Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp.

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp."

Transcription

1 Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Semi-Annual Management Report of Fund Performance May 31, 2017

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 Semi-Annual Management Report of Fund Performance as at May 31, 2017 Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. This semi-annual management report of fund performance contains financial highlights but does not contain the complete semi-annual financial statements for the investment fund. You can get a copy of the semi-annual financial statements at your request, and at no cost, by calling , by writing to us at Fidelity Investments, 483 Bay St. Suite 300, 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 Results of Operations Fidelity Balanced Income Private Pool (Fund), Series B, returned 4.5%, after fees and expenses, for the six-month period ended May 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 broad Canadian equity markets, as represented by the S&P/TSX Composite Index, returned 3.2%; while, the Canadian investment-grade bonds, as represented by the FTSE TMX Canada Universe Bond Index, returned 3.1% for the six month period ended May 31, Market overview: During the first half of the review period, Canadian equities rose on the strength of banking and oil and gas stocks. Share prices of Canadian banks rose largely on the basis of continued positive investor sentiment, including a spillover effect from strength in U.S. financial stocks that rallied following the presidential election. Oil prices also rose during the first half of the period, following the agreement of the Organization of the Petroleum Exporting Countries (OPEC) to reduce crude output. During the second half of the review period, however, investor concerns over a retrenchment in oil prices, rising household debt, and the risk of a pullback in the housing market weighed on Canadian equities. Canadian corporate bonds outperformed government bonds as positive economic data from both the U.S. and Canada provided a positive backdrop for relatively riskier assets. The U.S. Federal Reserve (Fed) raised its target Fed Fund rates again in March from 0.75% to 1.00% as the U.S. economy maintained positive growth momentum with the unemployment rate moving lower and inflation gradually moving toward the Fed s target of 2.00%. In Canada, the Bank of Canada kept monetary policy unchanged and maintained its cautious tone. The Bank continued to focus on the excess capacity within the economy and uncertainties around the new U.S. administration s trade policies and timing of tax reform and fiscal stimulus. Factors affecting performance: The Fund s benchmark returned 4.7% for the six-month period under review. The blended benchmark comprises 24.0% S&P/TSX Capped Composite Index, 16.0% MSCI ACWI (All Country World Index) ex Canada Index, 18.0% Bloomberg Barclays Global Aggregate Bond Index, 27.0% FTSE TMX Canada Universe Bond Index, and 15.0% FTSE TMX Canada 91 Day T-Bill Index. The Fund underperformed its benchmark, after fees and expenses. However, it outperformed its benchmark before fees and expenses. The Fund s holdings in emerging market equities and a lower-than-benchmark exposure to Canadian equities contributed to relative performance, while lower-than-benchmark exposure to U.S. and global equities detracted. In the fixed income segment, a lower-thanbenchmark exposure to Canadian money market securities and holdings in global investment-grade bonds contributed to relative performance, while higher-than-benchmark exposure to Canadian short-term bonds detracted from relative performance. Portfolio changes: During the review period, the portfolio managers increased exposure to global and international equities, reflecting attractive investment opportunities. In contrast, exposure to Canadian equities was reduced on the basis of potential economic risks. Similarly, exposure to U.S. equities was reduced on the basis of relatively expensive valuations compared to other global markets and reduced growth potential. Among fixed income funds, exposure to Canadian short term bonds was increased to actively manage interest rate risks within the portfolio, while exposures to Canadian and U.S. investment-grade bond funds were reduced as they found better opportunities in other segments of fixed income. Cash and cash equivalents also saw a decrease in exposure during the review period as the portfolio managers deployed cash in attractive investment opportunities. At the end of the review period, the Fund had its highest exposure to Canadian bonds, followed by Foreign bonds. The Fund is designed to offer investors a diversified investment option in a single product, with low to medium risk, and uses a balanced approach. Portfolio design, construction, ongoing monitoring and management are conducted by portfolio managers. The Fund is monitored and actively managed on a daily basis adhere to its mandate. Derivative disclosure: 1

4 Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Management Discussion of Fund Performance continued During the period under review, the Fund engaged in equity futures contracts in a manner consistent with its investment objective and strategies. The U.S. equity futures positions were used to execute investment strategies that allowed the Fund to effectively change its exposure to U.S. equities without the need to buy in or sell out of strategic positions. These futures positions, in aggregate, accounted for approximately 4.6% of the Fund s net assets at the end of the review period. In general, the futures contracted tended to be more liquid and less expensive than purchasing direct equity securities. However, security selection continued to be the primary driver of performance, and these derivatives had no material impact on performance. Recent Developments During the review period, portfolio managers Geoff Stein and David Wolf reduced the overall equity allocation to the Fund s neutral mix, while diversifying exposures among international equities. The portfolio managers believe inflation shocks are becoming more of a risk. They may threaten the valuation of financial assets and the traditional negative correlation between stock and bond returns. To cope with this new market development, the portfolio managers have tilted equity components away from bond proxies while shifting the overall portfolio into real assets such as inflation-linked bonds and commodities. In addition, they are actively managing fixed-income duration to reduce the portfolio s vulnerability to rising interest rates. Independent Review Committee Effective February 28, 2017, 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 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 $16,564,000 for the period ended May 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 $2,102,000 for the period ended May 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 less than $500 for the period ended May 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 Balanced Income Private Pool of the Fidelity Capital Structure Corp. Series B Six-months ended May 31, Periods ended November 30, The Series per Security A Net assets, beginning of period B $ $ $ $ $ $ Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) (.16) (.31) (.31) (.28) (.26) (.23) Realized gains (losses) Unrealized gains (losses) (.05) Total increase (decrease) from operations B Distributions: From net investment income (excluding dividends) From dividends (.04) (.03) (.05) (.04) (.04) From capital gains (.01) (.11) Return of capital Total distributions B,C (.01) (.14) (.03) (.05) (.04) (.04) Net assets, end of period B $ $ $ $ $ $ Ratios and Supplemental Data Net asset value (000s) D $ 1,055,017 $ 972,363 $ 792,785 $ 544,916 $ 373,919 $ 257,579 Securities outstanding D 63,444,298 61,015,019 51,002,162 36,861,056 27,482,818 20,550,429 Management expense ratio E 1.97% 1.97% 1.97% 1.97% 1.97% 1.90% Management expense ratio before waivers or absorptions E 1.97% 1.97% 1.97% 1.97% 1.97% 1.90% Trading expense ratio F.04%.06%.05%.09%.09%.07% Portfolio turnover rate G 23.68% 26.26% 53.98% 36.03% 57.95% 28.80% Net asset value per security, end of period $ $ $ $ $ $ Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Series F Six-months ended May 31, Periods ended November 30, The Series per Security A Net assets, beginning of period B $ $ $ $ $ $ Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) (.06) (.12) (.12) (.11) (.10) (.09) Realized gains (losses) Unrealized gains (losses) (.09) Total increase (decrease) from operations B Distributions: From net investment income (excluding dividends) From dividends (.03) (.03) (.05) (.18) (.16) From capital gains (.18) (.26) Return of capital Total distributions B,C (.18) (.29) (.03) (.05) (.18) (.16) Net assets, end of period B $ $ $ $ $ $ Ratios and Supplemental Data Net asset value (000s) D $ 1,135,319 $ 876,971 $ 480,489 $ 175,233 $ 59,983 $ 41,623 Securities outstanding D 73,954,383 59,273,290 33,339,095 12,913,670 4,858,055 3,659,741 Management expense ratio E.85%.84%.85%.85%.85%.81% Management expense ratio before waivers or absorptions E.85%.84%.85%.85%.85%.81% Trading expense ratio F.04%.06%.05%.09%.09%.07% Portfolio turnover rate G 23.68% 26.26% 53.98% 36.03% 57.95% 28.80% Net asset value per security, end of period $ $ $ $ $ $

7 Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Series F5 Six-months ended May 31, Periods ended November 30, The Series per Security A Net assets, beginning of period B $ $ $ $ $ $ Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) (.07) (.13) (.14) (.13) (.13) (.12) Realized gains (losses) Unrealized gains (losses) (.09) Total increase (decrease) from operations B Distributions: From net investment income (excluding dividends) From dividends (.03) (.04) (.05) (.21) (.20) From capital gains (.18) (.28) Return of capital (.38) (.77) (.77) (.77) (.77) (.78) Total distributions B,C (.56) (1.09) (.80) (.82) (.98) (.98) Net assets, end of period B $ $ $ $ $ $ Ratios and Supplemental Data Net asset value (000s) D $ 238,470 $ 196,241 $ 111,049 $ 52,466 $ 33,076 $ 21,802 Securities outstanding D 15,320,075 12,763,076 7,034,053 3,369,216 2,220,820 1,508,081 Management expense ratio E.85%.84%.85%.86%.85%.79% Management expense ratio before waivers or absorptions E.85%.84%.85%.86%.85%.79% Trading expense ratio F.04%.06%.05%.09%.09%.07% Portfolio turnover rate G 23.68% 26.26% 53.98% 36.03% 57.95% 28.80% Net asset value per security, end of period $ $ $ $ $ $ Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Series F8 Six-months ended May 31, Periods ended November 30, The Series per Security A Net assets, beginning of period B $ $ $ $ $ $ Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) (.05) (.10) (.11) (.11) (.11) (.11) Realized gains (losses) Unrealized gains (losses) (.04) Total increase (decrease) from operations B Distributions: From net investment income (excluding dividends) From dividends (.03) (.03) (.04) (.19) (.18) From capital gains (.14) (.23) Return of capital (.49) (1.06) (1.12) (1.12) (1.12) (1.20) Total distributions B,C (.63) (1.32) (1.14) (1.16) (1.31) (1.38) Net assets, end of period B $ $ $ $ $ $ Ratios and Supplemental Data Net asset value (000s) D $ 51,153 $ 50,227 $ 24,943 $ 8,732 $ 3,737 $ 2,000 Securities outstanding D 4,246,842 4,157,089 1,940, , , ,112 Management expense ratio E.85%.84%.83%.85%.85%.83% Management expense ratio before waivers or absorptions E.85%.84%.83%.85%.85%.83% Trading expense ratio F.04%.06%.05%.09%.09%.07% Portfolio turnover rate G 23.68% 26.26% 53.98% 36.03% 57.95% 28.80% Net asset value per security, end of period $ $ $ $ $ $

8 Financial Highlights continued Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Series I Six-months ended May 31, Periods ended November 30, The Series per Security A Net assets, beginning of period B $ $ $ $ $ $ Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) (.18) (.35) (.34) (.32) (.29) (.26) Realized gains (losses) Unrealized gains (losses) (.07) Total increase (decrease) from operations B Distributions: From net investment income (excluding dividends) From dividends (.04) (.03) (.05) (.01) From capital gains (.06) Return of capital Total distributions B,C (.10) (.03) (.05) (.01) Net assets, end of period B $ $ $ $ $ $ Ratios and Supplemental Data Net asset value (000s) D $ 247,120 $ 238,136 $ 168,400 $ 116,133 $ 85,004 $ 82,638 Securities outstanding D 15,154,838 14,981,667 10,970,843 7,941,215 6,298,287 6,645,339 Management expense ratio E 2.24% 2.23% 2.25% 2.25% 2.25% 2.17% Management expense ratio before waivers or absorptions E 2.24% 2.23% 2.25% 2.25% 2.25% 2.17% Trading expense ratio F.04%.06%.05%.09%.09%.07% Portfolio turnover rate G 23.68% 26.26% 53.98% 36.03% 57.95% 28.80% Net asset value per security, end of period $ $ $ $ $ $ Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Series I5 Six-months ended May 31, Periods ended November 30, The Series per Security A Net assets, beginning of period B $ $ $ $ $ $ Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) (.18) (.36) (.37) (.36) (.34) (.32) Realized gains (losses) Unrealized gains (losses) (.04) Total increase (decrease) from operations B Distributions: From net investment income (excluding dividends) From dividends (.04) (.04) (.05) (.01) (.01) From capital gains (.07) Return of capital (.40) (.80) (.80) (.80) (.80) (.78) Total distributions B,C (.40) (.91) (.84) (.86) (.81) (.79) Net assets, end of period B $ $ $ $ $ $ Ratios and Supplemental Data Net asset value (000s) D $ 36,018 $ 31,635 $ 28,263 $ 23,145 $ 14,203 $ 10,347 Securities outstanding D 2,234,634 1,998,178 1,737,858 1,422, , ,969 Management expense ratio E 2.21% 2.22% 2.21% 2.23% 2.23% 2.10% Management expense ratio before waivers or absorptions E 2.21% 2.22% 2.21% 2.23% 2.23% 2.10% Trading expense ratio F.04%.06%.05%.09%.09%.07% Portfolio turnover rate G 23.68% 26.26% 53.98% 36.03% 57.95% 28.80% Net asset value per security, end of period $ $ $ $ $ $

9 Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Series I8 Six-months ended May 31, Periods ended November 30, The Series per Security A Net assets, beginning of period B $ $ $ $ $ $ Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) (.14) (.28) (.30) (.30) (.30) (.31) Realized gains (losses) Unrealized gains (losses) (.05) Total increase (decrease) from operations B Distributions: From net investment income (excluding dividends) From dividends (.03) (.03) (.05) From capital gains (.05) Return of capital (.49) (1.08) (1.14) (1.14) (1.15) (1.20) Total distributions B,C (.49) (1.15) (1.17) (1.19) (1.15) (1.20) Net assets, end of period B $ $ $ $ $ $ Ratios and Supplemental Data Net asset value (000s) D $ 8,904 $ 8,260 $ 11,524 $ 8,888 $ 7,540 $ 8,414 Securities outstanding D 735, , , , , ,662 Management expense ratio E 2.27% 2.27% 2.27% 2.26% 2.26% 2.24% Management expense ratio before waivers or absorptions E 2.27% 2.27% 2.27% 2.26% 2.26% 2.24% Trading expense ratio F.04%.06%.05%.09%.09%.07% Portfolio turnover rate G 23.68% 26.26% 53.98% 36.03% 57.95% 28.80% Net asset value per security, end of period $ $ $ $ $ $ Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Series S5 Six-months ended May 31, Periods ended November 30, The Series per Security A Net assets, beginning of period B $ $ $ $ $ $ Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) (.16) (.32) (.33) (.32) (.31) (.29) Realized gains (losses) Unrealized gains (losses) (.08) Total increase (decrease) from operations B Distributions: From net investment income (excluding dividends) From dividends (.04) (.04) (.06) (.05) (.05) From capital gains (.01) (.11) Return of capital (.41) (.82) (.82) (.82) (.81) (.78) Total distributions B,C (.42) (.96) (.85) (.87) (.86) (.83) Net assets, end of period B $ $ $ $ $ $ Ratios and Supplemental Data Net asset value (000s) D $ 192,126 $ 186,959 $ 160,506 $ 103,970 $ 78,231 $ 66,681 Securities outstanding D 11,779,491 11,669,732 9,770,610 6,329,799 4,923,274 4,323,579 Management expense ratio E 1.97% 1.97% 1.98% 1.98% 1.97% 1.88% Management expense ratio before waivers or absorptions E 1.97% 1.97% 1.98% 1.98% 1.97% 1.88% Trading expense ratio F.04%.06%.05%.09%.09%.07% Portfolio turnover rate G 23.68% 26.26% 53.98% 36.03% 57.95% 28.80% Net asset value per security, end of period $ $ $ $ $ $

10 Financial Highlights continued Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Series S8 Six-months ended May 31, Periods ended November 30, The Series per Security A Net assets, beginning of period B $ $ $ $ $ $ Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) (.12) (.25) (.27) (.27) (.27) (.27) Realized gains (losses) Unrealized gains (losses) (.05) Total increase (decrease) from operations B Distributions: From net investment income (excluding dividends) From dividends (.03) (.03) (.05) (.04) (.04) From capital gains (.01) (.09) Return of capital (.50) (1.09) (1.15) (1.15) (1.16) (1.20) Total distributions B,C (.51) (1.21) (1.18) (1.20) (1.20) (1.24) Net assets, end of period B $ $ $ $ $ $ Ratios and Supplemental Data Net asset value (000s) D $ 43,590 $ 42,819 $ 38,109 $ 30,541 $ 21,730 $ 20,079 Securities outstanding D 3,533,025 3,478,956 2,908,934 2,255,265 1,603,832 1,476,894 Management expense ratio E 1.97% 1.97% 1.97% 1.97% 1.97% 1.91% Management expense ratio before waivers or absorptions E 1.97% 1.97% 1.97% 1.97% 1.97% 1.91% Trading expense ratio F.04%.06%.05%.09%.09%.07% Portfolio turnover rate G 23.68% 26.26% 53.98% 36.03% 57.95% 28.80% Net asset value per security, end of period $ $ $ $ $ $

11 Financial Highlights Footnotes A This information is derived from the Fund s audited annual and/or unaudited interim financial statements. Periods beginning on or after January 1, 2013 follow International Financial Reporting Standards (IFRS) and periods prior to January 1, 2013 follow Canadian Generally Accepted Accounting Principles (Canadian GAAP). 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, 2017 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, reporting periods ending prior to January 1, 2017 may not foot due to this rounding change. B C D E F G 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. 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. (2017:.01%, 2016: %, 2015: %, 2014: %, 2013: %, 2012: %). 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 100% 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. 9

12 Management and Advisory Fees Fidelity serves as manager of the Fund. The Fund pays Fidelity a monthly management fee for its 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 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 100% 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 B 1.600% 62.50% 37.50% Series F 0.600% % Series F % % Series F % % Series I 1.850% 67.57% 32.43% Series I % 67.57% 32.43% Series I % 67.57% 32.43% Series S % 62.50% 37.50% Series S % 62.50% 37.50% 10

13 Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. 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. For each Series in the Year-by-Year Returns table below, the most recent returns stated are for the current six month period. Series B Series F8 Fiscal Years Fiscal Years (%) (%) Commencement of Operations is November 26, 2008 Series F Commencement of Operations is October 5, 2009 Series I Fiscal Years Fiscal Years (%) (%) Commencement of Operations is October 5, 2009 Series F5 Commencement of Operations is November 26, 2008 Series I5 Fiscal Years Fiscal Years (%) (%) Commencement of Operations is October 5, 2009 Commencement of Operations is November 26,

14 Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Past Performance continued Series I8 Fiscal Years (%) Commencement of Operations is November 26, 2008 Series S5 Fiscal Years (%) Commencement of Operations is November 26, 2008 Series S8 Fiscal Years (%) Commencement of Operations is November 26,

15 Fidelity Balanced Income Private Pool of the Fidelity Capital Structure Corp. Summary of Investment Portfolio as at May 31, 2017 Asset Mix % of Fund s as at 5/31/17 % of Fund s as at 11/30/16 Canadian Bonds Foreign Bonds Foreign Equities Canadian Equities Exchange Traded funds Foreign Preferred Securities Canadian Preferred Securities Cash and Cash Equivalents Net Other Assets (Liabilities) Derivative Exposure % of Fund s as at 5/31/17 % of Fund s as at 11/30/16 Futures Contracts Quality Diversification % of Fund s as at 5/31/17 % of Fund s as at 11/30/16 AAA AA A BBB BB and Below Not Rated Equities Short-Term Investments and Net Other Assets 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. Futures Contracts percentage is calculated by dividing the sum of the underlying face amount at value by total net assets. Geographic Mix % of Fund s as at 5/31/17 % of Fund s as at 11/30/16 Canada United States of America United Kingdom Japan Germany Netherlands France Others (Individually Less Than 1%) Cash and Cash Equivalents Net Other Assets (Liabilities) Maturity Diversification Years % of Fund s as at 5/31/17 % of Fund s as at 11/30/ Over

16 Summary of Investment Portfolio as at May 31, 2017 continued Top Issuers % of Fund s 1. Fidelity Global Bond Fund Series O Fidelity Canadian Bond Fund Series O Fidelity Canadian Short Term Fixed Income Investment Trust Series O Fidelity Concentrated Canadian Equity Investment Trust Series O Fidelity Concentrated Value Investment Trust Series O Fidelity Emerging Markets Equity Investment Trust Series O Fidelity U.S. Multi-Cap Investment Trust Series O Fidelity Canadian Money Market Fund Series O Fidelity International Equity Investment Trust Series O Fidelity Canadian Real Return Bond Index Investment Trust Series O ishares MSCI EAFE Index ETF Fidelity Canadian Opportunities Fund Series O 2.3 % of Fund s 13. Fidelity Canadian Growth Company Fund Series O Fidelity High Income Commercial Real Estate Investment Trust Series O Fidelity American High Yield Fund Series O Fidelity Floating Rate High Income Investment Trust Series O Fidelity Convertible Securities Investment Trust Series O Fidelity Global Intrinsic Value Investment Trust Series O Energy Select Sector SPDR ETF Fidelity Canadian Focused Equity Investment Trust Series O Market Vectors Gold Miners ETF Fidelity U.S. Small/Mid Cap Equity Investment Trust Series O Fidelity Global Real Estate Fund Series O Cash and Cash Equivalents 0.3 Total Fund $3,013,000 Where applicable, the information in the above tables includes the Fund s pro-rata share of the investment in any Fidelity Underlying Fund. 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 300, Toronto ON M5G 2N7 or by visiting our web site at or SEDAR at

17

18

19

20 Fidelity Capital Structure Corp nd Street S.W., Suite 820 Calgary, Alberta T2P 2Y3 Manager and Registrar Fidelity Investments Canada ULC 483 Bay Street, Suite 300 Toronto, Ontario M5G 2N7 Custodian State Street Trust Company of Canada 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-BIP-CS-MRFPS-0717