Fidelity Dividend Growth Fund

Transcription

1 Fidelity Dividend Growth Fund Key Takeaways The fund's Retail Class shares gained 13.06% for the fiscal year ending July 31, 2017, lagging the 16.04% result of the benchmark S&P 500 index. Investors' increasing appetite for more-cyclical, riskier investments for most of the period held back the fund's performance versus the benchmark, as the portfolio managers typically focus on quality and value. A non-benchmark investment in Teva Pharmaceutical Industries was the fund's largest detractor. Among other factors, the stock declined due to market fear about generic-drug price deflation. On the positive side, several bank stocks finished among the fund's top relative contributors, as investors expected higher interest rates and new regulatory reforms to boost bank profits. On April 8, 2017, Gordon Scott became the fund's co-manager, a post he will hold through December 31, 2017, at which time he will become sole portfolio manager. As interest rate policies normalize, Gordon believes valuation discipline will grow increasingly important. Meanwhile, the portfolio managers are focusing on identifying opportunities in the health care, financials and industrials sectors. MARKET RECAP The U.S. equity bellwether S&P 500 index gained 16.04% for the year ending July 31, 2017, rising sharply following the November election and continuing to rally through the end of February on optimism for President Trump's pro-business agenda. Equity markets leveled off, however, as the fledgling administration faced the first test of its domestic agenda. Stocks reacted with uncertainty to efforts by Congress in March to repeal and replace the Affordable Care Act, and then reverted upward through July 31. Growth stocks surged ahead of value, while small-caps' advantage over largecaps narrowed. Sector-wise, financials (+36%) fared best, riding an uptick in bond yields and a surge in banks, particularly post-election. technology gained 29%, as a handful of major index constituents posted stellar returns. Industrials (+18%) was boosted by a call for increased infrastructure spending. Consumer discretionary (+14%) slightly lagged the broader market because brick-and-mortar retailers continued to suffer from increased online competition. Energy (0%) was hurt by low oil prices. Utilities (+6%), consumer staples (+4%), telecommunication services (-7%) and real estate (-2%) all struggled amid an improved backdrop for riskier assets that curbed demand for dividend-rich sectors, as well as the likelihood of further interest rate hikes later in Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A Ramona Persaud Lead Manager Fund Facts Trading Symbol: FDGFX Start Date: April 27, 1993 Size (in millions): $7, Investment Approach Gordon Scott Co-Manager Fidelity Dividend Growth Fund is a diversified domestic equity strategy with a large-cap core orientation. The fund seeks risk-aware capital appreciation. We believe that value investing wins over time, where quality plus good or improving capital allocation typically via dividend-paying stocks can enhance downside protection. Our investment process is bottom-up in nature and focused on generating total return through both capital appreciation and the stabilizing force of dividend income. We focus on quality companies trading at reasonable valuations with strong or improving capital-allocation policies. This tends to lead to a fund with profitability metrics and dividend yields similar to its high-quality S&P 500 benchmark, but often with better valuations and a better volatility profile. An interview with Lead Portfolio Manager Ramona Persaud and Co- Portfolio Manager Gordon Scott Q: Ramona, how did the fund perform for the fiscal year ending July 31, 2017 R.P. The fund's Retail Class shares gained 13.06% the past 12 months, lagging the 16.04% return of the benchmark S&P 500. During the same time frame, the fund also lagged its peer group average, albeit by a narrower margin. Q: How did market conditions influence the fund's performance the past year R.P. It was a volatile period, characterized by investors' increasing appetite for more-cyclical, riskier investments. This held back the fund, as Gordon and I tend to focus on both value- and quality-oriented investments. President Donald Trump's November victory a surprise to some reignited investors' risk preference. President Trump's stance appeared solidly pro-business, with promises of corporate and individual tax cuts, regulatory rollbacks and fiscal stimulus, which many thought would help reaccelerate the economy. As the period unfolded, though, disappointment grew over the new administration's seeming inability to effect promised legislation. Hope for economic stimulus waned, and investors began gravitating toward growth stocks, causing value-oriented investments to lag. We saw a sharp change in sentiment in a relatively short period of time. Despite the fund's performance in the one-year period, we believe value investing should outperform over time. We also believe owning quality companies and allocating capital wisely can help protect investors during market downtrends. So, in our view, the combination of these attributes can add longer-term value over the benchmark. Q: What factors affected the fund's result versus the benchmark this period R.P. From a sector perspective, our health care selections dragged most on relative results. We typically prefer names with reasonable valuations that adequately reflect their growth prospects. Such was the case with Israel-based 2 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

3 Teva Pharmaceutical Industries, which is not part of the benchmark. Unfortunately, the stock returned -38% the past 12 months. We thought Teva, set to become the world's largest generic-drug maker, would be able to drive scale efficiencies through its business. However, drug pricing became a major concern. The market also remained wary as Teva worked to integrate a recent acquisition. For these reasons, by period end we had exited our position. Picks in consumer discretionary also disappointed, especially retailing stocks. Here, an overweighting in autoparts seller AutoZone hurt us. The stock suffered a significant price drop in late May after AutoZone reported disappointing third-quarter earnings and revenue, along with a decline in same-store sales. AutoZone shares dipped even lower in July after competitor O'Reilly Automotive announced slowing overall sales and warned of weak same-store sales, sending the auto-parts industry plunging. AutoZone returned about -34% for the full 12 months. Apparel maker and retailer L Brands, best known for its Victoria's Secret and Bath & Body Works stores, was another detractor. Shares of L Brands returned -35% for the year, owing in large part to the company's Victoria's Secret brand repositioning, in which it eliminated its swim and apparel lines, hurting year-over-year sales figures. This, in combination with slowing foot-traffic trends, continued to impact the firm. As a result, L Brands' late- February release of 2017 fiscal guidance was far below many analysts' expectations, sending the stock price plunging. Despite the poor results for both AutoZone and L Brands this period, we remained optimistic about the growth potential for both names, and held on to our positions. Elsewhere, the fund's cash position about 5% of assets, on average, and which we held as a buffer against potential volatility was a big detractor amid a rising market. Q: What else influenced relative results R.P. Largely avoiding social-media juggernaut Facebook and aerospace giant Boeing two large-cap benchmark components that outperformed this period also weighed on the fund's performance. Meanwhile, we sold our position in Boeing because we no longer found it a compelling investment opportunity. Turning to the positive, an overweighting in banks was a big plus. Financials stocks led the so-called Trump rally, as investors expected stronger economic growth would boost interest rates and that burdensome regulations would be rolled back. Accordingly, Bank of America and JPMorgan Chase two of the fund's biggest positions the past year outperformed, as did our stakes in Citigroup and others. Citigroup was sold by period end. Q: What else helped R.P. A sizable overweighting in gaming and entertainment company Activision Blizzard was another notable fund contributor. Activision is best known for its video-game franchises "Call of Duty," "World of Warcraft" and "Candy Crush Saga," among others. We continued to like the firm's growth prospects, given its product pipeline. Activision gained 55% this period, including a spike in February after the firm announced a stock-buyback program, which we viewed as good capital allocation. The share price continued to climb as analysts upgraded the stock on the firm's integration of sponsored content and in-game ads, along with the sustained success of its legacy titles. Overweighting Apple was another positive. We took the opportunity to add to our position in this high-quality tech giant when we found its valuation compelling; indeed, Apple was the fund's largest holding this period. This was a good decision, as the stock rose roughly 45% the past 12 months, driven by better-than-expected iphone 7 sales, which represented roughly two-thirds of the company's total annual revenue. Apple sold 78 million iphone 7 devices in the final quarter of 2016 alone, helping propel the company to record revenues. Apple shares continued to rise in 2017 on optimism for the upcoming iphone 8, which promises significant design changes. Q: Gordon, what is your outlook as of July 31 G.S. I'm excited about the opportunity to join Ramona in managing the fund, in part because I believe the universe of higher-quality, dividend-paying stocks is attractive relative to the broader market today. I think many of these stocks have good secular-growth prospects and are trading at reasonable valuations versus their long-term records and the market as whole. In contrast, other parts of the U.S. stock market have seen valuations rise to historically lofty levels, primarily driven by exceptionally low long-term interest rates. We are beginning to see interest rate policies normalize across the globe. Extremely accommodative policies, such as the quantitative easing that emerged following the 2008 financial crisis, are just beginning to be slowly reversed. Interest rates are the starting point for stock market valuations, and as rate policies normalize, I believe valuation discipline will be increasingly important in the coming years. In that context, I think reasonably valued dividend-growth stocks look well-positioned to outperform the broader market. 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 Gordon Scott on his investment philosophy and where he's finding opportunities: "My investment process is centered on balancing valuation discipline with business quality, and I believe this process lends itself naturally to a dividend-growth mandate. "I look to purchase dividend-paying stocks at a discount to their estimated 'intrinsic,' or true, value, believing that price and value will converge over time in a competitive market. To me, the intrinsic value of a business ultimately is the present value of its future cash flows. "With that in mind, fundamental factors that increase the durability of a company's future earnings and that drive higher conversion of earnings into free cash flow tend to increase my appraisal of value. "My focus on quality and valuation within a universe of dividend-paying stocks is likely to result in a portfolio that skews cheaper than the benchmark, along with relatively higher traditional measures of portfolio quality. "As of July 31, I believe that select dividend-growth stocks within sectors such as health care, financials and industrials display a particularly attractive combination of good long-term earningsgrowth prospects and reasonable or even deeply discounted valuations. These are just a few areas of focus for Ramona and me as we work closely together through 2017 year-end, when she will step aside. "We view the transition as an evolution, and have worked side by side to make thoughtful, methodical changes in the portfolio, where appropriate. I look forward to updating shareholders in future reports with more detail on how the fund is performing." Holding Market Segment Average Relative Relative Contribution (basis points)* Bank of America Corp. Financials 1.29% 54 Activision Blizzard, Inc. 1.26% 49 JPMorgan Chase & Co. Financials 1.17% 31 Apple, Inc. 1.24% 29 Citigroup, Inc. Financials 0.81% 26 * 1 basis point = 0.01%. LARGEST DETRACTORS VS. BENCHMARK Holding Teva Pharmaceutical Industries Ltd. sponsored ADR AutoZone, Inc. Facebook, Inc. Class A Market Segment Average Relative Relative Contribution (basis points)* Health Care 0.86% -73 Consumer Discretionary 0.82% % -32 The Boeing Co. Industrials -0.43% -29 NVIDIA Corp. * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class -0.29% -29 Portfolio Portfolio Six Months Ago Domestic Equities 90.21% 88.20% International Equities 5.48% 6.46% Developed Markets 5.48% 6.46% Emerging Markets 0.00% 0.00% Tax-Advantaged Domiciles 0.00% 0.00% Bonds 0.09% 0.07% Cash & Net Other Assets 4.22% 5.27% 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 10 LARGEST HOLDINGS Market Segment Portfolio Portfolio Six Months Ago 19.50% 19.66% Financials 15.46% 18.44% Health Care 14.42% 11.18% Consumer Staples 11.01% 12.01% Industrials 10.71% 7.61% Consumer Discretionary 8.51% 8.50% Energy 7.43% 9.17% Materials 5.01% 5.36% Telecommunication Services 1.80% 1.90% Real Estate 1.15% 0.90% Utilities 0.79% 0.00% Other 0.00% 0.00% Holding Apple, Inc. Microsoft Corp. Market Segment Portfolio Portfolio Six Months Ago 3.99% 4.54% 3.50% 3.29% Johnson & Johnson Health Care 3.37% 3.08% Alphabet, Inc. Class C 2.92% 3.11% JPMorgan Chase & Co. Financials 2.90% 2.69% Wells Fargo & Co. Financials 2.43% 2.65% Chevron Corp. Energy 2.41% 2.47% Exxon Mobil Corp. Energy 2.16% 2.48% Bank of America Corp. Financials 1.99% 2.59% Amgen, Inc. Health Care 1.99% 1.52% 10 Largest Holdings as a % of Net Assets 27.67% 29.10% Total Number of Holdings The 10 largest holdings are as of the end of the reporting period, and may not be representative of the fund's current or future investments. Holdings do not include money market investments. FISCAL PERFORMANCE SUMMARY: Periods ending July 31, Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity Dividend Growth Fund Gross Expense Ratio: 0.62% % 8.85% 13.06% 7.48% 13.06% 6.68% S&P 500 Index 9.51% 11.59% 16.04% 10.87% 14.78% 7.74% Morningstar Fund Large Blend 8.66% 10.64% 15.08% 8.85% 13.50% 6.74% % Rank in Morningstar Category (1% = Best) % 80% 70% 55% # of Funds in Morningstar Category ,399 1,233 1, Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 04/27/ This expense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that fiscal year. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit fidelity.com/performance, advisor.fidelity.com, or 401k.com. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. Please see the last page(s) of this Q&A document for most-recent calendarquarter performance. 5 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

6 Definitions and Important 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. 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 4/8/17, Gordon Scott was added as co-portfolio manager and Ramona Persaud transitioned to lead portfolio manager of the fund. 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. 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. S&P 500 is a market-capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. MARKET-SEGMENT WEIGHTS Market-segment weights illustrate examples of sectors or industries in which the fund may invest, and may not be representative of the fund's current or future investments. Should not be construed or used as a recommendation for any sector or industry. RANKING INFORMATION 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. 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 6

7 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. Broad Market Opportunities Fund. Previously, Mr. Scott was a research associate covering transportation and machinery stocks. He has been in the investments industry since joining Fidelity in Mr. Scott earned his bachelor of business administration degree and his master of science degree in finance from the University of Wisconsin-Madison. He is also a CFA charterholder. 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 Portfolio, and the equity sleeve of Fidelity Strategic Dividend & 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. Gordon Scott 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. Scott manages Fidelity Export and Multinational Fund and is a member of the fund management team for Fidelity Advisor Stock Selector Mid Cap Fund. Additionally, he comanages Fidelity Dividend Growth Fund and Fidelity Advisor Dividend Growth Fund. Prior to assuming his current responsibilities, Mr. Scott was responsible for the coverage of stocks within the Consumer Discretionary sector, and managed Fidelity Select Consumer Discretionary Portfolio ( ), Fidelity Advisor Consumer Discretionary Fund ( ), VIP Consumer Discretionary Portfolio ( ), and Fidelity Consumer Discretionary Central Fund ( ). He was also a member of the fund management team for Fidelity Stock Selector All Cap Fund, Fidelity Advisor Stock Selector All Cap Fund, and Fidelity Series 7 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

8 PERFORMANCE SUMMARY: Quarter ending September 30, Annualized 5 10 / LOF 1 Fidelity Dividend Growth Fund Gross Expense Ratio: 0.52% % 7.64% 12.31% 6.55% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 04/27/ 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. 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.