Fidelity Independence Fund Key Takeaways For the semiannual reporting period ending May 31, 2017, the fund's share classes gained about 11%, topping the 10.81% advance of the benchmark S&P 500 index. Versus the benchmark, by far the biggest contribution the past six months came from stock picking in the information technology sector, led by personal-electronics maker Apple, the fund's largest holding and overweighting by a wide margin. Conversely, positioning in the energy sector detracted most, chiefly due to the fund's fairly sizable exposure to four energy exploration & production firms that struggled this period: SM Energy, Continental Resources, Devon Energy and Anadarko Petroleum. As of May 31, the fund is divided roughly equally among the three main types of companies targeted by Portfolio Manager Jeff Feingold fast growers, higher-quality growers and those he deems cheap with improving fundamentals. Looking ahead, Jeff expects to keep a close eye on the potential for pro-growth initiatives such as corporate tax reform. Believing there will be 'winners' to choose from regardless of the broader backdrop, Jeff continues to look across the market for companies with accelerating earnings, improving fundamentals and what he considers a low valuation. MARKET RECAP The U.S. equity bellwether S&P 500 index returned 10.81% for the six months ending May 31, 2017, displaying a strong ramp-up during the first half of the period on optimism for President Trump's pro-business agenda. Equity markets leveled off in March, however, as the fledgling administration faced the first test of its domestic agenda. The S&P reacted with uncertainty to efforts by Congress to repeal and replace the Affordable Care Act (ACA) and was relatively flat through May 31. In a reversal from much of 2016, growth-oriented stocks handily topped their value counterparts the past six months. Among sectors, information technology (+22%) fared best, surging in 2017 as a handful of constituents posted stellar returns. Certain so-called bond-proxy sectors bounced back after struggling in late 2016, with consumer staples (+14%) and utilities (+17%) rising strongly for the full six months; conversely, dividend-rich telecom (-1%) struggled amid rising interest rates and increased competition. Health care (+12%) performed well in February and again in April, climbing higher following the ACA's reprieve. Meanwhile, financials (+4%) lagged the broader market when sentiment regarding the potential for deregulation and lower taxes faded as the White House turned its attention to other initiatives. Lastly, lower oil prices sent energy (-11%) to the bottom of the sector performance rankings. Not FDIC Insured May Lose Value No Bank Guarantee
Q&A An interview with Portfolio Manager Jeffrey Feingold Fund Facts Trading Symbol: Jeffrey Feingold Portfolio Manager FDFFX Start Date: March 25, 1983 Size (in millions): $3,680.16 Investment Approach Fidelity Independence Fund is a diversified domestic equity strategy that seeks capital appreciation. The fund's mandate is highly flexible, giving us the ability to invest in domestic and foreign issuers across all market capitalizations and styles. We take a balanced approach to portfolio construction, which we believe can help reduce the volatility of a growth fund's returns. We look across all sectors to find opportunities, which often fall into one of three categories: fast growers, higher-quality growers and cheap with improving fundamentals. We believe significant rewards can result from identifying companies that can grow sales and earnings the fastest. Even companies with already-high expectations for earnings can continue to outperform, if they exceed expectations. We also believe that careful attention to portfolio construction through stock, sector and style diversification can help reduce the volatility of returns. Q: Jeff, how did the fund perform for the semiannual reporting period ending May 31, 2017 The fund's share classes gained about 11% the past six months, topping the 10.81% advance of the benchmark S&P 500 but lagging our peer group average. Taking a slightly longer view, the fund rose about 15% for the trailing year, but lagged both the benchmark and peer average. This six-month reporting period began roughly 10 weeks after my appointment as Lead Portfolio Manager of the fund in September 2016. Former Portfolio Manager Bob Bertelson and I worked together until the end of 2016, when Bob transitioned to an advisory role at Fidelity after overseeing Independence for about 10 years. I'll touch on some notable changes I have put in place since September as I describe what generally has been a productive six months for the fund amid a market environment that in some ways I consider a complete reversal from 2016. Q: Please tell us more about the investing backdrop and how you manage the fund. My strategy focuses on finding companies that have grown their earnings and improved their business fundamentals more quickly than has the market. These "fast growers," as I call them, performed well the past six months, as reflected in some of the fund's top individual contributors, particularly within the information technology sector. I also try to find higher-quality growers and companies I consider cheap but that have improving fundamentals. These categories did not fare as well this period, which is most evident in my weak picks within energy and materials, as well as through an overweighting in the lagging financials sector. Overall, the investing backdrop so far in 2017 has been a stark contrast to 2016, when the market was led higher by higher-quality growers and cheap companies with improving fundamentals. With this in mind, balancing the fund across three areas of the market is an important component of my strategy. By constructing a portfolio that 2 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.
is more balanced across these categories than some of its growth peers, I hope to generate more-stable relative performance over time while also reducing volatility. Because of the way I manage the fund, security selection typically has the primary influence on performance versus the benchmark. That was the case the past six months, with a major boost coming from tech. Q: What was the story within technology When I took over, tech was the fund's largest sector allocation but represented only a slight overweighting versus the benchmark. I added notably to our investments here, and as of May 31 the sector accounted for 30% of fund assets, about 7 percentage points more than in the benchmark. One of the biggest additions was Apple, our top relative contributor this period. Shares of the maker of personal electronics gained about 39% the past six months. I view Apple as a financially strong firm with decent dividends, relatively stable earnings and improving fundamentals. In addition, I foresee a strong iphone replacement cycle in 2017 and 2018. This is why I was comfortable increasing the fund's position in Apple, especially in the first quarter of 2017. Apple was our biggest holding by a wide margin on May 31, as well as the fund's largest overweighting. Relative performance also got a lift from Autodesk, another holding I added to this period. The maker of computeraided design software for engineering and construction firms benefited from some of the excitement around the potential for higher infrastructure spending, as well as the move to the cloud. Like much of the software industry, Autodesk continues to sell more of its products ondemand, or as a service, rather than through traditional software licenses. Elsewhere within tech, semiconductor-related stocks fared well for a variety of reasons, including continued strength within the mobile category. Broadcom and Nvidia were fund holdings that stood out here, adding to our relative results the past six months. I bought Nvidia in December, and its stock was particularly strong in the final month of the reporting period, rising sharply after the firm's May 9 announcement of robust quarterly financial results for the fiscal quarter ending April 30 and upbeat guidance for the next three months. Q: What else helped I made a good call in establishing a non-index stake in Tesla, which I bought in December. I added to our holdings later on, and the stock soared amid strong top-line growth and the growing popularity of Tesla's electric vehicles. Lastly, it helped to avoid industrial conglomerate General Electric and broadband and telecommunications firm Verizon Communications, two defensive benchmark stocks that lagged the past six months as investors grew increasingly comfortable taking on risk. Q: What hurt Energy was by far the weakest group in the S&P 500 the past six months, so the fund's overweighting here hurt our relative results, as did weak stock picking in the sector. I reduced exposure to energy this period, ending with a more modest overweighting. Company fundamentals in the sector did not improve as fast as I expected because the price of oil stayed within a fairly tight band this period. This pressured oil companies, particularly the oil & gas exploration & production group. Within this category, we had fairly sizable exposure to SM Energy, Continental Resources, Devon Energy and Anadarko Petroleum. These high-beta stocks all lost ground the past six months, ending the period as the fund's four largest relative detractors. SM Energy and Continental Resources were non-benchmark holdings. The price of oil also pressured some other stocks influenced by the price of commodities, such as Fluor and LyondellBasell Industries, both of which declined and therefore hurt relative performance this period. Nonetheless, I held steady in both investments because my view of their fundamentals remained favorable. Q: What are you focusing on as of May 31 Looking ahead, I remain cautiously optimistic about the overall environment for earnings growth. While I expect to keep a close eye on the potential for pro-growth initiatives such as corporate tax reform, I believe we'll have 'winners' to choose from regardless of the broader backdrop. I sense we are moving into the later stages of the economic cycle, which gives me some reason to be a bit nervous, although I don't see any big cracks in the economy. I do pay attention to big-picture dynamics such as the economic cycle, but my process is mostly based on bottom-up fundamental analysis. Also, I am closely monitoring our cash allocation, for a couple of reasons. The market has been up for quite a while now, so maintaining some degree of liquidity seems prudent. We have seen some volatility recently, especially in tech, and I want to be able to take advantage of opportunities and corrections if and when the market presents them. 3 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.
LARGEST CONTRIBUTORS VS. BENCHMARK Jeff Feingold on how the fund is positioned as of May 31: "The process of looking in all areas of the market to find companies with the fastest earnings growth and improving fundamentals is a proven method that I have followed for many years. It is crucial for me with help from Fidelity's research team to correctly forecast the direction of a company's fundamentals. "Because I believe great ideas can be found across the market, I am fairly disciplined in terms of sector allocation, with the intention of managing exposure to within 4 to 5 percentage points of benchmark weightings. Also, the fund is divided roughly equally among my target types: fast growers, higher-quality growers and those I view as cheap but with improving fundamentals. "My thesis is that this balance, over time, should be helpful because each group offers a different return profile. Within each category, I focus on identifying those stocks where I have the most conviction to give the fund the best opportunity for outperformance. "The fund has a bit of a cyclical tilt, largely due to my decision to increase exposure to financials. This sector represented roughly 17% of fund assets as of the end of the reporting period, trailing only information technology in both absolute and relative terms. Sizable holdings here include three banking firms: Bank of America, Citigroup and JPMorgan Chase, all of which were among the fund's biggest positions. "I reduced our investments in health care mainly by selling some stocks from the pharmaceuticals, biotechnology & life sciences industry that were pressured by a variety of concerns. These included Valeant Pharmaceuticals International, Celgene and Gilead Sciences." Holding Apple, Inc. Autodesk, Inc. Tesla, Inc. Market Segment Consumer Discretionary Average Relative Relative Contribution (basis points)* 3.23% 79 1.06% 41 0.72% 40 General Electric Co. Industrials -1.33% 29 Broadcom Ltd. * 1 basis point = 0.01%. LARGEST DETRACTORS VS. BENCHMARK Holding Market Segment 0.75% 23 Average Relative Relative Contribution (basis points)* SM Energy Co. Energy 0.71% -77 Continental Resources, Inc. Energy 0.91% -58 Devon Energy Corp. Energy 0.94% -45 Anadarko Petroleum Corp. Energy 0.71% -38 Fluor Corp. Industrials 0.88% -27 * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class Portfolio Portfolio Six Months Ago Domestic Equities 94.24% 88.34% International Equities 5.38% 10.46% Developed Markets 3.91% 9.13% Emerging Markets 1.47% 1.33% Tax-Advantaged Domiciles 0.00% 0.00% Bonds 0.00% 0.00% Cash & Net Other Assets 0.38% 1.20% 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.
MARKET-SEGMENT DIVERSIFICATION 10 LARGEST HOLDINGS Market Segment Portfolio Portfolio Six Months Ago 29.83% 22.62% Financials 16.63% 15.80% Consumer Discretionary 13.90% 9.26% Health Care 11.20% 17.80% Industrials 10.78% 13.40% Energy 7.13% 12.82% Consumer Staples 6.25% 3.91% Materials 1.11% 1.28% Multi Sector 1.02% -- Real Estate 0.76% 0.86% Telecommunication Services 0.73% 0.75% Utilities 0.28% 0.29% Other 0.00% 0.00% Holding Apple, Inc. Alphabet, Inc. Class A Market Segment Portfolio Portfolio Six Months Ago 7.88% 4.71% 3.84% 2.19% Bank of America Corp. Financials 3.20% 3.54% Citigroup, Inc. Financials 3.05% 1.89% JPMorgan Chase & Co. Financials 2.87% 2.57% Amgen, Inc. Health Care 2.75% 0.95% Amazon.com, Inc. Consumer Discretionary 2.62% 0.50% Caterpillar, Inc. Industrials 2.35% 1.06% Facebook, Inc. Class A 2.34% 1.86% Northrop Grumman Corp. Industrials 2.02% 1.93% 10 Largest Holdings as a % of Net Assets 32.93% 25.85% Total Number of Holdings 116 116 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 May 31, 2017 6 Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity Independence Fund Gross Expense Ratio: 0.54% 2 11.22% 10.72% 14.99% 4.56% 13.62% 6.43% S&P 500 Index 10.81% 8.66% 17.47% 10.14% 15.42% 6.94% Morningstar Fund Large Growth 14.64% 14.06% 18.19% 9.67% 14.45% 7.41% % Rank in Morningstar Category (1% = Best) -- -- 80% 96% 68% 76% # of Funds in Morningstar Category -- -- 1,426 1,284 1,145 805 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 03/25/1983. 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 section of this Q&A.
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 12/31/16, Jeffrey Feingold became the sole 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
Manager Facts Jeffrey Feingold 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 Magellan Fund (since 2011) and Fidelity Independence Fund (since 2016). Prior to assuming his current management responsibilities, Mr. Feingold managed various other Fidelity funds, including Fidelity Large Cap Growth Fund from 2009 to 2012, Fidelity Advisor Strategic Growth Fund, VIP Growth Stock Portfolio, and Fidelity Trend Fund from 2007 to 2012, the U.S. equity sub-portfolio of Fidelity Worldwide Fund from 2006 to 2007, and the U.S. equity sub-portfolio of Fidelity Global Balanced Fund from 2004 to 2007. Previously, he was co-director/managing director of research at FMRCo from 2004 to 2006 and a financial analyst from 1998 to 2004, during which he also managed Fidelity Select Portfolio. Before joining Fidelity in 1997 as an equity research analyst, Mr. Feingold was a financial analyst at Morgan Stanley & Co. from 1992 to 1995. He has been in the investments industry since 1992. Mr. Feingold earned his bachelor of arts degree in economics from Brown University 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 section of this Q&A.
PERFORMANCE SUMMARY: Quarter ending September 30, 2017 1 3 Annualized 5 10 / LOF 1 Fidelity Independence Fund Gross Expense Ratio: 0.54% 2 19.40% 6.15% 13.36% 6.20% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 03/25/1983. 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. 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. 709712.6.0 Diversification does not ensure a profit or guarantee against a loss.