Fidelity Overseas Fund

Transcription

1 QUARTERLY FUND REVIEW AS OF SEPTEMBER 30, 2017 Fidelity Overseas Fund Investment Approach Fidelity Overseas Fund is a diversified international equity strategy that seeks long-term capital growth. The fund's philosophy centers around owning high-quality companies purchased at attractive prices that can outperform the market over the long term, given their ability to compound value through the re-investment of earnings back into the business at attractive returns. By focusing on buying these companies at inexpensive valuations, we attempt to build in an inherent margin of safety in the investment. We particularly favor firms with unique business models that are able to generate sustainably high returns on capital through a full business cycle and are trading at a discount to their intrinsic (fair) value based on several conservative valuation frameworks. We strive to uncover these companies through in-depth fundamental analysis, working in concert with Fidelity's global research team, as well as by leveraging the fund manager's own independent analysis. PERFORMANCE SUMMARY Cumulative 3 Month YTD 1 Year Annualized 3 Year 5 Year 10 Year/ LOF 1 Fidelity Overseas Fund Gross Expense Ratio: 1.03% % 25.44% 20.03% 9.98% 11.80% 1.96% MSCI EAFE (Net Massachusetts tax) 5.43% 20.18% 19.34% 5.23% 8.55% 1.50% Morningstar Fund Foreign Large Growth 6.51% 25.37% 18.47% 6.96% 8.81% 2.25% % Rank in Morningstar Category (1% = Best) % 8% 8% 58% # of Funds in Morningstar Category FUND INFORMATION Manager(s): Vincent Montemaggiore Trading Symbol: FOSFX Start Date: December 04, 1984 Size (in millions): $7, Morningstar Category: Fund Foreign Large 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, all of which are magnified in emerging markets. 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 12/04/ 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 The fund's Retail Class shares returned 5.76% in the third quarter, modestly better than the 5.43% return of the benchmark MSCI EAFE. Foreign stocks in developed markets were aided by a declining U.S. dollar, which bolstered the returns of overseas stocks quoted in greenbacks. At the same time, yearover-year economic growth in the eurozone was roughly comparable to that of the U.S., and investors also were attracted to the more-stimulative monetary policy in the European Union and Japan. Versus the benchmark, the fund was helped primarily by stock selection, with sector weightings providing a small boost. Stock picking in the industrials and financials sectors was particularly additive. From a geographical perspective, our picks in Japan contributed most to relative performance. At the stock level, a non-index stake in Germany-based online payment services provider Wirecard helped most. The fund's stake here rose about 44%, as the company's first-half financial results included a 38% increase in transaction volume. The company also appeared to be progressing well with its integration of Citigroup's Prepaid Card Services. Its share price also benefited from deal activity in the online payment services space, the most recent example being a private equity buyout of U.K.-based Paysafe. Another out-of-benchmark holding that worked out well was Japan-based Outsourcing, a temp staffing company that benefited from a tight labor market in that nation. Additionally, a 2013 law mandating that companies cannot employ temporary workers for more than five years without converting them to fulltime status with the associated benefits and employment security that full-time work entails drove increased business to Outsourcing as the five-year anniversary for many temps approached. Outsourcing shares returned 43% for the three months. We'll also mention Israel's Teva Pharmaceutical Industries, a weak-performing index stock the fund didn't own. The company's shares, which have suffered a multi-quarter sell-off, suffered a particularly nasty spill in August after Teva reported disappointing second-quarter financial results hampered mainly by a "goodwill impairment charge" (effectively, a net loss) of $6 billion related to its 2016 acquisition of Actavis Generics. Teva also cut its dividend by 75%. The stock returned -47% for the quarter. On the negative side, our picks in the consumer discretionary sector weighed on relative performance, along with positioning in materials. By country, positioning in the U.K. was a modest negative. Among individual holdings, the fund's biggest relative detractor was Netherlands-based Royal Dutch Shell. We were penalized for not owning this index name, given its robust 16% gain the past three months. The stock benefited late in the quarter from news of lower crude-oil supplies in the U.S. and a subsequent price surge for the global commodity. An additional boost came from the firm's better-than-expected second-quarter earnings, lifted by healthy results in its refining and chemicals businesses. The stock of Dublin-based Medtronic returned -11% the past three months, rendering the fund's non-index position here untimely. The firm is a global leader in implantable medical devices such as defibrillators, pacemakers, brain and nerve stimulators, and related equipment. Investors and the company's CEO voiced worry about U.S. congressional health care wrangling, given potential losses in insurance coverage. Other negatives included currency translation and shifting risk preferences. Medtronic's August report of quarterly revenue $7.4 billion fell slightly short of analyst estimates, offset by completion of its $6 billion sale of a non-core supply line, among other factors. Performance also suffered due to an out-of-benchmark stake in Melrose Industries, a London-based turnaround specialist. The company a longtime favorite of ours buys, improves and then sells industrial assets, and has boasted a high return on shareholder capital over many years. Most of the value added came from improving the margins of the acquired businesses. Unlike with some private-equity firms, though, leverage is not a meaningful driver of returns a positive, in our book. This quarter, the stock sold off after Melrose reported first-half results marred by a warning that Brush, an electrical equipment business acquired in 2008, continued to struggle with weak demand. That said, Brush generates less than 10% of Melrose's revenue, and we remained confident in the firm's prospects. 2 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.

3 LARGEST CONTRIBUTORS VS. BENCHMARK Wirecard AG Information Technology Average Contribution (basis points)* 0.46% 15 Outsourcing, Inc. Industrials 0.44% 14 Nabtesco Corp. Industrials 0.60% 12 Teva Pharmaceutical Industries Ltd. sponsored ADR Kingspan Group PLC (United Kingdom) * 1 basis point = 0.01%. Health Care -0.15% 12 Industrials 0.59% 11 LARGEST DETRACTORS VS. BENCHMARK Royal Dutch Shell PLC Class A (United Kingdom) Average Contribution (basis points)* Energy -1.63% -17 Medtronic PLC Health Care 0.64% -12 Reckitt Benckiser Group PLC 0.69% -11 Melrose Industries PLC Industrials 0.69% -11 ConvaTec Group PLC Health Care 0.55% -10 * 1 basis point = 0.01%. 3 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.

4 Outlook and Positioning There were no major changes in the fund's positioning this quarter. Positioning continued to be driven mainly by bottom-up stock picking rather than top-down decisions. With that said, information technology remained the fund's largest sector overweighting at quarter end. This is an area where we continue to find a plentiful supply of companies we consider high-quality trading at reasonable valuations. We also had an overweighting in industrials at quarter end. On the flip side, we chose to completely avoid the utilities sector this quarter. Telecommunication services, real estate and energy also were meaningful underweightings. On a country basis, the fund was overweight the U.K. this quarter. We found particular value in companies with significant exposure to the domestic U.K. economy, as Brexit-related fear depressed many stocks unreasonably so, we thought, in a number of cases. Our focus here was on resilient businesses that we believed could outperform even in a risk-off environment, and we avoided most cyclical stocks. Lesser overweightings included Ireland and Sweden. Our out-of-benchmark stake in the U.S. consisted of roughly 5% of net assets at quarter end. Although this is primarily a foreignstock fund, the U.S. offers many fine global companies. Japan and Australia were our two largest country underweightings at quarter end. In Japan, we have found it challenging to identify companies that meet our standards for quality, value and growth potential. We have been able to identify high-quality companies, but most of them are priced accordingly. Alternatively, most firms with compelling valuations lack the quality we require. In Australia, the most interesting investments tend to be too pricey, in our opinion. The fund's largest holding at quarter end was Swiss food and beverage company Nestle. In the current environment of elevated stock valuations and sluggish economic growth, we favor a mix of stable-growth firms such as Nestle and companies we believe might offer faster growth but also entail more risk. Additionally, we like Nestle's plans to jettison some of its slower-growing businesses and invest in e-commerce and other initiatives to boost earnings growth. S&P Global, a provider of ratings, benchmarks, analytics and data to financial markets around the world, was the fund's largest nonbenchmark position at period end. The stock hit another all-time high this quarter. We like the company's ongoing shift to focus on its core, high-margin businesses. Elsewhere in the financial sector, we were increasing our exposure to insurance stocks this quarter as we gained better appreciation of certain niche insurance providers with better pricing power than more traditional peers. Finally, we sold out of several Italy-based small- and mid-cap stocks that had appreciated beyond our price targets. MARKET-SEGMENT DIVERSIFICATION Change From Prior Quarter Financials 21.22% 21.46% -0.24% -0.05% Industrials 18.26% 14.68% 3.58% 0.77% 12.43% 11.22% 1.21% -0.37% Information Technology 12.12% 6.27% 5.85% 0.34% Health Care 11.49% 10.30% 1.19% 0.01% Consumer Discretionary 10.72% 12.20% -1.48% -0.74% Materials 6.74% 7.85% -1.11% 0.43% Energy 2.59% 5.05% -2.46% -0.21% Telecommunication Services 1.02% 4.07% -3.05% 0.16% Real Estate 0.54% 3.54% -3.00% 0.13% Utilities 0.00% 3.35% -3.35% 0.05% Other 0.00% 0.00% 0.00% 0.00% REGIONAL DIVERSIFICATION Region Change From Prior Quarter Europe 66.32% 64.82% 1.50% -0.24% Japan 18.06% 23.03% -4.97% 0.49% United States 8.02% 0.00% 8.02% -0.90% Asia-Pacific ex Japan 4.17% 12.12% -7.95% 0.21% Emerging Markets 2.87% 0.03% 2.84% 0.45% Canada 0.55% 0.00% 0.55% -0.02% Other 0.01% 0.00% 0.01% 0.01% 3-YEAR RISK/RETURN STATISTICS Beta Standard Deviation 11.39% 12.28% Sharpe Ratio Tracking Error 3.67% -- Information Ratio R-Squared For definitions and other important information, please see Definitions and Important Information section of this Fund Review.

5 LARGEST OVERWEIGHTS BY HOLDING S&P Global, Inc. Financials 0.89% Amadeus IT SA Class A Information Technology 0.87% Deutsche Post AG Industrials 0.85% KBC Groep NV Financials 0.84% Nordea Bank AB Financials 0.81% LARGEST UNDERWEIGHTS BY HOLDING Royal Dutch Shell PLC Class A Energy -1.74% (United Kingdom) HSBC s PLC (United Kingdom) Financials -1.38% Novartis AG Health Care -1.32% Roche AG (participation certificate) Health Care -1.25% Toyota Motor Corp. Consumer Discretionary -1.08% ASSET ALLOCATION Asset Class Change From Prior Quarter International Equities 91.79% % -8.21% 0.77% Developed Markets 88.92% 99.97% % 0.32% Emerging Markets 2.87% 0.03% 2.84% 0.45% Tax-Advantaged Domiciles 0.00% 0.00% 0.00% 0.00% Domestic Equities 5.35% 0.00% 5.35% -0.27% Bonds 0.00% 0.00% 0.00% 0.00% Cash & Net Other Assets 2.86% 0.00% 2.86% -0.50% 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. 10 LARGEST HOLDINGS Nestle SA (Reg. S) Bayer AG Unilever NV (NY Reg.) British American Tobacco PLC (United Kingdom) SAP SE Total SA Sanofi SA Prudential PLC Deutsche Post AG Reckitt Benckiser Group PLC 10 Largest s as a % of Net Assets Health Care Information Technology Energy Health Care Financials Industrials 13.54% Total Number of s 172 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. CHARACTERISTICS Valuation Price/Earnings Trailing 21.9x 18.6x Price/Earnings (IBES 1-Year Forecast) 17.4x 15.0x Price/Book 2.8x 1.8x Price/Cash Flow 13.0x 8.8x Return on Equity (5-Year Trailing) 13.0% 9.1% Growth Sales/Share Growth 1-Year (Trailing) 3.4% -1.3% Earnings/Share Growth 1-Year (Trailing) 16.1% 8.7% Earnings/Share Growth 1-Year (IBES Forecast) 30.4% 30.5% Earnings/Share Growth 5-Year (Trailing) 9.3% 4.0% 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.

6 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-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. 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 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. 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. MSCI EAFE (Net MA Tax) is a market-capitalization-weighted index that is designed to measure the investable equity market performance for global 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. 6

7 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