Fidelity Event Driven Opportunities Fund

Transcription

1 Fidelity Event Driven Opportunities Fund Key Takeaways The fund returned -1.89% for the 12 months ending April 30, 2016, trailing the -0.18% result of the benchmark Russell 3000 Index. Versus the benchmark, stock selection hurt the fund's performance, as did the fund's inherent small-cap bias, as smallcaps lagged their large-cap peers this period. Among individual stocks, Canada-based Valeant Pharmaceuticals International was the largest detractor versus the benchmark, while a large stake in Journal Media Group was the fund's most significant contributor. Despite the underperformance this period, Portfolio Manager Arvind Navaratnam remains focused on the long term. He believes investments in firms engaged in corporate actions will outperform the market over time. MARKET RECAP The S&P 500 index gained 1.21% for the 12 months ending April 30, Largely range-bound until mid-august, U.S. stocks suffered a steep, latesummer decline on concern about an economic slowdown in China. The market recovered in October, lifted by the U.S. Federal Reserve's decision to delay raising near-term interest rates until mid-december, as well as a rate cut in China and economic stimulus in Europe. But continued oil-price weakness and U.S.-dollar strength pushed the S&P 500 to its worst January since 2009, followed by a volatile but ultimately flattish February, then a sharp rebound in March driven by U.S. jobs gains and perceived softening in the Fed's rate-tightening posture. April brought minimal change. For the full period, growth-oriented and larger-cap stocks fared better overall than value and smaller-cap complements. Performance was split, as five of 10 S&P 500 sectors gained ground, with a wide gap separating leaders from laggards. Investor demand for more-stable and higher-yielding investments boosted traditionally defensive, dividend-rich groups such as utilities (+14%), telecommunication services (+10%) and consumer staples (+11%) the latter also buoyed by rising wages and low inflation. Meanwhile, energy (-14%) foundered amid commodity weakness that also hurt materials (-4%). Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A An interview with Portfolio Manager Arvind Navaratnam Fund Facts Trading Symbol: Arvind Navaratnam Portfolio Manager FARNX Start Date: December 12, 2013 Size (in millions): $ 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. Q: Arvind, how did the fund perform for the 12 months ending April 30, 2016 The fund underperformed its benchmark this year, as the inherently idiosyncratic nature of the corporate events in which we are invested largely did not unfold in our favor. In addition, the fund's small-cap bias hurt this period as largecap peers, which dominate the fund's benchmark, outperformed. Results were better versus our peer average. The fund's performance the past year was in the top 20% among the 768 funds in the Morningstar Small Blend Category. Q: What is event-driven investing, and how do you manage the fund 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. Often these corporate actions are accompanied by limited research coverage and forced selling pressure, which I believe can increase the probability of investment success. In the case of an index delisting, for example, passive capital following the index is forced to exit the security without regard to the intrinsic value of the business. These are the types of environments to which I gravitate. I start by identifying situations that can lead to a security being mispriced, and then I begin the analytical work: examining a company's upside and downside scenarios, with a focus on its downside and the stock's risk/reward profile. I get interested if there's a big disconnect between where a stock is trading today and what I think is the fundamental future value of that business a few years down the road. I concentrate the fund's capital on our best ideas where I believe there is strong potential return and limited likelihood of a permanent loss of capital. Q: What are some attributes of the fund Because of the forced selling pressure unique to corporate events, the fund's return stream is meaningfully less correlated with the market than many other equity mutual 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

3 funds, regardless of economic conditions. Additionally, the fund typically has very high active share, meaning its composition differs meaningfully from the Russell 3000 Index. This index typically represents about 98% of the U.S. equity market. Since we are shopping in the rarefied universe of corporate actions, which, again, occur independent of the index's sector or size, many investment opportunities are outside of the benchmark. Q: Which individual holdings disappointed most the past 12 months Our stake in Canada-based Valeant Pharmaceuticals International was the fund's largest detractor versus the benchmark. The firm's rapid growth of the past few years was predicated on its management team's aggressive acquisition strategy. Unfortunately for the fund, the stock underperformed during the period, as shares of Valeant tumbled in October after short-selling research firm Citron accused Valeant of filing fake invoices with one of its business partners in order to show increased revenue. Then, in mid-march, the firm said it may default on its debt and will not meet earnings targets. Valeant also announced an accounting error that it said would likely lead to financial restatements. Despite the stock's poor performance, I continued to view Valeant as cheap on a price-to-earnings basis given the firm's organic growth and its returns on capital with strong assets it can potentially sell. I also remained confident in Valeant's growth prospects over time, so I held on to our position. Another disappointment was technology storage and data protection firm Quantum. Quantum shares slid in July after the firm warned of lower-than-expected revenue for its fiscal first quarter, relative to its previous forecast. The firm also reported lower-than-expected revenue due to general weakness in the tech storage market. The stock continued to fall, tumbling further in January after Quantum reported third-quarter revenue slightly below guidance and a yearover-year decline in its top-line growth. However, the company's next-generation product appeared to be growing nicely and I was attracted to the stock's low valuation multiple, so I added to the fund's stake in early Q: What else influenced the fund's result Among individual stocks, the fund's large stake in Journal Media Group was by far its biggest contributor. 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. I continued to find 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 has vast opportunities for cost-cutting, and I thought its cash flow was dramatically understated. Thus, I continued to build on the fund's position, making Journal Media easily our largest holding this period. This stance helped when the stock popped in October after media firm Gannett announced it would acquire Journal at a premium. In March, Journal Media shareholders approved the deal, which was completed in April. The fund's stake in Gannett also was a contributor. I established this position in July after Gannett spun off its publishing business, which retained its name, and created TEGNA, which operates television stations and websites, including Cars.com and Career Builder. Gannett is the largest publisher of newspapers in the United States. Q: Where else did you find success A sizable stake in tobacco-leaf producer Universal was a notable positive. I found Universal attractive due to its low stock valuation, which we thought would improve as the industry's supply/demand cycle normalized. I began building a stake late in 2014, and it was the fund's largest position by the end of April Despite a drop in August, the stock rebounded and advanced 20% for the full period. Q: Any final thoughts for shareholders I want to emphasize that my main goal is to deliver strong returns with lower correlation over long periods of time. I think it's important to remember that the fund's investment strategy is geared toward a long-term investment horizon. Although past performance is no guarantee of results, the corporate actions in which the fund typically invests historically have produced meaningful market-beating results over a full market cycle. Thus, I remain patient in the short term, focusing on making investments I think can produce value over the long term. And as a fellow shareholder with a significant personal investment in the strategy, I'm proud to say that we're in this together. 3 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

4 LARGEST CONTRIBUTORS VS. BENCHMARK Arvind Navaratnam on how he seeks to manage risk: "Risk monitoring is a key component of my investment strategy. One of the ways I keep an eye on risk is by studying my mistakes, along with those of very successful special-situations investors, to better recognize and, hopefully, escape the patterns that may lead to errors over time. By examining permanent capital losses and what led to them, I have built a checklist that, combined with some hard-won experience, I think may help me limit errors over time and thus better serve fund shareholders. "From a portfolio construction standpoint, I diversify the fund across event types and, importantly, only invest post-event, meaning I do not guess as to which events will occur. Investing in a corporate action after the fact may result in less upside, but I think it creates less uncertainty a tradeoff I find prudent. Additionally, I only invest in names in which I have very high conviction. These are companies that have earned my confidence and where I've done the legwork talking to their customers, suppliers and competitors and where I believe Fidelity has a strong research edge. "The fund can invest up to 20% of assets in foreign securities and up to 10% in debt instruments. And while the fund imposes no limitation on size categories, I typically don't invest in firms that fall below a market capitalization of $300 million. "I do look for opportunities in certain non-u.s. developed markets. Yet at period end, I feel less certain about many of those potential investments. It is much easier for me to meet with U.S.-based firms, and I tend to find financial transparency here." Holding Journal Media Group, Inc. Market Segment Average Relative Relative Contribution (basis points)* 10.75% 519 Universal Corp. Staples 9.45% 161 Apple, Inc. Outerwall, Inc. Information Technology -2.97% % 63 MedAssets, Inc. Health Care 0.39% 45 * 1 basis point = 0.01%. LARGEST DETRACTORS VS. BENCHMARK Holding Valeant Pharmaceuticals International, Inc. (United States) Quantum Corp. Market Segment Average Relative Relative Contribution (basis points)* Health Care 1.06% -198 Information Technology 0.68% -96 Ashford, Inc. Financials 0.79% -55 Halyard Health, Inc. Health Care 0.95% -47 Greenhill & Co., Inc. Financials 1.21% -46 * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class Portfolio Portfolio Six Months Ago Domestic Equities 95.54% 92.58% International Equities 1.95% 7.13% Developed Markets 1.95% 7.13% Emerging Markets 0.00% 0.00% Tax-Advantaged Domiciles 0.00% 0.00% Bonds 0.00% 0.00% Cash & Net Other Assets 2.51% 0.29% 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.

5 MARKET-SEGMENT DIVERSIFICATION 10 LARGEST HOLDINGS Market Segment Portfolio Portfolio Six Months Ago 25.18% 29.80% Staples 14.88% 14.22% Industrials 14.52% 14.83% Financials 13.73% 11.38% Health Care 9.61% 7.21% Information Technology 7.09% 15.74% Energy 3.29% 0.96% Materials 0.91% 2.19% Telecommunication Services 0.00% 0.00% Utilities 0.00% 0.00% Other 0.00% 0.00% Holding Universal Corp. Market Segment Staples Portfolio Portfolio Six Months Ago 11.82% 9.81% Exterran Corp. Energy 3.29% -- Time, Inc. Mondelez International, Inc. Staples 3.22% 0.83% 3.06% 0.91% Triumph Group, Inc. Industrials 3.04% 1.01% TopBuild Corp. Outerwall, Inc. The Madison Square Garden Co. 3.00% 0.84% 2.97% % 0.94% The Brink's Co. Industrials 2.59% 0.92% Kimball Electronics, Inc. Information Technology 2.46% 0.85% 10 Largest Holdings as a % of Net Assets 38.36% 33.84% Total Number of Holdings 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. FISCAL PERFORMANCE SUMMARY: Periods ending April 30, Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity Event Driven Opportunities Fund Gross Expense Ratio: 1.18% % 0.36% -1.89% % Russell 3000 Index 0.06% 1.59% -0.18% 10.77% 10.50% 7.92% Morningstar Small Blend -1.06% 1.84% -5.31% 7.01% 6.51% -- % 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 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, 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. 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.

6 Definitions and Important Information 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. 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. charges. 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. 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. 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. S&P 500 Index is a market capitalization weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. 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 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 6

7 Manager Facts Arvind Navaratnam is a portfolio manager at Fidelity Management & Research Company (FMRCo), 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, he manages Fidelity and Fidelity Advisor Event Driven Opportunities Fund, which focuses on special situations. Before joining Fidelity in 2010, he worked as a private equity associate at Texas Pacific Group (TPG) from 2006 to 2008, and as a private equity analyst at Rho Capital Partners from 2004 to He has been in the investments industry since Arvind earned his bachelor of arts degree in economics & philosophy and his bachelor of science degree in industrial engineering-operations research from Columbia University, as well as his master of business administration degree from Harvard Business School. 7 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

8 PERFORMANCE SUMMARY: Quarter ending June 30, Annualized 5 10 / LOF 1 Fidelity Event Driven Opportunities Fund Gross Expense Ratio: 1.14% % % 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 12/12/ 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, 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. 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 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 Diversification does not ensure a profit or guarantee against a loss.