is January 27, 2012
4
2012
2013
2014
2015
2016
2016
2.6
23.9
21.7
14.3
2.6
10.6
Fidelity Convertible Securities Investment Trust
Summary of Investment Portfolio as at December 31, 2016
Asset Mix as of December 31, 2016
Quality Diversification as of December 31, 2016
% of Fund’s
Net Assets
% of Fund’s
Net Assets
Foreign Bonds
56.2
A
Foreign Equities
32.5
BBB
3.0
2.4
Foreign Preferred Securities
1.5
BB and Below
34.3
Canadian Bonds
1.0
Not Rated
19.0
Cash and Cash Equivalents
8.1
Equities
32.5
Net Other Assets (Liabilities)
0.7
Short-Term Investments and Net Other Assets
Sector Mix as of December 31, 2016
% of Fund’s
Net Assets
Health Care
8.2
Financials
5.9
Consumer Staples
4.9
Energy
3.4
Utilities
3.0
Telecommunication Services
2.7
Industrials
2.6
Information Technology
1.8
Consumer Discretionary
1.0
Others (Individually Less Than 1%)
0.5
Foreign Bonds
56.2
Canadian Bonds
1.0
Cash and Cash Equivalents
8.1
Net Other Assets (Liabilities)
0.7
Geographic Mix as of December 31, 2016
% of Fund’s
Net Assets
United States of America
78.8
Bermuda
3.9
Ireland
2.9
Marshall Islands
2.0
Netherlands
1.0
Canada
1.0
Others (Individually Less Than 1%)
1.6
Cash and Cash Equivalents
8.1
Net Other Assets (Liabilities)
0.7
Maturity Diversification as of December 31, 2016
Years
% of Fund’s
Net Assets
0 – 1
1.0
1 – 3
13.4
3 – 5
13.5
Over 5
29.3
8.8
We have used ratings from Moody’s Investors Service, Inc. Where
Moody’s® ratings are not available, we have used S&P® ratings.
All ratings are as of the date indicated and do not reflect subsequent changes.
Top 25 Issuers
% of Fund’s
Net Assets
1.
Cash and Cash Equivalents
8.1
2.
Twitter, Inc. *
4.1
3.
DISH Network Corp. *
3.2
4.
InterDigital, Inc. *
3.2
5.
Wells Fargo & Co.
3.1
6.
Allergan PLC
2.9
7.
Micron Technology, Inc. *
2.5
8.
T-Mobile U.S., Inc.
2.3
9.
Liberty Media Corp. *
2.3
10. Bank of America Corp.
2.3
11. Brocade Communications Systems, Inc. *
2.2
12. CenterPoint Energy, Inc.
2.2
13. Anthem, Inc.
2.0
14. Post Holdings, Inc.
2.0
15. Scorpio Tankers, Inc. *
2.0
16. Chesapeake Energy Corp. *
1.9
17. VeriSign Inc *
1.9
18. Envision Healthcare Corp.
1.7
19. Salesforce.com, Inc. *
1.6
20. AMAG Pharmaceuticals, Inc. *
1.5
21. General Electric Co.
1.5
22. Intel Corp. *
1.5
23. Southwestern Energy Co.
1.4
24. Bunge Ltd.
1.4
25. Weatherford International Ltd. *
1.3
60.1
* Equity Issuer
Total Fund Net Assets $1,416,680,000
5
Summary of Investment Portfolio as at December 31, 2016 – continued
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 1-800-263-4077, 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 www.fidelity.ca or SEDAR at www.sedar.com.
6
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
www.fidelity.ca
or call Fidelity Client Services
at 1-800-263-4077
Fidelity’s mutual funds are sold by registered Investment Professionals. Each Fund has a simplified prospectus, which contains important
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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.
62.110828E
1.945039.104
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