Fidelity Global Equity Income Fund

Transcription

1 Fidelity Global Equity Income Fund Key Takeaways For the semiannual reporting period ending April 30, 2018, the fund's Retail Class shares returned 0.49%. This result underperformed the 3.76% return of the benchmark MSCI ACWI (All Country World Index) Index. Manager Ramona Persaud's bias toward global value stocks meaningfully detracted, as many investors continued to gravitate toward names with more growth potential. A few stock-specific situations particularly hurt performance, including U.K. software & services firm Micro Focus International, the fund's largest individual detractor this period. An out-of-benchmark stake in Conviviality, a U.K.-based alcoholic beverage retailer and supplier, also detracted, as did not owning index component Amazon.com. Conversely, several of the fund's energy names outperformed as oil prices improved due to tighter supply-and-demand conditions. Integrated energy company ConocoPhillips contributed more than any other individual fund holding. Ramona believes peaking economic conditions, the removal of extraordinary monetary policy, robust employment and expanding profit margins all portend increased volatility and the later stages of the market cycle. As a result, she expects to position the fund more conservatively, by looking more closely at sectors she thinks exhibit downsideprotection characteristics, such as telecommunication services and utilities, as well as by increasing the fund's cash position. MARKET RECAP The MSCI ACWI (All Country World Index) Index gained 3.76% for the six months ending April 30, Manufacturing and export activity plus a generally weak U.S. dollar aided international stocks early on, but global markets reversed sharply in February amid fear that rising inflation and potential economic overheating would prompt the U.S. Federal Reserve to pick up the pace of interest rate hikes. Markets lost further ground in March on global-trade concerns after the U.S. announced tariffs on Chinese imports. Among sectors, on-the-rise oil prices helped make energy (+11%) the top gainer. Consumer discretionary (+9%) also stood out. Laggards included the defensive utilities (-1%), consumer staples (-1%) and telecommunication services (+1%) sectors, as well as real estate (+1%). Industrials (+1%) saw weakness among commercial & professional services stocks. Regionally, yen strength helped bring Japan (+5%) into line with the rest of the Asia-Pacific (+5%) group. Continental Europe (+2%) lagged the export-led recovery in the U.K. (+6%) as investors reacted to local elections and global trade tension. Canada (-1%) was nipped by commodity-price volatility and NAFTA worries. The U.S. finished roughly in line with the MSCI index. Emerging markets (+5%) were supported by broadly stable macroeconomic trends among several group constituents. Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A An interview with Manager Ramona Persaud Fund Facts Trading Symbol: Ramona Persaud Manager FGILX Start Date: May 02, 2012 Size (in millions): $77.26 Investment Approach Fidelity Global Equity Income Fund is a diversified global equity strategy that seeks reasonable income. In pursuing this objective, the fund also will consider the potential for capital appreciation. The fund seeks a yield for its shareholders that exceeds the yield on the securities comprising the MSCI ACWI (All Country World Index) Index. We believe in mean reversion, a value-drive philosophy, and investment duration as a competitive advantage. In our bottom-up investment process, we focus on higherquality firms, which enhances downside protection over time. Q: Ramona, how did the fund perform for the six months ending April 30, 2018 The fund's Retail Class shares gained 0.49%, underperforming the 3.76% return of the benchmark, while also lagging our peer group average. The overarching theme the past six months was the continued wide underperformance of global value stocks versus growthier names. This was a challenging backdrop for the fund, given its focus on value- and quality-oriented stocks and sectors. A few specific stocks particularly hurt performance, including U.K. software & services firm Micro Focus International, by far the fund's largest detractor. Looking back a little further, the fund gained 10% for the trailing year, again underperforming both its benchmark and peer average. Q: What more can you tell us about individual detractors, including Micro Focus Micro Focus International is a provider of software designed to manage customers' maturing software infrastructure. Its shares returned about -51% the past six months, significantly declining in mid-march after the firm announced the resignation of CEO Chris Hsu and issued a profit warning as it struggled to integrate its acquisition of software assets from Hewlett Packard Enterprise, completed in September. I think the market is extraordinarily skittish about companies that lack organic growth another manifestation of the divergence of growths stocks versus value-oriented names. An out-of-benchmark stake in U.K.-based alcoholic beverage retailer and supplier Conviviality also hurt. Conviviality, which also grew by acquisition, issued two profit warnings in March, which it blamed on an accounting error and weakening profit margins. The firm also did not budget for a tax bill due at the end of March, which caused management to try to resolve this issue by April in order to stave off bankruptcy. Micro Focus and Conviviality held a higher-than-usual amount of debt as each company worked to absorb their 2 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

3 respective deals. I viewed this as a normal part of the acquisition-integration process in the recent era of cheap debt funding, as companies generally attempt to reduce leverage as deal synergies flow through. I'll note that both firms fit my criteria for quality, to the extent that their historic and projected returns on capital were above average. Overall, I'm looking for stocks with below-market valuations, along with a higher quality profile, meaning those with a high return on invested capital or equity, as driven by longterm sustainable competitive advantages. Q: What other stocks hurt performance Fund holding British American Tobacco declined on concerns that the U.S. Food and Drug Administration (FDA) would move to restrict nicotine levels and flavors in tobacco products. I added to this position by period end. Global tobacco appeals to me, as stocks in this segment appear fairly cheap and most still produce healthy free cash flow a key component of my investment philosophy. Not owning index component Amazon.com also cost the fund versus the index, as shares of the internet retailer gained about 42%. Amazon doesn't pay dividends and its stock wasn't obviously cheap to me, so we did not own this name. Amazon continued to take market share from overall retail sales this period, and its stock hit a record high in April after the company released strong quarterly profits, owed to Amazon Web Services, as well as Amazon's emerging advertising business. Elsewhere, the fund's overweighting in Qualcomm proved detrimental. In a highly unusual move, President Trump signed an executive order in March blocking the wireless equipment maker's proposed $117 billion acquisition by Broadcom, negating a premium for Qualcomm holders. Qualcomm also faced other headwinds, including a $1.2 billion fine by the European Union for allegedly paying Apple to only use Qualcomm chips in its devices, as well as an ongoing, well-publicized disagreement with Apple regarding licensing fees. period, such as ConocoPhillips (+29%), Suncor Energy (+14%), and Statoil (+29%). Of these holdings, ConocoPhillips contributed more than any other fund position. Investors rewarded the company for its focus on creating value for investors and its capital discipline, including the sale of land assets in Western Canada that helped reduce debt and return capital to shareholders. Notably, the stock surged in April on higher oil prices, new discoveries in Alaska and stronger-thananticipated first-quarter results, including news that the company produced much more oil than expected. I modestly reduced the fund's position shortly after these announcements due to valuation concerns. An overweighing in Canada's Constellation Software also helped versus the index. This firm specializes in software developed for, and customized to, the needs of specific industries. Shares of Constellation advanced 26%, as the firm posted better-than-expected quarterly results announced in April, and Constellation continued with its growth-by-acquisition business strategy. Q: What's your outlook as of April 30, Ramona An upward trend for leading economic indicators, the removal of extraordinary monetary policy, robust employment and expanding profit margins led me to believe we should expect peaking economic conditions in the near- to mid-term. Therefore, I'm focused on positioning the fund in a way I think is more conservative, partly by materially adding to the fund's cash position, due to broad-market valuations I see as extended versus the historical long-term average. In terms of opportunities, we are looking closely at names in the utilities and telecommunication services sectors for their downside-protection characteristics, but only where I think valuation gives us reasonable not necessarily great odds of success. Q: Versus the MSCI index, which stocks were key contributors The fund's overweighting in energy added value, and to a lesser extent, so did choices in this sector. Last year, I used market pessimism around oil prices to add to the fund's cyclical exposure in energy and materials. As oil prices improved due to tighter supply and strong demand driven by the improving global economy, several of the fund's energy names outperformed notably for the 3 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

4 LARGEST CONTRIBUTORS VS. BENCHMARK Ramona Persaud discusses signs of potential market volatility: "I'm especially mindful of two factors influencing the global equity markets. "First, the era of very low interest rates following the Great Recession has led to low stock-price dispersion and high stock-price correlation, each of which has contributed to strong headwinds for value investing. "While the case for cyclically higher policy rates is structurally sound, developed-market demographics, such as lower rates of population growth, have played a significant role in lowering long-term interest rates. I think this has negative implications for the efficacy of value, or at least the duration of value outperformance, with Japan providing some precedent for this phenomenon. "Secondly, globalization of the past 20 to 30 years has created distinct winners and losers. Real wages for the developed-market middle class largely have been flat, whereas wealth creation for holders of capital and assets, already the world's wealthiest, has been extraordinary. "One ramification of this is the political populism that has swept through the U.S., the U.K., France, Italy and other parts of Europe. Specifically in the U.S., trade and tax policies seem to focus on a reversal of globalization. "In my view, all of these factors portend muchincreased volatility and the later stages of the market cycle. "I'm confident that the fund should be wellpositioned for this type of market environment, due to its value-conscious, downside-protectionoriented approach." Holding Market Segment Average Relative Relative Contribution (basis points)* ConocoPhillips Co. Energy 1.33% 32 Constellation Software, Inc. Prada SpA Consumer Discretionary 0.98% % 19 Suncor Energy, Inc. Energy 1.70% 18 Dr. Pepper Snapple Group, Inc. * 1 basis point = 0.01%. Consumer Staples 0.58% 18 LARGEST DETRACTORS VS. BENCHMARK Holding Micro Focus International PLC Market Segment Average Relative Relative Contribution (basis points)* 1.77% -126 Conviviality PLC Consumer Staples 0.28% -41 Amazon.com, Inc. British American Tobacco PLC (United Kingdom) Qualcomm, Inc. * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class Consumer Discretionary -1.19% -38 Consumer Staples 1.72% % -18 Six Months Ago International Equities 48.99% 49.65% Developed Markets 44.59% 45.62% Emerging Markets 4.40% 4.03% Tax-Advantaged Domiciles 0.00% 0.00% Domestic Equities 45.09% 47.28% Bonds 0.00% 0.00% Cash & Net Other Assets 5.92% 3.07% 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 section of this Q&A.

5 MARKET-SEGMENT DIVERSIFICATION Market Segment Six Months Ago Financials 16.72% 15.48% Consumer Staples 14.81% 16.05% 12.88% 15.63% Consumer Discretionary 11.74% 9.34% Health Care 11.13% 12.69% Energy 8.48% 8.86% Industrials 8.24% 8.94% Telecommunication Services 4.35% 3.78% Materials 3.93% 4.10% Real Estate 1.55% 1.55% Utilities 0.27% 0.50% Other 0.00% 0.00% COUNTRY DIVERSIFICATION Country Six Months Ago United States 53.50% 50.35% United Kingdom 13.47% 14.73% Japan 7.43% 8.76% Switzerland 3.63% 2.01% Canada 3.44% 5.05% Germany 3.04% 2.01% Netherlands 2.08% 2.55% Hong Kong 1.89% 2.20% Spain 1.89% 1.76% France 1.71% 1.83% Belgium 1.57% 1.65% Taiwan 1.37% 1.61% Sweden 1.04% 1.20% Other Countries 3.94% LARGEST HOLDINGS Holding Microsoft Corp. Apple, Inc. British American Tobacco PLC (United Kingdom) Market Segment Six Months Ago 2.50% 2.23% 2.49% 3.06% Consumer Staples 2.27% 1.83% JPMorgan Chase & Co. Financials 2.07% 1.94% Bank of America Corp. Financials 1.90% 1.81% Chevron Corp. Energy 1.79% 2.07% Daiichikosho Co. Ltd. Consumer Discretionary 1.56% 1.27% American Tower Corp. Real Estate 1.55% 1.55% Nestle SA (Reg. S) Consumer Staples 1.54% 1.50% Wells Fargo & Co. Financials 1.52% 1.65% 10 Largest Holdings as a % of Net Assets 19.20% 20.36% 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. 5 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

6 FISCAL PERFORMANCE SUMMARY: Periods ending April 30, Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity Global Equity Income Fund Gross Expense Ratio: 1.13% % -2.96% 10.11% 5.96% 8.59% 9.69% MSCI All Country World (Net MA) Index 3.76% 0.11% 14.60% 7.87% 9.22% 10.26% Morningstar Fund World Large Stock 3.29% 0.10% 13.43% 7.23% 8.84% -- % Rank in Morningstar Category (1% = Best) % 69% 55% -- # of Funds in Morningstar Category Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 05/02/ 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. Please see the last page(s) of this Q&A document for most-recent calendarquarter performance. 6 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

7 Definitions and Important 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. 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. 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. 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. 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 All Country World Index (Net MA Tax) is a marketcapitalization weighted index that is designed to measure the investable equity market performance for global investors of developed and emerging markets. Index returns are adjusted for tax withholding rates applicable to U.S. based mutual funds organized as Massachusetts business trusts. MARKET-SEGMENT WEIGHTS Market-segment weights illustrate examples of sectors or industries in which the fund may invest, and may not be representative of the fund's current or future investments. Should not be construed or used as a recommendation for any sector or industry. RANKING INFORMATION 2018 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or redistributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Fidelity does not review the Morningstar data and, for mutual fund performance, you should check the fund's current prospectus for the most up-to-date information concerning applicable loads, fees and expenses. % Rank in Morningstar Category is the fund's total-return percentile rank relative to all funds that have the same Morningstar Category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top-performing fund in a category will always receive a rank of 1%. % Rank in Morningstar Category is based on total returns which include 7

8 Manager Facts Ramona Persaud 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, Ms. Persaud manages Fidelity Dividend Growth Fund, Fidelity Advisor Dividend Growth Fund, Fidelity Global Equity Income Fund and Fidelity Advisor Global Equity Income Fund. Additionally, she co-manages the global sub-portfolio of Fidelity Equity-Income Fund, Fidelity VIP Equity-Income, and the equity sleeve of Fidelity and Fidelity Advisor Strategic Dividend & Income Funds and Fidelity Advisor Multi-Asset Income Fund. Prior to assuming her current responsibilities, Ms. Persaud held various other roles within FMR Co., including assistant portfolio manager of Diversified International Fund, based in London. She was also a Select Banking portfolio manager and research analyst, Select Construction & Housing portfolio manager and research analyst, and a research analyst. Before joining Fidelity in 2003, Ms. Persaud worked as an analyst at both Morgan Stanley and Goldman Sachs. She has been in the finance industry since Ms. Persaud earned her bachelor of science degree, summa cum laude, in environmental engineering from the Polytechnic Institute at New York University. Additionally, she earned her master of business administration degree in finance from the Wharton School at the University of Pennsylvania. 8 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

9 PERFORMANCE SUMMARY: Quarter ending June 30, Annualized 5 10 / LOF 1 Fidelity Global Equity Income Fund Gross Expense Ratio: 1.13% % 6.35% 9.19% 9.54% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 05/02/ 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. It does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio. 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. Diversification does not ensure a profit or guarantee against a loss. 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