Fidelity International Small Cap Opportunities Fund

Transcription

1 QUARTERLY FUND REVIEW AS OF DECEMBER 31, 2017 Fidelity International Small Cap Opportunities Fund Investment Approach Fidelity International Small Cap Opportunities Fund is a diversified international equity strategy with a small- to mid-cap growth orientation. Our investment approach targets companies with multiyear structural growth prospects, high barriers to entry and attractive valuations based on our earnings forecasts. Investment ideas typically fall into three main categories: structurally attractive growth themes, where investors may be underestimating the durability of growth drivers and long-term earnings power; cyclically out-of-favor companies with limited competition and pricing power, where investors may be focusing on near-term cyclical concerns and discounting long-term prospects; and companies with strong earnings potential whose share prices have fallen due to macroeconomic events. We strive to uncover these companies through in-depth fundamental analysis, working in concert with Fidelity's global research team, with the goal of capturing market upside while limiting downside participation. PERFORMANCE SUMMARY Cumulative 3 Month YTD 1 Annualized / LOF 1 Fidelity International Small Cap Opportunities Fund 6.89% 35.69% 35.69% 13.91% 12.76% 4.32% Gross Expense Ratio: 1.13% 2 MSCI EAFE Small Cap (Net Massachusetts tax) 6.07% 33.21% 33.21% 14.35% 12.98% 5.89% Morningstar Fund Foreign Small/Mid Growth 6.09% 36.19% 36.19% 12.55% 11.33% 5.27% % Rank in Morningstar Category (1% = Best) % 34% 24% 70% # of Funds in Morningstar Category FUND INFORMATION Manager(s): Jed Weiss Trading Symbol: FSCOX Start Date: August 02, 2005 Size (in millions): $1, Morningstar Category: Fund Foreign Small/Mid Growth Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. The securities of smaller, less well-known companies can be more volatile than those of larger companies. 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 08/02/ This expense ratio is from the most recent prospectus and generally is based on amounts incurred during the most recent fiscal year. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit fidelity.com/performance, institutional.fidelity.com, or 401k.com. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. For definitions and other important information, please see the Definitions and Important Information section of this Fund Review. Not FDIC Insured May Lose Value No Bank Guarantee

2 Performance Review For the three months ending December 31, 2017, the fund's Retail Class shares gained 6.89%, outpacing the benchmark MSCI EAFE Small Cap, which returned 6.07%. The fund's sector, country and regional positions generally result from our bottom-up, stock-by-stock management process. This quarter, our active stock selection accounted for essentially all the fund's outperformance versus the benchmark. On a sector basis relative to the index, the fund benefited from strong stock picking in consumer discretionary and, to a lesser extent, health care and materials. Stock selection in information technology, however, was negative. On a geographic basis, stock picking in Japan and the Europe ex U.K. region was beneficial, whereas underweighting Asia-Pacific ex Japan nicked us, as did our small out-of-benchmark exposure to Canada. In individual terms, several top contributors were based in Japan, led by Shoei (+49%), a maker of motorsport helmets and a nonbenchmark investment; Koshidaka Holdings (+57%) an operator of various leisure-time facilities; and Sho-Bond Holdings (+26%), a provider of construction materials. Other contributors included an out-of-benchmark stake in Irish building-materials company James Hardie Industries (+28%), whose shares rose sharply in November on strong financial results, as well as CompuGroup Medical (+16%), a German developer of software for medical professionals and one of our largest holdings at quarter end. In contrast, the biggest individual detractor this quarter was outof-index Fagerhult (-14%), a Swedish maker of commercial lighting. This longtime holding had been benefiting from Europe's economic recovery but pulled back this quarter. Also, shares of U.K. defense contractor Ultra Electronics Holdings (-25%) fell sharply in November after the company issued a profit warning. Japanese real estate firm Goldcrest (-15%) also detracted. Outlook and Positioning Our stock-by-stock investment approach targets companies with multiyear structural growth prospects, high barriers to entry and attractive valuations based on our earnings forecasts. Another way to put it is that we look for what we consider inexpensive businesses with very strong competitive positions and the potential to generate favorable long-term returns. Our portfolioconstruction process is designed to make bottom-up security selection rather than our opinions about macroeconomic trends the primary driver of the fund's long-term performance. At quarter's end and versus the index, our largest individual overweightings were in Azbil, a maker of automation equipment; OBIC, a computer-systems firm; and CompuGroup, all of Japan. Our biggest individual underweightings were in Smurfit Kappa Group, an Irish manufacturer of corrugated packaging; U.K.- based business-services company Rentokil Initial; and Temenos Group, a Swiss enterprise-software company. We held none of these benchmark components, which we saw as poor fits for the fund's bottom-up investment strategy. During the quarter, notable transactions included trimming our exposure to biopharmaceutical company China Biologic Products Holdings and Italian asset management firm Azimut Holdings, both of which experienced worsening corporate governance. The only new position of note this period was Washtec, a German maker of equipment for car washes. In all market conditions, we try to stick to our three-step management strategy, as we look to develop a portfolio with the potential to outperform in both up and down markets. We are hopeful that our focus on good business franchises with stocks trading at attractive valuations can continue to do well, regardless of the economic backdrop. CHARACTERISTICS Valuation Price/Earnings Trailing 21.1x 19.4x Price/Earnings (IBES 1- Forecast) 20.4x 17.0x Price/Book 2.6x 1.7x Price/Cash Flow 18.2x 12.2x Return on Equity (5- Trailing) 11.0% 8.0% Growth Sales/Share Growth 1- (Trailing) 1.9% 1.7% Earnings/Share Growth 1- (Trailing) 16.0% 23.1% Earnings/Share Growth 1- (IBES Forecast) 28.8% 23.0% Earnings/Share Growth 5- (Trailing) 11.2% 11.8% Size ed Average Market Cap ($ Billions) ed Median Market Cap ($ Billions) Median Market Cap ($ Billions) For definitions and other important information, please see Definitions and Important Information section of this Fund Review.

3 MARKET-SEGMENT DIVERSIFICATION Market Segment 24.47% 21.47% 3.00% 1.08% Consumer Discretionary 14.41% 16.07% -1.66% 0.67% Information Technology 14.08% 11.45% 2.63% 0.38% Health Care 12.62% 6.74% 5.88% -0.22% Consumer Staples 10.03% 6.96% 3.07% -0.40% Materials 7.92% 9.53% -1.61% 0.39% Real Estate 7.28% 10.39% -3.11% -0.09% Financials 5.38% 11.55% -6.17% -0.18% Energy 2.00% 2.45% -0.45% 0.18% Telecommunication Services 0.00% 1.36% -1.36% -0.08% Utilities 0.00% 2.03% -2.03% 0.08% Other 0.00% 0.00% 0.00% 0.00% ASSET ALLOCATION Asset Class International Equities 95.57% 99.99% -4.42% 1.77% Developed Markets 90.02% 99.76% -9.74% 2.50% Emerging Markets 5.55% 0.23% 5.32% -0.73% Tax-Advantaged Domiciles 0.00% 0.00% 0.00% 0.00% Domestic Equities 2.62% 0.01% 2.61% 0.04% Bonds 0.00% 0.00% 0.00% 0.00% Cash & Net Other Assets 1.81% 0.00% 1.81% -1.81% Net Other Assets can include fund receivables, fund payables, and offsets to other derivative positions, as well as certain assets that do not fall into any of the portfolio composition categories. Depending on the extent to which the fund invests in derivatives and the number of positions that are held for future settlement, Net Other Assets can be a negative number. "Tax-Advantaged Domiciles" represent countries whose tax policies may be favorable for company incorporation. REGIONAL DIVERSIFICATION Region Europe 49.19% 56.23% -7.04% 1.97% Japan 34.72% 30.61% 4.11% 0.97% Emerging Markets 5.55% 0.21% 5.34% -0.73% Asia-Pacific ex Japan 4.59% 12.87% -8.28% -0.45% United States 4.42% 0.00% 4.42% -1.68% Canada 1.53% 0.06% 1.47% -0.08% Other 0.00% 0.02% -0.02% 0.00% 10 LARGEST HOLDINGS Holding Azbil Corp. Spirax-Sarco Engineering PLC OBIC Co. Ltd. CompuGroup Medical AG Spectris PLC Interpump Group SpA Nihon Parkerizing Co. Ltd. Elis SA Sartorius AG (non-vtg.) USS Co. Ltd. 10 Largest Holdings as a % of Net Assets Market Segment Health Care Materials Health Care Consumer Discretionary 19.37% Total Number of Holdings 135 The 10 largest holdings are as of the end of the reporting period, and may not be representative of the fund's current or future investments. Holdings do not include money market investments. 3-YEAR RISK/RETURN STATISTICS Beta Standard Deviation 10.20% 11.77% Sharpe Ratio Tracking Error 3.93% -- Information Ratio R-Squared For definitions and other important information, please see Definitions and Important Information section of this Fund Review.

4 Definitions and Important Information Unless otherwise disclosed to you, in providing this information, Fidelity is not undertaking to provide impartial investment advice, act as an impartial adviser, or to give advice in a fiduciary capacity. CHARACTERISTICS Earnings-Per-Share Growth measures the growth in reported earnings per share over the specified past time period. Median Market Cap identifies the median market capitalization of the portfolio or benchmark as determined by the underlying security market caps. Price-to-Book (P/B) Ratio is the ratio of a company's current share price to reported accumulated profits and capital. Price/Cash Flow is the ratio of a company's current share price to its trailing 12-months cash flow per share. Price-to-Earnings (P/E) Ratio (IBES 1- Forecast) is the ratio of a company's current share price to Wall Street analysts' estimates of earnings. Price-to-Earnings (P/E) Ratio Trailing is the ratio of a company's current share price to its trailing 12-months earnings per share. Return on Equity (ROE) 5- Trailing is the ratio of a company's last five years historical profitability to its shareholders' equity. Preferred stock is included as part of each company's net worth. Sales-Per-Share Growth measures the growth in reported sales over the specified past time period. ed Average Market Cap identifies the market capitalization of the average equity holding as determined by the dollars invested in the portfolio or benchmark. ed Median Market Cap identifies the market capitalization of the median equity holding as determined by the dollars invested in the portfolio or benchmark. IMPORTANT FUND INFORMATION positioning data presented in this commentary is based on the fund's primary benchmark (index) unless a secondary benchmark is provided to assess performance. Effective after the close of business on 3/31/2017, Patrick Buchanan and Patrick Drouot have been named interim comanagers of the fund. Jed Weiss will remain co-manager until 6/15/17 when he will begin a leave of absence. Mr. Weiss is expected to return as the sole portfolio manager on 11/29/17. Effective 12/18/17, the fund's redemption fee has been removed. Effective 12/30/17, Jed Weiss is sole portfolio manager, while Patrick Buchanan and Patrick Drouot transitioned off the fund. investors in developed markets, excluding the U.S. & Canada. returns are adjusted for tax withholding rates applicable to U.S. based mutual funds organized as Massachusetts business trusts. MARKET-SEGMENT WEIGHTS Market-segment weights illustrate examples of sectors or industries in which the fund may invest, and may not be representative of the fund's current or future investments. Should not be construed or used as a recommendation for any sector or industry. RANKING INFORMATION 2018 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or redistributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Fidelity does not review the Morningstar data and, for mutual fund performance, you should check the fund's current prospectus for the most up-to-date information concerning applicable loads, fees and expenses. % Rank in Morningstar Category is the fund's total-return percentile rank relative to all funds that have the same Morningstar Category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top-performing fund in a category will always receive a rank of 1%. % Rank in Morningstar Category is based on total returns which include reinvested dividends and capital gains, if any, and exclude sales charges. Multiple share classes of a fund have a common portfolio but impose different expense structures. RELATIVE WEIGHTS weights represents the % of fund assets in a particular market segment, asset class or credit quality relative to the benchmark. A positive number represents an overweight, and a negative number is an underweight. The fund's benchmark is listed immediately under the fund name in the Performance Summary. INDICES It is not possible to invest directly in an index. All indices represented are unmanaged. All indices include reinvestment of dividends and interest income unless otherwise noted. MSCI EAFE Small Cap (Net MA Tax) is a marketcapitalization-weighted index that is designed to measure the investable equity market performance of small cap stocks for global 4

5 3-YEAR RISK/RETURN STATISTICS Beta is a measure of the volatility of a fund relative to its benchmark index. A beta greater (less) than 1 is more (less) volatile than the index. Information Ratio measures a fund's active return (fund's average monthly return minus the benchmark's average monthly return) in relation to the volatility of its active returns. R-Squared measures how a fund's performance correlates with a benchmark index's performance and shows what portion of it can be explained by the performance of the overall market/index. R- Squared ranges from 0, meaning no correlation, to 1, meaning perfect correlation. An R-Squared value of less than 0.5 indicates that annualized alpha and beta are not reliable performance statistics. Sharpe Ratio is a measure of historical risk-adjusted performance. It is calculated by dividing the fund's excess returns (the fund's average annual return for the period minus the 3-month "risk free" return rate) and dividing it by the standard deviation of the fund's returns. The higher the ratio, the better the fund's return per unit of risk. The three month "risk free" rate used is the 90-day Treasury Bill rate. Standard Deviation is a statistical measurement of the dispersion of a fund's return over a specified time period. Fidelity calculates standard deviations by comparing a fund's monthly returns to its average monthly return over a 36-month period, and then annualizes the number. Investors may examine historical standard deviation in conjunction with historical returns to decide whether a fund's volatility would have been acceptable given the returns it would have produced. A higher standard deviation indicates a wider dispersion of past returns and thus greater historical volatility. Standard deviation does not indicate how the fund actually performed, but merely indicates the volatility of its returns over time. Tracking Error is the divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark, creating an unexpected profit or loss. Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges, and expenses. For this and other information, call or write Fidelity for a free prospectus or, if available, a summary prospectus. Read it carefully before you invest. Past performance is no guarantee of future results. Views expressed are through the end of the period stated and do not necessarily represent the views of Fidelity. Views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund. The securities mentioned are not necessarily holdings invested in by the portfolio manager(s) or FMR LLC. References to specific company securities should not be construed as recommendations or investment advice. Diversification does not ensure a profit or guarantee against a loss. S&P 500 is a registered service mark of Standard & Poor's Financial Services LLC. Other third-party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR LLC or an affiliated company. Fidelity Brokerage Services LLC, Member NYSE, SIPC., 900 Salem Street, Smithfield, RI Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI FMR LLC. All rights reserved. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee