Fidelity Tactical High Income Fund

Transcription

1 Fidelity Tactical High Income Fund Annual Management Report of Fund Performance March 31,

2 Caution Regarding Forward-looking Statements Certain portions of this report, including, but not limited to, Results of Operations and Recent Developments, may contain forward-looking statements about the Fund, including its strategy, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, intends, plans, believes, estimates and similar forward-looking expressions or negative versions thereof. In addition, any statement that may be made concerning future performance, strategies or prospects, and possible future Fund action, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Fund and economic factors. Accordingly, assumptions concerning future economic and other factors may prove to be incorrect at a future date. Forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made by the Fund. Any number of important factors could contribute to these digressions, including, but not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. It should be stressed that the above-mentioned list of important factors is not exhaustive. You are encouraged to consider these and other factors carefully before making any investment decisions and you are urged to avoid placing undue reliance on forward-looking statements. Further, you should be aware of the fact that the Fund has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, prior to the release of the next Management Report of Fund Performance.

3 Annual Management Report of Fund Performance as at March 31, Fidelity Tactical High Income Fund This annual management report of fund performance contains financial highlights but does not contain the complete annual financial statements for the investment fund. You can get a copy of the annual financial statements at your request, and at no cost, by calling , by writing to us at Fidelity Investments, 483 Bay St. Suite 3, Toronto ON M5G 2N7 or by visiting our website at or SEDAR at Securityholders may also contact us using one of these methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record or quarterly portfolio disclosure relating to the investment fund. Management Discussion of Fund Performance Investment Objective and Strategies Investment Objective: Fidelity Tactical High Income Fund (Fund) aims to provide income and capital growth by investing primarily in a mix of income-producing securities that may be located anywhere in the world. Income-producing securities may include, but are not limited to, equity securities, common and preferred shares, convertible securities, investment grade fixed-income securities, higher-yielding lower-quality fixed-income securities, floating rate debt instruments, asset-backed securities and mortgage-backed securities. The Fund can invest in these securities either directly or indirectly through investments in underlying funds. Strategies: When buying and selling equity securities, the portfolio manager examines each company s potential for success in light of its current financial condition and its industry and position within the industry, as well as economic and market conditions. When deciding whether or not to invest, the portfolio manager focuses primarily on a company s financial stability, potential to generate sustainable return on equity over time, and its valuation. The portfolio manager invests in companies believed to be undervalued in the marketplace in relation to factors such as the company s assets, sales, earnings, growth potential and cash flow, or in relation to securities of other companies in the same industry. The portfolio manager also considers factors such as balance sheet strength, earnings estimates, ability to pay dividends, and quality of management. The Fund may hold cash and invest in any kind of fixed-income securities, including lower-quality high-yield securities. When buying and selling high-yield securities, including convertible securities and floating rate debt instruments, the portfolio manager relies on fundamental analysis of each issuer and its potential in view of its current financial condition and industry position, as well as economic and market conditions. The portfolio manager considers a security s features and current price compared to its estimated long-term value, and the earnings potential, credit standing and management of the security s issuer. The portfolio manager may invest in high-yield securities that do not produce income, including defaulted securities and common stock, or in companies in a troubled or uncertain financial condition. When buying and selling other fixed-income securities, the portfolio manager analyzes the security s features, its current price compared to its estimated long-term value, the credit quality of the issuer, and any short-term trading opportunities resulting from market inefficiencies. An analysis of credit quality will consider balance sheet strength of the issuer, company leverage ratios, stability of income, management strength and track record, and risks to the issuer that may impair its ability to meet its obligations to debtholders. Risk The risks associated with investing in this Fund remain as discussed in the prospectus. The Fund is suitable for long-term investors who want to gain exposure to global equity and fixed-income securities, want a diversified portfolio in a single fund, and can handle the volatility of returns generally associated with equity investments. The Fund is not an appropriate investment if the investor has a short-term investment horizon. To invest in this Fund, investors should be able to accept a low to medium level of risk. The suitability of the investment has not changed from what has been disclosed in the prospectus. Results of Operations Fidelity Tactical High Income Fund, Series B, returned 12.9%, after fees and expenses, for the one-year period ended March 31,. The net returns of the other series of this Fund are similar to those of Series B, except for differences attributable to expense structures. The U.S. equity markets, as represented by the S&P 5 Index, returned 2.8% (in Canadian dollar terms). U.S. investment-grade bonds, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, returned 3.6% (in Canadian dollar terms) for the same period. Market Overview: Global equities registered positive returns during the review period owing to the continued low interest rate environment around the world. The U.S. was the best performing market, driven by positive economic data and optimism surrounding the proposed policies of the U.S. administration. The Canadian markets also performed well amid a recovery in commodity prices, and an improved economic environment. Asian markets also registered strong performance amid signs of economic stabilization in China, attributable to central bank monetary stimulus and strong economic activities across the region. European markets lagged global markets, as expected consequences of the U.K. decision to leave the European Union heightened investor concerns. 1

4 Fidelity Tactical High Income Fund Management Discussion of Fund Performance continued Global investment grade fixed-income markets remained weak during the review period as the U.S. administration s proposed fiscal policies were not very supportive of the global investment grade bond markets. In the U.S., economic growth continued to improve and the labor market tightened further. As a result, the U.S. Federal Reserve (the Fed) raised interest rates twice during the period once in December 216 from.5% to.75%, and again in March from.75% to 1.%. The Fed has also indicated the possibility of two more rate hikes in, which would be dependent on improving economic data. Factors affecting performance: The Fund s allocation to investment grade bonds and high-yield bonds contributed the most to relative performance, followed by selections among equities. In equities, Apple, Regions Financial and Qualcomm made the top contributions to relative performance. Among high-yield bonds, investments in International Lease Financial, Southwestern and Diamond Financial were among the primary contributors to relative performance. In investment grade corporate bonds, investments in General Electric and JP Morgan contributed to relative performance. The Fund s allocations to long-duration treasury bonds detracted from relative performance due to a decline in bond prices as government bond yields rose significantly during the period. Portfolio changes: Portfolio manager Adam Kramer continues to invest in securities offering attractive risk/reward profiles. He employs a dynamic investment approach in which the current yield of the Fund will always be balanced with the aggregate level of risk to maximise the so that the risk-adjusted return for the Fund. Mr. Kramer increased exposure to Treasury bonds and equities. In equities, he added exposures to interest rate sensitive stocks because he believed the valuations became attractive after these stocks sold off before the U.S. election. Conversely, he took profits and reduced the allocation to high-quality high-yield bonds after credit spreads tightened. He also trimmed exposure to convertible bonds. He decreased exposure to investment grade corporate bonds and preferred stocks because he believed valuations had reached their potential. In addition, he also decreased exposure to emerging markets debt. Overall, Mr. Kramer has modestly increased the risk profile of the portfolio primarily through increased equities because he still views this as a market with opportunities since most asset classes are not overly rich in his opinion. However, there is also less cushion for error than there was in 216, so he balanced the increased equity exposure with long-maturity Treasury securities. As at March 31,, the Fund s largest absolute exposure was to equity securities, followed by Treasuries. Recent Developments The portfolio manager believes the U.S. economy is approaching the late stages of the business cycle as credit conditions started to tighten, but strong data on employment and wages provide support for continued expansion. He believes that market volatility may remain elevated as uncertainty persists around the U.S. administration s policy implementation. He expects the market to trade within a narrow range as the fiscal stimulus plan becomes clear. Declining distress ratios in the high-yield markets suggest that the default rate is likely to decrease given that most defaults have already occurred. He has positioned the Fund to continue to deliver on its mandate to generate relatively consistent returns and income from year to year. Effective May 1,, Matthew Fruhan will be assigned as co-portfolio manager with portfolio manager James Morrow on a portion of the Fund. Upon Mr. Morrow s retirement on December 31,, Mr. Fruhan will assume lead portfolio manager responsibilities for this portion of the Fund. Adam Kramer will continue to act as lead portfolio manager of the overall portfolio of the Fund. Independent Review Committee Effective February 28,, Helen M. Meyer retired from the Independent Review Committee and was replaced by James E. Cook as Chair. Also effective on that date, Frances Horodelski of Toronto, Ontario became a member of the Independent Review Committee. 2

5 Related Party Transactions Manager and Portfolio Adviser The Fund is managed by Fidelity Investments Canada ULC (Fidelity). Fidelity is part of a broader group of companies collectively known as Fidelity Investments. Fidelity provides or arranges for the provision of all general management and administrative services required by the Fund in its day to day operations, bookkeeping, record keeping and other administrative services for the Fund. Fidelity is the portfolio adviser to the Fund and it provides investment advisory services to the Fund. Fidelity has entered into sub-advisory agreements with a number of entities including Fidelity Investments Money Management, Inc. and FMR Co., Inc., to provide investment advice with respect to all or a portion of the investments of the Fund. The sub-advisors arrange for acquisition and disposition of portfolio investments, including all necessary brokerage arrangements. The Fund pays Fidelity a monthly management and advisory fee for their services, based on the net asset value of each Series, calculated daily and payable monthly. The Fund paid Fidelity management and advisory fees of $2,498, for the period ended March 31,. Administration Fee Fidelity charges the Fund a fixed administration fee in place of certain variable expenses. Fidelity, in turn, pays all of the operating expenses of the Fund, other than certain specified fund costs (e.g. the fees and expenses of the Independent Review Committee, taxes, brokerage commissions and interest charges). The Fund pays an annual rate, which is calculated on a tiered basis, based on the net asset value of each Series, calculated daily and payable monthly. The Fund paid Fidelity administration fees of $339, for the period ended March 31,. Brokerage Commissions The Fund may place a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Investments, including National Financial Services LLC, provided it determines that these affiliates trade execution abilities and costs are comparable to those of non affiliated, qualified brokerage firms, on an execution only basis. Commissions paid to brokerage firms that are affiliates of Fidelity Investments were $2,6 for the period ended March 31,. Fidelity receives standing instructions from the IRC in respect of policies and procedures governing best execution of transactions with affiliates, which includes brokers affiliated to Fidelity Investments, at least once per year. 3

6 Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the period end of the years shown. This information is derived from the Fund s audited annual and/or unaudited semi-annual financial statements. Please see the front page for information about how you can obtain the Fund s annual or semi-annual financial statements. Fidelity Tactical High Income Fund Series A Periods ended March 31, A Net assets, beginning of period C $.91 $ $. Total revenue Total expenses (excluding distributions) (.31) (.32) (.24) Realized gains (losses) Unrealized gains (losses).51 (1.4) 1.52 Total increase (decrease) from operations C From net investment income (excluding dividends) (.22) (.3) (.8) From dividends From capital gains (.72) (.65) (.11) Return of capital Total distributions C,D (.94) (.95) (.19) Net assets, end of period C $ $.91 $ Net asset value (s) E $ 36,534 $ 37,263 $ 37,235 Securities outstanding E 3,233,94 3,42,171 3,191,744 Management expense ratio F,G 2.42% 2.4% 2.39% Management expense ratio before waivers or absorptions F,G 2.42% 2.41% 2.41% Trading expense ratio H.9%.8%.8% Portfolio turnover rate I % % 2.45% Net asset value per security, end of period $ $.9124 $ Fidelity Tactical High Income Fund Series B Periods ended March 31, A Net assets, beginning of period C $.92 $ $. Total revenue Total expenses (excluding distributions) (.28) (.3) (.21) Realized gains (losses) Unrealized gains (losses).56 (1.7) 1.44 Total increase (decrease) from operations C From net investment income (excluding dividends) (.24) (.32) (.9) From dividends From capital gains (.73) (.65) (.12) Return of capital Total distributions C,D (.97) (.97) (.21) Net assets, end of period C $ $.92 $ Net asset value (s) E $ 51,983 $ 57,173 $ 66,83 Securities outstanding E 4,638,868 5,241,827 5,668,684 Management expense ratio F,J 2.17% 2.17% 2.17% Management expense ratio before waivers or absorptions F,J 2.17% 2.17% 2.17% Trading expense ratio H.9%.8%.8% Portfolio turnover rate I % % 2.45% Net asset value per security, end of period $ $.9171 $

7 Fidelity Tactical High Income Fund Series F Periods ended March 31, A Net assets, beginning of period C $.92 $ $. Total revenue Total expenses (excluding distributions) (.15) (.16) (.11) Realized gains (losses) Unrealized gains (losses).48 (1.19) 1.31 Total increase (decrease) from operations C From net investment income (excluding dividends) (.36) (.44) (.18) From dividends From capital gains (.74) (.66) (.13) Return of capital Total distributions C,D (1.) (1.11) (.3) Net assets, end of period C $ $.92 $ Net asset value (s) E $ 45,891 $ 37,377 $ 49,364 Securities outstanding E 3,99,928 3,421,699 4,234,854 Management expense ratio F,G 1.6% 1.3% 1.3% Management expense ratio before waivers or absorptions F,G 1.6% 1.7% 1.8% Trading expense ratio H.9%.8%.8% Portfolio turnover rate I % % 2.45% Net asset value per security, end of period $ $.9171 $ Fidelity Tactical High Income Fund Series F5 Periods ended March 31, A Net assets, beginning of period C $ $ $ 2. Total revenue Total expenses (excluding distributions) (.28) (.32) (.22) Realized gains (losses) Unrealized gains (losses) 1.1 (2.66) 2.96 Total increase (decrease) from operations C From net investment income (excluding dividends) (.7) (.79) (.35) From dividends From capital gains (1.42) (1.29) (.25) Return of capital (.42) (.23) (.51) Total distributions C,D (2.54) (2.32) (1.) Net assets, end of period C $ $ $ Net asset value (s) E $ 2,419 $ 2,18 $ 4,496 Securities outstanding E 117,97 3,28 199,27 Management expense ratio F,G 1.4% 1.4% 1.3% Management expense ratio before waivers or absorptions F,G 1.4% 1.7% 1.9% Trading expense ratio H.9%.8%.8% Portfolio turnover rate I % % 2.45% Net asset value per security, end of period $ $ $

8 Financial Highlights continued Fidelity Tactical High Income Fund Series F8 Periods ended March 31, A Net assets, beginning of period C $ 2.2 $ $ 2. Total revenue Total expenses (excluding distributions) (.28) (.3) (.21) Realized gains (losses) Unrealized gains (losses) 1.7 (1.66) 2.44 Total increase (decrease) from operations C From net investment income (excluding dividends) (.65) (.84) (.35) From dividends From capital gains (1.31) (1.24) (.24) Return of capital (1.1) (.83) (1.) Total distributions C,D (2.97) (2.91) (1.6) Net assets, end of period C $ $ 2.2 $ Net asset value (s) E $ 1,28 $ 1,13 $ 875 Securities outstanding E 64,868 5,693 39,295 Management expense ratio F,G 1.5% 1.1%.99% Management expense ratio before waivers or absorptions F,G 1.5% 1.4% 1.4% Trading expense ratio H.9%.8%.8% Portfolio turnover rate I % % 2.45% Net asset value per security, end of period $ $ $ Fidelity Tactical High Income Fund Series O Periods ended March 31, A Net assets, beginning of period C $.91 $ $. Total revenue Total expenses (excluding distributions) (.3) (.4) (.2) Realized gains (losses) Unrealized gains (losses).53 (1.3) 1.42 Total increase (decrease) from operations C From net investment income (excluding dividends) (.47) (.55) (.26) From dividends From capital gains (.75) (.67) (.13) Return of capital Total distributions C,D (1.22) (1.23) (.4) Net assets, end of period C $ $.91 $ Net asset value (s) E $ 81,43 $ 63,898 $ 25,94 Securities outstanding E 7,21,349 5,852,461 2,229,264 Management expense ratio % % % Management expense ratio before waivers or absorptions % % % Trading expense ratio H.9%.8%.8% Portfolio turnover rate I % % 2.45% Net asset value per security, end of period $ $.9144 $

9 Fidelity Tactical High Income Fund Series T5 Periods ended March 31, A Net assets, beginning of period C $ 2.67 $ $ 2. Total revenue Total expenses (excluding distributions) (.58) (.62) (.46) Realized gains (losses) Unrealized gains (losses).84 (2.11) 3.7 Total increase (decrease) from operations C From net investment income (excluding dividends) (.41) (.57) (.15) From dividends From capital gains (1.35) (1.24) (.22) Return of capital (.69) (.45) (.71) Total distributions C,D (2.45) (2.26) (1.8) Net assets, end of period C $ 2.75 $ 2.67 $ Net asset value (s) E $ 3,771 $ 3,116 $ 3,132 Securities outstanding E 181,911 15, ,892 Management expense ratio F,G 2.42% 2.41% 2.4% Management expense ratio before waivers or absorptions F,G 2.42% 2.42% 2.42% Trading expense ratio H.9%.8%.8% Portfolio turnover rate I % % 2.45% Net asset value per security, end of period $ $ $ Fidelity Tactical High Income Fund Series T8 Periods ended March 31, A Net assets, beginning of period C $ $ 22.3 $ 2. Total revenue Total expenses (excluding distributions) (.54) (.6) (.45) Realized gains (losses) Unrealized gains (losses).88 (1.85) 3.1 Total increase (decrease) from operations C From net investment income (excluding dividends) (.38) (.55) (.15) From dividends From capital gains (1.25) (1.18) (.22) Return of capital (1.25) (1.) (1.2) Total distributions C,D (2.88) (2.84) (1.57) Net assets, end of period C $ 19.2 $ $ 22.3 Net asset value (s) E $ 4,28 $ 3,572 $ 3,638 Securities outstanding E 221, , ,214 Management expense ratio F,G 2.41% 2.39% 2.38% Management expense ratio before waivers or absorptions F,G 2.41% 2.4% 2.4% Trading expense ratio H.9%.8%.8% Portfolio turnover rate I % % 2.45% Net asset value per security, end of period $ $ $

10 Financial Highlights continued Fidelity Tactical High Income Fund Series S5 Periods ended March 31, A Net assets, beginning of period C $ 2.78 $ $ 2. Total revenue Total expenses (excluding distributions) (.51) (.56) (.4) Realized gains (losses) Unrealized gains (losses).97 (2.4) 2.73 Total increase (decrease) from operations C From net investment income (excluding dividends) (.47) (.63) (.19) From dividends From capital gains (1.36) (1.25) (.23) Return of capital (.63) (.39) (.66) Total distributions C,D (2.46) (2.27) (1.8) Net assets, end of period C $ 2.92 $ 2.78 $ Net asset value (s) E $ 3,26 $ 3,516 $ 4,278 Securities outstanding E 155, , ,256 Management expense ratio F,J 2.% 2.% 2.8% Management expense ratio before waivers or absorptions F,J 2.11% 2.% 2.9% Trading expense ratio H.9%.8%.8% Portfolio turnover rate I % % 2.45% Net asset value per security, end of period $ $ $ Fidelity Tactical High Income Fund Series S8 Periods ended March 31, A Net assets, beginning of period C $ $ 22.7 $ 2. Total revenue Total expenses (excluding distributions) (.47) (.53) (.4) Realized gains (losses) Unrealized gains (losses).86 (1.89) 2.3 Total increase (decrease) from operations C From net investment income (excluding dividends) (.45) (.61) (.18) From dividends From capital gains (1.26) (1.19) (.22) Return of capital (1.19) (1.5) (1.17) Total distributions C,D (2.9) (2.85) (1.58) Net assets, end of period C $ $ $ 22.7 Net asset value (s) E $ 3,686 $ 2,671 $ 1,142 Securities outstanding E 193,61 136,619 52,283 Management expense ratio F,J 2.7% 2.11% 2.13% Management expense ratio before waivers or absorptions F,J 2.7% 2.11% 2.13% Trading expense ratio H.9%.8%.8% Portfolio turnover rate I % % 2.45% Net asset value per security, end of period $ $ $

11 Fidelity Tactical High Income Fund Series E1 Periods ended March 31, 216 K Net assets, beginning of period C $ 9.8 $. Total revenue.45.9 Total expenses (excluding distributions) (.25) (.4) Realized gains (losses).57.3 Unrealized gains (losses).29.3 Total increase (decrease) from operations C From net investment income (excluding dividends) (.23) (.5) From dividends From capital gains (.65) Return of capital Total distributions C,D (.88) (.5) Net assets, end of period C $.16 $ 9.8 Net asset value (s) E $ 14,582 $ 8,248 Securities outstanding E 1,45, ,55 Management expense ratio F,L 2.% 2.% Management expense ratio before waivers or absorptions F,L 2.% 2.11% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $.163 $ Fidelity Tactical High Income Fund Series E1T5 Periods ended March 31, 216 K Net assets, beginning of period C $ $ 2. Total revenue.9.17 Total expenses (excluding distributions) (.49) (.7) Realized gains (losses).91.4 Unrealized gains (losses).71.5 Total increase (decrease) from operations C From net investment income (excluding dividends) (.44) (.11) From dividends From capital gains (1.28) Return of capital (.6) (.6) Total distributions C,D (2.32) (.17) Net assets, end of period C $ $ Net asset value (s) E $ 766 $ 457 Securities outstanding E 38,961 23,424 Management expense ratio F,L 2.14% 2.12% Management expense ratio before waivers or absorptions F,L 2.14% 2.12% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $ $

12 Financial Highlights continued Fidelity Tactical High Income Fund Series E2 Periods ended March 31, 216 K Net assets, beginning of period C $ 9.8 $. Total revenue.42.8 Total expenses (excluding distributions) (.24) (.3) Realized gains (losses).59.2 Unrealized gains (losses).24.5 Total increase (decrease) from operations C From net investment income (excluding dividends) (.23) (.6) From dividends From capital gains (.65) Return of capital Total distributions C,D (.88) (.6) Net assets, end of period C $.16 $ 9.8 Net asset value (s) E $ 2,699 $ 562 Securities outstanding E 265,95 57,449 Management expense ratio F,L 2.4% 2.3% Management expense ratio before waivers or absorptions F,L 2.4% 2.3% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $.1617 $ 9.83 Fidelity Tactical High Income Fund Series E3 Periods ended March 31, 216 K Net assets, beginning of period C $ 9.8 $. Total revenue.48.9 Total expenses (excluding distributions) (.24) (.3) Realized gains (losses).62.3 Unrealized gains (losses).49.2 Total increase (decrease) from operations C From net investment income (excluding dividends) (.23) (.6) From dividends From capital gains (.65) Return of capital Total distributions C,D (.88) (.6) Net assets, end of period C $.16 $ 9.8 Net asset value (s) E $ 1 $ 78 Securities outstanding E 1 7,998 Management expense ratio F,L 1.99% 2.% Management expense ratio before waivers or absorptions F,L 1.99% 2.% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $.1641 $ 9.832

13 Fidelity Tactical High Income Fund Series E4 Periods ended March 31, 216 K Net assets, beginning of period C $ 9.8 $. Total revenue Total expenses (excluding distributions) (.21) (.3) Realized gains (losses).5.6 Unrealized gains (losses) (2.98) (.11) Total increase (decrease) from operations C (1.77).1 From net investment income (excluding dividends) (.24) (.6) From dividends From capital gains (.66) Return of capital Total distributions C,D (.9) (.6) Net assets, end of period C $.17 $ 9.8 Net asset value (s) E $ 56 $ 35 Securities outstanding E 5,477 3,541 Management expense ratio F,L 1.96% 1.97% Management expense ratio before waivers or absorptions F,L 1.96% 1.97% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $.1731 $ 9.83 Fidelity Tactical High Income Fund Series E5 Periods ended March 31, M Net assets, beginning of period C $. Total revenue.39 Total expenses (excluding distributions) (.2) Realized gains (losses).5 Unrealized gains (losses).3 Total increase (decrease) from operations C.99 From net investment income (excluding dividends) (.21) From dividends From capital gains (.66) Return of capital Total distributions C,D (.87) Net assets, end of period C $.3 Net asset value (s) E $ 7 Securities outstanding E 726 Management expense ratio F,N 1.95% Management expense ratio before waivers or absorptions F,N 1.95% Trading expense ratio H.9% Portfolio turnover rate I % Net asset value per security, end of period $

14 Financial Highlights continued Fidelity Tactical High Income Fund Series P1 Periods ended March 31, 216 O Net assets, beginning of period C $ 9.7 $. Total revenue Total expenses (excluding distributions) (.12) (.4) Realized gains (losses) Unrealized gains (losses).3 (.56) Total increase (decrease) from operations C 1.4 (.3) From net investment income (excluding dividends) (.31) (.) From dividends From capital gains (.61) (.55) Return of capital Total distributions C,D (.92) (.65) Net assets, end of period C $ 9.4 $ 9.7 Net asset value (s) E $,499 $ 4,125 Securities outstanding E 1,158, ,396 Management expense ratio F,P.97%.97% Management expense ratio before waivers or absorptions F,P.97%.97% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $ $ 9.7 Fidelity Tactical High Income Fund Series P1T5 Periods ended March 31, 216 O Net assets, beginning of period C $ 18.2 $ 2. Total revenue Total expenses (excluding distributions) (.23) (.8) Realized gains (losses) Unrealized gains (losses).62 (1.35) Total increase (decrease) from operations C 1.97 (.86) From net investment income (excluding dividends) (.6) (.19) From dividends From capital gains (1.21) (1.) Return of capital (.35) (.12) Total distributions C,D (2.16) (1.41) Net assets, end of period C $ $ 18.2 Net asset value (s) E $ 494 $ 251 Securities outstanding E 26,9 13,936 Management expense ratio F,P.99%.99% Management expense ratio before waivers or absorptions F,P.99%.99% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $ $

15 Fidelity Tactical High Income Fund Series P2 Periods ended March 31, 216 O Net assets, beginning of period C $ 9.8 $. Total revenue Total expenses (excluding distributions) (.11) (.4) Realized gains (losses) Unrealized gains (losses).4 (.45) Total increase (decrease) from operations C 1.23 (.2) From net investment income (excluding dividends) (.31) (.) From dividends From capital gains (.61) (.55) Return of capital Total distributions C,D (.92) (.65) Net assets, end of period C $ 9.41 $ 9.8 Net asset value (s) E $ 2,242 $ 1,399 Securities outstanding E 37, ,517 Management expense ratio F,P.9%.9% Management expense ratio before waivers or absorptions F,P.9%.9% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $ $ Fidelity Tactical High Income Fund Series P2T5 Periods ended March 31, 216 O Net assets, beginning of period C $ 18.3 $ 2. Total revenue.8.34 Total expenses (excluding distributions) (.22) (.7) Realized gains (losses) Unrealized gains (losses).47 (1.94) Total increase (decrease) from operations C 2.4 (1.4) From net investment income (excluding dividends) (.63) (.2) From dividends From capital gains (1.21) (1.) Return of capital (.32) (.11) Total distributions C,D (2.16) (1.41) Net assets, end of period C $ $ 18.3 Net asset value (s) E $ 531 $ 9 Securities outstanding E 28,9 4,977 Management expense ratio F,P.86%.85% Management expense ratio before waivers or absorptions F,P.86%.85% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $ $

16 Financial Highlights continued Fidelity Tactical High Income Fund Series P3 Periods ended March 31, 216 O Net assets, beginning of period C $ 9.7 $. Total revenue Total expenses (excluding distributions) (.7) (.3) Realized gains (losses).14 Unrealized gains (losses) (.9) (.57) Total increase (decrease) from operations C (.59) (.3) From net investment income (excluding dividends) (.32) (.) From dividends From capital gains (.62) (.55) Return of capital Total distributions C,D (.94) (.65) Net assets, end of period C $ 9.41 $ 9.7 Net asset value (s) E $ 1,158 $ 1 Securities outstanding E 123,281 7 Management expense ratio F,P.87%.83% Management expense ratio before waivers or absorptions F,P.87%.83% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $ 9.49 $ Fidelity Tactical High Income Fund Series P4 Periods ended March 31, 216 O Net assets, beginning of period C $ 9.7 $. Total revenue Total expenses (excluding distributions) (.11) (.3) Realized gains (losses).25.6 Unrealized gains (losses).18 (.18) Total increase (decrease) from operations C.84.3 From net investment income (excluding dividends) (.32) (.) From dividends From capital gains (.62) (.55) Return of capital Total distributions C,D (.94) (.65) Net assets, end of period C $ 9.4 $ 9.7 Net asset value (s) E $ 1 $ 148 Securities outstanding E ,412 Management expense ratio F,P.85%.85% Management expense ratio before waivers or absorptions F,P.85%.85% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $ $

17 Fidelity Tactical High Income Fund Series P5 Periods ended March 31, 216 O Net assets, beginning of period C $ 9.7 $. Total revenue Total expenses (excluding distributions) (.11) (.3) Realized gains (losses) Unrealized gains (losses).45 (.58) Total increase (decrease) from operations C 1.32 (.3) From net investment income (excluding dividends) (.32) (.) From dividends From capital gains (.61) (.55) Return of capital Total distributions C,D (.93) (.65) Net assets, end of period C $ 9.4 $ 9.7 Net asset value (s) E $ 17 $ 1 Securities outstanding E 18, 7 Management expense ratio F,P.83%.83% Management expense ratio before waivers or absorptions F,P.83%.83% Trading expense ratio H.9%.8% Portfolio turnover rate I % % Net asset value per security, end of period $ $

18 Financial Highlights continued Financial Highlights Footnotes A For the period May 28, 214 (inception date) to March 31, 215. B C D E F G H I J This information is derived from the Fund s audited annual and/or unaudited interim financial statements. The net assets attributable to securityholders per security presented in the financial statements may differ from the net asset value calculated for fund pricing purposes. An explanation of these differences can be found in the notes to financial statements. For reporting periods ending after January 1, per security comparative figures (except for net asset value per security, end of period) have been conformed to the current rounding presentation of two decimal places. As a result, prior period figures in the tables above may not foot due to this rounding change. Net assets and distributions are based on the actual number of securities outstanding at the relevant time. The increase (decrease) from operations is based on the weighted average number of securities outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per security. Distributions were paid in cash or reinvested in additional securities of the Fund, or both, and excludes any applicable distributions of management fee reduction to securityholders. Distributions are presented based on management s best estimate of the tax character. This information is provided as at period end of the year shown. Management expense ratio is based on total expenses (excluding distributions, commissions and other portfolio transaction costs) for the stated period and is expressed as an annualized percentage of daily average net asset values during the period, including the Fund s pro-rata share of estimated expenses incurred in any underlying investment fund, if applicable. Effective November 1, 214, the manager of the Fund has waived a portion of its administration fee and as of the date of the MRFP has continued to provide the Fund with such waivers. The manager may terminate the waiver at any time, at its sole discretion. It is not known when such waivers will be terminated. The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period, including the Fund s pro-rata share of estimated trading costs incurred in any underlying investment fund, if applicable. The Fund s portfolio turnover rate indicates how actively the Fund s portfolio adviser manages its portfolio investments. A portfolio turnover rate of % is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high portfolio turnover rate and the performance of the Fund. The portfolio turnover rate is calculated based on the lesser of purchases or sales of securities divided by the weighted average market value of the portfolio securities, excluding short-term securities. For periods greater than six months, but less than a full fiscal year, the portfolio turnover rate is annualized. Effective October 1, 215, the manager of the Fund has waived a portion of its administration fee and as of the date of the MRFP has continued to provide the Fund with such waivers. The manager may terminate the waiver at any time, at its sole discretion. It is not known when such waivers will be terminated. K For the period February 5, 216 (commencement of sale of securities) to March 31, 216. L Effective February 9, 216, the manager of the Fund has waived a portion of its administration fee and as of the date of the MRFP has continued to provide the Fund with such waivers. The manager may terminate the waiver at any time, at its sole discretion. It is not known when such waivers will be terminated. M For the period May 13, 216 (commencement of sale of securities) to March 31,. N Effective May 17, 216, the manager of the Fund has waived a portion of its administration fee and as of the date of the MRFP has continued to provide the Fund with such waivers. The manager may terminate the waiver at any time, at its sole discretion. It is not known when such waivers will be terminated. O For the period December 4, 215 (commencement of sale of securities) to March 31, 216. P Effective December 8, 215, the manager of the Fund has waived a portion of its administration fee and as of the date of the MRFP has continued to provide the Fund with such waivers. The manager may terminate the waiver at any time, at its sole discretion. It is not known when such waivers will be terminated. 16

19 Management and Advisory Fees Fidelity serves as manager and investment advisor of the Fund. The Fund pays Fidelity a monthly management and advisory fee for their services, based on the net asset value of each Series, calculated daily and payable monthly. Fidelity uses these management fees to pay for sales and trailing commissions to registered dealers on the distribution of the Fund securities, as well as for the general investment management expenses. Dealer compensation represents cash commissions paid by Fidelity to registered dealers during the period and includes upfront deferred sales charge and trailing commissions. This amount may, in certain circumstances, exceed % of the fees earned by Fidelity during the period. For new Funds or Series the amounts presented may not be indicative of longer term operating periods. Management Fees Dealer Compensation Investment management, administration and other Series A 1.9% 47.79% 52.21% Series B 1.75% 57.14% 42.86% Series F.75%.% Series F5.75%.% Series F8.75%.% Series T5 1.9% 57.27% 42.73% Series T8 1.9% 33.59% 66.41% Series S5 1.75% 57.14% 42.86% Series S8 1.75% 57.14% 42.86% Series E % 57.97% 42.3% Series E1T % 57.97% 42.3% Series E2 1.7% 58.82% 41.18% Series E % 59.7% 4.3% Series E4 1.65% 6.61% 39.39% Series E % 61.54% 38.46% Series P1.725%.% Series P1T5.725%.% Series P2.7%.% Series P2T5.7%.% Series P3.675%.% Series P4.65%.% Series P5.625%.% 17

20 Fidelity Tactical High Income Fund Past Performance The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional securities of the Fund. The performance information does not take into account sales, redemption, distribution or other optional charges that would have reduced returns or performance. How the Fund has performed in the past does not necessarily indicate how it will perform in the future. Year-by-Year Returns The following bar chart shows the Fund s annual performance for each of the years shown, and illustrates how the Fund s performance was changed from year to year. In percentage terms, the bar chart shows how much an investment made on the first day of each financial year would have grown or decreased by the last day of each financial year. Series A Series F Commencement of Operations is May 28, 214 Commencement of Operations is May 28, 214 Series B Series F Commencement of Operations is May 28, 214 Commencement of Operations is May 28, 214 Series F Series O Commencement of Operations is May 28, 214 Commencement of Operations is May 28,

21 Series T5 Series E Commencement of Operations is May 28, 214 Commencement of Operations is February 5, 216 Series T8 Series E1T Commencement of Operations is May 28, 214 Commencement of Operations is February 5, 216 Series S5 Series E Commencement of Operations is May 28, 214 Commencement of Operations is February 5, 216 Series S8 Series E Commencement of Operations is May 28, 214 Commencement of Operations is February 5,

22 Fidelity Tactical High Income Fund Past Performance continued Series E4 Series P Commencement of Operations is February 5, 216 Commencement of Operations is December 4, 215 Series E5 Series P2T Commencement of Operations is May 13, 216 Commencement of Operations is December 4, 215 Series P1 Series P Commencement of Operations is December 4, 215 Commencement of Operations is December 4, 215 Series P1T5 Series P Commencement of Operations is December 4, 215 Commencement of Operations is December 4, 215 2

23 Series P Commencement of Operations is December 4, Annual Compound Returns This table shows the Fund s historical annual compound total returns for the periods indicated, compared with broad-based benchmarks, the S&P 5 Index and the Bloomberg Barclays U.S. Aggregate Bond Index. Past 1 year Since Inception Average Annual Total Returns Fidelity Tactical High Income Fund Series A 12.5% 11.3% Fidelity Tactical High Income Fund Series B 12.9% 11.6% Fidelity Tactical High Income Fund Series F 14.1% 12.8% Fidelity Tactical High Income Fund Series F5 14.1% 12.8% Fidelity Tactical High Income Fund Series F8 14.1% 12.8% Fidelity Tactical High Income Fund Series O 15.3% 14.% Fidelity Tactical High Income Fund Series T5 12.6% 11.3% Fidelity Tactical High Income Fund Series T8 12.6% 11.3% Fidelity Tactical High Income Fund Series S5 12.9% 11.6% Fidelity Tactical High Income Fund Series S8 12.9% 11.6% Fidelity Tactical High Income Fund Series E1 12.9% 9.7% Fidelity Tactical High Income Fund Series E1T5 12.9% 9.7% Fidelity Tactical High Income Fund Series E2 13.% 9.8% Fidelity Tactical High Income Fund Series E3 13.% 9.9% Fidelity Tactical High Income Fund Series E4 13.2%.% Fidelity Tactical High Income Fund Series P1 14.2% 8.% Fidelity Tactical High Income Fund Series P1T5 14.2% 8.% Fidelity Tactical High Income Fund Series P2 14.3% 8.1% Fidelity Tactical High Income Fund Series P2T5 14.3% 8.1% Fidelity Tactical High Income Fund Series P3 14.4% 8.2% Fidelity Tactical High Income Fund Series P4 14.4% 8.2% Fidelity Tactical High Income Fund Series P5 14.3% 8.1% Bloomberg Barclays U.S. Aggregate Bond Index 3.6% 9.7% S&P 5 Index 2.8% 18.3% The period used for the since inception Bloomberg Barclays U.S. Aggregate Bond Index and S&P 5 Index returns are based on Series A which has been in existence the longest compared to all Series with less than years of operations. A discussion of Fund performance can be found in the Results of Operation section of this report. The S&P 5 Index is a widely recognized index of 5 U.S. common stocks of large and mid-capitalization companies. The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged, market-value-weighted index of taxable investment grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of one year or more. On August 24, 216, Bloomberg purchased 21

24 Fidelity Tactical High Income Fund Past Performance continued the Barclays family of benchmark indices. As part of this transaction, all Barclays benchmark indices have been co-branded as the Bloomberg Barclays Indices for an initial period of 5 years. The Fund is not managed to a specific benchmark. Each series of the Fund will have different returns due to differences in management fees and expenses. 22

25 Fidelity Tactical High Income Fund Summary of Investment Portfolio as at March 31, Asset Mix as of March 31, % of Fund s Net Assets Foreign Bonds 4.8 Foreign Equities 36.7 Foreign Preferred Securities 6. Canadian Equities 1.6 Cash and Cash Equivalents 17.8 Net Other Assets (Liabilities) (2.9) Sector Mix as of March 31, % of Fund s Net Assets Consumer Discretionary 8.7 Consumer Staples 7.5 Information Technology 5.8 Industrials 4.9 Financials 4.3 Health Care 4. Energy 2.9 Telecommunication Services 2.3 Utilities 2. Materials 1.2 Others (Individually Less Than 1%).7 Foreign Bonds 4.8 Cash and Cash Equivalents 17.8 Net Other Assets (Liabilities) (2.9) Maturity Diversification as of March 31, Years % of Fund s Net Assets Over Quality Diversification as of March 31, % of Fund s Net Assets AAA.7 AA. A 4.9 BBB 2.7 BB and Below 27.5 Not Rated 1. Equities 38.3 Short-Term Investments and Net Other Assets 14.9 We have used ratings from Moody s Investors Service, Inc. Where Moody s ratings are not available, we have used S&P ratings. All ratings are as of the date indicated and do not reflect subsequent changes. Geographic Mix as of March 31, % of Fund s Net Assets United States of America 72.7 Brazil 3. Marshall Islands 2. Canada 1.6 Luxembourg 1.5 United Kingdom 1.2 Mexico 1.1 Netherlands 1.1 Others (Individually Less Than 1%).9 Cash and Cash Equivalents 17.8 Net Other Assets (Liabilities) (2.9) 23

26 Summary of Investment Portfolio as at March 31, continued Top 25 Issuers % of Fund s Net Assets 1. Cash and Cash Equivalents U.S. Treasury Obligations *.7 3. General Electric Co Brazilian Federative Republic * Apple, Inc DISH Network Corp. * Albertsons, Inc. * AT&T, Inc Sprint Capital Corp. * 1.6. Cisco Systems, Inc Delta 2 SARL * Twitter, Inc. * Viacom, Inc. 1.5 % of Fund s Net Assets 14. Cott Corp Bass Pro Shops LLC. * Johnson & Johnson Amgen, Inc Twitter, Inc Wells Fargo & Co JPMorgan Chase & Co Nexstar Broadcasting Group, Inc Target Corp Lineage Logistics Holdings, LLC. * Kimberly-Clark Corp Southwestern Energy Co. 1.3 *Bond Issuer Total Fund Net Assets $268,922, The summary of investment portfolio may change due to ongoing portfolio transactions of the investment fund. The most recent annual report, semi-annual report, quarterly report, fund facts document or simplified prospectus for the investment fund and/or underlying fund is available at no cost, by calling , by writing to us at Fidelity Investments Canada ULC, 483 Bay St. Suite 3, Toronto ON M5G 2N7 or by visiting our web site at or SEDAR at

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28 Fidelity Investments Canada ULC 483 Bay Street, Suite 3 Toronto, Ontario M5G 2N7 Manager, Transfer Agent and Registrar Fidelity Investments Canada ULC 483 Bay Street, Suite 3 Toronto, Ontario M5G 2N7 Custodian State Street Trust Company of Canada Toronto, Ontario Portfolio Adviser Fidelity Investments Canada ULC 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 securities 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-MA-MRFPA-617