Fidelity Funds Emerging Europe, Middle East and Africa - Russian assets fund split

Background

Following Russia’s invasion of Ukraine in February 2022, worldwide sanctions combined with the partial closure of the Russian Stock Exchange, resulted in an inability of market participants to trade and achieve settlement in Russian equities. These factors prevented the disposal of affected Russian assets (the “Russian Assets) held in the Fund. The Management Company of the Fidelity Funds SICAV, acting in the best interests of investors, decided to apply a fair valuation to the Russian Assets in the Fund. As a result, on 1 March 2022, the Russian equities in the Fund were written down to zero. These formed 25.3% of the Fund’s portfolio value as at 25 February 2022. Whilst some investment funds that invested heavily in Russian assets had to suspend trading at the end of February 2022, the Fund has remained open, has been priced daily and has continued to accept subscriptions and redemptions. 

The board of directors of the Fund together with FIL Investment Management (“Fidelity”) continue to review any further action which may be taken to ensure the activity of the Fund and the appropriate treatment of Russian Assets.

Split of the Fund to create new side pocket share classes for Russian Assets

Fidelity has advised of its intention to now split the Fund, creating new share classes (the “New Share Classes”), with effect 5 June 2023 (the “Effective Date”) to which the Russian Assets will be allocated. Fidelity consider the separation of assets to be in the best interest of the shareholders, while maintaining fair treatment for all shareholders of the Fund. 

On the Effective Date, the Russian Assets of the Fund will be transferred into the New Share Classes. All shareholders of the Fund will receive an equivalent number of shares they hold in the Fund on a 1:1 basis within the New Share Classes.

The New Share Classes will be denominated in the same currency (unhedged) as the corresponding existing share class. The New Share Classes will only exist for the sole purpose of housing the Russian Assets. If normal trading resumes and the Russian assets can be disposed of, any value will be returned to shareholders into the New Share Classes, in tranches at time or times and at price(s) considered to be in the best interests of shareholders, and in a manner to ensure fair and equal treatment of shareholders. The New Share Classes will not be marketed to the public and will not be open to receive subscriptions or to be switched into. The New Share Classes will be valued at zero until further notice.

Impact of the split for our defined fund range products (as listed above)

We feature the Fidelity Funds Emerging Europe, Middle East and Africa A Acc in EUR and USD (together herein referred to as the “Fund”).

On the Effective Date, plan owners who still have a holding in the Fund will receive a 1:1 allocation of their current unit holding in the Fund into the equivalent New Share Class in the relevant currency (i.e. EUR or USD). For example, if they currently hold one share in the Fund, they will be allocated one share in the corresponding New Share Class. 

As the New Share Classes will be priced at zero and will have a ‘suspended’ status, the New Share Class will not be visible on RL360 plans. This is because if a RL360 unit-linked plan holds a suspended fund, it ‘freezes’ functionality on the plan, such as switching or taking withdrawals, therefore the New Share Class unit allocation will be recorded off plan on the behalf of plan owners, to enable plans to continue to operate normally.

Plan owners will continue to see their existing holding in the original Fund only on their plan, which continues to be priced daily. 

Temporary suspension of subscriptions into the Fund and (where applicable) immediate action taken with regard to redirection of regular premium allocation

In preparation for the creation of the New Share Classes, Fidelity made the decision to temporarily close the Fund to subscriptions and switches-in from close of business on 4 May 2023 until 2 June 2023 (the “Subscription Suspension Period”). This does not affect redemptions and switches out of the Fund, which they will continue to accept. 

As Fidelity has temporarily closed the Fund to subscriptions, it was necessary to take immediate action with regard to regular premium directions to ensure all premiums we receive can continue to be fully invested.  For regular premium paying plans, with effect from 5 May 2023 any regular premium allocation for the Fund has been redirected into an alternative receiving fund. The default receiving fund (“DRF”) selected for the regular premium allocation is a money market fund, as detailed below:

Please note that unless plan owners notify us otherwise with an alternative premium redirection instruction, any allocation will continue to be directed into the DRF when the Subscription Suspension Period ends and we will not redirect the regular premium allocation back into the Fund.  Should plan owners (or appointed investment advisers) wish to direct regular premiums back into the Fund at the end of the Subscription Suspension Period, or to any other available fund, they will need to submit a request.

We have issued a notification to plan owners and appointed investment advisers, primarily by email-shot (or by letter where we have no email address) , detailing the above action.   More details of the impact of Fidelity's fund split can be found in the sample letters found opposite. Attaching servicing agents have also been notified.

Impact of the split for RL360 Portfolio Bond owners

Please refer to the Fidelity Funds shareholder notice for full details.