Fidelity Event Driven Opportunities Fund

Transcription

1 QUARTERLY FUND REVIEW AS OF MARCH 31, 2016 Fidelity Event Driven Opportunities Fund Investment Approach Fidelity Event Driven Opportunities Fund invests opportunistically in companies involved in corporate actions that can result in a mispricing of their stocks or other underlying securities. Historically, such securities have offered attractive returns over time and lower return correlations to the broad equity market. Event-driven securities often experience forced selling, and tend to have scarce research coverage and/or misunderstood business models, offering favorable entry points to invest in a potentially less-efficient area of the market. We believe that bottom-up, fundamental research and a disciplined, patient, opportunistic approach are the best means by which to identify and exploit these inefficiencies over time. By investing in these securities, we seek to outperform the Russell 3000 Index over a normal market cycle, with lower correlation. In managing the fund, we invest with a long-term time horizon and expect that short-term returns may be volatile. PERFORMANCE SUMMARY Cumulative 3 Month YTD 1 Year Annualized 3 Year 5 Year 10 Year/ LOF 1 Fidelity Event Driven Opportunities Fund Gross Expense Ratio: 1.18% % -1.55% -4.27% % Russell 3000 Index 0.97% 0.97% -0.34% 11.15% 11.01% 7.92% Morningstar Small Blend 0.56% 0.56% -8.14% 6.41% 6.74% -- % Rank in Morningstar Category (1% = Best) % # of Funds in Morningstar Category Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 12/12/ 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, advisor.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. FUND INFORMATION Manager(s): Arvind Navaratnam Trading Symbol: FARNX Start Date: December 12, 2013 Size (in millions): $ Morningstar Category: Small Blend 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 value of securities in companies involved in a special situation event can perform differently from the market as a whole and other types of stocks, and can be more volatile than that of other issuers. Fixed income investments entail interest rate risk (as interest rates rise bond prices usually fall), the risk of issuer default, issuer credit risk and inflation risk. Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds. The fund may have additional volatility because it can invest a significant portion of assets in securities of a small number of individual issuers. Not FDIC Insured May Lose Value No Bank Guarantee

2 Performance Review For the three months ending March 31, 2016, the fund returned -1.55%, lagging the 0.97% advance of the Russell 3000 Index. The inherently idiosyncratic nature of the corporate events in which we are invested did not unfold in our favor during the first quarter of The fact that the fund generally invests in smaller companies also proved challenging this quarter, as these types of stocks underperformed their larger peers. This investment strategy is based on investing in companies undertaking corporate actions that historically have outperformed the market in a meaningful way over the long term. The fund maintained its very high active share, or percentage of holdings that are not in the benchmark. Since we are shopping for investments based on corporate actions that are independent of the index's sector or size segments, we'll often identify opportunities outside of the benchmark, or take large positions in stocks that are small benchmark weightings. While the sector weightings tend to fluctuate over time, the size of the companies in which we invest generally falls firmly on the smaller side. As was the case last quarter, the fund's stake in Canada-based Valeant Pharmaceuticals International was its largest individual detractor by far. Valeant shares returned -74% for the quarter, falling sharply in mid-march after the company, known for acquiring drugs then raising their prices, said it may default on its debt and will not meet earnings targets. At quarter end, the company had yet to file financial statements for Valeant also announced an accounting error that it said would likely lead to financial restatements. The firm continues to face a U.S. Department of Justice investigation into its drug-pricing practices, and has drawn scorn from presidential candidates and members of Congress. While the stock's recent challenges have disappointed in terms of fund performance, we view this as a short-term setback. At period end, we continue to see Valeant as inexpensive on a price-toearnings basis, given the firm's organic volume growth and its returns on capital. It also has a strong portfolio of assets it can potentially sell. So, we added to the fund's position on weakness. LARGEST CONTRIBUTORS VS. BENCHMARK Progressive Waste Solution Ltd. (Canada) Outerwall, Inc. Journal Media Group, Inc. Average Contribution (basis points)* Industrials 1.10% 42 Discretionary Discretionary 1.22% % 29 The Brink's Co. Industrials 1.73% 27 Valmet Corp. Industrials 1.58% 23 * 1 basis point = 0.01%. Also hurting was our investment in SPX Flow, a global manufacturing and industrial equipment supplier, providing solutions primarily to energy firms. In September 2015, SPX Flow was spun-off from its parent company, SPX. SPX Flow shares plunged in February after the firm reported a 15% fourth-quarter revenue decline. The firm attributed its poor revenue result to the impact of the stronger U.S. dollar last quarter versus foreign currencies and low commodity prices. We sold SPX Flow by period end. Turning to positives, a stake in Canada-based Progressive Waste Solutions Limited was the fund's largest individual contributor during the recent quarter. The firm engages in waste collection, recycling, construction container rental and industrial waste management. The fund's position in Progressive gained 27%. In January, the stock jumped on the company's announcement that it has commenced the review of "strategic alternatives," including exploring a possible sale of the company. Weeks later, the stock jumped again when it was reported that Waste Connection would acquire Progressive. We subsequently sold the stock to take profit. The deal was not completed at quarter end. Journal Media, our largest holding this period, was another plus. In March 2015, E.W. Scripps and Journal Communications Media announced their intent to merge the two firms' broadcast assets and spin off both of their newspaper businesses into one company, Journal Media. Journal produces local newspapers in 14 markets across the United States. We found Journal Media's small-cap business attractive, as it had no debt, low capital expenditures and high book value relative to the share price. Additionally, the firm owned a large amount of real estate and separately, in our opinion, had vast opportunities for cutting costs. In October 2015, the stock popped after Gannett announced it would acquire Journal at a premium, and shares outperformed through the first quarter. In March, Journal Media shareholders approved the deal, which was not completed by period end. We sold much of our stake in Journal Media this quarter to take profit. LARGEST DETRACTORS VS. BENCHMARK Valeant Pharmaceuticals International, Inc. (United States) Average Contribution (basis points)* Health Care 1.28% -171 SPX Flow, Inc. Industrials 0.29% -44 Greenhill & Co., Inc. Financials 1.61% -34 Quantum Corp. Liberty TripAdvisor s, Inc. * 1 basis point = 0.01%. Information Technology Discretionary 0.56% % For definitions and other important information, please see Definitions and Important Information section of this Fund Review.

3 Outlook and Positioning We continue to invest in stocks of companies engaged in corporate events. As of quarter end, the fund predominantly is invested in stocks that have experienced a broad array of corporate actions, which historically have outperformed the market over the long term. Our view is that event-driven investing offers disciplined, patient investors an opportunity to take advantage of mispriced securities that can result from spinoffs, bankruptcy restructurings and other special situations. These investments require a patient approach because it often takes time for the opportunities within these securities to materialize. Furthermore, some of these opportunities also are accompanied by limited research coverage and forced selling pressure, which we believe can increase the probability of investment success. Over the long term, corporate actions tend to be less sensitive than other investment types to macroeconomic conditions like inflation, monetary policy or interest rates. Corporate events occur among all segments of investable securities; they are not specific to any geography, particular sector, market capitalization, investment style such as growth or value, or to any point in the business cycle. The fund continues to invest in companies of any market cap, size or style, based on wherever a particular corporate event or special situation occurs. Because we recently have found more attractive investment opportunities in the small- to mid-cap segment, the fund's average market cap as of quarter end continues to be significantly lower than that of the benchmark. The fund's sector allocations at period end continue to look very different from the benchmark. We are invested in stocks involved in corporate events that we think are fundamentally attractive, regardless of their sector. At the end of the quarter, the fund's largest sector overweightings are in consumer discretionary, consumer staples and industrials, whereas its biggest underweightings are in information technology, health care and financials. Because the fund constituents are entirely driven by available events within the pre-selected universes, these sector exposures do not yield too much insight into our decision making. MARKET-SEGMENT DIVERSIFICATION Portfolio Index Change From Prior Quarter Discretionary 31.36% 13.63% 17.73% 0.05% Industrials 14.25% 10.91% 3.34% -1.78% Staples 13.85% 9.18% 4.67% 0.77% Financials 11.53% 17.24% -5.71% 1.57% Information Technology 6.67% 20.04% % -2.16% Health Care 6.51% 13.69% -7.18% 0.03% Energy 3.03% 6.13% -3.10% -0.05% Materials 1.85% 3.23% -1.38% -0.31% Telecommunication Services 0.00% 2.48% -2.48% -0.30% Utilities 0.00% 3.49% -3.49% -0.42% Other 0.00% 0.00% 0.00% 0.00% CHARACTERISTICS Valuation Portfolio Index Price/Earnings Trailing 24.9x 19.3x Price/Earnings (IBES 1-Year Forecast) 16.4x 17.1x Price/Book 1.6x 2.9x Price/Cash Flow 9.9x 11.9x Return on Equity (5-Year Trailing) 8.7% 17.2% Growth Sales/Share Growth 1-Year (Trailing) -0.6% 3.2% Earnings/Share Growth 1-Year (Trailing) -19.7% 2.4% Earnings/Share Growth 1-Year (IBES Forecast) 29.2% 13.0% Earnings/Share Growth 5-Year (Trailing) % 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.

4 LARGEST OVERWEIGHTS BY HOLDING Universal Corp. Staples 11.23% Journal Media Group, Inc. 8.04% CME E-mini S&P 500 Index Contracts Futures and Options 8.04% Exterran Corp. Energy 3.03% Time, Inc. 2.99% LARGEST UNDERWEIGHTS BY HOLDING Apple, Inc. Information Technology -2.85% Microsoft Corp. Information Technology -2.03% Alphabet, Inc. Class A Information Technology -1.99% Exxon Mobil Corp. Energy -1.59% Johnson & Johnson Health Care -1.36% 10 LARGEST HOLDINGS Universal Corp. Journal Media Group, Inc. Exterran Corp. Time, Inc. Mondelez International, Inc. TopBuild Corp. Outerwall, Inc. The Brink's Co. The Madison Square Garden Co. Triumph Group, Inc. 10 Largest s as a % of Net Assets Total Number of s 59 Staples Energy Staples Industrials Industrials 39.95% 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. s do not include money market investments. ASSET ALLOCATION Asset Class Portfolio Index Change From Prior Quarter Domestic Equities 93.81% 96.77% -2.96% 3.36% International Equities 4.60% 3.23% 1.37% -3.77% Developed Markets 4.60% 2.99% 1.61% -3.79% Emerging Markets 0.00% 0.23% -0.23% 0.02% Tax-Advantaged Domiciles 0.00% 0.01% -0.01% 0.00% Bonds 0.00% 0.00% 0.00% 0.00% Cash & Net Other Assets 1.59% 0.00% 1.59% 0.41% 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. 3-YEAR RISK/RETURN STATISTICS Portfolio Index Beta Standard Deviation Sharpe Ratio Tracking Error Information Ratio R-Squared For definitions and other important information, please see Definitions and Important Information section of this Fund Review.

5 Definitions and Important Information 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-Year 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-Year 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. 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. 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. 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. 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. Russell 3000 Index is a market capitalization-weighted index designed to measure the performance of the 3,000 largest companies in the U.S. equity market. 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 2016 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 5

6 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 adjusted performance calculated by dividing the fund's excess returns (fund's average monthly returns minus the average monthly return of the Salomon Smith Barney 3-Month T-Bill Index) by the standard deviation of those returns. The higher the ratio, the better the fund's return per unit of risk. 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