|
Fund
|
Ticker
|
|
Fidelity®
Clean Energy ETF |
FRNW
|
|
Fidelity®
Cloud Computing ETF |
FCLD
|
|
Fidelity®
Crypto Industry and Digital Payments ETF |
FDIG
|
|
Fidelity®
Digital Health ETF |
FDHT
|
|
Fidelity®
Electric Vehicles and Future Transportation ETF |
FDRV
|
|
Fidelity®
Metaverse ETF |
FMET
|
Funds
of Fidelity Covington Trust
STATEMENT
OF ADDITIONAL INFORMATION
Principal
U.S. Listing Exchange: Cboe BZX Exchange, Inc. for Fidelity ®
Clean
Energy ETF, Fidelity ®
Cloud
Computing ETF, Fidelity ®
Digital
Health ETF, and Fidelity ®
Electric
Vehicles and Future Transportation ETF and The Nasdaq Stock Market ®
for
Fidelity ®
Crypto
Industry and Digital Payments ETF and Fidelity ®
Metaverse
ETF
October
29, 2022
This
Statement of Additional Information (SAI) is not a prospectus. Portions of each
fund's annual
report are
incorporated herein. The annual report(s) are supplied with this SAI.
To
obtain a free additional copy of a prospectus or SAI, dated October 29, 2022, or
an annual report, please call Fidelity at 1-800-FIDELITY or visit Fidelity's web
site at www.fidelity.com.
For
more information on any Fidelity ®
fund,
including charges and expenses, call Fidelity at the number indicated above for
a free prospectus. Read it carefully before investing or sending money.
245
Summer Street, Boston, MA 02210
CEE-PTB-1022
1.9903825.102
Each
fund is an exchange-traded fund that seeks to provide investment results that
correspond, before fees and expenses, generally to the returns of a specified
index.
Each fund issues and redeems shares on a continuous basis at net asset value per
share (NAV) in aggregations of a specified number of shares called "Creation
Units." Creation Units are issued in exchange for portfolio securities and/or
cash. Shares are listed and traded on an exchange. Shares trade in the secondary
market at market prices that may differ from the shares' NAV. Shares are not
individually redeemable, but are redeemable only in Creation Unit aggregations,
and in exchange for portfolio securities and/or cash. Shareholders who are not
Authorized Participants (as defined herein), therefore, will not be able to
purchase or redeem shares directly with or from a fund. Instead, most
shareholders who are not Authorized Participants will buy and sell shares in the
secondary market through a broker.
INVESTMENT
POLICIES AND LIMITATIONS
The
following policies and limitations supplement those set forth in the prospectus.
Unless otherwise noted, whenever an investment policy or limitation states a
maximum percentage of a fund's assets that may be invested in any security or
other asset, or sets forth a policy regarding quality standards, such standard
or percentage limitation will be determined immediately after and as a result of
the fund's acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will not be
considered when determining whether the investment complies with the fund's
investment policies and limitations.
A
fund's fundamental investment policies and limitations cannot be changed without
approval by a "majority of the outstanding voting securities" (as defined in the
Investment Company Act of 1940 (1940 Act)) of the fund. However, except for the
fundamental investment limitations listed below, the investment policies and
limitations described in this Statement of Additional Information (SAI) are not
fundamental and may be changed without shareholder approval.
The
following are each fund's fundamental investment limitations set forth in their
entirety.
Senior
Securities
For
each fund:
The
fund may not issue senior securities, except as permitted under the Investment
Company Act of 1940.
Borrowing
For
each fund:
The
fund may not borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed this
amount will be reduced within three days (not including Sundays and holidays) to
the extent necessary to comply with the 33 1/3% limitation.
Underwriting
For
each fund:
The
fund may not underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities or in connection with
investments in other investment companies.
Concentration
For
each fund:
Each
fund will invest more than 25% of its total assets in securities of issuers in a
particular industry to approximately the same extent that the fund's index
concentrates in the securities of issuers in a particular industry.
For
purposes of each fund's concentration limitation discussed above, securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities are not considered to be issued by members of any industry.
For
purposes of the fund's concentration limitation discussed above, with respect to
any investment in repurchase agreements collateralized by U.S. Government
securities, Fidelity Management & Research Company LLC (FMR) looks through
to the U.S. Government securities.
For
purposes of the fund's concentration limitation discussed above, with respect to
any investment in Fidelity® Money Market Central Fund and/or any non-money
market central fund, FMR looks through to the holdings of the central
fund.
Real
Estate
For
each fund:
The
fund may not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
fund from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business).
Commodities
For
each fund:
The
fund may not purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not prevent the
fund from purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities).
Loans
For
each fund:
The
fund may not lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or to repurchase agreements, or
to acquisitions of loans, loan participations or other forms of debt
instruments.
The
following investment limitations are not fundamental and may be changed without
shareholder approval.
Diversification
For
each fund:
In
order to qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended, the fund currently intends to comply
with certain diversification limits imposed by Subchapter M.
Subchapter
M generally requires a fund to invest no more than 25% of its total assets in
securities of any one issuer or in the securities of certain publicly-traded
partnerships and to invest at least 50% of its total assets so that (a) no more
than 5% of each fund's total assets are invested in securities of any one
issuer, and (b) each fund does not hold more than 10% of the outstanding voting
securities of that issuer. However, Subchapter M allows unlimited investments in
cash, cash items, government securities (as defined in Subchapter M) and
securities of other regulated investment companies. These tax requirements are
generally applied at the end of each quarter of each fund's taxable year.
Short
Sales
For
each fund:
The
fund does not currently intend to sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the securities
sold short, and provided that transactions in futures contracts and options are
not deemed to constitute selling securities short.
Margin
Purchases
For
each fund:
The
fund does not currently intend to purchase securities on margin, except that the
fund may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options on futures contracts shall not constitute purchasing
securities on margin.
Borrowing
For
each fund:
The
fund may borrow money only (a) from a bank or from a registered investment
company or portfolio for which FMR or an affiliate serves as investment adviser
or (b) by engaging in reverse repurchase agreements with any party (reverse
repurchase agreements are treated as borrowings for purposes of the fundamental
borrowing investment limitation).
Illiquid
Securities
For
each fund:
The
fund does not currently intend to purchase any security if, as a result, more
than 10% of its net assets would be invested in securities that are deemed to be
illiquid because they are subject to legal or contractual restrictions on resale
or because they cannot be sold or disposed of in the ordinary course of business
at approximately the prices at which they are valued.
For
purposes of each fund's illiquid securities limitation discussed above, if
through a change in values, net assets, or other circumstances, the fund were in
a position where more than 10% of its net assets were invested in illiquid
securities, it would consider appropriate steps to protect liquidity.
Loans
For
each fund:
The
fund does not currently intend to lend assets other than securities to other
parties, except by (a) lending money (up to 15% of the fund's net assets) to a
registered investment company or portfolio for which FMR or an affiliate serves
as investment adviser or (b) assuming any unfunded commitments in connection
with the acquisition of loans, loan participations, or other forms of debt
instruments. (This limitation does not apply to purchases of debt securities, to
repurchase agreements, or to acquisitions of loans, loan participations or other
forms of debt instruments.)
In
addition to each fund's fundamental and non-fundamental investment limitations
discussed above:
In
order to qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended, each fund currently intends to comply
with certain diversification limits imposed by Subchapter M.
For
a fund's policies and limitations on futures and options transactions, see
"Investment Policies and Limitations - Futures, Options, and Swaps."
The
following pages contain more detailed information about types of instruments in
which a fund may invest, techniques a fund's adviser (or a sub-adviser) may
employ in pursuit of the fund's investment objective, and a summary of related
risks. A fund's adviser (or a sub-adviser) may not buy all of these instruments
or use all of these techniques unless it believes that doing so will help the
fund achieve its goal. However, a fund's adviser (or a sub-adviser) is not
required to buy any particular instrument or use any particular technique even
if to do so might benefit the fund.
On
the following pages in this section titled "Investment Policies and
Limitations," and except as otherwise indicated, references to "an adviser" or
"the adviser" may relate to a fund's adviser or a sub-adviser, as
applicable.
Affiliated
Bank Transactions. A
Fidelity ®
fund
may engage in transactions with financial institutions that are, or may be
considered to be, "affiliated persons" of the fund under the 1940 Act. These
transactions may involve repurchase agreements with custodian banks; short-term
obligations of, and repurchase agreements with, the 50 largest U.S. banks
(measured by deposits); municipal securities; U.S. Government securities with
affiliated financial institutions that are primary dealers in these securities;
short-term currency transactions; and short-term borrowings. In accordance with
exemptive orders issued by the Securities and Exchange Commission (SEC), the
Board of Trustees has established and periodically reviews procedures applicable
to transactions involving affiliated financial institutions.
Borrowing.
If
a fund borrows money, its share price may be subject to greater fluctuation
until the borrowing is paid off. If a fund makes additional investments while
borrowings are outstanding, this may be considered a form of leverage.
Cash
Management. A
fund may hold uninvested cash or may invest it in cash equivalents such as money
market securities, repurchase agreements, or shares of short-term bond or money
market funds, including (for Fidelity ®
funds
and other advisory clients only) shares of Fidelity ®
central
funds. Generally, these securities offer less potential for gains than other
types of securities.
Central
Funds are
special types of investment vehicles created by Fidelity for use by the
Fidelity ®
funds
and other advisory clients. Central funds are used to invest in particular
security types or investment disciplines, or for cash management. Central funds
incur certain costs related to their investment activity (such as custodial fees
and expenses), but do not pay additional management fees. The investment results
of the portions of a Fidelity ®
fund's
assets invested in the central funds will be based upon the investment results
of those funds.
Commodity
Futures Trading Commission (CFTC) Notice of Exclusion. The
Adviser, on behalf of the Fidelity® funds to which this SAI relates, has filed
with the National Futures Association a notice claiming an exclusion from the
definition of the term "commodity pool operator" (CPO) under the Commodity
Exchange Act, as amended, and the rules of the CFTC promulgated thereunder, with
respect to each fund's operation. Accordingly, neither a fund nor its adviser is
subject to registration or regulation as a commodity pool or a CPO. As of the
date of this SAI, the adviser does not expect to register as a CPO of the funds.
However, there is no certainty that a fund or its adviser will be able to rely
on an exclusion in the future as the fund's investments change over time. A fund
may determine not to use investment strategies that trigger additional CFTC
regulation or may determine to operate subject to CFTC regulation, if
applicable. If a fund or its adviser operates subject to CFTC regulation, it may
incur additional expenses.
Common
Stock represents
an equity or ownership interest in an issuer. In the event an issuer is
liquidated or declares bankruptcy, the claims of owners of bonds and preferred
stock take precedence over the claims of those who own common stock, although
related proceedings can take time to resolve and results can be unpredictable.
For purposes of a Fidelity ®
fund's
policies related to investment in common stock Fidelity considers depositary
receipts evidencing ownership of common stock to be common stock.
Convertible
Securities are
bonds, debentures, notes, or other securities that may be converted or exchanged
(by the holder or by the issuer) into shares of the underlying common stock (or
cash or securities of equivalent value) at a stated exchange ratio. A
convertible security may also be called for redemption or conversion by the
issuer after a particular date and under certain circumstances (including a
specified price) established upon issue. If a convertible security held by a
fund is called for redemption or conversion, the fund could be required to
tender it for redemption, convert it into the underlying common stock, or sell
it to a third party.
Convertible
securities generally have less potential for gain or loss than common stocks.
Convertible securities generally provide yields higher than the underlying
common stocks, but generally lower than comparable non-convertible securities.
Because of this higher yield, convertible securities generally sell at prices
above their "conversion value," which is the current market value of the stock
to be received upon conversion. The difference between this conversion value and
the price of convertible securities will vary over time depending on changes in
the value of the underlying common stocks and interest rates. When the
underlying common stocks decline in value, convertible securities will tend not
to decline to the same extent because of the interest or dividend payments and
the repayment of principal at maturity for certain types of convertible
securities. However, securities that are convertible other than at the option of
the holder generally do not limit the potential for loss to the same extent as
securities convertible at the option of the holder. When the underlying common
stocks rise in value, the value of convertible securities may also be expected
to increase. At the same time, however, the difference between the market value
of convertible securities and their conversion value will narrow, which means
that the value of convertible securities will generally not increase to the same
extent as the value of the underlying common stocks. Because convertible
securities may also be interest-rate sensitive, their value may increase as
interest rates fall and decrease as interest rates rise. Convertible securities
are also subject to credit risk, and are often lower-quality securities.
Debt
Securities are
used by issuers to borrow money. The issuer usually pays a fixed, variable, or
floating rate of interest, and must repay the amount borrowed, usually at the
maturity of the security. Some debt securities, such as zero coupon bonds, do
not pay interest but are sold at a deep discount from their face values. Debt
securities include corporate bonds, government securities, repurchase
agreements, and mortgage and other asset-backed securities.
Disruption
to Financial Markets and Related Government Intervention. Economic
downturns can trigger various economic, legal, budgetary, tax, and regulatory
reforms across the globe. Instability in the financial markets in the wake of
events such as the 2008 economic downturn led the U.S. Government and other
governments to take a number of then-unprecedented actions designed to support
certain financial institutions and segments of the financial markets that
experienced extreme volatility, and in some cases, a lack of liquidity. Federal,
state, local, foreign, and other governments, their regulatory agencies, or
self-regulatory organizations may take actions that affect the regulation of the
instruments in which a fund invests, or the issuers of such instruments, in ways
that are unforeseeable. Reforms may also change the way in which a fund is
regulated and could limit or preclude a fund's ability to achieve its investment
objective or engage in certain strategies. Also, while reforms generally are
intended to strengthen markets, systems, and public finances, they could affect
fund expenses and the value of fund investments in unpredictable ways.
Similarly,
widespread disease including pandemics and epidemics, and natural or
environmental disasters, such as earthquakes, droughts, fires, floods,
hurricanes, tsunamis and climate-related phenomena generally, have been and can
be highly disruptive to economies and markets, adversely impacting individual
companies, sectors, industries, markets, currencies, interest and inflation
rates, credit ratings, investor sentiment, and other factors affecting the value
of a fund's investments. Economies and financial markets throughout the world
have become increasingly interconnected, which increases the likelihood that
events or conditions in one region or country will adversely affect markets or
issuers in other regions or countries, including the United States.
Additionally, market disruptions may result in increased market volatility;
regulatory trading halts; closure of domestic or foreign exchanges, markets, or
governments; or market participants operating pursuant to business continuity
plans for indeterminate periods of time. Further, market disruptions can (i)
prevent a fund from executing advantageous investment decisions in a timely
manner, (ii) negatively impact a fund's ability to achieve its investment
objective, and (iii) may exacerbate the risks discussed elsewhere in a fund's
registration statement, including political, social, and economic risks.
The
value of a fund's portfolio is also generally subject to the risk of future
local, national, or global economic or natural disturbances based on unknown
weaknesses in the markets in which a fund invests. In the event of such a
disturbance, the issuers of securities held by a fund may experience significant
declines in the value of their assets and even cease operations, or may receive
government assistance accompanied by increased restrictions on their business
operations or other government intervention. In addition, it remains uncertain
that the U.S. Government or foreign governments will intervene in response to
current or future market disturbances and the effect of any such future
intervention cannot be predicted.
Exchange
Traded Funds (ETFs) are
shares of other investment companies, commodity pools, or other entities that
are traded on an exchange. Typically, assets underlying the ETF shares are
stocks, though they may also be commodities or other instruments. An ETF may
seek to replicate the performance of a specific index or may be actively
managed.
Typically,
shares of an ETF that tracks an index are expected to increase in value as the
value of the underlying benchmark increases. However, in the case of inverse
ETFs (also called "short ETFs" or "bear ETFs"), ETF shares are expected to
increase in value as the value of the underlying benchmark decreases. Inverse
ETFs seek to deliver the opposite of the performance of the benchmark they track
and are often marketed as a way for investors to profit from, or at least hedge
their exposure to, downward moving markets. Investments in inverse ETFs are
similar to holding short positions in the underlying benchmark.
ETF
shares are redeemable only in large blocks of shares often called "creation
units" by persons other than a fund, and are redeemed principally in-kind at
each day's next calculated NAV. ETFs typically incur fees that are separate from
those fees incurred directly by a fund. A fund's purchase of ETFs results in the
layering of expenses, such that the fund would indirectly bear a proportionate
share of any ETF's operating expenses. Further, while traditional investment
companies are continuously offered at NAV, ETFs are traded in the secondary
market (e.g., on a stock exchange) on an intra-day basis at prices that may be
above or below the value of their underlying portfolios.
Some
of the risks of investing in an ETF that tracks an index are similar to those of
investing in an indexed mutual fund, including tracking error risk (the risk of
errors in matching the ETF's underlying assets to the index or other benchmark);
and the risk that because an ETF that tracks an index is not actively managed,
it cannot sell stocks or other assets as long as they are represented in the
index or other benchmark. Other ETF risks include the risk that ETFs may trade
in the secondary market at a discount from their NAV and the risk that the ETFs
may not be liquid. ETFs also may be leveraged. Leveraged ETFs seek to deliver
multiples of the performance of the index or other benchmark they track and use
derivatives in an effort to amplify the returns (or decline, in the case of
inverse ETFs) of the underlying index or benchmark. While leveraged ETFs may
offer the potential for greater return, the potential for loss and the speed at
which losses can be realized also are greater. Most leveraged and inverse ETFs
"reset" daily, meaning they are designed to achieve their stated objectives on a
daily basis. Leveraged and inverse ETFs can deviate substantially from the
performance of their underlying benchmark over longer periods of time,
particularly in volatile periods.
Exchange
Traded Notes (ETNs) are
a type of senior, unsecured, unsubordinated debt security issued by financial
institutions that combines aspects of both bonds and ETFs. An ETN's returns are
based on the performance of a market index or other reference asset minus fees
and expenses. Similar to ETFs, ETNs are listed on an exchange and traded in the
secondary market. However, unlike an ETF, an ETN can be held until the ETN's
maturity, at which time the issuer will pay a return linked to the performance
of the market index or other reference asset to which the ETN is linked minus
certain fees. Unlike regular bonds, ETNs typically do not make periodic interest
payments and principal typically is not protected.
ETNs
also incur certain expenses not incurred by their applicable index. The market
value of an ETN is determined by supply and demand, the current performance of
the index or other reference asset, and the credit rating of the ETN issuer. The
market value of ETN shares may differ from their intraday indicative value. The
value of an ETN may also change due to a change in the issuer's credit rating.
As a result, there may be times when an ETN's share trades at a premium or
discount to its NAV. Some ETNs that use leverage in an effort to amplify the
returns of an underlying index or other reference asset can, at times, be
relatively illiquid and, thus, they may be difficult to purchase or sell at a
fair price. Leveraged ETNs may offer the potential for greater return, but the
potential for loss and speed at which losses can be realized also are
greater.
Exposure
to Foreign and Emerging Markets. Foreign
securities, foreign currencies, and securities issued by U.S. entities with
substantial foreign operations may involve significant risks in addition to the
risks inherent in U.S. investments.
Foreign
investments involve risks relating to local political, economic, regulatory, or
social instability, military action or unrest, or adverse diplomatic
developments, and may be affected by actions of foreign governments adverse to
the interests of U.S. investors. Such actions may include expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. From time to time, a fund's adviser
and/or its affiliates may determine that, as a result of regulatory requirements
that may apply to the adviser and/or its affiliates due to investments in a
particular country, investments in the securities of issuers domiciled or listed
on trading markets in that country above certain thresholds (which may apply at
the account level or in the aggregate across all accounts managed by the adviser
and its affiliates) may be impractical or undesirable. In such instances, the
adviser may limit or exclude investment in a particular issuer, and investment
flexibility may be restricted. Additionally, governmental issuers of foreign
debt securities may be unwilling to pay interest and repay principal when due
and may require that the conditions for payment be renegotiated. There is no
assurance that a fund's adviser will be able to anticipate these potential
events or counter their effects. In addition, the value of securities
denominated in foreign currencies and of dividends and interest paid with
respect to such securities will fluctuate based on the relative strength of the
U.S. dollar.
It
is anticipated that in most cases the best available market for foreign
securities will be on an exchange or in over-the-counter (OTC) markets located
outside of the United States. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the United States,
and securities of some foreign issuers may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading, settlement and
custodial practices (including those involving securities settlement where fund
assets may be released prior to receipt of payment) are often less developed
than those in U.S. markets, and may result in increased investment or valuation
risk or substantial delays in the event of a failed trade or the insolvency of,
or breach of duty by, a foreign broker-dealer, securities depository, or foreign
subcustodian. In addition, the costs associated with foreign investments,
including withholding taxes, brokerage commissions, and custodial costs, are
generally higher than with U.S. investments.
Foreign
markets may offer less protection to investors than U.S. markets. Foreign
issuers are generally not bound by uniform accounting, auditing, and financial
reporting requirements and standards of practice comparable to those applicable
to U.S. issuers. Adequate public information on foreign issuers may not be
available, and it may be difficult to secure dividends and information regarding
corporate actions on a timely basis. In general, there is less overall
governmental supervision and regulation of securities exchanges, brokers, and
listed companies than in the United States. OTC markets tend to be less
regulated than stock exchange markets and, in certain countries, may be totally
unregulated. Regulatory enforcement may be influenced by economic or political
concerns, and investors may have difficulty enforcing their legal rights in
foreign countries.
Some
foreign securities impose restrictions on transfer within the United States or
to U.S. persons. Although securities subject to such transfer restrictions may
be marketable abroad, they may be less liquid than foreign securities of the
same class that are not subject to such restrictions.
American
Depositary Receipts (ADRs) as well as other "hybrid" forms of ADRs, including
European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs), are
certificates evidencing ownership of shares of a foreign issuer. These
certificates are issued by depository banks and generally trade on an
established market in the United States or elsewhere. The underlying shares are
held in trust by a custodian bank or similar financial institution in the
issuer's home country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various services,
including forwarding dividends and interest and corporate actions. ADRs are
alternatives to directly purchasing the underlying foreign securities in their
national markets and currencies. However, ADRs continue to be subject to many of
the risks associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic risks of the
underlying issuer's country.
The
risks of foreign investing may be magnified for investments in emerging markets.
Security prices in emerging markets can be significantly more volatile than
those in more developed markets, reflecting the greater uncertainties of
investing in less established markets and economies. In particular, countries
with emerging markets may have relatively unstable governments, may present the
risks of nationalization of businesses, restrictions on foreign ownership and
prohibitions on the repatriation of assets, and may have less protection of
property rights than more developed countries. The economies of countries with
emerging markets may be based on only a few industries, may be highly vulnerable
to changes in local or global trade conditions, and may suffer from extreme and
volatile debt burdens or inflation rates. Local securities markets may trade a
small number of securities and may be unable to respond effectively to increases
in trading volume, potentially making prompt liquidation of holdings difficult
or impossible at times.
Foreign
Currency Transactions. A
fund may conduct foreign currency transactions on a spot (i.e., cash) or forward
basis (i.e., by entering into forward contracts to purchase or sell foreign
currencies). Although foreign exchange dealers generally do not charge a fee for
such conversions, they do realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
may offer to sell a foreign currency at one rate, while offering a lesser rate
of exchange should the counterparty desire to resell that currency to the
dealer. Forward contracts are customized transactions that require a specific
amount of a currency to be delivered at a specific exchange rate on a specific
date or range of dates in the future. Forward contracts are generally traded in
an interbank market directly between currency traders (usually large commercial
banks) and their customers. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the contract
to maturity and complete the contemplated currency exchange.
The
following discussion summarizes the principal currency management strategies
involving forward contracts that could be used by a fund. A fund may also use
swap agreements, indexed securities, and options and futures contracts relating
to foreign currencies for the same purposes. Forward contracts not calling for
physical delivery of the underlying instrument will be settled through payments
in U.S. dollars rather than through delivery of the underlying currency. All of
these instruments and transactions are subject to the risk that the counterparty
will default.
A
"settlement hedge" or "transaction hedge" is designed to protect a fund against
an adverse change in foreign currency values between the date a security
denominated in a foreign currency is purchased or sold and the date on which
payment is made or received. Entering into a forward contract for the purchase
or sale of the amount of foreign currency involved in an underlying security
transaction for a fixed amount of U.S. dollars "locks in" the U.S. dollar price
of the security. Forward contracts to purchase or sell a foreign currency may
also be used to protect a fund in anticipation of future purchases or sales of
securities denominated in foreign currency, even if the specific investments
have not yet been selected. A fund may also use forward contracts to hedge
against a decline in the value of existing investments denominated in a foreign
currency. For example, if a fund owned securities denominated in pounds
sterling, it could enter into a forward contract to sell pounds sterling in
return for U.S. dollars to hedge against possible declines in the pound's value.
Such a hedge, sometimes referred to as a "position hedge," would tend to offset
both positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. A fund could also attempt to hedge
the position by selling another currency expected to perform similarly to the
pound sterling. This type of hedge, sometimes referred to as a "proxy hedge,"
could offer advantages in terms of cost, yield, or efficiency, but generally
would not hedge currency exposure as effectively as a direct hedge into U.S.
dollars. Proxy hedges may result in losses if the currency used to hedge does
not perform similarly to the currency in which the hedged securities are
denominated. A fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. This type of strategy, sometimes known as a "cross-hedge,"
will tend to reduce or eliminate exposure to the currency that is sold, and
increase exposure to the currency that is purchased, much as if a fund had sold
a security denominated in one currency and purchased an equivalent security
denominated in another. A fund may cross-hedge its U.S. dollar exposure in order
to achieve a representative weighted mix of the major currencies in its
benchmark index and/or to cover an underweight country or region exposure in its
portfolio. Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause a fund to assume the risk of fluctuations in the
value of the currency it purchases.
Successful
use of currency management strategies will depend on an adviser's skill in
analyzing currency values. Currency management strategies may substantially
change a fund's investment exposure to changes in currency exchange rates and
could result in losses to a fund if currencies do not perform as an adviser
anticipates. For example, if a currency's value rose at a time when a fund had
hedged its position by selling that currency in exchange for dollars, the fund
would not participate in the currency's appreciation. If a fund hedges currency
exposure through proxy hedges, the fund could realize currency losses from both
the hedge and the security position if the two currencies do not move in tandem.
Similarly, if a fund increases its exposure to a foreign currency and that
currency's value declines, the fund will realize a loss. Foreign currency
transactions involve the risk that anticipated currency movements will not be
accurately predicted and that a fund's hedging strategies will be ineffective.
Moreover, it is impossible to precisely forecast the market value of portfolio
securities at the expiration of a foreign currency forward contract.
Accordingly, a fund may be required to buy or sell additional currency on the
spot market (and bear the expenses of such transaction), if an adviser's
predictions regarding the movement of foreign currency or securities markets
prove inaccurate.
A
fund may be required to limit its hedging transactions in foreign currency
forwards, futures, and options in order to maintain its classification as a
"regulated investment company" under the Internal Revenue Code (Code). Hedging
transactions could result in the application of the mark-to-market provisions of
the Code, which may cause an increase (or decrease) in the amount of taxable
dividends paid by a fund and could affect whether dividends paid by a fund are
classified as capital gains or ordinary income. There is no assurance that an
adviser's use of currency management strategies will be advantageous to a fund
or that it will employ currency management strategies at appropriate
times.
Options
and Futures Relating to Foreign Currencies. Currency
futures contracts are similar to forward currency exchange contracts, except
that they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally is
purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase the
underlying currency, and the purchaser of a currency put obtains the right to
sell the underlying currency.
The
uses and risks of currency options and futures are similar to options and
futures relating to securities or indexes, as discussed below. A fund may
purchase and sell currency futures and may purchase and write currency options
to increase or decrease its exposure to different foreign currencies. Currency
options may also be purchased or written in conjunction with each other or with
currency futures or forward contracts. Currency futures and options values can
be expected to correlate with exchange rates, but may not reflect other factors
that affect the value of a fund's investments. A currency hedge, for example,
should protect a Yen-denominated security from a decline in the Yen, but will
not protect a fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of a fund's foreign-denominated
investments changes in response to many factors other than exchange rates, it
may not be possible to match the amount of currency options and futures to the
value of the fund's investments exactly over time.
Currency
options traded on U.S. or other exchanges may be subject to position limits
which may limit the ability of the fund to reduce foreign currency risk using
such options.
Foreign
Repurchase Agreements. Foreign
repurchase agreements involve an agreement to purchase a foreign security and to
sell that security back to the original seller at an agreed-upon price in either
U.S. dollars or foreign currency. Unlike typical U.S. repurchase agreements,
foreign repurchase agreements may not be fully collateralized at all times. The
value of a security purchased by a fund may be more or less than the price at
which the counterparty has agreed to repurchase the security. In the event of
default by the counterparty, a fund may suffer a loss if the value of the
security purchased is less than the agreed-upon repurchase price, or if the fund
is unable to successfully assert a claim to the collateral under foreign laws.
As a result, foreign repurchase agreements may involve higher credit risks than
repurchase agreements in U.S. markets, as well as risks associated with currency
fluctuations. In addition, as with other emerging markets investments,
repurchase agreements with counterparties located in emerging markets or
relating to emerging markets may involve issuers or counterparties with lower
credit ratings than typical U.S. repurchase agreements.
Funds'
Rights as Investors. Fidelity
®
funds
do not intend to direct or administer the day-to-day operations of any company.
A fund may, however, exercise its rights as a shareholder or lender and may
communicate its views on important matters of policy to a company's management,
board of directors, and shareholders, and holders of a company's other
securities when such matters could have a significant effect on the value of the
fund's investment in the company. The activities in which a fund may engage,
either individually or in conjunction with others, may include, among others,
supporting or opposing proposed changes in a company's corporate structure or
business activities; seeking changes in a company's directors or management;
seeking changes in a company's direction or policies; seeking the sale or
reorganization of the company or a portion of its assets; supporting or opposing
third-party takeover efforts; supporting the filing of a bankruptcy petition; or
foreclosing on collateral securing a security. This area of corporate activity
is increasingly prone to litigation and it is possible that a fund could be
involved in lawsuits related to such activities. Such activities will be
monitored with a view to mitigating, to the extent possible, the risk of
litigation against a fund and the risk of actual liability if a fund is involved
in litigation. No guarantee can be made, however, that litigation against a fund
will not be undertaken or liabilities incurred. A fund's proxy voting guidelines
are included in its SAI.
Futures,
Options, and Swaps. The
success of any strategy involving futures, options, and swaps depends on an
adviser's analysis of many economic and mathematical factors and a fund's return
may be higher if it never invested in such instruments. Additionally, some of
the contracts discussed below are new instruments without a trading history and
there can be no assurance that a market for the instruments will continue to
exist. Government legislation or regulation could affect the use of such
instruments and could limit a fund's ability to pursue its investment
strategies. If a fund invests a significant portion of its assets in
derivatives, its investment exposure could far exceed the value of its portfolio
securities and its investment performance could be primarily dependent upon
securities it does not own.
Each
of Fidelity® Clean Energy ETF, Fidelity® Cloud Computing ETF, Fidelity® Crypto
Industry and Digital Payments ETF, Fidelity® Digital Health ETF, Fidelity®
Electric Vehicles and Future Transportation ETF, and Fidelity® Metaverse ETF
will not: (a) sell futures contracts, purchase put options, or write call
options if, as a result, more than 25% of the fund's total assets would be
hedged with futures and options under normal conditions; (b) purchase futures
contracts or write put options if, as a result, the fund's total obligations
upon settlement or exercise of purchased futures contracts and written put
options would exceed 25% of its total assets under normal conditions; or (c)
purchase call options if, as a result, the current value of option premiums for
call options purchased by the fund would exceed 5% of the fund's total assets.
These limitations do not apply to options attached to or acquired or traded
together with their underlying securities, and do not apply to structured
notes.
The
policies and limitations regarding the funds' investments in futures contracts,
options, and swaps may be changed as regulatory agencies permit.
The
requirements for qualification as a regulated investment company may limit the
extent to which a fund may enter into futures, options on futures, and forward
contracts.
Futures
Contracts. In
purchasing a futures contract, the buyer agrees to purchase a specified
underlying instrument at a specified future date. In selling a futures contract,
the seller agrees to sell a specified underlying instrument at a specified date.
Futures contracts are standardized, exchange-traded contracts and the price at
which the purchase and sale will take place is fixed when the buyer and seller
enter into the contract. Some currently available futures contracts are based on
specific securities or baskets of securities, some are based on commodities or
commodities indexes (for funds that seek commodities exposure), and some are
based on indexes of securities prices (including foreign indexes for funds that
seek foreign exposure). Futures on indexes and futures not calling for physical
delivery of the underlying instrument will be settled through cash payments
rather than through delivery of the underlying instrument. Futures can be held
until their delivery dates, or can be closed out by offsetting purchases or
sales of futures contracts before then if a liquid market is available. A fund
may realize a gain or loss by closing out its futures contracts.
The
value of a futures contract tends to increase and decrease in tandem with the
value of its underlying instrument. Therefore, purchasing futures contracts will
tend to increase a fund's exposure to positive and negative price fluctuations
in the underlying instrument, much as if it had purchased the underlying
instrument directly. When a fund sells a futures contract, by contrast, the
value of its futures position will tend to move in a direction contrary to the
market for the underlying instrument. Selling futures contracts, therefore, will
tend to offset both positive and negative market price changes, much as if the
underlying instrument had been sold.
The
purchaser or seller of a futures contract or an option for a futures contract is
not required to deliver or pay for the underlying instrument or the final cash
settlement price, as applicable, unless the contract is held until the delivery
date. However, both the purchaser and seller are required to deposit "initial
margin" with a futures broker, known as a futures commission merchant, when the
contract is entered into. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to settle
the change in value on a daily basis. This process of "marking to market" will
be reflected in the daily calculation of open positions computed in a fund's
NAV. The party that has a gain is entitled to receive all or a portion of this
amount. Initial and variation margin payments do not constitute purchasing
securities on margin for purposes of a fund's investment limitations. Variation
margin does not represent a borrowing or loan by a fund, but is instead a
settlement between a fund and the futures commission merchant of the amount one
would owe the other if the fund's contract expired. In the event of the
bankruptcy or insolvency of a futures commission merchant that holds margin on
behalf of a fund, the fund may be entitled to return of margin owed to it only
in proportion to the amount received by the futures commission merchant's other
customers, potentially resulting in losses to the fund.
Although
futures exchanges generally operate similarly in the United States and abroad,
foreign futures exchanges may follow trading, settlement, and margin procedures
that are different from those for U.S. exchanges. Futures contracts traded
outside the United States may not involve a clearing mechanism or related
guarantees and may involve greater risk of loss than U.S.-traded contracts,
including potentially greater risk of losses due to insolvency of a futures
broker, exchange member, or other party that may owe initial or variation margin
to a fund. Because initial and variation margin payments may be measured in
foreign currency, a futures contract traded outside the United States may also
involve the risk of foreign currency fluctuation.
There
is no assurance a liquid market will exist for any particular futures contract
at any particular time. Exchanges may establish daily price fluctuation limits
for futures contracts, and may halt trading if a contract's price moves upward
or downward more than the limit in a given day. On volatile trading days when
the price fluctuation limit is reached or a trading halt is imposed, it may be
impossible to enter into new positions or close out existing positions. The
daily limit governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example, futures prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial losses.
If
the market for a contract is not liquid because of price fluctuation limits or
other market conditions, it could prevent prompt liquidation of unfavorable
positions, and potentially could require a fund to continue to hold a position
until delivery or expiration regardless of changes in its value. These risks may
be heightened for commodity futures contracts, which have historically been
subject to greater price volatility than exists for instruments such as stocks
and bonds.
Because
there are a limited number of types of exchange-traded futures contracts, it is
likely that the standardized contracts available will not match a fund's current
or anticipated investments exactly. A fund may invest in futures contracts based
on securities with different issuers, maturities, or other characteristics from
the securities in which the fund typically invests, which involves a risk that
the futures position will not track the performance of the fund's other
investments.
Futures
prices can also diverge from the prices of their underlying instruments, even if
the underlying instruments match a fund's investments well. Futures prices are
affected by such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument, and the time remaining until
expiration of the contract, which may not affect security prices the same way.
Imperfect correlation may also result from differing levels of demand in the
futures markets and the securities markets, from structural differences in how
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts. A fund may purchase or sell futures contracts with a
greater or lesser value than the securities it wishes to hedge or intends to
purchase in order to attempt to compensate for differences in volatility between
the contract and the securities, although this may not be successful in all
cases. If price changes in a fund's futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains or
result in losses that are not offset by gains in other investments.
In addition, the price of a commodity futures contract can reflect the
storage costs associated with the purchase of the physical commodity.
Futures
contracts on U.S. Government securities historically have reacted to an increase
or decrease in interest rates in a manner similar to the manner in which the
underlying U.S. Government securities reacted. To the extent, however, that a
fund enters into such futures contracts, the value of these futures contracts
will not vary in direct proportion to the value of the fund's holdings of U.S.
Government securities. Thus, the anticipated spread between the price of the
futures contract and the hedged security may be distorted due to differences in
the nature of the markets. The spread also may be distorted by differences in
initial and variation margin requirements, the liquidity of such markets and the
participation of speculators in such markets.
Options.
By
purchasing a put option, the purchaser obtains the right (but not the
obligation) to sell the option's underlying instrument at a fixed strike price.
In return for this right, the purchaser pays the current market price for the
option (known as the option premium). Options have various types of underlying
instruments, including specific assets or securities, baskets of assets or
securities, indexes of securities or commodities prices, and futures contracts
(including commodity futures contracts). Options may be traded on an exchange or
OTC. The purchaser may terminate its position in a put option by allowing it to
expire or by exercising the option. If the option is allowed to expire, the
purchaser will lose the entire premium. If the option is exercised, the
purchaser completes the sale of the underlying instrument at the strike price.
Depending on the terms of the contract, upon exercise, an option may require
physical delivery of the underlying instrument or may be settled through cash
payments. A purchaser may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The
buyer of a typical put option can expect to realize a gain if the underlying
instrument's price falls substantially. However, if the underlying instrument's
price does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium, plus
related transaction costs).
The
features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right (but not the
obligation) to purchase, rather than sell, the underlying instrument at the
option's strike price. A call buyer typically attempts to participate in
potential price increases of the underlying instrument with risk limited to the
cost of the option if the underlying instrument's price falls. At the same time,
the buyer can expect to suffer a loss if the underlying instrument's price does
not rise sufficiently to offset the cost of the option.
The
writer of a put or call option takes the opposite side of the transaction from
the option's purchaser. In return for receipt of the premium, the writer assumes
the obligation to pay or receive the strike price for the option's underlying
instrument if the other party to the option chooses to exercise it. The writer
may seek to terminate a position in a put option before exercise by closing out
the option in the secondary market at its current price. If the secondary market
is not liquid for a put option, however, the writer must continue to be prepared
to pay the strike price while the option is outstanding, regardless of price
changes. When writing an option on a futures contract, a fund will be required
to make margin payments to a futures commission merchant as described above for
futures contracts.
If
the underlying instrument's price rises, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If the underlying instrument's price remains the same over time, it is
likely that the writer will also profit, because it should be able to close out
the option at a lower price. If the underlying instrument's price falls, the put
writer would expect to suffer a loss. This loss should be less than the loss
from purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the
decline.
Writing
a call option obligates the writer to sell or deliver the option's underlying
instrument or make a net cash settlement payment, as applicable, in return for
the strike price, upon exercise of the option. The characteristics of writing
call options are similar to those of writing put options, except that writing
calls generally is a profitable strategy if prices remain the same or fall.
Through receipt of the option premium, a call writer should mitigate the effects
of a price increase. At the same time, because a call writer must be prepared to
deliver the underlying instrument or make a net cash settlement payment, as
applicable, in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in price increases
and, if a call writer does not hold the underlying instrument, a call writer's
loss is theoretically unlimited.
Where
a put or call option on a particular security is purchased to hedge against
price movements in a related security, the price to close out the put or call
option on the secondary market may move more or less than the price of the
related security.
There
is no assurance a liquid market will exist for any particular options contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying instrument's
current price. In addition, exchanges may establish daily price fluctuation
limits for exchange-traded options contracts, and may halt trading if a
contract's price moves upward or downward more than the limit in a given day. On
volatile trading days when the price fluctuation limit is reached or a trading
halt is imposed, it may be impossible to enter into new positions or close out
existing positions. If the market for a contract is not liquid because of price
fluctuation limits or otherwise, it could prevent prompt liquidation of
unfavorable positions, and potentially could require a fund to continue to hold
a position until delivery or expiration regardless of changes in its
value.
Unlike
exchange-traded options, which are standardized with respect to the underlying
instrument, expiration date, contract size, and strike price, the terms of OTC
options (options not traded on exchanges) generally are established through
negotiation with the other party to the option contract. While this type of
arrangement allows the purchaser or writer greater flexibility to tailor an
option to its needs, OTC options generally are less liquid and involve greater
credit risk than exchange-traded options, which are backed by the clearing
organization of the exchanges where they are traded.
Combined
positions involve purchasing and writing options in combination with each other,
or in combination with futures or forward contracts, to adjust the risk and
return characteristics of the overall position. For example, purchasing a put
option and writing a call option on the same underlying instrument would
construct a combined position whose risk and return characteristics are similar
to selling a futures contract. Another possible combined position would involve
writing a call option at one strike price and buying a call option at a lower
price, to reduce the risk of the written call option in the event of a
substantial price increase. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult to
open and close out.
A
fund may also buy and sell options on swaps (swaptions), which are generally
options on interest rate swaps. An option on a swap gives a party the right (but
not the obligation) to enter into a new swap agreement or to extend, shorten,
cancel or modify an existing contract at a specific date in the future in
exchange for a premium. Depending on the terms of the particular option
agreement, a fund will generally incur a greater degree of risk when it writes
(sells) an option on a swap than it will incur when it purchases an option on a
swap. When a fund purchases an option on a swap, it risks losing only the amount
of the premium it has paid should it decide to let the option expire
unexercised. However, when a fund writes an option on a swap, upon exercise of
the option the fund will become obligated according to the terms of the
underlying agreement. A fund that writes an option on a swap receives the
premium and bears the risk of unfavorable changes in the preset rate on the
underlying interest rate swap. Whether a fund's use of options on swaps will be
successful in furthering its investment objective will depend on the adviser's
ability to predict correctly whether certain types of investments are likely to
produce greater returns than other investments. Options on swaps may involve
risks similar to those discussed below in "Swap Agreements."
Because
there are a limited number of types of exchange-traded options contracts, it is
likely that the standardized contracts available will not match a fund's current
or anticipated investments exactly. A fund may invest in options contracts based
on securities with different issuers, maturities, or other characteristics from
the securities in which the fund typically invests, which involves a risk that
the options position will not track the performance of the fund's other
investments.
Options
prices can also diverge from the prices of their underlying instruments, even if
the underlying instruments match a fund's investments well. Options prices are
affected by such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument, and the time remaining until
expiration of the contract, which may not affect security prices the same way.
Imperfect correlation may also result from differing levels of demand in the
options and futures markets and the securities markets, from structural
differences in how options and futures and securities are traded, or from
imposition of daily price fluctuation limits or trading halts. A fund may
purchase or sell options contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price changes
in a fund's options positions are poorly correlated with its other investments,
the positions may fail to produce anticipated gains or result in losses that are
not offset by gains in other investments.
Swap
Agreements. Under
a typical equity swap agreement, a counterparty such as a bank or broker-dealer
agrees to pay a fund a return equal to the dividend payments and increase in
value, if any, of an index or group of stocks, or of a stock, and the fund
agrees in return to pay a fixed or floating rate of interest, plus any declines
in value of the index. Swap agreements can also have features providing for
maximum or minimum exposure to a designated index. In order to hedge its
exposure effectively, a fund would generally have to own other assets returning
approximately the same amount as the interest rate payable by the fund under the
swap agreement.
Swap
agreements allow a fund to acquire or reduce credit exposure to a particular
issuer, asset, or basket of assets. The most significant factor in the
performance of swap agreements is the change in value of the specific index,
security, or currency, or other factors that determine the amounts of payments
due to and from a fund. If a swap agreement calls for payments by a fund, the
fund must be prepared to make such payments when due. If the creditworthiness of
a fund's swap counterparty declines, the risk that the counterparty may not
perform could increase, potentially resulting in a loss to the fund and
impairing the fund's correlation with its applicable index. Although there can
be no assurance that a fund will be able to do so, a fund may be able to reduce
or eliminate its exposure under a swap agreement either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or another more creditworthy party.
A
fund bears the risk of loss of the amount expected to be received under a swap
agreement in the event of the default or bankruptcy of a swap agreement
counterparty. A fund would generally be required to provide margin or collateral
for the benefit of that counterparty. If a counterparty to a swap transaction
becomes insolvent, the fund may be limited temporarily or permanently in
exercising its right to the return of related fund assets designated as margin
or collateral in an action against the counterparty.
Swap
agreements are subject to the risk that the market value of the instrument will
change in a way detrimental to a fund's interest. A fund bears the risk that an
adviser will not accurately forecast market trends or the values of assets,
reference rates, indexes, or other economic factors in establishing swap
positions for a fund. If an adviser attempts to use a swap as a hedge against,
or as a substitute for, a portfolio investment, a fund may be exposed to the
risk that the swap will have or will develop imperfect or no correlation with
the portfolio investment, which could cause substantial losses for a fund. While
hedging strategies involving swap instruments can reduce the risk of loss, they
can also reduce the opportunity for gain or even result in losses by offsetting
favorable price movements in other fund investments. Swaps are complex and often
valued subjectively.
Hybrid
and Preferred Securities. A
hybrid security may be a debt security, warrant, convertible security,
certificate of deposit or other evidence of indebtedness on which the value of
the interest on or principal of which is determined by reference to changes in
the value of a reference instrument or financial strength of a reference entity
(e.g., a security or other financial instrument, asset, currency, interest rate,
commodity, index, or business entity such as a financial institution). Another
example is contingent convertible securities, which are fixed income securities
that, under certain circumstances, either convert into common stock of the
issuer or undergo a principal write-down by a predetermined percentage if the
issuer's capital ratio falls below a predetermined trigger level. The
liquidation value of such a security may be reduced upon a regulatory action and
without the need for a bankruptcy proceeding. Preferred securities may take the
form of preferred stock and represent an equity or ownership interest in an
issuer that pays dividends at a specified rate and that has precedence over
common stock in the payment of dividends. In the event an issuer is liquidated
or declares bankruptcy, the claims of owners of bonds generally take precedence
over the claims of those who own preferred and common stock.
The
risks of investing in hybrid and preferred securities reflect a combination of
the risks of investing in securities, options, futures and currencies. An
investment in a hybrid or preferred security may entail significant risks that
are not associated with a similar investment in a traditional debt or equity
security. The risks of a particular hybrid or preferred security will depend
upon the terms of the instrument, but may include the possibility of significant
changes in the value of any applicable reference instrument. Such risks may
depend upon factors unrelated to the operations or credit quality of the issuer
of the hybrid or preferred security. Hybrid and preferred securities are
potentially more volatile and carry greater market and liquidity risks than
traditional debt or equity securities. Also, the price of the hybrid or
preferred security and any applicable reference instrument may not move in the
same direction or at the same time. In addition, because hybrid and preferred
securities may be traded over-the-counter or in bilateral transactions with the
issuer of the security, hybrid and preferred securities may be subject to the
creditworthiness of the counterparty of the security and their values may
decline substantially if the counterparty's creditworthiness deteriorates. In
addition, uncertainty regarding the tax and regulatory treatment of hybrid and
preferred securities may reduce demand for such securities and tax and
regulatory considerations may limit the extent of a fund's investments in
certain hybrid and preferred securities.
Illiquid
Investments means
any investment that cannot be sold or disposed of in current market conditions
in seven calendar days or less without the sale or disposition significantly
changing the market value of the investment. Difficulty in selling or disposing
of illiquid investments may result in a loss or may be costly to a fund.
Illiquid securities may include (1) repurchase agreements maturing in more than
seven days without demand/redemption features, (2) OTC options and certain other
derivatives, (3) private placements, (4) securities traded on markets and
exchanges with structural constraints, and (5) loan participations.
Under
the supervision of the Board of Trustees, a Fidelity ®
fund's
adviser classifies the liquidity of the fund's investments and monitors the
extent of funds' illiquid investments.
Various
market, trading and investment-specific factors may be considered in determining
the liquidity of a fund's investments including, but not limited to (1) the
existence of an active trading market, (2) the nature of the security and the
market in which it trades, (3) the number, diversity, and quality of dealers and
prospective purchasers in the marketplace, (4) the frequency, volume, and
volatility of trade and price quotations, (5) bid-ask spreads, (6) dates of
issuance and maturity, (7) demand, put or tender features, and (8) restrictions
on trading or transferring the investment.
Fidelity
classifies certain investments as illiquid based upon these criteria. Fidelity
also monitors for certain market, trading and investment-specific events that
may cause Fidelity to re-evaluate an investment's liquidity status and may lead
to an investment being classified as illiquid. In addition, Fidelity uses a
third-party to assist with the liquidity classifications of the fund's
investments, which includes calculating the time to sell and settle a specified
size position in a particular investment without the sale significantly changing
the market value of the investment.
Increasing
Government Debt. The
total public debt of the United States and other countries around the globe as a
percent of gross domestic product has grown rapidly since the beginning of the
2008 financial downturn. Although high debt levels do not necessarily indicate
or cause economic problems, they may create certain systemic risks if sound debt
management practices are not implemented.
A
high national debt level may increase market pressures to meet government
funding needs, which may drive debt cost higher and cause a country to sell
additional debt, thereby increasing refinancing risk. A high national debt also
raises concerns that a government will not be able to make principal or interest
payments when they are due. In the worst case, unsustainable debt levels can
decline the valuation of currencies, and can prevent a government from
implementing effective counter-cyclical fiscal policy in economic
downturns.
On
August 5, 2011, Standard & Poor's Ratings Services lowered its long-term
sovereign credit rating on the United States one level to "AA+" from "AAA."
While Standard & Poor's Ratings Services affirmed the United States'
short-term sovereign credit rating as "A-1+," there is no guarantee that
Standard & Poor's Ratings Services will not decide to lower this rating in
the future. Standard & Poor's Ratings Services stated that its decision was
prompted by its view on the rising public debt burden and its perception of
greater policymaking uncertainty. The market prices and yields of securities
supported by the full faith and credit of the U.S. Government may be adversely
affected by Standard & Poor's Ratings Services decisions to downgrade the
long-term sovereign credit rating of the United States.
Indexed
Securities are
instruments whose prices are indexed to the prices of other securities,
securities indexes, or other financial indicators. Indexed securities typically,
but not always, are debt securities or deposits whose values at maturity or
coupon rates are determined by reference to a specific instrument, statistic, or
measure.
Indexed
securities also include commercial paper, certificates of deposit, and other
fixed-income securities whose values at maturity or coupon interest rates are
determined by reference to the returns of particular stock indexes. Indexed
securities can be affected by stock prices as well as changes in interest rates
and the creditworthiness of their issuers and may not track the indexes as
accurately as direct investments in the indexes.
Insolvency
of Issuers, Counterparties, and Intermediaries. Issuers
of fund portfolio securities or counterparties to fund transactions that become
insolvent or declare bankruptcy can pose special investment risks. In each
circumstance, risk of loss, valuation uncertainty, increased illiquidity, and
other unpredictable occurrences may negatively impact an investment. Each of
these risks may be amplified in foreign markets, where security trading,
settlement, and custodial practices can be less developed than those in the U.S.
markets, and bankruptcy laws differ from those of the U.S.
As
a general matter, if the issuer of a fund portfolio security is liquidated or
declares bankruptcy, the claims of owners of bonds and preferred stock have
priority over the claims of common stock owners. These events can negatively
impact the value of the issuer's securities and the results of related
proceedings can be unpredictable.
If
a counterparty to a fund transaction, such as a swap transaction, a short sale,
a borrowing, or other complex transaction becomes insolvent, the fund may be
limited in its ability to exercise rights to obtain the return of related fund
assets or in exercising other rights against the counterparty. Uncertainty may
also arise upon the insolvency of a securities or commodities intermediary such
as a broker-dealer or futures commission merchant with which a fund has pending
transactions. In addition, insolvency and liquidation proceedings take time to
resolve, which can limit or preclude a fund's ability to terminate a transaction
or obtain related assets or collateral in a timely fashion. If an intermediary
becomes insolvent, while securities positions and other holdings may be
protected by U.S. or foreign laws, it is sometimes difficult to determine
whether these protections are available to specific trades based on the
circumstances. Receiving the benefit of these protections can also take time to
resolve, which may result in illiquid positions.
Interfund
Borrowing and Lending Program. Pursuant
to an exemptive order issued by the SEC, a Fidelity ®
fund
may lend money to, and borrow money from, other funds advised by FMR or its
affiliates. A Fidelity ®
fund
will borrow through the program only when the costs are equal to or lower than
the costs of bank loans. A Fidelity ®
fund
will lend through the program only when the returns are higher than those
available from an investment in repurchase agreements. Interfund loans and
borrowings normally extend overnight, but can have a maximum duration of seven
days. Loans may be called on one day's notice. A Fidelity ®
fund
may have to borrow from a bank at a higher interest rate if an interfund loan is
called or not renewed. Any delay in repayment to a lending fund could result in
a lost investment opportunity or additional borrowing costs.
Investment-Grade
Debt Securities. Investment-grade
debt securities include all types of debt instruments that are of medium and
high-quality. Investment-grade debt securities include repurchase agreements
collateralized by U.S. Government securities as well as repurchase agreements
collateralized by equity securities, non-investment-grade debt, and all other
instruments in which a fund can perfect a security interest, provided the
repurchase agreement counterparty has an investment-grade rating. Some
investment-grade debt securities may possess speculative characteristics and may
be more sensitive to economic changes and to changes in the financial conditions
of issuers. An investment-grade rating means the security or issuer is rated
investment-grade by a credit rating agency registered as a nationally recognized
statistical rating organization (NRSRO) with the SEC (for example, Moody's
Investors Service, Inc.), or is unrated but considered to be of equivalent
quality by a fund's adviser. For purposes of determining the maximum maturity of
an investment-grade debt security, an adviser may take into account normal
settlement periods.
Loans
and Other Direct Debt Instruments. Direct
debt instruments are interests in amounts owed by a corporate, governmental, or
other borrower to lenders or lending syndicates (loans and loan participations),
to suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments involve a risk of loss in case of default
or insolvency of the borrower and may offer less legal protection to the
purchaser in the event of fraud or misrepresentation, or there may be a
requirement that a fund supply additional cash to a borrower on demand. A fund
may acquire loans by buying an assignment of all or a portion of the loan from a
lender or by purchasing a loan participation from a lender or other purchaser of
a participation.
Lenders
and purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the borrower and/or any collateral for payment of
interest and repayment of principal. If scheduled interest or principal payments
are not made, the value of the instrument may be adversely affected. Loans that
are fully secured provide more protections than an unsecured loan in the event
of failure to make scheduled interest or principal payments. However, there is
no assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral could be liquidated.
Indebtedness of borrowers whose creditworthiness is poor involves substantially
greater risks and may be highly speculative. Different types of assets may be
used as collateral for a fund's loans and there can be no assurance that a fund
will correctly evaluate the value of the assets collateralizing the fund's
loans. Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. In any
restructuring or bankruptcy proceedings relating to a borrower funded by a fund,
a fund may be required to accept collateral with less value than the amount of
the loan made by the fund to the borrower. Direct indebtedness of foreign
countries also involves a risk that the governmental entities responsible for
the repayment of the debt may be unable, or unwilling, to pay interest and repay
principal when due.
Loans
and other types of direct indebtedness (which a fund may originate, acquire or
otherwise gain exposure to) may not be readily marketable and may be subject to
restrictions on resale. Some indebtedness may be difficult to dispose of readily
at what the Adviser believes to be a fair price. In addition, valuation of
illiquid indebtedness involves a greater degree of judgment in determining a
fund's net asset value than if that value were based on readily available market
quotations, and could result in significant variations in a fund's daily share
price. Some loan interests are traded among certain financial institutions and
accordingly may be deemed liquid. As the market for different types of
indebtedness develops, the liquidity of these instruments is expected to
improve.
Direct
lending and investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional risks. For
example, if a loan is foreclosed, the lender/purchaser could become part owner
of any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In the event of a default by the
borrower, a fund may have difficulty disposing of the assets used as collateral
for a loan. In addition, a purchaser could be held liable as a co-lender. Direct
debt instruments may also involve a risk of insolvency of the lending bank or
other intermediary.
A
loan is often administered by a bank or other financial institution that acts as
agent for all holders. The agent administers the terms of the loan, as specified
in the loan agreement. Unless, under the terms of the loan or other
indebtedness, the purchaser has direct recourse against the borrower, the
purchaser may have to rely on the agent to apply appropriate credit remedies
against a borrower. If assets held by the agent for the benefit of a purchaser
were determined to be subject to the claims of the agent's general creditors,
the purchaser might incur certain costs and delays in realizing payment on the
loan or loan participation and could suffer a loss of principal or interest.
Direct loans are typically not administered by an underwriter or agent bank. The
terms of direct loans are negotiated with borrowers in private transactions.
Direct loans are not publicly traded and may not have a secondary market.
A
fund may seek to dispose of loans in certain cases, to the extent possible,
through selling participations in the loan. In that case, a fund would remain
subject to certain obligations, which may result in expenses for a fund and
certain additional risks.
Direct
indebtedness may include letters of credit, revolving credit facilities, or
other standby financing commitments that obligate lenders/purchasers, including
a fund, to make additional cash payments on demand. These commitments may have
the effect of requiring a lender/purchaser to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
borrower's condition makes it unlikely that the amount will ever be
repaid.
In
the process of originating, buying, selling and holding loans, a fund may
receive and/or pay certain fees. These fees are in addition to the interest
payments received and may include facility, closing or upfront fees, commitment
fees and commissions. A fund may receive or pay a facility, closing or upfront
fee when it buys or sells a loan. A fund may receive a commitment fee throughout
the life of the loan or as long as the fund remains invested in the loan (in
addition to interest payments) for any unused portion of a committed line of
credit. Other fees received by the fund may include prepayment fees, covenant
waiver fees, ticking fees and/or modification fees. Legal fees related to the
originating, buying, selling and holding loans may also be borne by the fund
(including legal fees to assess conformity of a loan investment with 1940 Act
provisions).
When
engaging in direct lending, if permitted by its investment policies, a fund's
performance may depend, in part, on the ability of the fund to originate loans
on advantageous terms. A fund may compete with other lenders in originating and
purchasing loans. Increased competition for, or a diminished available supply
of, qualifying loans could result in lower yields on and/or less advantageous
terms for such loans, which could reduce fund performance.
For
a Fidelity ®
fund
that limits the amount of total assets that it will invest in any one issuer or
in issuers within the same industry, the fund generally will treat the borrower
as the "issuer" of indebtedness held by the fund. In the case of loan
participations where a bank or other lending institution serves as financial
intermediary between a fund and the borrower, if the participation does not
shift to the fund the direct debtor-creditor relationship with the borrower, SEC
interpretations require a fund, in appropriate circumstances, to treat both the
lending bank or other lending institution and the borrower as "issuers" for
these purposes. Treating a financial intermediary as an issuer of indebtedness
may restrict a fund's ability to invest in indebtedness related to a single
financial intermediary, or a group of intermediaries engaged in the same
industry, even if the underlying borrowers represent many different companies
and industries.
A
fund may choose, at its expense or in conjunction with others, to pursue
litigation or otherwise to exercise its rights as a security holder to seek to
protect the interests of security holders if it determines this to be in the
best interest of the fund's shareholders.
If
permitted by its investment policies, a fund may also obtain exposure to the
lending activities described above indirectly through its investments in
underlying Fidelity funds or other vehicles that may engage in such activities
directly.
Real
Estate Investment Trusts (REITs). Equity
REITs own real estate properties, while mortgage REITs make construction,
development, and long-term mortgage loans. Their value may be affected by
changes in the value of the underlying property of the trusts, the
creditworthiness of the issuer, property taxes, interest rates, and tax and
regulatory requirements, such as those relating to the environment. Both types
of trusts are dependent upon management skill, are not diversified, and are
subject to heavy cash flow dependency, defaults by borrowers, self-liquidation,
and the possibility of failing to qualify for tax-free status of income under
the Internal Revenue Code and failing to maintain exemption from the 1940
Act.
Repurchase
Agreements involve
an agreement to purchase a security and to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the purchase
price plus an agreed-upon incremental amount which is unrelated to the coupon
rate or maturity of the purchased security. As protection against the risk that
the original seller will not fulfill its obligation, the securities are held in
a separate account at a bank, marked-to-market daily, and maintained at a value
at least equal to the sale price plus the accrued incremental amount. The value
of the security purchased may be more or less than the price at which the
counterparty has agreed to purchase the security. In addition, delays or losses
could result if the other party to the agreement defaults or becomes insolvent.
A fund may be limited in its ability to exercise its right to liquidate assets
related to a repurchase agreement with an insolvent counterparty. A
Fidelity ®
fund
may engage in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by the fund's
adviser.
Restricted
Securities (including Private Placements) are
subject to legal restrictions on their sale. Difficulty in selling securities
may result in a loss or be costly to a fund. Restricted securities, including
private placements of private and public companies, generally can be sold in
privately negotiated transactions, pursuant to an exemption from registration
under the Securities Act of 1933 (1933 Act), or in a registered public offering.
Where registration is required, the holder of a registered security may be
obligated to pay all or part of the registration expense and a considerable
period may elapse between the time it decides to seek registration and the time
it may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
the holder might obtain a less favorable price than prevailed when it decided to
seek registration of the security.
Reverse
Repurchase Agreements. In
a reverse repurchase agreement, a fund sells a security to another party, such
as a bank or broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. A Fidelity ®
fund
may enter into reverse repurchase agreements with parties whose creditworthiness
has been reviewed and found satisfactory by the fund's adviser. Such
transactions may increase fluctuations in the market value of a fund's assets
and, if applicable, a fund's yield, and may be viewed as a form of leverage.
Under SEC requirements, a fund needs to aggregate the amount of indebtedness
associated with its reverse repurchase agreements and similar financing
transactions with the aggregate amount of any other senior securities
representing indebtedness (e.g., borrowings, if applicable) when calculating the
fund's asset coverage ratio or treat all such transactions as derivatives
transactions.
SEC
Rule 18f-4.
In
October 2020, the SEC adopted a final rule related to the use of derivatives,
short sales, reverse repurchase agreements and certain other transactions by
registered investment companies (the "rule"). Subject to certain exceptions, the
rule requires the funds to trade derivatives and certain other transactions that
create future payment or delivery obligations subject to a value-at-risk (VaR)
leverage limit and to certain derivatives risk management program, reporting and
board oversight requirements. Generally, these requirements apply to any fund
engaging in derivatives transactions unless a fund satisfies a "limited
derivatives users" exception, which requires the fund to limit its gross
notional derivatives exposure (with certain exceptions) to 10% of its net assets
and to adopt derivatives risk management procedures. Under the rule, when a fund
trades reverse repurchase agreements or similar financing transactions, it needs
to aggregate the amount of indebtedness associated with the reverse repurchase
agreements or similar financing transactions with the aggregate amount of any
other senior securities representing indebtedness (e.g., borrowings, if
applicable) when calculating the fund's asset coverage ratio or treat all such
transactions as derivatives transactions. The SEC also provided guidance in
connection with the final rule regarding the use of securities lending
collateral that may limit securities lending activities. In addition, under the
rule, a fund may invest in a security on a when-issued or forward-settling
basis, or with a non-standard settlement cycle, and the transaction will be
deemed not to involve a senior security (as defined under Section 18(g) of the
1940 Act), provided that (i) the fund intends to physically settle the
transaction and (ii) the transaction will settle within 35 days of its trade
date (the "Delayed-Settlement Securities Provision"). A fund may otherwise
engage in when-issued, forward-settling and non-standard settlement cycle
securities transactions that do not meet the conditions of the
Delayed-Settlement Securities Provision so long as the fund treats any such
transaction as a derivatives transaction for purposes of compliance with the
rule. Furthermore, under the rule, a fund will be permitted to enter into an
unfunded commitment agreement, and such unfunded commitment agreement will not
be subject to the asset coverage requirements under the 1940 Act, if the fund
reasonably believes, at the time it enters into such agreement, that it will
have sufficient cash and cash equivalents to meet its obligations with respect
to all such agreements as they come due. These requirements may limit the
ability of the funds to use derivatives, short sales, reverse repurchase
agreements and similar financing transactions, and the other relevant
transactions as part of its investment strategies. These requirements also may
increase the cost of the fund's investments and cost of doing business, which
could adversely affect investors.
Securities
Lending. A
Fidelity ®
fund
may lend securities to parties such as broker-dealers or other institutions,
including an affiliate, National Financial Services LLC (NFS). Fidelity
®
funds
for which Geode Capital Management, LLC (Geode) serves as sub-adviser will not
lend securities to Geode or its affiliates. Securities lending allows a fund to
retain ownership of the securities loaned and, at the same time, earn additional
income. The borrower provides the fund with collateral in an amount at least
equal to the value of the securities loaned. The fund seeks to maintain the
ability to obtain the right to vote or consent on proxy proposals involving
material events affecting securities loaned. If the borrower defaults on its
obligation to return the securities loaned because of insolvency or other
reasons, a fund could experience delays and costs in recovering the securities
loaned or in gaining access to the collateral. These delays and costs could be
greater for foreign securities. If a fund is not able to recover the securities
loaned, the fund may sell the collateral and purchase a replacement investment
in the market. The value of the collateral could decrease below the value of the
replacement investment by the time the replacement investment is purchased. For
a Fidelity ®
fund,
loans will be made only to parties deemed by the fund's adviser to be in good
standing and when, in the adviser's judgment, the income earned would justify
the risks.
The
Fidelity ®
funds
have retained agents, including NFS, an affiliate of the funds, to act as
securities lending agent. If NFS acts as securities lending agent for a fund, it
is subject to the overall supervision of the fund's adviser, and NFS will
administer the lending program in accordance with guidelines approved by the
fund's Trustees.
Cash
received as collateral through loan transactions may be invested in other
eligible securities, including shares of a money market fund. Investing this
cash subjects that investment, as well as the securities loaned, to market
appreciation or depreciation.
Securities
of Other Investment Companies ,
including shares of closed-end investment companies (which include business
development companies (BDCs)), unit investment trusts, and open-end investment
companies, represent interests in professionally managed portfolios that may
invest in any type of instrument. Investing in other investment companies
involves substantially the same risks as investing directly in the underlying
instruments, but may involve additional expenses at the underlying investment
company-level, such as portfolio management fees and operating expenses. Fees
and expenses incurred indirectly by a fund as a result of its investment in
shares of one or more other investment companies generally are referred to as
"acquired fund fees and expenses" and may appear as a separate line item in a
fund's prospectus fee table. For certain investment companies, such as BDCs,
these expenses may be significant. Certain types of investment companies, such
as closed-end investment companies, issue a fixed number of shares that trade on
a stock exchange or over-the-counter at a premium or a discount to their NAV.
Others are continuously offered at NAV, but may also be traded in the secondary
market.
The
securities of closed-end funds may be leveraged. As a result, a fund may be
indirectly exposed to leverage through an investment in such securities. An
investment in securities of closed-end funds that use leverage may expose a fund
to higher volatility in the market value of such securities and the possibility
that the fund's long-term returns on such securities will be diminished.
A
fund's ability to invest in securities of other investment companies may be
limited by federal securities laws. To the extent a fund acquires securities
issued by unaffiliated investment companies, the Adviser's access to information
regarding such underlying fund's portfolio may be limited and subject to such
fund's policies regarding disclosure of fund holdings.
A
fund that seeks to track the performance of a particular index could invest in
investment companies that seek to track the performance of indexes other than
the index that the fund seeks to track.
Short
Sales "Against the Box" are
short sales of securities that a fund owns or has the right to obtain
(equivalent in kind or amount to the securities sold short). If a fund enters
into a short sale against the box, it will be required to set aside securities
equivalent in kind and amount to the securities sold short (or securities
convertible or exchangeable into such securities) and will be required to hold
such securities while the short sale is outstanding. A fund will incur
transaction costs, including interest expenses, in connection with opening,
maintaining, and closing short sales against the box.
Special
Purpose Acquisition Companies ("SPACs"). A
fund may invest in stock, warrants, and other securities of SPACs or similar
special purpose entities that pool money to seek potential acquisition
opportunities. SPACs are collective investment structures formed to raise money
in an initial public offering for the purpose of merging with or acquiring one
or more operating companies (the "de-SPAC Transaction"). Until an acquisition is
completed, a SPAC generally invests its assets in US government securities,
money market securities and cash. In connection with a de-SPAC Transaction, the
SPAC may complete a PIPE (private investment in public equity) offering with
certain investors. A fund may enter into a contingent commitment with a SPAC to
purchase PIPE shares if and when the SPAC completes its de-SPAC
Transaction.
Because
SPACs do not have an operating history or ongoing business other than seeking
acquisitions, the value of their securities is particularly dependent on the
ability of the SPAC's management to identify and complete a profitable
acquisition. Some SPACs may pursue acquisitions only within certain industries
or regions, which may increase the volatility of their prices. An investment in
a SPAC is subject to a variety of risks, including that (i) an attractive
acquisition or merger target may not be identified at all and the SPAC will be
required to return any remaining monies to shareholders; (ii) an acquisition or
merger once effected may prove unsuccessful and an investment in the SPAC may
lose value; (iii) the values of investments in SPACs may be highly volatile and
may depreciate significantly over time; (iv) no or only a thinly traded market
for shares of or interests in a SPAC may develop, leaving a fund unable to sell
its interest in a SPAC or to sell its interest only at a price below what the
fund believes is the SPAC interest's intrinsic value; (v) any proposed merger or
acquisition may be unable to obtain the requisite approval, if any, of
shareholders; (vi) an investment in a SPAC may be diluted by additional later
offerings of interests in the SPAC or by other investors exercising existing
rights to purchase shares of the SPAC; (vii) the warrants or other rights with
respect to the SPAC held by a fund may expire worthless or may be repurchased or
retired by the SPAC at an unfavorable price; (viii) a fund may be delayed in
receiving any redemption or liquidation proceeds from a SPAC to which it is
entitled; and (ix) a significant portion of the monies raised by the SPAC for
the purpose of identifying and effecting an acquisition or merger may be
expended during the search for a target transaction.
Purchased
PIPE shares will be restricted from trading until the registration statement for
the shares is declared effective. Upon registration, the shares can be freely
sold, but only pursuant to an effective registration statement or other
exemption from registration. The securities issued by a SPAC, which are
typically traded either in the over-the-counter market or on an exchange, may be
considered illiquid, more difficult to value, and/or be subject to restrictions
on resale.
Structured
Securities (also
called "structured notes") are derivative debt securities, the interest rate on
or principal of which is determined by an unrelated indicator. The value of the
interest rate on and/or the principal of structured securities is determined by
reference to changes in the value of a reference instrument (e.g., a security or
other financial instrument, asset, currency, interest rate, commodity, or index)
or the relative change in two or more reference instruments. A structured
security may be positively, negatively, or both positively and negatively
indexed; that is, its value or interest rate may increase or decrease if the
value of the reference instrument increases. Similarly, its value or interest
rate may increase or decrease if the value of the reference instrument
decreases. Further, the change in the principal amount payable with respect to,
or the interest rate of, a structured security may be calculated as a multiple
of the percentage change (positive or negative) in the value of the underlying
reference instrument(s); therefore, the value of such structured security may be
very volatile. Structured securities may entail a greater degree of market risk
than other types of debt securities because the investor bears the risk of the
reference instrument. Structured securities may also be more volatile, less
liquid, and more difficult to accurately price than less complex securities or
more traditional debt securities. In addition, because structured securities
generally are traded over-the-counter, structured securities are subject to the
creditworthiness of the counterparty of the structured security, and their
values may decline substantially if the counterparty's creditworthiness
deteriorates.
Transfer
Agent Bank Accounts. Proceeds
from shareholder purchases of a Fidelity ®
fund
may pass through a series of demand deposit bank accounts before being held at
the fund's custodian. Redemption proceeds may pass from the custodian to the
shareholder through a similar series of bank accounts.
If
a bank account is registered to the transfer agent or an affiliate, who acts as
an agent for the funds when opening, closing, and conducting business in the
bank account, the transfer agent or an affiliate may invest overnight balances
in the account in repurchase agreements. Any balances that are not invested in
repurchase agreements remain in the bank account overnight. Any risks associated
with such an account are investment risks of the funds. A fund faces the risk of
loss of these balances if the bank becomes insolvent.
Warrants.
Warrants
are instruments which entitle the holder to buy an equity security at a specific
price for a specific period of time. Changes in the value of a warrant do not
necessarily correspond to changes in the value of its underlying security. The
price of a warrant may be more volatile than the price of its underlying
security, and a warrant may offer greater potential for capital appreciation as
well as capital loss.
Warrants
do not entitle a holder to dividends or voting rights with respect to the
underlying security and do not represent any rights in the assets of the issuing
company. A warrant ceases to have value if it is not exercised prior to its
expiration date. These factors can make warrants more speculative than other
types of investments.
Zero
Coupon Bonds do
not make interest payments; instead, they are sold at a discount from their face
value and are redeemed at face value when they mature. Because zero coupon bonds
do not pay current income, their prices can be more volatile than other types of
fixed-income securities when interest rates change. In calculating a fund's
dividend, a portion of the difference between a zero coupon bond's purchase
price and its face value is considered income.
In
addition to the investment policies and limitations discussed above, a fund is
subject to the additional operational risk discussed below.
Considerations
Regarding Cybersecurity. With
the increased use of technologies such as the Internet to conduct business, a
fund's service providers are susceptible to operational, information security
and related risks. In general, cyber incidents can result from deliberate
attacks or unintentional events and may arise from external or internal sources.
Cyber attacks include, but are not limited to, gaining unauthorized access to
digital systems (e.g., through "hacking" or malicious software coding) for
purposes of misappropriating assets or sensitive information; corrupting data,
equipment or systems; or causing operational disruption. Cyber attacks may also
be carried out in a manner that does not require gaining unauthorized access,
such as causing denial-of-service attacks on websites (i.e., efforts to make
network services unavailable to intended users). Cyber incidents affecting a
fund's manager, any sub-adviser and other service providers (including, but not
limited to, fund accountants, custodians, transfer agents and financial
intermediaries) have the ability to cause disruptions and impact business
operations, potentially resulting in financial losses, interference with a
fund's ability to calculate its NAV, impediments to trading, the inability of
fund shareholders to transact business, destruction to equipment and systems,
violations of applicable privacy and other laws, regulatory fines, penalties,
reputational damage, reimbursement or other compensation costs, or additional
compliance costs. Similar adverse consequences could result from cyber incidents
affecting issuers of securities in which a fund invests, counterparties with
which a fund engages in transactions, governmental and other regulatory
authorities, exchange and other financial market operators, banks, brokers,
dealers, insurance companies and other financial institutions (including
financial intermediaries and service providers for fund shareholders) and other
parties. In addition, substantial costs may be incurred in order to prevent any
cyber incidents in the future.
While
a fund's service providers have established business continuity plans in the
event of, and risk management systems to prevent, such cyber incidents, there
are inherent limitations in such plans and systems including the possibility
that certain risks have not been identified. Furthermore, a fund cannot control
the cyber security plans and systems put in place by its service providers or
any other third parties whose operations may affect a fund or its shareholders.
A fund and its shareholders could be negatively impacted as a result.
EXCHANGE
TRADED FUND RISKS
Continuous
Offering.
The
method by which Creation Units of shares are created and traded may raise
certain issues under applicable securities laws. Because new Creation Units of
shares are issued and sold by a fund on an ongoing basis, at any point a
"distribution," as such term is used in the 1933 Act, may occur. Broker-dealers
and other persons are cautioned that some activities on their part may,
depending on the circumstances, result in their being deemed participants in a
distribution in a manner which could render them statutory underwriters and
subject them to the prospectus delivery and liability provisions of the 1933
Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with Fidelity
Distributors Company LLC (FDC), each fund's distributor, breaks them down into
constituent shares, and sells such shares directly to customers, or if it
chooses to couple the creation of a supply of new shares with an active selling
effort involving solicitation of secondary market demand for shares. A
determination of whether one is an underwriter for purposes of the 1933 Act must
take into account all the facts and circumstances pertaining to the activities
of the broker-dealer or its client in the particular case, and the examples
mentioned above should not be considered a complete description of all the
activities that could lead to a categorization as an underwriter.
Broker-dealer
firms should also note that dealers who are not "underwriters," but are
effecting transactions in shares of a fund, whether or not participating in the
distribution of shares, are generally required to deliver a prospectus. This is
because the prospectus delivery exemption in Section 4(a)(3) of the 1933 Act is
not available in respect of such transactions as a result of Section 24(d) of
the 1940 Act . As a result, broker-dealer firms should note that dealers who are
not underwriters but are participating in a distribution (as opposed to engaging
in ordinary secondary market transactions) and thus dealing with the shares that
are part of an overallotment within the meaning of Section 4(a)(3)(A) of the
1933 Act would be unable to take advantage of the prospectus delivery exemption
provided by Section 4(a)(3) of the 1933 Act. Firms that incur a
prospectus-delivery obligation with respect to shares of each fund are reminded
that, under Rule 153 under the 1933 Act, a prospectus-delivery obligation under
Section 5(b)(2) of the 1933 Act owed to an exchange member in connection with a
sale on an exchange is satisfied by the fact that the prospectus is available
from the exchange upon request. The prospectus delivery mechanism provided in
Rule 153 is only available with respect to transactions on an exchange.
Listing
and Trading.
Shares
of each fund have been approved for listing and trading on an exchange. Each
fund's shares trade on an exchange at prices that may differ to some degree from
their NAV.
The
listing exchange may remove each fund's shares from listing if (i) following the
initial 12-month period beginning upon the commencement of trading of each fund,
there are fewer than 50 beneficial owners of each fund's shares; (ii) the
listing exchange becomes aware that each fund is no longer eligible to operate
in reliance on Rule 6c-11 under the 1940 Act; (iii) the fund no longer complies
with certain listing exchange rules; or (iv) such other event shall occur or
condition exists that, in the opinion of the listing exchange, makes further
dealings on the exchange inadvisable.
The
listing exchange will remove each fund's shares from listing and trading upon
termination of the trust.
There
can be no assurance that the requirements of the listing exchange necessary to
maintain the listing of each fund's shares will continue to be met.
As
in the case of other publicly-traded securities, brokers' commissions on
transactions will be based on negotiated commission rates at customary
levels.
The
existence of a liquid trading market for certain securities may depend on
whether dealers will make a market in such securities. There can be no assurance
that such a market will be made or maintained or that any such market will be or
remain liquid. The price at which securities may be sold and the value of each
fund's shares will be adversely affected if trading markets for each fund's
portfolio securities are limited or absent, or if bid/ask spreads are
wide.
SPECIAL
GEOGRAPHIC CONSIDERATIONS
Emerging
Markets. Emerging
markets include countries that have an emerging stock market as defined by MSCI,
countries or markets with low- to middle-income economies as classified by the
World Bank, and other countries or markets that the Adviser identifies as having
similar emerging markets characteristics. Emerging markets tend to have
relatively low gross national product per capita compared to the world's major
economies and may have the potential for rapid economic growth.
Investments
in companies domiciled in emerging market countries may be subject to
potentially higher risks than investments in developed countries. These risks
include: (i) less social, political, and economic stability; (ii) greater
illiquidity and price volatility due to smaller or limited local capital markets
for such securities, or low or non-existent trading volumes; (iii) foreign
exchanges and broker-dealers may be subject to less oversight and regulation by
local authorities; (iv) local governments may decide to seize or confiscate
securities held by foreign investors, restrict an investor's ability to sell or
redeem securities, decide to suspend or limit an issuer's ability to make
dividend or interest payments; and/or may limit or entirely restrict
repatriation of invested capital, profits, and dividends; (v) capital gains may
be subject to local taxation, including on a retroactive basis; (vi) issuers
facing restrictions on dollar or euro payments imposed by local governments may
attempt to make dividend or interest payments to foreign investors in the local
currency; (vii) investors may experience difficulty in enforcing legal claims
related to the securities, shareholder claims common in the United States may
not exist in emerging markets, and/or local judges may favor the interests of
the issuer over those of foreign investors; (viii) U.S. authorities may be
unable to investigate, bring, or enforce actions against non-U.S. companies and
non-U.S. persons; (ix) bankruptcy judgments may only be permitted to be paid in
the local currency; (x) limited public information regarding the issuer may
result in greater difficulty in determining market valuations of the securities;
and (xi) infrequent financial reporting, substandard disclosure, and differences
in financial reporting, audit and accounting requirements and standards may make
it difficult to ascertain the financial health of an issuer. In addition, unlike
developed countries, many emerging countries' economic growth highly depends on
exports and inflows of external capital, making them more vulnerable to the
downturns of the world economy. The enduring low growth in the global economy
has weakened the global demand for emerging market exports and tightened
international credit supplies, highlighting the sensitivity of emerging
economies to the performance of their trading partners. Developing countries may
also face disproportionately large exposure to the negative effects of climate
change, due to both geography and a lack of access to technology to adapt to its
effects, which could include increased frequency and severity of natural
disasters and extreme weather events such as droughts, rising sea levels,
decreased crop yields, and increased spread of disease, all of which could harm
performance of affected economies. Given the particular vulnerability of
emerging market countries to the effects of climate change, disruptions in
international efforts to address climate-related issues may have a
disproportionate impact on developing countries.
Many
emerging market countries suffer from uncertainty and corruption in their legal
frameworks. Legislation may be difficult to interpret or laws may be too new to
provide any precedential value. Laws regarding foreign investment and private
property may be weak, not enforced consistently, or non-existent. Sudden changes
in governments or the transition of regimes may result in policies that are less
favorable to investors such as the imposition of price controls or policies
designed to expropriate or nationalize "sovereign" assets. Certain emerging
market countries in the past have expropriated large amounts of private
property, in many cases with little or no compensation, and there can be no
assurance that such expropriation will not occur in the future.
The
United States, other nations, or other governmental entities (including
supranational entities) could impose sanctions on a country that limits or
restricts foreign investment, the movement of assets or other economic activity.
In addition, an imposition of sanctions upon certain issuers in a country could
have a materially adverse effect on the value of such companies' securities,
delay a fund's ability to exercise certain rights as security holder, and/or
impair a fund's ability to meet its investment objectives. A fund may be
prohibited from investing in securities issued by companies subject to such
sanctions and may be required to freeze its existing investments in those
companies, prohibiting the fund from selling or otherwise transacting in these
investments. Such sanctions, or other intergovernmental actions that may be
taken in the future, may result in the devaluation of the country's currency, a
downgrade in the country's credit rating, and/or a decline in the value and
liquidity of impacted company stocks.
Many
emerging market countries in which a fund may invest lack the social, political,
and economic stability characteristic exhibited by developed countries.
Political instability among emerging market countries can be common and may be
caused by an uneven distribution of wealth, governmental corruption, social
unrest, labor strikes, civil wars, and religious oppression. Economic
instability in emerging market countries may take the form of: (i) high interest
rates; (ii) high levels of inflation, including hyperinflation; (iii) high
levels of unemployment or underemployment; (iv) changes in government economic
and tax policies, including confiscatory taxation (or taxes on foreign
investments); and (v) imposition of trade barriers.
Currencies
of emerging market countries are subject to significantly greater risks than
currencies of developed countries. Some emerging market currencies may not be
internationally traded or may be subject to strict controls by local
governments, resulting in undervalued or overvalued currencies. Some emerging
market countries have experienced balance of payment deficits and shortages in
foreign exchange reserves, which has resulted in some governments restricting
currency conversions. Future restrictive exchange controls could prevent or
restrict a company's ability to make dividend or interest payments in the
original currency of the obligation (usually U.S. dollars). In addition, even
though the currencies of some emerging market countries may be convertible into
U.S. dollars, the conversion rates may be artificial relative to their actual
market values.
Governments
of many emerging market countries have become overly reliant on the
international capital markets and other forms of foreign credit to finance large
public spending programs that cause huge budget deficits. Often, interest
payments have become too overwhelming for these governments to meet, as these
payments may represent a large percentage of a country's total GDP. Accordingly,
these foreign obligations have become the subject of political debate within
emerging market countries, which has resulted in internal pressure for such
governments to not make payments to foreign creditors, but instead to use these
funds for social programs. As a result of either an inability to pay or
submission to political pressure, the governments sought to restructure their
loan and/or bond obligations, have declared a temporary suspension of interest
payments, or defaulted (in part or full) on their outstanding debt obligations.
These events have adversely affected the values of securities issued by the
governments and corporations domiciled in these emerging market countries and
have negatively affected not only their cost of borrowing, but their ability to
borrow in the future as well. Emerging markets have also benefited from
continued monetary policies adopted by the central banks of developed countries.
After a period of continuously raising interest rates, the U.S. Federal Reserve
and central banks in other developed countries have reduced interest rates to
historically low levels. To the extent the Federal Reserve Board maintains near
zero rates, emerging market economies may benefit.
In
addition to their continued reliance on international capital markets, many
emerging economies are also highly dependent on international trade and exports,
including exports of oil and other commodities. As a result, these economies are
particularly vulnerable to downturns of the world economy. In recent years,
emerging market economies have been subject to tightened international credit
supplies and weakened global demand for their exports and, as a result, certain
of these economies faced significant difficulties and some economies face
recessionary concerns. Over the last decade, emerging market countries, and
companies domiciled in such countries, have acquired significant debt levels.
Any increase in U.S. interest rates could restrict the access to relatively
inexpensive credit supplies and jeopardize the ability of emerging market
countries to pay their respective debt service obligations. Although certain
emerging market economies have shown signs of growth and recovery, continued
growth is dependent on the uncertain economic outlook of China, Japan, the
European Union, and the United States. The reduced demand for exports and lack
of available capital for investment resulting from the European debt crisis, a
slowdown in China, the effects of the COVID-19 pandemic, and persistent low
growth in the global economy may inhibit growth for emerging market
countries.
Canada.
Economic.
Canada
is a major producer of commodities such as forest products, metals, agricultural
products, and energy related products like oil, gas, and hydroelectricity.
Accordingly, events affecting the supply and demand of base commodity resources
and industrial and precious metals and materials, both domestically and
internationally, can have a significant effect on Canadian market
performance.
The
United States is Canada's largest trading partner and developments in economic
policy and U.S. market conditions have a significant impact on the Canadian
economy. The economic and financial integration of the United States, Canada,
and Mexico through the United States-Mexico-Canada Agreement
(USMCA) may make the Canadian economy and securities market more sensitive
to North American trade patterns. Any disruption in the continued operation
of USMCA may have a significant and adverse impact on Canada's
economic outlook and the value of a fund's investments in Canada.
Growth
has continued to slow in recent years for certain sectors of the Canadian
economy, particularly energy extraction and manufacturing. Forecasts on growth
remain modest. Oil prices have fluctuated greatly over time and the enduring
volatility in the strength of the Canadian dollar may also negatively impact
Canada's ability to export, which could limit Canada's economic
growth.
Europe.
The
European Union (EU) is an intergovernmental and supranational union of European
countries spanning the continent, each known as a member state. One of the key
activities of the EU is the establishment and administration of a common single
market, consisting of, among other things, a common trade policy. In order to
further the integration of the economies of member states, member states
established, among other things, the European Economic and Monetary Union (EMU),
a collection of policies that set out different stages and commitments that
member states need to follow to achieve greater economic policy coordination and
monetary cooperation, including the adoption of a single currency, the euro.
While all EU member states participate in the economic union, only certain EU
member states have adopted the euro as their currency. When a member state
adopts the euro as its currency, the member state no longer controls its own
monetary policies. Instead, the authority to direct monetary policy is exercised
by the European Central Bank (ECB).
While
economic and monetary convergence in the EU may offer opportunities for those
investing in the region, investors should be aware that the success of the EU is
not wholly assured. European countries can be significantly affected by the
tight fiscal and monetary controls that the EU governing institutions may impose
on its members or with which candidates for EMU membership are required to
comply. Europe must grapple with a number of challenges, any one of which could
threaten the sustained economic growth, regulatory efficiency, or political
survival of the political and economic union. The countries adopting the euro
must adjust to a unified monetary system, which has resulted in the loss of
exchange rate flexibility and some degree of economic sovereignty. Europe's
economies are diverse, governance is decentralized, and its cultures differ
widely. Unemployment in some European countries has historically been higher
than in the United States, and a number of countries continue to face abnormally
high unemployment levels, particularly for younger workers, which could pose a
political risk. Many EU nations are susceptible to the economic risks associated
with high levels of debt. The EU continues to face major issues involving its
membership, structure, procedures and policies, including the successful
political, economic and social integration of new member states, the EU's
resettlement and distribution of refugees, and resolution of the EU's
problematic fiscal and democratic accountability. Efforts of the member states
to continue to unify their economic and monetary policies may increase the
potential for similarities in the movements of European markets and reduce the
benefit of diversification within the region.
Political.
Over
the last two decades, the EU has extended its membership and influence to the
countries of Eastern Europe. It has accepted several Eastern European countries
as new members, and has engaged with several other countries regarding future
enlargement. Membership for these states is intended to, among other things,
cement economic and political stability across the region. For these countries,
membership serves as a strong political impetus to engage in regulatory and
political reforms and to employ tight fiscal and monetary policies.
Nevertheless, certain new member states, particularly former satellites of the
former Soviet Union, remain burdened to various extents by certain
infrastructural, bureaucratic, and business inefficiencies inherited from their
history of economic central planning. Further expansion of the EU has long-term
economic benefits for both member states and potential expansion candidates.
However, certain European countries are not viewed as currently suitable for
membership, especially countries further east with less developed economies. The
current and future status of the EU therefore continues to be the subject of
political controversy, with widely differing views both within and between
member states. The growth of nationalist and populist parties in both national
legislatures and the European Parliament may further threaten enlargement, and
impede both national and supranational governance.
An
increasingly assertive Russia poses its own set of risks for the EU. Opposition
to EU expansion to members of the former Soviet bloc may prompt more
intervention by Russia in the affairs of its neighbors. This interventionist
stance may carry various negative consequences, including direct effects, such
as export restrictions on Russia's natural resources, Russian support for
separatist groups or pro-Russian parties located in EU countries, Russian
interference in the internal political affairs of current or potential EU
members or of the EU itself, externalities of ongoing conflict, such as an
influx of refugees from Ukraine and Syria, or collateral damage to foreign
assets in conflict zones, all of which could negatively impact EU economic
activity.
It
is possible that, as wealth and income inequality grow both within and between
individual member states, socioeconomic and political tensions may be
exacerbated. The potential direct and indirect consequences of this growing gap
may be substantial.
The
transition to a more unified economic system also brings uncertainty.
Significant political decisions will be made that may affect market regulation,
subsidization, and privatization across all industries, from agricultural
products to telecommunications, that may have unpredictable effects on member
states and companies within those states.
The
influx of migrants and refugees seeking resettlement in the EU as a result of
ongoing conflicts around the world also poses certain risks to the EU. The
COVID-19 pandemic has served to exacerbate need in unstable regions, leading to
increased numbers of refugees. Resettlement itself may be costly for individual
member states, particularly those border countries on the periphery of the EU
where migrants first enter. In addition, pressing questions over accepting,
processing and distributing migrants have been a significant source of
intergovernmental disagreements and could pose significant dangers to the
integrity of the EU.
Economic.
As
economic conditions across member states may vary widely, there is continued
concern about national-level support for the euro and the accompanying
coordination of fiscal and wage policy among EMU member states. Member states
must maintain tight control over inflation, public debt, and budget deficits in
order to qualify for participation in the euro. These requirements severely
limit EMU member states' ability to implement fiscal policy to address regional
economic conditions. Moreover, member states that use the euro cannot devalue
their currencies in the face of economic downturn, precluding them from stoking
inflation to reduce their real debt burden and potentially rendering their
exports less competitive.
The
United Kingdom (UK) left the European Union (EU) on January 31, 2020 under the
terms of a negotiated departure deal. A transition period, which kept most
pre-departure arrangements in place, ended on December 31, 2020, and the UK
entered into a new trading relationship with the EU under the terms of the EU-UK
trade agreement which reflected the long-term, post-transition landscape.
Further discussions are to be held between the UK and the EU in relation to
matters not covered by the trade agreement, such as financial services.
Significant economic and regulatory uncertainty caused by the UK's exit from the
EU has resulted in volatile markets for the UK and broader international
financial markets. While the long-term effects of Brexit remain unclear, in the
short term, financial markets may experience, among other things, greater
volatility and/or illiquidity, currency fluctuations, and a decline in
cross-border investment between the UK and the EU. The effects of Brexit will
also be shaped by new trade deals that the UK is negotiating with more than 60
other countries, including the United States. Brexit could lead to legal and tax
uncertainty and potentially divergent national laws and regulations as the UK
determines which EU laws to replicate or replace. The impact of Brexit on the UK
and in global markets as well as any associated adverse consequences remains
unclear, and the uncertainty may have a significant negative effect on the value
of a fund's investments.
The
global financial crisis of 2008-2009 brought several small countries in Europe
to the brink of sovereign default. Many other economies fell into recession,
decreasing tax receipts and widening budget deficits. In response, many
countries of Europe have implemented fiscal austerity, decreasing discretionary
spending in an attempt to decrease their budget deficits. However, many European
governments continue to face high levels of public debt and substantial budget
deficits, some with shrinking government expenditures, which hinder economic
growth in the region and may still threaten the continued viability of the EMU.
Due to these large public deficits, some European issuers may continue to have
difficulty accessing capital and may be dependent on emergency assistance from
European governments and institutions to avoid defaulting on their outstanding
debt obligations. The availability of such assistance, however, may be
contingent on an issuer's implementation of certain reforms or reaching a
required level of performance, which may increase the possibility of default.
Such prospects could inject significant volatility into European markets, which
may reduce the liquidity or value of a fund's investments in the region.
Likewise, the high levels of public debt raise the possibility that certain
European issuers may be forced to restructure their debt obligations, which
could cause a fund to lose the value of its investments in any such
issuer.
The
legacy of the global financial crisis of 2008-2009, the European sovereign debt
crisis, and the ongoing recession in parts of Europe have left the banking and
financial sectors of many European countries weakened and, in some cases,
fragile. Many institutions remain saddled with high default rates on loans,
still hold assets of indeterminate value, and have been forced to maintain
higher capital reserves under new regulations. This has led to decreased returns
from finance and banking directly, and has constricted the sector's ability to
lend, thus potentially reducing future returns and constricting economic growth.
The ECB has sought to spur economic growth and ward off deflation by engaging in
quantitative easing, lowering the ECB's benchmark rate into negative territory,
and opening a liquidity channel to encourage bank lending. Most recently, in
September 2019, the ECB announced a new bond-buying program and changed its
targeted long-term refinancing rate to provide more favorable bank lending
conditions. In response to the economic consequences of the COVID-19 pandemic,
the ECB has significantly increased bond purchases, and only began slowing their
purchasing strategy in September 2021.
Ongoing
regulatory uncertainty could have a negative effect on the value of a fund's
investments in the region. Governments across the EMU are facing increasing
opposition to certain measures taken in response to the recent economic crises.
In light of such uncertainty, the risk that certain member states will abandon
the euro persists, and any such occurrence would likely have wide-ranging
effects on global markets that are difficult to predict. However, these effects
would likely have a negative impact on a fund's investments in the
region.
Although
some European economies have begun to show more sustained economic growth, the
ongoing debt crisis, political and regulatory responses to the financial crisis,
the effects of the COVID-19 pandemic, and uncertainty over the future of the EMU
and the EU itself may continue to limit short-term growth and economic recovery
in the region. Some countries have experienced prolonged stagnation or returns
to recession, raising the possibility that other European economies could follow
suit. Economic challenges facing the region include high levels of public debt,
significant rates of unemployment, aging populations, heavy regulation of
non-financial businesses, persistent trade deficits, rigid labor markets, and
inability to access credit. Although certain of these challenges may weigh more
heavily on some European economies than others, the economic integration of the
region increases the likelihood that an economic downturn in one country may
spread to others. Should Europe fall into another recession, the value of a
fund's investments in the region may be affected.
Currency.
Investing
in euro-denominated securities (or securities denominated in other European
currencies) entails risk of being exposed to a currency that may not fully
reflect the strengths and weaknesses of the disparate European economies. In
addition, many European countries rely heavily upon export-dependent businesses
and significant change in the exchange rate between the euro and the U.S. dollar
can have either a positive or a negative effect upon corporate profits and the
performance of EU investments. If one or more countries abandon the use of the
euro as a currency, the value of investments tied to those countries or the euro
could decline significantly. In addition, foreign exchange markets have recently
experienced sustained periods of high volatility, subjecting a fund's foreign
investments to additional risks.
Nordic
Countries. The
Nordic countries - Iceland, Denmark, Finland, Norway, and Sweden - relate to
European integration in different ways. Norway and Iceland are outside the EU,
although they are members of the European Economic Area. Denmark, Finland, and
Sweden are EU members, but only Finland has adopted the euro as its currency,
while Denmark has pegged its currency to the euro. Faced with stronger global
competition, some Nordic countries have had to scale down their historically
generous welfare programs, resulting in drops in domestic demand and increased
unemployment. Economic growth in many Nordic countries continues to be
constrained by tight labor markets and adverse European and global economic
conditions, particularly the volatility in global commodity demand. The Nordic
countries' manufacturing sector has experienced continued contraction due to
outsourcing and flagging demand, spurring increasing unemployment. Furthermore,
the protracted recovery due to the ongoing European debt crisis and persistent
low growth in the global economy may limit the growth prospects of the Nordic
economies.
Eastern
Europe. Investing
in the securities of Eastern European issuers is highly speculative and involves
risks not usually associated with investing in the more developed markets of
Western Europe. Political and economic reforms are too recent to establish a
definite trend away from centrally planned economies and state-owned industries.
Investments in Eastern European countries may involve risks of nationalization,
expropriation, and confiscatory taxation.
Eastern
European countries continue to move towards market economies at different paces
with varying characteristics. Many Eastern European markets suffer from thin
trading activity, dubious investor protections, and often a lack of reliable
corporate information. Information and transaction costs, differential taxes,
and sometimes political, regulatory, or transfer risk may give a comparative
advantage to the domestic investor rather than the foreign investor. In
addition, these markets are particularly sensitive to social, political,
economic, and currency events in Western Europe and Russia and may suffer heavy
losses as a result of their trading and investment links to these economies and
their currencies. In particular, the disruption to the Russian economy as a
result of sanctions imposed by the United States and EU in connection with
Russia's involvement in Ukraine may hurt Eastern European economies with close
trade links to Russia. Russia may also attempt to directly assert its influence
in the region through coercive use of its economic, military, and natural
resources.
In
some of the countries of Eastern Europe, there is no stock exchange or formal
market for securities. Such countries may also have government exchange
controls, currencies with no recognizable market value relative to the
established currencies of Western market economies, little or no experience in
trading in securities, weak or nonexistent accounting or financial reporting
standards, a lack of banking and securities infrastructure to handle such
trading and a legal tradition without strongly defined property rights. Due to
the value of trade and investment between Western Europe and Eastern Europe,
credit and debt issues and other economic difficulties affecting Western Europe
and its financial institutions can negatively affect Eastern European
countries.
Eastern
European economies may also be particularly susceptible to the volatility of the
international credit market due to their reliance on bank related inflows of
foreign capital. Although many Eastern European economies have experienced
modest growth for several periods due, in part, to external demand, tighter
labor markets, and the attraction of foreign investment, major challenges
persist as a result of their continued dependence on Western European countries
for credit and trade. Accordingly, the European crisis may present serious risks
for Eastern European economies, which may have a negative effect on a fund's
investments in the region.
Several
Eastern European countries on the periphery of the EU have recently been the
destination for a surge of refugees and migrants fleeing global conflict zones,
particularly the civil wars in Syria and Afghanistan and economic hardship
across Africa and the developing world. While these countries have borne many of
the direct costs of managing the flow of refugees and migrants seeking
resettlement in Europe, they have also faced significant international criticism
over their treatment of migrants and refugees which may affect foreign investor
confidence in the attractiveness of such markets.
Japan.
Japan
continues to recover from recurring recessionary forces that have negatively
impacted Japan's economic growth over the last decade. Despite signs of economic
growth in recent years, Japan is still vulnerable to persistent underlying
systemic risks. For instance, Japan continues to face massive government debt,
an aging and shrinking of the population, an uncertain financial sector, low
domestic consumption, and certain corporate structural weaknesses, which remain
some of the major long-term problems of the Japanese economy.
Overseas
trade is important to Japan's economy and its economic growth is significantly
driven by its exports. Meanwhile, Japan's aging and shrinking population
increases the cost of the country's pension and public welfare system and lowers
domestic demand, making Japan more dependent on exports to sustain its economy.
Therefore, any developments that negatively affect Japan's exports could present
risks to a fund's investments in Japan. For example, domestic or foreign trade
sanctions or other protectionist measures could harm Japan's economy. In
addition, currency fluctuations may also significantly affect Japan's economy,
as a stronger yen would negatively impact Japan's ability to export. Likewise,
any escalation of tensions in the region, including disruptions caused by
political tensions with North Korea or territorial disputes with Japan's major
trading partners, may adversely impact Japan's economic outlook. In particular,
Japan is heavily dependent on oil imports, and higher commodity prices could
have a negative impact on its economy. Japan is also particularly susceptible to
the effects of declining growth rates in China, Japan's largest export market.
Given that China is a large importer of Japanese goods and is a significant
source of global economic growth, a continued Chinese slowdown may negatively
impact Japanese economic growth both directly and indirectly. Similarly, the
European debt crisis, the effects of the COVID-19 pandemic, and persistent low
growth in the global economy could present additional risks to a fund's
investments in Japan.
Japan's
economic recovery has been affected by economic stress resulting from a number
of natural disasters, including disasters that caused damage to nuclear power
plants in the region, which have introduced volatility into Japan's financial
markets. In response to these events, the government has injected capital into
the economy and reconstruction efforts in disaster-affected areas in order to
stimulate economic growth. The risks of natural disasters of varying degrees,
such as earthquakes and tsunamis, continue to persist. The full extent of the
impact of recurring natural disasters on Japan's economy and foreign investment
in Japan is difficult to estimate.
Although
Japanese banks are stable, maintaining large capital bases, they continue to
face difficulties generating profits. In recent years, Japan has employed a
program of monetary loosening, fiscal stimulus, and growth-oriented structural
reform, which has generated limited success in raising growth rates. Although
Japan's central bank has continued its quantitative easing program, there is no
guarantee such efforts will be sufficient or that additional stimulus policies
will not be necessary in the future. Furthermore, the long term potential of
this strategy remains uncertain, as the first of two planned increases in
Japan's consumption tax resulted in a decline in consumption and the effect of
the second increase remains to be seen.
Asia
Pacific Region (ex Japan). Many
countries in the region have historically faced political uncertainty,
corruption, military intervention, and social unrest. Examples include military
threats on the Korean peninsula and along the Taiwan Strait, the ethnic,
sectarian, extremist, and/or separatist violence found in Indonesia and the
Philippines, and the nuclear arms threats between India and Pakistan. To the
extent that such events continue in the future, they can be expected to have a
negative effect on economic and securities market conditions in the region. In
addition, the Asia Pacific geographic region has historically been prone to
natural disasters. The occurrence of a natural disaster in the region could
negatively impact the economy of any country in the region. Natural disasters
may become more frequent and severe as a result of global climate change. Given
the particular vulnerability of the region to the effects of climate change,
disruptions in international efforts to address climate-related issues may have
a disproportionate impact on a fund's investments in the region.
Economic.
The
economies of many countries in the region are heavily dependent on international
trade and are accordingly affected by protective trade barriers and the economic
conditions of their trading partners, principally, the United States, Japan,
China, and the European Union. The countries in this region are also heavily
dependent on exports and are thus particularly vulnerable to any weakening in
global demand for these products. Many countries in the region are economically
reliant on a wide range of commodity exports. Consequently, countries in this
region have been adversely affected by the persistent volatility in global
commodity prices and are particularly susceptible to declines in growth rates in
China. The Australian and New Zealand economies are also heavily dependent on
the economies of China and other Asian countries. Countries in this region have
experienced high debt levels, an issue that is being compounded by weakened
local currencies. Although the economies of many countries in the region have
exhibited signs of growth, such improvements, if sustained, may be gradual.
Significantly, the Australian economy has declined in recent years and in 2019
the Reserve Bank of Australia cut interest rates to an all-time low in response
to a reduction in consumption brought on, in part, by a downturn in the property
market and rising levels in unemployment. The Reserve Bank of Australia cut
rates further in response to the economic effects of the COVID-19 pandemic.
Though the country has seen marginal improvements, the Reserve Bank anticipates
leaving rates near zero until 2024. Furthermore, any future growth experienced
in the region may be limited or hindered by the reduced demand for exports due
to a continued economic slowdown in China, which could significantly lower
demand for the natural resources many Asia Pacific economies export. Because
China has been such a major source of demand for raw materials and a supplier of
foreign direct investment to exporting economies, the slowdown of the Chinese
economy could significantly affect regional growth. In addition, the trading
relationship between China and a number of Asia Pacific countries has been
strained by the geopolitical conflict created by competing territorial claims in
the South China Sea, which has created diplomatic tension in the region that may
adversely impact the economies of the affected countries. Regional growth may
also be limited by lack of available capital for investment resulting from the
European debt crisis and persistent low growth in the global economy, as well as
increases in interest rates and the tapering of other monetary policies adopted
by the central banks of developed countries.
The
Republic of Korea (South Korea) .
Investing in South Korea involves risks not typically associated with investing
in the U.S. securities markets. Investments in South Korea are, in part,
dependent on the maintenance of peaceful relations with North Korea, on both a
bilateral and global basis. Relations between the two countries remain tense, as
exemplified in periodic acts of hostility, and the possibility of serious
military engagement still exists. Any escalation in hostility, initiation of
military conflict, or collateral consequences of internal instability within
North Korea would likely cause a substantial disruption in South Korea's
economy, as well as the region as a whole.
South
Korea's economic reliance on international trade makes it highly sensitive to
fluctuations in international commodity prices, currency exchange rates and
government regulation, and vulnerable to downturns of the world economy. South
Korea has experienced modest economic growth in recent years. Such continued
growth may slow due, in part, to a continued economic slowdown in China. South
Korea is particularly sensitive to the economic volatility of its four largest
export markets (the European Union, Japan, United States, and China), which all
face varying degrees of economic uncertainty, including persistent low growth
rates. The economic weakness of South Korea's most important trading partners
could stifle demand for South Korean exports and damage its own economic growth
outlook. In particular, given that China is both a large importer of South
Korean goods and a significant source of global demand, a continued Chinese
slowdown may, directly or indirectly, negatively impact South Korean economic
growth. The South Korean economy's long-term challenges include a rapidly aging
population, inflexible labor market, dominance of large conglomerates, and
overdependence on exports to drive economic growth.
China
Region. The
China Region encompasses the People's Republic of China, Taiwan, and Hong Kong.
The region is highly interconnected and interdependent, with relationships and
tensions built on trade, finance, culture, and politics. The economic success of
China will continue to have an outsized influence on the growth and prosperity
of both Taiwan and Hong Kong.
Although
the People's Republic of China has experienced three decades of unprecedented
growth, it now faces a slowing economy that is due, in part, to China's effort
to shift away from an export-driven economy. Other contributing factors to the
slowdown include lower-than-expected industrial output growth, reductions in
consumer spending, a decline in the real estate market, which many observers
believed to be inflated, and most recently, the COVID-19 pandemic and China's
containment strategy. Further, local governments, which had borrowed heavily to
bolster growth, face high debt burdens and limited revenue sources. Demand for
Chinese exports by Western countries, including the United States and Europe,
may weaken due to the effects of weakened economic growth in those countries
resulting from the European debt crisis and persistent low growth in the global
economy. Additionally, Chinese land reclamation projects, actions to lay claim
to disputed islands, and China's attempt to assert territorial claims in the
South China Sea have caused strains in China's relationship with various
regional trading partners, and could cause further disruption to regional trade.
In the long term, China's ability to develop and sustain a credible legal,
regulatory, monetary, and socioeconomic system could influence the course of
foreign investment in China.
Hong
Kong is closely tied to China, economically and politically, following the
United Kingdom's 1997 handover of the former colony to China to be governed as a
Special Administrative Region. Changes to Hong Kong's legal, financial, and
monetary system could negatively impact its economic prospects. Hong Kong's
evolving relationship with the central government in Beijing has been a source
of political unrest and may result in economic disruption.
Although
many Taiwanese companies heavily invest in China, a state of hostility continues
to exist between China and Taiwan. Taiwan's political stability and ability to
sustain its economic growth could be significantly affected by its political and
economic relationship with China. Although economic and political relations have
both improved, Taiwan remains vulnerable to both Chinese territorial ambitions
and economic downturns.
In
addition to the risks inherent in investing in the emerging markets, the risks
of investing in China, Hong Kong, and Taiwan merit special
consideration.
People's
Republic of China. China's
economy has transitioned from a rigidly central-planned state-run economy to one
that has been only partially reformed by more market-oriented policies. Although
the Chinese government has implemented economic reform measures, reduced state
ownership of companies and established better corporate governance practices, a
substantial portion of productive assets in China are still owned or controlled
by the Chinese government. The government continues to exercise significant
control over regulating industrial development and, ultimately, over China's
economic growth, both through direct involvement in the market through state
owned enterprises, and indirectly by allocating resources, controlling access to
credit, controlling payment of foreign currency-denominated obligations, setting
monetary policy and providing preferential treatment to particular industries or
companies.
After
many years of steady growth, the growth rate of China's economy has declined
relative to prior years. Although this slowdown may have been influenced by the
government's desire to stop certain sectors from overheating, and to shift the
economy from one based on low cost export manufacturing to a model driven more
by domestic consumption, it holds significant economic, social and political
risks. For one, the real estate market, once rapidly growing in major cities,
has slowed down and may prompt government intervention to prevent collapse.
Additionally, local government debt is still very high, and local governments
have few viable means to raise revenue, especially with continued declines in
demand for housing. Moreover, although China has tried to restructure its
economy towards consumption, it remains heavily dependent on exports and is,
therefore, susceptible to downturns abroad which may weaken demand for its
exports and reduced foreign investments in the country. Reduction in spending on
Chinese products and services, institution of tariffs or other trade barriers or
a downturn in any of the economies of China's key trading partners may have an
adverse impact on the securities of Chinese issuers. In particular, the economy
faces the prospect of prolonged weakness in demand for Chinese exports as its
major trading partners, such as the United States, Japan, and Europe, continue
to experience economic uncertainty stemming from the European debt crisis, the
effects of the COVID-19 pandemic, and persistent low growth in the global
economy, among other things. After a period of intensified concerns about trade
tariffs and further escalation of the trade war between China and the United
States, the two countries reached a trade agreement in January 2020. However, it
is uncertain if the positive trend in U.S.-China trade relations will continue.
If the countries reinstitute tariffs, it may trigger a significant reduction in
international trade, the oversupply of certain manufactured goods, substantial
price reductions of goods and possible failure of individual companies and/or
large segments of China's export industry with a potentially negative impact to
a fund. These kinds of events and their consequences are difficult to foresee
and it is unclear whether future tariffs may be imposed or other escalating
actions may be taken in the future. Over the long term, China's aging
infrastructure, worsening environmental conditions, rapid and inequitable
urbanization, and quickly widening urban and rural income gap, which all carry
political and economic implications, are among the country's major challenges.
China also faces problems of domestic unrest and provincial separatism.
Additionally, the Chinese economy may be adversely affected by diplomatic
developments, the imposition of economic sanctions, changes in international
trading patterns, trade barriers, and other protectionist or retaliatory
measures.
Chinese
territorial claims are another source of tension and present risks to diplomatic
and trade relations with certain of China's regional trade partners. Actions by
the Chinese government, such as its land reclamation projects, assertion of
territorial claims in the South China Sea, and the establishment of an Air
Defense Identification Zone over disputed islands, raises the fear of both
accidental military conflict, and that Chinese territorial claims may result in
international reprisal. Such a reprisal may reduce international demand for
Chinese goods and services or cause a decline in foreign direct investment, both
of which could have a negative effect on a fund's investments in the securities
of Chinese issuers.
As
with all transition economies, China's ability to develop and sustain a credible
legal, regulatory, monetary, and socioeconomic system could influence the course
of outside investment. The Chinese legal system, in particular, constitutes a
significant risk factor for investors. Since the late 1970s, Chinese legislative
bodies have promulgated laws and regulations dealing with various economic
matters such as foreign investment, corporate organization and governance,
commerce, taxation, and trade. However, despite the expanding body of law in
China, legal precedent and published court decisions based on these laws are
limited and non-binding. The interpretation and enforcement of these laws and
regulations are uncertain, and investments in China may not be subject to the
same degree of legal protection as in other developed countries.
China
continues to limit direct foreign investments generally in industries deemed
important to national interests. Foreign investment in domestic securities is
also subject to substantial restrictions, although Chinese regulators have begun
to introduce new programs through which foreign investors can gain direct access
to certain Chinese securities markets. For instance, Chinese regulators have
implemented a program that will permit direct foreign investment in permissible
products (which include cash bonds) traded on the China inter-bank bond market
(CIBM) in compliance with the relevant rules established by applicable Chinese
regulators. While CIBM is relatively large and trading volumes are generally
high, the market remains subject to similar risks as fixed income securities
markets in other developing countries. As foreign investment access to CIBM is
relatively new and its rules may be materially amended as the program continues
to develop, it is uncertain how this program will impact economic growth within
China.
Securities
listed on China's two main stock exchanges are divided into two classes. One of
the two classes is limited to domestic investors (and a small group of qualified
international investors), while the other is available to both international and
domestic investors. Although the Chinese government has announced plans to merge
the two markets, it is uncertain whether and to what extent such a merger will
take place. The existing bifurcated system raises liquidity and stability
concerns.
Investments
in securities listed and traded through the Shanghai-Hong Kong Stock Connect and
Shenzhen-Hong Kong Stock Connect programs (Stock Connect Programs) involve
unique risks. The Stock Connect Programs are relatively new and there is no
guarantee that they will continue. Trading through Stock Connect Programs is
subject to daily quotas that limit the maximum daily net purchases and daily
limits on permitted price fluctuations. Trading suspensions are more likely in
these markets than in many other global equity markets. There can be no
assurance that a liquid market on an exchange will exist. In addition,
investments made through Stock Connect Programs are subject to comparatively
untested trading, clearance and settlement procedures. Stock Connect Programs
are available only on days when markets in both China and Hong Kong are open. A
fund's ownership interest in securities traded through the Stock Connect
Programs will not be reflected directly, and thus a fund may have to rely on the
ability or willingness of a third party to enforce its rights. Investments in
Stock Connect Program A-shares are generally subject to Chinese securities
regulations and listing rules, among other restrictions. Hong Kong investor
compensation funds, which protect against trade defaults, are unavailable when
investing through Stock Connect Programs. Uncertainties in Chinese tax rules
could also result in unexpected tax liabilities for the fund.
Currency
fluctuations could significantly affect China and its trading partners. China
continues to exercise control over the value of its currency, rather than
allowing the value of the currency to be determined by market forces. This type
of currency regime may experience sudden and significant currency adjustments,
which may adversely impact investment returns. One such currency adjustment
occurred in 2015, in which China purposefully devalued the yuan in an effort to
bolster economic growth. However, the government has taken steps to
internationalize its currency. This policy change is driven, in part, by the
government's desire for the yuan's continued inclusion in the basket of
currencies that comprise the International Monetary Fund's Special Drawing
Rights.
Chinese
companies, particularly those located in China, may be smaller and less
seasoned. China may lack, or have different, accounting and financial reporting
standards, which may result in the unavailability of material information about
Chinese issuers. Moreover, the Public Company Accounting Oversight Board (PCAOB)
has warned that it lacks the ability to inspect audit work and practices of
PCAOB-registered auditing firms within China. PCAOB's limited ability to oversee
the operations of auditing firms within China may result in inaccurate or
incomplete financial records of an issuer's operations within China, which may
negatively impact a fund's investments in such companies.
Additionally,
China's stock market has experienced tumult and high volatility, which has
prompted the Chinese government to implement a number of policies and
restrictions with regards to the securities market. While China may take actions
aimed at maintaining growth and stability in the stock market, investors in
Chinese securities may be negatively affected by, among other things,
disruptions in the ability to sell securities for compliance with investment
objectives or when most advantageous given market conditions. It is not clear
what the long-term effect of such policies would be on the securities market in
China or whether additional actions by the government will occur in the
future.
A
fund may obtain exposure to companies based or operated in China by investing
through legal structures known as variable interest entities (VIEs). Because of
Chinese governmental restrictions on non-Chinese ownership of companies in
certain industries in China, certain Chinese companies have used VIEs to
facilitate foreign investment without distributing direct ownership of companies
based or operated in China. In such cases, the Chinese operating company
establishes an offshore company, and the offshore company enters into
contractual arrangements with the Chinese company. These contractual
arrangements are intended to give the offshore company the ability to exercise
power over and obtain economic rights from the Chinese company. Shares of the
offshore company, in turn, are listed and traded on exchanges outside of China
and are available to non-Chinese investors, such as a fund. This arrangement
allows non-Chinese investors in the offshore company to obtain economic exposure
to the Chinese company without direct equity ownership in the Chinese
company.
Although
VIEs are a longstanding industry practice and well known to officials and
regulators in China, VIEs are not formally recognized under Chinese law. There
is a risk that China may cease to tolerate VIEs at any time or impose new
restrictions on the structure, in each case either generally or with respect to
specific industries, sectors or companies. Investments involving a VIE may also
pose additional risks because such investments are made through a company whose
interests in the underlying Chinese company are established through contract
rather than through equity ownership. For example, in the event of a dispute,
the offshore company's contractual claims with respect to the Chinese company
may be deemed unenforceable in China, thus limiting (or eliminating) the
remedies and rights available to the offshore company and its investors. Such
legal uncertainty may also be exploited against the interests of the offshore
company and its investors. Further, the interests of the equity owners of the
Chinese company may conflict with the interests of the investors of the offshore
company, and the fiduciary duties of the officers and directors of the Chinese
company may differ from, or conflict with, the fiduciary duties of the officers
and directors of the offshore company. The VIE structure generally restricts a
fund's ability to influence the Chinese company through proxy voting and other
means and may restrict the ability of an issuer to pay dividends to shareholders
from the Chinese company's earnings. VIE structures also could face delisting or
other ramifications for failure to meet the requirements of the Securities and
Exchange Commission (SEC), the Public Company Accounting Oversight Board (PCAOB)
or other United States regulators. If these risks materialize, the value of
investments in VIEs could be adversely affected and a fund could incur
significant losses with no recourse available.
Hong
Kong. In
1997, the United Kingdom handed over control of Hong Kong to the People's
Republic of China. Since that time, Hong Kong has been governed by a
quasi-constitution known as the Basic Law, while defense and foreign affairs are
the responsibility of the central government in Beijing. The chief executive of
Hong Kong is appointed by the Chinese government. However, Hong Kong is able to
participate in international organizations and agreements and it continues to
function as an international financial center, with no exchange controls, free
convertibility of the Hong Kong dollar and free inward and outward movement of
capital. The Basic Law also guarantees existing freedoms, including the freedom
of speech, assembly, press, and religion, as well as the right to strike and
travel. Business ownership, private property, the right of inheritance and
foreign investment are also protected by law.
By
treaty, China has committed to preserve Hong Kong's high degree of autonomy in
certain matters until 2047. However, as demonstrated by Hong Kong protests in
recent years over political, economic, and legal freedoms, and the Chinese
government's response to them, there continues to exist political uncertainty
within Hong Kong. For example, in June 2020 China adopted a new security law
that severely limits freedom of speech in Hong Kong and expands police powers to
seize electronic devices and intercept communications of suspects. Widespread
protests were held in Hong Kong in response to the new law, and the United
States imposed sanctions on 11 Hong Kong officials for cracking down on
pro-democracy protests. Pro-democracy protests, which have become increasingly
violent over time, have continued into 2021, and there is no guarantee that
additional protests will not arise in the future or whether the United States
will respond to such protests with additional sanctions.
Hong
Kong has experienced strong economic growth in recent years due, in part, to its
close ties with China and a strong service sector, but Hong Kong still faces
concerns over overheating in certain sectors of its economy, such as its real
estate market, which could limit Hong Kong's future growth. In addition, due to
Hong Kong's heavy reliance on international trade and global financial markets,
Hong Kong remains exposed to significant risks as a result of the European debt
crisis and persistent low growth in the global economy. Likewise, due to Hong
Kong's close political and economic ties with China, a continued economic
slowdown on the mainland could continue to have a negative impact on Hong Kong's
economy.
Taiwan.
For
decades, a state of hostility has existed between Taiwan and the People's
Republic of China. China has long deemed Taiwan a part of the "one China" and
has made a nationalist cause of reuniting Taiwan with mainland China. In the
past, China has staged frequent military provocations off the coast of Taiwan
and made threats of full-scale military action. However, tensions have lowered,
exemplified by improved relations, including the first official contacts between
the governments' leaders of China and Taiwan in 2015. Despite closer relations
in recent years, the relationship with China remains a divisive political issue
within Taiwan. Foreign trade has been the engine of rapid growth in Taiwan and
has transformed the island into one of Asia's great exporting nations. As an
export-oriented economy, Taiwan depends on a free-trade trade regime and remains
vulnerable to downturns in the world economy. Taiwanese companies continue to
compete mostly on price, producing generic products or branded merchandise on
behalf of multinational companies. Accordingly, these businesses can be
particularly vulnerable to currency volatility and increasing competition from
neighboring lower-cost countries. Moreover, many Taiwanese companies are heavily
invested in mainland China and other countries throughout Southeast Asia, making
them susceptible to political events and economic crises in these parts of the
region. Significantly, Taiwan and China have entered into agreements covering
banking, securities, and insurance. Closer economic links with the mainland may
bring greater opportunities for the Taiwanese economy, but such arrangements
also pose new challenges. For example, foreign direct investment in China has
resulted in Chinese import substitution away from Taiwan's exports and a
constriction of potential job creation in Taiwan. Likewise, the Taiwanese
economy has experienced slow economic growth as demand for Taiwan's exports has
weakened due, in part, to declines in growth rates in China. Taiwan has sought
to diversify its export markets and reduce its dependence on the Chinese market
by increasing exports to the United States, Japan, Europe, and other Asian
countries by, in part, entering into free-trade agreements. In addition, the
lasting effects of the European debt crisis and persistent low growth in the
global economy may reduce global demand for Taiwan's exports. The Taiwanese
economy's long-term challenges include a rapidly aging population, low birth
rate, and the lingering effects of Taiwan's diplomatic isolation.
India.
The
value of a fund's investments in Indian securities may be affected by, among
other things, political developments, rapid changes in government regulation,
state intervention in private enterprise, nationalization or expropriation of
foreign assets, legal uncertainty, high rates of inflation or interest rates,
currency volatility, and civil unrest. Moreover, the Indian economy remains
vulnerable to natural disasters, such as droughts and monsoons. Natural
disasters may become more frequent and severe as a result of global climate
change. Given the particular vulnerability of India to the effects of climate
change, disruptions in international efforts to address climate-related issues
may have a disproportionate impact on a fund's investments in the country. In
addition, any escalation of tensions with Pakistan may have a negative impact on
India's economy and foreign investments in India. Likewise, political, social
and economic disruptions caused by domestic sectarian violence or terrorist
attacks may also present risks to a fund's investments in India.
The
Indian economy is heavily dependent on exports and services provided to U.S. and
European companies, and is vulnerable to any weakening in global demand for
these products and services. In recent years, rising wages have chipped away at
India's competitive advantage in certain service sectors. A large fiscal deficit
and persistent inflation have contributed to modest economic growth in India in
recent years. While the economic growth rate has risen more recently, the Indian
economy continues to be susceptible to a slowdown in the manufacturing sector,
and it is uncertain whether higher growth rates are sustainable without more
fundamental governance reforms.
India's
market has less developed clearance and settlement procedures and there have
been times when settlements have not kept pace with the volume of securities and
have been significantly delayed. The Indian stock exchanges have in the past
been subject to closure, broker defaults and broker strikes, and there can be no
certainty that this will not recur. In addition, significant delays are common
in registering transfers of securities and a fund may be unable to sell
securities until the registration process is completed and may experience delays
in the receipt of dividends and other entitlements. Furthermore, restrictions or
controls applicable to foreign investment in the securities of issuers in India
may also adversely affect a fund's investments within the country. The
availability of financial instruments with exposure to Indian financial markets
may be substantially limited by restrictions on foreign investors and subject to
regulatory authorizations. Foreign investors are required to observe certain
investment restrictions, including limits on shareholdings, which may impede a
fund's ability to invest in certain issuers or to fully pursue its investment
objective. These restrictions may also have the effect of reducing demand for,
or limiting the liquidity of, such investments. There can be no assurance that
the Indian government will not impose restrictions on foreign capital
remittances abroad or otherwise modify the exchange control regime applicable to
foreign investors in such a way that may adversely affect the ability of a fund
to repatriate their income and capital.
Shares
of many Indian issuers are held by a limited number of persons and financial
institutions, which may limit the number of shares available for investment.
Sales of securities by such issuer's major shareholders may also significantly
and adversely affect other shareholders. Moreover, a limited number of issuers
represent a disproportionately large percentage of market capitalization and
trading value in India.
The
Indian government has sought to implement numerous reforms to the economy,
including efforts to bolster the Indian manufacturing sector and entice foreign
direct investment. However, such reformation efforts have proven difficult and
there is no guarantee that such reforms will be implemented or that they will be
fully implemented in a manner that benefits investors.
Indonesia.
Over
the last decade, Indonesia has applied prudent macroeconomic efforts and policy
reforms that have led to modest growth in recent years, but many economic
development problems remain, including poverty and unemployment, corruption,
inadequate infrastructure, a complex regulatory environment, and unequal
resource distribution among regions. Although Indonesia's government has taken
steps in recent years to improve the country's infrastructure and investment
climate, these problems may limit the country's ability to maintain such
economic growth as Indonesia has begun to experience slowing growth rates in
recent years. Indonesia is prone to natural disasters such as typhoons,
tsunamis, earthquakes and flooding, which may also present risks to a fund's
investments in Indonesia. Natural disasters may become more frequent and severe
as a result of global climate change. Given the particular vulnerability of
Indonesia to the effects of climate change, disruptions in international efforts
to address climate-related issues may have a disproportionate impact on a fund's
investments in the country. In addition, Indonesia continues to be at risk of
ethnic, sectarian, and separatist violence.
In
recent periods, Indonesia has employed a program of monetary loosening through
reductions in interest rates and implemented a number of reforms to encourage
investment. Although Indonesia's central bank has continued to utilize monetary
policies to promote growth, there can be no guarantee such efforts will be
sufficient or that additional stimulus policies will not be necessary in the
future.
Indonesia's
dependence on resource extraction and export leaves it vulnerable to a slowdown
of the economies of its trading partners and a decline in commodity prices more
generally. Commodity prices have experienced significant volatility in recent
years, which has adversely affected the exports of Indonesia's economy.
Indonesia is particularly vulnerable to the effects of a continued slowdown in
China, which has been a major source of demand growth for Indonesia's commodity
exports. Indonesia is also vulnerable to further weakness in Japan, which
remains one of Indonesia's largest single export markets. Indonesia has recently
reversed several policies that restricted foreign investment by permitting
increased foreign ownership in several sectors and opening up sectors previously
closed to foreign investors. Failure to pursue internal reform, peacefully
resolve internal conflicts, bolster the confidence of international and domestic
investors, and weak global economic growth could limit Indonesia's economic
growth in the future.
Thailand.
Thailand
has well-developed infrastructure and a free-enterprise economy, which is both
conducive and enticing to certain foreign investment. While Thailand experienced
an increase in exports in recent years, the rate of export growth has since
slowed, in part due to domestic political turmoil, weakness in commodity prices
and declines in growth rates in China. Moreover, Thailand has pursued
preferential trade agreements with a variety of partners in an effort to boost
exports and maintain high growth. However, weakening fiscal discipline,
separatist violence in the south, the intervention by the military in civilian
spheres, and continued political instability may cause additional risks for
investments in Thailand. The risk of political instability has proven
substantial, as the protests, disputed election, government collapse, and coup
of 2014 have led to short term declines in GDP, a collapse of tourism, and a
decrease in foreign direct investment. The military junta formally controlled
the government from 2014 until July 2019. Parliamentary elections were
held in May 2019 in which pro-military parties won a slim majority and the
former military junta leader became Prime Minister. However, international
watchdog groups claimed the election was not free and fair. Uncertainty
regarding the stability and legitimacy of Thailand's new elected government
could have a negative impact on economic growth.
In
the long term, Thailand's economy faces challenges including an aging
population, outdated infrastructure, and an inadequate education system.
Thailand's cost of labor has risen rapidly in recent years, threatening its
status as a low cost manufacturing hub. In addition, natural disasters may
affect economic growth in the country. Natural disasters may become more
frequent and severe as a result of global climate change. Given the particular
vulnerability of Thailand to the effects of climate change, disruptions in
international efforts to address climate-related issues may have a
disproportionate impact on a fund's investments in the country. Thailand
continues to be vulnerable to weak economic growth of its major trading
partners, particularly China and Japan. Additionally, Thailand's economy may be
limited by lack of available capital for investment resulting from the European
debt crisis and persistent slow growth in the global economy.
Philippines.
The
economy of the Philippines has benefitted from its relatively low dependence on
exports and high domestic rates of consumption, as well as substantial
remittances received from large overseas populations. Although the economy of
the Philippines has grown quickly in recent years, there can be no assurances
that such growth will continue. Like other countries in the Asia Pacific region,
the Philippines' growth in recent years has been reliant, in part, on exports to
larger economies, notably the United States, Japan and China. Given that China
is a large importer and source of global demand, a continued Chinese slowdown
may, directly or indirectly, negatively impact Philippine economic growth.
Additionally, lower global economic growth may lead to lower remittances from
Filipino emigrants abroad, negatively impacting economic growth in the
Philippines. Furthermore, certain weaknesses in the economy, such as inadequate
infrastructure, high poverty rates, uneven wealth distribution, low fiscal
revenues, endemic corruption, inconsistent regulation, unpredictable taxation,
unreliable judicial processes, and the appropriation of foreign assets may
present risks to a fund's investments in the Philippines. In more recent years,
poverty rates have declined; however, there is no guarantee that this trend will
continue. In addition, investments in the Philippines are subject to risks
arising from political or social unrest, including governmental actions that
strain relations with the country's major trading partners, threats from
military coups, terrorist groups and separatist movements. Likewise, the
Philippines is prone to natural disasters such as typhoons, tsunamis,
earthquakes and flooding, which may also present risks to a fund's investments
in the Philippines. Natural disasters may become more frequent and severe as a
result of global climate change. Given the particular vulnerability of the
Philippines to the effects of climate change, disruptions in international
efforts to address climate-related issues may have a disproportionate impact on
a fund's investments in the country.
Latin
America. Latin
American countries have historically suffered from social, political, and
economic instability. For investors, this has meant additional risk caused by
periods of regional conflict, political corruption, totalitarianism,
protectionist measures, nationalization, hyperinflation, debt crises, sudden and
large currency devaluation, and intervention by the military in civilian and
economic spheres. In recent decades, certain Latin American economies have
experienced prolonged, significant economic growth, and many countries have
developed sustainable democracies and a more mature and accountable political
environment. However, in recent periods, many Latin American countries have
experienced persistent low growth rates and certain countries have fallen into
recessions. Specifically, the region has recently suffered from the effects of
Argentina's economic crisis. While the region is experiencing an economic
recovery, there can be no guarantee that such recovery will continue or that
Latin American countries will not face further recessionary
pressures. Furthermore, economic recovery efforts continue to be weighed
down by the costs of the COVID-19 pandemic.
The
region's economies represent a spectrum of different levels of political and
economic development. In many Latin American countries, domestic economies have
been deregulated, privatization of state-owned companies had been undertaken and
foreign trade restrictions have been relaxed. However, there can be no guarantee
that such trends in economic liberalization will continue or that the desired
outcomes of these developments will be successful. Nonetheless, to the extent
that the risks identified above continue or re-emerge in the future, such
developments could reverse favorable trends toward market and economic reform,
privatization, and removal of trade barriers, and result in significant
disruption in securities markets in the region. In addition, recent favorable
economic performance in much of the region has led to a concern regarding
government overspending in certain Latin American countries. Investors in the
region continue to face a number of potential risks. Certain Latin American
countries depend heavily on exports to the United States and investments from a
small number of countries. Accordingly, these countries may be sensitive to
fluctuations in demand, exchange rates and changes in market conditions
associated with those countries. The economic growth of most Latin American
countries is highly dependent on commodity exports and the economies of certain
Latin American countries, particularly Mexico and Venezuela, are highly
dependent on oil exports. These economies are particularly susceptible to
fluctuations in the price of oil and other commodities and currency
fluctuations. The prices of oil and other commodities are in the midst of a
period of high volatility driven, in part, by a continued slowdown in growth in
China and the effects of the COVID-19 pandemic. If growth in China remains slow,
or if global economic conditions worsen, Latin American countries may face
significant economic difficulties. Although certain Latin American countries
have recently shown signs of improved economic growth, such improvements, if
sustained, may be gradual. In addition, prolonged economic difficulties may have
negative effects on the transition to a more stable democracy in some Latin
American countries. Political risks remain prevalent throughout the region,
including the risk of nationalization of foreign assets. Certain economies in
the region may rely heavily on particular industries or foreign capital and are
more vulnerable to diplomatic developments, the imposition of economic sanctions
against a particular country or countries, changes in international trading
patterns, trade barriers, and other protectionist or retaliatory
measures.
For
certain countries in Latin America, political risks have created significant
uncertainty in financial markets and may further limit the economic recovery in
the region. For example, in Mexico, uncertainty regarding the recently ratified
United States-Mexico-Canada Agreement may have a significant and adverse impact
on Mexico's economic outlook and the value of a fund's investments in Mexico.
Additionally, recent political and social unrest in Venezuela has resulted in a
massive disruption in the Venezuelan economy, including a deep recession and
near hyperinflation.
A
number of Latin American countries are among the largest debtors of developing
countries and have a long history of reliance on foreign debt and default. The
majority of the region's economies have become highly dependent upon foreign
credit and loans from external sources to fuel their state-sponsored economic
plans. Most countries have been forced to restructure their loans or risk
default on their debt obligations. In addition, interest on the debt is subject
to market conditions and may reach levels that would impair economic activity
and create a difficult and costly environment for borrowers. Accordingly, these
governments may be forced to reschedule or freeze their debt repayment, which
could negatively affect local markets. Most recently, Argentina defaulted on its
debt after a U.S. court ruled in 2014 that payments to a majority of bondholders
(who had settled for lower rates of repayment) could not be made so long as
holdout bondholders were not paid the full value of their bonds. Although
Argentina settled with its bondholders following the 2014 court ruling, the
country defaulted on its debt obligations again in May 2020. While Argentina
continues to negotiate with its bondholders, it may continue to experience
constraints on its ability to issue new debt, and therefore fund its government.
Further, the ruling increases the risk of default on all sovereign debt
containing similar clauses.
Because
of their dependence on foreign credit and loans, a number of Latin American
economies may benefit from the U.S. Federal Reserve's recent lowering of
interest rates; however the impact of such interest rate cuts remains to be
seen. While the region has recently had mixed levels of economic growth,
recovery from past economic downturns in Latin America has historically been
slow, and such growth, if sustained, may be gradual. The ongoing effects of the
European debt crisis, the effects of the COVID-19 pandemic, and persistent low
growth in the global economy may reduce demand for exports from Latin America
and limit the availability of foreign credit for some countries in the region.
As a result, a fund's investments in Latin American securities could be harmed
if economic recovery in the region is limited.
Russia.
Investing
in Russian securities is highly speculative and involves significant risks and
special considerations not typically associated with investing in the securities
markets of the United States and most other developed countries.
Political.
Over
the past century, Russia has experienced political and economic turbulence and
has endured decades of communist rule under which tens of millions of its
citizens were collectivized into state agricultural and industrial enterprises.
Since the collapse of the Soviet Union, Russia's government has been faced with
the daunting task of stabilizing its domestic economy, while transforming it
into a modern and efficient structure able to compete in international markets
and respond to the needs of its citizens. However, to date, many of the
country's economic reform initiatives have floundered or been retrenched. In
this environment, political and economic policies could shift suddenly in ways
detrimental to the interest of foreign and private investors.
In
the last several years, as significant income from oil and commodity exports
boosted Russia's economic growth, the Russian government began to re-assert its
regional geopolitical influence, including most recently its military actions in
Ukraine and Syria. The involvement in Ukraine has increased tensions between
Russia and its neighbors and the West, resulting in the United States and EU
placing sanctions on the Russian financial, energy, and defense sectors, as well
as targeting top Russian officials. These sanctions, combined with a collapse in
energy and commodity prices, have had the effect of slowing the Russian economy,
which has continued to experience recessionary trends. Additionally, the
conflict has caused capital flight, loss of confidence in Russian sovereign
debt, and a retaliatory import ban by Russia that has helped stoke inflation.
Further possible actions by Russia, including restricting gas exports to Ukraine
and countries downstream, or provoking another military conflict elsewhere in
Eastern Europe could lead to greater consequences for the Russian
economy.
Economic.
Many
Russian businesses are inefficient and uncompetitive by global standards due to
systemic corruption, regulatory favoritism for government-affiliated
enterprises, or the legacy of old management teams and techniques left over from
the command economy of the Soviet Union. Poor accounting standards, inept
management, pervasive corruption, insider trading and crime, and inadequate
regulatory protection for the rights of investors all pose a significant risk,
particularly to foreign investors. In addition, enforcement of the Russian tax
system is prone to inconsistent, arbitrary, retroactive, confiscatory, and/or
exorbitant taxation.
Compared
to most national stock markets, the Russian securities market suffers from a
variety of problems not encountered in more developed markets. There is little
long-term historical data on the Russian securities market because it is
relatively new and a substantial proportion of securities transactions in Russia
are privately negotiated outside of stock exchanges. The inexperience of the
Russian securities market and the limited volume of trading in securities in the
market may make obtaining accurate prices on portfolio securities from
independent sources more difficult than in more developed markets. Additionally,
there is little solid corporate information available to investors because of
less stringent auditing and financial reporting standards that apply to
companies operating in Russia. As a result, it may be difficult to assess the
value or prospects of an investment in Russian companies.
Because
of the recent formation of the Russian securities market as well as the
underdeveloped state of the banking and telecommunications systems, settlement,
clearing and registration of securities transactions are subject to significant
risks. Ownership of shares (except where shares are held through depositories
that meet the requirements of the 1940 Act) is defined according to entries in
the company's share register and normally evidenced by extracts from the
register or by formal share certificates. However, these services are carried
out by the companies themselves or by registrars located throughout Russia.
These registrars are not necessarily subject to effective state supervision nor
are they licensed with any governmental entity and it is possible for a fund to
lose its registration through fraud, negligence, or even mere oversight. While a
fund will endeavor to ensure that its interest continues to be appropriately
recorded either itself or through a custodian or other agent inspecting the
share register and by obtaining extracts of share registers through regular
confirmations, these extracts have no legal enforceability and it is possible
that subsequent illegal amendment or other fraudulent act may deprive a fund of
its ownership rights or improperly dilute its interests. In addition, while
applicable Russian regulations impose liability on registrars for losses
resulting from their errors, it may be difficult for a fund to enforce any
rights it may have against the registrar or issuer of the securities in the
event of loss of share registration. Furthermore, significant delays or problems
may occur in registering the transfer of securities, which could cause a fund to
incur losses due to either a counterparty's failure to pay for securities the
fund has delivered or the fund's inability to complete its contractual
obligations. The designation of the National Settlement Depository (NSD) as the
exclusive settlement organization for all publicly traded Russian companies and
investment funds has enhanced the efficiency and transparency of the Russian
securities market. Additionally, agreements between the NSD and foreign central
securities depositories and settlement organizations have allowed for simpler
and more secure access for foreign investors as well.
The
Russian economy is heavily dependent upon the export of a range of commodities
including industrial metals, forestry products, oil, and gas. Accordingly, it is
strongly affected by international commodity prices and is particularly
vulnerable to any weakening in global demand for these products. Furthermore,
the sale and use of certain strategically important commodities, such as gas,
may be dictated by political, rather than economic, considerations.
The
recent fall in the price of commodities has demonstrated the sensitivity of the
Russian economy to such price volatility, especially in oil and gas markets.
During this time, many sectors in the Russian economy fell into turmoil, pushing
the whole economy into recession. In addition, prior to the global financial
crisis, Russia's economic policy encouraged excessive foreign currency borrowing
as high oil prices increased investor appetite for Russian financial assets. As
a result of this credit boom, Russia reached alarming debt levels and suffered
from the effects of tight credit markets. Russia continues to face significant
economic challenges, including weak levels of investment, falling domestic
consumption levels, and low global commodity demand. In the near term, the
ongoing European sovereign debt crisis, a continued slowdown in China, the
effects of the COVID-19 pandemic, and persistent low growth in the global
economy may continue to result in low prices for Russian exports such as oil and
gas, which could limit Russia's economic growth. Over the long-term, Russia
faces challenges including a shrinking workforce, high levels of corruption,
difficulty in accessing capital for smaller, non-energy companies, and poor
infrastructure in need of large investments.
The
sanctions imposed on Russia by the United States and the European Union, as well
as the threat of additional sanctions, could have further adverse consequences
for the Russian economy, including continued weakening of the ruble, additional
downgrades in the country's credit rating, and a significant decline in the
value and liquidity of securities issued by Russian companies or the Russian
government. The imposition of broader sanctions targeting specific issuers or
sectors could prohibit a fund from investing in any securities issued by
companies subject to such sanctions. In addition, these sanctions and/or
retaliatory action by Russia could require a fund to freeze its existing
investments in Russian companies. This could prohibit a fund from selling or
transacting in these investments and potentially impact a fund's
liquidity.
Currency.
Foreign
investors also face a high degree of currency risk when investing in Russian
securities and a lack of available currency hedging instruments. The Russian
ruble has recently been subject to significant devaluation pressure due to the
fall in commodity prices and the collapse in the value of Russian exports. The
Russian Central Bank has spent significant foreign exchange reserves to maintain
the value of the ruble. However, such reserves are finite and, as exemplified by
the recent rise in inflation, the Russian Central Bank may be unable to properly
manage competing demands of supporting the ruble, managing inflation, and
stimulating a struggling Russian economy. Although Russia's foreign exchange
reserves have begun to rebound, there can be no guarantee that this trend will
continue or that the Russian Central Bank will not need to spend these reserves
to stabilize Russia's currency and/or economy in the future. Therefore, any
investment denominated in rubles may be subject to significant devaluation in
the future. Although official sovereign debt to GDP figures are low for a
developed economy, sovereign default remains a risk. Even absent a sovereign
default, foreign investors could face the possibility of further devaluations.
There is the risk that the government may impose capital controls on foreign
portfolio investments in the event of extreme financial or political crisis.
Such capital controls could prevent the sale of a portfolio of foreign assets
and the repatriation of investment income and capital. Such risks have led to
heightened scrutiny of Russian liquidity conditions, which in turn creates a
heightened risk of the repatriation of ruble assets by concerned foreign
investors. The persistent economic turmoil in Russia caused the Russian ruble to
depreciate as unemployment levels increased and global demand for oil exports
decreased. In particular, the recent collapse in energy prices has shrunk the
value of Russian exports and further weakened both the value of the ruble and
the finances of the Russian state. The Russian economy has also suffered
following the conflict in Ukraine, as a result of significant capital flight
from the country. The pressure put on the ruble caused by this divestment has
been compounded by the sanctions from the United States and EU, leading to
further depreciation, a limitation of the ruble's convertibility, and an
increase in inflation.
The
Middle East and Africa. Investing
in Middle Eastern and African securities is highly speculative and involves
significant risks and special considerations not typically associated with
investing in the securities markets of the United States and most other
developed countries.
Political.
Many
Middle Eastern and African countries historically have suffered from political
instability. Despite a growing trend towards democratization, especially in
Africa, significant political risks continue to affect some Middle Eastern and
African countries. These risks may include substantial government intervention
in and control over the private sector, corrupt leaders, civil unrest,
suppression of opposition parties that can lead to further dissidence and
militancy, fixed elections, terrorism, coups, and war. In recent years, several
countries in the Middle East and North Africa have experienced pro-democracy
movements that resulted in swift regime changes. In some instances where
pro-democracy movements successfully toppled regimes, the stability of successor
regimes has proven weak, as evidenced, for example, in Egypt. In other
instances, these changes have devolved into armed conflict involving local
factions, regional allies or international forces, and even protracted civil
wars, such as in Libya and Syria.
The
protracted civil war in Syria has given rise to numerous militias, terrorist
groups, and most notably, the proto-state of ISIS. The conflict has disrupted
oil production across Syria and Iraq, effectively destroying the economic value
of large portions of the region, and caused a massive exodus of refugees into
neighboring states, which further threatens government infrastructure of the
refuge countries.
Regional
instability has not been confined to the Middle East. In Nigeria, Africa's
largest economy, radical groups have conducted a disruptive insurgency in the
country's north. In addition, Africa has experienced a number of regional health
crises in recent years, which has demonstrated the vulnerabilities of political
institutions and health care systems in the face of crisis. African
countries, particularly in Eastern and sub-Saharan Africa, have struggled to
access sufficient quantities of COVID-19 vaccines to support their
populations.
Continued
instability may slow the adoption of economic and political reforms and could
damage trade, investment, and economic growth going forward. Further, because
many Middle East and African nations have a history of dictatorship, military
intervention, and corruption, any successful reforms may prove impermanent. In
addition, there is an increasing risk that historical animosities, border
disputes, or defense concerns may lead to further armed conflict in the region.
Across the Middle East and Africa, such developments could have a negative
effect on economic growth and reverse favorable trends toward economic and
market reform, privatization, and the removal of trade barriers. Such
developments could also result in significant disruptions in securities
markets.
Economic.
Middle
Eastern and African countries historically have suffered from underdeveloped
infrastructure, high unemployment rates, a comparatively unskilled labor force,
and inconsistent access to capital, which have contributed to economic
instability and stifled economic growth in the region. Furthermore, certain
Middle Eastern and African markets may face a higher concentration of market
capitalization, greater illiquidity and greater price volatility than that found
in more developed markets of Western Europe or the United States. Additionally,
certain countries in the region have a history of nationalizing or expropriating
foreign assets, which could cause a fund to lose the value of its investments in
those countries or negatively affect foreign investor confidence in the region.
Despite a growing trend towards economic diversification, many Middle Eastern
and African economies remain heavily dependent upon a limited range of
commodities. These include gold, silver, copper, cocoa, diamonds, natural gas
and petroleum. These economies are greatly affected by international commodity
prices and are particularly vulnerable to any weakening in global demand for
these products. The demand in global commodities continues to decrease,
particularly the decline in the price of oil, causing certain countries in the
region to face significant economic difficulties. As a result, many countries
have been forced to scale down their infrastructure investment and the size of
their public welfare systems, which could have long-term economic, social, and
political implications.
South
Africa, Africa's second largest economy, is the largest destination for foreign
direct investment on the continent. The country has a two-tiered, developing
economy with one tier similar to that of a developed country and the second tier
having only the most basic infrastructure. Although South Africa has experienced
modest economic growth in recent years, such growth has been sluggish, hampered
by endemic corruption, ethnic and civil conflicts, labor unrest, the effects of
the HIV health crisis, and political instability. In addition, reduced demand
for South African exports due to the lasting effects of the European debt crisis
and persistent low growth in the global economy may limit any such recovery.
These problems have been compounded by worries over South African sovereign debt
prompted by an increasing deficit and rising level of sovereign debt. These
conditions led Fitch and S&P to downgrade South African debt to "junk"
status and to downgrade South Africa's long-term foreign currency issuer default
rating to "negative" in 2017. Additionally, Moody's downgraded South African
debt to "junk" status in 2020. Such downgrades in South African sovereign debt
and issuer default could have serious consequences for investments in South
Africa.
Currency.
Certain
Middle Eastern and African countries have currencies pegged to the U.S. dollar
or euro, rather than free-floating exchange rates determined by market forces.
Although intended to stabilize the currencies, these pegs, if abandoned, may
cause sudden and significant currency adjustments, which may adversely impact
investment returns. There is no significant foreign exchange market for certain
currencies, and it would, as a result, be difficult for a fund to engage in
foreign currency transactions designed to protect the value of a fund's
interests in securities denominated in such currencies.
PORTFOLIO
TRANSACTIONS
Orders
for the purchase or sale of portfolio securities are placed on behalf of a fund
by Geode pursuant to authority contained in the management contract and the
sub-advisory agreement.
Geode
may be responsible for the placement of portfolio securities transactions for
other investment companies and investment accounts for which it has or its
affiliates have investment discretion.
A
fund will not incur any commissions or sales charges when it invests in shares
of mutual funds (including any underlying central funds), but it may incur such
costs when it invests directly in other types of securities.
Purchases
and sales of equity securities on a securities exchange or OTC are effected
through brokers who receive compensation for their services. Generally,
compensation relating to securities traded on foreign exchanges will be higher
than compensation relating to securities traded on U.S. exchanges and may not be
subject to negotiation. Compensation may also be paid in connection with
principal transactions (in both OTC securities and securities listed on an
exchange) and agency OTC transactions executed with an electronic communications
network (ECN) or an alternative trading system. Equity securities may be
purchased from underwriters at prices that include underwriting fees.
Purchases
and sales of fixed-income securities are generally made with an issuer or a
primary market-maker acting as principal. Although there is no stated brokerage
commission paid by a fund for any fixed-income security, the price paid by a
fund to an underwriter includes the disclosed underwriting fee and prices in
secondary trades usually include an undisclosed dealer commission or markup
reflecting the spread between the bid and ask prices of the fixed-income
security. New issues of equity and fixed-income securities may also be purchased
in underwritten fixed price offerings.
The
Trustees of each fund periodically review Geode's performance of its
responsibilities in connection with the placement of portfolio securities
transactions on behalf of each fund. The Trustees also review the compensation
paid by each fund over representative periods of time to determine if it was
reasonable in relation to the benefits to the fund.
Geode.
The
Selection of Brokers
In
selecting brokers or dealers (including affiliates of FMR) to execute a fund's
portfolio transactions, Geode considers factors deemed relevant in the context
of a particular trade and in regard to Geode's overall responsibilities with
respect to the fund and other investment accounts, including any instructions
from the fund's portfolio manager, which may emphasize, for example, speed of
execution over other factors. The factors considered will influence whether it
is appropriate to execute an order using ECNs, electronic channels including
algorithmic trading, or by actively working an order. Other factors deemed
relevant may include, but are not limited to: price; the size and type of the
transaction; the reasonableness of compensation to be paid, including spreads
and commission rates; the speed and certainty of trade executions; the nature
and characteristics of the markets for the security to be purchased or sold,
including the degree of specialization of the broker in such markets or
securities; the availability of liquidity in the security, including the
liquidity and depth afforded by a market center or market-maker; the reliability
of a market center or broker; the degree of anonymity that a particular broker
or market can provide; the potential for avoiding market impact; the execution
services rendered on a continuing basis; the execution efficiency, settlement
capability, and financial condition of the firm; arrangements for payment of
fund expenses, if applicable; and the provision of additional brokerage and
research products and services, if applicable. In seeking best qualitative
execution, Geode may select a broker using a trading method for which the broker
may charge a higher commission than its lowest available commission rate. Geode
also may select a broker that charges more than the lowest commission rate
available from another broker. For futures transactions, the selection of a
futures commission merchant is generally based on the overall quality of
execution and other services provided by the futures commission merchant.
The
Acquisition of Brokerage and Research Products and Services
Brokers
(who are not affiliates of FMR) that execute transactions for a fund may receive
higher compensation from the fund than other brokers might have charged the
fund, in recognition of the value of the brokerage or research products and
services they provide to Geode.
Research
Products and Services. These
products and services may include, when permissible under applicable law:
economic, industry, company, municipal, sovereign (U.S. and non-U.S.), legal, or
political research reports; market color; company meeting facilitation;
compilation of securities prices, earnings, dividends and similar data;
quotation services, data, information and other services; analytical computer
software and services; and investment recommendations. In addition to receiving
brokerage and research products and services via written reports and
computer-delivered services, such reports may also be provided by telephone and
in person meetings with securities analysts, corporate and industry
spokespersons, economists, academicians and government representatives and
others with relevant professional expertise. Geode may request that a broker
provide a specific proprietary or third-party product or service. Some of these
products and services supplement Geode's own research activities in providing
investment advice to the funds.
Execution
Services. In
addition, products and services may include, when permissible under applicable
law, those that assist in the execution, clearing, and settlement of securities
transactions, as well as other incidental functions (including, but not limited
to, communication services related to trade execution, order routing and
algorithmic trading, post-trade matching, exchange of messages among brokers or
dealers, custodians and institutions, and the use of electronic confirmation and
affirmation of institutional trades).
Mixed-Use
Products and Services. Geode
may use commission dollars to obtain certain products or services that are not
used exclusively in Geode's investment decision-making process (mixed-use
products or services). In those circumstances, Geode will make a good faith
judgment to evaluate the various benefits and uses to which they intend to put
the mixed-use product or service, and will pay for that portion of the mixed-use
product or service that does not qualify as brokerage and research products and
services with their own resources (referred to as "hard dollars").
Benefit
to Geode. Geode's
expenses would likely be increased if it attempted to generate these additional
products and services through its own efforts, or if it paid for these products
or services itself. Certain of the brokerage and research products and services
Geode receives are furnished by brokers on their own initiative, either in
connection with a particular transaction or as part of their overall services.
Some of these products or services may not have an explicit cost associated with
such product or service.
Geode's
Decision-Making Process. Before
causing a fund to pay a particular level of compensation, Geode will make a good
faith determination that the compensation is reasonable in relation to the value
of the brokerage and/or research products and services provided to Geode, viewed
in terms of the particular transaction for the fund or Geode's overall
responsibilities to the fund or other investment companies and investment
accounts. While Geode may take into account the brokerage and/or research
products and services provided by a broker in determining whether compensation
paid is reasonable, neither Geode nor the funds incurs an obligation to any
broker, dealer, or third party to pay for any product or service (or portion
thereof) by generating a specific amount of compensation or otherwise.
Typically, these products and services assist Geode in terms of its overall
investment responsibilities to a fund and other investment companies and
investment accounts; however, each product or service received may not benefit
the fund. Certain funds or investment accounts may use brokerage commissions to
acquire brokerage and research products and services that may also benefit other
funds or accounts managed by Geode.
Affiliated
Transactions
Geode
may place trades with certain brokers, including NFS, through its Fidelity
Capital Markets (FCM) division, and Luminex Trading & Analytics LLC
(Luminex), with whom FMR is under common control, provided it determines that
these affiliates' trade execution abilities and costs are comparable to those of
non-affiliated, qualified brokerage firms.
The
Trustees of each fund have approved procedures whereby a fund is permitted to
purchase securities that are offered in underwritings in which an affiliate of
the adviser or certain other affiliates participate. In addition, for
underwritings where such an affiliate participates as a principal underwriter,
certain restrictions may apply that could, among other things, limit the amount
of securities that the funds could purchase in the underwritings.
Trade
Allocation
Although
the Trustees and officers of each fund are substantially the same as those of
certain other Fidelity ®
funds,
investment decisions for each fund are made independently from those of other
Fidelity ®
funds
or investment accounts (including proprietary accounts).The same security is
often held in the portfolio of more than one of these funds or investment
accounts. Simultaneous transactions are inevitable when several funds and
investment accounts are managed by the same investment adviser, particularly
when the same security is suitable for the investment objective of more than one
fund or investment account.
When
two or more funds or investment accounts are simultaneously engaged in the
purchase or sale of the same security or instrument, the prices and amounts are
allocated in accordance with procedures believed to be appropriate and equitable
to each fund or investment account. In some cases this could have a detrimental
effect on the price or value of the security or instrument as far as a fund is
concerned. In other cases, however, the ability of the funds to participate in
volume transactions will produce better executions and prices for the
funds.
Orders
for funds and investment accounts are not typically combined or "blocked".
However, Geode may, when feasible and when consistent with the fair and
equitable treatment of all funds and investment accounts and best execution,
block orders of various funds and investment accounts for order entry and
execution.
Geode
has established allocation policies for its various funds and investment
accounts to ensure allocations are appropriate given its clients' differing
investment objectives and other considerations. When the supply/demand is
insufficient to satisfy all outstanding trade orders, generally the amount
executed is distributed among participating funds and investment accounts based
on account asset size (for purchases and short sales), and security position
size (for sales and covers), or otherwise according to the allocation policies.
These policies also apply to initial public and secondary offerings. Generally,
allocations are determined by traders, independent of portfolio managers, in
accordance with these policies. Allocations are determined and documented on
trade date.
Geode's
trade allocation policies identify circumstances under which it is appropriate
to deviate from the general allocation criteria and describe the alternative
procedures. For example, if a standard allocation would result in a fund or
investment account receiving a very small allocation (e.g., because of its small
asset size), the fund or investment account may receive an increased allocation
to achieve a more meaningful allocation, or it may receive no allocation.
Generally, any exceptions to Geode's policies (i.e., special allocations) must
be approved by senior investment or trading personnel, reviewed by the
compliance department, and documented.
Commissions
Paid
A
fund may pay compensation including both commissions and spreads in connection
with the placement of portfolio transactions. The amount of brokerage
commissions paid by a fund may change from year to year because of, among other
things, changing asset levels, shareholder activity, and/or portfolio
turnover.
For
each of Fidelity® Clean Energy ETF, Fidelity® Cloud Computing ETF, Fidelity®
Crypto Industry and Digital Payments ETF, Fidelity® Digital Health ETF,
Fidelity® Electric Vehicles and Future Transportation ETF, and Fidelity®
Metaverse ETF, the following table shows the fund's portfolio turnover rate for
the fiscal period(s) ended June 30, 2022. Variations in turnover rate may
be due to a fluctuating volume of shareholder purchase and redemption orders
and/or market conditions.
|
Turnover
Rates |
2022
|
|
Fidelity
®
Clean
Energy ETF (A)
|
30%
|
|
Fidelity
®
Cloud
Computing ETF (A)
|
31%
|
|
Fidelity
®
Crypto
Industry and Digital Payments ETF (B)
|
28%
|
|
Fidelity
®
Digital
Health ETF (A)
|
48%
|
|
Fidelity
®
Electric
Vehicles and Future Transportation ETF (A)
|
31%
|
|
Fidelity
®
Metaverse
ETF (B)
|
8%
|
(A)
Fund
commenced operations on October 5, 2021.
(B)
Fund
commenced operations on April 19, 2022.
The
following table shows the total amount of brokerage commissions paid by the
following fund(s), comprising commissions paid on securities and/or futures
transactions, as applicable, for the fiscal year(s) ended June 30, 2022. The
total amount of brokerage commissions paid is stated as a dollar amount and a
percentage of the fund's average net assets.
|
Fund
|
Fiscal
Year End |
Dollar
Amount |
Percentage
of Average
Net
Assets |
|
Fidelity
®
Clean
Energy ETF |
2022
(A)
|
$
1,846 |
0.01%
|
|
Fidelity
®
Cloud
Computing ETF |
2022
(A)
|
$
524
|
0.00%
|
|
Fidelity
®
Crypto
Industry and Digital Payments ETF |
2022
(B)
|
$
1,700 |
0.02%
|
|
Fidelity
®
Digital
Health ETF |
2022
(A)
|
$
423
|
0.00%
|
|
Fidelity
®
Electric
Vehicles and Future Transportation ETF |
2022
(A)
|
$
3,484 |
0.01%
|
|
Fidelity
®
Metaverse
ETF |
2022
(B)
|
$
882
|
0.01%
|
(A)
Fund
commenced operations on October 5, 2021.
(B)
Fund
commenced operations on April 19, 2022.
During
the fiscal year ended June 30, 2022, Fidelity® Clean Energy ETF, Fidelity® Cloud
Computing ETF, Fidelity® Crypto Industry and Digital Payments ETF, Fidelity®
Digital Health ETF, Fidelity® Electric Vehicles and Future Transportation ETF,
and Fidelity® Metaverse ETF paid no brokerage commissions to firms for providing
research or brokerage services.
During
the twelve-month period ended March 31, 2022, Fidelity® Clean Energy ETF,
Fidelity® Cloud Computing ETF, Fidelity® Crypto Industry and Digital Payments
ETF, Fidelity® Digital Health ETF, Fidelity® Electric Vehicles and Future
Transportation ETF, and Fidelity® Metaverse ETF did not allocate brokerage
commissions to firms for providing research or brokerage services.
VALUATION
The
NAV is the value of a single share. NAV is computed by adding the value of a
fund's investments, cash, and other assets, subtracting its liabilities, and
dividing the result by the number of shares outstanding.
The
value of fund shares bought and sold in the secondary market is driven by market
price. The price of these shares, like the price of all traded securities, is
subject to factors such as supply and demand, as well as the current value of
the portfolio securities held by a fund. Secondary market shares, available for
purchase or sale on an intraday basis, do not have a fixed relationship either
to the previous day's NAV nor the current day's NAV. Prices in the secondary
market, therefore, may be below, at, or above the most recently calculated NAV
of such shares.
The
Board of Trustees has designated the fund's investment adviser as the valuation
designee responsible for the fair valuation function and performing fair value
determinations as needed. The adviser has established a Fair Value Committee
(the Committee) to carry out the day-to-day fair valuation responsibilities and
has adopted policies and procedures to govern the fair valuation process and the
activities of the Committee.
Shares
of open-end investment companies (including any underlying central funds) held
by a fund are valued at their respective NAVs. If an underlying fund's NAV is
unavailable, shares of that underlying fund will be fair valued in good faith by
the Committee in accordance with applicable fair value pricing policies.
Generally,
other portfolio securities and assets held by a fund, as well as portfolio
securities and assets held by an underlying central fund, are valued as
follows:
Most
equity securities are valued at the official closing price or the last reported
sale price or, if no sale has occurred, at the last quoted bid price on the
primary market or exchange on which they are traded.
Debt
securities and other assets for which market quotations are readily available
may be valued at market values in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or assets. Or,
debt securities and convertible securities may be valued on the basis of
information furnished by a pricing service that uses a valuation matrix which
incorporates both dealer-supplied valuations and electronic data processing
techniques.
Short-term
securities with remaining maturities of sixty days or less for which market
quotations and information furnished by a pricing service are not readily
available may be valued at amortized cost, which approximates current
value.
Futures
contracts are valued at the settlement or closing price. Options are valued at
their market quotations, if available. Swaps are valued daily using quotations
received from independent pricing services or recognized dealers.
Prices
described above are obtained from pricing services that have been approved by
the Committee. A number of pricing services are available and a fund may use
more than one of these services. A fund may also discontinue the use of any
pricing service at any time. A fund's adviser through the Committee engages
in oversight activities with respect to the fund's pricing services, which
includes, among other things, testing the prices provided by pricing services
prior to calculation of a fund's NAV, conducting periodic due diligence
meetings, and periodically reviewing the methodologies and inputs used by these
services.
Foreign
securities and instruments are valued in their local currency following the
methodologies described above. Foreign securities, instruments and currencies
are translated to U.S. dollars, based on foreign currency exchange rate
quotations supplied by a pricing service as of the close of regular trading on
the listing exchange or the New York Stock Exchange (NYSE), which uses a
proprietary model to determine the exchange rate. Forward foreign currency
exchange contracts are valued at an interpolated rate based on days to maturity
between the closest preceding and subsequent settlement period reported by the
third party pricing service.
Other
portfolio securities and assets for which market quotations, official closing
prices, or information furnished by a pricing service are not readily available
or, in the opinion of the Committee, are deemed unreliable will be fair valued
in good faith by the Committee in accordance with applicable fair value pricing
policies. For example, if, in the opinion of the Committee, a security's value
has been materially affected by events occurring before a fund's pricing time
but after the close of the exchange or market on which the security is
principally traded, that security will be fair valued in good faith by the
Committee in accordance with applicable fair value pricing policies. In fair
valuing a security, the Committee may consider factors including, but not
limited to, price movements in futures contracts and American Depositary
Receipts (ADRs), market and trading trends, the bid/ask quotes of brokers, and
off-exchange institutional trading. The frequency that portfolio securities or
assets are fair valued cannot be predicted and may be significant.
In
determining the fair value of a private placement security for which market
quotations are not available, the Committee generally applies one or more
valuation methods including the market approach, income approach and cost
approach. The market approach considers factors including the price of recent
investments in the same or a similar security or financial metrics of comparable
securities. The income approach considers factors including expected future cash
flows, security specific risks and corresponding discount rates. The cost
approach considers factors including the value of the security's underlying
assets and liabilities.
The
fund's adviser reports to the Board information regarding the fair valuation
process and related material matters.
BUYING
AND SELLING INFORMATION
Book-Entry
Only System .
The Depository Trust Company (DTC) acts as securities depository for the shares.
Shares of each fund are represented by securities registered in the name of DTC
or its nominee and deposited with, or on behalf of, DTC. Certificates will not
be issued for shares.
DTC,
a limited-purpose trust company, was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among DTC participants in such securities through electronic
book-entry changes in accounts of the DTC participants, thereby eliminating the
need for physical movement of securities certificates. DTC participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations, some of whom (and/or their representatives) own
DTC. Access to the DTC system is also available to others such as banks,
brokers, dealers, and trust companies that clear through or maintain a custodial
relationship with a DTC participant, either directly or indirectly.
Beneficial
ownership of shares is limited to DTC participants and persons holding interests
through DTC participants. Ownership of beneficial interests in shares (owners of
beneficial interests are referred to herein as Beneficial Owners) is shown on,
and the transfer of ownership is effected only through, records maintained by
DTC (with respect to DTC participants) and on the records of DTC participants
(with respect to indirect DTC participants and Beneficial Owners that are not
DTC participants). Beneficial Owners will receive from or through a DTC
participant a written confirmation relating to their purchase of shares.
Conveyance
of all notices, statements and other communications to Beneficial Owners is
effected as follows. Pursuant to the Depositary Agreement between the trust and
DTC, DTC is required to make available to the trust upon request and for a fee
to be charged to the trust a listing of the shares of each fund held by each DTC
participant. The trust shall inquire of each such DTC participant as to the
number of Beneficial Owners holding fund shares, directly or indirectly, through
such DTC participant. The trust shall provide each such DTC participant with
copies of such notice, statement or other communication, in such form, number
and at such place as such DTC participant may reasonably request, in order that
such notice, statement or communication may be transmitted by such DTC
participant, directly or indirectly, to such Beneficial Owners. In addition, the
trust shall pay to each such DTC participant a fair and reasonable amount as
reimbursement for the expenses attendant to such transmittal, all subject to
applicable statutory and regulatory requirements.
Share
distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all shares. DTC or its nominee, upon receipt of any such
distributions, shall credit immediately DTC participants' accounts with payments
in amounts proportionate to their respective beneficial interests in shares of
each fund as shown on the records of DTC or its nominee. Payments by DTC
participants to indirect DTC participants and Beneficial Owners of shares held
through such DTC participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in a "street name," and will be the
responsibility of such DTC participants.
The
trust has no responsibility or liability for any aspect of the records relating
to or notices to Beneficial Owners, or payments made on account of beneficial
ownership interests in such shares, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests, or for any other
aspect of the relationship between DTC and the DTC participants or the
relationship between such DTC participants and the indirect DTC participants and
Beneficial Owners owning through such DTC participants.
DTC
may decide to discontinue providing its service with respect to shares at any
time by giving reasonable notice to the trust and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the trust shall take action either to find a replacement for DTC
to perform its functions at a comparable cost or, if such a replacement is
unavailable, to issue and deliver printed certificates representing ownership of
shares, unless the trust makes other arrangements with respect thereto
satisfactory to the listing exchange.
Creation
Units. The
trust issues and redeems shares of each fund only in Creation Unit aggregations
on a continuous basis through FDC, without a sales load, at its NAV next
determined after receipt, on any Business Day (as defined herein), of an order
in proper form. An Authorized Participant that is not a "qualified institutional
buyer," as such term is defined under Rule 144A of the 1933 Act, will not be
able to receive, as part of a redemption, restricted securities eligible for
resale under Rule 144A.
A
"Business Day" with respect to each fund is any day on which the listing
exchange or the NYSE is open for business. As of the date of the prospectus, the
listing exchange and the NYSE observe the following holidays: New Year's Day,
Martin Luther King, Jr. Day (U.S.), President's Day (Washington's Birthday)
(U.S.), Good Friday, Memorial Day (U.S.), Juneteenth (U.S.), Independence Day
(U.S.), Labor Day (U.S.), Thanksgiving Day (U.S.), and Christmas Day.
To
be eligible to place orders to purchase a Creation Unit of each fund, an entity
must be an "Authorized Participant" which is a member or participant of a
clearing agency registered with the SEC, which has a written agreement with a
fund or one of its service providers that allows the Authorized Participant to
place orders for the purchase and redemption of Creation Units ("Participant
Agreement"). All shares of each fund, however created, will be entered on the
records of DTC in the name of Cede & Co. for the account of a DTC
participant.
Each
fund reserves the right to adjust the prices of fund shares and the number of
shares in a Creation Unit in the future to maintain convenient trading ranges
for investors. Any adjustments would be accomplished through stock splits or
reverse stock splits, which would have no effect on the net assets of each
fund.
Portfolio
Deposit. The
consideration for purchase of a Creation Unit generally consists of an in-kind
deposit of a portfolio of securities (Deposit Securities) designated by a fund
together with a deposit of a specified cash payment (Cash Component) computed as
described herein. Alternatively, the fund may issue and redeem Creation Units in
exchange for a specified all-cash payment (Cash Deposit). Together, the Deposit
Securities and the Cash Component or, alternatively, the Cash Deposit,
constitute the "Portfolio Deposit," which represents the minimum initial and
subsequent investment amount for a Creation Unit. In the event the fund requires
Deposit Securities and a Cash Component in consideration for purchasing a
Creation Unit, the function of the Cash Component is to compensate for any
differences between the NAV per Creation Unit and the Deposit Amount (as defined
below). The Cash Component would be an amount equal to the difference between
the NAV of the shares (per Creation Unit) and the "Deposit Amount," which is an
amount equal to the market value of the Deposit Securities. If the Cash
Component is a positive number (the NAV per Creation Unit exceeds the Deposit
Amount), the Authorized Participant will deliver the Cash Component. If the Cash
Component is a negative number (the NAV per Creation Unit is less than the
Deposit Amount), the Authorized Participant will receive the Cash Component.
Computation of the Cash Component excludes any stamp duty or other similar fees
and expenses payable upon transfer of beneficial ownership of the Deposit
Securities, which shall be the sole responsibility of the Authorized
Participant.
Each
fund may determine, upon receiving a purchase order from an Authorized
Participant, to accept a basket of securities or cash that differs from Deposit
Securities or to permit the substitution of an amount of cash (i.e., a "cash in
lieu" amount) to be added to the Cash Component to replace any Deposit Security.
In cases where a fund purchases portfolio securities with cash, the Authorized
Participant will reimburse the fund for, among other things, any difference
between the market value at which the securities were purchased by the fund and
the cash in lieu amount (which amount, at FMR's discretion, may be capped),
applicable registration fees and taxes. Brokerage commissions incurred in
connection with a fund's acquisition of Deposit Securities will be at the
expense of the fund and will affect the value of all shares of the fund; but FMR
may adjust the transaction fee to the extent the composition of the Deposit
Securities changes or cash in lieu is added to the Cash Component to protect
ongoing shareholders. The adjustments described above will reflect changes,
known to FMR on the date of the announcement to be in effect by the time of
delivery of the Portfolio Deposit, in the composition of the underlying index
being tracked by each fund or resulting from certain corporate actions.
Procedures
for Creation Unit Purchases. All
purchase orders must be placed for one or more Creation Units. All orders to
purchase Creation Units must be received by FDC or its agent no later than the
closing time of regular trading hours on the listing exchange or the NYSE
(ordinarily 4:00 p.m. Eastern time) (the Closing Time) or at an earlier time set
forth in the Participant Agreement or otherwise provided to all Authorized
Participants on the date such order is placed in order for the creation of
Creation Units to be effected based on the NAV of shares of each fund as next
determined on such date after receipt of the order in proper form. The date on
which an order to purchase Creation Units (or an order to redeem Creation Units
as discussed below) is placed is referred to as the "Transmittal Date." Orders
must be transmitted by an Authorized Participant by telephone or other
transmission method acceptable to FDC pursuant to procedures set forth in the
Participant Agreement. Severe economic or market disruptions or changes, or
telephone or other communications failure may impede the ability to reach FDC or
an Authorized Participant.
All
orders to purchase Creation Units shall be placed with an Authorized
Participant, as applicable, in the form required by such Authorized Participant.
In addition, the Authorized Participant may request the investor to make certain
representations or enter into agreements with respect to the order, including
payments of cash to pay the Cash Component, when required. Investors should be
aware that their particular broker may not have executed a Participant Agreement
and that, therefore, orders to purchase Creation Units have to be placed by the
investor's broker through an Authorized Participant that has executed a
Participant Agreement. In such cases there may be additional charges to such
investor. At any given time, there may be only a limited number of
broker-dealers that have executed a Participant Agreement.
Those
placing orders to purchase Creation Units should afford sufficient time to
permit proper submission of the order to FDC or its agent prior to the
applicable deadlines on the Transmittal Date. Authorized participants may
ascertain the deadlines applicable to DTC and the Federal Reserve Bank wire
system by contacting the operations department of the broker or depository
institution effecting such transfer of Deposit Securities and Cash
Component.
Portfolio
Deposits must be delivered through the Federal Reserve System (for cash and
government securities) and through DTC (for corporate and municipal securities)
by an Authorized Participant that has executed a Participant Agreement. The
Portfolio Deposit transfer must be ordered by the Authorized Participant on the
Transmittal Date in a timely fashion so as to ensure the delivery of the
requisite number of Deposit Securities through DTC to the account of each fund
by no later than 1:00 p.m. Eastern time of the next Business Day immediately
following the Transmittal Date. In certain cases Authorized Participants will
purchase and redeem Creation Units of each fund on the same Transmittal Date. In
these instances, each fund reserves the right to settle these transactions on a
net basis.
All
questions as to the number of Deposit Securities to be delivered, and the
validity, form and eligibility (including time of receipt) for the deposit of
any tendered securities, will be determined by each fund, whose determination
shall be final and binding. For purchase orders composed solely of a Cash
Component, the amount of cash equal to the Cash Component must be transferred
directly to each fund's custodian through the Federal Reserve Bank wire transfer
system in a timely manner so as to be received by each fund's custodian no later
than 10:00 a.m. Eastern time on the next Business Day immediately following such
Transmittal Date. An order to purchase Creation Units is deemed received by FDC
on the Transmittal Date if (i) such order is received by FDC or its agent not
later than 3:00 p.m. Eastern time on such Transmittal Date; and (ii) all other
procedures set forth in the Participant Agreement are properly followed.
However, if each fund's custodian does not receive the required Deposit
Securities together with the associated Cash Component by 1:00 p.m. or, with
respect to purchase orders composed solely of a Cash Component, the Cash
Component by 10:00 a.m. on the next Business Day immediately following the
Transmittal Date, such order will be deemed not in proper form and canceled.
Upon written notice to FDC, such canceled order may be resubmitted the following
Business Day using a Portfolio Deposit as newly constituted to reflect the next
calculated NAV of each fund. The delivery of Creation Units so purchased will
occur not later than the second (2nd) Business Day following the day on which
the purchase order is deemed received by FDC.
FDC
or its agent will inform the transfer agent, FMR and each fund's custodian upon
receipt of a purchase order. The custodian will then provide such information to
the appropriate subcustodian. The custodian will cause the subcustodian to
maintain an account into which the Deposit Securities (or the cash value of all
or part of such securities, in the case of a cash purchase or "cash in lieu"
amount) will be delivered. Deposit Securities must be delivered to an account
maintained at the applicable local custodian. The trust must also receive, on or
before the contractual settlement date, immediately available or same day funds
estimated by the custodian to be sufficient to pay the Cash Component next
determined after receipt in proper form of the purchase order, together with the
purchase transaction fee described below.
Once
the trust has accepted a purchase order, the trust will confirm the issuance of
a Creation Unit of a fund against receipt of payment, at such NAV as will have
been calculated after receipt in proper form of such order. FDC or its agent
will then transmit a confirmation of acceptance of such order.
Creation
Units will not be issued until the transfer of good title to the trust of the
Deposit Securities and the payment of the Cash Component have been completed.
When the subcustodian has confirmed to the custodian that the required Deposit
Securities (or the cash value thereof) have been delivered to the account of the
relevant subcustodian, FDC and FMR will be notified of such delivery and the
trust will issue and cause the delivery of the Creation Units.
Creation
Units may be created in advance of receipt by each fund of all or a portion of
the applicable Deposit Securities as described below. In these circumstances,
the initial deposit will have a value greater than the NAV of the shares on the
date the order is placed in proper form since, in addition to available Deposit
Securities, cash must be deposited in an amount equal to the sum of (i) the Cash
Component (including any Transaction Fees), plus (ii) at least 105% and up to
115% of the market value of the undelivered Deposit Securities (Additional Cash
Deposit). The order shall be deemed to be received on the Business Day on which
the order is placed provided that the order is placed in proper form prior to
3:00 p.m. Eastern time on such date and federal funds in the appropriate amount
are deposited with each fund's custodian by 10:00 a.m. Eastern time the
following Business Day. If the order is not placed in proper form by 3:00 p.m.
or federal funds in the appropriate amount are not received by 10:00 a.m. the
next Business Day, then the order may be deemed to be rejected and the
Authorized Participant shall be liable to each fund for losses, if any,
resulting therefrom. An additional amount of cash shall be required to be
deposited with each fund, pending delivery of the missing Deposit Securities to
the extent necessary to maintain the Additional Cash Deposit with each fund in
an amount at least equal to 105% and up to 115% of the daily marked to market
value of the missing Deposit Securities. In the sole discretion of each fund
following the Business Day on which the order was received a fund may use the
cash on deposit to purchase the missing Deposit Securities. Authorized
Participants will be liable to each fund for the costs incurred by each fund in
connection with any such purchases. These costs will be deemed to include the
amount by which the actual purchase price of the Deposit Securities exceeds the
market value of such Deposit Securities on the day the purchase order was deemed
received by FDC plus the brokerage and related transaction costs associated with
such purchases and the Authorized Participant shall be liable to the fund for
any shortfall between the cost to the fund of purchasing any missing Deposit
Securities and the value of the collateral. Each fund will return any unused
portion of the Additional Cash Deposit once all of the missing Deposit
Securities have been properly received by FDC or purchased by each fund and
deposited into each fund.
Acceptance
of Purchase Orders. Each
fund reserves the right to reject a purchase order transmitted to it by FDC in
certain circumstances, including but not limited to (i) the order is not in
proper form; (ii) the investor(s), upon obtaining the shares ordered, would own
80% or more of the currently outstanding shares of each fund; (iii) acceptance
of the Portfolio Deposit would, in the opinion of the fund, be unlawful; (iv) in
the event that circumstances outside the control of each fund, make it
impossible to process creation orders for all practical purposes. Examples of
such circumstances include, without limitation, acts of God; public service or
utility problems such as earthquakes, fires, floods, extreme weather conditions,
and power outages resulting in telephone, telecopy, and computer failures; wars;
civil or military disturbances, including acts of civil or military authority or
governmental actions; terrorism; sabotage; epidemics; riots; labor disputes;
market conditions or activities causing trading halts; systems failures
involving computer or other information systems affecting each fund, FMR, Geode,
FDC, DTC, the transfer agent, or any other participant in the purchase process,
and similar extraordinary events. Each fund and FDC have the right to require
information to determine beneficial share ownership for purposes of (ii) above
should it so choose or to rely on a certification from a broker-dealer who is a
member of the Financial Industry Regulatory Authority, Inc. as to the cost basis
of Deposit Securities. If creations are on an in-kind basis, the fund further
reserves the absolute right to reject or suspend an order transmitted to it by
FDC and/or the transfer agent in respect of the fund if: (i) acceptance of the
Deposit Securities would have certain adverse tax consequences to the fund; or
(ii) for any other reasons as specified herein. FDC or the fund shall notify a
prospective purchaser of a Creation Unit and/or the Authorized Participant
acting on the purchaser's behalf, of its rejection of the purchaser's order.
Each fund, the transfer agent, and FDC are under no duty, however, to verify or
give notification of any defects or irregularities in any written order or in
the delivery of a Portfolio Deposit, nor shall any of them incur any liability
for the failure to give any such notification.
Redemption
of Creation Units .
Shares
may be redeemed only in Creation Units at their NAV next determined after
receipt of a redemption request in proper form by each fund through the transfer
agent and only on a Business Day through an Authorized Participant that has
entered into a Participant Agreement. Each fund generally will not redeem shares
in amounts less than Creation Unit-size aggregations. Beneficial Owners must
accumulate enough shares to constitute a Creation Unit in order to have such
shares redeemed by each fund. There can be no assurance, however, that there
will be sufficient liquidity in the public trading market at any time to permit
assembly of a Creation Unit. Investors should expect to incur brokerage and
other costs in connection with assembling a sufficient number of shares to
constitute a redeemable Creation Unit.
The
redemption proceeds for a Creation Unit may consist of a portfolio of securities
(Fund Securities) - as announced by FMR, or its agent, on the Business Day of
the request for redemption received in proper form - plus cash in an amount
equal to the difference between the NAV of the shares being redeemed, as next
determined after a receipt of the request in proper form, and the value of the
Fund Securities (Cash Redemption Amount), less a redemption transaction fee and
any variable fee as listed below. In the event that the Fund Securities have a
value greater than the NAV of the shares being redeemed, a compensating cash
payment to a fund equal to the differential plus the applicable redemption
transaction fee is required to be made by or through an Authorized Participant
by the redeeming shareholder. Notwithstanding the foregoing, each fund will
substitute a cash-in-lieu amount to replace any Fund Security that is a
non-deliverable instrument. The amount of the cash paid out in such cases will
be equivalent to the value of the instrument listed as a Fund Security.
The
right of redemption may be suspended or the date of payment postponed with
respect to each fund (i) for any period during which the NYSE is closed (other
than customary weekend and holiday closings); (ii) for any period during which
trading on the NYSE is suspended or restricted; (iii) for any period during
which an emergency exists as a result of which disposal of the shares or
determination of each fund's NAV is not reasonably practicable; or (iv) in such
other circumstances as is permitted by the SEC.
Orders
to redeem Creation Units must be delivered through an Authorized Participant. An
order to redeem Creation Units is deemed received by each fund on the
Transmittal Date if (i) such order is received in proper form by the transfer
agent not later than the Closing Time (or one hour prior to the Closing Time
(ordinarily 3:00 p.m. Eastern Time) for nonconforming orders) on such
Transmittal Date; (ii) such order is accompanied or followed by the requisite
number of shares of each fund and the Cash Redemption Amount specified in such
order, which delivery must be made through DTC to each fund's custodian no later
than 1:00 p.m., for the shares, and 3:00 p.m., for the Cash Redemption Amount,
Eastern time on the next Business Day following such Transmittal Date (the DTC
Cut-Off-Time); and (iii) all other procedures set forth in the Participant
Agreement are properly followed. The requisite Fund Securities and the Cash
Redemption Amount will generally be transferred by the second (2nd) Business Day
following the date on which such request for redemption is deemed received,
which will generally be no more than seven (7) days after such request for
redemption but may be up to fifteen days for funds that invest in foreign
securities. In certain cases, Authorized Participants will redeem and purchase
Creation Units of each fund on the same Transmittal Date. In these instances,
each fund reserves the right to settle these transactions on a net basis.
If
each fund determines, based on information available to each fund when a
redemption request is submitted by an Authorized Participant, that: (i) the
short interest of each fund in the marketplace is greater than or equal to 100%;
and (ii) the orders in the aggregate from all Authorized Participants redeeming
shares on a Business Day represent 25% or more of the outstanding shares of each
fund, such Authorized Participant will be required to verify to each fund the
accuracy of its representations that are deemed to have been made by submitting
a request for redemption. If, after receiving notice of the verification
requirement, the Authorized Participant does not verify the accuracy of its
representations that are deemed to have been made by submitting a request for
redemption in accordance with this requirement, its redemption request will be
considered not to have been received in proper form.
To
the extent contemplated by an Authorized Participant's agreement, in the event
the Authorized Participant has submitted a redemption request in proper form but
is unable to transfer all or part of the Creation Units to be redeemed to FDC,
on behalf of each fund, at or prior to the closing time of regular trading on
the listing exchange (or the NYSE if the listing exchange is not open that day)
on the date such redemption request is submitted, FDC will nonetheless accept
the redemption request in reliance on the undertaking by the Authorized
Participant to deliver the missing fund shares as soon as possible, which
undertaking shall be secured by the Authorized Participant's delivery and
maintenance of collateral consisting of cash having a value (marked to market
daily) at least equal to 105% and up to 115% of the value of the missing fund
shares. The current procedures for collateralization of missing shares require,
among other things, that any cash collateral shall be in the form of U.S.
dollars in immediately available funds and shall be held by each fund and marked
to market daily, and that the fees of each fund and any sub-custodians in
respect of the delivery, maintenance, and redelivery of the cash collateral
shall be payable by the Authorized Participant. The Participant Agreement will
permit each fund to purchase the missing fund shares or acquire the Deposit
Securities and specified cash payment (the "Balancing Amount") underlying such
shares at any time and will subject the Authorized Participant to liability for
any shortfall between the cost to each fund of purchasing such shares, Deposit
Securities or Balancing Amount and the value of the collateral.
The
calculation of the value of the Fund Securities and the Cash Redemption Amount
to be delivered upon redemption will be made by Fidelity Service Company, Inc.
(FSC) according to the procedures set forth in the section entitled "Valuation"
computed on the Business Day on which a redemption order is deemed received by
the transfer agent. Therefore, if a conforming redemption order in proper form
is submitted to the transfer agent by an Authorized Participant not later than
Closing Time, or 3:00 p.m. Eastern time in the case of nonconforming orders, on
the Transmittal Date, and the requisite number of shares of each fund are
delivered to each fund's custodian prior to the DTC Cut-Off-Time, then the value
of the Fund Securities and the Cash Redemption Amount to be delivered will be
determined by FSC on such Transmittal Date. If, however, a conforming redemption
order is submitted to the transfer agent by an Authorized Participant not later
than the Closing Time, or 3:00 p.m. Eastern time in the case of nonconforming
orders, on the Transmittal Date but either (i) the requisite number of shares of
each fund and the Cash Redemption Amount are not delivered by the DTC
Cut-Off-Time as described above on the next Business Day following the
Transmittal Date, or (ii) the redemption order is not submitted in proper form,
then the redemption order will not be deemed received as of the Transmittal
Date. In such case, the value of the Fund Securities and the Cash Redemption
Amount to be delivered will be computed as of the Closing Time on the Business
Day that such order is deemed received by the transfer agent, i.e., the Business
Day on which the shares of each fund are delivered through DTC to FDC by the DTC
Cut-Off-Time on such Business Day pursuant to a properly submitted redemption
order.
Each
fund may in its discretion exercise its option to redeem shares in cash, and the
redeeming Beneficial Owner will be required to receive its redemption proceeds
in cash. In addition, an investor may request a redemption in cash that each
fund may, in its sole discretion, permit. In either case, the investor will
receive a cash payment equal to the NAV of its shares based on the NAV of shares
of each fund next determined after the redemption request is received in proper
from (minus a redemption transaction fee and additional charge for requested
cash redemptions specified above, to offset each fund's brokerage and other
transaction costs associated with the disposition of Fund Securities). In
addition, each fund reserves the right to honor a redemption request by
delivering a basket of securities or cash that differs from the Fund
Securities.
Redemption
of shares for Fund Securities will be subject to compliance with applicable
federal and state securities laws and each fund (whether or not it otherwise
permits cash redemptions) reserves the right to redeem Creation Units for cash
to the extent that each fund could not lawfully deliver specific Fund Securities
upon redemptions or could not do so without first registering the Fund
Securities under such laws. An Authorized Participant or a Beneficial Owner for
which it is acting subject to a legal restriction with respect to a particular
stock included in the Fund Securities applicable to the redemption of a Creation
Unit may be paid an equivalent amount of cash. The Authorized Participant may
request the redeeming Beneficial Owner of the shares to complete an order form
or to enter into agreements with respect to such matters as compensating cash
payment.
In
connection with taking delivery of shares for Fund Securities upon redemption of
Creation Units, a redeeming shareholder or entity acting on behalf of a
redeeming shareholder must maintain appropriate custody arrangements with a
qualified broker-dealer, bank or other custody providers in each jurisdiction in
which any of the Fund Securities are customarily traded, to which account such
Fund Securities will be delivered. If neither the redeeming shareholder nor the
entity acting on behalf of a redeeming shareholder has appropriate arrangements
to take delivery of the Fund Securities in the applicable foreign jurisdiction
and it is not possible to make other such arrangements, or if it is not possible
to effect deliveries of the Fund Securities in such jurisdictions, the trust
may, in its discretion, exercise its option to redeem such shares in cash, and
the redeeming shareholder will be required to receive its redemption proceeds in
cash.
Deliveries
of redemption proceeds generally will be made within two Business Days. Due to
the schedule of holidays in certain countries, however, the delivery of
redemption proceeds may take longer than two Business Days after the day on
which the redemption request is received in proper form. In such cases, the
local market settlement procedures will not commence until the end of the local
holiday periods.
Creation/Redemption
Transaction Fees .
The funds may impose a "Transaction Fee" on investors purchasing or redeeming
Creation Units. The Transaction Fee will be limited to amounts that have been
determined by FMR to be appropriate. The purpose of the Transaction Fee is to
protect the existing shareholders of the funds from the dilutive costs
associated with the purchase and redemption of Creation Units. Where a fund
permits cash creations (or redemptions) or cash in lieu of depositing one or
more Deposit Securities, the purchaser (or redeemer) may be assessed a higher
Transaction Fee to offset the transaction cost to the funds of buying (or
selling) those particular Deposit Securities. To the extent a
purchase/redemption transaction consists of in-kind securities and/or cash, the
standard fee applies and an additional transaction fee (up to the maximum
amounts shown in the table below) may also be imposed. Each fund reserves the
right to not impose the standard or additional transaction fee or to vary the
amount of the transaction fee, up to the maximum listed below, depending on the
materiality of the fund's actual transaction costs incurred or where FDC
believes that not imposing or varying the transaction fee would be in the fund's
interest. Transaction fees associated with the redemption of Creation Units will
not exceed 2% of the value of shares redeemed. To the extent the fund cannot
recoup the amount of transaction costs incurred in connection with a redemption
from the redeeming shareholder because of the 2% cap or otherwise, those
transaction costs will be borne by the fund's remaining shareholders and
negatively affect the fund's performance. Actual transaction costs may vary
depending on the time of day an order is received or the nature of the
securities. Investors bear the costs of transferring Deposit Securities or Fund
Securities to/from each fund to/from their account or on their order. Every
purchaser of a Creation Unit will receive a prospectus that contains disclosure
about the Transaction Fees, including the maximum amount of the additional
transaction fee charged by the funds.
The
following table shows, as of June 30, 2022, standard transaction fees and
maximum additional transaction fees for creations and redemptions.
|
Name
of Fund |
Standard
Creation/Redemption Transaction Fee |
Maximum
Additional Creation Transaction Fee* |
Maximum
Additional Redemption Transaction Fee* |
|
Fidelity
®
Clean
Energy ETF |
$300
|
5.0%
|
2.0%
|
|
Fidelity
®
Cloud
Computing ETF |
$300
|
5.0%
|
2.0%
|
|
Fidelity
®
Crypto
Industry and Digital Payments ETF |
$250
|
5.0%
|
2.0%
|
|
Fidelity
®
Digital
Health ETF |
$300
|
5.0%
|
2.0%
|
|
Fidelity
®
Electric
Vehicles and Future Transportation ETF |
$300
|
5.0%
|
2.0%
|
|
Fidelity
®
Metaverse
ETF |
$250
|
5.0%
|
2.0%
|
*
As a percentage of the cash amount invested or redeemed.
DISTRIBUTIONS
AND TAXES
Dividends.
Because
each fund invests significantly in foreign securities, corporate shareholders
should not expect fund dividends to qualify for the dividends-received
deduction. However, a portion of the fund's dividends, when distributed to
individual shareholders, may qualify for taxation at long-term capital gains
rates (provided certain holding period requirements are met). Short-term capital
gains are taxable at ordinary income tax rates. Distributions by a fund to
tax-advantaged retirement plan accounts are not taxable currently (but you may
be taxed later, upon withdrawal of your investment from such account).
Capital
Gain Distributions. Unless
your shares of a fund are held in a tax-advantaged retirement plan, each fund's
long-term capital gain distributions are federally taxable to shareholders
generally as capital gains.
The
following table shows a fund's aggregate capital loss carryforward as of June
30, 2022, which is available to offset future capital gains. A fund's ability to
utilize its capital loss carryforwards in a given year or in total may be
limited.
|
Fund
|
Capital
Loss Carryforward (CLC) | |
|
Fidelity®
Clean Energy ETF |
$
|
936,004
|
|
Fidelity®
Cloud Computing ETF |
$
|
1,007,817
|
|
Fidelity®
Crypto Industry and Digital Payments ETF |
$
|
857,128
|
|
Fidelity®
Digital Health ETF |
$
|
118,201
|
|
Fidelity®
Electric Vehicles and Future Transportation ETF |
$
|
3,904,483
|
|
Fidelity®
Metaverse ETF |
$
|
176,101
|
Returns
of Capital. If
a fund's distributions exceed its taxable income and capital gains realized
during a taxable year, all or a portion of the distributions made in the same
taxable year may be recharacterized as a return of capital to shareholders. A
return of capital distribution will generally not be taxable, but will reduce
each shareholder's cost basis in the fund and result in a higher reported
capital gain or lower reported capital loss when those shares on which the
distribution was received are sold in taxable accounts.
Sales
of Listed Shares. Gain
or loss that is recognized on the sale of exchange-listed shares generally will
be characterized as long-term capital gain or loss for shares that have been
held for more than one year and as short-term capital gain or loss for shares
that have been held for one year or less.
Purchase
of Creation Units. The
purchase of Creation Units generally will be a taxable event for the person who
transfers securities in exchange for Creation Units but generally will not be a
taxable event for the fund. The transferor will recognize gain or loss equal to
the difference between (a) the sum of the fair market value of the Creation
Units (which may differ from their NAV) and any Balancing Amount that is
received and (b) the sum of the transferor's basis in the transferred
securities, transaction fees and any Balancing Amount that is paid. The purchase
of Creation Units may trigger application of the wash sale rules for federal tax
purposes.
Redemption
of Creation Units. The
redemption of Creation Units generally will be a taxable event for the person
who receives securities in exchange for Creation Units but generally will not be
a taxable event for the fund. The recipient will recognize gain or loss equal to
the difference between (a) the sum of the fair market value of the securities
and any Cash Redemption Amount that is received and (b) the sum of the basis of
the Creation Unit shares, transaction fees and any Cash Redemption Amount that
is paid. The redemption of Creation Units may be treated as a wash sale for
federal tax purposes.
Foreign
Tax Credit or Deduction. Foreign
governments may impose withholding taxes on dividends and interest earned by a
fund with respect to foreign securities held directly by a fund. Foreign
governments may also impose taxes on other payments or gains with respect to
foreign securities held directly by a fund. As a general matter, if, at the
close of its fiscal year, more than 50% of a fund's total assets is invested in
securities of foreign issuers, the fund may elect to pass through eligible
foreign taxes paid and thereby allow shareholders to take a deduction or, if
they meet certain holding period requirements with respect to fund shares, a
credit on their individual tax returns. In addition, if at the close of each
quarter of its fiscal year at least 50% of a fund's total assets is represented
by interests in other regulated investment companies, the same rules will apply
to any foreign tax credits that underlying funds pass through to the fund.
Special rules may apply to the credit for individuals who receive dividends
qualifying for the long-term capital gains tax rate.
Tax
Status of the Funds. Each
fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it will not be liable for
federal tax on income and capital gains distributed to shareholders. In order to
qualify as a regulated investment company, and avoid being subject to federal
income or excise taxes at the fund level, each fund intends to distribute
substantially all of its net investment income and net realized capital gains
within each calendar year as well as on a fiscal year basis (if the fiscal year
is other than the calendar year), and intends to comply with other tax rules
applicable to regulated investment companies.
Other
Tax Information. The
information above is only a summary of some of the tax consequences generally
affecting each fund and its shareholders, and no attempt has been made to
discuss individual tax consequences. It is up to you or your tax preparer to
determine whether the sale of shares of a fund resulted in a capital gain or
loss or other tax consequence to you. In addition to federal income taxes,
shareholders may be subject to state and local taxes on fund distributions, and
shares may be subject to state and local personal property taxes. Investors
should consult their tax advisers to determine whether a fund is suitable to
their particular tax situation.
TRUSTEES
AND OFFICERS
The
Trustees, Members of the Advisory Board (if any), and officers of the trust and
funds, as applicable, are listed below. The Board of Trustees governs each fund
and is responsible for protecting the interests of shareholders. The Trustees
are experienced executives who meet periodically throughout the year to oversee
each fund's activities, review contractual arrangements with companies that
provide services to each fund, oversee management of the risks associated with
such activities and contractual arrangements, and review each fund's
performance. Each of the Trustees oversees 316 funds.
The
Trustees hold office without limit in time except that (a) any Trustee may
resign; (b) any Trustee may be removed by written instrument, signed by at least
two-thirds of the number of Trustees prior to such removal; (c) any Trustee who
requests to be retired or who has become incapacitated by illness or injury may
be retired by written instrument signed by a majority of the other Trustees; and
(d) any Trustee may be removed at any special meeting of shareholders by a
two-thirds vote of the outstanding voting securities of the trust. Each Trustee
who is not an interested person (as defined in the 1940 Act) of the trust and
the funds is referred to herein as an Independent Trustee. Each Independent
Trustee shall retire not later than the last day of the calendar year in which
his or her 75th birthday occurs. The Independent Trustees may waive this
mandatory retirement age policy with respect to individual Trustees. Officers
and Advisory Board Members hold office without limit in time, except that any
officer or Advisory Board Member may resign or may be removed by a vote of a
majority of the Trustees at any regular meeting or any special meeting of the
Trustees. Except as indicated, each individual has held the office shown or
other offices in the same company for the past five years.
Experience,
Skills, Attributes, and Qualifications of the Trustees. The
Governance and Nominating Committee has adopted a statement of policy that
describes the experience, qualifications, attributes, and skills that are
necessary and desirable for potential Independent Trustee candidates (Statement
of Policy). The Board believes that each Trustee satisfied at the time he or she
was initially elected or appointed a Trustee, and continues to satisfy, the
standards contemplated by the Statement of Policy. The Governance and Nominating
Committee also engages professional search firms to help identify potential
Independent Trustee candidates who have the experience, qualifications,
attributes, and skills consistent with the Statement of Policy. From time to
time, additional criteria based on the composition and skills of the current
Independent Trustees, as well as experience or skills that may be appropriate in
light of future changes to board composition, business conditions, and
regulatory or other developments, have also been considered by the professional
search firms and the Governance and Nominating Committee. In addition, the Board
takes into account the Trustees' commitment and participation in Board and
committee meetings, as well as their leadership of standing and ad hoc
committees throughout their tenure.
In
determining that a particular Trustee was and continues to be qualified to serve
as a Trustee, the Board has considered a variety of criteria, none of which, in
isolation, was controlling. The Board believes that, collectively, the Trustees
have balanced and diverse experience, qualifications, attributes, and skills,
which allow the Board to operate effectively in governing each fund and
protecting the interests of shareholders. Information about the specific
experience, skills, attributes, and qualifications of each Trustee, which in
each case led to the Board's conclusion that the Trustee should serve (or
continue to serve) as a trustee of the funds, is provided below.
Board
Structure and Oversight Function. Robert
A. Lawrence is an interested person and currently serves as Chair. The Trustees
have determined that an interested Chair is appropriate and benefits
shareholders because an interested Chair has a personal and professional stake
in the quality and continuity of services provided to the funds. Independent
Trustees exercise their informed business judgment to appoint an individual of
their choosing to serve as Chair, regardless of whether the Trustee happens to
be independent or a member of management. The Independent Trustees have
determined that they can act independently and effectively without having an
Independent Trustee serve as Chair and that a key structural component for
assuring that they are in a position to do so is for the Independent Trustees to
constitute a substantial majority for the Board. The Independent Trustees also
regularly meet in executive session. David M. Thomas serves as Lead Independent
Trustee and as such (i) acts as a liaison between the Independent Trustees and
management with respect to matters important to the Independent Trustees and
(ii) with management prepares agendas for Board meetings.
Fidelity
®
funds
are overseen by different Boards of Trustees. The funds' Board oversees
Fidelity's high income and certain equity funds, and other Boards oversee
Fidelity's investment-grade bond, money market, asset allocation, and other
equity funds. The asset allocation funds may invest in Fidelity ®
funds
overseen by the funds' Board. The use of separate Boards, each with its own
committee structure, allows the Trustees of each group of Fidelity ®
funds
to focus on the unique issues of the funds they oversee, including common
research, investment, and operational issues. On occasion, the separate Boards
establish joint committees to address issues of overlapping consequences for the
Fidelity ®
funds
overseen by each Board.
The
Trustees operate using a system of committees to facilitate the timely and
efficient consideration of all matters of importance to the Trustees, each fund,
and fund shareholders and to facilitate compliance with legal and regulatory
requirements and oversight of the funds' activities and associated risks. The
Board, acting through its committees, has charged FMR and its affiliates with
(i) identifying events or circumstances the occurrence of which could have
demonstrably adverse effects on the funds' business and/or reputation; (ii)
implementing processes and controls to lessen the possibility that such events
or circumstances occur or to mitigate the effects of such events or
circumstances if they do occur; and (iii) creating and maintaining a system
designed to evaluate continuously business and market conditions in order to
facilitate the identification and implementation processes described in (i) and
(ii) above. Because the day-to-day operations and activities of the funds are
carried out by or through FMR, its affiliates, and other service providers, the
funds' exposure to risks is mitigated but not eliminated by the processes
overseen by the Trustees. While each of the Board's committees has
responsibility for overseeing different aspects of the funds' activities,
oversight is exercised primarily through the Operations, Audit, and Compliance
Committees. Appropriate personnel, including but not limited to the funds' Chief
Compliance Officer (CCO), FMR's internal auditor, the independent accountants,
the funds' Treasurer and portfolio management personnel, make periodic reports
to the Board's committees, as appropriate, including an annual review of
Fidelity's risk management program for the Fidelity ®
funds.
The responsibilities of each standing committee, including their oversight
responsibilities, are described further under "Standing Committees of the
Trustees."
Interested
Trustees*:
Correspondence
intended for a Trustee who is an interested person may be sent to Fidelity
Investments, 245 Summer Street, Boston, Massachusetts 02210.
Name,
Year of Birth; Principal Occupations and Other Relevant Experience+
Bettina
Doulton (1964)
Year
of Election or Appointment: 2020
Trustee
Ms.
Doulton also serves as Trustee of other Fidelity ®
funds.
Prior to her retirement, Ms. Doulton served in a variety of positions at
Fidelity Investments, including as a managing director of research (2006-2007),
portfolio manager to certain Fidelity ®
funds
(1993-2005), equity analyst and portfolio assistant (1990-1993), and research
assistant (1987-1990). Ms. Doulton currently owns and operates Phi Builders +
Architects and Cellardoor Winery. Previously, Ms. Doulton served as a member of
the Board of Brown Capital Management, LLC (2014-2018).
Robert
A. Lawrence (1952)
Year
of Election or Appointment: 2020
Trustee
Chair
of the Board of Trustees
Mr.
Lawrence also serves as Trustee of other funds. Previously, Mr. Lawrence served
as a Trustee and Member of the Advisory Board of certain funds. Prior to
his retirement in 2008, Mr. Lawrence served as Vice President of certain
Fidelity ®
funds
(2006-2008), Senior Vice President, Head of High Income Division of Fidelity
Management & Research Company (investment adviser firm, 2006-2008), and
President of Fidelity Strategic Investments (investment adviser firm,
2002-2005).
*
Determined to be an "Interested Trustee" by virtue of, among other things, his
or her affiliation with the trust or various entities under common control with
FMR.
+
The information includes the Trustee's principal occupation during the last five
years and other information relating to the experience, attributes, and skills
relevant to the Trustee's qualifications to serve as a Trustee, which led to the
conclusion that the Trustee should serve as a Trustee for each fund.
Independent
Trustees:
Correspondence
intended for an Independent Trustee may be sent to Fidelity Investments, P.O.
Box 55235, Boston, Massachusetts 02205-5235.
Name,
Year of Birth; Principal Occupations and Other Relevant Experience+
Thomas
P. Bostick (1956)
Year
of Election or Appointment: 2021
Trustee
Lieutenant
General Bostick also serves as Trustee of other Fidelity ®
funds.
Prior to his retirement, General Bostick (United States Army, Retired) held a
variety of positions within the U.S. Army, including Commanding General and
Chief of Engineers, U.S. Army Corps of Engineers (2012-2016) and Deputy Chief of
Staff and Director of Human Resources, U.S. Army (2009-2012). General Bostick
currently serves as a member of the Board and Finance and Governance Committees
of CSX Corporation (transportation, 2020-present) and a member of the Board and
Corporate Governance and Nominating Committee of Perma-Fix Environmental
Services, Inc. (nuclear waste management, 2020-present). General Bostick serves
as Chief Executive Officer of Bostick Global Strategies, LLC (consulting,
2016-present) and as a member of the Board of HireVue, Inc. (video interview and
assessment, 2020-present). Previously, General Bostick served as a Member of the
Advisory Board of certain Fidelity® funds (2021), President, Intrexon
Bioengineering (2018-2020) and Chief Operating Officer (2017-2020) and Senior
Vice President of the Environment Sector (2016-2017) of Intrexon Corporation
(biopharmaceutical company).
Dennis
J. Dirks (1948)
Year
of Election or Appointment: 2018
Trustee
Mr.
Dirks also serves as Trustee of other Fidelity ®
funds.
Prior to his retirement in May 2003, Mr. Dirks served as Chief Operating Officer
and as a member of the Board of The Depository Trust & Clearing Corporation
(financial markets infrastructure), President, Chief Operating Officer and a
member of the Board of The Depository Trust Company (DTC), President and a
member of the Board of the National Securities Clearing Corporation (NSCC),
Chief Executive Officer and a member of the Board of the Government Securities
Clearing Corporation and Chief Executive Officer and a member of the Board of
the Mortgage-Backed Securities Clearing Corporation. Mr. Dirks currently serves
as a member of the Finance Committee (2016-present) and Board (2017-present) and
is Treasurer (2018-present) of the Asolo Repertory Theatre.
Donald
F. Donahue (1950)
Year
of Election or Appointment: 2018
Trustee
Mr.
Donahue also serves as Trustee of other Fidelity ®
funds.
Mr. Donahue serves as President and Chief Executive Officer of Miranda Partners,
LLC (risk consulting for the financial services industry, 2012-present).
Previously, Mr. Donahue served as Chief Executive Officer (2006-2012), Chief
Operating Officer (2003-2006) and Managing Director, Customer Marketing and
Development (1999-2003) of The Depository Trust & Clearing Corporation
(financial markets infrastructure). Mr. Donahue currently serves as a member
(2007-present) and Co-Chairman (2016-present) of the Board of United Way of New
York and a member of the Board of The Leadership Academy (previously NYC
Leadership Academy) (2012-present). Mr. Donahue previously served as a member of
the Advisory Board of certain Fidelity® funds (2015-2018).
Vicki
L. Fuller (1957)
Year
of Election or Appointment: 2020
Trustee
Ms.
Fuller also serves as Trustee of other Fidelity ®
funds.
Previously, Ms. Fuller served as a member of the Advisory Board of certain
Fidelity ®
funds
(2018-2020), Chief Investment Officer of the New York State Common Retirement
Fund (2012-2018) and held a variety of positions at AllianceBernstein L.P.
(global asset management, 1985-2012), including Managing Director (2006-2012)
and Senior Vice President and Senior Portfolio Manager (2001-2006). Ms. Fuller
currently serves as a member of the Board, Audit Committee and Nominating and
Governance Committee of two Blackstone business development companies
(2020-present), as a member of the Board of Treliant, LLC (consulting,
2019-present), as a member of the Advisory Board of Ariel Alternatives, LLC
(private equity, 2021-present) and as a member of the Board and Chair of the
Audit Committee of Gusto, Inc. (software, 2021-present). In addition, Ms. Fuller
currently serves as a member of the Board of Roosevelt University (2019-present)
and as a member of the Executive Board of New York University's Stern School of
Business. Ms. Fuller previously served as a member of the Board, Audit Committee
and Nominating and Governance Committee of The Williams Companies, Inc. (natural
gas infrastructure, 2018-2021).
Patricia
L. Kampling (1959)
Year
of Election or Appointment: 2020
Trustee
Ms.
Kampling also serves as Trustee of other Fidelity ®
funds.
Prior to her retirement, Ms. Kampling served as Chairman of the Board and Chief
Executive Officer (2012-2019), President and Chief Operating Officer (2011-2012)
and Executive Vice President and Chief Financial Officer (2010-2011) of Alliant
Energy Corporation. Ms. Kampling currently serves as a member of the Board,
Finance Committee and Governance, Compensation and Nominating Committee of Xcel
Energy Inc. (utilities company, 2020-present) and as a member of the Board,
Audit, Finance and Risk Committee and Safety, Environmental, Technology and
Operations Committee and Chair of the Executive Development and Compensation
Committee of American Water Works Company, Inc. (utilities company,
2019-present). In addition, Ms. Kampling currently serves as a member of the
Board of the Nature Conservancy, Wisconsin Chapter (2019-present). Previously,
Ms. Kampling served as a Member of the Advisory Board of certain Fidelity® funds
(2020), a member of the Board, Compensation Committee and Executive Committee
and Chair of the Audit Committee of Briggs & Stratton Corporation
(manufacturing, 2011-2021), a member of the Board of Interstate Power and Light
Company (2012-2019) and Wisconsin Power and Light Company (2012-2019) (each a
subsidiary of Alliant Energy Corporation) and as a member of the Board and
Workforce Development Committee of the Business Roundtable (2018-2019).
Thomas
A. Kennedy (1955)
Year
of Election or Appointment: 2021
Trustee
Mr.
Kennedy also serves as Trustee of other Fidelity ®
funds.
Previously, Mr. Kennedy served as a Member of the Advisory Board of certain
Fidelity ®
funds
(2020) and held a variety of positions at Raytheon Company (aerospace and
defense, 1983-2020), including Chairman and Chief Executive Officer (2014-2020)
and Executive Vice President and Chief Operating Officer (2013-2014). Mr.
Kennedy currently serves as Executive Chairman of the Board of Directors of
Raytheon Technologies Corporation (aerospace and defense, 2020-present). He is
also a member of the Rutgers School of Engineering Industry Advisory Board
(2011-present) and a member of the UCLA Engineering Dean's Executive Board
(2016-present).
Oscar
Munoz (1959)
Year
of Election or Appointment: 2021
Trustee
Mr.
Munoz also serves as Trustee of other Fidelity ®
funds.
Prior to his retirement, Mr. Munoz served as Executive Chairman (2020-2021),
Chief Executive Officer (2015-2020), President (2015-2016) and a member of the
Board (2010-2021) of United Airlines Holdings, Inc. Mr. Munoz currently serves
as a member of the Board of CBRE Group, Inc. (commercial real estate,
2020-present), a member of the Board of Univision Communications, Inc. (Hispanic
media, 2020-present) and a member of the Advisory Board of Salesforce.com, Inc.
(cloud-based software, 2020-present). Previously, Mr. Munoz served as a Member
of the Advisory Board of certain Fidelity ®
funds
(2021).
Garnett
A. Smith (1947)
Year
of Election or Appointment: 2013
Trustee
Mr.
Smith also serves as Trustee of other Fidelity ®
funds.
Prior to his retirement, Mr. Smith served as Chairman and Chief Executive
Officer (1990-1997) and President (1986-1990) of Inbrand Corp. (manufacturer of
personal absorbent products). Prior to his employment with Inbrand Corp., he was
employed by a retail fabric chain and North Carolina National Bank (now Bank of
America). Mr. Smith previously served as a member of the Advisory Board of
certain Fidelity ®
funds
(2012-2013).
David
M. Thomas (1949)
Year
of Election or Appointment: 2018
Trustee
Lead
Independent Trustee
Mr.
Thomas also serves as Trustee of other Fidelity ®
funds.
Previously, Mr. Thomas served as Executive Chairman (2005-2006) and Chairman and
Chief Executive Officer (2000-2005) of IMS Health, Inc. (pharmaceutical and
healthcare information solutions). Mr. Thomas currently serves as a member of
the Board of Fortune Brands Home and Security (home and security products,
2004-present) and as Director (2013-present) and Non-Executive Chairman of the
Board (2022-present) of Interpublic Group of Companies, Inc. (marketing
communication).
Susan
Tomasky (1953)
Year
of Election or Appointment: 2020
Trustee
Ms.
Tomasky also serves as Trustee of other Fidelity ®
funds.
Prior to her retirement, Ms. Tomasky served in various executive officer
positions at American Electric Power Company, Inc. (1998-2011), including most
recently as President of AEP Transmission (2007-2011). Ms. Tomasky currently
serves as a member of the Board and Sustainability Committee and as Chair of the
Audit Committee of Marathon Petroleum Corporation (2018-present) and as a member
of the Board, Executive Committee, Corporate Governance Committee and
Organization and Compensation Committee and as Chair of the Audit Committee of
Public Service Enterprise Group, Inc. (utilities company, 2012-present) and as a
member of the Board of its subsidiary company, Public Service Electric and Gas
Co. (2021-present). In addition, Ms. Tomasky currently serves as a member
(2009-present) and President (2020-present) of the Board of the Royal
Shakespeare Company - America (2009-present), as a member of the Board of the
Columbus Association for the Performing Arts (2011-present) and as a member of
the Board and Kenyon in the World Committee of Kenyon College (2016-present).
Previously, Ms. Tomasky served as a Member of the Advisory Board of certain
Fidelity ®
funds
(2020), as a member of the Board of the Columbus Regional Airport Authority
(2007-2020), as a member of the Board (2011-2018) and Lead Independent Director
(2015-2018) of Andeavor Corporation (previously Tesoro Corporation) (independent
oil refiner and marketer) and as a member of the Board of Summit Midstream
Partners LP (energy, 2012-2018).
Michael
E. Wiley (1950)
Year
of Election or Appointment: 2013
Trustee
Mr.
Wiley also serves as Trustee of other Fidelity ®
funds.
Previously, Mr. Wiley served as a member of the Advisory Board of certain
Fidelity ®
funds
(2018-2020), Chairman, President and CEO of Baker Hughes, Inc. (oilfield
services, 2000-2004). Mr. Wiley also previously served as a member of the Board
of Andeavor Corporation (independent oil refiner and marketer, 2005-2018), a
member of the Board of Andeavor Logistics LP (natural resources logistics,
2015-2018) and a member of the Board of High Point Resources (exploration and
production, 2005-2020).
+
The information includes the Trustee's principal occupation during the last five
years and other information relating to the experience, attributes, and skills
relevant to the Trustee's qualifications to serve as a Trustee, which led to the
conclusion that the Trustee should serve as a Trustee for each fund.
Advisory
Board Members and Officers:
Correspondence
intended for a Member of the Advisory Board (if any) may be sent to Fidelity
Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence
intended for an officer or Peter S. Lynch may be sent to Fidelity Investments,
245 Summer Street, Boston, Massachusetts 02210. Officers appear below in
alphabetical order.
Name,
Year of Birth; Principal Occupation
Peter
S. Lynch (1944)
Year
of Election or Appointment: 2018
Member
of the Advisory Board
Mr.
Lynch also serves as a Member of the Advisory Board of other Fidelity
®
funds.
Mr. Lynch is Vice Chairman and a Director of Fidelity Management & Research
Company LLC (investment adviser firm). In addition, Mr. Lynch serves as a
Trustee of Boston College and as the Chairman of the Inner-City Scholarship
Fund. Previously, Mr. Lynch served as Vice Chairman and a Director of FMR Co.,
Inc. (investment adviser firm) and on the Special Olympics International Board
of Directors (1997-2006).
Craig
S. Brown (1977)
Year
of Election or Appointment: 2019
Assistant
Treasurer
Mr.
Brown also serves as an officer of other funds. Mr. Brown serves as Assistant
Treasurer of FIMM, LLC (2021-present) and is an employee of Fidelity Investments
(2013-present).
John
J. Burke III (1964)
Year
of Election or Appointment: 2018
Chief
Financial Officer
Mr.
Burke also serves as Chief Financial Officer of other funds. Mr. Burke serves as
Head of Investment Operations for Fidelity Fund and Investment Operations
(2018-present) and is an employee of Fidelity Investments (1998-present).
Previously Mr. Burke served as head of Asset Management Investment Operations
(2012-2018).
William
C. Coffey (1969)
Year
of Election or Appointment: 2019
Assistant
Secretary
Mr.
Coffey also serves as Assistant Secretary of other funds. He is Senior Vice
President and Deputy General Counsel of FMR LLC (diversified financial services
company, 2010-present), and is an employee of Fidelity Investments. Previously,
Mr. Coffey served as Secretary and CLO of certain funds (2018-2019); CLO,
Secretary, and Senior Vice President of Fidelity Management & Research
Company and FMR Co., Inc. (investment adviser firms, 2018-2019); Secretary of
Fidelity SelectCo, LLC and Fidelity Investments Money Management, Inc.
(investment adviser firms, 2018-2019); CLO of Fidelity Management & Research
(Hong Kong) Limited, FMR Investment Management (UK) Limited, and Fidelity
Management & Research (Japan) Limited (investment adviser firms, 2018-2019);
and Assistant Secretary of certain funds (2009-2018).
Timothy
M. Cohen (1969)
Year
of Election or Appointment: 2018
Vice
President
Mr.
Cohen also serves as Vice President of other funds. Mr. Cohen serves as Co-Head
of Equity (2018-present), a Director of Fidelity Management & Research
(Japan) Limited (investment adviser firm, 2016-present), and is an employee of
Fidelity Investments. Previously, Mr. Cohen served as Executive Vice President
of Fidelity SelectCo, LLC (2019), Head of Global Equity Research (2016-2018),
Chief Investment Officer - Equity and a Director of Fidelity Management &
Research (U.K.) Inc. (investment adviser firm, 2013-2015) and as a Director of
Fidelity Management & Research (Hong Kong) Limited (investment adviser firm,
2017).
Jonathan
Davis (1968)
Year
of Election or Appointment: 2013
Assistant
Treasurer
Mr.
Davis also serves as an officer of other funds. Mr. Davis serves as Assistant
Treasurer of FIMM, LLC (2021-present), FMR Capital, Inc. (2017-present), FD
Funds GP LLC (2021-present), FD Funds Holding LLC (2021-present), and FD Funds
Management LLC (2021-present); and is an employee of Fidelity Investments.
Previously, Mr. Davis served as Vice President and Associate General Counsel of
FMR LLC (diversified financial services company, 2003-2010).
Laura
M. Del Prato (1964)
Year
of Election or Appointment: 2018
Assistant
Treasurer
Ms.
Del Prato also serves as an officer of other funds. Ms. Del Prato serves as
Assistant Treasurer of FIMM, LLC (2021-present) and is an employee of Fidelity
Investments (2017-present). Previously, Ms. Del Prato served as President and
Treasurer of The North Carolina Capital Management Trust: Cash Portfolio and
Term Portfolio (2018-2020). Prior to joining Fidelity Investments, Ms. Del Prato
served as a Managing Director and Treasurer of the JPMorgan Mutual Funds
(2014-2017). Prior to JPMorgan, Ms. Del Prato served as a partner at Cohen Fund
Audit Services (accounting firm, 2012-2013) and KPMG LLP (accounting firm,
2004-2012).
Colm
A. Hogan (1973)
Year
of Election or Appointment: 2020
Assistant
Treasurer
Mr.
Hogan also serves as an officer of other funds. Mr. Hogan serves as Assistant
Treasurer of FIMM, LLC (2021-present) and FMR Capital, Inc. (2017-present) and
is an employee of Fidelity Investments (2005-present). Previously, Mr. Hogan
served as Deputy Treasurer of certain Fidelity ®
funds
(2016-2020) and Assistant Treasurer of certain Fidelity ®
funds
(2016-2018).
Pamela
R. Holding (1964)
Year
of Election or Appointment: 2018
Vice
President
Ms.
Holding also serves as Vice President of other funds. Ms. Holding serves as
Co-Head of Equity (2018-present) and is an employee of Fidelity Investments
(2013-present). Previously, Ms. Holding served as Executive Vice President of
Fidelity SelectCo, LLC (2019) and as Chief Investment Officer of Fidelity
Institutional Asset Management (2013-2018).
Cynthia
Lo Bessette (1969)
Year
of Election or Appointment: 2019
Secretary
and Chief Legal Officer (CLO)
Ms.
Lo Bessette also serves as an officer of other funds. Ms. Lo Bessette serves as
CLO, Secretary, and Senior Vice President of Fidelity Management & Research
Company LLC (investment adviser firm, 2019-present); CLO of Fidelity Management
& Research (Hong Kong) Limited, FMR Investment Management (UK) Limited, and
Fidelity Management & Research (Japan) Limited (investment adviser firms,
2019-present); Secretary of FD Funds GP LLC (2021-present), FD Funds Holding LLC
(2021-present), and FD Funds Management LLC (2021-present); and Assistant
Secretary of FIMM, LLC (2019-present). She is a Senior Vice President and Deputy
General Counsel of FMR LLC (diversified financial services company,
2019-present), and is an employee of Fidelity Investments. Previously, Ms. Lo
Bessette served as CLO, Secretary, and Senior Vice President of FMR Co., Inc.
(investment adviser firm, 2019); Secretary of Fidelity SelectCo, LLC and
Fidelity Investments Money Management, Inc. (investment adviser firms, 2019).
Prior to joining Fidelity Investments, Ms. Lo Bessette was Executive Vice
President, General Counsel (2016-2019) and Senior Vice President, Deputy General
Counsel (2015-2016) of OppenheimerFunds (investment management company) and
Deputy Chief Legal Officer (2013-2015) of Jennison Associates LLC (investment
adviser firm).
Chris
Maher (1972)
Year
of Election or Appointment: 2020
Deputy
Treasurer
Mr.
Maher also serves as an officer of other funds. Mr. Maher serves as
Assistant Treasurer of FIMM, LLC (2021-present) and FMR Capital, Inc.
(2017-present), and is an employee of Fidelity Investments (2008-present).
Previously, Mr. Maher served as Assistant Treasurer of certain funds
(2013-2020); Vice President of Asset Management Compliance (2013), Vice
President of the Program Management Group of FMR (investment adviser firm,
2010-2013), and Vice President of Valuation Oversight (2008-2010).
Jason
P. Pogorelec (1975)
Year
of Election or Appointment: 2020
Chief
Compliance Officer
Mr.
Pogorelec also serves as Chief Compliance Officer of other funds. Mr. Pogorelec
is a senior Vice President of Asset Management Compliance for Fidelity
Investments and is an employee of Fidelity Investments (2006-present).
Previously, Mr. Pogorelec served as Vice President, Associate General Counsel
for Fidelity Investments (2010-2020) and Assistant Secretary of certain Fidelity
funds (2015-2020).
Brett
Segaloff (1972)
Year
of Election or Appointment: 2021
Anti-Money
Laundering (AML) Officer
Mr.
Segaloff also serves as an AML Officer of other funds and other related
entities. He is Director, Anti-Money Laundering (2007-present) of FMR LLC
(diversified financial services company) and is an employee of Fidelity
Investments (1996-present).
Stacie
M. Smith (1974)
Year
of Election or Appointment: 2018
President
and Treasurer
Ms.
Smith also serves as an officer of other funds. Ms. Smith serves as Assistant
Treasurer of FIMM, LLC (2021-present) and FMR Capital, Inc. (2017-present), is
an employee of Fidelity Investments (2009-present), and has served in other fund
officer roles. Prior to joining Fidelity Investments, Ms. Smith served as Senior
Audit Manager of Ernst & Young LLP (accounting firm, 1996-2009). Previously,
Ms. Smith served as Assistant Treasurer (2013-2019) and Deputy Treasurer
(2013-2016) of certain Fidelity ®
funds.
Jim
Wegmann (1979)
Year
of Election or Appointment: 2019
Assistant
Treasurer
Mr.
Wegmann also serves as an officer of other funds. Mr. Wegmann serves as
Assistant Treasurer of FIMM, LLC (2021-present) and is an employee of Fidelity
Investments (2011-present). Previously, Mr. Wegmann served as Assistant
Treasurer of certain Fidelity ®
funds
(2019-2021).
Standing
Committees of the Trustees. The
Board of Trustees has established various committees to support the Independent
Trustees in acting independently in pursuing the best interests of the funds and
their shareholders. Currently, the Board of Trustees has 9 standing committees.
The members of each committee are Independent Trustees. Advisory Board members
may be invited to attend meetings of the committees.
The
Operations Committee is composed of all of the Independent Trustees, with Mr.
Thomas currently serving as Chair and Mr. Wiley serving as Vice Chair. The
committee serves as a forum for consideration of issues of importance to, or
calling for particular determinations by, the Independent Trustees. The
committee also considers matters involving potential conflicts of interest
between the funds and FMR and its affiliates and reviews proposed contracts and
the proposed continuation of contracts between the funds and FMR and its
affiliates, and reviews and makes recommendations regarding contracts with third
parties unaffiliated with FMR, including insurance coverage and custody
agreements. The committee also monitors additional issues including the nature,
levels and quality of services provided to shareholders and significant
litigation. The committee also has oversight of compliance issues not
specifically within the scope of any other committee. The committee is also
responsible for definitive action on all compliance matters involving the
potential for significant reimbursement by FMR.
The
Fair Value Oversight Committee is composed of Mses. Fuller (Chair) and Tomasky,
and Messrs. Donahue and Wiley. The Fair Value Oversight Committee oversees the
valuation of fund investments by the valuation designee, receives and reviews
related reports and information, and monitors matters of disclosure to the
extent required to fulfill its statutory responsibilities.
The
Board of Trustees has established two Fund Oversight Committees: the Equity I
Committee (composed of Ms. Tomasky (Chair) and Messrs. Smith, Bostick,
Donahue, and Thomas) and the Equity II Committee (composed of Messrs. Kennedy
(Chair), Dirks, Munoz, and Wiley, and Mses. Fuller and Kampling). Each committee
develops an understanding of and reviews the investment objectives, policies,
and practices of each fund under its oversight. Each committee also monitors
investment performance, compliance by each relevant fund with its investment
policies and restrictions and reviews appropriate benchmarks, competitive
universes, unusual or exceptional investment matters, the personnel and other
resources devoted to the management of each fund and all other matters bearing
on each fund's investment results. Each committee will review and recommend any
required action to the Board in respect of specific funds, including new funds,
changes in fundamental and non-fundamental investment policies and restrictions,
partial or full closing to new investors, fund mergers, fund name changes, and
liquidations of funds. The members of each committee may organize working groups
to make recommendations concerning issues related to funds that are within the
scope of the committee's review. These working groups report to the committee or
to the Independent Trustees, or both, as appropriate. Each working group may
request from FMR such information from FMR as may be appropriate to the working
group's deliberations.
The
Shareholder, Distribution, Brokerage and Proxy Voting Committee is composed of
Mses. Kampling (Chair) and Fuller and Messrs. Dirks, Smith, and Thomas.
Regarding shareholder services, the committee considers the structure and amount
of the funds' transfer agency fees and fees, including direct fees to investors
(other than sales loads), such as bookkeeping and custodial fees, and the nature
and quality of services rendered by FMR and its affiliates or third parties
(such as custodians) in consideration of these fees. The committee also
considers other non-investment management services rendered to the funds by FMR
and its affiliates, including pricing and bookkeeping services. The committee
monitors and recommends policies concerning the securities transactions of the
funds, including brokerage. The committee periodically reviews the policies and
practices with respect to efforts to achieve best execution, commissions paid to
firms supplying research and brokerage services or paying fund expenses, and
policies and procedures designed to assure that any allocation of portfolio
transactions is not influenced by the sale of fund shares. The committee also
monitors brokerage and other similar relationships between the funds and firms
affiliated with FMR that participate in the execution of securities
transactions. Regarding the distribution of fund shares, the committee considers
issues bearing on the various distribution channels employed by the funds,
including issues regarding Rule 18f-3 plans and related consideration of classes
of shares, sales load structures (including breakpoints), load waivers, selling
concessions and service charges paid to intermediaries, Rule 12b-1 plans,
contingent deferred sales charges, and finder's fees, and other means by which
intermediaries are compensated for selling fund shares or providing shareholder
servicing, including revenue sharing. The committee also considers issues
bearing on the preparation and use of advertisements and sales literature for
the funds, policies and procedures regarding frequent purchase of fund shares,
and selective disclosure of portfolio holdings. Regarding proxy voting, the
committee reviews the fund's proxy voting policies, considers changes to the
policies, and reviews the manner in which the policies have been applied. The
committee will receive reports on the manner in which proxy votes have been cast
under the proxy voting policies and reports on consultations between the fund's
investment advisers and portfolio companies concerning matters presented to
shareholders for approval. The committee will address issues relating to the
fund's annual voting report filed with the SEC. The committee will receive
reports concerning the implementation of procedures and controls designed to
ensure that the proxy voting policies are implemented in accordance with their
terms. The committee will consider FMR's recommendations concerning certain
non-routine proposals not covered by the proxy voting policies. The committee
will receive reports with respect to steps taken by FMR to assure that proxy
voting has been done without regard to any other FMR relationships, business or
otherwise, with that portfolio company. The committee will make recommendations
to the Board concerning the casting of proxy votes in circumstances where FMR
has determined that, because of a conflict of interest, the proposal to be voted
on should be reviewed by the Board.
The
Audit Committee is composed of Messrs. Donahue (Chair), Bostick, Kennedy, and
Smith, and Ms. Tomasky. All committee members must be able to read and
understand fundamental financial statements, including a company's balance
sheet, income statement, and cash flow statement. At least one committee member
will be an "audit committee financial expert" as defined by the SEC. The
committee meets separately at least annually with the funds' Treasurer, with the
funds' Chief Financial Officer, with personnel responsible for the internal
audit function of FMR LLC, with the funds' independent auditors, and with the
funds' CCO. The committee has direct responsibility for the appointment,
compensation, and oversight of the work of the independent auditors employed by
the funds. The committee assists the Trustees in fulfilling their responsibility
to oversee: (i) the systems relating to internal control over financial
reporting of the funds and the funds' service providers; (ii) the funds'
auditors and the annual audits of the funds' financial statements; (iii) the
financial reporting processes of the funds; (iv) the handling of whistleblower
reports relating to internal accounting and/or financial control matters; (v)
the accounting policies and disclosures of the funds; and (vi) studies of fund
profitability and other comparative analyses relevant to the board's
consideration of the investment management contracts for the funds. The
committee considers and acts upon (i) the provision by any independent auditor
of any non-audit services for any fund, and (ii) the provision by any
independent auditor of certain non-audit services to fund service providers and
their affiliates to the extent that such approval (in the case of this clause
(ii)) is required under applicable regulations of the SEC. In furtherance of the
foregoing, the committee has adopted (and may from time to time amend or
supplement) and provides oversight of policies and procedures for non-audit
engagements by independent auditors of the funds. The committee is responsible
for approving all audit engagement fees and terms for the funds and for
resolving disagreements between a fund and any independent auditor regarding any
fund's financial reporting. Auditors of the funds report directly to the
committee. The committee will obtain assurance of independence and objectivity
from the independent auditors, including a formal written statement delineating
all relationships between the auditor and the funds and any service providers
consistent with the rules of the Public Company Accounting Oversight Board. It
will discuss regularly and oversee the review of internal controls of and the
management of risks by the funds and their service providers with respect to
accounting and financial matters (including financial reporting relating to the
funds), including a review of: (i) any significant deficiencies or material
weaknesses in the design or operation of internal control over financial
reporting that are reasonably likely to adversely affect the funds' ability to
record, process, summarize, and report financial data; (ii) any change in the
fund's internal control over financial reporting that has materially affected,
or is reasonably likely to materially affect, the fund's internal control over
financial reporting; and (iii) any fraud, whether material or not, that involves
management or other employees who have a significant role in the funds' or
service providers' internal control over financial reporting. The committee will
also review periodically the funds' major exposures relating to internal control
over financial reporting and the steps that have been taken to monitor and
control such exposures. In connection to such reviews the committee will receive
periodic reports on the funds' service providers' internal control over
financial reporting. It will also review any correspondence with regulators or
governmental agencies or published reports that raise material issues regarding
the funds' financial statements or accounting policies. These matters may also
be reviewed by the Compliance Committee or the Operations Committee. The Chair
of the Audit Committee will coordinate with the Chairs of other committees, as
appropriate. The committee reviews at least annually a report from each
independent auditor describing any material issues raised by the most recent
internal quality control, peer review, or Public Company Accounting Oversight
Board examination of the auditing firm and any material issues raised by any
inquiry or investigation by governmental or professional authorities of the
auditing firm and in each case any steps taken to deal with such issues. The
committee will oversee and receive reports on the funds' financial reporting
process, will discuss with FMR, the funds' Treasurer, independent auditors and,
if appropriate, internal audit personnel of FMR LLC, their qualitative judgments
about the appropriateness and acceptability of accounting principles and
financial disclosure practices used or proposed for adoption by the funds. The
committee will review with FMR, the funds' Treasurer, independent auditor, and
internal audit personnel of FMR LLC and, as appropriate, legal counsel the
results of audits of the funds' financial statements.
The
Governance and Nominating Committee is composed of Messrs. Thomas (Chair),
Dirks, and Wiley. With respect to fund governance and board administration
matters, the committee periodically reviews procedures of the Board of Trustees
and its committees (including committee charters) and periodically reviews
compensation of Independent Trustees. The committee monitors corporate
governance matters and makes recommendations to the Board of Trustees on the
frequency and structure of the Board of Trustee meetings and on any other aspect
of Board procedures. It acts as the administrative committee under the
retirement plan for Independent Trustees who retired prior to December 30, 1996
and under the fee deferral plan for Independent Trustees. It reviews the
performance of legal counsel employed by the funds and the Independent Trustees.
On behalf of the Independent Trustees, the committee will make such findings and
determinations as to the independence of counsel for the Independent Trustees as
may be necessary or appropriate under applicable regulations or otherwise. The
committee is also responsible for Board administrative matters applicable to
Independent Trustees, such as expense reimbursement policies and compensation
for attendance at meetings, conferences and other events. The committee monitors
compliance with, acts as the administrator of, and makes determinations in
respect of, the provisions of the code of ethics and any supplemental policies
regarding personal securities transactions applicable to the Independent
Trustees. The committee monitors the functioning of each Board committee and
makes recommendations for any changes, including the creation or elimination of
standing or ad hoc Board committees. The committee monitors regulatory and other
developments to determine whether to recommend modifications to the committee's
responsibilities or other Trustee policies and procedures in light of rule
changes, reports concerning "best practices" in corporate governance, and other
developments in mutual fund governance. The committee reports regularly to the
Independent Trustees with respect to these activities. The committee recommends
that the Board establish such special or ad hoc Board committees as may be
desirable or necessary from time to time in order to address ethical, legal, or
other matters that may arise. The committee also oversees the annual
self-evaluation of the Board of Trustees and of each committee and establishes
procedures to allow it to exercise this oversight function. In conducting this
oversight, the committee shall address all matters that it considers relevant to
the performance of the Board of Trustees and shall report the results of its
evaluation to the Board of Trustees, including any recommended amendments to the
principles of governance, and any recommended changes to the funds' or the Board
of Trustees' policies, procedures, and structures. The committee reviews
periodically the size and composition of the Board of Trustees as a whole and
recommends, if necessary, measures to be taken so that the Board of Trustees
reflects the appropriate balance of knowledge, experience, skills, expertise,
and diversity required for the Board as a whole and contains at least the
minimum number of Independent Trustees required by law. The committee makes
nominations for the election or appointment of Independent Trustees and
non-management Members of any Advisory Board, and for membership on committees.
The committee shall have authority to retain and terminate any third-party
advisers, including authority to approve fees and other retention terms. Such
advisers may include search firms to identify Independent Trustee candidates and
board compensation consultants. The committee may conduct or authorize
investigations into or studies of matters within the committee's scope of
responsibilities, and may retain, at the funds' expense, such independent
counsel or other advisers as it deems necessary. The committee will consider
Independent Trustee candidates to the Board of Trustees recommended by
shareholders based upon the criteria applied to candidates presented to the
committee by a search firm or other source. Recommendations, along with
appropriate background material concerning the candidate that demonstrates his
or her ability to serve as an Independent Trustee of the funds, should be
submitted to the Chair of the committee at the address maintained for
communications with Independent Trustees. If the committee retains a search
firm, the Chair will generally forward all such submissions to the search firm
for evaluation. With respect to the criteria for selecting Independent Trustees,
it is expected that all candidates will possess the following minimum
qualifications: (i) unquestioned personal integrity; (ii) not an interested
person of the funds within the meaning of the 1940 Act; (iii) does not have a
material relationship (e.g., commercial, banking, consulting, legal, or
accounting) with the adviser, any sub-adviser, or their affiliates that could
create an appearance of lack of independence in respect of the funds; (iv) has
the disposition to act independently in respect of FMR and its affiliates and
others in order to protect the interests of the funds and all shareholders; (v)
ability to attend regularly scheduled meetings during the year; (vi)
demonstrates sound business judgment gained through broad experience in
significant positions where the candidate has dealt with management, technical,
financial, or regulatory issues; (vii) sufficient financial or accounting
knowledge to add value in the complex financial environment of the funds; (viii)
experience on corporate or other institutional oversight bodies having similar
responsibilities, but which board memberships or other relationships could not
result in business or regulatory conflicts with the funds; and (ix) capacity for
the hard work and attention to detail that is required to be an effective
Independent Trustee in light of the funds' complex regulatory, operational, and
marketing setting. The Governance and Nominating Committee may determine that a
candidate who does not have the type of previous experience or knowledge
referred to above should nevertheless be considered as a nominee if the
Governance and Nominating Committee finds that the candidate has additional
qualifications such that his or her qualifications, taken as a whole,
demonstrate the same level of fitness to serve as an Independent Trustee.
The
Compliance Committee is composed of Messrs. Wiley (Chair) and Munoz, and Mses.
Fuller and Kampling. The committee oversees the administration and operation of
the compliance policies and procedures of the funds and their service providers
as required by Rule 38a-1 of the 1940 Act. The committee is responsible for the
review and approval of policies and procedures relating to (i) provisions of the
Code of Ethics, (ii) anti-money laundering requirements, (iii) compliance with
investment restrictions and limitations, (iv) privacy, (v) recordkeeping, and
(vi) other compliance policies and procedures which are not otherwise delegated
to another committee. The committee has responsibility for recommending to the
Board the designation of a CCO of the funds. The committee serves as the primary
point of contact between the CCO and the Board, oversees the annual performance
review and compensation of the CCO, and makes recommendations to the Board with
respect to the removal of the appointed CCO, as appropriate. The committee
receives reports of significant correspondence with regulators or governmental
agencies, employee complaints or published reports which raise concerns
regarding compliance matters, and copies of significant non-routine
correspondence with the SEC. The committee receives reports from the CCO
including the annual report concerning the funds' compliance policies as
required by Rule 38a-1, quarterly reports in respect of any breaches of
fiduciary duty or violations of federal securities laws, and reports on any
other compliance or related matters that would otherwise be subject to periodic
reporting or that may have a significant impact on the funds. The committee will
recommend to the Board, what actions, if any, should be taken with respect to
such reports.
The
Research Committee is composed of all of the Independent Trustees, with Mr.
Bostick currently serving as Chair. The Committee's purpose is to assess the
quality of the investment research available to FMR's investment professionals.
As such, the Committee reviews information pertaining to the sources of such
research, the categories of research, the manner in which the funds bear the
cost of research, and FMR's internal research capabilities, including
performance metrics, interactions between FMR portfolio managers and research
analysts, and the professional quality of analysts in research careers. Where
necessary, the Committee recommends actions with respect to various reports
providing information on FMR's research function.
During
the fiscal year ended June 30, 2022, each committee held the number of meetings
shown in the table below:
|
COMMITTEE
|
NUMBER
OF MEETINGS HELD |
|
Operations
Committee |
11
|
|
Fair
Value Oversight Committee |
3
|
|
Equity
I Committee |
7
|
|
Equity
II Committee |
7
|
|
Shareholder,
Distribution, Brokerage, and Proxy Voting Committee |
7
|
|
Audit
Committee |
4
|
|
Governance
and Nominating Committee |
7
|
|
Compliance
Committee |
5
|
|
Research
Committee |
7
|
The
following table sets forth information describing the dollar range of equity
securities beneficially owned by each Trustee in each fund and in all funds in
the aggregate within the same fund family overseen by the Trustee for the
calendar year ended December 31, 2021.
Interested
Trustees
|
DOLLAR
RANGE OF
FUND
SHARES |
Bettina
Doulton |
Robert
Lawrence |
||
|
Fidelity®
Clean Energy ETF |
none
|
none
|
||
|
Fidelity®
Cloud Computing ETF |
none
|
none
|
||
|
Fidelity®
Crypto Industry and Digital Payments ETF |
none
|
none
|
||
|
Fidelity®
Digital Health ETF |
none
|
none
|
||
|
Fidelity®
Electric Vehicles and Future Transportation ETF |
none
|
none
|
||
|
Fidelity®
Metaverse ETF |
none
|
none
|
||
|
AGGREGATE
DOLLAR RANGE OF
FUND
SHARES IN ALL FUNDS
OVERSEEN
WITHIN FUND FAMILY |
over
$100,000 |
over
$100,000 |
Independent
Trustees
|
DOLLAR
RANGE OF
FUND
SHARES |
Thomas
P Bostick |
Dennis
J Dirks |
Donald
F Donahue |
Vicki
L Fuller |
|
Fidelity®
Clean Energy ETF |
none
|
none
|
none
|
none
|
|
Fidelity®
Cloud Computing ETF |
none
|
none
|
none
|
none
|
|
Fidelity®
Crypto Industry and Digital Payments ETF |
none
|
none
|
none
|
none
|
|
Fidelity®
Digital Health ETF |
none
|
none
|
none
|
none
|
|
Fidelity®
Electric Vehicles and Future Transportation ETF |
none
|
none
|
none
|
none
|
|
Fidelity®
Metaverse ETF |
none
|
none
|
none
|
none
|
|
AGGREGATE
DOLLAR RANGE OF
FUND
SHARES IN ALL FUNDS
OVERSEEN
WITHIN FUND FAMILY |
none
|
over
$100,000 |
over
$100,000 |
over
$100,000 |
|
DOLLAR
RANGE OF
FUND
SHARES |
Patricia
L Kampling |
Thomas
Kennedy |
Oscar
Munoz |
Garnett
A Smith |
|
Fidelity®
Clean Energy ETF |
none
|
none
|
none
|
none
|
|
Fidelity®
Cloud Computing ETF |
none
|
none
|
none
|
none
|
|
Fidelity®
Crypto Industry and Digital Payments ETF |
none
|
none
|
none
|
none
|
|
Fidelity®
Digital Health ETF |
none
|
none
|
none
|
none
|
|
Fidelity®
Electric Vehicles and Future Transportation ETF |
none
|
none
|
none
|
none
|
|
Fidelity®
Metaverse ETF |
none
|
none
|
none
|
none
|
|
AGGREGATE
DOLLAR RANGE OF
FUND
SHARES IN ALL FUNDS
OVERSEEN
WITHIN FUND FAMILY |
over
$100,000 |
over
$100,000 |
none
|
over
$100,000 |
|
DOLLAR
RANGE OF
FUND
SHARES |
David
M Thomas |
Susan
Tomasky |
Michael
E Wiley |
|
|
Fidelity®
Clean Energy ETF |
none
|
none
|
none
|
|
|
Fidelity®
Cloud Computing ETF |
none
|
none
|
none
|
|
|
Fidelity®
Crypto Industry and Digital Payments ETF |
none
|
none
|
none
|
|
|
Fidelity®
Digital Health ETF |
none
|
none
|
none
|
|
|
Fidelity®
Electric Vehicles and Future Transportation ETF |
none
|
none
|
none
|
|
|
Fidelity®
Metaverse ETF |
none
|
none
|
none
|
|
|
AGGREGATE
DOLLAR RANGE OF
FUND
SHARES IN ALL FUNDS
OVERSEEN
WITHIN FUND FAMILY |
over
$100,000 |
over
$100,000 |
over
$100,000 |
The
following table sets forth information describing the compensation of each
Trustee and Member of the Advisory Board (if any) for his or her services for
the fiscal year ended June 30, 2022, or calendar year ended December 31, 2021,
as applicable.
Compensation
Table (A)
|
AGGREGATE
COMPENSATION
FROM
A FUND |
Thomas
P Bostick (B)
|
Dennis
J Dirks
|
Donald
F Donahue
|
Vicki
L Fuller
| ||||
|
Fidelity®
Clean Energy ETF (C)
|
$
|
5
|
$
|
6
|
$
|
6
|
$
|
5
|
|
Fidelity®
Cloud Computing ETF (D)
|
$
|
5
|
$
|
5
|
$
|
5
|
$
|
5
|
|
Fidelity®
Crypto Industry and Digital Payments ETF (E)
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|
Fidelity®
Digital Health ETF (F)
|
$
|
3
|
$
|
3
|
$
|
3
|
$
|
3
|
|
Fidelity®
Electric Vehicles and Future Transportation ETF (G)
|
$
|
9
|
$
|
9
|
$
|
9
|
$
|
9
|
|
Fidelity®
Metaverse ETF (H)
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|
TOTAL
COMPENSATION
FROM
THE FUND COMPLEX (I)
|
$
|
313,333
|
$
|
495,000
|
$
|
536,000
|
$
|
470,000
|
|
AGGREGATE
COMPENSATION
FROM
A FUND |
Patricia
L Kampling
|
Thomas
Kennedy
|
Oscar
Munoz (J)
|
Garnett
A Smith
| ||||
|
Fidelity®
Clean Energy ETF (C)
|
$
|
5
|
$
|
5
|
$
|
5
|
$
|
5
|
|
Fidelity®
Cloud Computing ETF (D)
|
$
|
5
|
$
|
5
|
$
|
5
|
$
|
5
|
|
Fidelity®
Crypto Industry and Digital Payments ETF (E)
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|
Fidelity®
Digital Health ETF (F)
|
$
|
3
|
$
|
3
|
$
|
3
|
$
|
3
|
|
Fidelity®
Electric Vehicles and Future Transportation ETF (G)
|
$
|
9
|
$
|
9
|
$
|
9
|
$
|
9
|
|
Fidelity®
Metaverse ETF (H)
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|
TOTAL
COMPENSATION
FROM
THE FUND COMPLEX (I)
|
$
|
506,000
|
$
|
470,000
|
$
|
313,333
|
$
|
470,000
|
|
AGGREGATE
COMPENSATION
FROM
A FUND |
David
M Thomas
|
Susan
Tomasky
|
Michael
E Wiley
|
|||||
|
Fidelity®
Clean Energy ETF (C)
|
$
|
6
|
$
|
5
|
$
|
6
|
||
|
Fidelity®
Cloud Computing ETF (D)
|
$
|
6
|
$
|
5
|
$
|
5
|
||
|
Fidelity®
Crypto Industry and Digital Payments ETF (E)
|
$
|
0
|
$
|
0
|
$
|
0
|
||
|
Fidelity®
Digital Health ETF (F)
|
$
|
3
|
$
|
3
|
$
|
3
|
||
|
Fidelity®
Electric Vehicles and Future Transportation ETF (G)
|
$
|
11
|
$
|
9
|
$
|
9
|
||
|
Fidelity®
Metaverse ETF (H)
|
$
|
0
|
$
|
0
|
$
|
0
|
||
|
TOTAL
COMPENSATION
FROM
THE FUND COMPLEX (I)
|
$
|
570,000
|
$
|
528,917
|
$
|
495,000
|
|
(A)
Bettina Doulton, Robert A. Lawrence, and Peter S. Lynch are interested
persons and are compensated by Fidelity.
|
|
(B)
Mr. Bostick served as a Member of the Advisory Board of Fidelity Covington
Trust from May 1, 2021 through May 31, 2021. Mr. Bostick serves as a
Trustee of Fidelity Covington Trust effective June 1, 2021.
|
|
(C)
Estimated for the fund's first full fiscal year.
|
|
(D)
Estimated for the fund's first full fiscal year.
|
|
(E)
Estimated for the fund's first full fiscal year.
|
|
(F)
Estimated for the fund's first full fiscal year.
|
|
(G)
Estimated for the fund's first full fiscal year.
|
|
(H)
Estimated for the fund's first full fiscal year.
|
|
(I)
Reflects compensation received for the calendar year ended December 31,
2021 for 314 funds of 30 trusts (including Fidelity Central Investment
Portfolios LLC). Compensation figures include cash and may include amounts
elected to be deferred. Certain individuals elected voluntarily to defer a
portion of their compensation as follows: Donald F. Donahue, $291,125;
Vicki L. Fuller, $99,996; Patricia L. Kampling, $240,000; Thomas A.
Kennedy, $136,770; Garnett A. Smith, $273,540; and Susan Tomasky,
$180,000.
|
|
(J)
Mr. Munoz served as a Member of the Advisory Board of Fidelity Covington
Trust from May 1, 2021 through May 31, 2021. Mr. Munoz serves as a Trustee
of Fidelity Covington Trust effective June 1, 2021.
|
As
of September 22, 2022, the Trustees, Members of the Advisory Board (if any), and
officers of each fund owned, in the aggregate, less than 1% of each class's
total outstanding shares, with respect to each fund.
As
of September 22, 2022, the following owned of record and/or beneficially 5% or
more of the outstanding shares:
|
Fund
or Class Name |
Owner
Name |
City
|
State
|
Ownership
% |
|
Fidelity®
Clean Energy ETF |
NATIONAL
FINANCIAL SERVICES LLC |
NEW
YORK |
NY
|
79.71%
|
|
Fidelity®
Clean Energy ETF |
CHARLES
SCHWAB & CO., INC. |
SAN
FRANCISCO |
CA
|
6.62%
|
|
Fidelity®
Cloud Computing ETF |
NATIONAL
FINANCIAL SERVICES LLC |
NEW
YORK |
NY
|
67.26%
|
|
Fidelity®
Cloud Computing ETF |
CHARLES
SCHWAB & CO., INC. |
SAN
FRANCISCO |
CA
|
8.39%
|
|
Fidelity®
Cloud Computing ETF |
E*TRADE
SECURITIES LLC |
ARLINGTON
|
VA
|
7.67%
|
|
Fidelity®
Crypto Industry and Digital Payments ETF |
NATIONAL
FINANCIAL SERVICES LLC |
NEW
YORK |
NY
|
80.22%
|
|
Fidelity®
Digital Health ETF |
NATIONAL
FINANCIAL SERVICES LLC |
NEW
YORK |
NY
|
77.18%
|
|
Fidelity®
Digital Health ETF |
J.P.
MORGAN SECURITIES LLC |
BROOKLYN
|
NY
|
8.51%
|
|
Fidelity®
Electric Vehicles and Future Transportation ETF |
NATIONAL
FINANCIAL SERVICES LLC |
NEW
YORK |
NY
|
84.12%
|
|
Fidelity®
Metaverse ETF |
NATIONAL
FINANCIAL SERVICES LLC |
NEW
YORK |
NY
|
71.52%
|
|
Fidelity®
Metaverse ETF |
J.P.
MORGAN SECURITIES LLC |
BROOKLYN
|
NY
|
13.47%
|
|
Fidelity®
Metaverse ETF |
CHARLES
SCHWAB & CO., INC. |
SAN
FRANCISCO |
CA
|
5.82%
|
CONTROL
OF INVESTMENT ADVISERS
FMR
LLC, as successor by merger to FMR Corp., is the ultimate parent company of FMR.
The voting common shares of FMR LLC are divided into two series. Series B is
held predominantly by members of the Johnson family, including Abigail P.
Johnson, directly or through trusts, and is entitled to 49% of the vote on any
matter acted upon by the voting common shares. Series A is held predominantly by
non-Johnson family member employees of FMR LLC and its affiliates and is
entitled to 51% of the vote on any such matter. The Johnson family group and all
other Series B shareholders have entered into a shareholders' voting agreement
under which all Series B shares will be voted in accordance with the majority
vote of Series B shares. Under the 1940 Act, control of a company is presumed
where one individual or group of individuals owns more than 25% of the voting
securities of that company. Therefore, through their ownership of voting common
shares and the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a controlling group
with respect to FMR LLC.
At
present, the primary business activities of FMR LLC and its subsidiaries are:
(i) the provision of investment advisory, management, shareholder, investment
information and assistance and certain fiduciary services for individual and
institutional investors; (ii) the provision of securities brokerage services;
(iii) the management and development of real estate; and (iv) the investment in
and operation of a number of emerging businesses.
Geode,
a registered investment adviser, is a subsidiary of Geode Capital Holdings LLC.
Geode was founded in January 2001 to develop and manage quantitative investment
strategies and to provide advisory and sub-advisory services.
FMR,
Geode, Fidelity Distributors Company LLC (FDC), and the funds have adopted codes
of ethics under Rule 17j-1 of the 1940 Act that set forth employees' fiduciary
responsibilities regarding the funds, establish procedures for personal
investing, and restrict certain transactions. Employees subject to the codes of
ethics, including Fidelity and Geode investment personnel, may invest in
securities for their own investment accounts, including securities that may be
purchased or held by the funds.
MANAGEMENT
CONTRACTS
Each
fund has entered into a management contract with FMR, pursuant to which FMR
furnishes investment advisory and other services.
FMR
and the funds are seeking an exemptive order from the SEC that will permit FMR,
subject to the approval of the Board of Trustees, to enter into new or amended
sub-advisory agreements with one or more unaffiliated and affiliated
sub-advisers without obtaining shareholder approval of such agreements. The
funds' initial sole shareholder has approved the funds' use of this exemptive
order once issued by the SEC and the funds and FMR intend to rely on the
exemptive order when issued without seeking additional shareholder approval.
Subject to oversight by the Board of Trustees, FMR has the ultimate
responsibility to oversee the funds' sub-advisers and recommend their hiring,
termination, and replacement. In the event the Board of Trustees approves a
sub-advisory agreement with a new sub-adviser, shareholders will be provided
with information about the new sub-adviser and sub-advisory agreement.
Management
and Sub-Advisory Services. FMR
provides each fund with all necessary office facilities and personnel for
servicing the fund's investments, compensates all officers of each fund and all
Trustees who are interested persons of the trust or of FMR, and compensates all
personnel of each fund or FMR performing services relating to research,
statistical and investment activities.
In
addition, FMR or its affiliates, subject to the supervision of the Board of
Trustees, provide the management and administrative services necessary for the
operation of each fund. These services include providing facilities for
maintaining each fund's organization; supervising relations with custodians,
transfer and pricing agents, accountants, underwriters and other persons dealing
with each fund; preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the registration of
each fund's shares under federal securities laws and making necessary filings
under state securities laws; developing management and shareholder services for
each fund; and furnishing reports, evaluations and analyses on a variety of
subjects to the Trustees.
Geode
serves as sub-adviser of each fund. Under its management contract with each
fund, FMR acts as investment adviser. Under the sub-advisory agreement, and
subject to the supervision of the Board of Trustees, Geode directs the
investments of each fund in accordance with its investment objective, policies,
and limitations.
Management-Related
Expenses. Under
the terms of a fund's management contract, FMR, either itself or through an
affiliate, is responsible for payment of all operating expenses of the fund with
limited exceptions. Specific expenses payable by FMR include legal expenses,
fees of the custodian, auditor, and interested Trustees, a fund's proportionate
share of insurance premiums and Investment Company Institute dues, and the costs
of registering shares under federal securities laws and making necessary filings
under state securities laws. FMR also pays all fees associated with the transfer
agency services and pricing and bookkeeping services agreements.
FMR
pays all other expenses of a fund with the following exceptions: expenses for
typesetting, printing, and mailing proxy materials to shareholders, all other
expenses incidental to holding meetings of the fund's shareholders (including
proxy solicitation), fees and expenses of the Independent Trustees, interest,
taxes, and such non-recurring and/or extraordinary expenses as may arise,
including costs of any litigation to which the fund may be a party, and any
obligation it may have to indemnify its officers and Trustees with respect to
litigation. The fund shall pay its non-operating expenses, including brokerage
commissions and fees and expenses associated with the fund's securities lending
program, if applicable.
Management
Fees.
For
the services of FMR under each management contract, each fund pays FMR a monthly
management fee at the annual rate of 0.39% of the fund's average daily net
assets throughout the month.
The
following table shows the amount of management fees paid by a fund for the
fiscal year(s) ended June 30, 2022 to its current manager and prior affiliated
manager(s), if any.
|
Fund(s)
|
Fiscal
Years
Ended
|
Management
Fees
Paid
to
Investment
Adviser | |
|
Fidelity®
Clean Energy ETF |
2022
(A)
|
$
|
62,493
|
|
Fidelity®
Cloud Computing ETF |
2022
(A)
|
$
|
53,568
|
|
Fidelity®
Crypto Industry and Digital Payments ETF |
2022
(B)
|
$
|
7,004
|
|
Fidelity®
Digital Health ETF |
2022
(A)
|
$
|
28,338
|
|
Fidelity®
Electric Vehicles and Future Transportation ETF |
2022
(A)
|
$
|
107,019
|
|
Fidelity®
Metaverse ETF |
2022
(B)
|
$
|
7,046
|
|
(A)Fund
commenced operations on October 5, 2021.
|
|
(B)Fund
commenced operations on April 19, 2022.
|
FMR
may, from time to time, voluntarily reimburse all or a portion of a fund's or,
in the case of a multiple class fund, a class's operating expenses. FMR retains
the ability to be repaid for these expense reimbursements in the amount that
expenses fall below the limit prior to the end of the fiscal year.
Expense
reimbursements will increase returns, and repayment of the reimbursement will
decrease returns.
Sub-Adviser
- Geode.
Each
fund and FMR have entered
into sub-advisory agreement(s) with Geode. Pursuant to the
sub-advisory agreement(s), FMR has granted Geode investment management
authority as well as the authority to buy and sell securities.
Under
the terms of the sub-advisory agreement(s), for providing investment management
services to each fund, FMR, and not the fund, pays Geode fees at an annual
rate of 0.05% of the average daily net assets of the
fund.*
*
Calculated
monthly for each ETF, subject to individual fund minimums of: $0 (first year),
$25,000 (second year), and $50,000 (third and subsequent years).
The
following table shows the amount of sub-advisory fees paid by FMR and prior
affiliated managers, if any, on behalf of a fund, to Geode for the
fiscal year(s) ended June 30, 2022.
|
Fund
|
Fiscal
Years
Ended
|
Sub-Advisory
Fees
Paid
by FMR
to
Geode | |
|
Fidelity®
Clean Energy ETF |
2022
(A)
|
$
|
8,007
|
|
Fidelity®
Cloud Computing ETF |
2022
(A)
|
$
|
6,862
|
|
Fidelity®
Crypto Industry and Digital Payments ETF |
2022
(B)
|
$
|
887
|
|
Fidelity®
Digital Health ETF |
2022
(A)
|
$
|
3,629
|
|
Fidelity®
Electric Vehicles and Future Transportation ETF |
2022
(A)
|
$
|
13,715
|
|
Fidelity®
Metaverse ETF |
2022
(B)
|
$
|
893
|
|
(A)Fund
commenced operations on October 5, 2021.
|
|
(B)Fund
commenced operations on April 19, 2022.
|
Fidelity®
Clean Energy ETF, Fidelity® Cloud Computing ETF, Fidelity® Crypto Industry and
Digital Payments ETF, Fidelity® Digital Health ETF, Fidelity® Electric Vehicles
and Future Transportation ETF, and Fidelity® Metaverse ETF are managed by Geode,
a sub-adviser to each fund. Louis Bottari is a senior portfolio manager of each
fund and receives compensation for those services. Peter Matthew is a senior
portfolio manager of each fund and receives compensation for those services.
Payal Gupta is a portfolio manager of each fund and receives compensation for
those services. Robert Regan is a portfolio manager of each fund and receives
compensation for those services. Navid Sohrabi is a portfolio manager of each
fund and receives compensation for those services. As of June 30, 2022,
portfolio manager compensation generally consists of a fixed base salary, a
bonus that is based on both objective and subjective criteria, and, in certain
cases, participation in a profit-based compensation plan. A portion of each
portfolio manager's compensation may be deferred based on criteria established
by Geode.
Each
portfolio manager's base salary is determined annually by level of
responsibility and tenure at Geode. The primary component for determining each
portfolio manager's bonus is the pre-tax investment performance of the portfolio
manager's fund(s) and account(s) relative to a custom peer group, if applicable,
and relative to a benchmark index assigned to each fund or account. Performance
is measured over multiple measurement periods that eventually encompass periods
of up to five years. A portion of each portfolio manager's bonus is linked to
each fund's relative pre-tax investment performance measured against the fund's
benchmark index. A subjective component of each portfolio manager's bonus is
based on the portfolio manager's overall contribution to the management of
Geode, including recruiting, monitoring, and mentoring within the investment
management teams, as well as time spent assisting in firm promotion. Each
portfolio manager may also be compensated under a profit-based compensation
plan, which is primarily based on the profits of Geode.
A
portfolio manager's compensation plan can give rise to potential conflicts of
interest. A manager's base pay tends to increase with additional and more
complex responsibilities that include increased assets under management and a
portion of the bonus relates to firm promotion efforts, which together
indirectly link compensation to sales. Managing and providing research to
multiple accounts (including proprietary accounts) can give rise to potential
conflicts of interest if the accounts have different objectives, benchmarks,
time horizons, and fees as a portfolio manager must allocate time and investment
ideas across multiple accounts. Securities selected for accounts other than the
fund may outperform the securities selected for the fund.
In
addition to managing each fund's investment portfolio, each portfolio manager
also manages other investment portfolios and accounts on behalf of Geode or its
affiliates.
The
following table provides information relating to other accounts managed by Louis
Bottari as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Clean Energy ETF ($28 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Clean Energy ETF
beneficially owned by Mr. Bottari was none.
The
following table provides information relating to other accounts managed by Payal
Gupta as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Clean Energy ETF ($28 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Clean Energy ETF
beneficially owned by
Ms.
Gupta was none.
The
following table provides information relating to other accounts managed by Peter
Matthew as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Clean Energy ETF ($28 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Clean Energy ETF
beneficially owned by Mr. Matthew was none.
The
following table provides information relating to other accounts managed by Bob
Regan as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Clean Energy ETF ($28 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Clean Energy ETF
beneficially owned by Mr. Regan was none.
The
following table provides information relating to other accounts managed by Navid
Sohrabi as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Clean Energy ETF ($28 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Clean Energy ETF
beneficially owned by Mr. Sohrabi was none.
The
following table provides information relating to other accounts managed by Louis
Bottari as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Cloud Computing ETF ($18 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Cloud Computing ETF
beneficially owned by Mr. Bottari was none.
The
following table provides information relating to other accounts managed by Payal
Gupta as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Cloud Computing ETF ($18 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Cloud Computing ETF
beneficially owned by Ms. Gupta was none.
The
following table provides information relating to other accounts managed by Peter
Matthew as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Cloud Computing ETF ($18 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Cloud Computing ETF
beneficially owned by Mr. Matthew was none.
The
following table provides information relating to other accounts managed by Bob
Regan as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Cloud Computing ETF ($18 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Cloud Computing ETF
beneficially owned by Mr. Regan was none.
The
following table provides information relating to other accounts managed by Navid
Sohrabi as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Cloud Computing ETF ($18 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Cloud Computing ETF
beneficially owned by Mr. Sohrabi was none.
The
following table provides information relating to other accounts managed by Louis
Bottari as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Crypto Industry and Digital Payments ETF ($13 (in millions)
assets managed). The amount of assets managed of the fund reflects trades and
other assets as of the close of the business day prior to the fund's fiscal
year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Crypto Industry and
Digital Payments ETF beneficially owned by Mr. Bottari was none.
The
following table provides information relating to other accounts managed by Payal
Gupta as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Crypto Industry and Digital Payments ETF ($13 (in millions)
assets managed). The amount of assets managed of the fund reflects trades and
other assets as of the close of the business day prior to the fund's fiscal
year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Crypto Industry and
Digital Payments ETF beneficially owned by Ms. Gupta was none.
The
following table provides information relating to other accounts managed by Peter
Matthew as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Crypto Industry and Digital Payments ETF ($13 (in millions)
assets managed). The amount of assets managed of the fund reflects trades and
other assets as of the close of the business day prior to the fund's fiscal
year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Crypto Industry and
Digital Payments ETF beneficially owned by Mr. Matthew was none.
The
following table provides information relating to other accounts managed by Bob
Regan as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Crypto Industry and Digital Payments ETF ($13 (in millions)
assets managed). The amount of assets managed of the fund reflects trades and
other assets as of the close of the business day prior to the fund's fiscal
year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Crypto Industry and
Digital Payments ETF beneficially owned by Mr. Regan was none.
The
following table provides information relating to other accounts managed by Navid
Sohrabi as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Crypto Industry and Digital Payments ETF ($13 (in millions)
assets managed). The amount of assets managed of the fund reflects trades and
other assets as of the close of the business day prior to the fund's fiscal
year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Crypto Industry and
Digital Payments ETF beneficially owned by Mr. Sohrabi was none.
The
following table provides information relating to other accounts managed by Louis
Bottari as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Digital Health ETF ($9 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Digital Health ETF
beneficially owned by Mr. Bottari was none.
The
following table provides information relating to other accounts managed by Payal
Gupta as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Digital Health ETF ($9 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Digital Health ETF
beneficially owned by Ms. Gupta was none.
The
following table provides information relating to other accounts managed by Peter
Matthew as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Digital Health ETF ($9 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Digital Health ETF
beneficially owned by Mr. Matthew was none.
The
following table provides information relating to other accounts managed by Bob
Regan as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Digital Health ETF ($9 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Digital Health ETF
beneficially owned by Mr. Regan was none.
The
following table provides information relating to other accounts managed by Navid
Sohrabi as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Digital Health ETF ($9 (in millions) assets managed). The
amount of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Digital Health ETF
beneficially owned by Mr. Sohrabi was none.
The
following table provides information relating to other accounts managed by Louis
Bottari as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Electric Vehicles and Future Transportation ETF ($38 (in
millions) assets managed). The amount of assets managed of the fund reflects
trades and other assets as of the close of the business day prior to the
fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Electric Vehicles and
Future Transportation ETF beneficially owned by Mr. Bottari was
none.
The
following table provides information relating to other accounts managed by Payal
Gupta as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Electric Vehicles and Future Transportation ETF ($38 (in
millions) assets managed). The amount of assets managed of the fund reflects
trades and other assets as of the close of the business day prior to the
fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Electric Vehicles and
Future Transportation ETF beneficially owned by Ms. Gupta was none.
The
following table provides information relating to other accounts managed by Peter
Matthew as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Electric Vehicles and Future Transportation ETF ($38 (in
millions) assets managed). The amount of assets managed of the fund reflects
trades and other assets as of the close of the business day prior to the
fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Electric Vehicles and
Future Transportation ETF beneficially owned by Mr. Matthew was
none.
The
following table provides information relating to other accounts managed by Bob
Regan as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Electric Vehicles and Future Transportation ETF ($38 (in
millions) assets managed). The amount of assets managed of the fund reflects
trades and other assets as of the close of the business day prior to the
fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Electric Vehicles and
Future Transportation ETF beneficially owned by Mr. Regan was none.
The
following table provides information relating to other accounts managed by Navid
Sohrabi as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Electric Vehicles and Future Transportation ETF ($38 (in
millions) assets managed). The amount of assets managed of the fund reflects
trades and other assets as of the close of the business day prior to the
fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Electric Vehicles and
Future Transportation ETF beneficially owned by Mr. Sohrabi was
none.
The
following table provides information relating to other accounts managed by Louis
Bottari as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Metaverse ETF ($11 (in millions) assets managed). The amount
of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Metaverse ETF
beneficially owned by Mr. Bottari was none.
The
following table provides information relating to other accounts managed by Payal
Gupta as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Metaverse ETF ($11 (in millions) assets managed). The amount
of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Metaverse ETF
beneficially owned by Ms. Gupta was none.
The
following table provides information relating to other accounts managed by Peter
Matthew as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Metaverse ETF ($11 (in millions) assets managed). The amount
of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Metaverse ETF
beneficially owned by Mr. Matthew was none.
The
following table provides information relating to other accounts managed by Bob
Regan as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
9
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,407
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Metaverse ETF ($11 (in millions) assets managed). The amount
of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Metaverse ETF
beneficially owned by Mr. Regan was none.
The
following table provides information relating to other accounts managed by Navid
Sohrabi as of June 30, 2022:
|
Registered
Investment Companies
*
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
| |||
|
Number
of Accounts Managed |
81
|
87
|
8
| ||
|
Number
of Accounts Managed with Performance-Based Advisory Fees |
none
|
none
|
none
| ||
|
Assets
Managed (in millions) |
$748,212
|
$72,694
|
$3,175
| ||
|
Assets
Managed with Performance-Based Advisory Fees (in millions)
|
none
|
none
|
none
|
*
Includes Fidelity® Metaverse ETF ($11 (in millions) assets managed). The amount
of assets managed of the fund reflects trades and other assets as of
the close of the business day prior to the fund's fiscal year-end.
As
of June 30, 2022, the dollar range of shares of Fidelity® Metaverse ETF
beneficially owned by Mr. Sohrabi was none.
PROXY
VOTING GUIDELINES
|
Geode
Proxy Voting Policies
As
an investment adviser, Geode holds voting authority for securities in many
of the client accounts that it manages. Geode takes seriously its
responsibility to monitor events affecting securities in those client
accounts and to exercise its voting authority with respect to those
securities in the best interests of its clients (as well as shareholders
of mutual funds for which it serves as adviser or sub-adviser). The
purposes of these proxy voting policies are to (1) establish a framework
for Geode's analysis and decision-making with respect to proxy voting and
(2) set forth operational procedures for Geode's exercise of proxy voting
authority.
Overview
Geode
anticipates that, based on its current business model, it will manage the
vast majority of assets under its management using passive investment
management techniques, such as indexing. Geode also manages funds and
separate accounts using active investment management techniques, primarily
employing quantitative investment strategies.
Geode
will engage established commercial proxy advisory firms for comprehensive
analysis, research and voting recommendations, particularly for matters
that may be controversial or require additional analysis under these proxy
voting policies.
Geode
may determine to follow or reject any recommendation based on the research
and analysis provided by proxy advisory firms or on any independent
research and analysis obtained or generated by Geode. However, Geode has
retained a third-party proxy voting service (the "Agent") to affect votes
based on the customized policies established by Geode and maintain records
of all of Geode's proxy votes. In limited instances where the proxy voting
policies do not address the specific matter, the Agent will refer the
ballot back to Geode. For ballots related to proxy contests, mergers,
acquisitions and other organizational transactions, Geode may determine it
is appropriate to conduct a company specific evaluation. In cases of
proxies not voted by the Agent, the ultimate voting decision and
responsibility rests with Geode Proxy. Geode's Operations Committee
oversees the exercise of voting authority under these proxy voting
policies.
Due
to its focused business model and the number of investments that Geode
will make for its clients (particularly pursuant to its indexing
strategy), Geode does not anticipate that actual or potential conflicts of
interest are likely to occur in the ordinary course of its business.
However, Geode believes it is essential to avoid having conflicts of
interest affect its objective of voting in the best interests of its
clients. Therefore, in the event that members of the Operations Committee,
the Agent or any other person involved in the analysis or voting of
proxies has knowledge of, or has reason to believe there may exist, any
potential relationship, business or otherwise, between the portfolio
company subject to the proxy vote and Geode (or any affiliate of Geode) or
their respective directors, officers, employees or agents, such person
shall notify the other members of the Operations Committee. Geode will
analyze and address such potential conflict of interest, consulting with
outside counsel, as appropriate. In the case of an actual conflict of
interest, on the advice of counsel, Geode expects that the independent
directors of Geode will consider the matter and may (1) determine that
there is no conflict of interest (or that reasonable measures have been
taken to remedy or avoid any conflict of interest) that would prevent
Geode from voting the applicable proxy, (2) abstain, (3) cause authority
to be delegated to the Agent or a similar special fiduciary to vote the
applicable proxy or (4) recommend other methodology for mitigating the
conflict of interest, if deemed appropriate (e.g., echo voting).
Geode
has established the specific proxy voting policies that are summarized
below to maximize the value of investments in its clients' accounts, which
it believes will be furthered through (1) accountability of a company's
management and directors to its shareholders, (2) alignment of the
interests of management with those of shareholders (including through
compensation, benefit and equity ownership programs), and (3) increased
disclosure of a company's business and operations. Geode reserves the
right to override any of its proxy voting policies with respect to a
particular shareholder vote when such an override is, in Geode's best
judgment, consistent with the overall principle of voting proxies in the
best long-term economic interests of Geode's clients.
Policies
All
proxy votes shall be considered and made in a manner consistent with the
best interests of Geode's clients (as well as shareholders of mutual fund
clients) without regard to any other relationship, business or otherwise,
between the portfolio company subject to the proxy vote and Geode or its
affiliates. As a general matter, (1) proxies will be voted FOR incumbent
members of a board of directors and FOR routine management proposals,
except as otherwise addressed under these policies; (2) shareholder and
non-routine management proposals addressed by these policies will be voted
as provided in these policies; and (3) shareholder and non-routine
management proposals not addressed by these policies will be evaluated by
Geode Proxy based on fundamental analysis and/or research and
recommendations provided by the Agent and other third-party proxy advisory
firms.
When
voting the securities of non-US issuers, Geode will evaluate proposals in
accordance with these policies but will also take local market standards
and best practices into consideration. Geode may also limit or modify its
voting at certain non-US meetings (e.g., if shares are required to be
blocked or reregistered in connection with voting).
Geode's
specific policies are as follows:
I.
Election of Directors
Geode
will generally vote FOR incumbent members of a board of directors
except:
•
Attendance.
The
incumbent board member failed to attend at least 75% of meetings in the
previous year and does not provide a reasonable explanation.
•
Independent
Directors. Nominee
is not independent and full board comprises less than a majority of
independents. Nominee is not independent and sits on the audit,
compensation or nominating committee.
•
Director
Responsiveness. The
board failed to act on shareholder proposals that received approval by
Geode and a majority of the votes cast in the previous year. The board
failed to act on takeover offers where Geode and a majority of
shareholders tendered their shares. At the previous board election,
directors opposed by Geode received more than 50 percent withhold/against
votes of the shares cast, and the company failed to address the issue(s)
that caused the high withhold/against vote.
•
Golden
Parachutes. Incumbent
members of the compensation committee adopted or renewed an excessive
golden parachute within the past year.
•
Gender
Diversity. If
there are no women on the Board unless the Board has made a firm
commitment to return to a gender-diverse status when there was a woman on
the Board at the preceding annual meeting.
•
Overboarding.
The
Director is a CEO and sits on the Board of more than two public companies
besides his or her own; or a non-CEO Director who sits on more than five
public company boards.
•
In Other
Circumstances when
a member of the board has acted in a manner inconsistent with the
interests of shareholders of a company whose securities are held in client
accounts.
II.
Majority Election. Unless
a company has a policy achieving a similar result, Geode will generally
vote in favor of a proposal calling for directors to be elected by a
majority of votes cast in a board election provided that the plurality
vote applies when there are more nominees than board seats.
III.
Say on Pay (non-binding).
•
Advisory
Vote on Executive Compensation. Geode
will generally vote AGAINST advisory vote when: (1) there is a significant
misalignment between executive pay and company performance; (2) the
company maintains significant problematic pay practices; or (3) the board
exhibits a significant level of poor communication and responsiveness to
shareholders.
•
Frequency
Vote. Geode
will generally vote FOR having an advisory vote on executive compensation
every year.
•
Advisory
Vote on Golden Parachute. Geode
will vote AGAINST excessive change-in-control severance payments.
IV.
Vote AGAINST Anti-Takeover
Proposals ,
including:
•
Addition
of Special Interest Directors to
the board.
•
Authorization
of "Blank Check" Preferred Stock. Geode
will vote FOR proposals to require shareholder approval for the
distribution of preferred stock except for acquisitions and raising
capital in the ordinary course of business.
•
Classification
of Boards, Geode
will vote FOR proposals to de-classify boards.
•
Fair
Price Amendments, other
than those that consider only a two-year price history and are not
accompanied by other anti-takeover measures.
•
Golden
Parachutes, that
Geode deems to be excessive in the event of change-in-control.
•
Poison
Pills. Adoption
or extension of a Poison Pill without shareholder approval will result in
our voting AGAINST the election of incumbents or a management slate in the
concurrent or next following vote on the election of directors, provided
the matter will be considered if (a) the board has adopted a Poison Pill
with a sunset provision; (b) the Pill is linked to a business strategy
that will result in greater value for the shareholders; (c) the term is
less than three years; (d) the Pill includes a qualifying offer clause; or
(e) shareholder approval is required to reinstate the expired Pill. Geode
will vote FOR shareholder proposals requiring or recommending that
shareholders be given an opportunity to vote on the adoption of poison
pills.
•
Reduction
or Limitation of Shareholder Rights (
e.g.
,
action by written consent, ability to call meetings, or remove directors).
•
Reincorporation
in
another state (when accompanied by Anti-Takeover Provisions, including
increased statutory anti-takeover provisions). Geode will vote FOR
reincorporation in another state when not accompanied by such
anti-takeover provisions.
•
Requirements
that the Board Consider Non-Financial Effects of
merger and acquisition proposals.
•
Requirements
regarding Size, Selection and Removal of the Board that
are likely to have an anti-takeover effect (although changes with
legitimate business purposes will be evaluated).
•
Supermajority
Voting Requirements (i.e.,
typically 2/3 or greater) for boards and shareholders. Geode will vote FOR
proposals to eliminate supermajority voting requirements.
•
Transfer
of Authority from Shareholders to Directors.
V.
Vote FOR proposed
amendments to a company's certificate of incorporation or by-laws that
enable the company to Opt
Out
of the Control Shares Acquisition Statutes.
VI.
Vote AGAINST the
introduction of new classes of Stock
with Differential Voting Rights.
VII.
Vote AGAINST introduction
and FOR elimination of Cumulative
Voting Rights, except
in certain instances where it is determined not to enhance shareholders'
interests.
VIII.
Vote FOR elimination
of Preemptive
Rights.
IX.
Vote FOR Anti-Greenmail
proposals
so long as they are not part of anti-takeover provisions (in which case
the vote will be AGAINST).
X.
Vote FOR charter
and by-law amendments expanding the Indemnification
of Directors to
the maximum extent permitted under Delaware law (regardless of the state
of incorporation) and vote AGAINST
charter
and by-law amendments completely Eliminating
Directors' Liability for Breaches of Care.
XI.
Vote FOR proposals
to adopt Confidential
Voting and Independent Vote Tabulation practices.
XII.
Vote FOR Open-Market
Stock
Repurchase Programs ,
unless there is clear evidence of past abuse of the authority; the plan
contains no safeguards against selective buybacks, or the authority can be
used as an anti-takeover mechanism.
XIII.
Vote FOR management
proposals to implement a Reverse
Stock Split when
the number of authorized shares will be proportionately reduced or the
Reverse Stock Split is necessary to avoid de-listing.
XIV.
Vote FOR management
proposals to Reduce
the Par Value of
common stock unless the proposal may facilitate an anti-takeover device or
other negative corporate governance action.
XV.
Vote FOR the
Issuance
of Large Blocks of Stock if
such proposals have a legitimate business purpose and do not result in
dilution of greater than 20%. However, a company's specific circumstances
and market practices may be considered in determining whether the proposal
is consistent with shareholders' interests.
XVI.
Vote AGAINST Excessive
Increases in Common Stock. Vote
AGAINST increases in authorized common stock that would result in
authorized capital in excess of three times the company's shares
outstanding and reserved for legitimate purposes. For non-U.S. securities
with conditional capital requests, vote AGAINST issuances of shares with
preemptive rights in excess of 100% of the company's current shares
outstanding. Special requests will be evaluated, taking company-specific
circumstances into account.
XVII.
Vote AGAINST the
adoption of or amendment to authorize additional shares under a
Stock
Option Plan if:
•
The stock
option plan includes
evergreen
provisions, which
provides for an automatic allotment of equity compensation every year.
•
The dilution
effect of
the shares authorized under the plan (including by virtue of any
"evergreen" or replenishment provision), plus the shares reserved for
issuance pursuant to all other option or restricted stock plans, is
greater
than 10%. However,
dilution may be increased to 15% for small capitalization companies, and
20% for micro capitalization companies, respectively. If the plan fails
this test, the dilution effect may be evaluated relative to any unusual
factor involving the company.
•
The offering
price of options is less than 100% of fair market value on
the date of grant, except that the offering price may be as low as 85% of
fair market value if the discount is expressly granted in lieu of salary
or cash bonus, except that a modest number of shares (limited to 5% for a
large capitalization company and 10% for small and micro capitalization
companies) may be available for grant to employees and directors under the
plan if the grant is made by a compensation committee composed entirely of
independent directors (the "De Minimis Exception").
•
The
plan is administered by (1)
a compensation
committee not comprised entirely of independent directors or
(2) a board
of directors not comprised of a majority of independent directors,
provided
that a plan is acceptable if it satisfies the De Minimis Exception.
•
The plan's
terms allow repricing of underwater options, or the board/committee has
repriced options outstanding under the plan in the past two years without
shareholder approval, unless
by the express terms of the plan or a board resolution such repricing is
rarely used (and then only to maintain option value due to extreme
circumstances beyond management's control) and is within the limits of the
De Minimis Exception.
•
Liberal
Definition of Change in Control: the
plan provides that the vesting of equity awards may accelerate even though
an actual change in control may not occur.
XVIII.
Vote AGAINST the
election of incumbent members of the compensation committee or a
management slate in the concurrent or next following vote on the election
of directors if, within the last year and without shareholder approval,
the company's board of directors or compensation committee has
repriced
outstanding options .
XIX.
Evaluate proposals to Reprice
Outstanding Stock Options ,
taking
into account such factors as: (1) whether the repricing proposal excludes
senior management and directors; (2) whether the options proposed to be
repriced exceeded the dilution thresholds described in these current proxy
voting policies when initially granted; (3) whether the repricing proposal
is value neutral to shareholders based upon an acceptable options pricing
model; (4) the company's relative performance compared to other companies
within the relevant industry or industries; (5) economic and other
conditions affecting the relevant industry or industries in which the
company competes; and (6) other facts or circumstances relevant to
determining whether a repricing proposal is consistent with the interests
of shareholders.
XX.
Vote AGAINST adoption
of or amendments to authorize additional shares for Restricted
Stock Awards ("RSA")
if:
•
The dilution
effect of
the shares authorized under the plan, plus the shares reserved for
issuance pursuant to all other option or restricted stock plans, is
greater
than 10%. However,
dilution may be increased to 15% for small capitalization companies, and
20% for micro capitalization companies, respectively. If the plan fails
this test, the dilution effect may be evaluated relative to any unusual
factor involving the company.
XXI.
Vote AGAINST Omnibus
Stock Plans if
one or more component violates any of the criteria applicable to Stock
Option Plans or RSAs under these proxy voting policies, unless such
component is de minimis. In the case of an omnibus stock plan, the
dilution limits applicable to Stock Option Plans or RSAs under these proxy
voting policies will be measured against the total number of shares under
all components of such plan.
XXII.
Vote AGAINST Employee
Stock Purchase Plans if
the plan violates any of the relevant criteria applicable to Stock Option
Plans or RSAs under these proxy voting policies, except that (1) the
minimum stock purchase price may be equal to or greater than 85% of the
stock's fair market value if the plan constitutes a reasonable effort to
encourage broad based participation in the company's equity, and (2) in
the case of non-U.S. company stock purchase plans, the minimum stock
purchase price may be equal to the prevailing "best practices," as
articulated by the Agent, provided that the minimum stock purchase price
must be at least 75% of the stock's fair market value.
XXIII.
Vote AGAINST Stock
Awards (other
than stock options and RSAs) unless it is determined they are identified
as being granted to officers/directors in lieu of salary or cash bonus,
subject to number of shares being reasonable.
XXIV.
Vote AGAINST equity vesting acceleration programs or
amendments to authorize additional shares under such programs if the
program provides for the acceleration of vesting of equity awards even
though an actual change in control may not occur.
XXV.
Vote FOR Employee
Stock Ownership Plans ("ESOPs")
of non-leveraged ESOPs, and
in the case of leveraged ESOPs, giving consideration to the company's
state of incorporation, existence of supermajority vote rules in the
charter, number of shares authorized for the ESOP, and number of shares
held by insiders. Geode may also examine where the ESOP shares are
purchased and the dilution effect of the purchase. Geode will vote AGAINST
a leveraged ESOP if all outstanding loans are due immediately upon a
change in control.
XXVI.
Vote AGAINST management or shareholder proposals
on other Compensation
Plans or Practices if
such plans or practices are Inconsistent
with the Interests of Shareholders. In
addition, Geode may vote AGAINST the election of incumbents or a
management slate in the concurrent or next following vote on the election
of directors if Geode believes a board has approved executive compensation
arrangements inconsistent with the interests of shareholders.
XXVII.
Environmental and Social Proposals .
Evaluate each proposal related to environmental and social issues
(including political contributions). Generally, Geode expects to vote with
management's recommendation on shareholder proposals concerning
environmental or social issues, as Geode believes management and the board
are ordinarily in the best position to address these matters. Geode may
support certain shareholder environmental and social proposals that
request additional disclosures from companies which may provide material
information to the investment management process, or where Geode otherwise
believes support will help maximize shareholder value. Geode may take
action against the re-election of board members if there are serious
concerns over ESG practices or the board failed to act on related
shareholder proposals that received approval by Geode and a majority of
the votes cast in the previous year.
XXVIII.
Geode will generally vote AGAINST shareholder proposals seeking to
establish proxy access. Geode
will evaluate management proposals on proxy access. Geode will evaluate
shareholder proposals seeking to amend an existing proxy access right.
XXIX.
Shares of Investment Companies.
•
For institutional accounts, Geode will generally vote in favor of
proposals recommended by the underlying funds' Board of Trustees, unless
voting is not permitted under applicable laws and regulations.
•
For retail managed accounts, Geode will employ echo voting when voting
shares. To avoid certain potential conflicts of interest, if an investment
company has a shareholder meeting, Geode would vote their shares in the
investment company in the same proportion as the votes of the other
shareholders of the investment company. |
|
To
view a fund's proxy voting record for the most recent 12-month period
ended June 30, if applicable, visit www.fidelity.com/proxyvotingresults or
visit the SEC's web site at www.sec.gov. |
DISTRIBUTION
SERVICES
Each
fund has entered into a distribution agreement with FDC, an affiliate of FMR.
The principal business address of FDC is 900 Salem Street, Smithfield, Rhode
Island 02917. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the Financial Industry Regulatory Authority,
Inc.
A
fund's distribution agreement calls for FDC to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
funds, which are continuously offered.
Promotional
and administrative expenses in connection with the offer and sale of shares are
paid by FMR.
The
Trustees have approved Distribution and Service Plans with
respect to shares of each fund (the Plans) pursuant to Rule 12b-1 under the 1940
Act (the Rule).
The
Rule provides in substance that a fund may not engage directly or indirectly in
financing any activity that is primarily intended to result in the sale of
shares of the fund except pursuant to a plan approved on behalf of the fund
under the Rule.
The
Plans, as approved by the Trustees, allow shares of the funds and/or FMR to
incur certain expenses that might be considered to constitute indirect payment
by the funds of distribution expenses.
The
Plan adopted for each fund or class, as applicable, is described in the
prospectus.
Under
each Plan, if the payment of management fees by the fund to FMR is deemed to be
indirect financing by the fund of the distribution of its shares, such payment
is authorized by the Plan.
While
each fund will not make direct payments for distribution or shareholder support
services, each Plan specifically recognizes that FMR may use its management fee
revenue, as well as its past profits or its other resources, to pay FDC for
expenses incurred in connection with providing services intended to result in
the sale of shares of the fund and/or shareholder support services. In addition,
each Plan provides that FMR, directly or through FDC, may pay significant
amounts to intermediaries that provide those services.
Currently,
the Board of Trustees has authorized such payments for shares of each
fund.
Prior
to approving each Plan, the Trustees carefully considered all pertinent factors
relating to the implementation of the Plan, and determined that there is a
reasonable likelihood that the Plan will benefit the fund or class, as
applicable, and its shareholders.
In
particular, the Trustees noted that each Plan does not authorize payments by
shares of a fund other than those made to FMR under its management contract with
the fund.
To
the extent that each Plan gives FMR and FDC greater flexibility in connection
with the distribution of shares, additional sales of shares or stabilization of
cash flows may result.
Furthermore,
certain shareholder support services may be provided more effectively under the
Plans by local entities with whom shareholders have other relationships.
FDC
or an affiliate may compensate, or upon direction make payments for certain
retirement plan expenses to intermediaries. A number of factors are considered
in determining whether to pay these additional amounts. Such factors may
include, without limitation, the level or type of services provided by the
intermediary, the level or expected level of assets or sales of shares, and
other factors. In addition to such payments, FDC or an affiliate may offer other
incentives such as sponsorship of educational or client seminars relating to
current products and issues, payments or reimbursements for travel and related
expenses associated with due diligence trips that an intermediary may undertake
in order to explore possible business relationships with affiliates of FDC,
and/or payments of costs and expenses associated with attendance at seminars,
including travel, lodging, entertainment, and meals. Certain of the payments
described above may be significant to an intermediary. As permitted by SEC and
Financial Industry Regulatory Authority rules and other applicable laws and
regulations, FDC or an affiliate may pay or allow other incentives or payments
to intermediaries.
FDC
or an affiliate may also make payments to banks, broker-dealers and other
service-providers (who may be affiliated with FDC) for distribution-related
activities and/or shareholder services. If you have purchased shares of a fund
through an investment professional, please speak with your investment
professional to learn more about any payments his or her firm may receive from
FMR, FDC, and/or their affiliates, as well as fees and/or commissions the
investment professional charges. You should also consult disclosures made by
your investment professional at the time of purchase.
Any
of the payments described in this section may represent a premium over payments
made by other fund families. Investment professionals may have an added
incentive to sell or recommend a fund over others offered by competing fund
families, or retirement plan sponsors may take these payments into account when
deciding whether to include a fund as a plan investment option.
FDC
may also enter into agreements with securities dealers who will solicit
purchases of Creation Units. Such securities dealers may also be Authorized
Participants, DTC Participants, and or investor services organizations.
TRANSFER
AND SERVICE AGENT AGREEMENTS
Each
fund has entered into a transfer agency and service agreement with State Street
Bank and Trust Company (State Street), which is located at One Heritage Drive,
Floor 1, North Quincy, Massachusetts, 02171. Under the terms of the agreement,
State Street (or an agent, including an affiliate) acts as transfer agent and
dividend and disbursing agent.
Each
fund has entered into a service agent agreement with Fidelity Service Company,
Inc. (FSC), an affiliate of FMR (or an agent, including an affiliate), which is
located at 245 Summer Street, Boston, Massachusetts, 02210. Under the terms of
the agreement, FSC calculates the NAV and dividends for shares, maintains each
fund's portfolio and general accounting records, and administers each fund's
securities lending program.
For
providing pricing and bookkeeping services, FSC receives a monthly fee based on
each fund's average daily net assets throughout the month.
FMR
bears the cost of services under these agreements under the terms of its
management contract with each fund.
Prior
to July 11, 2022, there was a sub-administration agreement between FSC and State
Street pursuant to which State Street provided various fund accounting and fund
administration services, including preparation of financial information for
shareholder reports and tax services, for each fund. No fees were payable by the
funds under this agreement.
SECURITIES
LENDING
During
the fiscal year, the securities lending agent, or the investment adviser (where
the fund does not use a securities lending agent) monitors loan opportunities
for each fund, negotiates the terms of the loans with borrowers, monitors the
value of securities on loan and the value of the corresponding collateral,
communicates with borrowers and the fund's custodian regarding marking to market
the collateral, selects securities to be loaned and allocates those loan
opportunities among lenders, and arranges for the return of the loaned
securities upon the termination of the loan. Income and fees from securities
lending activities for the fiscal year ended June 30, 2022, are shown in the
following table:
|
Security
Lending Activities |
Fund(s)
|
|||||||
|
Fidelity®
Clean Energy ETF (A),(B)
|
Fidelity®
Cloud Computing ETF (A),(B)
|
Fidelity®
Crypto Industry and Digital Payments ETF (A),(C)
|
Fidelity®
Digital Health ETF (A),(B)
| |||||
|
Gross
income from securities lending activities |
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|
Fees
paid to securities lending agent from a revenue split |
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|
Administrative
fees |
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|
Rebate
(paid to borrower) |
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|
Other
fees not included in the revenue split (lending agent fees to NFS)
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|
Aggregate
fees/compensation for securities lending activities |
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|
Net
income from securities lending activities |
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|
Security
Lending Activities |
Fund(s)
|
|||
|
Fidelity®
Electric Vehicles and Future Transportation ETF (A),(B)
|
Fidelity®
Metaverse ETF (A),(C)
| |||
|
Gross
income from securities lending activities |
$
|
0
|
$
|
0
|
|
Fees
paid to securities lending agent from a revenue split |
$
|
0
|
$
|
0
|
|
Administrative
fees |
$
|
0
|
$
|
0
|
|
Rebate
(paid to borrower) |
$
|
0
|
$
|
0
|
|
Other
fees not included in the revenue split (lending agent fees to NFS)
|
$
|
0
|
$
|
0
|
|
Aggregate
fees/compensation for securities lending activities |
$
|
0
|
$
|
0
|
|
Net
income from securities lending activities |
$
|
0
|
$
|
0
|
|
(A)
The fund did not lend securities during the year.
|
|
(B)
Fund commenced operations on October 5, 2021.
|
|
(C)
Fund commenced operations on April 19, 2022.
|
A
fund does not pay cash collateral management fees, separate indemnification
fees, or other fees not reflected above.
DESCRIPTION
OF THE TRUST
Trust
Organization.
Fidelity®
Clean Energy ETF is a fund of Fidelity Covington Trust, an open-end management
investment company created under an initial declaration of trust dated May 10,
1995.
Fidelity®
Cloud Computing ETF is a fund of Fidelity Covington Trust, an open-end
management investment company created under an initial declaration of trust
dated May 10, 1995.
Fidelity®
Crypto Industry and Digital Payments ETF is a fund of Fidelity Covington Trust,
an open-end management investment company created under an initial declaration
of trust dated May 10, 1995.
Fidelity®
Digital Health ETF is a fund of Fidelity Covington Trust, an open-end management
investment company created under an initial declaration of trust dated May 10,
1995.
Fidelity®
Electric Vehicles and Future Transportation ETF is a fund of Fidelity Covington
Trust, an open-end management investment company created under an initial
declaration of trust dated May 10, 1995.
Fidelity®
Metaverse ETF is a fund of Fidelity Covington Trust, an open-end management
investment company created under an initial declaration of trust dated May 10,
1995.
The
Trustees are permitted to create additional funds in the trust and to create
additional classes of a fund.
The
assets of the trust received for the issue or sale of shares of each fund and
all income, earnings, profits, and proceeds thereof, subject to the rights of
creditors, are allocated to such fund, and constitute the underlying assets of
such fund. The underlying assets of each fund in the trust shall be charged with
the liabilities and expenses attributable to such fund. Any general expenses of
the trust shall be allocated between or among any one or more of the
funds.
Shareholder
Liability. The
trust is an entity commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable for the obligations of the
trust.
The
Declaration of Trust contains an express disclaimer of shareholder liability for
the debts, liabilities, obligations, and expenses of the trust or fund. The
Declaration of Trust provides that the trust shall not have any claim against
shareholders except for the payment of the purchase price of shares and requires
that each agreement, obligation, or instrument entered into or executed by the
trust or the Trustees relating to the trust or to a fund shall include a
provision limiting the obligations created thereby to the trust or to one or
more funds and its or their assets. The Declaration of Trust further provides
that shareholders of a fund shall not have a claim on or right to any assets
belonging to any other fund.
The
Declaration of Trust provides for indemnification out of a fund's property of
any shareholder or former shareholder held personally liable for the obligations
of the fund solely by reason of his or her being or having been a shareholder
and not because of his or her acts or omissions or for some other reason. The
Declaration of Trust also provides that a fund shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which a fund itself would be unable to meet its obligations.
Fidelity Management & Research Company LLC believes that, in view of the
above, the risk of personal liability to shareholders is remote.
Voting
Rights. Each
fund's capital consists of shares of beneficial interest. Shareholders are
entitled to one vote for each dollar of net asset value they own. The voting
rights of shareholders can be changed only by a shareholder vote. Shares may be
voted in the aggregate, by fund, and by class.
The
shares have no preemptive or conversion rights. Shares are fully paid and
nonassessable, except as set forth under the heading "Shareholder Liability"
above.
The
trust or a fund or a class may be terminated upon the sale of its assets to, or
merger with, another open-end management investment company, series, or class
thereof, or upon liquidation and distribution of its assets. The Trustees may
reorganize, terminate, merge, or sell all or a portion of the assets of a trust
or a fund or a class without prior shareholder approval. In the event of the
dissolution or liquidation of a trust, shareholders of each of its funds are
entitled to receive the underlying assets of such fund available for
distribution. In the event of the dissolution or liquidation of a fund or a
class, shareholders of that fund or that class are entitled to receive the
underlying assets of the fund or class available for distribution.
Custodians.
State
Street Bank and Trust Company, 1 Lincoln Street, Boston, Massachusetts, is
custodian of the assets of each fund.
The
custodian is responsible for the safekeeping of a fund's assets and the
appointment of any subcustodian banks and clearing agencies.
The
Bank of New York Mellon, headquartered in New York, also may serve as special
purpose custodian of certain assets of taxable funds in connection with
repurchase agreement transactions.
From
time to time, subject to approval by a fund's Treasurer, a Fidelity® fund may
enter into escrow arrangements with other banks if necessary to participate in
certain investment offerings.
FMR,
its officers and directors, its affiliated companies, Members of the Advisory
Board (if any), and Members of the Board of Trustees may, from time to time,
conduct transactions with various banks, including banks serving as custodians
for certain funds advised by FMR or an affiliate. Transactions that have
occurred to date include mortgages and personal and general business loans. In
the judgment of each fund's adviser, the terms and conditions of those
transactions were not influenced by existing or potential custodial or other
fund relationships.
Independent
Registered Public Accounting Firm.
Deloitte
& Touche LLP, 200 Berkeley Street, Boston, Massachusetts, independent
registered public accounting firm, and its affiliates, audit the financial
statements for each fund and provide other audit, tax, and related
services.
FUND
HOLDINGS INFORMATION
Each
fund views holdings information as sensitive and limits its dissemination. The
Board authorized FMR to establish and administer guidelines for the
dissemination of fund holdings information, which may be amended at any time
without prior notice. FMR's Disclosure Policy Committee (comprising executive
officers of FMR) evaluates disclosure policy with the goal of serving a fund's
best interests by striking an appropriate balance between providing information
about a fund's portfolio and protecting a fund from potentially harmful
disclosure. The Board reviews the administration and modification of these
guidelines and receives reports from the funds' chief compliance officer
periodically.
On
each Business Day, before the opening of regular trading on the listing
exchange, each fund will provide a full list of holdings daily on
www.fidelity.com.
Daily
portfolio composition files (PCFs) that identify a basket of specified
securities that may overlap with the actual or expected portfolio holdings of
each fund may be provided as frequently as daily to each fund's service
providers to facilitate the provision of services to each fund and to certain
other entities in connection with the dissemination of information necessary for
transactions in Creation Units. Each business day prior to the opening of the
listing exchange, a PCF containing a list of the names and the required number
of shares of each Deposit Security for each fund will be provided through
fee-based services; to subscribers to the fee-based services, including
Authorized Participants; and to entities that publish and/or analyze such
information in connection with the process of purchasing or redeeming Creation
Units or trading fund shares in the secondary market.
A
fund may also from time to time provide or make available to the Board or third
parties upon request specific fund level performance attribution information and
statistics. Third parties may include fund shareholders or prospective fund
shareholders, members of the press, consultants, and ratings and ranking
organizations. Nonexclusive examples of performance attribution information and
statistics may include (i) the allocation of a fund's portfolio holdings and
other investment positions among various asset classes, sectors, industries, and
countries, (ii) the characteristics of the stock and bond components of a fund's
portfolio holdings and other investment positions, (iii) the attribution of fund
returns by asset class, sector, industry, and country and (iv) the volatility
characteristics of a fund.
FMR's
Disclosure Policy Committee may approve a request for fund level performance
attribution and statistics as long as (i) such disclosure does not enable the
receiving party to recreate the complete or partial portfolio holdings of any
Fidelity fund prior to such fund's public disclosure of its portfolio holdings
and (ii) Fidelity has made a good faith determination that the requested
information is not material given the particular facts and circumstances.
Fidelity may deny any request for performance attribution information and other
statistical information about a fund made by any person, and may do so for any
reason or for no reason.
Disclosure
of non-public portfolio holdings information for a Fidelity fund's portfolio may
only be provided pursuant to the guidelines below.
The
Use of Holdings In Connection With Fund Operations. Material
non-public holdings information may be provided as part of the activities
associated with managing Fidelity ®
funds
to: entities which, by explicit agreement or by virtue of their respective
duties to the fund, are required to maintain the confidentiality of the
information disclosed; other parties if legally required; or persons FMR
believes will not misuse the disclosed information. These entities, parties, and
persons include, but are not limited to: a fund's trustees; a fund's manager,
its sub-advisers, if any, and their affiliates whose access persons are subject
to a code of ethics (including portfolio managers of affiliated funds of funds);
contractors who are subject to a confidentiality agreement; a fund's auditors; a
fund's custodians; proxy voting service providers; financial printers; pricing
service vendors; broker-dealers in connection with the purchase or sale of
securities or requests for price quotations or bids on one or more securities;
securities lending agents; counsel to a fund or its Independent Trustees;
regulatory authorities; stock exchanges and other listing organizations; parties
to litigation; third parties in connection with a bankruptcy proceeding relating
to a fund holding; and third parties who have submitted a standing request to a
money market fund for daily holdings information. Non-public holdings
information may also be provided to an issuer regarding the number or percentage
of its shares that are owned by a fund and in connection with redemptions in
kind.
Other
Uses Of Holdings Information. In
addition, each fund may provide material non-public holdings information to (i)
third parties that calculate information derived from holdings for use by FMR, a
sub-adviser, or their affiliates, (ii) ratings and rankings organizations, and
(iii) an investment adviser, trustee, or their agents to whom holdings are
disclosed for due diligence purposes or in anticipation of a merger involving a
fund. Each individual request is reviewed by the Disclosure Policy Committee
which must find, in its sole discretion that, based on the specific facts and
circumstances, the disclosure appears unlikely to be harmful to a fund. Entities
receiving this information must have in place control mechanisms to reasonably
ensure or otherwise agree that, (a) the holdings information will be kept
confidential, (b) no employee shall use the information to effect trading or for
their personal benefit, and (c) the nature and type of information that they, in
turn, may disclose to third parties is limited. FMR relies primarily on the
existence of non-disclosure agreements and/or control mechanisms when
determining that disclosure is not likely to be harmful to a fund.
At
this time, the entities receiving information described in the preceding
paragraph are: Factset Research Systems Inc. (full or partial fund holdings
daily, on the next business day); Standard & Poor's Ratings Services (full
holdings weekly (generally as of the previous Friday), generally 5 business days
thereafter); MSCI Inc. and certain affiliates (full or partial fund holdings
daily, on the next business day); and Bloomberg, L.P. (full holdings daily, on
the next business day).
FMR,
its affiliates, or the funds will not enter into any arrangements with third
parties from which they derive consideration for the disclosure of material
non-public holdings information. If, in the future, such an arrangement is
desired, prior Board approval would be sought and any such arrangements would be
disclosed in the funds' SAI.
There
can be no assurance that the funds' policies and procedures with respect to
disclosure of fund portfolio holdings will prevent the misuse of such
information by individuals and firms that receive such information.
FINANCIAL
STATEMENTS
Each
fund's financial statements and financial highlights for the fiscal year ended
June 30, 2022, and report of the independent registered public accounting firm,
are included in the fund's annual
report and
are incorporated herein by reference.
Total
annual operating expenses as shown in the prospectus fee table may differ from
the ratios of expenses to average net assets in the financial highlights because
total annual operating expenses as shown in the prospectus fee table include any
acquired fund fees and expenses, whereas the ratios of expenses in the financial
highlights do not, except to the extent any acquired fund fees and expenses
relate to an entity, such as a wholly-owned subsidiary, with which a fund's
financial statements are consolidated. Acquired funds include other investment
companies (such as central funds or other underlying funds) in which a fund has
invested, if and to the extent it is permitted to do so.
Total
annual operating expenses in the prospectus fee table and the financial
highlights do not include any expenses associated with investments in certain
structured or synthetic products that may rely on the exception from the
definition of "investment company" provided by section 3(c)(1) or 3(c)(7) of the
1940 Act.
APPENDIX
Fidelity,
the Fidelity Investments Logo and all other Fidelity trademarks or service marks
used herein are trademarks or service marks of FMR LLC. Any third-party marks
that are used herein are trademarks or service marks of their respective owners.
© 2022 FMR LLC. All rights reserved.