Fidelity Tactical Fixed Income Fund

Transcription

1 Fidelity Tactical Fixed Income Fund Semi-Annual Report December 31, 2015 Notice to Readers The accompanying interim financial statements have not been reviewed by the external auditor of the Fund. The external auditor will be auditing the annual financial statements of the Fund in accordance with Canadian generally accepted auditing standards.

2 Fidelity Tactical Fixed Income Fund Schedule of Investments December 31, 2015 (Unaudited) Showing Percentage of Net Assets Attributable to Holders of Redeemable Units (Net Assets) Bonds 12.7% Principal Amount (000s) Cost (000s) Market Value (000s) Domestic Bonds 6.8% Corporate 1.5% Mach One Trust Series 2005 CDN1: Class J, 5% 7/21/37 $ 1,169 $ 1,185 $ 1,169 Class K, 5% 7/21/ Class L, 5% 7/21/ Class M, 5% 7/21/ Class N, 5% 7/21/ ,997 3,973 Federal 5.3% Canada Government stripped principal 0% 12/1/64 4,950 1,697 1,785 Canadian Government: 2.25% 6/1/25 5,480 5,688 5, % 12/1/45 5,350 6,990 6,940 14,375 14,616 TOTAL DOMESTIC BONDS 18,372 18,589 Foreign Bonds 5.9% Alcoa, Inc % 10/1/ USD Bank of America Corp. 4.25% 10/22/ USD Chicago Gen. Oblig % 1/1/44 1,215 USD 1,364 1,608 Constellation Brands, Inc. 4.25% 5/1/23 1,090 USD 1,422 1,508 Dolphin Subsidiary II, Inc. 7.25% 10/15/21 1,110 USD 1,447 1,459 General Motors Co. 5.2% 4/1/45 2,900 USD 3,284 3,778 Noble Holding International Ltd. 5.95% 4/1/ USD Omega Healthcare Investors, Inc. 4.5% 4/1/ USD Petrobras Global Finance BV 7.25% 3/17/44 1,170 USD 1,468 1,093 Petroleos Mexicanos 5.5% 6/27/44 2,945 USD 3,549 3,066 Reynolds American, Inc. 5.85% 8/15/ USD Royal Bank of Scotland Group PLC 5.125% 5/28/24 1,341 USD 1,456 1,881 Units Cost (000s) Market Value (000s) Global Fixed-Income Funds 1.3% Fidelity Emerging Markets Debt Investment Trust Series O 160,643 $ 1,749 $ 1,919 Fidelity Global Bond Fund Series O 146,324 1,501 1,760 TOTAL GLOBAL FIXED-INCOME FUNDS 3,250 3,679 U.S. Fixed-Income Funds 14.9% Fidelity American High Yield Fund Series O 2,666,892 22,273 24,418 Fidelity Floating Rate High Income Investment Trust Series O 1,325,678 14,961 16,500 TOTAL U.S. FIXED-INCOME FUNDS 37,234 40,918 TOTAL FIXED-INCOME FUNDS 233, ,384 Short-Term Investments 1.1% Principal Amount (000s) Cost (000s) Market Value (000s) Investments in reverse repurchase agreements in a joint trading account at 0.47%, dated 12/31/15 due 1/4/16 (Collateralized by Canadian Government Obligations) # $ 3,070 $ 3,070 $ 3,070 TOTAL INVESTMENT PORTFOLIO 100.8% $270, ,315 NET OTHER ASSETS (LIABILITIES) (0.8)% (2,162) NET ASSETS 100% $ 275,153 TOTAL FOREIGN BONDS 15,708 16,272 TOTAL BONDS 34,080 34,861 Fixed-Income Funds 87.0% Units Canadian Fixed-Income Funds 70.8% Fidelity Canadian Bond Fund Series O 13,517, , ,787 See accompanying notes which are an integral part of the financial statements. Semi-Annual Reportport 2

3 Forward Foreign Currency Contracts Amounts in thousands Settlement Date Value (000s) Appreciation/ (Depreciation) (000s) Contracts to Sell 400 EUR (Receivable amount $563) Jan $ (39) 400 EUR (Receivable amount $603) Feb ,420 JPY (Receivable amount $398) Feb ,056 USD (Receivable amount $12,059) Jan ,530 (471) 9,056 USD (Receivable amount $12,059) Jan ,530 (471) 9,056 USD (Receivable amount $12,059) Jan ,530 (471) 9,056 USD (Receivable amount $12,578) Feb , ,056 USD (Receivable amount $12,567) Feb , ,056 USD (Receivable amount $12,578) Feb , ,056 USD (Receivable amount $12,578) Feb , ,056 USD (Receivable amount $12,578) Feb , TOTAL CONTRACTS TO SELL 101,836 (1,216) Contracts to Buy 400 EUR (Payable amount $604) Jan (2) JPY (Payable amount $25) Jan (25) USD (Payable amount $520) Jan (520) 9,056 USD (Payable amount $12,568) Jan ,530 (38) 0 USD (Payable amount $520) Jan (520) 9,056 USD (Payable amount $12,579) Jan ,530 (49) 9,056 USD (Payable amount $12,579) Jan ,530 (49) 2,515 USD (Payable amount $3,480) Feb ,480 0 TOTAL CONTRACTS TO BUY 41,672 (1,203) TOTAL FORWARD FOREIGN CURRENCY CONTRACTS $ (2,419) The value of contracts to buy as a percentage of Net Assets is 15.1% The value of contracts to sell as a percentage of Net Assets is 37.0%. See accompanying notes which are an integral part of the financial statements. 3 Semi-Annual Report

4 Fidelity Tactical Fixed Income Fund Schedule of Investments (Unaudited) continued Currency Abbreviations USD U.S. dollar EUR European Monetary Unit JPY Japanese yen Presentation Notes Cost amount includes broker commissions and other trading expenses, if any. Principal Amount is stated in Canadian dollars unless otherwise noted. Investment Valuation The following is a summary of the inputs used, as of December 31, 2015 and June 30, 2015 involving the Fund s assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the tables below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements. Valuation Inputs at December 30, 2015: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Investments in Securities: Bonds $ 34,861 $ $34,861 $ Fixed-Income Funds 239, ,384 Short-Term Investments 3,070 3,070 Total Investments in Securities: $277,315 $239,384 $37,931 $ Derivative Instruments: Assets Forward Foreign Currency Contracts $ 236 $ $ 236 $ Total Assets $ 236 $ $ 236 $ Liabilities Forward Foreign Currency Contracts $ (2,655) $ $ (2,655) $ Total Liabilities $ (2,655) $ $ (2,655) $ Total Derivative Instruments: $ (2,419) $ $ (2,419) $ Valuation Inputs at June 30, 2015: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Investments in Securities: Equities: Bonds $ 30,149 $ $30,149 $ Fixed-Income Funds 256, ,849 Short-Term Investments Total Investments in Securities: $287,489 $256,849 $30,640 $ Derivative Instruments: Assets: Forward Foreign Currency Contracts $ 29 $ $ 29 $ Total Assets $ 29 $ $ 29 $ Liabilities: Forward Foreign Currency Contracts $ (56) $ $ (56) $ Total Liabilities $ (56) $ $ (56) $ Total Derivative Instruments: $ (27) $ $ (27) $ Other Information # Additional information on each counterparty to the reverse repurchase agreement is as follows: Reverse Repurchase Agreement / Counterparty Value (000s) $3,070,000 due 1/04/16 at 0.47% Bank of Montreal $ 678 Royal Bank of Canada 1,017 Scotia Capital, Inc. 1,130 The Toronto-Dominion Bank 245 $ 3,070 See accompanying notes which are an integral part of the financial statements. Semi-Annual Reportport 4

5 Financial Statements (Unaudited) Statements of Financial Position Amounts in thousands of Canadian Dollars /thousands of units (except per unit amounts) As at December 31, 2015 June 30, 2015 Assets (Note 3) Current assets Investments at fair value through profit or loss (Note 8) $ 277,315 $ 287,489 Receivable for investments sold Unrealized appreciation on forward foreign currency contracts (Note 9) Distributions receivable 416 1,007 Receivable on sale of units 158 1, , ,865 Liabilities (Note 3) Current liabilities Payable to custodian bank 224 Payable for investments purchased 181 1,117 Payable on redemption of units Distributions payable (Note 5) Management and advisory fees payable (Note 4) Other payables to affiliates (Note 4) Unrealized depreciation on forward foreign currency contracts (Note 9) 2, Other payables and accrued expenses (Note 4) ,758 2,191 Net assets attributable to holders of redeemable units (Notes 3 and 6) $ 275,153 $ 287,674 Net assets attributable to holders of redeemable units per Series and per unit (Note 6) Series A: ($74,035 / 8,025 units and $92,269 / 9,682 units, respectively) $ $ Series B: ($90,740 / 9,718 units and $90,341 / 9,381 units, respectively) $ $ Series F: ($68,127 / 7,422 units and $64,799 / 6,827 units, respectively) $ $ Series O: ($38,853 / 3,889 units and $40,265 / 3,949 units, respectively) $ $ Series P1: ($3,169 / 318 units and $ / units, respectively) $ $ Series P2: ($228 / 23 units and $ / units, respectively) $ $ Series P3: ($1 / units and $ / units, respectively) $ $ See accompanying notes which are an integral part of the financial statements. 5 Semi-Annual Report

6 Financial Statements (Unaudited) continued Statements of Comprehensive Income Amounts in thousands of Canadian Dollars (except per unit amounts) For the six-month periods ended December 31, Investment income (Note 3) Interest $ 709 $ 275 Income distributions from the underlying funds 4,750 5,293 Capital gain distributions from the underlying funds Net gain (loss) on Investments Net realized gain (loss) on investments 1, Change in net unrealized appreciation (depreciation) on investments (1,571) 5, ,051 Net gain (loss) on Foreign Currencies Net realized gain (loss) on foreign currency transactions (4,041) 28 Change in net unrealized appreciation (depreciation) on other net assets in foreign currencies 4 12 (4,037) 40 Net gain (loss) on Derivatives Net realized gain (loss) on derivatives (2,124) Change in net unrealized appreciation (depreciation) on derivatives (2,392) (1,884) (2,392) (4,008) Total investment income (loss) (314) 8,425 Operating expenses (Note 4) Management and advisory fees 1,286 1,183 Administration fees Independent Review Committee fees Commissions and other portfolio costs Sales tax Total operating expenses 1,699 1,560 Expenses waived (Note 4) (41) (18) Net operating expenses 1,658 1,542 Net increase (decrease) in net assets attributable to holders of redeemable units from operations $ (1,972) $ 6,883 Other information: Increase (decrease) in net assets attributable to holders of redeemable units from operations per Series (Note 3) Series A $ (824) $ 1,880 Series B $ (752) $ 1,756 Series F $ (357) $ 1,038 Series O $ (39) $ 2,209 Series P1 $ 1 $ Series P2 $ (1) $ Series P3 $ $ Increase (decrease) in net assets attributable to holders of redeemable units from operations per Series per unit (Note 3) Series A $ (.0924) $.1951 Series B $ (.0774) $.2146 Series F $ (.0481) $.2527 Series O $ (.0097) $.2927 Series P1 $.0024 $ Series P2 $.0149 $ Series P3 $.0300 $ For certain Series the period shown is from the commencement of sale of units to period end. See Note 1 for the commencement dates for newly offered Series. See accompanying notes which are an integral part of the financial statements. Semi-Annual Reportport 6

7 Statements of Changes in Net Assets Attributable to Holders of Redeemable Units Amounts in thousands of Canadian Dollars For the six-month period ended December 31, 2015 Fund Series A Series B Series F Series O Series P1 Net assets attributable to holders of redeemable units, beginning of period $ 287,674 $ 92,269 $ 90,341 $ 64,799 $ 40,265 $ Distributions to holders of redeemable units (Note 5) From net investment income (3,926) (887) (1,155) (1,089) (785) (10) Return of capital (2,895) (977) (979) (924) (14) Management fee reduction (8) (1) (4) (3) (6,829) (1,865) (2,138) (2,016) (785) (24) Redeemable unit transactions (Note 6) Proceeds from sale of redeemable units 42,335 4,027 16,126 15,931 2,820 3,201 Reinvestment of distributions 5,580 1,417 1,883 1, Amounts paid upon redemption of redeemable units (51,635) (20,989) (14,720) (11,704) (4,193) (29) (3,720) (15,545) 3,289 5,701 (588) 3,192 Increase (decrease) in net assets attributable to holders of redeemable units from operations (1,972) (824) (752) (357) (39) 1 Net increase (decrease) in net assets attributable to holders of redeemable units (12,521) (18,234) 399 3,328 (1,412) 3,169 Net assets attributable to holders of redeemable units, end of period $ 275,153 $ 74,035 $ 90,740 $ 68,127 $ 38,853 $ 3,169 For certain Series the period shown is from the commencement of sale of units to period end. See Note 1 for the commencement dates for newly offered Series. Amounts in thousands of Canadian Dollars For the six-month period ended December 31, 2015 Series P2 Series P3 Net assets attributable to holders of redeemable units, beginning of period $ $ Distributions to holders of redeemable units (Note 5) Return of capital (1) (1) Redeemable unit transactions (Note 6) Proceeds from sale of redeemable units Reinvestment of distributions Increase (decrease) in net assets attributable to holders of redeemable units from operations (1) Net increase (decrease) in net assets attributable to holders of redeemable units Net assets attributable to holders of redeemable units, end of period $ 228 $ 1 For certain Series the period shown is from the commencement of sale of units to period end. See Note 1 for the commencement dates for newly offered Series. See accompanying notes which are an integral part of the financial statements. 7 Semi-Annual Report

8 Financial Statements (Unaudited) continued Statements of Changes in Net Assets Attributable to Holders of Redeemable Units continued Amounts in thousands of Canadian Dollars For the six-month period ended December 31, 2014 Fund Series A Series B Series F Series O Net assets attributable to holders of redeemable units, beginning of period $ 291,159 $ 94,825 $ 77,954 $ 33,034 $ 85,346 Distributions to holders of redeemable units (Note 5) From net investment income (4,172) (1,021) (1,021) (647) (1,483) Return of capital (2,316) (1,033) (777) (506) Management fee reduction (5) (4) (1) (6,493) (2,054) (1,802) (1,154) (1,483) Redeemable unit transactions (Note 6) Proceeds from sale of redeemable units 488,583 5,364 13,433 15, ,326 Reinvestment of distributions 5,615 1,600 1, ,483 Amounts paid upon redemption of redeemable units (501,065) (11,741) (11,803) (2,466) (475,055) (6,867) (4,777) 3,232 13,924 (19,246) Increase (decrease) in net assets attributable to holders of redeemable units from operations 6,883 1,880 1,756 1,038 2,209 Net increase (decrease) in net assets attributable to holders of redeemable units (6,477) (4,951) 3,186 13,808 (18,520) Net assets attributable to holders of redeemable units, end of period $ 284,682 $ 89,874 $ 81,140 $ 46,842 $ 66,826 See accompanying notes which are an integral part of the financial statements. Semi-Annual Reportport 8

9 Statements of Cash Flows Amounts in thousands of Canadian Dollars For the six-month periods ended December 31, Cash, beginning of period $ $ Cash flows from (used in) operating activities: Purchases of investments and derivatives (31,991) (48,883) Proceeds from sale and maturity of investments and derivatives 36,884 55,696 Cash receipts from interest income 724 1,065 Cash receipts from other investment income 5,764 5,940 Cash paid for operating expenses (1,681) (1,535) Net cash from (used in) operating activities 9,700 12,283 Cash flows from (used in) financing activities: Distributions to holders of redeemable units net of reinvestments (1,252) (855) Proceeds from sales of units 43, ,042 Amounts paid upon redemption of units (51,929) (500,972) Amounts borrowed from (repaid to) custodian bank Net cash from (used in) financing activities (9,700) (12,283) Net change in cash Foreign exchange gain (loss) on cash Cash, end of period $ $ See accompanying notes which are an integral part of the financial statements. 9 Semi-Annual Report

10 Notes to Financial Statements (Unaudited) For the period ended December 31, 2015 (Unaudited) (Amounts in thousands of Canadian dollars except per unit amounts) 1. Formation of the Fund Fidelity Tactical Fixed Income Fund (Fund) is an open end mutual fund trust formed under the laws of Ontario and governed by a Master Declaration of Trust dated April 30, 2012 (Inception Date), as amended thereafter from time to time. The Fund is authorized to issue an unlimited number of units. Fidelity Investments Canada ULC (Fidelity), as manager and trustee of the Fund, is responsible for the day-to-day operations and provides all general management and administrative services. FIAM LLC (FIAM) (formerly Pyramis Global Advisors, LLC), an affiliate of Fidelity, is responsible for the investment management of the Fund s portfolio. The registered office of the Fund is located at 483 Bay Street, Suite 300, Toronto, Ontario, M5G 2N7. The Fund invests primarily in a combination of other affiliated equity, fixed income and money market funds (Underlying Funds). The Fund offers Series A, Series B, Series F, Series O, Series P1, Series P2 and Series P3 units. The Fund commenced the offering of Series P1, Series P2 and Series P3 units on December 4, Series A units are available to all investors in a deferred sales charge (DSC) option and will be converted to lower management and advisory fee Series B units one year after completion of their redemption schedule. Series B units are available to all investors in an initial sales charge (ISC) option. Series F units are usually only available to investors who have fee based accounts with dealers who have signed an eligibility agreement with Fidelity. Series P1, Series P2 and Series P3 units are available only to investors who initially hold Series F and/or Series F5 units and then become eligible to hold certain Series P units. Series P1, Series P2 and Series P3 units have lower combined management and administration fees than Series F units. Series O units are only available to selected investors who have been approved by Fidelity and have entered into a Series O Account Agreement with Fidelity. The Fund meets the definition of an investment entity and its purpose is to provide investment management services to its unitholders by investing its net assets for capital growth and/or investment income and by measuring its investment performance on a fair value basis. Refer to the Financial Instruments Risk note below for the Fund s investment objective. Effective at the close of business on December 31, 2015, the investment advisor was changed from FIAM to Fidelity and, as such, all investment management services previously provided by FIAM will be provided by Fidelity. 2. Basis of Preparation Statement of Compliance - These interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB) and as applicable to the preparation of interim financial statements, including IAS 34 Interim Financial Reporting. The accounting policies set out below have been applied consistently unless otherwise stated. The policies applied in these interim financial statements are based on IFRS issued and outstanding as of February 9, 2016, which is the date on which the interim financial statements were authorized for issue by Fidelity s board of directors. Any subsequent changes to IFRS that are given effect in the Fund s annual financial statements for the period ending June 30, 2016 could result in restatement of these interim financial statements. Functional and Presentation Currency These financial statements are presented in Canadian dollars, which is the Fund s functional currency. 3. Summary of Significant Accounting Policies Basis of Measurement These financial statements have been prepared on the historical cost basis except for investments and derivatives which are measured at fair value in the Statements of Financial Position. Use of Estimates and Judgments Under IFRS, management is required to make certain estimates and judgments at the date of the financial statements. The principal financial statement components subject to significant accounting estimates and judgments include: Fair value measurements The Fund may invest in financial instruments that are not quoted in an active market. Where applicable, these instruments are categorized in Level 2 and Level 3 of the fair value hierarchy explained below. When current market prices or quotations are not readily available or reliable, valuation techniques will be applied in good faith and in accordance with procedures adopted by the manager. Factors used in determining fair value may include, but are not limited to, broker quotes from reputable pricing sources, market or security specific events, changes in interest rates and credit quality. Fair value models use observable data, to the extent practical; however, the manager is required from time to time to make estimates and assumptions that are based on the best information available at that particular time. Changes in these estimates could impact the fair values of the financial instruments, and the impact could be material. The aggregate fair value of investments measured by valuation techniques as at December 31, 2015 and June 30, 2015, is included at the end of the Fund s Schedule of Investments. Classification and measurement of financial instrument The Fund has made significant judgments when determining the classification and measurement of its financial instruments under IAS 39, Financial Instruments Recognition and Measurement (IAS 39). These judgments Semi-Annual Reportport 10

11 centre upon the determination that certain investments are held-for-trading and that the fair value measurement option can be applied to those that are not due to factors including performance evaluation and management of the Fund on a fair value basis. Presentation of financial instruments The Fund has made significant judgments when determining the classification of its redeemable units as financial liabilities in accordance with IAS 32 Financial Instruments Presentation (IAS 32). These judgments centre upon the determination that the Fund s redeemable units do not have identical features and their entitlements include a contractual obligation to distribute any net income and net realized capital gains at least annually in cash (at the request of the unitholder). Therefore, the ongoing redemption feature is not the units only contractual obligation. Determination of Relationship with Underlying Funds The Fund has made significant judgments when determining the nature of its relationship with any Underlying Fund in accordance with IFRS 10 Consolidated financial statements (IFRS 10) and IAS 28 Investment in associates and joint ventures (IAS 28). These judgments centre upon identifying the Fund s ability to control or significantly influence any Underlying Fund. In both determinations, the Fund looks at the relevant activities of any Underlying Fund such as voting rights, participation in policy choices and material cash flows such as subscription and redemption proceeds. The Fund has determined that it does not have the ability to control nor exercise significant influence on any Underlying Fund due to the Fund s inability to exercise its voting rights and direct or participate in the financial and operating policy decisions of any Underlying Fund. Investment and Derivative Valuation Investments, excluding derivatives, are designated at their fair value through profit or loss in accordance with IAS 39 and are carried at their fair value. Derivatives are classified as held-for-trading in accordance with IAS 39 and are carried at fair value. The Fund categorizes the inputs to valuation techniques used to fair value its investments and derivatives into a disclosure hierarchy consisting of three levels as shown below: Level 1 quoted prices in active markets for identical investments Level 2 other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.) Level 3 unobservable inputs (including the Fund s own assumptions based on the best information available) Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. There were no significant transfers between Level 1 and Level 2 during the periods. The aggregate value of investments by input level, as at December 31, 2015 and June 30, 2015, as well as a roll forward of Level 3 securities, where applicable, is included at the end of the Fund s Schedule of Investments. Valuation techniques used to value the Fund s investments and derivatives by major category are as follows: Debt securities, including restricted securities, are valued based on prices received from independent pricing services or from dealers who make markets in such securities. For corporate bonds and preferred securities, pricing services utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type, prepayment speed assumptions, attributes of the collateral as well as dealer supplied prices and are generally categorized as Level 2 in the hierarchy, but may be categorized as Level 3. The Canadian dollar value of forward foreign currency contracts is determined using the closing foreign currency exchange rates and are categorized as Level 2 in the hierarchy. Investment in any Underlying Fund is valued at its closing net asset value per unit (NAVPU) each business day and is categorized as Level 1 in the hierarchy. Short-term securities for which quotations are not readily available are valued at amortized cost, which approximates fair value and are categorized as Level 2 in the hierarchy. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing matrices which consider similar factors that would be used by independent pricing services. These are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances. Cash Cash is comprised of cash on deposit and may include cash equivalents which are short-term debt instruments with terms to maturity of less than 90 days at acquisition which are held for the purpose of meeting short-term cash commitments. Foreign currencies are comprised of cash amounts denominated in currencies other than Canadian dollars, which are on deposit with the custodian to facilitate the settlement of foreign denominated security transactions. Cash is carried at amortized cost which approximates its fair value. The Fund did not hold any cash equivalents as at December 31, 2015 and June 30, Impairment of Financial Assets At each reporting date, the Fund assesses whether there is objective evidence that a financial asset carried at amortized cost is impaired. If such impairment exists, the Fund recognizes the difference between the amortized cost of the financial assets and the present value of the estimated future cash flows, discounted using the instrument s original effective interest rate as an impairment loss on the Statements of Comprehensive Income. Such impairment losses are reversed in subsequent periods in the Statements of Comprehensive Income if the conditions that lead to the initial recognition of the loss diminish or cease to exist. Other Assets and Liabilities Other assets and liabilities may include amounts due to or from the custodian, affiliates or other counterparties for accrued income, investment transactions, unit transactions, accrued expenses and other unsettled transactions at period end. These amounts are classified as loans and receivables or financial liabilities and are carried at amortized cost, which approximates fair value due to their shortterm nature. 11 Semi-Annual Report

12 Notes to Financial Statements (Unaudited) continued (Amounts in thousands of Canadian dollars except per unit amounts) Offsetting Financial Instruments Financial assets and liabilities are offset and the net amount reported in the Statements of Financial Position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. Classification of redeemable units issued by the Fund In accordance with IAS 32, the Fund s redeemable units entitlements include a contractual obligation to distribute any net income and net realized capital gains at least annually in cash (at the request of the unitholder) and, therefore, the ongoing redemption feature is not the units only contractual obligation. In addition, each series of redeemable units are equally subordinated to each other, but have differing features as outlined in the notes below. Therefore, the Fund s redeemable units do not meet the criteria for classification as equity and have been classified as financial liabilities on the Statements of Financial Position. The Fund s obligation for net assets attributable to holders of redeemable units is recorded at the redemption amount. As at December 31, 2015 and June 30, 2015, the Fund s net asset value per Series per unit may differ by less than $0.01 from its net assets attributable to holders of redeemable units per Series per unit calculated in accordance with IFRS as a result of normal reporting period end procedures to close off the books and records. Investment Transactions, Income Recognition and Transaction Costs Regular way purchases and sales of financial assets are recognized at their trade date. The cost of investments is determined on an average cost basis, excluding commissions and other portfolio transaction costs. Income from investments is recognized on an accrual basis. Interest income is accrued as earned and includes coupon interest and accretion of discount and amortization of premium on debt securities using the effective interest rate. This is the rate that exactly discounts the estimated future cash receipts through the expected life of the relevant debt securities, to their net carrying amounts. Distributions from Underlying Fund, if any, are recognized on the ex-dividend date by the Fund in the same form that they were distributed. Net realized gains and losses from the sale of investments and change in net unrealized appreciation (depreciation) on investments are calculated with reference to average cost of the related investment securities which exclude transaction costs and may include proceeds received from litigation. Transaction costs, such as brokerage commissions, incurred in the purchase and sale of securities by the Fund are recognized as Commissions and other portfolio costs in the Statements of Comprehensive Income. Foreign Currency Translation Securities and other assets and liabilities denominated in a foreign currency are translated into Canadian dollars at the period-end exchange rates. Purchases and sales of securities, income and expenses denominated in foreign currencies are translated into Canadian dollars at the exchange rate on the date of the respective transaction. The effects of exchange rate fluctuations on investments are included in the Net realized gain (loss) and change in net unrealized appreciation (depreciation) on investments and exchange rate fluctuations on other foreign currency transactions are included in the Net realized gain (loss) on foreign currency transactions and Change in net unrealized appreciation (depreciation) on other net assets in foreign currencies in the Statements of Comprehensive Income. Reverse Repurchase Agreements Uninvested cash balances may be transferred into one or more joint trading accounts where these balances are invested in reverse repurchase transactions. In reverse repurchase transactions, U.S. or Canadian Government securities are purchased from a counterparty who agrees to repurchase the securities at a higher price at a specified future date. The difference in price is reported as interest income. Credit risk arises from the potential for a counterparty to default on its obligation to repurchase the security. The risk is managed by the use of counterparties acceptable to Fidelity and by the receipt of the securities as collateral. The value of the collateral must be at least 102% of the daily fair value of the cash invested. Any reverse repurchase agreements open at period end are included in the Schedule of Investments. The following tables summarize the securities pledged to the Fund as collateral: December 31, 2015 Collateral Description Interest Rate Maturity Date % of Collateral Collateral Value as a % of Cash Invested Canada Housing Trust 1.85% 2.75% 06/15/ /15/ % Canadian Treasury Bond 1.25% 5.75% 06/01/ /01/ % 100.0% 102.0% June 30, 2015 Collateral Description Interest Rate Maturity Date % of Collateral Collateral Value as a % of Cash Invested Canada Housing Trust 1.32% 1.47% 09/15/ /15/ % Canadian Treasury Bond 1.00% 5.75% 11/01/ /01/ % Canadian Treasury Bill n/a 09/10/ /08/ % 100.0% 102.1% Forward Foreign Currency Contracts The Fund may use forward foreign currency contracts to facilitate transactions in foreign-denominated securities and to manage its currency exposure. Contracts to sell generally are used to mitigate the risk of the Fund s investments against Semi-Annual Reportport 12

13 currency fluctuations, while contracts to buy generally are used to offset a previous contract to sell. Also, a contract to buy can be used to acquire exposure to foreign currencies and a contract to sell can be used to offset a previous contract to buy. These contracts involve market risk in excess of the unrealized gain or loss reflected in the Statements of Financial Position. Fidelity monitors the credit rating of each counterparty with which it does business. All counterparties have a credit rating of at least A, as determined by Moody s Investor Services, Inc. or S&P at the date of purchase. The Canadian dollar value of any currencies the Fund has committed to buy or sell is shown in its Schedule of Investments under the caption Forward Foreign Currency Contracts. This amount represents the aggregate exposure to each currency the Fund has acquired or sold through currency contracts at period end. Losses may arise from changes in the value of foreign currency or if the counterparties do not perform under the contracts terms. Purchases and sales of forward foreign currency contracts having the same currency, settlement date and broker are offset and any realized gain (loss) is recognized on settlement date and settled with the counterparty on a net basis. Valuation of Series Separate net assets attributable to holders of redeemable units is calculated for each Series of units in the Fund. The net assets attributable to holders of redeemable units of a Series is computed by calculating the Series proportionate share of the assets and liabilities of the Fund common to all Series, adjusted for the assets and liabilities of the Fund attributable only to that Series. Expenses directly attributable to a Series are charged to that Series. Investment income and operating expenses are allocated proportionately to each Series based upon the relative net assets attributable to holders of redeemable units of each Series, except for items that can be specifically attributed to one or more Series. Per Unit from Operations - The increase (decrease) in net assets attributable to holders of redeemable units resulting from operations per unit in the Statements of Comprehensive Income represent the increase (decrease) in net assets attributable to holders of redeemable units resulting from operations for each Series of the Fund, divided by the weighted average units outstanding for each Series of the Fund during the period as follows: Weighted Average Units Period ended December 31, 2015 Series A 8,929 Series B 9,718 Series F 7,434 Series O 3,985 Series P1 222 Series P2 11 Series P3 Period ended December 31, 2014 Series A 9,637 Series B 8,170 Series F 4,111 Series O 7,554 Statements of Cash Flows When preparing the Statements of Cash Flows, the Fund nets the rollover activity of its short-term investments, and includes only the net cash flow impact in Purchases of investments and derivatives or Proceeds from sale and maturity of investments and derivatives, as applicable. Additionally, in accordance with IFRS, the Fund s Statements of Cash Flows excludes non-cash transactions from its operating and financing activities. Recent Accounting Pronouncements The final version of IFRS 9, Financial Instruments, was issued by the IASB in July 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces a model for classification and measurement, a single, forward-looking expected loss impairment model and a substantially reformed approach to hedge accounting. The new single, principle based approach for determining the classification of financial assets is driven by cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being applied to all financial instruments, which will require more timely recognition of expected credit losses. It also includes changes in respect of an entity s own credit risk in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of an entity s own credit risk on such liabilities are no longer recognised in profit or loss. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, however is available for early adoption. In addition, the entity s own credit risk changes can be early applied in isolation without otherwise changing the accounting for financial instruments. The Fund is in the process of assessing the impact of IFRS 9 and has not yet determined when it will adopt the new standard. 13 Semi-Annual Report

14 Notes to Financial Statements (Unaudited) continued (Amounts in thousands of Canadian dollars except per unit amounts) 4. Expenses and Other Related Party Transactions Management and Advisory Fees Fidelity serves as the manager of the Fund and FIAM serves as investment advisor of the Fund. FIAM has entered into a sub-advisory agreement with Fidelity Investments Money Management, Inc., an affiliate of Fidelity, to provide investment advice with respect to all or a portion of the investments of the Fund. The Fund pays Fidelity and FIAM a monthly management and advisory fee for their services and the provision of key management personnel to the Fund, based on the net asset value of each Series, calculated daily and payable monthly. Fidelity may reduce the management and advisory fee or fund expenses for certain investors by reducing the management and advisory fee it charges to the Fund or reducing the amount charged to the Fund for certain expenses and having the Fund pay out the amount of the reduction to the investors as a distribution. These distributions are disclosed as Management fee reduction in the Statements of Changes in Net Assets Attributable to Holders of Redeemable Units. No management and advisory fees are charged with respect to the Series O units, but investors will be charged a negotiated management fee. To avoid duplication of fees, Series O units of any Underlying Fund are not subject to management and advisory fees. The annual management and advisory fee rates for each Series were as follows: Annual Management and Advisory Fee Rate (%) Series A Series B Series F Series P Series P Series P Administration Fee Fidelity charges the Fund a fixed administration fee in place of certain variable expenses and the provision of key management personnel to the Fund. Fidelity, in turn, pays all of the operating expenses of the Fund, other than certain specified fund costs, including the fees and expenses of the Independent Review Committee (IRC), taxes, brokerage commissions and interest charges. To avoid duplication of fees, Series O units of any Underlying Fund are not subject to the Administration fee. The administration fee is in addition to the management and advisory fee. No administration fees are charged with respect to the Series O units. The annual rate of the administration fee will fall under one of three tiers, depending on the net asset value of the Fund: Under $100 Million (Tier 1), $100 Million to $1 Billion (Tier 2) and Over $1 Billion (Tier 3). The administration fee is calculated as a fixed annual percentage, accrued daily and payable monthly, of the net asset value of each Series as follows: Tier 1 (%) Tier 2 (%) Tier 3 (%) Series A Series B Series F Series P Series P Series P Prior to October 29, 2015, the administration fee was calculated as a fixed annual percentage of the net asset value of each Series as follows: Tier 1 (%) Tier 2 (%) Tier 3 (%) Series A Series B Series F Independent Review Committee Fees - The IRC, as required under National Instrument , reviews conflict of interest matters referred to it by the manager and provides recommendations or approves actions, as appropriate, that are in the best interest of the funds. There are currently four members of the IRC who are independent of Fidelity and its affiliates. IRC members are compensated by way of an annual retainer fee and a per meeting attendance fee, as well as reimbursed for expenses associated with IRC duties. These costs are allocated among the individual funds proportionately by assets. No IRC fees are charged with respect to the Series O units. Sales Tax - Certain provinces have harmonized their Provincial Sales Tax (PST) with the federal Goods and Services Tax (GST). The Harmonized Sales Tax (HST) combines the GST rate of 5% with the PST rate of certain provinces. The Provincial HST liability or refund is calculated using the residency of unitholders and the value of their interests in the Fund as at specific times, rather than the physical location of the Fund. The effective GST/HST rate charged to each Series of the Fund is based on the unitholders proportionate investments by province, using Semi-Annual Reportport 14

15 each province s HST rate or GST rate in the case of non-participating provinces. All amounts are included in the Statements of Comprehensive Income as Sales tax. Expenses Waived - Fidelity may absorb or waive certain expenses at its sole discretion. Fidelity can terminate the absorption or waiver at any time. The manager of the Fund waived a portion of its administration fee. The expenses absorbed or waived during the periods are disclosed as Expenses waived in the Statements of Comprehensive Income, if applicable. 5. Taxation and Distributions The Fund qualifies as a mutual fund trust under the provisions of the Income Tax Act (Canada). For tax purposes, the Fund has a December year end. In each tax year, the Fund declares and credits as due and payable sufficient net investment income and net realized capital gains to unitholders such that the Fund will not be subject to income taxes. As a result, the Fund does not record income taxes under IAS 12 Income Taxes (IAS 12) and accordingly does not recognize the deferred tax benefit associated with tax loss carry forwards and other taxable temporary differences. Distributions are taxable in unitholders hands. At the end of each tax year, the character of the distributions is determined for tax purposes. Under the terms of the Declaration of Trust, the trustee may capitalize any distribution amount without any increase in the number of units outstanding. For Series A, Series B, Series F, Series P1, Series P2 and Series P3, the Fund will make monthly distributions of an amount that will generally be comprised of a return of capital and/or net investment income, if available. Distributions, if any, are declared separately for each Series. Capital losses may be carried forward indefinitely to reduce future realized capital gains. As at the last taxation year-end, the Fund had $8,535 of capital losses available to be carried forward. Non capital losses may be carried forward for up to 20 tax years to reduce future taxable income, but expire in December of the year noted. As at the last taxation year-end, the Fund had no non capital losses available to be carried forward. 6. Capital Risk Management Units issued and outstanding are considered to be the capital of the Fund. The capital of each series of the Fund is divided into an unlimited number of units of equal value, with no par value. All units in a series of the Fund rank equally with respect to distributions. A unitholder of the Fund is entitled to one vote for each one dollar in value of units owned. Fractional units are proportionately entitled to these rights. The Fund generally has no restrictions or specific capital requirements on the subscriptions and redemptions of units other than minimum subscription requirements; although, on rare occasions, Fidelity may temporarily suspend unitholders right to redeem units and postpone paying sale proceeds. The relevant movements attributable to unitholders are shown in the Statements of Changes in Net Assets Attributable to Holders of Redeemable Units. In accordance with the objectives and the risk management policies outlined in the Financial Instruments Risk notes, the Fund endeavors to invest the subscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions. Such liquidity is managed by investing the majority of assets in investments that can be readily disposed and via the Fund s ability to borrow up to 5% of its net asset value. Unit Transactions - Unit transactions for each Series were as follows: Units Outstanding, Beginning of Period Issued Reinvested Redeemed Units Outstanding, End of Period Period ended December 31, 2015 Series A 9, (2,235) 8,025 Series B 9,381 1, (1,553) 9,718 Series F 6,827 1, (1,258) 7,422 Series O 3, (416) 3,889 Series P (3) 318 Series P Series P3 Period ended December 31, 2014 Series A 9, (1,223) 9,381 Series B 8,062 1, (1,220) 8,395 Series F 3,451 1, (258) 4,908 Series O 8,485 44, (47,030) 6,582 Affiliated Ownership - As at December 31, 2015 and June 30, 2015, Fidelity and its affiliates held approximately 14% of the Fund. 15 Semi-Annual Report

16 Notes to Financial Statements (Unaudited) continued (Amounts in thousands of Canadian dollars except per unit amounts) 7. Financial Instruments Risk The Fund s activities expose it to a variety of financial instruments risks: credit risk, liquidity risk, other price risk, interest rate risk and currency risk. FIAM seeks to minimize potential adverse effects of these performance risks by employing professional, experienced portfolio advisors, by daily monitoring of the positions and market events, and by diversifying the investment portfolio within the constraints of the investment mandate. The Fund and each Underlying Fund may use derivative financial instruments to moderate certain risk exposures. The Fund is more diversified and expected to be less risky than funds that invest primarily in equities or fixed income securities directly. The value can change when the price of equity or fixed-income securities change. There is greater risk when more of the Fund is invested in any one asset class. The Fund has the same risks as its Underlying Funds. FIAM s objective is to provide consistent value-added return over the benchmark. Unsystematic risk is mitigated primarily through investments in a diverse portfolio of securities across many sectors, styles or regions of the market. FIAM s qualitative fundamental security selection is also well diversified across many analysts. Rather than relying on a single valuation process or quantitative model that implicitly assumes that past value-added returns of some sectors or styles will persist into the future, FIAM s analysts select securities based on their own unique valuation processes. The Fund aims to provide a steady flow of income. It invests, either directly or indirectly through investments in underlying funds, primarily in Canadian fixed-income securities. The Fund s benchmark is the FTSE TMX Canada Universe Bond Index. Portfolio risk is monitored daily and reviewed monthly by an investment compliance group. In addition, there is a formal quarterly review of each fund. The investment compliance group, portfolio managers and the senior analysts attend a quarterly portfolio review. Portfolios within each strategy are reviewed relative to each other and to their benchmark. Active industry and security allocations are analyzed. Credit Risk - Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Fund. The Fund s own credit risk in the case of financial liabilities and a counterparty s credit risk in the case of financial assets are considered, where applicable, in determining the fair value of financial assets and financial liabilities, including derivative instruments. The Fund may be exposed to indirect credit risk through its investments in the Underlying Funds. In addition, as part of its cash management, the Fund limits its direct exposure to credit loss by placing its cash with high credit quality financial institutions. The carrying amount of investments and other assets represents the maximum credit risk exposure as at December 31, 2015 and June 30, Credit risk arising on Canadian debt securities held directly or indirectly, as applicable, is mitigated by investing primarily in rated instruments or instruments issued by rated counterparties with credit ratings of at least BB or better as determined by Moody s Investor Services, Inc. or S&P at the date of purchase. Collateralized reverse repurchase agreements may result in credit exposure, in the event that the counterparty to the transaction is unable to fulfill its contractual obligations. The risk is managed by the receipt of the underlying securities as collateral, and use of counterparties whose credit worthiness is considered sufficient based on Fidelity s independent review. Credit risk exposure for derivative instruments is based on the Fund s unrealized gain on the contractual obligations with the counterparty as at the reporting date. The Fund restricts its exposure to credit losses on derivative instruments by limiting its exposure to any one counterparty and by entering into transactions with counterparties who meet the minimum approved credit rating under securities regulations and other pre-set financial and non-financial criteria. Other than outlined above, there were no significant concentrations of credit risk to counterparties as at December 31, 2015 and June 30, Concentration Risk - FIAM analyzes credit concentration based on the counterparty, industry and/or geographical location of the financial assets that the Fund holds. The following tables summarize the investment concentration risks that are relevant for the Fund based on its investment objective, which it is exposed to, through its investment in each Underlying Fund: Asset Mix % of Fund s Net Assets as at 12/31/15 % of Fund s Net Assets as at 6/30/15 Canadian Bonds Foreign Bonds Canadian Preferred Securities Foreign Equities Foreign Preferred Securities Cash and Short-Term Investments Net Other Assets (Liabilities) Derivative Exposure Semi-Annual Reportport 16

17 % of Fund s Net Assets as at 12/31/15 % of Fund s Net Assets as at 6/30/15 Forward Foreign Currency Contracts (0.9) 0.0 Forward Foreign Currency Contracts percentage is calculated by dividing the net unrealized gain/loss of all contracts held by total net assets. Geographic Mix % of Fund s Net Assets as at 12/31/15 % of Fund s Net Assets as at 6/30/15 Canada United States of America United Kingdom Mexico Others (Individually Less Than 1%) Cash and Short-Term Investments Net Other Assets (Liabilities) FIAM regularly monitors the relative weights of individual securities, sectors, countries, and also monitors the market capitalization and trading liquidity of each holding. Liquidity Risk - Liquidity risk is defined as the risk that the Fund may not be able to settle or meet its obligations on time or at a reasonable price. The Fund is exposed to daily cash redemptions of redeemable units. Redeemable units are redeemed on demand at the unitholder s option based on the Fund s NAVPU at the time of redemption. The Fund may be exposed to indirect liquidity risk through its investments in the Underlying Funds. In accordance with securities regulations, the Fund and the Underlying Funds must maintain at least 90% of assets in liquid investments; investments that are traded in an active market and can be readily disposed of. In addition, the Fund has the ability to borrow up to 5% of its net asset value from the custodian for the purposes of funding redemptions. The Underlying Funds may, from time to time, invest in securities that are not traded in an active market and may be illiquid. Private and/or restricted securities held, if any, are identified in the Underlying Funds Schedules of Investments as at their respective period ends. The liquidity position of the Fund and Underlying Funds is monitored on a daily basis. As at December 31, 2015 and June 30, 2015, the Fund did not have financial liabilities with maturities greater than 3 months. Indirect Exposure to Other Price Risk, Interest Rate Risk and Currency Risk - Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in a market or market segment. All securities present a risk of loss of capital. The Fund moderates this risk through a careful selection of securities and other financial instruments within the parameters of the investment strategy. The maximum risk resulting from financial instruments is equivalent to their fair value. The Fund s investments and derivatives are susceptible to other price risk arising from uncertainties about future prices of the instruments. The Fund may be exposed to indirect other price risk through its investments in the Underlying Funds. Interest rate risk arises on interest-bearing financial instruments held in the investment portfolio such as bonds. The Fund is exposed to the risk that the fair value or the future cash flows of interest-bearing financial instruments will fluctuate due to changes in the prevailing levels of market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates. The Fund may be exposed to indirect interest rate risk through its investments in the Underlying Funds. Currency risk arises from financial instruments that are denominated in a currency other than Canadian dollars, which is the Fund s functional currency. The Fund is exposed to the risk that the fair value of financial instruments denominated in other currencies will fluctuate due to changes in exchange rates. Currency risk is not considered to arise from financial instruments that are non-monetary items such as equity investments, or forward foreign exchange contracts related to such non-monetary items. The Fund considers the foreign exchange exposure relating to non-monetary assets and liabilities to be a component of other price risk, not foreign currency risk. However, management monitors the exposure on all foreign currency denominated assets and liabilities, and enters into forward foreign currency contracts to manage the Fund s exposure to foreign exchange movements. The Fund may be exposed to indirect currency risk through its investments in the Underlying Funds. The Underlying Funds may also hedge against other foreign currencies through the use of forward foreign currency contracts. For example, underlying currency hedged funds use derivatives to try to minimize the exposure to currency fluctuations between the foreign currencies (such as the U.S. dollar, the Euro or the Yen), and the Canadian dollar. 17 Semi-Annual Report

18 Notes to Financial Statements (Unaudited) continued (Amounts in thousands of Canadian dollars except per unit amounts) Generally, the use of forward contracts to hedge as completely as possible currency fluctuations between developed market currencies and the Canadian dollar will not result in the impact of currency fluctuations being eliminated altogether. The Fund s returns will differ from the local currency returns of each Underlying Fund s investments. Furthermore, during times of extreme market stress or volatility, the Fund may not be able to prevent losses from exposure to foreign currency. The tables below summarize the impact on the Fund s net assets attributable to holders of redeemable units, of reasonable possible changes in the returns of each of the strategies to which the Fund is exposed through the Underlying Funds in which it invests. The impact on net assets attributable to holders of redeemable units is calculated by applying a 5% possible movement determined for each strategy as a percentage of the net assets attributable to holders of redeemable units of the Fund. The analysis is based on the assumption that the returns on each strategy have increased or decreased as disclosed with all other variables held constant. Money market funds have minimal sensitivity to changes in interest rates since the securities tend to be short-term in nature. The impact on net assets attributable to holders of redeemable units for the sensitivity analysis excludes money market funds. In practice, the actual trading results may differ from this sensitivity analysis and the difference could be material. The indirect risk disclosures presented in the tables below represent the market risks to which the various strategies are exposed net of forward foreign currency contracts: I, C, O representing Interest rate, Currency and Other price risks, respectively. Underlying risk exposures Number of Underlying Funds Impact on net assets based on 5% increase or decrease Strategy As at December 31, 2015 Canadian Fixed-Income I 1 9,739 Global Fixed-Income I, C U.S. Fixed-Income I, C 2 2,046 TOTAL 5 11,969 As at June 30, 2015 Canadian Fixed-Income I 1 10,474 Global Fixed-Income I,C U.S. Fixed-Income I,C 2 2,183 TOTAL 5 12, Investment in Structured Entities The Fund s investment in any Underlying Fund represents an interest in a structured entity. A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements such as those agreements executed by a Fund with its manager and portfolio advisor. An Underlying Fund is financed through the issuance of its redeemable trust units. In addition, the purpose of any Underlying Fund is to provide investment management services to its unitholders by investing its net assets for capital growth and/or investment income. The Fund has assessed its ability to control or significantly influence any Underlying Fund in accordance with IFRS 10 and IAS 28. The Fund has determined that it does not have the ability to control nor exercise significant influence on an Underlying Fund due to the Fund s inability to exercise its voting rights and direct or participate in the financial and operating policy decisions of an Underlying Fund. The maximum risk of loss in an investment in an Underlying Fund is equal to its fair value and carrying value which is outlined in the tables below and included in Investments on the Statements of Financial Position. There is no difference between the maximum risk of loss and the carrying amounts of the assets and liabilities of an Underlying Fund that relate to the Fund s interests. There are additional risks associated with an investment in an Underlying Fund. Refer to the Financial Instruments Risk note for further discussion. In the normal course of operations to fulfil its investment objective, the Fund will, from time to time, subscribe for additional units issued by an Underlying Fund or redeem in whole or in part its investment in an Underlying Fund. In addition, the Fund may receive a distribution of income from an Underlying Fund as described above in the Investment Transactions, Income Recognition and Transaction Costs note. The Fund does not have any obligation or intention to provide financial support to an Underlying Fund. The following tables present additional information that is relevant to the Fund s investment in structured entities: Semi-Annual Reportport 18

19 Total Net Assets Fair Value of Investment December 31, 2015 Fidelity American High Yield Fund Series O 3,563,208 24,418 Fidelity Canadian Bond Fund Series O 9,851, ,787 Fidelity Emerging Markets Debt Investment Trust Series O 1,159,143 1,919 Fidelity Floating Rate High Income Investment Trust Series O 560,691 16,500 Fidelity Global Bond Fund Series O 2,863,050 1,760 Total Net Assets Fair Value of Investment June 30, 2015 Fidelity American High Yield Fund Series O 3,426,793 26,347 Fidelity Canadian Bond Fund Series O 9,754, ,470 Fidelity Emerging Markets Debt Investment Trust Series O 1,114,639 1,914 Fidelity Floating Rate High Income Investment Trust Series O 428,310 17,342 Fidelity Global Bond Fund Series O 1,801,357 1, Offsetting of Financial Assets and Liabilities The Fund s derivatives noted below are subject to enforceable master netting arrangements in the form of foreign exchange netting agreements with its counterparties. The normal business terms of the foreign exchange netting agreements call for net settlement of transactions when contracts with the same counterparty and currency mature simultaneously. In the event of default or bankruptcy net settlement of contracts would be enforced. The following tables summarize financial instruments that are offset in the Statements of Financial Position, or are subject to enforceable master netting arrangements or other similar agreements but are not offset: As at December 31, 2015 Amounts offset Amounts not offset Gross Gross assets/liabilities offset Net Master Netting Arrangements Financial Collateral Assets Forward foreign currency contracts (236) Liabilities Forward foreign currency contracts (2,655) (2,655) 236 (2,419) Net As at June 30, 2015 Amounts offset Amounts Not offset Gross Gross assets/liabilities offset Net Master Netting Arrangements Financial Collateral Assets Forward foreign currency contracts 31 (2) 29 (28) 1 Liabilities Forward foreign currency contracts (58) 2 (56) 28 (28) Net 19 Semi-Annual Report

20 Fidelity Investments Canada ULC 483 Bay Street, Suite 300 Toronto, Ontario M5G 2N7 Manager, Transfer Agent and Registrar Fidelity Investments Canada ULC 483 Bay Street, Suite 300 Toronto, Ontario M5G 2N7 Portfolio Adviser Fidelity Investments Canada ULC Toronto, Ontario Custodian State Street Trust Company of Canada Toronto, Ontario Auditor PricewaterhouseCoopers LLP Toronto, Ontario Visit us online at or call Fidelity Client Services at Fidelity s mutual funds are sold by registered Investment Professionals. Each Fund has a simplified prospectus, which contains important information on the Fund, including its investment objective, purchase options, and applicable charges. Please obtain a copy of the prospectus, read it carefully, and consult your Investment Professional before investing. As with any investment, there are risks to investing in mutual funds. There is no assurance that any Fund will achieve its investment objective, and its net asset value, yield, and investment return will fluctuate from time to time with market conditions. Investors may experience a gain or loss when they sell their units in any Fidelity Fund. Fidelity Global Funds may be more volatile than other Fidelity Funds as they concentrate investments in one sector and in fewer issuers; no single Fund is intended to be a complete diversified investment program. Past performance is no assurance or indicator of future returns. There is no assurance that either Fidelity Canadian Money Market Fund or Fidelity U.S. Money Market Fund will be able to maintain its net asset value at a constant amount. The breakdown of Fund investments is presented to illustrate the way in which a Fund may invest, and may not be representative of a Fund s current or future investments. A Fund s investments may change at any time. Fidelity Investments is a registered trademark of FMR LLC E FICL-FCTLBD-SANN-0216