Fidelity Small Cap Growth Fund

Transcription

1 Fidelity Small Cap Growth Fund Key Takeaways For the semiannual reporting period ending January 31, 2018, the fund's Retail Class shares rose 17.86%, well outpacing the 14.44% return of the benchmark Russell 2000 Growth Index. Versus the benchmark, successful stock picking, especially within the information technology and consumer discretionary sectors two of our primary areas of investment fueled the fund's performance, as the combination of established-growth and emerging-growth names worked well during the market rally. This period, an emerging-growth name was our top individual relative contributor: clinical-stage biotech AnaptysBio (+406% in the fund). Online shipping-services provider Stamps.com, an example of an established grower, was another big contributor. On the flip side, stock selection and an underweighting in the health care group hurt us somewhat. This included the fund's biggest individual detractor, Cotiviti Holdings (-19%), which aims to save insurance companies money by catching payment errors. As of period end, Portfolio Manager Patrick Venanzi views current valuations as historically high. Nevertheless, he steers clear of predicting market factors and market timing, focusing instead on companies with strong competitive positions in growing industries. In Pat's experience, their stocks tend to compound value over time no matter the market backdrop. Pat Venanzi will be taking a leave of absence from Fidelity beginning June 1, He will return to Fidelity and his portfolio management responsibilities on August 30, Jennifer Fo Cardillo and Slava Kruzement-Prykhodko will serve as interim Co-Managers of the fund. The fund closed to new accounts on February 2, MARKET RECAP U.S. equities gained 15.43% for the six months ending January 31, 2018, as the S&P 500 index closed the period near an all-time high after a strong start to the new year. The lone exception to the uptrend was a brief cooldown in August, when geopolitical tension escalated and uncertainty grew regarding legislation out of Washington. Upward momentum soon returned and continued through year-end, with consumer sentiment and other market indicators staying positive. Investors remained decidedly upbeat as the calendar turned the index rose roughly 6% in January. Growth stocks handily topped value for the six months, while large-caps edged small-caps. By sector, information technology fared best, advancing 22% on strong earnings growth from several major index constituents. Financials (+20%) also stood out, riding the uptick in bond yields and a surge in banks (+24%). Consumer discretionary added 19%, driven by a roughly 33% gain for retailers. Materials rose about 16%, spurred by increased demand, especially from China. Conversely, notable laggards included some defensive-oriented categories, including utilities (-2%), telecommunication services (+5%) and consumer staples (+6%), that struggled amid investors' general preference for risk. Health care (+11%) fared better but still trailed the index. Lastly, rising interest rates held back real estate (+1%). Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A An interview with Portfolio Manager Patrick Venanzi Fund Facts Trading Symbol: Patrick Venanzi Portfolio Manager FCPGX Start Date: November 03, 2004 Size (in millions): $4, Investment Approach Fidelity Small Cap Growth Fund seeks small-cap companies with above-average growth prospects and that are trading at reasonable valuations. We believe that changes in expectations about future earnings drive stocks, and companies with secure competitive positions in growing markets tend to experience positive earnings revisions over time. Within the inherently volatile small-cap growth universe, we believe the companies that one chooses to avoid are just as important as those one owns. As a result, we employ a valuation discipline and focus on higher-quality businesses, especially those that are sound allocators of shareholder capital. Lastly, we employ a disciplined portfolio construction framework, so as to focus the fund's risk/return profile on stock selection, our core competency. Q: Pat, how did the fund perform for the six months ending January 31, 2018 I'm pleased with our result. The fund's Retail Class shares advanced 17.86%, handily outpacing the Russell 2000 Growth Index, which returned 14.44%, as well as our peer group average. Successful stock picking, especially within the technology and consumer discretionary sectors two of our primary areas of investment fueled the fund's outperformance of its benchmark. Our investments rallied along with the index, as generally stable global economic growth, combined with the prospect of fiscal stimulus and tax reform under President Donald Trump, supported growth-oriented investments. Ten of the Russell benchmark's 11 sectors posted a gain during the past six months; real estate declined slightly. Results for the corresponding 12-month period were even better, as the fund gained 31.86%, leading its benchmark and peer group average by a wider margin. Q: How did your investment strategy influence the fund's relative result the past six months As shareholders will recall, I divide fund investments into two groups: established growers and emerging growers. Based on historical analysis, I believe outperformers in my universe can come from either category. Given the strong backdrop for growth stocks in general this period, holding a combination of both types worked well for the fund. An emerging-growth name proved the fund's top individual relative contributor: AnaptysBio, which we bought in August. Shares of this clinical-stage biotech popped in October, after phase 2 trials suggested that its eczema drug outperformed rival offerings from two competitors. More good news came in November, when the firm reported pipeline updates that pleased investors. As well, the firm announced positive results from phase 1 trials of its treatment for atopic dermatitis. The stock advanced 333% in the index for the full six months but, via our active management, even higher in the fund, up 406%. Emerging growers like AnaptysBio typically lack a long financial history, but I expect favorable results to develop over time. 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

3 Longtime fund holding Stamps.com, an example of an established grower, also helped notably. I look to invest in stocks, like Stamps, that I find to be attractively priced, well-positioned multiyear growers with a high-quality financial track record and with what I see as still ample room to grow even more. The fund's stakes in such stocks tend to be larger, due to what I see as their relatively lower risk profile, and they make up the majority of fund assets. Stamps represented, on average, one of the fund's largest overweightings this period. Shares of the internet-based shipping-services provider rallied alongside other smallcaps. In addition, the stock jumped in August after the firm released its second-quarter financial results. Investors were impressed by the company's better-than-expected earnings increase, which more than doubled on a year-over-year basis. Despite a sharp pullback in November after the firm had released another quarter of stellar financial results the stock finished the period with roughly a 38% gain. Q: What other stocks lifted relative results 2U was another big contributor, and also the fund's largest holding. The firm offers cloud-based online campuses and learning platforms for nonprofit colleges and universities. I continued to like 2U's competitive position, leadership team and what I saw as a long runway for potential growth. Shares of 2U returned about 44% for the period, benefiting from consecutive quarters of better-than-expected financial results. The company also announced several new programs, including a variety of new online degrees at Syracuse University and the University of California, Davis. In addition, 2U made moves to expand its graduate programs to international markets. Overweighting LGI Homes (+53%) also helped. This Texasbased homebuilder posted strong monthly closings this period, including an all-time record in December. In November, the firm reported solid third-quarter results, with improvement in key metrics such as closings, backlog, new orders and average selling prices. In addition, LGI's management raised its full-year earnings guidance two quarters in a row. Q: What stocks disappointed versus the index From a sector perspective, our stock selection and an underweighting in health care hurt most the past six months. The fund's biggest individual detractor was Cotiviti Holdings. This company is relatively new to the public markets, but has over a 30-year history of saving insurance companies money by catching payment errors. In my view, Cotiviti appeared well-positioned to continue saving money for its customers, as well as the health care system overall. Unfortunately, the stock returned about -19% this period, largely because growth slowed. The firm's customers health insurers have seen healthy profits thanks to lower utilization of the health care system by consumers. This has reduced the incentive for insurance companies to look for additional ways to save money, Cotiviti's main business. Elsewhere in the health care sector, entirely avoiding Sage Therapeutics and the fund's underexposure to Nektar Therapeutics two biopharmaceutical firms in the index also detracted. We missed out on Sage's 138% gain, which was related largely to encouraging late-stage results for its compounds aimed at postpartum depression and MDD (major depressive disorder). Meanwhile, Nektar jumped after the firm stated, with regard to its pain-relieving drug, that it would move to file for approval from the U.S. Food and Drug Administration earlier than expected. The firm also released positive earlystage results for its candidate drug for solid-tumor cancers. The stock more than doubled in value for the full period, but due to untimely positioning, we missed out on much of that gain, which hurt our benchmark-relative result. Q: Anything else you would like to share with shareholders, Pat As of January 31, I think valuations continue to look high by historical standards, so that creates a bit of a challenge. I view market, sector and factor timing as very difficult tasks, and therefore continue to focus my energy on picking individual stocks, while at the same time managing sector over- and underweightings and staying fully invested. In my 17 years looking at small- and mid-cap stocks professionally, I have consistently seen companies with strong competitive positions in growing markets compound value. Those are the types of companies that I look for, regardless of the market environment. On a separate note, I'm taking a short leave of absence from Fidelity at the start of this coming June, with plans to return at the end of August. I'll be temporarily turning over management responsibilities to my colleagues Jennifer Fo Cardillo and Slava Kruzement-Prykhodko, who will serve as interim co-managers for the fund. I've worked closely with both Jen and Slava for quite some time. Jen has worked at Fidelity for nearly a decade, and has spent many years as an analyst on our small-cap team. Meanwhile, Slava began his tenure at Fidelity in I'll be available to them and plan to check in periodically over the summer. In addition, the fund will be closed to new accounts effective February 2, For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

4 10 LARGEST HOLDINGS Patrick Venanzi on how he handles market volatility: "As a professional investor constantly immersed in the market, I am used to seeing big moves in a handful of stocks every day. These moves are typically explained by company-specific news: earnings surprises, clinical trial results or mergerand-acquisition activity, for instance. Big shortterm swings in a stock's price can create opportunity, and as an active manager, I see it as part of my job to quickly process news events and then take advantage of such opportunities. "Consider, for example, the Cboe Volatility Index (VIX ) a measure of market-wide volatility, often referred to as 'the fear gauge.' When the VIX spikes, the number of stocks undergoing an outsized short-term move increases dramatically. Oftentimes, the driver is some macroeconomic data point or a political event. At such times, we might not have a lot of company-specific news to work with, but often we still want to be able to take advantage of an opportunity. When the VIX spikes and lots of stocks are making big moves all at once, it can be difficult to know where to begin. "The analyses we perform on companies during the calm days is what prepares us to pounce during more-volatile episodes. When I work on a 'new' company or update my thinking on an 'old' one, my practical output is the same. I set two price targets: one is a 'fair-value' target what I think the company is worth and the other is a 'downside-risk' target, or an estimate of where I think the stock could trade if it were to fall out of favor or gets stuck in a market downswing. I maintain my targets in a spreadsheet that updates with market prices every day, which may afford me opportunity to better spot the most favorable riskreward situations in a very timely manner." Holding Market Segment 2U, Inc. Information Technology Grand Canyon Education, Inc. Stamps.com, Inc. Nektar Therapeutics Eagle Materials, Inc. Insulet Corp. Vail Resorts, Inc. GrubHub, Inc. ishares Russell 2000 Growth Index ETF Cavco Industries, Inc. 10 Largest Holdings as a % of Net Assets Consumer Discretionary Information Technology Health Care Materials Health Care Consumer Discretionary Information Technology Multi Sector Consumer Discretionary 16.23% Total Number of Holdings 177 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. ASSET ALLOCATION Asset Class Portfolio Weight Portfolio Weight Six Months Ago Domestic Equities 94.81% 93.80% International Equities 4.31% 5.20% Developed Markets 4.29% 4.88% Emerging Markets 0.02% 0.32% Tax-Advantaged Domiciles 0.00% 0.00% Bonds 0.00% 0.00% Cash & Net Other Assets 0.88% 1.00% Net Other Assets can include fund receivables, fund payables, and offsets to other derivative positions, as well as certain assets that do not fall into any of the portfolio composition categories. Depending on the extent to which the fund invests in derivatives and the number of positions that are held for future settlement, Net Other Assets can be a negative number. "Tax-Advantaged Domiciles" represent countries whose tax policies may be favorable for company incorporation. 4 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

5 MARKET-SEGMENT DIVERSIFICATION Market Segment Portfolio Weight Portfolio Weight Six Months Ago Information Technology 23.01% 28.29% Health Care 21.96% 21.04% Industrials 21.22% 17.41% Consumer Discretionary 14.32% 13.80% Financials 6.78% 6.76% Materials 4.68% 4.45% Consumer Staples 3.88% 3.93% Real Estate 1.60% 2.55% Multi Sector 1.25% -- Utilities 0.42% 0.28% Energy 0.00% 0.49% Telecommunication Services 0.00% 0.00% Other 0.00% 0.00% FISCAL PERFORMANCE SUMMARY: Periods ending January 31, Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity Small Cap Growth Fund Gross Expense Ratio: 1.09% % 5.78% 31.86% 17.57% 17.55% 11.15% Russell 2000 Growth Index 14.44% 3.90% 24.90% 12.56% 14.62% 10.67% Morningstar Fund Small Growth 13.59% 3.77% 23.68% 12.44% 13.47% 9.89% % Rank in Morningstar Category (1% = Best) % 6% 5% 21% # of Funds in Morningstar Category Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 11/03/ This expense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that fiscal year. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit fidelity.com/performance, institutional.fidelity.com, or 401k.com. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. Please see the last page(s) of this Q&A document for most-recent calendarquarter performance. 5 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

6 Definitions and Important Information Unless otherwise disclosed to you, in providing this information, Fidelity is not undertaking to provide impartial investment advice, act as an impartial adviser, or to give advice in a fiduciary capacity. FUND RISKS Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. The securities of smaller, less well-known companies can be more volatile than those of larger companies. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. IMPORTANT FUND INFORMATION Relative positioning data presented in this commentary is based on the fund's primary benchmark (index) unless a secondary benchmark is provided to assess performance. Effective 12/18/17, the fund's redemption fee has been removed. Effective at close of business on 2/2/18, all classes of Fidelity Small Cap Growth Fund are closed to new accounts. % 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. Multiple share classes of a fund have a common portfolio but impose different expense structures. RELATIVE WEIGHTS Relative weights represents the % of fund assets in a particular market segment, asset class or credit quality relative to the benchmark. A positive number represents an overweight, and a negative number is an underweight. The fund's benchmark is listed immediately under the fund name in the Performance Summary. 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. Russell 2000 Growth Index is a market-capitalization-weighted index designed to measure the performance of the small-cap growth segment of the U.S. equity market. It includes those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth rates. 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. Cboe Volatility Index is a weighted average of prices on S&P 500 index options with a constant maturity of 30 days to expiration. It is designed to measure the market's expectation of near-term stock market volatility. MARKET-SEGMENT WEIGHTS Market-segment weights illustrate examples of sectors or industries in which the fund may invest, and may not be representative of the fund's current or future investments. Should not be construed or used as a recommendation for any sector or industry. RANKING INFORMATION 2018 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or redistributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Fidelity does not review the Morningstar data and, for mutual fund performance, you should check the fund's current prospectus for the most up-to-date information concerning applicable loads, fees and expenses. 6

7 Manager Facts Patrick Venanzi is a portfolio manager at Fidelity Management & Research Company (FMRCo), 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, he manages Fidelity and Fidelity Advisor Small Cap Growth Fund (since 2011), and co-manages Fidelity Series Small Cap Opportunities Fund as well as Fidelity and Fidelity Advisor Stock Selector Small Cap Fund (all since 2009). Prior to assuming his current responsibilities, Mr. Venanzi held various positions in FMRCo's Equity Research department, including that of research analyst from 2003 to 2009, research associate from 2001 to 2003, and intern on the Small Cap team from 2000 to He has been in the investments industry since joining Fidelity as an intern in Mr. Venanzi earned his bachelor of science degree in finance and economics from Boston College. 7 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

8 PERFORMANCE SUMMARY: Quarter ending December 31, Annualized 5 10 / LOF 1 Fidelity Small Cap Growth Fund Gross Expense Ratio: 1.09% % 14.84% 17.85% 9.54% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 11/03/ 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. Information included on this page is as of the most recent calendar quarter. S&P 500 is a registered service mark of Standard & Poor's Financial Services LLC. Other third-party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR LLC or an affiliated company. Fidelity Brokerage Services LLC, Member NYSE, SIPC., 900 Salem Street, Smithfield, RI Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI FMR LLC. All rights reserved. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee