Fidelity American Disciplined Equity Currency Neutral Fund

Transcription

1 Fidelity American Disciplined Equity Currency Neutral Fund Annual Report June 30, 2016

2 Fidelity American Disciplined Equity Currency Neutral Fund Schedule of Investments June 30, 2016 Showing Percentage of Net Assets Attributable to Holders of Redeemable Units (Net Assets) Underlying Funds 98.8% Units (000s) Cost (000s) Market Value (000s) Fidelity American Disciplined Equity Fund Series O 8 $ 172 $ 159 TOTAL INVESTMENT PORTFOLIO 98.8% $ Currency Abbreviations USD U.S. dollar NET OTHER ASSETS (LIABILITIES) 1.2% 2 NET ASSETS 100% $ 161 Forward Foreign Currency Contracts Amounts in thousands Settlement Date Value (000 s) Appreciation/ (Depreciation) (000 s) Contracts to Sell 26 USD (Receivable amount $34) Jul $ 33 $ 1 2 USD (Receivable amount $3) Jul USD (Receivable amount $2) Jul USD (Receivable amount $3) Aug USD (Receivable amount $30) Aug USD (Receivable amount $30) Aug USD (Receivable amount $30) Aug USD (Receivable amount $30) Aug USD (Receivable amount $30) Aug TOTAL CONTRACTS TO SELL Contracts to Buy 1 USD (Payable amount $1) Jul USD (Payable amount $2) Jul USD (Payable amount $30) Jul USD (Payable amount $4) Jul TOTAL CONTRACTS TO BUY 37 0 TOTAL FORWARD FOREIGN CURRENCY CONTRACTS $ 2 The value of contracts to buy as a percentage of Net Assets is 23.0% The value of contracts to sell as a percentage of Net Assets is 118.4%. See accompanying notes which are an integral part of the financial statements. Annual Reportport 2

3 Investment Valuation The following is a summary of the inputs used, as of June 30, 2016 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 June 30, 2016: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Investments in Securities: Underlying Funds $ 159 $ 159 $ $ Total Investments in Securities: $ 159 $ 159 $ $ Derivative Instruments: Assets Forward Foreign Currency Contracts $ 2 $ $ 2 $ Total Assets $ 2 $ $ 2 $ Liabilities Forward Foreign Currency Contracts $ $ $ $ Total Liabilities $ $ $ $ Total Derivative Instruments: $ 2 $ $ 2 $ Valuation Inputs at June 30, 2015: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Investments in Securities: Underlying Funds $353,267 $353,267 $ $ Total Investments in Securities: $353,267 $353,267 $ $ Derivative Instruments: Assets: Forward Foreign Currency Contracts $ 297 $ $ 297 $ Total Assets $ 297 $ $ 297 $ Liabilities: Forward Foreign Currency Contracts $ (296) $ $ (296) $ Total Liabilities $ (296) $ $ (296) $ Total Derivative Instruments: $ 1 $ $ 1 $ See accompanying notes which are an integral part of the financial statements. 3 Annual Report

4 Financial Statements Statements of Financial Position Amounts in thousands of Canadian Dollars /thousands of units (except per unit amounts) As at June 30, 2016 June 30, 2015 Assets (Note 3) Current assets Investments at fair value through profit or loss (Note 8) $ 159 $ 353,267 Cash 1 Unrealized appreciation on forward foreign currency contracts (Note 9) ,565 Liabilities (Note 3) Current liabilities Unrealized depreciation on forward foreign currency contracts (Note 9) 296 Net assets attributable to holders of redeemable units (Notes 3 and 6) $ 161 $ 353,269 Net assets attributable to holders of redeemable units per Series and per unit (Note 6) Series O: ($161 / 9 units and $353,269 / 18,249 units, respectively) $ $ See accompanying notes which are an integral part of the financial statements. Annual Reportport 4

5 Statements of Comprehensive Income Amounts in thousands of Canadian Dollars (except per unit amounts) For the periods ended June 30, Investment income (Note 3) Interest $ $ Income distributions from the underlying funds 2,138 7 Capital gain distributions from the underlying funds 25, Net gain (loss) on Investments Net realized gain (loss) on investments (22,645) 402 Change in net unrealized appreciation (depreciation) on investments 2,608 (2,969) (20,037) (2,567) Net gain (loss) on Derivatives Net realized gain (loss) on derivatives (43,748) 8,391 Change in net unrealized appreciation (depreciation) on derivatives 1 (19) (43,747) 8,372 Total investment income (loss) (36,576) 5,903 Operating expenses (Note 4) Management and advisory fees Administration fees Independent Review Committee fees Commissions and other portfolio costs Sales tax Total operating expenses Net increase (decrease) in net assets attributable to holders of redeemable units from operations $ (36,576) $ 5,903 Other information: Increase (decrease) in net assets attributable to holders of redeemable units from operations per Series (Note 3) Series O $ (36,576) $ 5,903 Increase (decrease) in net assets attributable to holders of redeemable units from operations per Series per unit (Note 3) Series O $ (3.5482) $ See accompanying notes which are an integral part of the financial statements. 5 Annual Report

6 Financial Statements continued Statements of Changes in Net Assets Attributable to Holders of Redeemable Units Amounts in thousands of Canadian Dollars For the period ended June 30, 2016 Series O Net assets attributable to holders of redeemable units, beginning of period $ 353,269 Distributions to holders of redeemable units (Note 5) From net investment income (2,165) From net realized gain (9,552) (11,717) Redeemable unit transactions (Note 6) Proceeds from sale of redeemable units 151 Reinvestment of distributions 11,717 Amounts paid upon redemption of redeemable units (316,683) (304,815) Increase (decrease) in net assets attributable to holders of redeemable units from operations (36,576) Net increase (decrease) in net assets attributable to holders of redeemable units (353,108) Net assets attributable to holders of redeemable units, end of period $ 161 Amounts in thousands of Canadian Dollars For the period ended June 30, 2015 Series O Net assets attributable to holders of redeemable units, beginning of period $ 1,159 Distributions to holders of redeemable units (Note 5) From net investment income (8) (8) Redeemable unit transactions (Note 6) Proceeds from sale of redeemable units 361,500 Reinvestment of distributions 8 Amounts paid upon redemption of redeemable units (15,293) 346,215 Increase (decrease) in net assets attributable to holders of redeemable units from operations 5,903 Net increase (decrease) in net assets attributable to holders of redeemable units 352,110 Net assets attributable to holders of redeemable units, end of period $ 353,269 See accompanying notes which are an integral part of the financial statements. Annual Reportport 6

7 Statements of Cash Flows Amounts in thousands of Canadian Dollars For the periods ended June 30, Cash, beginning of period $ 1 $ Cash flows from (used in) operating activities: Purchases of investments and derivatives (35,059) (372,838) Proceeds from sale and maturity of investments and derivatives 324,382 26,533 Cash receipts from other investment income 27, Net cash from (used in) operating activities 316,532 (346,207) Cash flows from (used in) financing activities: Proceeds from sales of units ,501 Amounts paid upon redemption of units (316,683) (15,293) Net cash from (used in) financing activities (316,533) 346,208 Net change in cash (1) 1 Cash, end of period $ $ 1 See accompanying notes which are an integral part of the financial statements. 7 Annual Report

8 Notes to Financial Statements For the periods ended June 30, 2016 and 2015 (Amounts in thousands of Canadian dollars except per unit amounts) 1. Formation of the Fund Fidelity American Disciplined Equity Currency Neutral Fund (Fund) is a unit trust formed under the laws of Ontario and governed by a Declaration of Trust dated November 2, 2009 (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. The investment advisor is responsible for the investment management of the Fund s portfolio. On December 31, 2015, the investment advisor changed from FIAM LLC (formerly Pyramis Global Advisors, LLC) to Fidelity. The registered office of the Fund is located at 483 Bay Street, Suite 300, Toronto, Ontario, M5G 2N7. The Fund invests substantially all of its assets in Fidelity American Disciplined Equity Fund-Series O (Underlying Fund). Currently, Fidelity mutual funds are offered in the following Series: Series A, Series B, Series C, Series D, Series F, Series F5, Series F8, Series I, Series I5, Series I8, Series O, Series T5, Series T8, Series S5, Series S8, Series E1, Series E1T5, Series E2, Series E2T5, Series E3, Series E3T5, Series E4, Series E4T5, Series E5, Series E5T5, Series P1, Series P1T5, Series P2, Series P2T5, Series P3, Series P3T5, Series P4, Series P4T5, Series P5 and Series P5T5. Series A, Series C, Series T5 and Series T8 units are available to all investors in a deferred sales charge (DSC) option. Series A, Series T5 and Series T8 units will be converted to lower management and advisory fee Series B, Series S5 and Series S8 units, respectively, one year after completion of their redemption schedule. Series T5 and Series T8 units have substantially all the same attributes as the Series A units with the exception that Series T5 and Series T8 units distribute an amount comprised of net income and/or return of capital monthly, if available. Series B, Series D, Series S5 and Series S8 units are available to all investors in an initial sales charge (ISC) option. Series S5 and Series S8 units have substantially all the same attributes as the Series B units with the exception that Series S5 and Series S8 units distribute an amount comprised of net income and/or return of capital monthly, if available. Series C and Series D units are available to investors who have enrolled in the rebalancing service. Series F, Series F5 and Series F8 units are usually only available to investors who have fee based accounts with dealers who have signed an eligibility agreement with Fidelity. Series F5 and Series F8 units have substantially all the same attributes as the Series F units with the exception that Series F5 and Series F8 units distribute an amount comprised of net income and/or return of capital monthly, if available. Series E1, Series E1T5, Series E2, Series E2T5, Series E3, Series E3T5, Series E4, Series E4T5, Series E5 and Series E5T5 units are available only to investors who initially hold Series B and/or Series S5 units and then become eligible to hold certain Series E units. Series E1, Series E1T5, Series E2, Series E2T5, Series E3, Series E3T5, Series E4, Series E4T5, Series E5 and Series E5T5 units have lower combined management and administration fees than Series B or Series S5 units. Series E1T5, Series E2T5, Series E3T5, Series E4T5 and Series E5T5 units have the same attributes as the other Series E units with the exception that Series E1T5, Series E2T5, Series E3T5, Series E4T5 and Series E5T5 units distribute an amount comprised of net income and/or return of capital monthly, if available. Series P1, Series P1T5, Series P2, Series P2T5, Series P3, Series P3T5, Series P4, Series P4T5, Series P5 and Series P5T5 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 P1T5, Series P2, Series P2T5, Series P3, Series P3T5, Series P4, Series P4T5, Series P5 and Series P5T5 units have lower combined management and administration fees than Series F or Series F5 units. Series P1T5, Series P2T5, Series P3T5, Series P4T5 and Series P5T5 units have the same attributes as the other Series P units with the exception that Series P1T5, Series P2T5, Series P3T5, Series P4T5 and Series P5T5 units distribute an amount comprised of net income and/or return of capital monthly, if available. 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. Series I, Series I5 and Series I8 units are available to all investors who have entered into a Series I Agreement with Fidelity and are available to all investors in an initial sales charge (ISC) option. Series I5 and Series I8 units have substantially all the same attributes as the Series I units with the exception that Series I5 and Series I8 units distribute an amount comprised of net income and/or return of capital monthly, if available. This Fund offers Series O units, which are only available to other Fidelity products and are not available for public purchase. 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. 2. Basis of Preparation Statement of Compliance These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB).The accounting policies set out below have been applied consistently unless otherwise stated. The financial statements were authorized for issue by Fidelity s board of directors on September 13, Functional and Presentation Currency These financial statements are presented in Canadian dollars, which is the Fund s functional currency. Annual Reportport 8

9 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. 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 June 30, 2016 and June 30, 2015, is included at the end of the Fund s Schedule of Investments. Classification and measurement of financial instruments 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 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 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. 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 June 30, 2016 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: 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. 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 June 30, 2016 and June 30, Annual Report

10 Notes to Financial Statements continued (Amounts in thousands of Canadian dollars except per unit amounts) 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. 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. 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 June 30, 2016 and June 30, 2015, the Fund s net asset value per unit may differ by less than $0.01 from its net assets attributable to holders of redeemable units 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. Distributions from any 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. Forward Foreign Currency Contracts The Fund may use forward foreign currency contracts to manage its currency exposure in any Underlying Fund. Contracts to sell generally are used to mitigate the risk of the Fund s investments against 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. 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 the Fund, divided by the weighted average units outstanding for the Fund during the period as follows: Weighted Average Units Period ended June 30, 2016 Series O 10,308 Period ended June 30, 2015 Annual Reportport 10

11 Weighted Average Units Series O 5,543 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. 4. Expenses and Other Related Party Transactions Management and Advisory Fees Fidelity serves as the manager and investment advisor of the Fund. The Fund pays Fidelity 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 the Fund, calculated daily and payable monthly. No management and advisory fees are charged with respect to the Series O units. 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. 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 the Fund is based on the unitholders proportionate investments by province, using 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. 5. Taxation and Distributions The Fund qualifies as a unit 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. Capital losses may be carried forward indefinitely to reduce future realized capital gains. As at the last taxation year-end, the Fund had no 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. 11 Annual Report

12 Notes to Financial Statements continued (Amounts in thousands of Canadian dollars except per unit amounts) 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 June 30, 2016 Series O 18, (18,899) 9 Period ended June 30, 2015 Series O 67 18,960 (778) 18,249 Affiliated Ownership - As at June 30, 2016 and June 30, 2015, Fidelity and its affiliates held 100% of the Fund. 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. Fidelity seeks to minimize potential adverse effects of these performance risks by employing professional, experienced portfolio advisors, by daily monitoring of positions and market events, and by diversifying the investment portfolio within the constraints of the investment mandate. The Fund and any Underlying Fund may use derivative financial instruments to moderate certain risk exposures. Risk, as defined by Fidelity, is the mismatch of certain risk factors, such as the market capitalization, beta, common factors such as size, priceearnings ratio, price-to-book ratio and industry exposures, between a portfolio and its benchmark. Such mismatches may result in divergence of returns relative to the benchmark. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. A beta of 1 indicates that the security s price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security s price will be more volatile than the market. For example, if a stock s beta is 1.2, it s theoretically 20% more volatile than the market. Fidelity 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. Fidelity 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, Fidelity s analysts select securities based on their own unique valuation processes. The Fund aims to achieve long-term capital growth and seeks a similar return to its Underlying Fund, Fidelity American Disciplined Equity Fund, by investing substantially all of its assets in units of the Underlying Fund. The Fund also uses derivatives to try to minimize the exposure to currency fluctuations between the U.S. and Canadian dollars. The Fund also uses derivatives to try to minimize the exposure to currency fluctuations between the U.S. and Canadian dollars. The Underlying Fund aims to achieve long-term capital growth by investing primarily in equity securities of U.S. companies. The Fund s benchmark is the S&P 500 Index Hedged CAD. The Underlying Fund s benchmark is S&P 500 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 any Underlying Fund. In addition, as part of its cash management, the Annual Reportport 12

13 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 June 30, 2016 and June 30, 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 June 30, 2016 and June 30, Concentration Risk - Fidelity 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 any Underlying Fund. Sector Mix % of Fund s Net Assets as at 6/30/16 % of Fund s Net Assets as at 6/30/15 Information Technology Financials Health Care Consumer Discretionary Consumer Staples Industrials Energy Utilities Materials Telecommunication Services Net Other Assets (Liabilities) Derivative Exposure % of Fund s Net Assets as at 6/30/16 % of Fund s Net Assets as at 6/30/15 Forward Foreign Currency Contracts Forward Foreign Currency Contracts percentage is calculated by dividing the net unrealized gain/loss of all contracts held by total net assets. Fidelity 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 investment in any Underlying Fund. In accordance with securities regulations, investment 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 aims to retain sufficient cash and short-term investments to maintain liquidity, and has the ability to borrow up to 5% of its net asset value from the custodian for the purpose of funding redemptions. The Fund and any Underlying Fund 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 any Underlying Fund s Schedule of Investments as at their respective period ends. The liquidity position of the Fund and any Underlying Fund is monitored on a daily basis. As at June 30, 2016 and June 30, 2015, the Fund did not have financial liabilities with maturities greater than 3 months. Other Price 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 on monetary instruments), whether caused by factors specific to an individual investment, its issuer, or other factors affecting all instruments traded in a market or market segment. All securities present a risk of loss of capital. The Fund and any Underlying 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 13 Annual Report

14 Notes to Financial Statements continued (Amounts in thousands of Canadian dollars except per unit amounts) and any Underlying Fund s investments and derivatives are susceptible to other price risk arising from uncertainties about future prices of the instruments. If the benchmark had increased or decreased by 5% on June 30, 2016 and June 30, 2015, with all other variables held constant, the net assets attributable to holders of redeemable units of the Fund would have increased or decreased by approximately $8 (June 30, 2015: $17,310). This change is estimated using the Fund s beta which is calculated based on the historical correlation between the return of the Fund as compared to the return of the benchmark. In practice, the actual trading results may differ from this sensitivity analysis and the difference could be material. Interest Rate Risk - Interest rate risk arises on interest-bearing financial instruments held in the investment portfolio such as bonds. The Fund and any Underlying Fund are 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 in short-term investments at market interest rates. The majority of the Fund s and any Underlying Fund s financial assets and liabilities are non-interest bearing. As a result, the Fund is not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. Currency Risk - Currency risk arises from financial instruments that are denominated in a currency other than Canadian dollar, which is the Fund s and any Underlying Fund s functional currency. The Fund and any Underlying Fund are exposed to the risk that the 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. As a result, the Fund is not subject to significant amounts of risk due to fluctuations in exchange rates. Generally, the use of forward contracts to hedge as completely as possible currency fluctuations between U.S. and the Canadian dollar will not result in the impact of currency fluctuations being eliminated altogether. The Fund s returns will differ from the U.S. dollar returns of any 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 U.S. foreign currency. 8. 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. Underlying Fund names presented in the tables reflect names in effect as at the dates shown: June 30, 2016 Fidelity American Disciplined Equity Fund Series O Total Net Assets Fair Value of Investment 1,146, Annual Reportport 14

15 June 30, 2015 Fidelity American Disciplined Equity Fund Series O Total Net Assets Fair Value of Investment 1,194, , 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 June 30, 2016 Amounts offset Amounts not offset Assets Gross Gross assets/liabilities offset Net Master Netting Arrangements Financial Collateral Forward foreign currency contracts 3 (1) 2 2 Liabilities Forward foreign currency contracts (1) 1 Net As at June 30, 2015 Amounts offset Amounts Not offset Assets Gross Gross assets/liabilities offset Net Master Netting Arrangements Financial Collateral Forward foreign currency contracts 389 (92) 297 (166) 131 Liabilities Forward foreign currency contracts (388) 92 (296) 166 (130) Net 15 Annual Report

16 Management Report and Independent Auditor s Report Management Responsibility for Financial Reporting To the Unitholders and Trustee of Fidelity American Disciplined Equity Currency Neutral Fund (Fund) The accompanying financial statements have been prepared by Fidelity Investments Canada ULC (Fidelity), as manager of the Fund. Fidelity is responsible for the information and representations contained in these financial statements. The Board of Directors of Fidelity is responsible for reviewing and approving the financial statements. Fidelity maintains appropriate processes to ensure that relevant and reliable financial information is produced. The financial statements have been prepared in accordance with International Financial Reporting Standards and include certain amounts and disclosures that are based on estimates and judgments. The significant accounting policies, which management believes are appropriate for the Fund, are described in Note 3 to the financial statements. PricewaterhouseCoopers LLP is the external auditor of the Fund. They have audited the financial statements in accordance with Canadian generally accepted auditing standards to enable them to express to the unitholders their opinion on the financial statements. Their report is set out below. Darren Farkas Vice President and Fund Treasurer Fidelity Investments Canada ULC September 13, 2016 Independent Auditor s Report To the Unitholders and Trustee of Fidelity American Disciplined Equity Currency Neutral Fund (Fund) We have audited the accompanying financial statements of the Fund, which comprise the statements of financial position as at June 30, 2016 and 2015 and the statements of comprehensive income, changes in net assets attributable to holders of redeemable units and cash flows for the years ended June 30, 2016 and 2015, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as at June 30, 2016 and 2015 and its financial performance and its cash flows for the years ended June 30, 2016 and 2015 in accordance with International Financial Reporting Standards. PricewaterhouseCoopers LLP Chartered Professional Accountants, Licensed Public Accountants Toronto, Ontario September 13, 2016 Annual Reportport 16