Fidelity Europe Fund MARKET RECAP. Key Takeaways

Transcription

1 Fidelity Europe Fund Key Takeaways For the fiscal year ending October 31, 2017, the fund's Retail Class shares gained 26.05%, underperforming the 27.33% result of the benchmark MSCI Europe Index. Amid a strong market for European stocks, bolstered by a sense of optimism as the political environment stabilized, Manager Stefan Lindblad's defensive positioning of the fund hindered its result versus the benchmark the past 12 months. Among sectors, selection in industrials, consumer discretionary and financials detracted most from relative performance. Individually, shares of Intertrust Group, a Netherlands-based trust- and corporate-services provider, hurt most, followed by U.K.-based emerging-markets lender International Personal Finance; both were out-of-benchmark positions. On the plus side, stock picking in health care notably boosted the fund's relative result, led by U.K.-based veterinary-products manufacturer Dechra Pharmaceuticals, also out-of-benchmark. The fund's biggest relative contributor was a sizable overweighting in tinder, pulp and paper manufacturer Svenska Cellulosa, based in Sweden. While mindful of the economic environment, at period end Stefan remains committed to his stock-selection process, which is based on fundamental analysis and his evaluation of each holding's long-term outlook. MARKET RECAP The MSCI ACWI (All Country World Index) ex USA Index returned 23.85% for the 12 months ending October 31, 2017, helped partly by a generally weak U.S. dollar. Some favorable election results in continental Europe (+30%) suggested ebbing political uncertainty and near-term risk there, but the U.K. (+20%) faced more-mixed conditions ahead of its expected exit from the European Union. Despite central-bank easing and pressured recently by yen strength Japan (+18%) lagged the rest of the Asia-Pacific group (+22%). Commodity-price volatility slowed Canada (+17%), but the emergingmarkets group (+26%) sped ahead. Sector-wise, information technology (+47%) was driven by a surge among several Chinese internet-related names. Financials (+27%) rode rising interest rates that, at the same time, weighed on real estate (+17%), utilities (+16%), consumer staples (+14%) and telecommunication services (+9%) socalled "bond proxy" sectors. Materials (+28%) and industrials (+27%) responded to demand from China and price gains for certain commodities. In the energy sector (+20%), oil prices lost ground in the spring before rebounding through October 31 to end well above where they started 12 months ago. Lastly, health care (+14%) was hurt by early-period turmoil around drug pricing and health care legislation. Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A An interview with Manager Stefan Lindblad Fund Facts Trading Symbol: Stefan Lindblad Manager FIEUX Start Date: October 01, 1986 Size (in millions): $1, Investment Approach Fidelity Europe Fund is a regional equity strategy that seeks long-term growth of capital by investing primarily in the securities of European issuers and other investments that are tied economically to Europe. We believe that investing in high-quality companies with demonstrated track records of compounding value and that trade at a discount to their intrinsic (fair) value has the best potential to generate alpha (risk-adjusted excess return) over the long term. Guided by this philosophy, we focus the portfolio on companies that can generate sustainable returns above their cost of capital. These tend to be firms with proven business models, wide competitive moats and access to scarce or intangible resources (e.g., properties, cost structure, R&D, brands, company culture and management). Fidelity's vast global research organization and focus on long-term fundamental analysis helps us identify the tangible and intangible elements that drive consistent value creation, as well as inefficiencies between market price and intrinsic value. Q: Stefan, how did the fund perform for the fiscal year ending October 31, 2017 Amid a strong market for European stocks, propelled by healthy economic growth across the Continent, the fund's Retail Class shares rose 26.05%, trailing the 27.33% return of the benchmark MSCI Europe Index. The fund edged the peer group average. Q: What was the investment backdrop like for European stocks this period A general sense of optimism marked Europe's investment environment the past 12 months. Interest rates slowly began to rise and the political environment settled, developments that proved encouraging for investors. For the period, the European market finished ahead of the major U.S. equity indexes. Q: Why did the fund lag its benchmark All things considered, I had positioned the fund too defensively, especially in late 2016, when markets sharply shifted to favor more-cyclical stocks such as banks, an area where the fund carried an underweighting. While many of the fund's positions rebounded as we moved through 2017, it was not enough to make up the ground we had lost earlier in the period. I always find it disappointing when the fund underperforms the benchmark, but I maintained conviction in my investment strategy, which is based on fundamental analysis and bottom-up stock selection. I continued to emphasize growing companies that I thought could generate value over time with solid business models in areas with high barriers to entry. Characteristics of investments I seek for the fund include businesses demonstrating steady growth and a return above their capital costs, because I believe their intrinsic value should increase over time. In my experience, companies meeting these criteria tend to pay a stable and rising dividend an important component of total shareholder return, especially against a backdrop of persistently low interest rates. 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

3 Q: What specific factors weighed on the fund's performance versus the benchmark Stock picking in the industrials and consumer discretionary sectors detracted most from the fund's relative result. In industrials, our out-of-index position in Intertrust Group, a Netherlands-based trust- and corporate-services company, proved the fund's biggest individual detractor. I established a stake in Intertrust in 2015 when it launched its IPO (initial public offering), but performance has been lackluster in the subsequent years, mainly due to poor execution and some internal issues. In July, the firm posted disappointing financial results, and the stock fell steeply. From my perspective, I still think Intertrust has a positive outlook, and I took advantage of the dip in valuation to add substantially to the fund's stake. I expect operational issues to be resolved once the company's management changes the CEO has stated he will not seek reappointment in Furthermore, Intertrust continued to expand its footprint through acquisitions, driving growth. In consumer discretionary, it hurt to hold a non-benchmark investment in Kambi Group, a Malta-based firm providing sports-betting infrastructure to Europe's gaming industry including such services as odds compilation, risk management and custom digital and mobile solutions. This period, I increased our stake in Kambi based on my high conviction in the company's ability to grow its margin, as well as in its product pipeline. Additionally, the gaming industry continues to expand quickly, which I thought could benefit Kambi over the longer term. This period, however, the company issued a disappointing financial report, which detailed costs outstripping revenue. Our position returned -29% the past 12 months. Q: What else hurt Picks in financials, particularly within diversified financials, dragged on our relative result. Here, our non-benchmark stake in U.K.-based emerging-markets lender International Personal Finance (IPF) returned -20% the past year. Via its so-called "home credit" business, IPF makes small, unsecured, short-term loans, with local agents calling on customers directly every week to collect installment payments. The stock's value declined sharply in December on news of a potential regulatory change in Poland, the company's biggest market. The stock stumbled again in March after Poland announced further potential regulatory changes. As it became clear to investors that these changes were not as impactful as anticipated, IPF began to recover, rising from June through much of the rest of the period, albeit not to prior levels. While holding IPF hurt the fund in the short term, I still saw significant upside potential with or without any change to the regulatory environment. By period end, I also thought the downside risk could be relatively limited moving forward, thus I held on to the position. Q: What helped Our choices in health care proved beneficial. In particular, our out-of-benchmark position in U.K.-headquartered Dechra Pharmaceuticals, which specializes in veterinary products, was a relative contributor. The animal-health market continued to experience strong growth as more pet owners looked to provide the best care for their animals. While most of the market remained fragmented, Dechra did a solid job of consolidation through acquisitions. I think the potential revenue and cost synergies from its purchases could be substantial, one of the reasons why the fund held the stock. Shares of Dechra rose roughly 68% the past 12 months, and I maintained my conviction in the company's fundamentals and growth prospects. Stock selection in materials also boosted our relative result, led by a timely overweighting in tinder, pulp and paper manufacturer Svenska Cellulosa (SCA), based in Sweden. Coming into this period, SCA represented a conglomerate with two main units: a forest-asset manager and a consumer tissue producer. In my view, the company's share price never truly reflected the combined value of these two underlying businesses. However, at the beginning of 2017, the company split in two: SCA (forest) and Essity (tissue). Given that SCA was Europe's largest private owner of forestland, I believed it was undervalued after the split. I then added to our stake because I saw SCA as a stable firm with a solid historical long-term return. Q: Any final thoughts for shareholders, Stefan While I am mindful of the overall economic environment, I've chosen the fund's holdings based on my fundamental analysis and long-term outlook for each position. That said, I am optimistic about the companies in which the fund is invested, and see significant potential upside for them, especially as Europe remains on a growth trajectory. 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 Stefan Lindblad on Europe's economic recovery: "As of October 31, we are finally starting to see some signs that Europe is recovering from the long-term slump that followed the global financial crisis 10 years ago. "Loan growth has picked up throughout the region, and consumer sentiment is on the rise. Moreover, the European Central Bank continues to support the region with ultra-low interest rates and quantitative easing. On the political side, the dust seems to be settling. France has elected an arguably market-friendly president, and Germany has maintained its current leadership. "I consider all of these to be positive signs, but ultimately, I am most interested in how European companies are progressing through this recovery. More recently, they too have begun to echo the positive sentiment taking hold on the Continent. Even though valuations appear relatively high in a historical context, earnings growth is recovering, which I think should provide valuation support. "Bolstered by these positive signals, I've increased the fund's exposure to domestically oriented firms. For instance, this period I established a position in Italian bank Unicredit. The bank's restructuring plan appeared viable to me, and positive sentiment in Italy has been boosting Unicredit's loan portfolio both in terms of growth and of improvement among underperforming loans. "I bought shares of Spain's CaixaBank for similar reasons. I ultimately sold our non-benchmark stake before the end of the period to take profits, though, as the bank's valuation quickly hit my price target. "I added out-of-benchmark stakes in a few construction-related names, including Vicat in France and Buzzi Unicem in Italy, two cementmakers that have seen improving fundamentals amid a pickup in new construction." Holding Svenska Cellulosa AB (SCA) (B Shares) Dechra Pharmaceuticals PLC Roche Holding AG (participation certificate) Market Segment Average Relative Relative Contribution (basis points)* Materials 2.01% 61 Health Care 1.57% 56 Health Care -2.08% 50 Prudential PLC Financials 2.23% 47 NCC Group Ltd. * 1 basis point = 0.01%. Information Technology LARGEST DETRACTORS VS. BENCHMARK Holding Market Segment 1.93% 47 Average Relative Relative Contribution (basis points)* Intertrust NV Industrials 1.37% -96 International Personal Finance PLC Kambi Group PLC Vostok New Ventures Ltd. (depositary receipt) Panalpina Welttransport Holding AG * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class Financials 1.00% -82 Consumer Discretionary 0.74% -58 Financials 2.54% -50 Industrials 1.25% -46 Six Months Ago International Equities 92.85% 96.15% Developed Markets 91.56% 95.49% Emerging Markets 1.29% 0.66% Tax-Advantaged Domiciles 0.00% 0.00% Domestic Equities 3.09% 2.53% Bonds 0.00% 0.00% Cash & Net Other Assets 4.06% 1.32% 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 Market Segment Six Months Ago Industrials 21.70% 20.72% Financials 17.57% 16.36% Consumer Discretionary 17.18% 16.62% Health Care 11.35% 12.78% Information Technology 10.68% 11.98% Materials 7.29% 6.90% Consumer Staples 6.07% 8.41% Real Estate 3.35% 3.29% Utilities 0.75% 1.61% Energy 0.00% 0.00% Telecommunication Services 0.00% 0.00% Other 0.00% 0.00% COUNTRY DIVERSIFICATION Country Six Months Ago Sweden 22.00% 17.42% United Kingdom 20.94% 14.99% Germany 11.81% 14.85% United States 10.36% 1.93% France 6.41% 10.30% Italy 6.17% 7.25% Spain 5.87% 6.16% Ireland 5.40% 3.50% Netherlands 4.48% 8.15% Denmark 3.33% 3.58% Norway 2.60% 3.10% Switzerland 2.30% 7.86% 10 LARGEST HOLDINGS Holding Market Segment Six Months Ago Getinge AB (B Shares) Health Care 3.69% 3.29% Securitas AB (B Shares) Industrials 3.50% -- SAP SE Autoliv, Inc. (depositary receipt) Information Technology Consumer Discretionary 3.13% 4.22% 3.09% 2.53% Prudential PLC Financials 2.89% 3.05% NCC Group Ltd. Schibsted ASA (A Shares) Information Technology Consumer Discretionary 2.62% 1.84% 2.60% 2.03% Investor AB (B Shares) Financials 2.59% 2.79% Svenska Cellulosa AB (SCA) (B Shares) Vostok New Ventures Ltd. (depositary receipt) Materials 2.39% 2.22% Financials 2.28% 2.52% 10 Largest Holdings as a % of Net Assets 28.77% 27.32% 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 Information section of this Q&A.

6 FISCAL PERFORMANCE SUMMARY: Periods ending October 31, Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity Europe Fund Gross Expense Ratio: 1.07% % 26.50% 26.05% 7.38% 9.14% 1.66% MSCI Europe Index (Net Massachusetts tax) 11.03% 23.66% 27.33% 5.72% 8.41% 0.92% Morningstar Fund Europe Stock 9.62% 22.40% 25.97% 7.11% 9.04% 0.97% % Rank in Morningstar Category (1% = Best) % 37% 32% 35% # of Funds in Morningstar Category Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 10/01/ 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 Information section of this Q&A.

7 Definitions and Important Information Unless otherwise disclosed to you, in providing this information, Fidelity is not undertaking to provide impartial investment advice, act as an impartial adviser, or to give advice in a fiduciary capacity. FUND RISKS Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. The risks are particularly significant for funds that focus on a single country or region. 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. 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 Europe Index (Net MA Tax) is a market-capitalization-weighted index that is designed to measure the investable equity market performance for global investors of the developed markets in Europe. Index returns are adjusted for tax withholding rates applicable to U.S. based mutual funds organized as Massachusetts business trusts. MSCI ACWI (All Country World Index) ex USA Index is a marketcapitalization-weighted index that is designed to measure the investable equity market performance for global investors of developed and emerging markets, excluding the United States. MARKET-SEGMENT WEIGHTS Market-segment weights illustrate examples of sectors or industries in which the fund may invest, and may not be representative of the fund's current or future investments. Should not be construed or used as a recommendation for any sector or industry. RANKING INFORMATION 2017 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or redistributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Fidelity does not review the Morningstar data and, for mutual fund performance, you should check the fund's current prospectus for 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 Stefan Lindblad is a portfolio manager at Fidelity Management & Research Company (FMR Co.), the investment advisor for Fidelity's family of mutual funds. Fidelity Investments is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and other financial products and services to more than 20 million individuals, institutions and financial intermediaries. In this role, Mr. Lindblad manages Fidelity Nordic Fund, as well as Fidelity Europe Fund and Fidelity Advisor Europe Fund. Additionally, he co-manages Fidelity Global Balanced Fund. Prior to assuming his current responsibilities, Mr. Lindblad was a partner at KDA Capital. Previously, he worked as a research analyst at Fidelity International Limited (FIL). Before joining Fidelity in 2003, Mr. Lindblad was a project manager at Framtidsfabriken and an auditor and consultant at KPMG. He has been in the investments industry since Mr. Lindblad earned his master of science degree in business administration from the School of Economics and Commercial Law at the University of Gothenburg and his master of business administration degree from INSEAD in Singapore and France.. 8 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

9 PERFORMANCE SUMMARY: Quarter ending September 30, Annualized 5 10 / LOF 1 Fidelity Europe Fund Gross Expense Ratio: 1.07% % 6.04% 9.14% 2.13% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 10/01/ This expense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that fiscal year. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit fidelity.com/performance, institutional.fidelity.com, or 401k.com. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges, and expenses. For this and other information, call or write Fidelity for a free prospectus or, if available, a summary prospectus. Read it carefully before you invest. Past performance is no guarantee of future results. Views expressed are through the end of the period stated and do not necessarily represent the views of Fidelity. Views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund. The securities mentioned are not necessarily holdings invested in by the portfolio manager(s) or FMR LLC. References to specific company securities should not be construed as recommendations or investment advice. Information included on this page is as of the most recent calendar quarter. S&P 500 is a registered service mark of Standard & Poor's Financial Services LLC. Other third-party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR LLC or an affiliated company. Fidelity Brokerage Services LLC, Member NYSE, SIPC., 900 Salem Street, Smithfield, RI 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.