Fidelity International Small Cap Fund Key Takeaways For the fiscal year ending October 31, 2017, the fund's Retail Class shares gained 26.18%, topping the 24.85% advance of the benchmark MSCI ACWI (All Country World Index) ex USA Small Cap Index. Despite the fund's somewhat cautious positioning in the face of fairly rich global stock valuations, Portfolio Manager Samuel Chamovitz's focus on companies with strong fundamentals enabled the fund to finish ahead of the benchmark. Stock picking in the industrials and consumer discretionary sectors aided relative performance the most. Overall, active management added value in eight of 11 market sectors this period. Positioning in information technology and health care, along with the drag from a roughly 5% cash position, on average, were the primary negatives. Geographically, stock picking in Japan provided a significant performance boost, with lesser contributions from Australia, Brazil and Hong Kong. As a group, emerging markets were a significantly positive influence. Conversely, positioning in Germany, the U.K. and Finland worked against us. Although he is encouraged by signs of broad acceleration in global economic growth, Sam believes much of the improvement already is reflected in share prices. He continues to be cautious and prepared to use increased volatility as buying opportunities. MARKET RECAP The MSCI ACWI (All Country World Index) ex USA Index returned 23.85% for the 12 months ending October 31, 2017, helped partly by a generally weak U.S. dollar. Some favorable election results in continental Europe (+30%) suggested ebbing political uncertainty and near-term risk there, but the U.K. (+20%) faced more-mixed conditions ahead of its expected exit from the European Union. Despite central-bank easing and pressured recently by yen strength Japan (+18%) lagged the rest of the Asia-Pacific group (+22%). Commodity-price volatility slowed Canada (+17%), but the emergingmarkets group (+26%) sped ahead. Sector-wise, information technology (+47%) was driven by a surge among several Chinese internet-related names. Financials (+27%) rode rising interest rates that, at the same time, weighed on real estate (+17%), utilities (+16%), consumer staples (+14%) and telecommunication services (+9%) socalled "bond proxy" sectors. Materials (+28%) and industrials (+27%) responded to demand from China and price gains for certain commodities. In the energy sector (+20%), oil prices lost ground in the spring before rebounding through October 31 to end well above where they started 12 months ago. Lastly, health care (+14%) was hurt by early-period turmoil around drug pricing and health care legislation. Not FDIC Insured May Lose Value No Bank Guarantee
Q&A An interview with Portfolio Manager Samuel Chamovitz Fund Facts Trading Symbol: Sam Chamovitz Portfolio Manager FISMX Start Date: September 18, 2002 Size (in millions): $1,762.11 Investment Approach Fidelity International Small Cap Fund is an opportunistic international small-cap strategy focused on our best ideas across geographies. The fund seeks capital appreciation. We favor higher-quality small-cap companies trading at a discount to their intrinsic (fair) value because we believe this combination can lead to outperformance over the course of a market cycle. This is a value-oriented approach where the fund looks to optimize the risk/reward trade-off by investing at the intersection of value and quality. Investing in "undiscovered" or "out of favor" securities is the key, in our view, to finding attractive valuations for "quality" businesses. Typically, businesses we own require less capital to grow, which leads to strong free cash flow. The combination of strong free cash flow and an unencumbered balance sheet allows astute management teams the flexibility to deploy capital for inorganic (acquisition-driven) growth or returns to shareholders. Q: Sam, how did the fund perform for the fiscal year ending October 31, 2017 The fund's Retail Class shares gained 26.18%, topping the 24.85% advance of the benchmark MSCI ACWI (All Country World Index) ex USA Small Cap Index. However, the fund trailed its peer group average. Despite the fund's somewhat cautious positioning in the face of fairly rich global stock valuations, I was pleased that my focus on companies with strong fundamentals enabled the fund to finish ahead of the benchmark. Q: Why specifically was the fund able to outpace the benchmark this past year Stock picking in the industrials and consumer discretionary sectors aided relative performance the most. Overall, active management added value in eight of 11 market sectors. Positioning in information technology and health care, along with the drag from a roughly 5% cash position, on average, were the primary negatives. For much of the period, market volatility remained near its all-time low, and investors seemed to ignore any potentially negative news. I thought this situation wouldn't last, and I wanted to have some "dry powder" in case of any sell-off: hence, the fund's notable cash position, which was near the upper end of my target range of 3% to 5%. Geographically, stock picking in Japan provided a significant performance boost, with lesser contributions from Australia, Brazil and Hong Kong. Emerging markets helped, while positioning in Germany, the U.K. and Finland worked against us. As usual, the fund's positioning primarily was a result of where I was finding the most attractive opportunities from a bottom-up, stock-specific perspective. As a reminder, I generally favor companies with profitable business models, ample free cash flow, meaningful protection from competitive pressure, capable management teams and strong balance sheets. Q: Which stocks were noteworthy contributors versus the benchmark A sizable overweighting in Taiwan-based Yageo was the fund's top relative contributor. The company makes 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.
resistors and other so-called passive electrical components. Investors tend to find this firm's business boring, but the types of components Yageo makes are essential parts of virtually all electrical devices. I established this position just before the start of the reporting period, and added to it substantially later on. Overall, our stake here advanced a robust 188%. Yageo's products enjoyed strong demand from Chinese smartphone vendors, as well as from the notebook computer, automotive and industrial segments. It helped that the company was taking market share from larger Japanese competitors and also was able to raise prices on some key products. A recent management change that resulted in a sharper focus on returning capital to shareholders also aided the stock. Overweighted exposure to for-profit education provider Estacio Participacoes also lifted the fund's relative result. I thought this name was relatively inexpensive after it fell in late June when antitrust authorities in Brazil blocked a merger with rival education company Kroton Educacional. At that point, many analysts had given up on the stock. We maintained close contact with Estacio's management and liked the company's plan to substantially increase profit margins, even without a merger. This gave me the confidence to purchase the stock in July. The company then beat earnings estimates, and the shares also benefited from an improvement in investor sentiment toward Brazil. This is a good example of not giving up too soon on an idea, which I consider one of my strengths. I'll also mention an overweighted stake in Programmed Maintenance Services, an Australia-based company providing facilities maintenance, staffing and marine services. I thought this stock was undervalued when the period started. It hadn't recovered much after plunging near the beginning of 2016, when the broader market was reeling from concerns about oil prices and China's economy. In July, the stock shot higher after the company received a buyout offer from Japanese recruiting firm Persol Holdings. I exited the position soon after to nail down profits. The fund also was penalized for its overweighting in U.K.- based real estate brokerage Countrywide. The company's operations suffered due to several factors, including some slowing of the property market due to concerns about Brexit the U.K.'s June 2016 decision to depart from the European Union higher taxes and stiffer competition from online competitors. I believed the market's longer-term outlook here was too pessimistic and roughly doubled the fund's share count in Countrywide by period end. Increasing online competition also was part of the reason for the poor performance of Oriola, a Finlandheadquartered drug distributor. Further, the company encountered problems with the phase-in of new ERP (enterprise resource planning) software. I thought these were temporary challenges and increased the fund's overweighting in Oriola. Q: What's your outlook at period end, Sam Although I'm encouraged by signs of broad acceleration in global economies, I believe much of the improvement already is reflected in share prices. At this point, it's too soon to know if what we're seeing is temporary or the beginning of a stronger leg of global expansion. If the latter is true, we could see significantly higher interest rates before long, which I believe could be a headwind for the stock market. Above all, though, the extended period of steadily rising stock prices with minimal pullbacks makes me cautious. Such activity is unusual and typically is followed by a stretch of greater volatility. I would view any decent pullback as a buying opportunity, as I believe the longerterm outlook for many companies in my universe is quite favorable. However, now is not the time to throw caution to the wind, in my opinion. Q: What about detractors Petra Diamonds, where we had a large overweighting, was the fund's biggest relative detractor. I liked that diamonds are a consumer product for which there is growing demand and a constrained supply. That said, the company encountered grade (quality) issues at its largest mine and, as a result, had to make significant investments to upgrade its facilities. Those investments essentially were complete at period end, and the company now needs to prove it can consistently produce higher grades of diamonds. I considerably boosted our stake in Petra this period. 3 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.
10 LARGEST HOLDINGS Sam Chamovitz on his reasons for underweighting semiconductors: "Information technology was one of the fund's larger sector underweightings and the most damaging sector in terms of the fund's performance versus its benchmark. A lot of that drag came from below-index exposure to semiconductors, an industry in which the index posted a robust 71% return. "Semiconductors are a notoriously short-cycle group. As recently as early 2016, the market was quite negative about chip stocks and most other stocks tied to Apple's iphone. Fast-forward to October 2017, and many of these stocks have doubled or tripled in value. "We are weeks away from the launch of Apple's widely heralded iphone X, the 10 th anniversary product commemorating the introduction of the original iphone in 2007. "Of course, the iphone wasn't the only driver of semiconductor demand. Data centers, computer manufacturers, automakers and other sources have accounted for significant chip sales, too. "With that said, the combination of outsized returns and extremely positive sentiment about this group makes me cautious. When orders slow, as they surely will at some point, I think money could flow out of the group quite rapidly. "In technology, I'm currently more interested in special situations and firms I believe can deliver stable growth in a variety of economic circumstances. In my view, Taiwan-based United Microelectronics, a chip stock I purchased this period, is an interesting special situation. Long an also-ran in a market dominated by larger competitors, United Micro recently developed a plan to narrow its focus to a part of the market in which I think this firm can be quite successful." Holding Micro Focus International PLC John Wood Group PLC JSR Corp. LivaNova PLC S Foods, Inc. Iida Group Holdings Co. Ltd. McColl's Retail Group PLC PALTAC Corp. SITC International Holdings Co. Ltd. Mears Group PLC 10 Largest Holdings as a % of Net Assets Market Segment Information Technology Energy Materials Health Care Consumer Staples Consumer Discretionary Consumer Staples Consumer Discretionary Industrials Industrials 8.85% Total Number of Holdings 199 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. ASSET ALLOCATION Asset Class Portfolio Weight Portfolio Weight Six Months Ago International Equities 94.89% 94.40% Developed Markets 78.56% 82.25% Emerging Markets 16.33% 12.15% Tax-Advantaged Domiciles 0.00% 0.00% Domestic Equities 0.00% 0.36% Bonds 0.00% 0.00% Cash & Net Other Assets 5.11% 5.24% 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. 4 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.
MARKET-SEGMENT DIVERSIFICATION COUNTRY DIVERSIFICATION Market Segment Portfolio Weight Portfolio Weight Six Months Ago Industrials 19.84% 19.27% Consumer Discretionary 16.97% 17.15% Financials 11.65% 12.31% Information Technology 9.82% 8.51% Materials 9.54% 9.82% Consumer Staples 8.95% 9.35% Health Care 7.94% 8.64% Real Estate 6.14% 6.00% Energy 3.74% 3.40% Utilities 0.31% 0.30% Telecommunication Services 0.00% 0.00% Other 0.00% 0.00% Country Portfolio Weight Portfolio Weight Six Months Ago Japan 19.96% 20.06% United Kingdom 17.67% 17.21% Hong Kong 5.53% 5.76% Canada 5.23% 5.04% United States 5.20% 5.36% Australia 5.08% 4.91% Taiwan 4.18% 2.80% France 4.01% 3.53% Austria 3.18% 3.30% Netherlands 2.83% 2.93% Finland 2.73% 2.98% Brazil 1.86% 1.49% Korea (South) 1.84% 1.16% China 1.82% 1.06% Singapore 1.70% 1.56% Thailand 1.56% 1.11% Ireland 1.47% 2.05% Sweden 1.39% 1.42% Denmark 1.11% 1.16% Norway 1.09% 1.88% Mexico 1.00% -- FISCAL PERFORMANCE SUMMARY: Periods ending October 31, 2017 6 Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity International Small Cap Fund Gross Expense Ratio: 1.34% 2 13.32% 27.77% 26.18% 13.71% 14.38% 5.15% MSCI All Country World ex US Small Cap - Net MA 12.39% 25.97% 24.85% 9.80% 10.26% 3.45% Fidelity International Small Cap Fund Linked Index 12.39% 25.97% 24.85% 9.80% 11.93% 3.72% Morningstar Fund Foreign Small/Mid Blend 12.81% 27.16% 27.34% 10.26% 11.09% 3.64% % Rank in Morningstar Category (1% = Best) -- -- 68% 1% 1% 4% # of Funds in Morningstar Category -- -- 95 72 63 36 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 09/18/2002. 2 This expense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that fiscal year. This fund has a short term trading fee 2.00% for shares held less than 90 days. 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. Please see the last page(s) of this Q&A document for most-recent calendarquarter performance. 5 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.
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. FUND RISKS 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, all of which are magnified in emerging markets. The securities of smaller, less well-known companies can be more volatile than those of larger companies. IMPORTANT FUND INFORMATION Relative 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 12/18/17, the fund's redemption fee has been removed. 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 Relative 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. Fidelity International Small Cap Fund Linked Index represents the performance of the MSCI ACWI (All Country World Index) ex USA Small Cap Index since April 1, 2014, and the MSCI EAFE Small Cap Index prior to that date. MSCI All Country World ex USA Small Cap Index (Net MA Tax) is a market-capitalization-weighted index designed to measure the investable equity market performance for global investors of small cap stocks in developed and emerging markets, excluding the United States. Index returns are adjusted for tax withholding rates applicable to U.S. based mutual funds organized as Massachusetts business trusts. MSCI ACWI (All Country World Index) ex USA Index is a marketcapitalization-weighted index designed to measure the investable equity market performance for global investors of large and mid-cap stocks in developed and emerging markets, excluding the United States. 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 2017 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 6
Manager Facts Samuel Chamovitz is a portfolio manager at Fidelity Management & Research Company (FMR Co.), the investment advisor for Fidelity's family of mutual funds. Fidelity Investments is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and other financial products and services to more than 20 million individuals, institutions and financial intermediaries. In this role, Mr. Chamovitz manages Fidelity and Fidelity Advisor International Small Cap Fund. Additionally, he co-manages Fidelity Low-Priced Stock Fund. Prior to assuming his current responsibilities, Mr. Chamovitz was a small cap international analyst covering the industrials sector. Previously, he worked as a research analyst covering health care, real estate, and technology. During this time, Mr. Chamovitz focused on non-u.s. small cap stocks. Before joining Fidelity in 2007, Mr. Chamovitz held various roles at Putnam Investments, including equity analyst, assistant vice president of All Cap Growth, assistant vice president of Global Equity Research, and investment associate. He has been in the investments industry since 2002. Mr. Chamovitz earned his bachelor of arts degree in economics from the University of Pennsylvania. 7 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.
PERFORMANCE SUMMARY: Quarter ending December 31, 2017 1 3 Annualized 5 10 / LOF 1 Fidelity International Small Cap Fund Gross Expense Ratio: 1.25% 2 32.90% 15.21% 14.34% 6.71% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 09/18/2002. 2 This expense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that 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. 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. Information included on this page is as of the most recent calendar quarter. 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 02917. Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917. 2018 FMR LLC. All rights reserved. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee. 705646.7.0 Diversification does not ensure a profit or guarantee against a loss.