Fidelity Growth & Income Key Takeaways For the fiscal year ending July 31, 2017, the fund's Retail Class shares gained 17.48%, topping the 16.04% advance of the benchmark S&P 500 index. The fund's outperformance of the benchmark the past 12 months partly reflected Manager Matthew Fruhan's long-term, valuation-conscious focus and willingness to avoid reacting to short-term changes in the marketplace. Versus the benchmark, favorable positioning in the financials sector especially a sizable and longtime overweight in banks was by far the biggest contributor. Results were mixed in energy, where strong stock picks partly were offset by an unhelpful overweight in this lagging category. Poor stock selection and a large underweight in the strongperforming information technology sector detracted. Throughout the period, Matt remained focused on his long-term investment approach, which emphasizes stocks with underappreciated long-term earnings power. 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. Information 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 2017. Not FDIC Insured May Lose Value No Bank Guarantee
Q&A An interview with Manager Matthew Fruhan Fund Facts Trading Symbol: Matt Fruhan Manager FGRIX Start Date: December 30, 1985 Size (in millions): $7,251.81 Investment Approach Fidelity Growth & Income is a diversified domestic equity strategy that seeks to maintain a higher dividend yield and higher earnings growth than the S&P 500 index. Our investment approach is to find companies that we believe have attractive earnings and yield potential over the next two to three years, and where our view is different than market consensus. We believe securities can become mispriced relative to their true long-term value when investors become increasingly focused on the short term, and our process seeks to exploit these discrepancies to drive performance. We strive to uncover these companies through in-depth bottom-up, fundamental analysis, working in concert with Fidelity's global research team. Q: Matt, how did the fund perform for the fiscal year ending July 31, 2017 For the past 12 months, the fund's Retail Class shares gained 17.48%, outpacing the 16.04% advance of the benchmark S&P 500. The fund topped the peer group average for the same time frame. Relative to the benchmark, favorable positioning in the financials sector was by far the biggest contributor. Most notably, a sizable and longtime overweight in banks added value in light of the industry's strong performance, as did stock picks among banks and diversified financials firms. In contrast, poor stock selection and a meaningful underweight in information technology detracted. Health care also was a negative, especially a disappointing position in Teva Pharmaceutical Industries. We had mixed but overall positive results in energy, with strong stock picking partly offset by an overweight in this lagging group. Q: What factors set the stage for the fund's outperformance of the S&P 500 I think a big part of it was my willingness to keep a longterm focus and avoid reacting to short-term changes in the marketplace. This is central to my investment philosophy. As a reminder to shareholders: I find that the market sometimes overreacts to changes in short-term earnings estimates, leading securities to become mispriced relative to their long-term intrinsic (true) values. I believe that by combining deep investment research with patience and discipline, an investor has the opportunity to take advantage of these market inefficiencies. At the same time, I will sell or avoid stocks with valuations that appear too high in relation to their respective companies' future earnings potential. Such close attention to underappreciated long-term earnings power, as well as valuation, is critical to my philosophy and process, and also key to my approach to risk management. Stocks may outperform or underperform at different points in a given market cycle, but paying close attention to the valuations of stocks with durable earnings power has tended to be helpful to fund performance over longer stretches. 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.
One example of this strategy is in the financials sector, where the fund has been significantly overweight for several years. Coming into this reporting period, I saw the market as undervaluing many companies in this group, as financials long had remained out of favor. Maintaining a position in this sector hurt relative performance for several years. But around the middle of 2016, financials stocks began to climb as signs of economic growth and inflation became increasingly clear. The rebound accelerated shortly after the November U.S. elections, as investors became more optimistic about the potential for pro-growth economic policies. This contributed to a strong backdrop for most financials, including several key fund positions. Q: Which individual stocks helped relative performance most the past 12 months Big banks dominated, led by Bank of America, Citigroup and JPMorgan Chase all among the fund's largest holdings. Various regional banks also boosted our result, especially Regions Financial, Comerica and SunTrust Banks. I continued to see good opportunity in this particular niche, but nonetheless reduced our exposure to regional banks this period in light of their higher valuations and less-favorable risk/reward balance. Among our largercap holdings, I also reduced the fund's stake in Bank of America and JPMorgan, while modestly increasing exposure to Citigroup, which had not participated in the market rally to the same degree as its competitors and, in my view, offered better value prospects. Elsewhere, it helped to overweight rail operator CSX. I thought the company's business challenges were fully reflected in its valuation and that signs of economic growth had yet to be reflected in its share price. As optimism about the economy increased, CSX shares benefited. The stock saw a particularly big gain on a single day late in January when an activist investor made a push to improve the firm's business operations and install a new management team. Q: You said earlier that the fund was hurt by an overweight in energy That's correct, because the energy sector significantly lagged the S&P 500 this period. Our outsized stake here reflects my view that energy's continued down cycle is a function of excess supply and not a demand issue, as global demand steadily has been increasing. Meanwhile, I believe supply growth is in the process of moderating, and the lack of capital investment in production could further limit supply over the next 12 to 18 months. The fund largely is invested in energy companies with low production costs and strong balance sheets. The fund did not own industry giant and benchmark component Exxon Mobil, a stock that returned about -7% the past 12 months. I found the stock overvalued given what I saw as its limited prospects for production growth. Apache and Canada's Cenovus Energy are exploration and production stocks I favored the past year. Even as I was optimistic about both companies' long-term prospects, they were notable detractors, reflecting the environment of lower oil prices. Cenovus was not in the benchmark. Q: What else detracted Israel-based drug manufacturer Teva was the biggest disappointment. This continued to be a very frustrating stock, as the firm's management has made questionable decisions regarding capital allocation and operations. During the period, however, Teva's valuation fell below even my lowered expectations, so the fund still holds this out-of-index stock as of July 31. Another notable laggard was industrial conglomerate General Electric, one of the fund's largest holdings. GE has been struggling for some time and is expected to lower its earnings targets. Under the company's new CEO, however, I think GE's valuation level already is discounting both this expected earnings reset and the potential for a growth framework that is more realistic. In the meantime, the stock is offering an attractive yield. Q: Any closing thoughts, Matt This period, I reduced exposure to the information technology sector because I found the category especially certain high-flying growth stocks too expensive, as I'll describe in more detail later on. Conversely, I increased the fund's sizable overweights in financials and energy. That said. I'm considering scaling back the fund's allocation to financials over time, reflecting the extremely strong results we've seen in the category in recent years. In energy, I continue to see positive near- and mediumterm trends working in favor of high-quality companies with solid balance sheets that are returning capital to shareholders and have the financial ability to withstand continued-low oil prices. 3 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.
LARGEST CONTRIBUTORS VS. BENCHMARK Matt Fruhan on the fund's positioning in the technology sector: "The fund significantly underweighted information technology stocks throughout the period. I remained comfortable with this positioning, even as it weighed on relative performance. I especially wanted to avoid exposure to some high-flying growth stocks that, in addition to not offering dividends, I thought were being valued based on best-case scenarios. "Consider Facebook, a strong-performing index stock I chose to not own for valuation reasons. This company is a leader in internet advertising, and it dramatically has increased its share of total advertising spending, mostly at the expense of outdoor and print advertising. "But now, for this internet heavyweight to continue to meet its own rosy growth estimates for ad spending, it is going to have to take substantial market share from television a much more entrenched advertising model. This is a more expensive and daunting challenge, in my view. And yet the company's shares already appear to be pricing in this successful growth. "Facebook is a great business and it's always possible the company could meet its goals. But when I look at its stock valuation, compared with other options available in the marketplace, I see better risk/reward trade-offs elsewhere." Holding Market Segment Average Relative Relative Contribution (basis points)* Bank of America Corp. Financials 2.24% 101 Citigroup, Inc. Financials 1.97% 66 JPMorgan Chase & Co. Financials 2.01% 66 Exxon Mobil Corp. Energy -1.78% 45 State Street Corp. Financials 1.57% 41 * 1 basis point = 0.01%. LARGEST DETRACTORS VS. BENCHMARK Holding Teva Pharmaceutical Industries Ltd. sponsored ADR Market Segment Average Relative Relative Contribution (basis points)* Health Care 0.89% -71 General Electric Co. Industrials 1.30% -46 Target Corp. GlaxoSmithKline PLC sponsored ADR Qualcomm, Inc. * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class Consumer Discretionary 0.78% -39 Health Care 1.56% -38 Information Technology 1.38% -36 Six Months Ago Domestic Equities 91.75% 89.84% International Equities 7.93% 7.67% Developed Markets 7.80% 7.37% Emerging Markets 0.13% 0.30% Tax-Advantaged Domiciles 0.00% 0.00% Bonds 0.24% 0.30% Cash & Net Other Assets 0.08% 2.19% 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.
MARKET-SEGMENT DIVERSIFICATION 10 LARGEST HOLDINGS Market Segment Six Months Ago Financials 24.10% 22.75% Information Technology 16.96% 16.78% Health Care 13.87% 12.64% Energy 12.86% 12.74% Industrials 11.59% 11.81% Consumer Staples 7.49% 6.77% Consumer Discretionary 6.45% 8.36% Materials 3.09% 3.06% Utilities 1.20% 0.94% Telecommunication Services 1.15% 1.03% Real Estate 1.04% 0.83% Other 0.00% 0.00% Holding Microsoft Corp. Market Segment Information Technology Six Months Ago 3.59% 3.50% Bank of America Corp. Financials 3.36% 3.15% JPMorgan Chase & Co. Financials 3.36% 3.45% Citigroup, Inc. Financials 3.32% 2.54% Apple, Inc. Information Technology 2.80% 3.19% General Electric Co. Industrials 2.29% 2.58% State Street Corp. Financials 2.08% 1.65% Comcast Corp. Class A Alphabet, Inc. Class A Consumer Discretionary Information Technology 1.94% 2.04% 1.93% 1.71% Wells Fargo & Co. Financials 1.81% 1.69% 10 Largest Holdings as a % of Net Assets 26.46% 25.74% Total Number of Holdings 209 229 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, 2017 6 Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity Growth & Income Gross Expense Ratio: 0.65% 2 6.62% 7.65% 17.48% 8.65% 13.96% 3.94% 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) -- -- 20% 62% 49% 96% # of Funds in Morningstar Category -- -- 1,399 1,233 1,095 802 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 12/30/1985. 2 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 Information section of this Q&A.
Definitions and Important Information FUND RISKS Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Fixed income investments entail interest rate risk (as interest rates rise bond prices usually fall), the risk of issuer default, issuer credit risk and inflation risk. Lowerquality bonds can be more volatile and have greater risk of default than higher-quality bonds. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. 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. 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 6
Manager Facts Matthew Fruhan 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. Fruhan manages Fidelity Advisor Capital Development Fund, Fidelity Series Growth & Income Fund, Fidelity Advisor Series Growth & Income Fund, Fidelity Growth & Income, Fidelity Advisor Growth & Income Fund, and Fidelity VIP Growth & Income. Additionally, he manages Fidelity Mega Cap Stock Fund, Fidelity Advisor Mega Cap Stock Fund, Fidelity Large Cap Stock Fund, and Fidelity Advisor Large Cap Fund, as well as co-manages Fidelity Multi Asset Income Fund and Fidelity Equity-Income Strategy, a separately managed account (SMA). Prior to assuming his current responsibilities, Mr. Fruhan managed Fidelity Advisor Financial Services Fund, VIP Financial Services, and Select Financial Services. Previously, he served as the industrials sector leader and managed Fidelity Advisor Industrials Fund, VIP Industrials, and Select Industrials. Prior to that, Mr. Fruhan managed Select Defense and Aerospace, Select Air Transportation, and Select Consumer Staples. Additionally, Mr. Fruhan worked as an equity analyst following the food and supermarket industries, and in Fidelity's High Yield Research department following the specialty retail, automotive supply, and transportation industries. He has been in the investment industry since joining Fidelity in 1995. Mr. Fruhan earned his bachelor of arts degree, cum laude, in economics from Harvard College and his master of business administration degree from Harvard Business School. 7 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.
PERFORMANCE SUMMARY: Quarter ending September 30, 2017 1 3 Annualized 5 10 / LOF 1 Fidelity Growth & Income Gross Expense Ratio: 0.63% 2 17.82% 8.86% 13.18% 3.83% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 12/30/1985. 2 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 02917. Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917. 2017 FMR LLC. All rights reserved. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee. 714622.6.0