Fidelity Tactical Fixed Income Fund

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1 Fidelity Tactical Fixed Income Fund Annual Report June 30, 2017

2 Fidelity Tactical Fixed Income Fund Schedule of Investments June 30, 2017 Showing Percentage of Net Assets Attributable to Securityholders (Net Assets) Bonds 12.0% Principal Amount (000s) Cost (000s) Market Value (000s) Domestic Bonds 8.0% Corporate 0.3% Cominar (REIT) 4.247% 5/23/23 $ 760 $ 760 $ 731 Federal 7.7% Canada Government stripped principal 0% 12/1/64 5,460 1,916 2,131 Canadian Government: 0.75% 9/1/21 1,300 1,302 1,269 1% 6/1/27 1,510 1,380 1, % 6/1/26 5,180 5,230 5, % 6/1/25 3,680 4,003 3, % 12/1/48 1,770 1,947 2, % 12/1/45 3,730 4,833 4,783 20,611 20,547 TOTAL DOMESTIC BONDS 21,371 21,278 Foreign Bonds 4.0% Chicago Gen. Oblig. (Taxable Proj.) Series 2014 B, 6.314% 1/1/44 1,215 USD 1,363 1,462 Dolphin Subsidiary II, Inc. 7.25% 10/15/21 1,110 USD 1,424 1,540 Noble Holding International Ltd. 7.7% 4/1/25 (a) 106 USD Omega Healthcare Investors, Inc. 4.5% 4/1/ USD Petrobras Global Finance BV 7.25% 3/17/44 1,170 USD 1,468 1,492 Petroleos Mexicanos: 5.5% 6/27/ USD 1,134 1, % 9/21/47 1,878 USD 2,454 2,459 Royal Bank of Scotland Group PLC 5.125% 5/28/24 1,341 USD 1,456 1,827 TOTAL FOREIGN BONDS 10,240 10,796 TOTAL BONDS 31,611 32,074 Underlying Funds 86.6% Shares / Units (000s) Fidelity American High Yield Fund Series O 1,886 16,225 17,712 Fidelity Canadian Bond Fund Series O 13, , ,473 Fidelity Emerging Markets Debt Investment Trust Series O 177 1,979 2,137 Fidelity Floating Rate High Income Investment Trust Series O 1,648 19,459 19,996 Fidelity Global Bond Fund Series O 143 1,521 1,679 TOTAL UNDERLYING FUNDS 228, ,997 Short-Term Investments 0.5% Principal Amount (000s) Cost (000s) Market Value (000s) Canada 0.5% Investments in reverse repurchase agreements in a joint trading account at 0.47%, dated 6/30/17 due 7/4/17 (Collateralized by Canadian Government Obligations) # $ 1,299 $ 1,299 $ 1,299 TOTAL INVESTMENT PORTFOLIO 99.1% $261, ,370 NET OTHER ASSETS (LIABILITIES) 0.9% 2,297 NET ASSETS 100% $ 267,667 Forward Foreign Currency Contracts Amounts in thousands Settlement Date Value (000 s) Appreciation/ (Depreciation) (000 s) Contracts to Sell 0 EUR (Receivable amount $16) Jul $ 0 $ EUR (Receivable amount $593) Aug JPY (Receivable amount $23) Jul ,420 JPY (Receivable amount $398) Aug USD (Receivable amount $548) Jul USD (Receivable amount $548) Jul USD (Receivable amount $548) Jul USD (Receivable amount $548) Jul USD (Receivable amount $548) Jul ,790 USD (Receivable amount $10,111) Aug , ,790 USD (Receivable amount $10,111) Aug , ,790 USD (Receivable amount $10,111) Aug , USD (Receivable amount $699) Aug ,790 USD (Receivable amount $10,111) Aug , ,790 USD (Receivable amount $10,111) Aug , TOTAL CONTRACTS TO SELL 52,884 2,140 Contracts to Buy 556 USD (Payable amount $751) Jul (30) TOTAL CONTRACTS TO BUY 721 (30) See accompanying notes which are an integral part of the financial statements. Annual Reportport 2

3 Forward Foreign Currency Contracts continued Amounts in thousands Contracts to Buy continued Settlement Date Value (000 s) Appreciation/ (Depreciation) (000 s) TOTAL FORWARD FOREIGN CURRENCY CONTRACTS $ 2,110 The value of contracts to buy as a percentage of Net Assets is 0.3% The value of contracts to sell as a percentage of Net Assets is 19.8%. Currency Abbreviations USD U.S. dollar EUR European Monetary Unit JPY Japanese yen Presentation Notes Principal Amount is stated in Canadian dollars unless otherwise noted. Legend (a) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. Investment Valuation The following is a summary of the inputs used, as of June 30, 2017 and June 30, 2016, 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, 2017: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Investments in Securities: Bonds $ 32,074 $ $32,074 $ Underlying Funds 231, ,997 Short-Term Investments 1,299 1,299 Total Investments in Securities: $265,370 $231,997 $33,373 $ Derivative Instruments: Assets Forward Foreign Currency Contracts $ 2,140 $ $ 2,140 $ Total Assets $ 2,140 $ $ 2,140 $ Liabilities Forward Foreign Currency Contracts $ (30) $ $ (30) $ Total Liabilities $ (30) $ $ (30) $ Total Derivative Instruments: $ 2,110 $ $ 2,110 $ Valuation Inputs at June 30, 2016: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Investments in Securities: Bonds $ 36,079 $ $36,079 $ Fixed-Income Funds 233, ,430 Short-Term Investments Total Investments in Securities: $270,432 $233,430 $37,002 $ Derivative Instruments: Assets Forward Foreign Currency Contracts $ 807 $ $ 807 $ Total Assets $ 807 $ $ 807 $ See accompanying notes which are an integral part of the financial statements. 3 Annual Report

4 Fidelity Tactical Fixed Income Fund Schedule of Investments continued Valuation Inputs at June 30, 2016: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Liabilities Forward Foreign Currency Contracts $ (101) $ $ (101) $ Total Liabilities $ (101) $ $ (101) $ Total Derivative Instruments: $ 706 $ $ 706 $ Other Information # Additional information on each counterparty to the reverse repurchase agreement is as follows: Reverse Repurchase Agreement / Counterparty Value (000s) $1,299,000 due 7/04/17 at 0.47% Bank of Montreal $ 133 CIBC World Markets, Inc. 155 Royal Bank of Canada 310 Scotia Capital, Inc. 554 The Toronto-Dominion Bank 147 $ 1,299 See accompanying notes which are an integral part of the financial statements. Annual Reportport 4

5 Financial Statements Statements of Financial Position Amounts in thousands of Canadian Dollars (except per security amounts) As at June 30, 2017 June 30, 2016 Current assets (Note 3) Investments at fair value through profit or loss (Note 8) $ 265,370 $ 270,432 Cash 1 Receivable for investments sold Unrealized appreciation on forward foreign currency contracts (Note 9) 2, Accrued interest and dividends receivable Subscriptions receivable , ,478 Current liabilities (Note 3) Payable for investments purchased Redemptions payable Distributions payable (Note 5) Management and advisory fees payable (Note 4) Other payables to affiliates (Note 4) Unrealized depreciation on forward foreign currency contracts (Note 9) Other payables and accrued expenses (Note 4) ,722 2,163 Net assets attributable to securityholders (Notes 3 and 6) $ 267,667 $ 271,315 Net assets attributable to securityholders per Series and per security (Note 6) Series A: ($37,474 and $60,710, respectively) $ 9.08 $ 9.42 Series B: ($77,209 and $78,142, respectively) $ 9.23 $ 9.55 Series F: ($70,328 and $71,136, respectively) $ 9.02 $ 9.36 Series O: ($46,481 and $40,522, respectively) $ $ Series E1: ($16,505 and $10,598, respectively) $ 9.90 $ Series E2: ($3,026 and $1,525, respectively) $ 9.90 $ Series E3: ($35 and $1, respectively) $ 9.92 $ Series E4: ($36 and $1, respectively) $ 9.92 $ Series P1: ($12,089 and $5,566, respectively) $ 9.79 $ Series P2: ($4,164 and $1,185, respectively) $ 9.79 $ Series P3: ($218 and $1,929, respectively) $ 9.80 $ Series P4: ($101 and $-, respectively) $ 9.66 $ Series P5: ($1 and $-, respectively) $ 9.68 $ See accompanying notes which are an integral part of the financial statements. 5 Annual Report

6 Financial Statements continued Statements of Comprehensive Income Amounts in thousands of Canadian Dollars (except per security amounts) For the periods ended June 30, (Note 1) Investment income (Note 3) Interest $ 1,190 $ 1,380 Income distributions from underlying funds 8,560 9,002 Capital gain distributions from underlying funds Net gain (loss) on investments Net realized gain (loss) on investments 2,884 2,887 Change in net unrealized appreciation (depreciation) on investments (6,411) 2,301 (3,527) 5,188 Net gain (loss) on foreign currencies Net realized gain (loss) on foreign currency transactions Change in net unrealized appreciation (depreciation) on other net assets in foreign currencies (5) (4) Net gain (loss) on derivatives Net realized gain (loss) on derivatives (2,058) (3,860) Change in net unrealized appreciation (depreciation) on derivatives 1, (654) (3,127) Total investment income (loss) 5,956 12,844 Operating expenses (Note 4) Management and advisory fees 2,185 2,433 Administration fees Independent Review Committee fees Commissions and other portfolio costs Sales tax Total operating expenses 2,883 3,212 Expenses waived (Note 4) (65) (68) Net operating expenses 2,818 3,144 Net increase (decrease) in net assets attributable to securityholders from operations $ 3,138 $ 9,700 Increase (decrease) in net assets attributable to securityholders from operations per Series (Note 3) Series A $ 134 $ 1,736 Series B $ 749 $ 2,494 Series F $ 1,109 $ 2,820 Series O $ 866 $ 1,902 Series E1 $ 58 $ 386 Series E2 $ 12 $ 58 Series E3 $ 1 $ Series E4 $ (1) $ Series P1 $ 139 $ 231 Series P2 $ 27 $ 25 Series P3 $ 12 $ 48 Series P4 $ (31) $ Series P5 $ 63 $ Increase (decrease) in net assets attributable to securityholders from operations per Series per security (Notes 3 and 6) Series A $.03 $.22 Series B $.09 $.27 Series F $.14 $.37 Series O $.20 $.48 Series E1 $.04 $.49 Series E2 $.05 $.47 See accompanying notes which are an integral part of the financial statements. Annual Reportport 6

7 Statements of Comprehensive Income continued Amounts in thousands of Canadian Dollars (except per security amounts) For the periods ended June 30, (Note 1) Series E3 $.68 $.40 Series E4 $ (.15) $.40 Series P1 $.14 $.53 Series P2 $.09 $.61 Series P3 $.24 $.74 Series P4 $ (.22) $ Series P5 $.84 $ See accompanying notes which are an integral part of the financial statements. 7 Annual Report

8 Financial Statements continued Statements of Changes in Net Assets Attributable to Securityholders Amounts in thousands of Canadian Dollars For the period ended June 30, 2017 (Note 1) Total Series A Series B Series F Series O Series E1 Net assets attributable to securityholders, beginning of period $ 271,315 $ 60,710 $ 78,142 $ 71,136 $ 40,522 $ 10,598 Increase (decrease) in net assets attributable to securityholders from operations 3, , Distributions to securityholders (Note 5) From net investment income (7,112) (894) (1,738) (1,996) (1,647) (346) Management fee reduction (11) (1) (4) (6) Return of capital (4,963) (1,055) (1,520) (1,683) (297) (12,086) (1,950) (3,262) (3,685) (1,647) (643) Security transactions (Note 6) Proceeds from sale of securities 129,389 8,314 38,527 28,440 15,677 12,699 Reinvestment of distributions 9,579 1,553 2,786 2,458 1, Amounts paid upon redemption of securities (133,668) (31,287) (39,733) (29,130) (10,584) (6,741) 5,300 (21,420) 1,580 1,768 6,740 6,492 Net assets attributable to securityholders, end of period $ 267,667 $ 37,474 $ 77,209 $ 70,328 $ 46,481 $ 16,505 For the period ended June 30, 2017 (Note 1) Series E2 Series E3 Series E4 Series P1 Series P2 Net assets attributable to securityholders, beginning of period $ 1,525 $ 1 $ 1 $ 5,566 $ 1,185 Increase (decrease) in net assets attributable to securityholders from operations 12 1 (1) Distributions to securityholders (Note 5) From net investment income (53) (1) (291) (86) Management fee reduction Return of capital (45) (1) (243) (71) (98) (2) (534) (157) Security transactions (Note 6) Proceeds from sale of securities 2, ,756 4,528 Reinvestment of distributions Amounts paid upon redemption of securities (1,334) (75) (7,228) (1,532) 1, ,918 3,109 Net assets attributable to securityholders, end of period $ 3,026 $ 35 $ 36 $ 12,089 $ 4,164 For the period ended June 30, 2017 (Note 1) Series P3 Series P4 Series P5 Net assets attributable to securityholders, beginning of period $ 1,929 $ $ Increase (decrease) in net assets attributable to securityholders from operations 12 (31) 63 Distributions to securityholders (Note 5) From net investment income (13) (33) (14) Management fee reduction Return of capital (10) (28) (10) (23) (61) (24) Security transactions (Note 6) Proceeds from sale of securities 216 2,339 1,910 Reinvestment of distributions 7 7 Amounts paid upon redemption of securities (1,923) (2,153) (1,948) (1,700) 193 (38) Net assets attributable to securityholders, end of period $ 218 $ 101 $ 1 See accompanying notes which are an integral part of the financial statements. Annual Reportport 8

9 Statements of Changes in Net Assets Attributable to Securityholders continued For the period ended June 30, 2016 (Note 1) Total Series A Series B Series F Series O Series E1 Net assets attributable to securityholders, beginning of period $ 287,674 $ 92,269 $ 90,341 $ 64,799 $ 40,265 $ Increase (decrease) in net assets attributable to securityholders from operations 9,700 1,736 2,494 2,820 1, Distributions to securityholders (Note 5) From net investment income (7,389) (1,521) (2,067) (2,097) (1,508) (82) Management fee reduction (14) (2) (6) (6) Return of capital (5,098) (1,633) (1,654) (1,662) (61) (12,501) (3,156) (3,727) (3,765) (1,508) (143) Security transactions (Note 6) Proceeds from sale of securities 97,752 7,868 31,869 29,969 5,681 11,121 Reinvestment of distributions 10,080 2,355 3,257 2,682 1, Amounts paid upon redemption of securities (121,390) (40,362) (46,092) (25,369) (7,326) (903) (13,558) (30,139) (10,966) 7,282 (137) 10,355 Net assets attributable to securityholders, end of period $ 271,315 $ 60,710 $ 78,142 $ 71,136 $ 40,522 $ 10,598 For the period ended June 30, 2016 (Note 1) Series E2 Series E3 Series E4 Series P1 Series P2 Net assets attributable to securityholders, beginning of period $ $ $ $ $ Increase (decrease) in net assets attributable to securityholders from operations Distributions to securityholders (Note 5) From net investment income (13) (80) (8) Management fee reduction Return of capital (9) (64) (6) (22) (144) (14) Security transactions (Note 6) Proceeds from sale of securities 1, ,169 1,337 Reinvestment of distributions Amounts paid upon redemption of securities (282) (801) (170) 1, ,479 1,174 Net assets attributable to securityholders, end of period $ 1,525 $ 1 $ 1 $ 5,566 $ 1,185 For the period ended June 30, 2016 (Note 1) Series P3 Series P4 Series P5 Net assets attributable to securityholders, beginning of period $ $ $ Increase (decrease) in net assets attributable to securityholders from operations 48 Distributions to securityholders (Note 5) From net investment income (13) Management fee reduction Return of capital (9) (22) Security transactions (Note 6) Proceeds from sale of securities 1,987 Reinvestment of distributions 1 Amounts paid upon redemption of securities (85) 1,903 Net assets attributable to securityholders, end of period $ 1,929 $ $ See accompanying notes which are an integral part of the financial statements. 9 Annual Report

10 Financial Statements continued Statements of Cash Flows Amounts in thousands of Canadian Dollars For the periods ended June 30, (Note 1) Cash flows from (used in) operating activities: Purchases of investments and derivatives $ (70,017) $ (53,046) Proceeds from sale and maturity of investments and derivatives 69,352 70,568 Cash receipts from interest income 1,291 1,485 Cash receipts from other investment income 8,959 9,464 Cash paid for operating expenses (2,835) (3,186) Net cash from (used in) operating activities 6,750 25,285 Cash flows from (used in) financing activities: Distributions to securityholders net of reinvestments (2,494) (2,433) Proceeds from sales of securities 68,581 98,166 Amounts paid upon redemption of securities (72,836) (121,018) Net cash from (used in) financing activities (6,749) (25,285) Net change in cash 1 Cash, beginning of period Cash, end of period $ 1 $ See accompanying notes which are an integral part of the financial statements. Annual Reportport 10

11 Notes to Financial Statements For the periods ended June 30, 2017 and 2016 (Amounts in thousands of Canadian dollars/thousands of securities (except per security amounts)) 1. Formation of the Fund Fidelity Tactical Fixed Income Fund (Fund) is an open end mutual fund trust formed under the laws of Ontario and governed by a Master Declaration of Trust dated April 30, 2012 (Inception Date), as amended thereafter from time to time. The Fund is authorized to issue an unlimited number of securities. 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 primarily in a combination of other Fidelity managed equity, fixed income and money market funds (Underlying Funds). Currently, Fidelity mutual funds are offered in the following Series: Series A, Series C, Series T5 and Series T8 securities are available to all investors in a deferred sales charge (DSC) option. Series A, Series T5 and Series T8 securities will be converted to lower management and advisory fee Series B, Series S5 and Series S8 securities, respectively, one year after completion of their redemption schedule. Series B, Series D, Series S5 and Series S8 securities are available to all investors in an initial sales charge (ISC) option. Series C and Series D securities are available to investors who have enrolled in the rebalancing service. Series F, Series F5 and Series F8 securities are usually only available to investors who have fee based accounts with dealers who have signed an eligibility agreement with Fidelity. Series E1, Series E1T5, Series E2, Series E2T5, Series E3, Series E3T5, Series E4, Series E4T5, Series E5 and Series E5T5 securities are available only to investors who initially hold Series B and/or Series S5 securities and then become eligible to hold certain Series E securities. Series P1, Series P1T5, Series P2, Series P2T5, Series P3, Series P3T5, Series P4, Series P4T5, Series P5 and Series P5T5 securities are available only to investors who initially hold Series F and/or Series F5 securities and then become eligible to hold certain Series P securities. Series O securities 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 securities 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. In addition, Series F5, Series F8, Series I5, Series I8, Series T5, Series T8, Series S5, Series S8, Series E1T5, Series E2T5, Series E3T5, Series E4T5, Series E5T5, Series P1T5, Series P2T5, Series P3T5, Series P4T5 and Series P5T5 securities distribute an amount comprised of net income and/or return of capital monthly, if available. The Fund commenced the offering of Series P1, Series P2 and Series P3 securities on December 4, 2015, commenced the offering of Series E1, Series E2, Series E3 and Series E4 securities on February 5, 2016 and commenced the offering of Series P4 and Series P5 securities on September 16, The Fund meets the definition of an investment entity and its purpose is to provide investment management services to its securityholders 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 7, Functional and Presentation Currency These financial statements are presented in Canadian dollars, which is the Fund s functional currency. Comparative Figures - Per security comparative figures have been conformed to the current rounding presentation of two decimal places. 3. Summary of Significant Accounting Policies Basis of Measurement These financial statements have been prepared on the historical cost basis except for investments and derivatives which are measured at fair value in the Statements of Financial Position. Use of Estimates and Judgments Under IFRS, management is required to make certain estimates and judgments at the date of the financial statements. The principal financial statement components subject to significant accounting estimates and judgments include: Fair value measurements The Fund may invest in financial instruments that are not quoted in an active market. Where applicable, these instruments are categorized in Level 2 and Level 3 of the fair value hierarchy explained below. When current market prices or quotations are not readily available or reliable, valuation techniques will be applied in good faith and in accordance with procedures adopted by the manager. Factors used in determining fair value may include, but are not limited to, broker quotes from reputable pricing sources, market or security specific events, changes in interest rates and credit quality. Fair value models use observable data, to the extent practical; however, the manager is required from time to time to make estimates and assumptions that are based on the best information available at that particular time. Changes 11 Annual Report

12 Notes to Financial Statements continued (Amounts in thousands of Canadian dollars/thousands of securities (except per security amounts)) 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, 2017 and June 30, 2016, 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 securities as financial liabilities in accordance with IAS 32 Financial Instruments Presentation (IAS 32). These judgments centre upon the determination that the Fund s redeemable securities do not have identical features and their entitlements include a contractual obligation to distribute any net income and net realized capital gains at least annually in cash (at the request of the securityholder). Therefore, the ongoing redemption feature is not the securities only contractual obligation. Determination of Relationship with Underlying Funds The Fund has made significant judgments when determining the nature of its relationship with an 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 an Underlying Fund. In both determinations, the Fund looks at the relevant activities of an 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 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. 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, 2017 and June 30, 2016, as well as a roll forward of Level 3 securities, where applicable, is included at the end of the Fund s Schedule of Investments. Valuation techniques used to value the Fund s investments and derivatives by major category are as follows: Debt securities, including restricted debt securities, are valued based on prices received from independent pricing services or from dealers who make markets in such securities. Pricing services utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type, prepayment speed assumptions, attributes of the collateral as well as dealer supplied prices and are generally categorized as Level 2 in the hierarchy, but may be categorized as Level 3. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing matrices which consider similar factors that would be used by independent pricing services. These are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances. Independent prices obtained from a single source or broker are evaluated by management and may be categorized as Level 3 in the hierarchy. 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. Fidelity managed Underlying Funds are valued at their closing net asset value per security (NAVPS) each business day and are categorized as Level 1 in the hierarchy. Short-term securities for which quotations are not readily available are valued at amortized cost, which approximates fair value and are categorized as Level 2 in the hierarchy. 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, 2017 and June 30, Impairment of Financial Assets At each reporting date, the Fund assesses whether there is objective evidence that a financial asset carried at amortized cost is impaired. If such impairment exists, the Fund recognizes the difference between the amortized cost of the financial assets and the present value of the estimated future cash flows, discounted using the instrument s original effective interest rate as an impairment loss Annual Reportport 12

13 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, Fund s security 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 short-term 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 securities issued by the Fund In accordance with IAS 32, the Fund s redeemable securities 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 securityholder) and, therefore, the ongoing redemption feature is not the securities only contractual obligation. In addition, each series of redeemable securities are equally subordinated to each other, but have differing features as outlined in the notes below. Therefore, the Fund s redeemable securities 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 securityholders is recorded at the redemption amount. As at June 30, 2017 and June 30, 2016, the Fund s net asset value per Series per security may differ by less than $0.01 from its net assets attributable to securityholders per Series per securities 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. Net realized gains and losses from the sale of investments (which may include proceeds received from litigation) and change in net unrealized appreciation (depreciation) on investments are calculated with reference to average cost of the related investment securities. Interest income is accrued as earned and includes coupon interest and accretion of discount and amortization of premium on debt securities using the effective interest rate. This is the rate that exactly discounts the estimated future cash receipts through the expected life of the relevant debt securities, to their net carrying amounts. Distributions received from investment trusts, including Underlying Funds, are recorded as income, capital gains or a return of capital based on the best information available. Due to the nature of these investments, actual allocations could vary from this information. Distributions from investment trusts treated as a return of capital reduce the average cost of the underlying investment trust. Transaction costs, such as brokerage commissions, incurred in the purchase and sale of investment securities by the Fund are recognized as Commissions and other portfolio costs in the Statements of Comprehensive Income. Foreign Currency Translation Securities and other assets and liabilities denominated in a foreign currency are translated into Canadian dollars at the period-end exchange rates. Purchases and sales of securities, income and expenses denominated in foreign currencies are translated into Canadian dollars at the exchange rate on the date of the respective transaction. The effects of exchange rate fluctuations on investments are included in the Net realized gain (loss) and change in net unrealized appreciation (depreciation) on investments and exchange rate fluctuations on other foreign currency transactions are included in the Net realized gain (loss) on foreign currency transactions and Change in net unrealized appreciation (depreciation) on other net assets in foreign currencies in the Statements of Comprehensive Income. Reverse Repurchase Agreements Uninvested cash balances may be transferred into one or more joint trading accounts where these balances are invested in reverse repurchase transactions. In reverse repurchase transactions, U.S. or Canadian Government securities are purchased from a counterparty who agrees to repurchase the securities at a higher price at a specified future date. The difference in price is reported as interest income. Credit risk arises from the potential for a counterparty to default on its obligation to repurchase the security. The risk is managed by the use of counterparties acceptable to Fidelity and by the receipt of the securities as collateral. The value of the collateral must be at least 102% of the daily fair value of the cash invested. Any reverse repurchase agreements open at period end are included in the Schedule of Investments. The following tables summarize the securities pledged to the Fund as collateral: June 30, 2017 Collateral Description Interest Rate (%) Maturity Date % of Collateral Collateral Value as a % of CAD Cash Invested Canada Housing Trust /15/ Canadian Treasury Bonds /1/ /1/ Canadian Treasury Bill n/a 3/8/2018 4/5/ Annual Report

14 Notes to Financial Statements continued (Amounts in thousands of Canadian dollars/thousands of securities (except per security amounts)) June 30, 2016 Collateral Description Interest Rate (%) Maturity Date % of Collateral Collateral Value as a % of CAD Cash Invested Canadian Treasury Bonds /1/ /1/ Canadian Treasury Bill n/a 12/29/ Forward Foreign Currency Contracts The Fund may use forward foreign currency contracts to facilitate transactions in foreign-denominated securities and to manage its currency exposure. Contracts to sell generally are used to mitigate the risk of the Fund s investments against currency fluctuations, while contracts to buy generally are used to offset a previous contract to sell. Also, a contract to buy can be used to acquire exposure to foreign currencies and a contract to sell can be used to offset a previous contract to buy. These contracts involve market risk in excess of the unrealized gain or loss reflected in the Statements of Financial Position. Fidelity monitors the credit rating of each counterparty with which it does business. All counterparties have a credit rating of at least A, as determined by Moody s Investor Services, Inc. or S&P at the date of purchase. The Canadian dollar value of any currencies the Fund has committed to buy or sell is shown in its Schedule of Investments under the caption Forward Foreign Currency Contracts. This amount represents the aggregate exposure to each currency the Fund has acquired or sold through currency contracts at period end. Losses may arise from changes in the value of foreign currency or if the counterparties do not perform under the contracts terms. Purchases and sales of forward foreign currency contracts having the same currency, settlement date and broker are offset and any realized gain (loss) is recognized on settlement date and settled with the counterparty on a net basis. Valuation of Series Separate net assets attributable to securityholders is calculated for each Series of securities of the Fund. The net assets attributable to securityholders of a Series is computed by calculating the Series proportionate share of the assets and liabilities of the Fund common to all Series, adjusted for the assets and liabilities of the Fund attributable only to that Series. Expenses directly attributable to a Series are charged to that Series. Investment income and operating expenses are allocated proportionately to each Series based upon the relative net assets attributable to securityholders of each Series, except for items that can be specifically attributed to one or more Series. Per Security from Operations - The increase (decrease) in net assets attributable to securityholders resulting from operations per security in the Statements of Comprehensive Income represent the operational increase (decrease) for each Series of the Fund, divided by the relevant weighted average securities outstanding during the period. Refer to the Security Transactions Note for the Fund s weighted average securities outstanding. 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 does not plan to adopt the new standard early. 4. Expenses and Other Related Party Transactions Management and Advisory Fees - Fidelity serves as the manager and investment advisor of the Fund. Fidelity is part of a broader group of companies collectively known as Fidelity Investments. Fidelity has entered into sub-advisory agreements with a number of entities including Fidelity Investments Money Management, 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 and the provision of key management personnel to the Fund, based on the net asset value of each Series, calculated daily and payable monthly. Fidelity may reduce the management and advisory fee or fund expenses for certain investors by reducing the management and advisory fee it charges to the Fund or reducing the amount charged to the Fund for certain expenses and having the Fund pay out the amount of the reduction to the investors as a distribution. These distributions are disclosed as Annual Reportport 14

15 Management fee reduction in the Statements of Changes in Net Assets Attributable to Securityholders. No management and advisory fees are charged with respect to the Series O securities, but investors will be charged a negotiated management fee. To avoid duplication of fees, Series O securities of any Fidelity managed Underlying Fund are not subject to management and advisory fees. The annual management and advisory fee rates for each Series were as follows: Annual Management and Advisory Fee Rate (%) Series A Series B Series F.600 Series E Series E Series E Series E Series P1.600 Series P2.575 Series P3.550 Series P4.550 Series P5.525 Administration Fee Fidelity charges the Fund a fixed administration fee in place of certain variable and administrative expenses, including the provision of key administrative 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, taxes, brokerage commissions and interest charges. To avoid duplication of fees, Series O securities of any Fidelity managed Underlying Fund are not subject to the Administration fee. The administration fee is in addition to the management and advisory fee. No administration fees are charged with respect to the Series O securities. The annual rate of the administration fee will fall under one of three tiers, depending on the net asset value of the Fund: Under $100 Million (Tier 1), $100 Million to $1 Billion (Tier 2) and Over $1 Billion (Tier 3). The administration fee is calculated as a fixed annual percentage, accrued daily and payable monthly, of the net asset value of each Series as follows: Tier 1 (%) Tier 2 (%) Tier 3 (%) Series A Series B Series F Series E Series E Series E Series E Series P Series P Series P Series P Series P Prior to October 28, 2016, the administration fee was calculated as a fixed annual percentage of the net asset value of each Series as follows (some or all Series administration fees may not have changed): Tier 1 (%) Tier 2 (%) Tier 3 (%) Series A Series B Series F Series E Series E Series E Series E Series P Series P Series P Annual Report

16 Notes to Financial Statements continued (Amounts in thousands of Canadian dollars/thousands of securities (except per security amounts)) Prior to October 29, 2015, the administration fee was calculated as a fixed annual percentage of the net asset value of each Series as follows (some or all Series administration fees may not have changed): Tier 1 (%) Tier 2 (%) Tier 3 (%) Series A Series B Series F Independent Review Committee Fees - The Independent Review Committee (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 securities. 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 GST/HST liability or refund is calculated using the residency of securityholders and the value of their interests in the Fund as at specific times, rather than the physical location of the Fund. The effective GST/HST rate charged to each Series of the Fund is based on the securityholders 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. Expenses Waived - Fidelity may absorb or waive certain expenses at its sole discretion and can terminate the absorption or waiver at any time. Fidelity waived a portion of its administration fee which is disclosed as Expenses waived in the Statements of Comprehensive Income. 5. Taxation and Distributions The Fund qualifies as a mutual fund trust under the provisions of the Income Tax Act (Canada). For tax purposes, the Fund has a December year end. In each tax year, the Fund declares and credits as due and payable sufficient net investment income and net realized capital gains to securityholders 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 securityholders 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 securities outstanding. For all Series, except for Series O, the Fund will make monthly distributions of an amount that will generally be comprised of a return of capital and/or net investment income, if available. Distributions, if any, are declared separately for each Series. Capital losses may be carried forward indefinitely to reduce future realized capital gains. As at the last taxation year-end, the Fund had $12,485 of capital losses available to be carried forward. Non capital losses may be carried forward for up to 20 tax years to reduce future taxable income, but expire in December of the year noted. As at the last taxation year-end, the Fund had no non capital losses available to be carried forward. 6. Capital Risk Management Securities 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 securities of equal value, with no par value. All securities in a series of the Fund rank equally with respect to distributions. A securityholder of the Fund is entitled to one vote for each one dollar in value of securities owned. Fractional securities are proportionately entitled to these rights. The Fund generally has no restrictions or specific capital requirements on the subscriptions and redemptions of securities other than minimum subscription requirements; although, on rare occasions, Fidelity may temporarily suspend securityholders right to redeem securities and postpone paying sale proceeds. The relevant movements attributable to securityholders are shown in the Statements of Changes in Net Assets Attributable to Securityholders. 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. Security Transactions - Security transactions and weighted average securities for each Series were as follows: Annual Reportport 16

17 Securities Outstanding, Beginning of Period Issued Reinvested Redeemed Securities Outstanding, End of Period Weighted Average Securities Period ended June 30, 2017 Series A 6, (3,384) 4,128 5,146 Series B 8,187 4, (4,233) 8,363 8,279 Series F 7,597 3, (3,163) 7,799 7,635 Series O 3,934 1, (1,047) 4,575 4,373 Series E1 1,036 1, (677) 1,667 1,478 Series E (132) Series E Series E4 11 (7) 4 5 Series P , (725) 1, Series P (155) Series P (190) Series P4 234 (224) Series P5 199 (199) 75 Period ended June 30, 2016 Series A 9, (4,327) 6,448 8,035 Series B 9,381 3, (4,908) 8,187 9,180 Series F 6,827 3, (2,739) 7,597 7,523 Series O 3, (725) 3,934 3,938 Series E1 1, (90) 1, Series E (28) Series E3 Series E4 Series P (80) Series P (17) Series P3 198 (8) Affiliated Ownership - As at June 30, 2017, Fidelity and its affiliates held approximately 17% of the Fund. As at June 30, 2016, Fidelity and its affiliates held approximately 15% 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. Derivative financial instruments may be used 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 provide a steady flow of income. It invests, either directly or indirectly through investments in underlying funds, primarily in Canadian fixed-income securities. The Fund s benchmark is FTSE TMX Canada Universe Bond Index. Portfolio risk is monitored daily and reviewed monthly by an investment compliance group. In addition, there is a formal quarterly review of each fund. The investment compliance group, portfolio managers and the senior analysts attend a quarterly portfolio review. Portfolios within each strategy are reviewed relative to each other and to their benchmark. Active industry and security allocations are analyzed. 17 Annual Report

18 Notes to Financial Statements continued (Amounts in thousands of Canadian dollars/thousands of securities (except per security amounts)) For reporting periods ending June 30, 2017 (including applicable comparative figures), the Fund now discloses its exposure to any indirect financial instrument risks from Underlying Funds in aggregate with any direct exposure it may have. This change in presentation, seeks to provide investors with a more fulsome disclosure of the Fund s susceptibility to each relevant financial instrument risk. 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, both indirect and direct, are considered, where applicable, in determining the fair value of financial assets and financial liabilities. In addition, as part of its cash management, the Fund limits its direct exposure to credit loss by placing its cash with high credit quality financial institutions. The carrying amount of investments and other assets represents the maximum credit risk exposure as at June 30, 2017 and June 30, Credit risk arising on Canadian debt securities held directly or indirectly, as applicable, is mitigated by investing primarily in rated instruments or instruments issued by rated counterparties with credit ratings of at least BB or better as determined by Moody s Investor Services, Inc. or S&P at the date of purchase. Refer to the Quality Diversification tables in the Summary of Investment Portfolio of the Fund s Annual Management Report of Fund Performance as at June 30, 2017, which summarize the credit risk that is relevant for the Fund. Collateralized reverse repurchase agreements may result in credit exposure in the event that the counterparty to the transaction is unable to fulfill its contractual obligations. The risk is managed by the receipt of the underlying securities as collateral and use of counterparties whose credit worthiness is considered sufficient based on Fidelity s independent review. Credit risk exposure for derivative instruments is based on the Fund s unrealized gain on the contractual obligations with the counterparty as at the reporting date. The Fund restricts its exposure to credit losses on derivative instruments by limiting its exposure to any one counterparty and by entering into transactions with counterparties who meet the minimum approved credit rating under securities regulations and other pre-set financial and non- financial criteria. Other than outlined above, there were no significant concentrations of credit risk to counterparties as at June 30, 2017 and June 30, Concentration Risk - The Fund may be exposed to risk based on the concentration levels of its financial instruments in various sectors, geographic regions, asset weightings and market capitalization, as applicable. Fidelity analyzes and monitors these concentration risks regularly. Refer to the Derivative Exposure, Geographic Mix and Asset Mix tables in the Summary of Investment Portfolio of the Fund s Annual Management Report of Fund Performance as at June 30, 2017, which summarize the investment concentration risks that are relevant for the Fund. 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 its redeemable securities. Redeemable securities are redeemed on demand at the securityholder s option based on the Fund s NAVPS at the time of redemption. The Fund may be exposed to indirect liquidity risk through its investments. 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 liquidity position is monitored on a daily basis. As at June 30, 2017 and June 30, 2016, 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 financial instruments present a risk of loss of capital. This risk is moderated 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 except for possible losses from options written and future contracts which can be unlimited. Investments and derivatives, if applicable, 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, 2017 and June 30, 2016, with all other variables held constant, the net assets attributable to securityholders of the Fund would have increased or decreased by approximately $11,411 (June 30, 2016: $11,358). 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 directly or indirectly in the investment portfolio such as bonds. The Fund is exposed to the risk that the fair value or the future cash flows of interest-bearing financial instruments will fluctuate due to changes in the prevailing levels of market interest rates. Any excess cash may be invested in short-term investments at market interest rates. Annual Reportport 18

19 Refer to the Maturity Diversification tables in the Summary of Investment Portfolio of the Fund s Annual Management Report of Fund Performance as at June 30, 2017, which summarize the Fund s exposure to interest-bearing financial instruments at period end categorized by the earlier of contractual interest rate reset or maturity dates. The fixed income investment strategy adheres to independent quantitative understanding of all benchmark and portfolio risk and return characteristics with an explicit understanding of all active exposures relative to the investment benchmark. Interest rate anticipation is not a significant component of the fixed income investment strategy. The Fund invests directly and/or indirectly in high yield fixed income securities, which may be more or less sensitive to changes in market interest rates, depending upon the securities coupon rates, terms to maturity and other factors. However, the volatility associated with these high yield securities is not a result of interest rate risk; in fact, the interest rate risk of these securities tends to be lower than the investment grade bonds, which generally pay lower coupon rates and/or offer lower yields. High yield securities typically are issued by companies that tend to be less creditworthy than investment grade bond issuers. As such, they carry greater default risk than investment grade bonds and accordingly offer higher coupon payments to compensate investors for this additional risk. As at June 30, 2017 and June 30, 2016, had prevailing interest rates raised or lowered by 25 basis points, with all other variables remaining constant, net assets attributable to securityholders would have decreased or increased by approximately $4,274 (June 30, 2016: $695). In practice, the actual trading results may differ from this sensitivity analysis and the difference could be material. Currency Risk - Currency risk arises from financial instruments that are denominated in a currency other than Canadian dollar, which is the Fund s functional currency. The Fund is exposed to the risk that the value of financial instruments 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. Foreign exchange exposure relating to non-monetary assets and liabilities is considered to be a component of other price risk, not foreign currency risk. 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 (such as the U.S. dollar, the Euro or the Yen). Generally, the use of forward contracts to hedge currency fluctuations as completely as possible will not result in the impact of currency fluctuations being eliminated altogether. Furthermore, during times of extreme market stress or volatility, the Fund may not be able to prevent losses from exposure to foreign currencies. As at June 30, 2017 and June 30, 2016, the majority of the Fund s monetary assets and liabilities are denominated in Canadian dollars. As a result, the Fund is not subject to significant amounts of risk due to fluctuations in exchange rates. 8. Investment in Structured Entities The Fund s investment in a Fidelity managed 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 securities. In addition, its purpose is to provide investment management services to its securityholders by investing its net assets for capital growth and/or investment income. The Fund does not control nor significantly influence an Underlying Fund, as defined by IFRS 10 and IAS 28, due to the Fund s inability to exercise its voting rights and direct or participate in the financial and operating policy decisions. 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 securities issued by an Underlying Fund or redeem in whole or in part its investment in an Underlying Fund. However, the Fund does not have any obligation or intention to provide financial support to an Underlying Fund. In addition, the Fund may receive a distribution of income and/or capital gains from an Underlying Fund as described above in the Investment Transactions, Income Recognition and Transaction Costs note. The following tables present additional information that is relevant to the Fund s investment in structured entities. Total Net Assets Fair Value of Investment June 30, 2017 Fidelity American High Yield Fund 4,184,588 17,712 Fidelity Canadian Bond Fund 10,870, ,473 Fidelity Emerging Markets Debt Investment Trust 1,359,120 2,137 Fidelity Floating Rate High Income Investment Trust 846,125 19, Annual Report

20 Notes to Financial Statements continued (Amounts in thousands of Canadian dollars/thousands of securities (except per security amounts)) Total Net Assets Fair Value of June 30, 2017 Investment Fidelity Global Bond Fund 3,874,150 1,679 Total Net Assets Fair Value of Investment June 30, 2016 Fidelity American High Yield Fund 3,981,278 23,101 Fidelity Canadian Bond Fund 10,529, ,151 Fidelity Emerging Markets Debt Investment Trust 1,203,382 2,026 Fidelity Floating Rate High Income Investment Trust 591,043 15,392 Fidelity Global Bond Fund 3,496,469 1,760 Underlying Fund names presented in the tables reflect names in effect as at the dates shown. 9. 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, 2017 Amounts offset Amounts not offset Assets Gross Gross assets/liabilities offset Net Master Netting Arrangements Financial Collateral Forward foreign currency contracts 2,221 (81) 2,140 2,140 Liabilities Forward foreign currency contracts (111) 81 (30) (30) Net 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 1,056 (249) 807 (101) 706 Liabilities Forward foreign currency contracts (350) 249 (101) 101 Net Annual Reportport 20

21 Management Report and Independent Auditor s Report Management Responsibility for Financial Reporting To the Securityholders and Trustee of Fidelity Tactical Fixed Income 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 securityholders their opinion on the financial statements. Their report is set out below. Brock Dunlop Vice President and Fund Treasurer Fidelity Investments Canada ULC September 7, 2017 Independent Auditor s Report To the Securityholders and Trustee of Fidelity Tactical Fixed Income Fund (Fund) We have audited the accompanying financial statements of the Fund, which comprise the statements of financial position as at June 30, 2017 and 2016 and the statements of comprehensive income, changes in net assets attributable to securityholders and cash flows for the years ended June 30, 2017 and 2016, 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, 2017 and 2016 and its financial performance and its cash flows for the years ended June 30, 2017 and 2016 in accordance with International Financial Reporting Standards. PricewaterhouseCoopers LLP Chartered Professional Accountants, Licensed Public Accountants Toronto, Ontario September 7, Annual Report

22 Annual Reportport 22

23 23 Annual Report

24 Fidelity Investments Canada ULC 483 Bay Street, Suite 300 Toronto, Ontario M5G 2N7 Manager, Transfer Agent and Registrar Fidelity Investments Canada ULC 483 Bay Street, Suite 300 Toronto, Ontario M5G 2N7 Portfolio Adviser Fidelity Investments Canada ULC Toronto, Ontario Custodian State Street Trust Company of Canada Toronto, Ontario Auditor PricewaterhouseCoopers LLP Toronto, Ontario Visit us online at or call Fidelity Client Services at Fidelity s mutual funds are sold by registered Investment Professionals. Each Fund has a simplified prospectus, which contains important information on the Fund, including its investment objective, purchase options, and applicable charges. Please obtain a copy of the prospectus, read it carefully, and consult your Investment Professional before investing. As with any investment, there are risks to investing in mutual funds. There is no assurance that any Fund will achieve its investment objective, and its net asset value, yield, and investment return will fluctuate from time to time with market conditions. Investors may experience a gain or loss when they sell their 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 Fidelity Investments Canada ULC E FICL-FCTLBD-ANN-0917

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