FI Inside Scoop. 12 Months Through 2/28/18. Table of Contents

Transcription

1 Volume 21 Number 3 March 2018 James Lowell is the leading expert on the Fidelity family of funds. He is the President of the Fund Family Shareholder Association, and he is Partner and Chief Investment Officer with Adviser Investments ( ). (Fidelity Investor operates independently from Adviser Investments.) Mr. Lowell is the author of several critically praised investment books, including Investing From Scratch, Smart Money Moves, and What Every Fidelity Investor Needs to Know. He is often quoted in the nation s leading financial publications and online media, and appears regularly on CNN, CNBC, NECN, Bloomberg (radio and TV) and Fox Business News. 12 Months Through 2/28/ M A S&P 500 M J J A EAFE S O N Agg Bond Fidelity Performance Index (FPI) M February: -2.1% 2018: 1.4% A M J J A The FPI is a dollar-weighted performance for all Fidelity retail funds, and provides a yardstick to the monthly performance of the average Fidelity mutual fund investor. Table of Contents FI Inside Scoop...1 Model Portfolios...2 FI Tactical Opportunities...3 FI Focus: Large-Cap Growth Funds...4 FI Interview: Eddie Yoon...5 Performance Review...6 FI Investment Book Club...11 S O N D D J J F F FI Market Monitor See-Saw Markets February saw the return of volatility to our marketplace. I see nothing abnormal about that. In fact, as you well know, what was abnormal was the prolonged absence of volatility throughout last year. You also know the trigger for its return: Fear. In this case, fear of high inflation. And you know my investment view on that: The fundamentals remain solid, and such fears remain unfounded. So, while these may be uncertain times, we already know a lot about why we should fear them less than most seem willing to do. This doesn t mean that I think this year is going to be a bed of roses. From the outset, I ve been keeping my eyes on the thorns of this bull market s stem. Check out your January issue for my Investment Fear and Fact Checklist; no risk on my checklist has diminished in terms of real or imagined threat. On the other hand, the opportunities also listed in your January issue similarly remain undiminished. You and I know that the market has never been a riskless place. Being risk aware is key to being able to pursue, attain and hold onto gains. And on that note, our Model Portfolios are faring just fine. Expansions don t go on forever, and expansions do have a history of ending after market prices and interest rates have risen exponentially. We are closer to that end than we are to this expansion s beginning, and we ll have to pass through the other side before seeing what will inevitably be our next post-bear market wealth-building opportunity. But we are not as close as fear would have you think. With our economy growing, and the global economy growing, overheating prices, not cooling activity, is something I ll be watching for but for now, I think that the fundamentals support moderately greater gains in the wake of any short-term losses. FI s Proprietary Manager Selection System Is Based on Skill Not Luck Trying to game the market on any given day remains a matter of luck, not skill. My proprietary manager ranking system and proven, disciplined, risk-adjusted approach to the markets is based on discernible manager skill, not random luck of the draw. In this issue, I share my recent conversation with Eddie Yoon, manager of Select Healthcare (FSPHX; see page 5). Yoon s stellar tenure on the fund is coming up on a decade in October 2018, and his insights into the healthcare marketplace (which accounts for about 18% of our total GDP) provide one lens through which to view the whole marketplace. Healthcare stocks are classified as growth stocks; they also offer the potential for solid risk-adjusted returns. On page 4, I focus on Fidelity s large-cap growth fund lineup. We own two out of three of the best of them in the Model Portfolios: Contrafund (FCNTX) and Focused Stock (FTQGX). (We don t own the third, Growth Company (FDGRX), since it s closed to new investors, but my standing recommendation for members who own it is to never sell a share unless or until Steve Wymer leaves that helm.) When you combine Contra- FI Inside Scoop (FI Market Monitor, continued on page 12) Divided Fidelity News February didn t just see a return of volatility to the markets. There was volatility in Fidelity-related headlines, too. Case in point: In the same month Kiplinger Magazine published Fidelity s Stock-Picking Culture is Alive and Well (on February 1), The Wall Street Journal released its article, Fidelity May Abandon Its Star Stock-Picker System After Harassment Claims (on February 26). In my recollection of Fidelity news and my professional recollection of all things Fidelity goes back to May 1990 never have I seen two well-respected investment publications present such diametrically opposed views on Fidelity s managers and stock- (FI Inside Scoop, continued on page 12) 1

2 Fidelity Investor Portfolios GLOBAL QUANT Fund Ticker Shares NAV Value Percent Mo. Return Blue Chip Growth FBGRX ,123 10% -2.3% Small Cap Growth FCPGX ,807 10% -1.0% Focused Stock FTQGX ,177 10% -3.1% Select Retailing FSRPX ,497 11% -2.6% Pacific Basin FPBFX ,879 10% -3.8% Trend FTRNX ,021 10% -2.8% Overseas FOSFX ,700 10% -4.9% Int l Cap App FIVFX ,851 10% -4.8% Contrafund FCNTX ,270 10% -2.3% Small Cap Val FCPVX ,105 9% -4.2% Total $235, % The Global Quant model is based on our proprietary manager rankings system. It is a quantitative portfolio that looks to deliver capital appreciation for most longer-term investors. The model holds the best-performing fund from the top six domestic equity managers, top three international equity managers, and top sector manager. The portfolio is equal weighted and will be rebalanced semiannually on the last trading day of December and June. AGGRESSIVE GROWTH Fund Ticker Shares NAV Value Percent Mo. Return Sel Healthcare FSPHX ,687 10% -3.1% Event Driven Opps FARNX ,081 8% -2.5% Focused Stock FTQGX ,660 5% -3.1% Tot l Emerging Mkts FTEMX ,092 9% -4.0% Mega Cap Stock FGRTX ,448 10% -5.4% Int'l Growth FIGFX ,790 13% -5.1% Contrafund FCNTX ,618 20% -2.3% Low-Priced Stk FLPSX ,076 19% -4.4% Strategic Real Rtn FSRRX ,181 3% -1.7% Floating Rate Hi Inc FFRHX ,596 3% 0.0% Total $544, % Volatility 1.03 R-squared 89% Beta 0.97 Equities 98.4 Bonds 0.0 Cash 1.5 Foreign 31.6 Top Sectors Percent Technology 25.1 Discretionary 22.8 Financials 14.1 Industrials 12.0 Healthcare 9.6 Volatility 0.98 R-squared 92% Beta 0.94 Equities 91.1 Bonds 5.9 Cash 3.0 Foreign 31.8 Top Sectors Percent Technology 23.7 Healthcare 17.9 Financials 13.9 Discretionary 12.9 Industrials % % % % % % % % % % % % % % % % % % % % % % % The Aggressive Growth model is designed for investors who are active traders and are willing to make meaningful trades on a monthly basis. There is a $10,000 minimum investment in some of these funds. All data through 2/28/ % % % % % TRAILING RETURNS YTD 3.6% 1 year 22.8% 3 year 11.3% 5 year 14.5% 10 year 8.9% 15 year Since Inception* 8.1% *Inception: 2/28/07. Initial value: TRAILING RETURNS YTD 2.4% 1 year 17.6% 3 year 8.6% 5 year 12.7% 10 year 8.2% 15 year 11.6% Since Inception* 9.4% *Inception: 4/9/99. Initial value: GROWTH Fund Ticker Shares NAV Value Percent Mo. Return Sel Healthcare FSPHX ,707 9% -3.1% Event Driven Opps FARNX ,723 6% -2.5% Focused Stock FTQGX ,098 6% -3.1% Tot l Emerging Mkts FTEMX ,367 10% -4.0% Mega Cap Stock FGRTX ,199 10% -5.4% Int'l Growth FIGFX ,816 14% -5.1% Contrafund FCNTX ,631 15% -2.3% Low-Priced Stk FLPSX ,998 18% -4.4% Strategic Real Rtn FSRRX ,585 6% -1.7% Floating Rate Hi Inc FFRHX ,665 6% 0.0% Total $656, % GROWTH & INCOME Volatility 0.91 R-squared 91% Beta 0.87 Equities 86.5 Bonds 10.3 Cash 3.2 Foreign 33.3 Top Sectors Percent Technology 21.3 Healthcare 16.1 Financials 13.1 Discretionary 11.8 Industrials 6.8 The Growth model looks to deliver capital appreciation for most longer-term investors. It is most suitable for investors with 10 years or more to retirement. There is a $10,000 minimum investment in some of these funds % % % % % % % % % % % % % % % % % % % % Fund Ticker Shares NAV Value Percent Mo. Return Volatility % % Sel Healthcare FSPHX ,363 7% -3.1% R-squared 91% % % Mega Cap Stock FGRTX ,408 11% -5.4% Beta % % Int'l Growth FIGFX ,945 10% -5.1% Equities % % Contrafund FCNTX ,426 13% -2.3% Bonds % % Low-Priced Stk FLPSX ,340 10% -4.4% Cash % % Strategic Div&Inc FSDIX ,971 22% -4.3% Foreign % % New Mkts Income FNMIX ,749 7% -2.1% Top Sectors Percent % Strategic Real Rtn FSRRX ,506 2% -1.7% Technology % Floating Rate Hi Inc FFRHX ,793 2% 0.0% Healthcare % Total Bond FTBFX ,179 8% -0.9% Financials % Ltd Term Bond ETF FLTB ,025 8% -0.3% Discretionary % Total $513, % Staples % While the primary objective is growth, I also pay attention to the income in the title, derived from stock dividends, bonds, and money markets. There is a $10,000 minimum investment in some of these funds. TRAILING RETURNS YTD 1.9% 1 year 16.1% 3 year 7.4% 5 year 12.2% 10 year 8.2% 15 year 11.2% Since Inception* 9.8% *Inception: 12/31/97. Initial value: TRAILING RETURNS YTD 0.3% 1 year 11.2% 3 year 5.9% 5 year 10.7% 10 year 7.7% 15 year 9.0% Since Inception* 8.5% *Inception: 12/31/97. Initial value: INCOME Fund Ticker Shares NAV Value Percent Mo. Return Large Cap Stock FLCSX ,564 11% -5.2% Strategic Div&Inc FSDIX ,181 36% -4.3% New Mkts Income FNMIX ,261 5% -2.1% Strategic Real Rtn FSRRX ,447 4% -1.7% Floating Rate Hi Inc FFRHX ,923 4% 0.0% Total Bond FTBFX ,575 22% -0.9% Ltd Term Bond ETF FLTB ,453 9% -0.3% Gov't Cash Reserves FDRXX ,159 9% 0.1% Total $391, % Volatility 0.59 R-squared 80% Beta 0.53 Equities 47.2 Bonds 41.2 Cash 11.6 Foreign 10.3 Top Sectors Percent Technology 8.0 Staples 5.7 Real Estate 5.3 Financials 5.0 Healthcare % % % % % % % % % % % % % % % % % % % % TRAILING RETURN YTD -1.3% 1 year 4.1% 3 year 2.5% 5 year 7.2% 10 year 6.8% 15 year 7.7% Since Inception* 7.0% *Inception: 12/31/97. Initial value: This model holds bonds and cash, but it s not exclusively a bond portfolio by a long shot, because income-oriented investors need to keep their eyes on capital appreciation, too. There is a $10,000 minimum investment in some of these funds. 2 Fidelity Investor

3 ANNUITY GROWTH Fund Ticker Shares NAV Value Percent Mo. Return VIP Health Care FAVHC ,455 6% -3.0% VIP Growth Opps FAVGO ,594 24% -1.7% VIP Overseas FAVOO ,668 16% -5.0% VIP Contrafund FAVCF ,563 22% -3.8% VIP Equity Income FAVEI ,676 12% -5.8% VIP Balanced FAVBB ,504 8% -2.9% VIP Float Rate Hi Inc FFLAC ,546 12% 0.0% Total $295, % Volatility 1.03 R-squared 85% Beta 0.95 Equities 84.5 Bonds 13.5 Cash 2.0 Foreign 21.8 Top Sectors Percent Technology 21.4 Healthcare 16.6 Financials 11.9 Discretionary 9.6 Staples % % % % % % % % % % % % % % % % % % % The Growth model looks to deliver capital appreciation for most longer-term annuity investors. It is most suitable for investors with 10 years or more to retirement. TRAILING RETURNS YTD 2.1% 1 year 16.3% 3 year 5.9% 5 year 9.7% 10 year 6.3% 15 year 8.5% Since Inception* 5.2% *Inception: 12/31/97. Initial value: ANNUITY GROWTH & INCOME Fund Ticker Shares NAV Value Percent Mo. Return VIP Health Care FAVHC ,248 5% -3.0% VIP Growth Opps FAVGO ,721 22% -1.7% VIP Overseas FAVOO ,224 13% -5.0% VIP Contrafund FAVCF ,921 21% -3.8% VIP Equity Income FAVEI ,681 7% -5.8% VIP Balanced FAVBB ,167 3% -2.9% VIP High Income FAVHI ,272 12% -1.2% VIP Float Rate Hi Inc FFLAC ,930 13% 0.0% VIP Gov't MMkt FAVMM ,348 4% 0.0% Total $280, % Vital Stats Glossary Volatility: Measures a fund s risk. Calculated by taking a fund s standard deviation over a three-year period and dividing by the S&P 500 s three-year standard deviation. R-squared: Represents how much a fund s movements correlate to the movements of the S&P 500. Beta: Measure of a fund s volatility compared to movements of the S&P 500. A fund can be volatile on its own, but if its movements do not correlate with the S&P 500, it will have a low beta. NOTES: All returns for periods greater than one year are annualized. TRADES: None. Volatility 0.87 R-squared 85% Beta 0.81 Equities 69.1 Bonds 24.5 Cash 6.4 Foreign 20.7 Top Sectors Percent Technology 18.2 Healthcare 13.2 Financials 9.1 Discretionary 7.9 Industrials 5.9 While the primary objective is growth, I also pay attention to the income in the title, derived from stock dividends, bonds, and money markets % % % % % % % % % % % % % % % % % % % TRAILING RETURNS YTD 1.8% 1 year 14.0% 3 year 5.5% 5 year 8.8% 10 year 5.7% 15 year 7.3% Since Inception* 5.0% *Inception: 12/31/97. Initial value: FI TACTICAL OPPORTUNITIES FI Smart Offense: Select Consumer Staples (FDFAX). New manager James McElligott has been on the fund for about three months now, but I like this sector s ability to perform well during downdrafts while still providing the upside of being able to raise product prices to offset any inflationary toll. Though it s a blink of an eye, he did successfully beat his benchmark in December and January. Looking at a more meaningful time period: Over the past 10 years, the various managers of the fund have returned 142.7% versus 180.2% for the MSCI USA IMI Consumer Staples Index. Let s hope James recent uber-short-term outperformance is a sign of what s to come. I d expect this fund to hold up relatively well in bear markets compared to other sector funds and the overall market, but it will still fluctuate up and down with the business cycle. FI Smart Defense: Hold 2.5% to 5% in Government Cash Reserves (FDRXX). I continue to think that this stable store of value will help offset any Ides of March while keeping some powder dry for better defense or offense buys. Kevin Gaffney and Andre Messier manage this money market fund. Over the past few years, money market yields have been ticking up. One year ago, the yield for this fund was 0.25%, while five years ago, it was 0.01%. If we look further, 10 years ago the yield was 3.52%. While I don t think we ll see yields that high anytime soon, I do like seeing a steady increase. Today s yield is 1.03%. The fund has net assets of $131.7 billion. James H. Lowell's Fidelity Investor (ISSN ) is published monthly by InvestorPlace Media, LLC, 9201 Corporate Blvd., Rockville, MD Please write or call if you have any questions. Phone: service@fidelityinvestor.com. Web address: Editor-in-Chief: James H. Lowell Analyst: Julianne Donlon Senior Vice President and Publisher: Amy Long Managing Editor: David Clarfield Assistant Managing Editor: Rachel Johnsen Editorial Intern: Wola Odeniran Marketing Director: Katy Anadale Marketing Director: Mary Southard Subscriptions: $229 per year by InvestorPlace Media, LLC, Founding Member of the Newsletter Publishers Association of America. Photocopying, reproduction or quotation strictly prohibited without the written permission of the publisher. While the information provided is based upon sources believed to be reliable, its accuracy cannot be guaranteed, nor can the publication be considered liable for the investment performance of any securities or strategies mentioned. Subscribers should review the full disclaimer and securities holdings disclosure policy at or call 800/ for a mailed copy. Periodicals postage rates paid at Rockville, MD, and at additional mailing offices. Postmaster: Send address changes to James H. Lowell's Fidelity Investor, InvestorPlace Media, LLC, 9201 Corporate Blvd., Suite 200, Rockville, MD March

4 FI Focus Large Cap Growth Funds A growth stock seeks capital appreciation, not without disregard to dividend yield, but without being constrained by having to produce it. Growth stocks run the gamut from well-known, analyzed, owned, established, dividend-paying blue-chip technology names like Intel, Microsoft and Apple (although Apple can be regarded as a consumer cyclical) to companies that have never turned a profit and are hoping to be the next Apple or Amazon. The less a given name has recognizably strong earnings, management, products and consumer history, the riskier its ride will be, but in the hands of skilled stock pickers, growth stocks have the potential for higher returns. Growth companies tend to thrive when economic growth is the rule and many dive when it isn t. They tend to get pricier and pricier as the good times roll and the belief in their ability to keep on rollin occludes the market s history of eventually running out of steam. Before you think of adding a growth fund, especially a mid- to small-cap growth fund, to your portfolio, I d recommend recalling the Dot-com crash of 2000 or the market meltdown of 2008 to mind. For reasons I ve been detailing throughout this year, I don t think we re going to shift from expansion to recession anytime soon, but I do think we re closer to recession than we have been over the past nine years. In this issue, I m focusing on Fidelity s large-cap growth funds, like Blue Chip Growth (FBGRX). Like last month, I m again excluding Asset Allocation and Growth & Income funds from this month s Focus, as those fund groups have had a Focus all their own in the past. This complements last month s Focus on Fidelity s selection of large-cap value funds, like Blue Chip Value (FB- CVX), and large-cap blend (value and growth) funds, like 500 Index (FUSEX). Simply owning those three funds Blue Chip Growth, Blue Chip Value, and 500 Index as 80% of your growth portfolio, with Total Bond (FTBFX) or Total Bond ETF (FBND) as the remaining 20%, could suffice. My Model Portfolios are positioned to outperform this combination of funds, but I know there are those of you out there who seek to own only a handful of funds and simply want to set it and forget it. Fidelity is often only thought of as a growth fund shop. Obviously, they are not so constrained. I don t know of another fund family that I trust as much and that offers as wide a selection of above-average performing funds, let alone growth funds, as Fidelity. Investors who are seeking stellar growth funds are in the right place. Let s get to them. Blue Chip Growth (FBGRX) Buy. Manager Sonu Kalra invests in blue chip companies that he thinks will deliver an above-average potential for growth. Blue chips are large, well-established, mostly well-known companies that are included in the S&P 500 or the Dow, as well as companies with market caps of $1 billion if not in either index. Sonu has returned 317.8% versus 277.7% for his Russell 1000 Growth benchmark since he began managing the fund in July Foreign investments make up 11.8% of the holdings. The fund is heavy in information technology (42.9%), followed by consumer discretionary (25.6%), and healthcare (11.0%). For comparison, this fund s value counterpart, Blue Chip Value (FBCVX), has about one-third in financials (32.6%), followed by healthcare (15.0%) and consumer discretionary (11.0%). FBGRX s top holdings are Apple, Alphabet, Amazon, Facebook, Nvidia, Salesforce.com, Broadcom, Tesla, Home Depot, and Visa. Capital Appreciation (FDCAX) Hold. In this go-anywhere fund, manager Fergus Shiel has returned 206.3% versus 203.2% for his S&P 500 benchmark since he began managing the fund in October That s my abiding reason for my abiding Hold recommendation. He can invest in both growth and value investments, but he currently has the majority of assets invested on the growth side. Foreign investments make up 11.5% of the technology (29.5%), financials (18.0%), and consumer discretionary (12.5%). The top holdings are Apple, Las Vegas Sands, Morgan Stanley, CME Group, Adobe Systems, Alphabet, Goldman Sachs, PayPal, Amgen, and FMC. Contrafund (FCNTX) Buy. Inimitable manager Will Danoff invests in growth-oriented companies whose value he thinks is unrecognized, underappreciated or priced right though that may not be immediately obvious from the fund s current top holdings. Danoff s astonishing long-term track record speaks for itself: He has returned 3,375.4% versus 1,534.8% for his S&P 500 benchmark since he began managing the fund in September He s off to a great start this year as well, returning 6.8% versus 1.8% for his benchmark through February 28. Foreign investments make up 6.7% of the technology (41.6%), financials (18.8%), and consumer discretionary (14.1%). The top holdings are Facebook, Berkshire Hathaway, Amazon, Alphabet Class A, Alphabet Class C, Microsoft, UnitedHealth Group, Visa, and Salesforce.com. Focused Stock (FTQGX) Buy. Stephen DuFour manages this year s Hot Hands fund. (See my conversation with him in your February 2018 issue.) DuFour is, as the fund name implies, focused; staying within holdings. He has returned 201.0% versus 150.6% for his S&P 500 benchmark since he began managing the fund in March This focused, deliberate, disciplined stock-picker is a new addition to the majority of my model portfolios. Foreign investments make up 4.9% of the holdings. The top sectors are information technology (40.6%), financials (20.2%), and healthcare (9.1%). The top holdings are Adobe Systems, Caterpillar, Intuit, Microsoft, S&P Global, PayPal, Alphabet Class A, Square Inc, Cboe Global Markets, and Wal-Mart. Growth Company (FDGRX) Buy. Manager Steven Wymer is one of the most gifted and proven growth stock managers at Fidelity and overall. He has managed this growth fund for over 20 years, returning 817.2% versus 384.3% for his Russell 3000 Growth benchmark since he began managing the fund in January He looks for companies that have an above-average potential for earnings and revenue growth. This fund has been closed to new investors since April Foreign investments make up 9.5% of the technology (41.5%), consumer discretionary (20.9%), and healthcare (19.0%). The top holdings are Nvidia, Apple, Amazon, Alphabet Class A, Facebook, Salesforce. com, Adidas, Microsoft, Alphabet Class C, and Alnylam Pharmaceuticals. Growth Discovery (FDSVX) Hold. Manager Jason Weiner, who has been joined by co-manager Asher Anolic since July 2017, invests in companies that are believed to have above-average potential for growth. Jason has returned 202.2% versus 204.7% for his Russell 3000 Growth benchmark since he began managing the fund in February Foreign investments make up 10.4% of the technology (40.6%), financials (12.1%), and consumer discretionary (11.8%). The (FI Fund Focus, continued on page 10) 4 Fidelity Investor

5 FI Interview Eddie Yoon Select Health Care, Select Medical Technology and Devices, Stock Selector All Cap, Stock Selector Mid Cap The following excerpts are from my full length interview, available online at My view on the long-term benefits of holding healthcare stocks remains unchanged: Necessary demographic demand from increasingly aging established market populations, coupled with increased emerging consumer demands from emerging marketplaces, sets a timeless stage for more inclusive, less invasive, innovative services and solutions. Throw the political monkey wrench into that engine, and you get periodic price breakdowns that provide buying opportunities at discounted prices. Long-term, like consumer staples, I think healthcare is a hard sector to beat, and hence a sector I have nearly always kept as a staple in my Model Portfolios. Of course, when investing in any sector, even healthcare, you need to be not only right about the sector, but right about the manager at the helm of the fund. Manager Eddie Yoon is familiar to longstanding members, and his track record speaks for itself: 434.1% vs % for the MSCI USA IMI Health Care Index (and vs % for the S&P 500). You can read more about my outlook on the healthcare industry in my Portfolio Holdings Focus from the December 2017 issue. Here and now, we can share in my recent conversation with him. Jim: Eddie, you are coming up on 10 years of your tenure on Healthcare. Your track record has been stellar could we talk about your process? Yoon: Over those 10 years, the investment process really hasn t changed. From a portfolio management perspective, I think our key differentiating factor is that we re able to uncover really great growth companies early on in their life cycle and hold them through their life cycle. That s driven by the talented research team that we have here at Fidelity that we ve been able to put together over that period of time. The secular drivers behind healthcare and why we think it has a place as a strategic asset allocation is based on a couple of different pillars. Healthcare demand is a global demand. It s not sensitive to economic cycles. The entire world s getting older, and it s really a long-term driver of why healthcare will always be a part of the conversation and why you re able to compound returns in that sector over a long period of time. Innovation in the sector has continued to be very, very robust. When you think about innovation, you tend to think about it in biotechnology it s very robust in biotechnology, but it s also in a lot of different other areas within the sector, whether it be medical devices or healthcare technology. The healthcare system in the United States is going to go through just an incredible amount of change over the next I ll call it the next generation. And it s going to really enable new business models that are going to bring the consumer together technology and healthcare all together into this new consumer health tech ecosystem. We re trying to invest in companies that are going to take advantage of that trendline. We re very excited about what we re seeing in those parts of the market. And then, lastly, we talk a lot about the emerging middle class. There are over 150 million people in China alone that are considered the upper middle class. There s about a billion people in the Association of Southeast Asian Nations (ASEAN) countries. India s emerging. Latin America s emerging. These countries are just getting access to modern-day medicine. That s going to make a trend I ve talked about for a long time and something that I m very excited about medical equipment stocks is a group that I m significantly overweight in the fund. I think that s the best way to own that theme. And then we have a couple of individual bets in China that are taking advantage of the big push to drive innovation in China through some of these big Chinese therapeutic companies. When I think of my fund versus some of my competitors funds, it tends to be much more diversified across the entire healthcare spectrum. I don t own only therapeutic companies and only biotech companies. I tend to own the whole gamut of stocks, from med tech to some of the big pharma companies. Some of the HMOs I own, as well as biotechnology. What that does is it helps provide balance in any given year. From a shareholder experience perspective, we try to put together a portfolio that can deliver durable returns over a long period of time and doesn t have quite the volatility of some of the sector-specific or more industry-specific funds that are out there. I think that s something that we ve been able to see over a period of time. Jim: What are the attributes of growth that you re looking for in these stocks? While this fund is certainly growth-oriented, it can play a meaningful risk-adjusted role inside of a portfolio. Yoon: Right. I think that speaks to portfolio construction and how I think about risk. At the top of the portfolio, you re going to see stocks that are large-cap multinational companies, companies that may sell hundreds of products to hundreds of countries around the world, may grow at [the rate of] GDP plus a couple percentage points, and are great allocators of capital great operators. There, I m looking for very stable total shareholder return year in, year out, driven by the big macro tailwinds that we have been talking about. A lot of the larger names where we have a lot of capital behind them tend to have that flavor, where you re not betting on any single product. You re betting on these big macro themes that are happening or that s somewhat risk-reduced. I think one of my jobs as a fund manager is to be that risk filter and not expose the shareholder to any big binary bet that can materially impair the returns of the portfolio, and I think we ve been successful in doing that over time. I ve run the fund at close to 100 names now for 10 years. The top 20, 30, 40 names will have greater than 50% of the total capital, and the bottom 50 names will be 10 20% of the capital. These represent what I consider to be the more dynamic biotech names, the ones where investment theses are more predicated on a specific product or a specific trial. I think we ve demonstrated an ability to put together a portfolio that has very high risk-adjusted returns. We stick to the discipline through market cycles, take advantage of where we see real weakness that s related to market volatility, and then obviously sell when things are overvalued versus the framework that we ve put in place. Jim: So far, your operation has been a success. Thank you, Eddie! March

6 Performance Review All data through 2/28/18 Ticker Price Total Return (%) Asset Allocation % Momentum Style FAST Symbol Rating (NAV) 1-mo. 3-mo. YTD yr. Risk Stock Bond Cash Foreign Index S & P K # Dow Jones 30 Industrials K # NASDAQ OTC Composite # # S&P 400 Mid-Cap K # Russell 2000 Small-Cap K # MS EAFE K # Bloom Barc Aggregate Bond Index Funds Style FAST Symbol Group average: Stock Bond Cash Foreign Momentum 500 Index LB 650 FUSEX Hold # # Extended Mkt Idx SG 398 FSEMX Hold K # Four-in-One Index LB 355 FFNOX Buy K # Freedom Index 2005 LB 2223 FJIFX Hold K # Freedom Index 2010 LB 2226 FKIFX Hold K # Freedom Index 2015 LB 2242 FLIFX Hold K # Freedom Index 2020 LB 2228 FPIFX Hold K # Freedom Index 2025 LB 2232 FQIFX Hold K # Freedom Index 2030 LB 2235 FXIFX Hold K # Freedom Index 2035 LB 2238 FIHFX Hold K # Freedom Index 2040 LB 2239 FBIFX Hold K # Freedom Index 2045 LB 2240 FIOFX Hold K # Freedom Index 2050 LB 2241 FIPFX Hold K # Freedom Index 2055 LB 2338 FDEWX Hold K # Freedom Index 2060 LB 2714 FDKLX Hold K # Freedom Index Income LB 2216 FIKFX Hold K # LgCap Core Enhanced LB 1827 FLCEX Hold # # LgCap Grow Enhanced LG 1829 FLGEX Hold # # LgCap Growth Index LG 2823 FSUIX Hold # # LgCap Value Enhanced LV 1828 FLVEX Buy K # LgCap Value Index LV 2827 FLCDX Hold K # Mid Cap Enhanced Idx MV 2012 FMEIX Buy K # Mid Cap Index MB 2349 FSCLX Hold K # Nasdaq Comp Index LG 1282 FNCMX Hold # # Real Estate Idx MB 2353 FRXIX Buy $ $ Small Cap Enhanced Idx SB 2011 FCPEX Buy K # Small Cap Idx SG 2356 FSSPX Hold K # Total Mkt Idx LB 397 FSTMX Buy K # U.S. Sustainability Idx LB 2939 FENSX Buy K # Int l Index Funds FAST Symbol Group average: Stock Bond Cash Foreign Momentum Emerging Mkts Idx 2341 FPEMX Hold # # Global ex US Idx 2345 FSGUX Hold K # Int'l Enhanced Index 2010 FIENX Buy K # Int'l Index 399 FSIIX Hold K # Int'l Sustainability Idx 2986 FNIYX Buy K # Total Int'l Index 2831 FTIGX Hold K # Fidelity ETFs Equity ETFs Style Symbol Group average: Stock Bond Cash Foreign Momentum NASDAQ Composite Idx LG ONEQ Buy # # Factor ETFs Style Symbol Group average: Stock Bond Cash Foreign Momentum High Dividend LV FDVV Buy K # Dividend ETF for Rising Rates LV FDRR Buy K # International High Dividend LV FIDI Buy International Value Factor LV FIVA Buy Low Volatility Factor LB FDLO Buy K # Momentum Factor LG FDMO Buy # # Quality Factor LG FQAL Buy # # Value Factor LV FVAL Buy K # Sector ETFs Symbol Group average: Momentum MSCI Cons Discretionary FDIS Buy # # MSCI Cons Staples FSTA Buy K K MSCI Energy FENY Hold K K MSCI Financials FNCL Buy # # MSCI Healthcare FHLC Buy K # MSCI Industrials FIDU Buy K # MSCI Information Tech FTEC Buy # # MSCI Materials FMAT Buy K # MSCI Real Estate FREL Buy $ $ MSCI Telecomm Services FCOM Hold K $ MSCI Utilities FUTY Buy $ $ Ticker Price Total Return (%) Avg. % Symbol Rating (NAV) 1-mo. 3-mo. YTD yr. Risk Duration Qual Yield Exps. Bond ETFs Group average: Corporate Bond FCOR Buy BBB Limited Term Bond FLTB Buy A Total Bond FBND Buy BBB Performance Review Notes: after a fund name denotes a fund closed to new investors. Group average returns and risk are based on the mo. returns of a portfolio equally weighted in each fund in the group. FAST is the Fidelity Automated Service Telephone fund code. Symbol is the more universal system of fund (and stock) Quotron symbols. NAV is the Net Asset Value per share. Rating is Buy, Sell, or Hold; (+) or (-) signifies upgrade or downgrade of recommendation from last month. Total Returns show returns for the month, the past three months, the year to date, the previous calendar year, and average annualized return for the past three years. Risk is Relative Volatility, the fund s 36-month standard deviation divided by the 36-month standard deviation of the S&P 500 index. Momentum: The arrows reflect whether a fund is above # or below $ the average of its closing daily prices for the past 13 or 39 weeks (a common momentum indicator). The J or K arrows reflect whether a fund moved above or below averages this month. Style reflects the price to book value ratios of the fund s equity positions, with G for growth (price high relative to book value), V for value (low-priced), and B for blend. Asset Allocation is the fund s breakdown into Stocks (including convertibles), Bonds, and Cash; and separately, the fund s % in Foreign positions. Duration is a measure of interest rate risk comparable to a zero-coupon bond of that maturity (in years). Average Quality ratings are based on S&P-style credit ratings, where AAA has essentially no credit risk, BBB is the lowest investment grade rating, and B is a junk bond fund. Yield is the month-end yield to maturity. Tax-Equivalent Yield assumes top state (and, for New York, NYC) tax rate for a given federal bracket. * The highest four brackets include the 3.8% health care surtax. Expenses is the latest reported annual fund expense ratio. Destiny funds bear a ~12% maximum load on a completed plan (loads are lower for larger investments). They are sold as long-term regular contractual plans by brokers and financial advisors. VIP funds can be traded at no cost, but withdrawals from the VIP group are subject to a 5% redemption fee, phased out over 5 years, and tax consequences. 6 Fidelity Investor

7 Actively Managed Funds Ticker Price Total Return (%) Asset Allocation % Momentum Style FAST Symbol Rating (NAV) 1-mo. 3-mo. YTD yr. Risk Stock Bond Cash Foreign Large-Cap Group average: Blue Chip Growth G 312 FBGRX Buy # # Blue Chip Value V 1271 FBCVX Buy K # Capital Appreciation G 307 FDCAX Hold # # Contrafund G 22 FCNTX Buy # # Destiny I - class O G 6 FDESX Hold # # Destiny II - class O B 306 FDETX Hold K # Disciplined Equity B 315 FDEQX Sell K # Dividend Growth V 330 FDGFX Hold K # Export & Multinational V 332 FEXPX Hold K # Focused Stock G 333 FTQGX Buy # # Growth Company G 25 FDGRX Buy # # Growth Discovery G 339 FDSVX Hold # # Independence G 73 FDFFX Buy # # Large Cap Stock B 338 FLCSX Buy K # Magellan G 21 FMAGX Hold # # Mega Cap Stock B 361 FGRTX Buy K # New Millennium B 300 FMILX Buy K # OTC G 93 FOCPX Buy # # Stock Selector All Cap G 320 FDSSX Hold # # Stock Selector Lg Cap Val V 708 FSLVX Buy K # Trend G 5 FTRNX Buy # # Value Discovery V 832 FVDFX Hold K # Mid-Cap Style FAST Symbol Group average: Stock Bond Cash Foreign Momentum Event Driven Opps G 2624 FARNX Buy # # Growth Strategies G 324 FDEGX Hold # # Leveraged Co Stock G 122 FLVCX Buy # # Low-Priced Stock B 316 FLPSX Buy K # Mid Cap Value V 762 FSMVX Hold K # Mid-Cap Stock B 337 FMCSX Hold K # Stock Select Mid Cap B 2412 FSSMX Sell K # Value V 39 FDVLX Sell K # Value Strategies B 14 FSLSX Sell K # Small-Cap Style FAST Symbol Group average: Stock Bond Cash Foreign Momentum Small Cap Discovery B 384 FSCRX Buy K # Small Cap Growth G 1388 FCPGX Hold # # Small Cap Stock B 340 FSLCX Hold K # Small Cap Value B 1389 FCPVX Buy K # Stock Selector Small Cap G 336 FDSCX Sell K # Growth and Income Style FAST Symbol Group average: Stock Bond Cash Foreign Momentum Balanced LG 304 FBALX Buy # # Convertible Securities LV 308 FCVSX Hold K # Equity-Income LV 23 FEQIX Sell K # Equity Div Inc LV 319 FEQTX Sell K # Fidelity Fund LG 3 FFIDX Sell # # Growth & Income LV 27 FGRIX Hold K # Puritan LG 4 FPURX Hold # # Real Estate Invest MB 303 FRESX Buy $ $ Real Estate Income SB 833 FRIFX Buy $ $ Strat. Dividend & Inc LV 1329 FSDIX Buy K # Telecom & Utilities LV 311 FIUIX Sell K K Asset Allocation Style FAST Symbol Group average: Stock Bond Cash Foreign Momentum Asset Manager 20% LB 328 FASIX Buy K # Asset Manager 30% LG 1957 FTANX Buy K # Asset Manager 40% LG 1958 FFANX Buy K # Asset Manager 50% LG 314 FASMX Buy K # Asset Manager 60% LG 1959 FSANX Buy K # Asset Manager 70% LG 321 FASGX Buy K # Asset Manager 85% LG 347 FAMRX Buy K # Funds of Funds Style FAST Symbol Group average: Stock Bond Cash Foreign Momentum Freedom 2005 LB 1312 FFFVX Hold K # Freedom 2010 LB 371 FFFCX Hold K # Freedom 2015 LB 1313 FFVFX Hold K # Freedom 2020 LB 372 FFFDX Hold K # Freedom 2025 LB 1314 FFTWX Hold K # Freedom 2030 LB 373 FFFEX Hold K # Freedom 2035 LB 1315 FFTHX Hold K # Freedom 2040 LB 718 FFFFX Hold K # Freedom 2045 LB 1617 FFFGX Hold K # Freedom 2050 LB 1618 FFFHX Hold K # Freedom 2055 LB 2331 FDEEX Hold K # Freedom 2060 LB 2708 FDKVX Hold K # Freedom Income LB 369 FFFAX Hold K # Managed Retirement 2005 LB 1889 FIROX Hold K # Managed Retirement 2010 LB 1891 FIRQX Hold K # Managed Retirement 2015 LB 1893 FIRSX Hold K # Managed Retirement 2020 LB 1995 FIRVX Hold K # Managed Retirement 2025 LB 1996 FIXRX Hold K # Managed Retirement Income LB 1887 FIRMX Hold K # Simplicity RMD 2005 LB 1890 FIRPX Hold K # Simplicity RMD 2010 LB 1892 FIRRX Hold K # Simplicity RMD 2015 LB 1894 FIRUX Hold K # Simplicity RMD 2020 LB 2009 FIRWX Hold K # Simplicity RMD Income LB 1888 FIRNX Hold K # March

8 Performance Review Ticker Price Total Return (%) Asset Allocation % Momentum Style FAST Symbol Rating (NAV) 1-mo. 3-mo. YTD yr. Risk Stock Bond Cash Foreign International Group average: Diversified International 325 FDIVX Buy K # Global Balanced 334 FGBLX Hold # # Global Commodity Stk 2120 FFGCX Buy K # Global Equity Inc 2406 FGILX Hold K # Global Strategies 1960 FDYSX Buy K # Int'l Capital Appreciation 335 FIVFX Buy K # Int'l Discovery 305 FIGRX Buy K # Int'l Growth 1979 FIGFX Buy K # Int'l Real Estate 1368 FIREX Buy K # Int'l Small Cap 818 FISMX Hold # # Int'l Small Cap Opps 1504 FSCOX Buy # # Int'l Value 1597 FIVLX Buy K # Overseas 94 FOSFX Buy K # Total Int'l Equity 1978 FTIEX Hold K # Worldwide 318 FWWFX Buy # # Int'l Western FAST Symbol Group average: Stock Bond Cash Foreign Momentum Canada 309 FICDX Hold # # Europe 301 FIEUX Buy # # Nordic 342 FNORX Hold # # Int'l Asia & Emerging FAST Symbol Group average: Stock Bond Cash Foreign Momentum China Region 352 FHKCX Sell # # Emerging Asia 351 FSEAX Hold K # Emerg Eur, ME, Africa 2053 FEMEX Sell # # Emerging Markets 322 FEMKX Hold # # Emerg Mkts Discovery 2374 FEDDX Buy # # Japan 350 FJPNX Buy # # Japan Smaller Cos 360 FJSCX Buy # # Latin America 349 FLATX Sell # # Pacific Basin 302 FPBFX Buy K # Total Emerging Mkts 2369 FTEMX Buy # # International Bonds FAST Symbol Group average: Stock Bond Cash Foreign Momentum Global Credit 2423 FGBFX Hold $ K Global High Income 2297 FGHNX Buy K # New Markets Income 331 FNMIX Buy K K Fidelity Sector Funds Ticker Price Total Return (%) Momentum FAST Symbol Rating (NAV) 1-mo. 3-mo. YTD yr. Risk Consumer Group average: Consumer Discretionary 517 FSCPX Buy # # Consumer Staples 9 FDFAX Buy K K Leisure 62 FDLSX Buy K # Multimedia 503 FBMPX Buy K # Retailing 46 FSRPX Hold # # Cyclicals FAST Symbol Group average: Momentum Air Transport 34 FSAIX Buy K # Automotive 502 FSAVX Buy K # Chemicals 69 FSCHX Buy K # Construction & Housing 511 FSHOX Buy K # Defense & Aerospace 67 FSDAX Hold # # Environment & Alt Engy 516 FSLEX Hold K # Industrials 515 FCYIX Buy K # Materials 509 FSDPX Buy K # Transportation 512 FSRFX Buy K # Financial Services FAST Symbol Group average: Momentum Banking 507 FSRBX Hold # # Brokerage 68 FSLBX Buy # # Consumer Finance 98 FSVLX Buy K # Financial Services 66 FIDSX Buy # # Insurance 45 FSPCX Buy K # Health Care FAST Symbol Group average: Momentum Biotechnology 42 FBIOX Buy # # Health Care 63 FSPHX Buy # # Health Care Services 505 FSHCX Buy K # Medical Technology 354 FSMEX Buy # # Pharmaceuticals 580 FPHAX Buy K # Natural Resources FAST Symbol Group average: Momentum Energy 60 FSENX Hold K # Energy Service 43 FSESX Hold K K Gold 41 FSAGX Hold K K Natural Resources 514 FNARX Hold K # Technology FAST Symbol Group average: Momentum Communications Equip 518 FSDCX Buy # # Computers 7 FDCPX Buy # # IT Services 353 FBSOX Buy # # Semiconductors 8 FSELX Hold # # Software & IT 28 FSCSX Buy # # Technology 64 FSPTX Buy # # Wireless 963 FWRLX Hold # # Utilities FAST Symbol Group average: Momentum Natural Gas 513 FSNGX Buy K K Telecommunications 96 FSTCX Hold K K Utilities 65 FSUTX Buy $ K 8 Fidelity Investor