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  • Semi-Annual Management Report of Fund Performance May 31, 2019

    Fidelity Global Consumer Industries Class of the Fidelity Capital Structure Corp.

  • 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 state- ments 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.

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    Semi-Annual Management Report of Fund Performance as at May 31, 2019 Fidelity Global Consumer Industries Class of the Fidelity Capital Structure Corp. 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 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 Results of Operations Fidelity Global Consumer Industries Class (Fund) invests substantially all of its assets in securities of Fidelity Global Consumer Industries Fund (Underlying Fund).

    Fidelity Global Consumer Industries Class, Series B, returned 7.7% after fees and expenses for the six-month period ended May 31, 2019. The net returns of the other series of this Fund are similar to those of Series B, except for differences attributable to expense structures. During the review period, global equities, as represented by the MSCI World Index, returned 3.1% in Canadian dollar terms.

    Market overview:

    Global equities advanced over the review period, rebounding from weaker returns at the end of 2018. The decision by the U.S. Federal Reserve (the Fed) to pause its cycle of interest rate hikes in early 2019 contributed to gains in global equities. The expectation that the U.S. and China would resolve their trade dispute was among the leading factors driving market performance. Strong economies and healthy corporate earnings supported U.S. and Canadian equities over most of the review period. European equities registered positive returns despite intermittent volatility due to Brexit-related uncertainty, as well as budget-related tensions between Italy and the European Union. However, global markets turned volatile as international trade tensions intensified. Concerns about slowing global growth resurfaced in May and weighed on investor sentiment.

    Factors affecting performance:

    The Fund’s benchmark, the MSCI ACWI (All Country World Index) Consumer Industries Index, returned 4.4% in Canadian dollar terms for the six-month period under review.

    The Fund outperformed its benchmark primarily due to the Underlying Fund’s exposure to certain stocks in the luxury and personal care product manufacturers. The investments in France- based luxury conglomerate LVMH, luxury goods retailers Kering, and Germany-based leisure wear company Puma, contributed to relative returns. These companies, along with cosmetics and personal care products company L’Oreal, gained as the strength of brands and product innovation helped drive strong sales growth. Among other sectors, exposure to Switzerland-based hearing aid manufacturer Sonova Holdings, and lack of exposure to U.S.-based pharmacy and staples retailer Walgreens Boots Alliance, also contributed to relative returns.

    In contrast, the Underlying Fund’s holdings in Spain-based fashion retailer Inditex declined on weak quarterly sales growth, while the Fund’s holding in PVH Corp, the owner and licensor of Tommy Hilfiger and Calvin Klein brands, detracted from relative returns. Among other industries, exposure to China-based internet and direct market retailer Alibaba detracted from relative performance.

    Portfolio changes:

    During the review period, exposure to the textile, apparel & luxury goods industry increased. Specifically, the portfolio manager initiated a position in Adidas, the Germany-based global sport- ing goods company. The portfolio manager believes the company is favourably positioned to benefit from strong structural growth drivers over the medium term, with stronger profit margins supported by greatly improved scale in the U.S., and greater utilization of e-commerce sales. The portfolio manager also initiated a new position in The Booking Holdings, in the internet and direct marketing retail industry. The portfolio manager believes it is a cash-generative and high-quality business with strong earnings growth potential and attractive valuations. Among other industries, a new position in Japan-based cosmetics firm Shiseido is, in the portfolio manager’s view, likely to benefit from enhanced brand recognition, and a growing preference for prestige brands in Asia and elsewhere.

    In contrast, exposure to the media industry declined, as the portfolio manager closed the position in U.S.-based cable company Comcast. The portfolio manager also took profit in select food and staples holdings and reduced the Underlying Fund’s exposure to specialty retail businesses, where the portfolio manager believes, risk/reward characteristics had become less attractive.

    As at May 31, 2019, the Underlying Fund’s largest absolute exposure was to the textiles, apparel and luxury goods industry, followed by the internet and direct marketing retail industry. The textiles, apparel and luxury goods industry accounted for a larger-than-benchmark allocation, while the automobiles industry had an allocation smaller than the benchmark.

    Recent Developments Portfolio manager Aneta Wynimko believes companies that have unique intellectual property, and that continue to create intangible value, will grow faster than global GDP by benefiting from pricing power and/or rising volumes. In addition, such companies should be able to charge higher prices, and should typically have higher and improving gross margins and returns on invested capital compared with their peers.

    Ms. Wynimko seeks to invest in businesses with pricing power, strong brands and valuable intellectual property. She prefers businesses that have high barriers to entry and where manage- ments have a differentiated strategy as they create valuable intellectual property. She prefers to invest in brands at an early stage of growth, or in companies that are well versed in manag- ing a cluster of brands in order to create a strong portfolio with a longer holding period.

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    Fidelity Global Consumer Industries Class of the Fidelity Capital Structure Corp.

    Management Discussion of Fund Performance – continued

    Independent Review Committee Effective February 8, 2019, Kerry D. Adams retired from the Independent Review Committee. Also effective on that date, Douglas Nowers of Toronto, Ontario became a member of the Independent Review Committee.

    Related Party Transactions Manager and Portfolio Adviser

    The Fund is managed by Fidelity Investments Canada ULC (Fidelity). Fidelity is part of a broader collection 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 th


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