Fidelity OTC Portfolio

Transcription

1 Fidelity OTC Portfolio Key Takeaways For the fiscal year ending July 31, 2017, the fund's Retail Class shares gained 27.97%, well ahead of the 24.41% return of the benchmark Nasdaq Composite Index. Stock selection accounted for all of the fund's outperformance of the benchmark the past 12 months, whereas sector allocations modestly detracted overall. Picks in information technology added the most value by far, followed by consumer discretionary. Conversely, security selection and an overweighting in health care particularly the pharmaceuticals, biotechnology & life sciences group detracted from relative performance. Selections in industrials also hurt. The fund's top individual contributor was a substantial overweighting in electric-vehicle (EV) maker Tesla (+38%). Graphics-processor maker Nvidia also helped, as did video-game developers Activision Blizzard and Ubisoft Entertainment. On the downside, untimely ownership of some pharma and biotech names that declined sharply, including Endo International and Novavax, detracted from the fund's relative result. Overweighting online-deal purveyor Groupon also hurt. Effective September 18, 2017, Sonu Kalra has been appointed Lead Portfolio Manager and Chris Lin appointed Co-Manager of Fidelity OTC Portfolio, succeeding Gavin Baker. 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. 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 An interview with Portfolio Manager Sonu Kalra Fund Facts Trading Symbol: Sonu Kalra Lead Manager FOCPX Start Date: December 31, 1984 Size (in millions): $15, Investment Approach Fidelity OTC Portfolio invests primarily in dynamic growth companies listed on the NASDAQ stock exchange. Our investment approach focuses on companies we believe have above-average earnings growth potential with sustainable business models, for which we believe the market has mispriced the rate and/or durability of growth. In particular, we look for events that might provide a business catalyst such as product cycles, a change in management and turnaround situations that could add to a stock's true value. We believe finding companies with a competitive advantage, pricing power and strong management teams will deliver superior earnings over the long term. We look to exploit inappropriate valuations in the market through bottom-up, fundamental analysis, working in concert with Fidelity's global research team. Q: Sonu, how did the fund perform for the fiscal year ending July 31, 2017 The fund delivered strong results both in absolute terms and relative to the benchmark. For the year, the fund's Retail Class shares rose 27.97%, well ahead of the 24.41% return of the benchmark Nasdaq Composite Index. The fund easily outpaced its peer average as well. Importantly, stock selection accounted for all of the fund's outperformance this period; indeed, sector allocation modestly detracted. The fund's information technology holdings added the most value by far. Picks in the consumer discretionary sector also were quite strong. On the downside, unfavorable stock selection and an overweighting in health care particularly in the pharma, biotech & life sciences group detracted most from the fund's relative result. Selections in industrials also hurt, as did overweighting energy and underweighting financials. Q: What factors helped the fund outperform its benchmark the past year The fund's outperformance of its Nasdaq Composite benchmark was driven overwhelmingly by stock selection in the information technology sector, with picks in consumer discretionary also adding substantial value. The past 12 months saw large-cap growth stocks outpace most other style segments. The November election of Donald Trump as U.S. president brought with it the prospect of fiscal stimulus and tax reform, which investors believed could help reaccelerate the economy. Q: Let's talk about relative contributors This period, a sizable overweighting in Tesla (+38%) proved the fund's No. 1 contributor. To be fair, much of the benefit could almost be considered an artifact of the time frame involved. After market pressure in both early and late 2016, driven partly by analyst pessimism and post-election concern about the future of EVs generally, the fund's Tesla position was increased significantly. This proved fortunate given the stock's big move in By June, the fund's position was trimmed as a risk-management exercise. 2 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

3 To some investors, Tesla appeared to be extending its competitive advantage with its popular EVs, the largest EV charging network, and better autonomous-driving features developed entirely in-house. Also, even five years after introduction, Tesla still produces the world's only "connected" cars, with OTA (over the air) software communication that aims to continually improve vehicle performance and collect and report data. Tesla has been building a large data advantage that could prove crucial in the race to full autonomy. More and more competitors are trying to catch up, announcing their own EV programs. I'll also mention Nvidia, which nearly tripled in value this year. The company has done well in the field of visual computing PC gaming, for example and shown leadership in machine learning, including the technology supporting driverless cars. Shares of the graphics-card and "system on a chip" designer gained 186%, as the firm reported several quarters of impressive financial results driven by strength in its core gaming business, as well as rapid adoption of its products in the development of AI (artificial intelligence) and self-driving cars. Although the fund's stake was substantially reduced to lock in profits, Nvidia remained a large position in the fund at period end. Elsewhere, game developers Activision Blizzard (+55%) and Ubisoft Entertainment (+54%), the latter based in France and thus not part of the benchmark, also ranked as top contributors. Underweighting Microsoft (+31%), however, detracted from the fund's relative result. Q: A good segue; other detractors this period Not owning content-streamer Netflix (+99%) prior to March detracted. In terms of overweightings, the fund was hurt by specialty pharma Endo International (-37%) and biotech Novavax (-86%). Endo had been sold from the fund by the year's halfway point, and Novavax was liquidated in July. I'll also mention the fund's position in online discount-deal purveyor Groupon (-22%), which remained volatile this period. Over time, many of the fund's larger holdings have been names that elicit strong investor sentiment and can swing wildly in the short term. Q: What can you tell us about your investment strategy Chris and I focus on owning companies that we think can sustain above-average earnings over the long term. We aim to achieve this by looking for firms with some combination of competitive advantage, high barriers to entry, pricing power and strong management. We also seek firms that demonstrate above-average growth versus peers, and those with good return on equity and improving return on capital. Additionally, we look for events that might provide a business catalyst such as product cycles, management changes and turnaround situations that could add to a stock's intrinsic, or true, value. Managing risk is an important component of our investment strategy. One of the ways we try to mitigate a fund's risk exposure is by holding a large number of positions, with names in which we have the highest conviction representing the fund's heaviest weightings. Lastly, I'm still an analyst at heart, believing bottom-up, fundamental analysis is the best way to uncover mispriced valuations in the market. I feel strongly that, together with our deep and talented research organization, Chris and I will be able to identify opportunities that add value for shareholders over the long term. Q: Sonu, what is your outlook as of July 31 I am cautiously optimistic that recent strength in the stock market could continue through the end of Earnings growth has been strong, and investors seem hopeful that the faster earnings growth could be buoyed by a decrease in the regulatory burden on corporate America, as well as by potential tax reform. I'm also hopeful that we will see continued improvement in the economy more generally. Although interest rates have risen a bit, they are still low by historical standards. I'm paying particular attention to the potential impact this may have on the U.S. housing market. Energy prices have declined since the start of 2017, and employment growth has been robust. I'm watching for early signs of rising inflation and also eyeing the impact of higher wages as they filter through the U.S. economy. By history's standard, equity valuations appear high, but I'm optimistic that after two years of stagnation, earnings growth will help bring relative valuations back to historically more normal levels. The first seven months of Donald Trump's administration have been hindered by controversy around Russia and the lack of progress on the president's legislative agenda. Health care reform looks to be stuck in the mud, and little progress has been made on other priorities, such as tax reform. I'll continue to monitor these events closely, assessing the potential impact they may have across sectors and industries such as health care, retail, financials and industrials, to name a few. 3 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

4 Sonu Kalra on Amazon.com: "To me, Amazon one of the fund's largest holdings and a relative contributor this period has become the '800-pound gorilla' of retail. Brickand-mortar rivals already were suffering amid the rising preference for online shopping when they were hit with the June news that Amazon intended to acquire organic grocer Whole Foods Market. "In my view, online grocery represents a stillunderpenetrated category. Of all retail shopping, about 12% is done online, and grocery accounts for only a small part of that. By some estimates, grocery overall is an $800 billion business, which presents Amazon with a big opportunity to gain market share. For this and other reasons, I'm bullish on the deal. Whole Foods aims to give customers a high-quality experience, which I think nicely aligns with Amazon's business philosophy. "Over time, I think we'll see Amazon make Whole Foods more cost-competitive, as one struggle the chain has faced is the perception that its products are unaffordable. Amazon also plans to offer home delivery or in-store pick-up of customer orders. "Amazon already has a distinct data advantage with regard to its customers' purchasing habits, and I think the company should be able put that information to good use in this new endeavor. That said, while I would not be surprised were Amazon to continue taking market share, I don't expect it to become a global monopoly. Indeed, I see certain ways businesses might compete with the Amazon e-commerce juggernaut. "Take, for example, out-of-benchmark contributor Wayfair (+76%), an online retailer of home goods. In my view, furniture has very few go-to 'brands,' and shoppers want to see these items in context. Thus furniture shopping can be very different from Amazon's core retail business. "At the other end of the spectrum, consider 'off price' discounters. I think stores like Dollar Tree where prices literally are $1 or less and cash transactions predominate may be more insulated from Amazon, as their customer bases overlap less than others' with Amazon Prime, which not all consumers want or can afford. Suffice to say I'll be watching Amazon and its competitors closely." LARGEST CONTRIBUTORS VS. BENCHMARK Holding Tesla, Inc. NVIDIA Corp. Activision Blizzard, Inc. Ubisoft Entertainment SA Wayfair LLC Class A * 1 basis point = 0.01%. Market Segment Average Relative LARGEST DETRACTORS VS. BENCHMARK Holding Market Segment Relative Contribution (basis points)* 6.26% % % % % 46 Average Relative Relative Contribution (basis points)* Endo International PLC Health Care 1.40% -135 Groupon, Inc. 1.77% -110 Novavax, Inc. Health Care 0.13% -63 SolarCity Corp. Industrials 0.43% -59 PDC Energy, Inc. Energy 0.25% -47 * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class Portfolio Portfolio Six Months Ago Domestic Equities 91.42% 91.74% International Equities 8.18% 8.22% Developed Markets 8.18% 7.72% Emerging Markets 0.00% 0.50% Tax-Advantaged Domiciles 0.00% 0.00% Bonds 0.09% 0.00% Cash & Net Other Assets 0.31% 0.04% 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 52.60% 46.32% 19.93% 25.39% Health Care 14.15% 16.39% Staples 4.57% 2.14% Financials 4.54% 6.19% Industrials 1.63% 1.57% Energy 1.17% 0.68% Materials 0.62% 0.51% Real Estate 0.39% 0.34% Telecommunication Services 0.10% 0.43% Utilities 0.00% 0.00% Other 0.00% 0.00% Holding Apple, Inc. Alphabet, Inc. Class A Amazon.com, Inc. Activision Blizzard, Inc. Ubisoft Entertainment SA Tesla, Inc. Facebook, Inc. Class A Market Segment Portfolio Portfolio Six Months Ago 8.03% 9.30% 6.22% 4.30% 5.22% 5.54% 5.22% 4.21% 4.29% 2.53% 4.29% 7.79% 3.66% 2.46% Amgen, Inc. Health Care 3.45% 0.03% NVIDIA Corp. Alphabet, Inc. Class C 2.85% 3.15% 2.70% 2.90% 10 Largest Holdings as a % of Net Assets 45.93% 45.73% 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 OTC Portfolio Gross Expense Ratio: 0.91% % 26.84% 27.97% 17.20% 21.24% 12.34% NASDAQ Composite Index 13.70% 18.64% 24.41% 14.60% 18.11% 10.77% Morningstar Fund Large Growth 13.01% 17.38% 17.50% 10.37% 14.42% 8.00% % Rank in Morningstar Category (1% = Best) % 1% 1% 1% # of Funds in Morningstar Category ,398 1,260 1, Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 12/31/ 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. The technology industries can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, and competition from new markets, and general economic conditions. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. The securities of smaller, less well-known companies can be more volatile than those of larger companies. The fund may have additional volatility because it can invest a significant portion of assets in securities of a small number of individual issuers. 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 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. 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. NASDAQ Composite Index is a market-capitalization-weighted index that is designed to represent the performance of NASDAQ stocks. 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 6

7 Manager Facts Sonu Kalra 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. Mr. Lin earned his bachelor of arts degree, with honors, in economics from Harvard University. In this role, Mr. Kalra is lead portfolio manager of Fidelity OTC Portfolio and Fidelity OTC Commingled Pool. Mr. Kalra also manages Fidelity Blue Chip Growth Fund, Fidelity Series Blue Chip Growth Fund and Fidelity Blue Chip Growth Commingled Pool. Prior to assuming his current responsibilities, Mr. Kalra managed a variety of other funds, including Fidelity Select Computers Portfolio, Fidelity Select Portfolio, Fidelity Advisor Fund, and Fidelity VIP Portfolio. Mr. Kalra also served as sector leader of the technology team and managed Fidelity Select Networking & Infrastructure Portfolio. He joined Fidelity as an analyst in 1998 covering the radio, television, and entertainment industries, and following various areas within the technology sector including hardware, software, networking, and internet stocks. Before joining Fidelity, Mr. Kalra completed the Financial Management Program at GE Capital in Stamford, Connecticut. He has been in the financial industry since Mr. Kalra earned his bachelor of science degree in finance from Pennsylvania State University and his master of business administration degree from The Wharton School of the University of Pennsylvania. Christopher Lin 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. Lin manages Fidelity Select Computers Portfolio and co-manages Fidelity and Fidelity Advisor Stock Selector Mid Cap Funds. Mr. Lin is also responsible for co-managing the Fidelity OTC Portfolio and the Fidelity OTC Commingled Pool. Mr. Lin is a sector leader where he is responsible for the coverage of large cap internet stocks. He has also previously served as comanager of Fidelity Select Semiconductors Portfolio and Fidelity Advisor Semiconductors Fund. Prior to assuming his current responsibilities, Mr. Lin served as a research analyst and as a research associate covering biotechnology and other health care stocks. He has been in the financial industry since joining Fidelity in 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 OTC Portfolio Gross Expense Ratio: 0.81% % 16.52% 20.27% 11.75% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 12/31/ 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. Diversification does not ensure a profit or guarantee against a loss. included on this page is as of the most recent calendar quarter. S&P 500 is a registered service mark of Standard & Poor's Financial Services LLC. Other third-party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR LLC or an affiliated company. Fidelity Brokerage Services LLC, Member NYSE, SIPC., 900 Salem Street, Smithfield, RI Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI FMR LLC. All rights reserved. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee