Fidelity Income Replacement 2017 Portfolio

Transcription

1 Fidelity Income Replacement 2017 Portfolio Semi-Annual Report December 31, 2015 Notice to Readers The accompanying interim financial statements have not been reviewed by the external auditor of the Fund. The external auditor will be auditing the annual financial statements of the Fund in accordance with Canadian generally accepted auditing standards.

2 Fidelity Income Replacement 2017 Portfolio Schedule of Investments December 31, 2015 (Unaudited) Showing Percentage of Net Assets Attributable to Holders of Redeemable Units (Net Assets) Equity Funds 6.1% Units Cost (000s) Market Value (000s) Canadian Equity Funds 6.1% Fidelity Canadian Disciplined Equity Fund Series O 1,490 $ 54 $ 61 Fidelity Canadian Opportunities Fund Series O 1, Fidelity Dividend Fund Series O 6, Fidelity True North Fund Series O 1, TOTAL CANADIAN EQUITY FUNDS TOTAL EQUITY FUNDS Fixed-Income Funds 5.0% Canadian Fixed-Income Funds 2.0% Fidelity Canadian Bond Fund Series O 5, Global Fixed-Income Funds 3.0% Fidelity Global Bond Currency Neutral Fund Series O 10, TOTAL FIXED-INCOME FUNDS Short-Term Funds 89.4% Fidelity Canadian Money Market Fund Series O 240,749 2,408 2,407 Fidelity Canadian Short Term Bond Fund Series O 112,551 1,191 1,184 TOTAL SHORT-TERM FUNDS 3,599 3,591 TOTAL INVESTMENT PORTFOLIO 100.5% $4,020 4,035 NET OTHER ASSETS (LIABILITIES) (0.5)% (19) NET ASSETS 100% $ 4,016 Investment Valuation The following is a summary of the inputs used, as of December 31, 2015 and June 30, 2015, involving the Fund s assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the tables below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements. Valuation Inputs at December 31, 2015: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Investments in Securities: Equity Funds $ 243 $ 243 $ $ Fixed-Income Funds Short-Term Funds 3,591 3,591 Total Investments in Securities: $4,035 $4,035 $ $ Valuation Inputs at June 30, 2015: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Investments in Securities: Equity Funds $ 408 $ 408 $ $ See accompanying notes which are an integral part of the financial statements. Semi-Annual Reportport 2

3 Valuation Inputs at June 30, 2015: Description Total Level 1 Level 2 Level 3 (Amounts in thousands) Fixed-Income Funds Short-Term Funds $4,104 $4,104 $ $ Total Investments in Securities: $5,102 $5,102 $ $ See accompanying notes which are an integral part of the financial statements. 3 Semi-Annual Report

4 Financial Statements (Unaudited) Statements of Financial Position Amounts in thousands of Canadian Dollars /thousands of units (except per unit amounts) As at December 31, 2015 June 30, 2015 Assets (Note 3) Current assets Investments at fair value through profit or loss (Note 8) $ 4,035 $ 5,102 Receivable for investments sold Distributions receivable 5 8 4,132 5,180 Liabilities (Note 3) Current liabilities Payable to custodian bank 2 Payable for investments purchased 5 7 Payable on redemption of units Distributions payable (Note 5) Management and advisory fees payable (Note 4) 6 7 Other payables to affiliates (Note 4) 1 1 Other payables and accrued expenses (Note 4) Net assets attributable to holders of redeemable units (Notes 3 and 6) $ 4,016 $ 5,102 Net assets attributable to holders of redeemable units per Series and per unit (Note 6) Series A: ($908 / 308 units and $1,699 / 446 units, respectively) $ $ Series B: ($2,933 / 985 units and $3,251 / 845 units, respectively) $ $ Series F: ($175 / 56 units and $152 / 37 units, respectively) $ $ See accompanying notes which are an integral part of the financial statements. Semi-Annual Reportport 4

5 Statements of Comprehensive Income Amounts in thousands of Canadian Dollars (except per unit amounts) For the six-month periods ended December 31, Investment income (Note 3) Interest $ $ Income distributions from the underlying funds Capital gain distributions from the underlying funds Net gain (loss) on Investments Net realized gain (loss) on investments Change in net unrealized appreciation (depreciation) on investments (123) (102) (38) 32 Total investment income (loss) Operating expenses (Note 4) Management and advisory fees Administration fees 6 8 Independent Review Committee fees Commissions and other portfolio costs Sales tax 8 9 Total operating expenses Expenses waived (Note 4) (1) Net operating expenses Net increase (decrease) in net assets attributable to holders of redeemable units from operations $ (44) $ 54 Other information: Increase (decrease) in net assets attributable to holders of redeemable units from operations per Series (Note 3) Series A $ (11) $ 20 Series B $ (32) $ 31 Series F $ (1) $ 3 Increase (decrease) in net assets attributable to holders of redeemable units from operations per Series per unit (Note 3) Series A $ (.0288) $.0335 Series B $ (.0263) $.0416 Series F $ (.0049) $.0820 See accompanying notes which are an integral part of the financial statements. 5 Semi-Annual Report

6 Financial Statements (Unaudited) continued Statements of Changes in Net Assets Attributable to Holders of Redeemable Units Amounts in thousands of Canadian Dollars For the six-month period ended December 31, 2015 Fund Series A Series B Series F Net assets attributable to holders of redeemable units, beginning of period $ 5,102 $ 1,699 $ 3,251 $ 152 Distributions to holders of redeemable units (Note 5) From net realized gain (86) (17) (63) (6) Return of capital (1,307) (287) (952) (68) (1,393) (304) (1,015) (74) Redeemable unit transactions (Note 6) Proceeds from sale of redeemable units 4, , Reinvestment of distributions Amounts paid upon redemption of redeemable units (4,983) (904) (3,693) (386) 351 (476) Increase (decrease) in net assets attributable to holders of redeemable units from operations (44) (11) (32) (1) Net increase (decrease) in net assets attributable to holders of redeemable units (1,086) (791) (318) 23 Net assets attributable to holders of redeemable units, end of period $ 4,016 $ 908 $ 2,933 $ 175 Amounts in thousands of Canadian Dollars For the six-month period ended December 31, 2014 Fund Series A Series B Series F Net assets attributable to holders of redeemable units, beginning of period $ 7,712 $ 3,523 $ 3,996 $ 193 Distributions to holders of redeemable units (Note 5) From net realized gain (165) (62) (94) (9) Return of capital (1,075) (474) (570) (31) (1,240) (536) (664) (40) Redeemable unit transactions (Note 6) Proceeds from sale of redeemable units Reinvestment of distributions Amounts paid upon redemption of redeemable units (1,796) (890) (878) (28) (112) (414) Increase (decrease) in net assets attributable to holders of redeemable units from operations Net increase (decrease) in net assets attributable to holders of redeemable units (1,298) (930) (408) 40 Net assets attributable to holders of redeemable units, end of period $ 6,414 $ 2,593 $ 3,588 $ 233 See accompanying notes which are an integral part of the financial statements. Semi-Annual Reportport 6

7 Statements of Cash Flows Amounts in thousands of Canadian Dollars For the six-month periods ended December 31, Cash, beginning of period $ $ Cash flows from (used in) operating activities: Purchases of investments (4,347) (411) Proceeds from sale and maturity of investments 5,353 1,727 Cash receipts from interest income Cash receipts from other investment income Cash paid for operating expenses (66) (82) Net cash from (used in) operating activities 1,000 1,346 Cash flows from (used in) financing activities: Distributions to holders of redeemable units net of reinvestments (592) (323) Proceeds from sales of units 4, Amounts paid upon redemption of units (4,950) (1,794) Amounts borrowed from (repaid to) custodian bank 2 (2) Net cash from (used in) financing activities (1,000) (1,346) Net change in cash Cash, end of period $ $ See accompanying notes which are an integral part of the financial statements. 7 Semi-Annual Report

8 Notes to Financial Statements (Unaudited) For the period ended December 31, 2015 (Unaudited) (Amounts in thousands of Canadian dollars except per unit amounts) 1. Formation of the Fund Fidelity Income Replacement 2017 Portfolio (Fund) is an open end mutual fund trust formed under the laws of Ontario and governed by a Master Declaration of Trust dated January 2, 2008 (Inception Date), as amended thereafter from time to time. The Fund is authorized to issue an unlimited number of units. Fidelity Investments Canada ULC (Fidelity), as manager and trustee of the Fund, is responsible for the day-to-day operations and provides all general management and administrative services. FIAM LLC (FIAM) (formerly Pyramis Global Advisors, LLC), an affiliate of Fidelity, is responsible for the investment management of the Fund s portfolio. The registered office of the Fund is located at 483 Bay Street, Suite 300, Toronto, Ontario, M5G 2N7. The Fund invests primarily in a combination of other affiliated equity, fixed income and money market funds (Underlying Funds). The Fund offers Series A, Series B and Series F units. Series A units are available to all investors in a deferred sales charge (DSC) option and will be converted to lower management and advisory fee Series B units one year after completion of their redemption schedule. Series B units are available to all investors in an initial sales charge (ISC) option. Series F units are usually only available to investors who have fee based accounts with dealers who have signed an eligibility agreement with Fidelity. The Fund meets the definition of an investment entity and its purpose is to provide investment management services to its unitholders by investing its net assets for capital growth and/or investment income and by measuring its investment performance on a fair value basis. Refer to the Financial Instruments Risk note below for the Fund s investment objective. Effective at the close of business on December 31, 2015, the investment advisor was changed from FIAM to Fidelity and, as such, all investment management services previously provided by FIAM will be provided by Fidelity. 2. Basis of Preparation Statement of Compliance - These interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB) and as applicable to the preparation of interim financial statements, including IAS 34 Interim Financial Reporting. The accounting policies set out below have been applied consistently unless otherwise stated. The policies applied in these interim financial statements are based on IFRS issued and outstanding as of February 9, 2016, which is the date on which the interim financial statements were authorized for issue by Fidelity s board of directors. Any subsequent changes to IFRS that are given effect in the Fund s annual financial statements for the period ending June 30, 2016, could result in restatement of these interim financial statements, including the transition adjustments recognized on transition to IFRS. Functional and Presentation Currency These financial statements are presented in Canadian dollars, which is the Fund s functional currency. 3. Summary of Significant Accounting Policies Basis of Measurement These financial statements have been prepared on the historical cost basis except for investments which are measured at fair value in the Statements of Financial Position. Use of Estimates and Judgments Under IFRS, management is required to make certain estimates and judgments at the date of the financial statements. The principal financial statement components subject to significant accounting estimates and judgments include: Fair value measurements The Fund may invest in financial instruments that are not quoted in an active market. Where applicable, these instruments are categorized in Level 2 and Level 3 of the fair value hierarchy explained below. When current market prices or quotations are not readily available or reliable, valuation techniques will be applied in good faith and in accordance with procedures adopted by the manager. Factors used in determining fair value may include, but are not limited to, broker quotes from reputable pricing sources, market or security specific events. Fair value models use observable data, to the extent practical; however, the manager is required from time to time to make estimates and assumptions that are based on the best information available at that particular time. Changes in these estimates could impact the fair values of the financial instruments, and the impact could be material. The aggregate fair value of investments measured by valuation techniques as at December 31, 2015 and June 30, 2015, is included at the end of the Fund s Schedule of Investments. Classification and measurement of financial instrument The Fund has made significant judgments when determining the classification and measurement of its financial instruments under IAS 39, Financial Instruments Recognition and Measurement (IAS 39). These judgments centre upon the determination that certain investments are held-for-trading and that the fair value measurement option can be applied to those that are not due to factors including performance evaluation and management of the Fund on a fair value basis. Presentation of financial instruments The Fund has made significant judgments when determining the classification of its redeemable units as financial liabilities in accordance with IAS 32 Financial Instruments Presentation (IAS 32). These judgments centre upon the determination that the Fund s redeemable units do not have identical features and their entitlements include a contractual obligation to distribute any Semi-Annual Reportport 8

9 net income and net realized capital gains at least annually in cash (at the request of the unitholder). Therefore, the ongoing redemption feature is not the units only contractual obligation. Investment Valuation Investments are designated at their fair value through profit or loss in accordance with IAS 39 and are carried at their fair value. The Fund categorizes the inputs to valuation techniques used to fair value its investments into a disclosure hierarchy consisting of three levels as shown below: Level 1 quoted prices in active markets for identical investments Level 2 other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.) Level 3 unobservable inputs (including the Fund s own assumptions based on the best information available) Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. There were no significant transfers between Level 1 and Level 2 during the periods. The aggregate value of investments by input level, as at December 31, 2015 and June 30, 2015, as well as a roll forward of Level 3 securities, where applicable, is included at the end of the Fund s Schedule of Investments. Valuation techniques used to value the Fund s investments by major category are as follows: Investment in any Underlying Fund is valued at its closing net asset value per unit (NAVPU) each business day and is categorized as Level 1 in the hierarchy. Cash Cash is comprised of cash on deposit and may include cash equivalents which are short-term debt instruments with terms to maturity of less than 90 days at acquisition which are held for the purpose of meeting short-term cash commitments. Foreign currencies are comprised of cash amounts denominated in currencies other than Canadian dollars, which are on deposit with the custodian to facilitate the settlement of foreign denominated security transactions. Cash is carried at amortized cost which approximates its fair value. The Fund did not hold any cash equivalents as at December 31, 2015 and June 30, Impairment of Financial Assets At each reporting date, the Fund assesses whether there is objective evidence that a financial asset carried at amortized cost is impaired. If such impairment exists, the Fund recognizes the difference between the amortized cost of the financial assets and the present value of the estimated future cash flows, discounted using the instrument s original effective interest rate as an impairment loss on the Statements of Comprehensive Income. Such impairment losses are reversed in subsequent periods in the Statements of Comprehensive Income if the conditions that lead to the initial recognition of the loss diminish or cease to exist. Other Assets and Liabilities Other assets and liabilities may include amounts due to or from the custodian, affiliates or other counterparties for accrued income, investment transactions, unit transactions, accrued expenses and other unsettled transactions at period end. These amounts are classified as loans and receivables or financial liabilities and are carried at amortized cost, which approximates fair value due to their shortterm nature. Classification of redeemable units issued by the Fund In accordance with IAS 32, the Fund s redeemable units entitlements include a contractual obligation to distribute any net income and net realized capital gains at least annually in cash (at the request of the unitholder) and, therefore, the ongoing redemption feature is not the units only contractual obligation. In addition, each series of redeemable units are equally subordinated to each other, but have differing features as outlined in the notes below. Therefore, the Fund s redeemable units do not meet the criteria for classification as equity and have been classified as financial liabilities on the Statements of Financial Position. The Fund s obligation for net assets attributable to holders of redeemable units is recorded at the redemption amount. As at December 31, 2015 and June 30, 2015, the Fund s net asset value per Series per unit may differ by less than $0.01 from its net assets attributable to holders of redeemable units per Series per unit calculated in accordance with IFRS as a result of normal reporting period end procedures to close off the books and records. Investment Transactions, Income Recognition and Transaction Costs Regular way purchases and sales of financial assets are recognized at their trade date. The cost of investments is determined on an average cost basis, excluding commissions and other portfolio transaction costs. Income from investments is recognized on an accrual basis. Interest income is accrued as earned. Distributions from any Underlying Fund, if any, are recognized on the ex-dividend date by the Fund in the same form that they were distributed. Net realized gains and losses from the sale of investments and change in net unrealized appreciation (depreciation) on investments are calculated with reference to average cost of the related investment securities which exclude transaction costs and may include proceeds received from litigation. Transaction costs, such as brokerage commissions, incurred in the purchase and sale of securities by the Fund are recognized as Commissions and other portfolio costs in the Statements of Comprehensive Income. Foreign Currency Translation Securities and other assets and liabilities denominated in a foreign currency are translated into Canadian dollars at the period-end exchange rates. Purchases and sales of securities, income and expenses denominated in foreign currencies are translated into Canadian dollars at the exchange rate on the date of the respective transaction. The effects of exchange rate fluctuations on investments are included in the Net realized gain (loss) and change in net unrealized appreciation (depreciation) on investments and exchange rate 9 Semi-Annual Report

10 Notes to Financial Statements (Unaudited) continued (Amounts in thousands of Canadian dollars except per unit amounts) 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. Valuation of Series Separate net assets attributable to holders of redeemable units is calculated for each Series of units in the Fund. The net assets attributable to holders of redeemable units of a Series is computed by calculating the Series proportionate share of the assets and liabilities of the Fund common to all Series, adjusted for the assets and liabilities of the Fund attributable only to that Series. Expenses directly attributable to a Series are charged to that Series. Investment income and operating expenses are allocated proportionately to each Series based upon the relative net assets attributable to holders of redeemable units of each Series, except for items that can be specifically attributed to one or more Series. Per Unit from Operations - The increase (decrease) in net assets attributable to holders of redeemable units resulting from operations per unit in the Statements of Comprehensive Income represent the increase (decrease) in net assets attributable to holders of redeemable units resulting from operations for each Series of the Fund, divided by the weighted average units outstanding for each Series of the Fund during the period as follows: Weighted Average Units Period ended December 31, 2015 Series A 390 Series B 1,223 Series F 81 Period ended December 31, 2014 Series A 621 Series B 727 Series F 37 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 or Proceeds from sale and maturity of investments, as applicable. Additionally, in accordance with IFRS, the Fund s Statements of Cash Flows excludes non-cash transactions from its operating and financing activities. Recent Accounting Pronouncements The final version of IFRS 9, Financial Instruments, was issued by the IASB in July 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces a model for classification and measurement, a single, forward-looking expected loss impairment model and a substantially reformed approach to hedge accounting. The new single, principle based approach for determining the classification of financial assets is driven by cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being applied to all financial instruments, which will require more timely recognition of expected credit losses. It also includes changes in respect of an entity s own credit risk in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of an entity s own credit risk on such liabilities are no longer recognised in profit or loss. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, however is available for early adoption. In addition, the entity s own credit risk changes can be early applied in isolation without otherwise changing the accounting for financial instruments. The Fund is in the process of assessing the impact of IFRS 9 and has not yet determined when it will adopt the new standard. 4. Expenses and Other Related Party Transactions Management and Advisory Fees Fidelity serves as the manager of the Fund and FIAM serves as investment advisor of the Fund. FIAM has entered into a sub-advisory agreement with FMR Co., Inc., an affiliate of Fidelity, to provide investment advice with respect to all or a portion of the investments of the Fund. The Fund pays Fidelity and FIAM a monthly management and advisory fee for their services and the provision of key management personnel to the Fund, based on the net asset value of each Series, calculated daily and payable monthly. Fidelity may reduce the management and advisory fee or fund expenses for certain investors by reducing the management and advisory fee it charges to the Fund or reducing the amount charged to the Fund for certain expenses and having the Fund pay out the amount of the reduction to the investors as a distribution. These distributions are disclosed as Management fee reduction in the Statements of Changes in Net Assets Attributable to Holders of Redeemable Units. To avoid duplication of fees, Series O units of any Underlying Fund are not subject to management and advisory fees. The annual management and advisory fee rates for each Series were as follows: Semi-Annual Reportport 10

11 Annual Management and Advisory Fee Rate (%) Series A Series B Series F Administration Fee Fidelity charges the Fund a fixed administration fee in place of certain variable expenses and the provision of key management personnel to the Fund. Fidelity, in turn, pays all of the operating expenses of the Fund, other than certain specified fund costs, including the fees and expenses of the Independent Review Committee (IRC), taxes, brokerage commissions and interest charges. To avoid duplication of fees, Series O units of any Underlying Fund are not subject to the Administration fee. The administration fee is in addition to the management and advisory fee. 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 Prior to October 29, 2015, the administration fee was calculated as a fixed annual percentage of the net asset value of each Series as follows: Tier 1 (%) Tier 2 (%) Tier 3 (%) Series A Series B Series F Independent Review Committee Fees The IRC, as required under National Instrument , reviews conflict of interest matters referred to it by the manager and provides recommendations or approves actions, as appropriate, that are in the best interest of the funds. There are currently four members of the IRC who are independent of Fidelity and its affiliates. IRC members are compensated by way of an annual retainer fee and a per meeting attendance fee, as well as reimbursed for expenses associated with IRC duties. These costs are allocated among the individual funds proportionately by assets. Sales Tax - Certain provinces have harmonized their Provincial Sales Tax (PST) with the federal Goods and Services Tax (GST). The Harmonized Sales Tax (HST) combines the GST rate of 5% with the PST rate of certain provinces. The Provincial HST liability or refund is calculated using the residency of unitholders and the value of their interests in the Fund as at specific times, rather than the physical location of the Fund. The effective GST/HST rate charged to each Series of the Fund is based on the unitholders proportionate investments by province, using each province s HST rate or GST rate in the case of non-participating provinces. All amounts are included in the Statements of Comprehensive Income as Sales tax. Expenses Waived - Fidelity may absorb or waive certain expenses at its sole discretion. Fidelity can terminate the absorption or waiver at any time. The manager of the Fund waived a portion of its administration fee. The expenses absorbed or waived during the periods are disclosed as Expenses waived in the Statements of Comprehensive Income, if applicable. 5. Taxation and Distributions The Fund qualifies as a mutual fund trust under the provisions of the Income Tax Act (Canada). For tax purposes, the Fund has a December year end. In each tax year, the Fund declares and credits as due and payable sufficient net investment income and net realized capital gains to unitholders such that the Fund will not be subject to income taxes. As a result, the Fund does not record income taxes under IAS 12 Income Taxes (IAS 12) and accordingly does not recognize the deferred tax benefit associated with tax loss carry forwards and other taxable temporary differences. Distributions are taxable in unitholders hands. At the end of each tax year, the character of the distributions is determined for tax purposes. Under the terms of the Declaration of Trust, the trustee may capitalize any distribution amount without any increase in the number of units outstanding. For Series A, Series B and Series F, 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. 11 Semi-Annual Report

12 Notes to Financial Statements (Unaudited) continued (Amounts in thousands of Canadian dollars except per unit amounts) Capital losses may be carried forward indefinitely to reduce future realized capital gains. As at the last taxation year-end, the Fund had no capital losses available to be carried forward. Non capital losses may be carried forward for up to 20 tax years to reduce future taxable income, but expire in December of the year noted. As at the last taxation year-end, the Fund had no non capital losses available to be carried forward. 6. Capital Risk Management Units issued and outstanding are considered to be the capital of the Fund. The capital of each series of the Fund is divided into an unlimited number of units of equal value, with no par value. All units in a series of the Fund rank equally with respect to distributions. A unitholder of the Fund is entitled to one vote for each one dollar in value of units owned. Fractional units are proportionately entitled to these rights. The Fund generally has no restrictions or specific capital requirements on the subscriptions and redemptions of units other than minimum subscription requirements; although, on rare occasions, Fidelity may temporarily suspend unitholders right to redeem units and postpone paying sale proceeds. The relevant movements attributable to unitholders are shown in the Statements of Changes in Net Assets Attributable to Holders of Redeemable Units. In accordance with the objectives and the risk management policies outlined in the Financial Instruments Risk notes, the Fund endeavors to invest the subscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions. Such liquidity is managed by investing the majority of assets in investments that can be readily disposed and via the Fund s ability to borrow up to 5% of its net asset value. Unit Transactions - Unit transactions for each Series were as follows: Units Outstanding, Beginning of Period Issued Reinvested Redeemed Units Outstanding, End of Period Period ended December 31, 2015 Series A (263) 308 Series B 845 1, (1,109) 985 Series F (110) 56 Period ended December 31, 2014 Series A (177) 568 Series B (172) 778 Series F (5) Financial Instruments Risk The Fund s activities expose it to a variety of financial instruments risks: credit risk, liquidity risk, other price risk, interest rate risk and currency risk. FIAM seeks to minimize potential adverse effects of these performance risks by employing professional, experienced portfolio advisors, by daily monitoring of the positions and market events, and by diversifying the investment portfolio within the constraints of the investment mandate. The Fund and each Underlying Fund may use derivative financial instruments to moderate certain risk exposures. The Fund is more diversified and expected to be less risky than funds that invest primarily in equities or fixed income securities directly. The value can change when the price of equity or fixed-income securities change. There is greater risk when more of the Fund is invested in any one asset class. The Fund has the same risks as its Underlying Funds. FIAM s objective is to provide consistent value-added return over the benchmark. Unsystematic risk is mitigated primarily through investments in a diverse portfolio of securities across many sectors, styles or regions of the market. FIAM s qualitative fundamental security selection is also well diversified across many analysts. Rather than relying on a single valuation process or quantitative model that implicitly assumes that past value-added returns of some sectors or styles will persist into the future, FIAM s analysts select securities based on their own unique valuation processes. The Fund aims to achieve high total investment return. The Fund uses a dynamic asset allocation strategy and invests in underlying Fidelity Funds that invest primarily in a mix of equity securities, fixed-income securities and money market instruments. From inception through its horizon date, an increasing proportion of the Fund s assets will be invested in fixed-income funds and money market funds. Once the Fund reaches its horizon date and its asset mix becomes substantially similar to that of Fidelity Canadian Money Market Fund, it is expected that the Fund will, on prior approval of the IRC and on prior notice to investors and on a date to be determined by Fidelity, be combined with Fidelity Canadian Money Market Fund and unitholders of the Fund will become unitholders of Fidelity Canadian Money Market Fund. Semi-Annual Reportport 12

13 Portfolio risk is monitored daily and reviewed monthly by an investment compliance group. In addition, there is a formal quarterly review of each fund. The investment compliance group, portfolio managers and the senior analysts attend a quarterly portfolio review. Portfolios within each strategy are reviewed relative to each other and to their benchmark. Active industry and security allocations are analyzed. Credit Risk - Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Fund. The Fund s own credit risk in the case of financial liabilities and a counterparty s credit risk in the case of financial assets are considered, where applicable, in determining the fair value of financial assets and financial liabilities. The Fund may be exposed to indirect credit risk through its investments in the Underlying Funds. In addition, as part of its cash management, the Fund limits its direct exposure to credit loss by placing its cash with high credit quality financial institutions. The carrying amount of investments and other assets represents the maximum credit risk exposure as at December 31, 2015 and June 30, Other than outlined above, there were no significant concentrations of credit risk to counterparties as at December 31, 2015 and June 30, Concentration Risk - FIAM analyzes credit concentration based on the counterparty, industry and/or geographical location of the financial assets that the Fund holds. The following tables summarize the investment concentration risks that are relevant for the Fund based on its investment objective, which it is exposed to, through its investment in each Underlying Fund: Asset Mix % of Fund s Net Assets as at 12/31/15 % of Fund s Net Assets as at 6/30/15 Canadian Bonds Canadian Equities Foreign Bonds Foreign Equities Canadian Preferred Securities Foreign Preferred Securities Cash and Short-Term Investments Net Other Assets (Liabilities) (0.4) 2.5 Geographic Mix % of Fund s Net Assets as at 12/31/15 % of Fund s Net Assets as at 6/30/15 Canada United States of America Others (Individually Less Than 1%) Cash and Short-Term Investments Net Other Assets (Liabilities) (0.4) 2.5 FIAM regularly monitors the relative weights of individual securities, sectors, countries, and also monitors the market capitalization and trading liquidity of each holding. Liquidity Risk - Liquidity risk is defined as the risk that the Fund may not be able to settle or meet its obligations on time or at a reasonable price. The Fund is exposed to daily cash redemptions of redeemable units. Redeemable units are redeemed on demand at the unitholder s option based on the Fund s NAVPU at the time of redemption. The Fund may be exposed to indirect liquidity risk through its investments in the Underlying Funds. In accordance with securities regulations, the Fund and the Underlying Funds must maintain at least 90% of assets in liquid investments; investments that are traded in an active market and can be readily disposed of. In addition, the Fund has the ability to borrow up to 5% of its net asset value from the custodian for the purposes of funding redemptions. The Underlying Funds may, from time to time, invest in securities that are not traded in an active market and may be illiquid. Private and/or restricted securities held, if any, are identified in the Underlying Funds Schedules of Investments as at their respective period ends. The liquidity position of the Fund and Underlying Funds is monitored on a daily basis. As at December 31, 2015 and, June 30, 2015, the Fund did not have financial liabilities with maturities greater than 3 months. Indirect Exposure to Other Price Risk, Interest Rate Risk and Currency Risk - Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in a market or market segment. All securities present a risk of loss of capital. The Fund moderates this risk through a careful selection of securities and other financial instruments 13 Semi-Annual Report

14 Notes to Financial Statements (Unaudited) continued (Amounts in thousands of Canadian dollars except per unit amounts) within the parameters of the investment strategy. The maximum risk resulting from financial instruments is equivalent to their fair value. The Fund s investments are susceptible to other price risk arising from uncertainties about future prices of the instruments. The Fund may be exposed to indirect other price risk through its investments in the Underlying Funds. Interest rate risk arises on interest-bearing financial instruments held in the investment portfolio such as bonds. The Fund is exposed to the risk that the fair value or the future cash flows of interest-bearing financial instruments will fluctuate due to changes in the prevailing levels of market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates. The Fund may be exposed to indirect interest rate risk through its investments in the Underlying Funds. Currency risk arises from financial instruments that are denominated in a currency other than Canadian dollars, which is the Fund s functional currency. The Fund is exposed to the risk that the fair value of financial instruments denominated in other currencies will fluctuate due to changes in exchange rates. Currency risk is not considered to arise from financial instruments that are non-monetary items such as equity investments, or forward foreign exchange contracts related to such non-monetary items. The Fund considers the foreign exchange exposure relating to non-monetary assets and liabilities to be a component of other price risk, not foreign currency risk. The Fund may be exposed to indirect currency risk through its investments in the Underlying Funds. The Underlying Funds may also hedge against other foreign currencies through the use of forward foreign currency contracts. For example, underlying currency hedged funds use derivatives to try to minimize the exposure to currency fluctuations between the foreign currencies (such as the U.S. dollar, the Euro or the Yen), and the Canadian dollar. The tables below summarize the impact on the Fund s net assets attributable to holders of redeemable units, of reasonable possible changes in the returns of each of the strategies to which the Fund is exposed through the Underlying Funds in which it invests. The impact on net assets attributable to holders of redeemable units is calculated by applying a 5% possible movement determined for each strategy as a percentage of the net assets attributable to holders of redeemable units of the Fund. The analysis is based on the assumption that the returns on each strategy have increased or decreased as disclosed with all other variables held constant. Money market funds have minimal sensitivity to changes in interest rates since the securities tend to be short-term in nature. The impact on net assets attributable to holders of redeemable units for the sensitivity analysis excludes money market funds. In practice, the actual trading results may differ from this sensitivity analysis and the difference could be material. The indirect risk disclosures presented in the tables below represent the market risks to which the various strategies are exposed net of forward foreign currency contracts: I, C, O representing Interest rate, Currency and Other price risks, respectively. Underlying risk exposures Number of Underlying Funds Impact on net assets based on 5% increase or decrease ($) Strategy As at December 31, 2015 Canadian Equity O 4 12 Canadian Fixed-Income I 1 4 Global Fixed-Income I 1 6 Short-Term I 2 59 TOTAL 8 81 As at June 30, 2015 Canadian Equity O 4 20 Canadian Fixed-Income I 1 12 Global Fixed-Income I 1 18 Short-Term I 2 71 TOTAL Investment in Structured Entities The Fund s investment in any Underlying Fund represents an interest in a structured entity. A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements such as those agreements executed by a Fund with its manager and portfolio advisor. An Underlying Fund is financed through the issuance of its redeemable trust units. In addition, the purpose of any Underlying Fund is to provide investment management services to its unitholders by investing its net assets for capital growth and/or investment income. Semi-Annual Reportport 14

15 The Fund has assessed its ability to control or significantly influence any Underlying Fund in accordance with IFRS 10 and IAS 28. The Fund has determined that it does not have the ability to control nor exercise significant influence on an Underlying Fund due to the Fund s inability to exercise its voting rights and direct or participate in the financial and operating policy decisions of an Underlying Fund. The maximum risk of loss in an investment in an Underlying Fund is equal to its fair value and carrying value which is outlined in the tables below and included in Investments on the Statements of Financial Position. There is no difference between the maximum risk of loss and the carrying amounts of the assets and liabilities of an Underlying Fund that relate to the Fund s interests. There are additional risks associated with an investment in an Underlying Fund. Refer to the Financial Instruments Risk note for further discussion. In the normal course of operations to fulfil its investment objective, the Fund will, from time to time, subscribe for additional units issued by an Underlying Fund or redeem in whole or in part its investment in an Underlying Fund. In addition, the Fund may receive a distribution of income from an Underlying Fund as described above in the Investment Transactions, Income Recognition and Transaction Costs note. The Fund does not have any obligation or intention to provide financial support to an Underlying Fund. The following tables present additional information that is relevant to the Fund s investment in structured entities: Total Net Assets ($) Fair Value of Investment ($) December 31, 2015 Fidelity Canadian Bond Fund Series O 9,851, Fidelity Canadian Disciplined Equity Fund Series O 2,363, Fidelity Canadian Money Market Fund Series O 1,362,989 2,407 Fidelity Canadian Opportunities Fund Series O 701, Fidelity Canadian Short Term Bond Fund Series O 1,001,787 1,184 Fidelity Dividend Fund Series O 1,705, Fidelity Global Bond Currency Neutral Fund Series O 1,020, Fidelity True North Fund Series O 4,881, Total Net Assets ($) Fair Value of Investment ($) June 30, 2015 Fidelity Canadian Bond Fund Series O 9,754, Fidelity Canadian Disciplined Equity Fund Series O 2,367, Fidelity Canadian Money Market Fund Series O 1,155,672 2,684 Fidelity Canadian Opportunities Fund Series O 781, Fidelity Canadian Short Term Bond Fund Series O 938,356 1,420 Fidelity Dividend Fund Series O 1,791, Fidelity Global Bond Currency Neutral Fund Series O 527, Fidelity True North Fund Series O 5,039, Subsequent Event Fidelity Income Replacement 2017 Portfolio will be closed as of February 19, The decision to close the Fidelity Income Replacement Portfolios was reached after careful consideration of a number of factors including the small size of each fund and small number of investors in each fund. If investors hold units within a Fidelity registered plan and do not switch or redeem before the close of business on February 19, 2016, investor units will be automatically switched into units of Fidelity Canadian Money Market Fund to ensure that the closure does not result in a withdrawal from your registered plan. 15 Semi-Annual Report

16 Fidelity Investments Canada ULC 483 Bay Street, Suite 300 Toronto, Ontario M5G 2N7 Manager, Transfer Agent and Registrar Fidelity Investments Canada ULC 483 Bay Street, Suite 300 Toronto, Ontario M5G 2N7 Portfolio Adviser Fidelity Investments Canada ULC Toronto, Ontario Custodian State Street Trust Company of Canada Toronto, Ontario Auditor PricewaterhouseCoopers LLP Toronto, Ontario Visit us online at or call Fidelity Client Services at Fidelity s mutual funds are sold by registered Investment Professionals. Each Fund has a simplified prospectus, which contains important information on the Fund, including its investment objective, purchase options, and applicable charges. Please obtain a copy of the prospectus, read it carefully, and consult your Investment Professional before investing. As with any investment, there are risks to investing in mutual funds. There is no assurance that any Fund will achieve its investment objective, and its net asset value, yield, and investment return will fluctuate from time to time with market conditions. Investors may experience a gain or loss when they sell their units in any Fidelity Fund. Fidelity Global Funds may be more volatile than other Fidelity Funds as they concentrate investments in one sector and in fewer issuers; no single Fund is intended to be a complete diversified investment program. Past performance is no assurance or indicator of future returns. There is no assurance that either Fidelity Canadian Money Market Fund or Fidelity U.S. Money Market Fund will be able to maintain its net asset value at a constant amount. The breakdown of Fund investments is presented to illustrate the way in which a Fund may invest, and may not be representative of a Fund s current or future investments. A Fund s investments may change at any time. Fidelity Investments is a registered trademark of FMR LLC E FICL-IRP17-SANN-0216